Schroder UK Mid Cap

Fund plc

Report and Accounts

For the year ended

30 September 2022

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:48 Page a

Key messages

– A high conviction portfolio targeting 40-50 holdings, with

the goal of delivering a return in excess of the FTSE 250

ex Investment Trusts Index, offering exposure to a wide

spectrum of investment sectors and themes and both UK

and overseas earnings.

– The Manager seeks out resilient companies that are

capable of delivering high risk-adjusted returns with

rising cash flows and earnings. They can be disruptors,

which challenge the status quo within the marketplace, or

established companies which can grow sustainably as

they reinvent themselves in response to the disruption.

Resilience comes from strong finances, leading

ESG/sustainability practices and clear strategic direction.

– The investment process is proven and repeatable, having

generated a NAV return^ of 9.8% p.a. versus 9.6%p.a. for

the benchmark since Schroders became the Manager in

2003*.

^Alternative Performance measure.

*Source: Schroders, Morningstar, 1 May 2003 to 30 September 2022. Net

asset value total return compared to the benchmark of the FTSE All-Share

ex Investment Trusts ex FTSE 100 TR Index until 2011, and subsequently

the FTSE 250 ex Investment Trusts Index. Past performance is not a guide

to future performance and may not be repeated.

Investment objective

Schroder UK Mid Cap Fund plc’s (the “Company”) investment

objective is to invest in mid cap equities with the aim of

providing a total return in excess of the FTSE 250

ex Investment Trusts Index.

Investment policy

The Manager applies a high conviction approach, managing

a focused portfolio of resilient companies that are all capable

of delivering excess risk-adjusted returns with rising cash

flows and earnings. Fundamental research forms the basis of

each investment decision taken by the Manager.

The Company will predominantly invest in companies from

the FTSE 250 Index, but may hold up to 20% of its portfolio in

equities and collective investment vehicles outside the

benchmark index.

The Company may also invest in other collective investment

vehicles where desirable, for example to provide exposure to

specialist areas within the universe.

The Company has the ability to use gearing for investment

purposes up to 25% of total assets.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page b

Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Contents

Strategic Report

Financial Highlights 2

10 Year Financial Record 3

Chairman’s Statement 4

Manager’s Review 6

Investment Portfolio 10

Strategic Review 11

Governance

Board of Directors 22

Directors’ Report 24

Audit and Risk Committee Report 27

Management Engagement Committee Report 29

Nomination Committee Report 30

Remuneration Committee Report 32

Statement of Directors’ Responsibilities in respect of

the Annual Report and Accounts 35

Financial

Independent Auditor’s Report 36

Income Statement 41

Statement of Changes in Equity 42

Statement of Financial Position 43

Notes to the Accounts 44

Annual General Meeting

Annual General Meeting – Recommendations 56

Notice of Annual General Meeting 57

Explanatory Notes to the Notice of Annual

General Meeting 58

Definitions of Terms and Performance Measures 60

Shareholder Information Inside back cover

Strategic Report

Governance Financial

Annual General Meeting

Annual Report and Accounts

for the year ended 30 September 2022

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 1

Schroder UK Mid Cap Fund plc

Financial Highlights

Other financial information

30 September 30 September

2022 2021 % Change

Shareholders’ funds (£’000) 187,393 277,569 -32.5

Shares in issue 34,581,190 35,066,190 -1.4

NAV per share (pence) 541.89 791.56 -31.5

Share price (pence) 480.00 730.00 -34.2

Share price discount to NAV per share* (%) 11.4 7.8

Gearing* (%) 10.8 7.7

Year ended Year ended

30 September 30 September

2022 2021 % Change

Net revenue return after taxation (£’000) 7,823 5,322 +47.0

Revenue return per share (pence) 22.43 15.18 +47.8

Dividends per share (pence) 19.0 14.80 +28.4

Ongoing Charges* (%) 0.89 0.90

Total returns for the year ended 30 September 2022

(Total returns include the impact of dividends paid. Details of the calculations are given on page 60).

Annualised total returns for the 10 years ended 30 September 2022

-30.0

1 year net asset value (“NAV”)

per share total return*

-32.5

1 year share price

total return*

2021: +41.8% 2021: +62.6%

-26.8

1 year benchmark

2021: +40.9%

+7.4

10 year annualised NAV

per share total return*

+8.3

10 year annualised

share price total return*

2021: +14.1% 2021: +15.7%

+6.0

10 year annualised

benchmark

2021 +11.8%

Some of the financial measures below are classified as Alternative Performance Measures, as defined by the

European Securities and Markets Authority and are indicated with an asterisk (*). Definitions of these

performance measures, and other terms used in this report, are given on pages 60 to 61 together with

supporting calculations where appropriate.

Source: Thomson Reuters.

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Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Definitions of terms and performance measures are provided on pages 60 to 61.

At 30 September 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Shareholders’ funds (£’000) 161,739 173,327 184,260 192,718 226,577 229,734 226,424 199,524 277,569 187,393

NAV per share (pence) 447.5 479.6 509.8 533.2 632.0 640.8 633.5 569.0 791.6 541.9

Share price (pence) 420.0 448.9 462.5 435.4 524.5 538.0 540.0 458.5 730.0 480.0

Share price discount to NAV

per share* (%) 6.1 6.4 9.3 18.3 17.0 16.0 14.8 19.4 7.8 11.4

Gearing/(net cash)* (%) 2.0 (4.4) (6.1) 1.5 (0.5) (3.0) 4.3 5.3 7.7 10.8

For the year ended 30 September 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net revenue return after

taxation (£’000) 3,096 3,506 3,549 4,455 5,031 6,015 7,325 3,155 5,322 7,823

Revenue return per share (pence) 8.57 9.70 9.82 12.33 13.96 16.78 20.43 8.92 15.18 22.43

Dividends per share (pence) 7.70 8.50 9.20 11.25 13.10 16.00 18.50 13.30 14.80 19.00

Ongoing Charges* (%) 1.01 0.94 0.93 0.95 0.92 0.90 0.90 0.90 0.90 0.89

Performance

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

NAV total return* 100.0 139.3 151.8 164.2 174.8 211.6 218.9 222.9 205.8 291.9 204.4

Share price total return* 100.0 156.0 169.7 178.1 171.0 211.4 222.1 231.0 202.1 328.6 221.7

Benchmark 100.0 133.0 140.0 157.9 171.5 195.8 203.9 204.4 173.1 243.9 178.5

Source: Morningstar/Thomson Reuters. Rebased to 100 at 30 September 2012.

*Alternative Performance Measures

NAV per share, share price and Benchmark total returns for the ten years ended

30 September 2022

Source: Morningstar/Thomson Reuters. Rebased to 100 at 30 September 2012.

30 Sep 2012 30 Sep 2013 30 Sep 2014 30 Sep 2015 30 Sep 2016 30 Sep 2017 30 Sep 2018 30 Sep 2019 30 Sep 2020 30 Sep 2021 30 Sep 2022

NAV total return Share price total return Benchmark total return

100

150

200

250

300

350

400

450

Ten Year Financial Record

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 3

Schroder UK Mid Cap Fund plc

Chairman’s Statement

Investment and

share price

performance

The Company’s net asset

value (“NAV”) total return

for the year was -30.0%

compared to -26.8% from

the Company’s Benchmark

(the FTSE 250 ex

Investment Trusts Index).

The share price total

return over the same

period was -32.5%.

The challenges for UK

equities and in particular for those of the mid-cap area grew

considerably in the second half of the financial year. The war

in Ukraine led to significant increases in raw material costs,

hence threatening corporate margins and a squeeze in

consumer expenditure. Higher input costs and supply chain

bottle necks in part contributed to a very marked increase in

headline inflation. This brought with it the start of a

significant tightening of monetary policy through higher

interest rates which lead to valuation compression for higher

growth companies which make up much of the mid-cap

universe. Lastly, the UK experienced a period of political

turmoil with the resignation of the Prime Minister and

uncertainty over the likely successor and policy direction.

While higher inflation and tightening monetary policy

affected all equity markets, the UK seemed more vulnerable

than most perhaps because of the political uncertainties.

Overall, we saw a further de-rating of the UK market which

has been evident since at least 2016 despite the resilience

reported by most companies through the period. The last

year has clearly been a challenging period for UK equities,

with small and mid caps particularly affected by worsening

investor sentiment. This has left the investment universe

available to your managers clearly showing attractive

valuations and considerable potential for capital gains over

the next few years as the current clouds affecting the outlook

hopefully clear. For more details on the drivers of

performance during the period please refer to the Portfolio

Manager’s review.

Revenue and dividends

In June of this year, the Board was pleased to announce an

increased interim dividend of 5.0 pence per share which

represented a 32% increase on the interim dividend paid in

2021. Following a significant recovery in portfolio income, we

have declared a final dividend of 14 pence per share for the

year ended 30 September 2022. The proposed final dividend,

combined with the interim dividend of 5.0 pence per share

already paid during the year, brings total dividends for the

year to 19 pence per share, a level which is covered by

current year earnings, and an increase of 28.4% in dividends

declared in respect of the previous financial year. This total

dividend is the largest annual distribution to shareholders for

the Company to date. At the current share price of 553 pence

(as at 5 December 2022) this represents a yield of 3.4%. A

resolution to approve the payment of the final dividend for

the year ended 30 September 2022 will be proposed at the

forthcoming Annual General Meeting (“AGM”). If the

resolution is passed, the dividend will be paid on 27 February

2023 to shareholders on the register on 13January 2023.

Gearing

At the year end, net gearing was 10.8% (2021: 7.7%), which

comprised the Company’s £25 million loan with Scotiabank

Europe plc, maturing in February 2023. As disclosed in the

Half-Year Report, the Board also approved an additional £10

million three-year revolving loan facility with Scotiabank in

addition to the existing £25 million three-year term loan. It is

expected that the Manager will continue to use this gearing

to take advantage of attractive new investment opportunities

and to participate in capital raisings by portfolio companies.

The Board is currently exploring options to replace the £25

million facility upon its expiration in February 2023 and still

believes in the long-term attractiveness of gearing, but needs

to be mindful of the increased cost of debt at present.

Discount management

During the period the Company’s discount to NAV widened

from -7.8% to -11.4% at period end, averaging -8.0%. The

Board continues to actively monitor the level of the

Company’s discount and bought back shares during the

period when the discount was considered to be unduly wide.

The Company bought back a total of 485,000 shares during

the period between 27 April and 20 May 2022 with this

activity being accretive to the Trusts net asset value.

In order to facilitate future buybacks should we deem them

to once again be appropriate, we propose that the

Company’s share buyback authorities be renewed at the

forthcoming AGM and that any shares so purchased be

cancelled or held in treasury for potential reissue at a

premium to NAV.

Environmental, Social and Governance

(“ESG”)

The Board recognises the continued importance of ESG

concerns to investors. ESG considerations have been

embedded within the Schroders investment process for over

20 years and the degree of engagement that has occurred

with investee companies on areas of investor concern and

ways in which improvements can be made can be clearly

demonstrated. The board believes that such engagement can

bring about improved valuations of companies to the benefit

of shareholders. In addition, while the Company is not

managed with a specific ESG mandate, the Board is pleased

to report that the portfolio has a carbon intensity of around

half that of its benchmark. More details of the Manager’s

approach to ESG can be found on pages 13 to 16 of the

Strategic Report.

Board Changes

In line with the Board’s tenure policy, Clare Dobie retired from

the Board on 15 September 2022 following nine years as a

director of the Company. I would like to thank Clare for her

outstanding contribution and commitment to the Board. We

were delighted to appoint Helen Galbraith to the Board in

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Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Chairman’s Statement

April 2022, who brings a wealth of experience in the asset

management industry to the Board.

Annual General Meeting

The Company’s AGM will be held at 12.00 noon on Tuesday,

21 February 2023. We encourage shareholders to attend in

person and, if unable to, to cast their votes by proxy. The

AGM will include a presentation by the Manager on the

prospects for the UK market and the Company’s investment

strategy, and will provide an opportunity for shareholders to

ask questions of the Board and the Manager. The meeting

will be held at the Manager’s office at 1 London Wall Place,

London, EC2Y 5AU.

It will also be available to watch online and the details are set

out below. Any shareholders planning on attending the AGM

will also be able to watch the Manager’s presentation. To sign

up to watch the AGM and presentation, please click on this link

https://schroders.zoom.us/webinar/register/WN_Zy1kUakRS_

WRiTD-sxsLsA. By using a webinar, I hope more shareholders

and interested parties will be able to listen to, and ask

questions of, the Manager.

In addition to the presentation at the AGM, Jean Roche will

also be presenting a separate webinar at 11.00am on

Tuesday 7 February 2023, and all shareholders are

encouraged to sign up to hear the fund manager’s views. To

to receive details of how to join

Sunil.Kler@Schroders.com.

Outlook

The period under review has undoubtedly been a challenging

one for the Company with sentiment towards the UK

deteriorating as global and domestic headwinds

strengthened. The prospect of high and sustained inflation,

rising interest rates, and a looming recession will

undoubtedly present a challenging backdrop at least in the

short term for companies, investors, and households looking

forwards. Political and policy chaos has only heightened the

economic uncertainty. There can be no hiding from the fact

that the challenges facing the UK have not been this

substantial for many a year. However, out of adversity can

come considerable opportunity.

Looking forwards at the prospects for UK mid-caps, there are

reasons for optimism despite the turbulent backdrop and

recent equity market weakness. Current valuations would

suggest that the market has already priced in a lot of the

prevailing bad news with small and mid cap stocks having

underperformed large caps meaningfully during the period.

Valuations remain extremely attractive relative to history and

your Portfolio Manager feels confident that many of the

companies in your portfolio are well placed to thrive in this

challenging environment. This could be through their ability

to pass through input cost pressures to their prices or by

being market leaders in niche fields with services and

products with clear competitive advantages or barriers to

entry.

In addition, M&A activity is likely to continue as overseas

firms see opportunity to expand their operations into the UK

at extremely attractive valuations with domestically focused

mid-caps likely to attract the most attention. Shareholders in

many companies will continue to benefit from ongoing share

buyback programs as management teams recognise the

value in their own shares at current levels and indeed

management are also personally buyers of their own

company stock.

In short, the Board believes that weakness in the UK mid-cap

area over the last twelve months should be seen as

presenting attractive investment opportunities over the

medium and longer-term. Your Portfolio Manager will

continue to diligently seek out those companies with clear

pricing power who are best able to sustain themselves in the

short term and emerge as market leaders through the

current cycle and beyond.

Robert Talbut

Chairman

5December 2022

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Schroder UK Mid Cap Fund plc

Market Background

The UK’s mature, slower growing large cap companies

performed well over the period, underpinning the broader

UK equity market. This resilience masked very poor

performance from small and mid-cap equities (smids), the

extent of whose underperformance against large caps over

the period was rare in history. The divergence occurred

against the backdrop of a strong US dollar, a positive for

more internationally diversified UK large caps, and global

shortages and supply chain issues as activity bounced back

sharply following Covid lockdowns. Soaring energy and food

costs following Russia’s invasion of Ukraine added further

impetus to interest rate hikes as inflation hit multi-decade

highs in many developed countries, including the UK.

All the major developed central banks increased interest rates

materially after the Bank of England became the first G7

monetary authority to hike from historically low levels. UK

smids are home to many fast-growing companies in new and

emerging industries whose valuations have come under

intense pressure due to rising interest rates. Higher interest

costs have also squeezed consumers already struggling to

cope with inflation, further curtailing spending, which

disproportionately hit smids. Market dislocation also led to an

investor preference for liquidity, which again favoured larger

stocks. These trends were exacerbated towards the end of

the period as the pound retreated to an all-time low against

the dollar, partly on the back of political uncertainty.

Portfolio Performance

The portfolio NAV per share underperformed the Mid 250

Index total return over the 12-month period. Net gearing was

the main driver of negative relative returns. At the end of the

period the discount was 11.4%, which has narrowed from

15.0% at the end of March.

Speciality chemicals business Synthomer was the lead

detractor over the year. The company cut earnings forecasts

largely as a result of ongoing destocking in medical nitrile

rubber glove markets. Following the creation of a new

division through the acquisition of US chemicals company

Eastman Chemical Company’s specialist adhesives business

in the US, Synthomer is better diversified, both

geographically and from a product perspective. However, it

has a weaker balance sheet than before. With an active

divestment strategy now underway alongside a cash saving

programme, suspension of the dividend, newly-announced

financing from UK Export Finance, and relaxation of banking

covenants, it is reasonable to expect to see an improvement

in the shares’ performance.

Media company Future also underperformed despite small

upgrades to earnings expectations this year. The shares

suffered a de-rating alongside other growth stocks and amid

fears around the outlook for the digital advertising market.

Towards the end of the period, the announcement that the

very successful CEO may retire at the end of 2023 after ten

years at the helm, further impacted confidence. The group’s

ability to deliver targeted audiences, both online and in print,

to a wide range of advertisers in niche interest areas from

pets to photography, PCs to pianos, remains a strength, as

does a strong bench of talent around the CEO and, now, a

very supportive valuation.

Online gaming group 888 was another detractor over the

period as the UK regulatory uncertainty, which we had

anticipated would be resolved this year, persisted. Although

higher than expected cost synergies from the William Hill

deal in the UK are helping to offset interest costs, the level of

financial leverage in the business in a rising interest rate

environment is discouraging the marginal investor (or new

investors). We have performed a stress test analysis that has

given us some comfort that 888 can pay down debt over the

coming years even in a weaker economic environment.

Importantly the debt is without a financial covenant, giving

management breathing space. Gambling activity has been

resilient in previous downturns and 888 have restructured

their UK business to focus on lower value, recreational

customers. The United States and Canada are structural

growth opportunities that we believe are not priced into the

shares.

IP Group, which invests in the commercialisation of IP with

technology, cleantech and life sciences applications,

underperformed over the period as falling technology

company valuations affected sentiment towards the

company’s shares. During the year, one of its portfolio

companies, First Light Fusion, achieved nuclear fusion,

underscoring the excitement which exists within the

company’s holdings.

Having been an underperformer of note in the last financial

year, it was pleasing to see our conviction in multi-utility

provider Telecom Plus rewarded this year. Management

upgraded earnings expectations as the company benefited

from rising retail energy prices linked to the Russia Ukraine

conflict, being able to offer a highly competitive energy deal

to prospective customers. This is thanks to its long-term

supply agreement with Eon (formerly npower), which

essentially secures wholesale energy at an agreed (c.15%)

discount, some of which Telecom Plus passes on to its

customers. The group also benefitted from the collapse of a

number of rival providers which went out of business as they

were unable to manage a spike in wholesale gas prices.

Alternative investment manager Man Group bucked the

decline in markets as robust net inflows followed strong

Manager’s Review

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Annual Report and Accounts

for the year ended 30 September 2022

performance from many of its products. Man announced a

second tranche of share buybacks underlining the strength of

the balance sheet and confidence in the valuation of its

shares. Buybacks are now common amongst our holdings

underscoring their attractive valuations and balance sheet

strength. This is the second consecutive year that Man has

appeared in our top five performers table.

A further positive contribution came from direct marketing

specialist, 4imprint. The company published very strong

interim results, citing “customer demand at record levels”,

driven by a post Covid recovery in its key North American

market. An increase in the effectiveness of its US TV

advertising spend has markedly boosted profitability. The

business model allows for growth together with strong cash

returns which has allowed the company to retain a net cash

balance sheet whilst growing the interim dividend by 167%.

Shares in gaming software group, Playtech, also performed

very well as the company became the subject of a three-way

bidding war. With the stock hitting five-year valuation highs,

we disposed of our position.

Stocks held – significant positive and negative

contributions versus the benchmark

Weight Relative

Positive Portfolio relative to perfor-

contributor weight

index mance

Impact

(%) (%) (%) (%)

Telecom Plus 2.5 +2.1 73.5 +1.7

Man Group 4.2 +3.0 41.5 +1.1

4Imprint 2.2 +1.9 41.5 +0.7

Playtech 0.2 –0.5 20.9 +0.6

QuinetiQ 2.6 +2.0 30.8 +0.6

Weight Relative

Negative Portfolio relative to perfor-

contributor weight

index mance

Impact

(%) (%) (%) (%)

Synthomer 1.7 +1.3 –49.9 –0.9

Future 2.6 +1.6 –37.4 –0.8

888 Holdings 1.1 +0.8 –51.4 –0.7

IP Group 1.9 +1.6 –30.1 –0.6

Dunelm 3.2 +2.8 –18.7 –0.6

Our underweight exposure in the travel and leisure sector

was positive for relative returns. Specifically, we did not hold

shares in airlines Wizz Air and Easyjet, tour operator Tui or

Cruise Ship company Carnival. It has been a turbulent year

for these businesses. Initial hopes of a post pandemic

recovery with the end to travel restrictions and testing has

been dwarfed by the headwinds of labour shortages, higher

expenses, and economic pressures of higher costs of living

on the consumer. All of this combined with, in many cases,

more shares in issue than before the pandemic, makes for an

unpalatable combination.

Not holding Lloyd’s insurer Beazley, a first mover in cyber

insurance, detracted from performance. We prefer exposure

to the cyber security structural growth theme via our holding

in cyber security technology company NCC, and the Roke

Manor division of our defence company holding, Chemring.

Lack of exposure to gas and electricity supply business

Centrica also weighed on relative returns as it benefitted

from high energy prices. Oil and gas producer Harbour

Energy also performed strongly for this reason. As

mentioned, we have exposure to this theme via our holding

in Telecom Plus which performed well during the period.

Stocks not held – significant positive and negative

contributions versus the benchmark

Weight Relative

Positive Portfolio relative to perfor-

contributor weight

index mance

Impact

(%) (%) (%) (%)

Wizz Air – –1.1 –41.6 +0.6

Easyjet – –1.2 –28.5 +0.4

Tui – –0.8 –33.6 +0.4

Carnival – –0.6 –38.6 +0.3

Marks & Spencer – –1.2 –19.4 +0.2

Weight Relative

Negative Portfolio relative to perfor-

contributor weight

index mance

Impact

(%) (%) (%) (%)

Beazley – –1.1 79.4 –0.6

Centrica – –1.1 63.4 –0.5

Harbour Energy – –0.5 111.2 –0.5

Homeserve – –0.9 59.3 –0.4

Mediclinic – –0.6 85.6 –0.3

Strategic Report

Manager’s Review

Source: Schroders, Factset, close 30September 2021 to close 30September 2022.

Weights are averages.

Performance of the stock in the index relative to the FTSE 250 (ex. ITs) Index return.

Impact is the contribution to performance relative to the FTSE 250 (ex. ITs) Index

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 7

Schroder UK Mid Cap Fund plc

Manager’s Review

Portfolio Activity

Attractively priced structural growth opportunities in market

niches continue to influence our new additions to the

portfolio.

We took advantage of share price weakness to initiate a new

holding in Watches of Switzerland. The company has

excellent relationships with luxury brands such as Rolex and

Patek Phillipe. The Rolex relationship dates back to 1919 and

is a key strength. Watches of Switzerland has a three-year

waiting list for new Rolex watches which should ensure

resilience through a more difficult economic environment.

There are strong growth prospects in the United States

where the luxury market is significantly under penetrated

compared to the UK due to a lack of investment in the retail

experience. Watches of Switzerland is taking market share

through both organic and acquisitive growth as the major

brands reallocate supply away from smaller retailers to

larger, better invested stores.

We initiated a new position in Just Group which we expect to

enjoy the structural growth opportunity in the UK bulk

annuity market. The company has a strong balance sheet and

is a likely beneficiary of a rising interest rate environment.

Keeping with structural growth opportunities, but with the

theme of digital innovation, we added Clarkson, the London-

based leading shipping services provider, whose innovative

digital platform, Sea/net, which brings together all aspects of

shipping data and services, is showing early signs of success.

We added two new positions in the industrials sector, Weir

Group and XP Power. Weir Group, provides equipment

(mainly slurry pumps) and aftermarket support for hardware

in the mining space. It has an interesting sustainability angle

and, we believe, will benefit from increased mining activity.

XPPower, is a critical power control solutions provider. The

company supplies the technology, semiconductor fab,

healthcare and industrial electronics industries, and is

exposed to the structural growth drivers within these

industries. Whilst the shares have been under some pressure

following the unexpected loss of a legal dispute in March

2022, the position’s size during the period has meant that it

has had little negative impact. We can, additionally, expect

the shares to recover as China emerges from pandemic

related disruption.

Moving to the energy sector, we added energy services

business Petrofac, which we have previously owned, back

into the portfolio. After settling a case with the UK’s Serious

Fraud Office the company can now bid for new business in

Saudi Arabia and appears high on the list to be reinstated for

work with state oil company Saudi Aramco.

Another new holding in the portfolio is UK independent

hospital group Spire Healthcare, which gives options to well-

off consumers amid long NHS waiting lists.

Lastly, we diversified our real estate exposure by building

positions in both Savills and Sirius Real Estate. We initiated

our position in the former to gain exposure to the theme of a

rapidly changing property landscape as opposed to the

owners of the underlying properties. We bought a position in

mixed use business park landlord and operator Sirius Real

Estate as it raised capital for an attractive UK deal which

complements its German business. The German operations

are poised to benefit, in the medium term, from a trend

towards near shoring.

Turning to sales over the period, we disposed of positions in

both Dechra Pharmaceuticals and Electrocomponents (now

renamed RS Group) following their promotions to the FTSE

100, in line with our stated policy of selling stocks which

reach this pinnacle.

M&A activity continues to remain elevated in the small and

mid-cap space. Takeovers from overseas investors in

particular, continue to be a driver for turnover in the

portfolio. UK based wealth manager, Brewin Dolphin,

received a bid with a premium of over 60% from Royal Bank

of Canada. Software company Micro Focus received a bid at

over 90% premium to the previous close from Canadian

software company OpenText. Both share prices were lifted

following the bids, and we have since sold our holdings.

Finally, gaming software provider, Playtech, was also subject

to multiple ex-UK takeover bids during the period, which

lifted the share price whereupon we decided to take profits

and disposed of our position.

We disposed entirely of our holding in provider for private

rented accommodation Grainger. We also exited a residual

stake in commercial real estate business CLS Holdings as we

expect to see further pressure in the office space, not only

from the shift in working patterns, but also from regulation.

We have diversified our (still underweight) real estate

exposure towards new holdings Savills and Sirius Real Estate.

We also sold our small position in alternative investment

manager and 2021 IPO, Petershill Partners. We anticipate

downward pressure on the valuations of underlying holdings

in the venture capital funded companies in which it holds

stakes, due to the squeeze on capital provision because of

structurally higher interest rates.

Outlook

There has been no respite this year as a UK mid cap investor.

Companies have seen 1970s-style pressure on supply chains

and inflation rates in their cost bases. Investors have

responded by adopting a risk off approach, moving into the

largest capitalised stocks for “safety”. This has had a

disproportionate impact on the SMID area of the market as

share prices have sold off aggressively: year to date, the

benchmark index has returned -27.7%.

There has been some pressure on earnings due to the above

factors and the Company’s portfolio has not escaped entirely

from these challenges. However, earnings growth for the

overall portfolio continues to be healthy even as stocks

continue to de-rate. Stock valuations are starting to attract

attention from several quarters, which we discuss further

below. This is a theme which we expect to continue,

especially as sterling weakness persists.

Putting some more numbers around this, 85 FTSE 250

companies’ share prices are down more than one third year

to date. This compares with 140 during the GFC in 2008,

when the global banking system failed.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 8

Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Manager’s Review

The team

The Company’s portfolio is co-managed by Jean Roche and Andy Brough.

Jean, who has been the lead manager since 2021, and was co-manager for four years before this, has over 20 years of

investment experience and holds the Chartered Financial Analyst designation, as well as an MSc in Financial and Industrial

Mathematics. She was previously named a Wall Street Journal analyst of the year based on her stock picking skills.

Number of FTSE 250 constituents whose share

prices have fallen by over a third

Source: Datastream Refinitiv, Schroders. Data as at 02November 2022.

Calendar year data shown for all years, except 2022, where value is based

on year to date.

We note that three types of market participants seem most

willing to take advantage of this opportunity. These are

private equity and strategic corporate acquirors, particularly

North American ones, management teams via share

buybacks, and company directors.

• UK SMIDs which have been acquired or approached

since the beginning of the year include Brewin Dolphin,

Micro Focus, Playtech and Ted Baker, as mentioned

above. The list goes on, however, and includes both

established mid cap companies such as Euromoney and

Homeserve and more recent IPOs Darktrace and The

Hut.

• A significant proportion, fifteen, of our c. fifty holdings

are currently buying back shares. These include Grafton,

Pets at Home, Redrow, Man Group and Spectris.

• Insider share purchases are becoming more frequent

and may be considered a significant indicator of

management confidence in their business.

Turning back to the UK economy, the big question is where

inflation goes from here and whether unfilled job vacancies

outnumbering those actively seeking work translates into

rising wage growth. Although energy and food inflation are

widely anticipated to ease next year, domestically driven

inflation remains a concern. It is notable that the Bank of

England now appears to be managing down expectations of

further significant rate rises. If this comes to pass, it should

help to quieten financial markets. Meanwhile, the consumer

will be cushioned to some extent by the government’s energy

package and residual excess savings.

As stock pickers, we are confident that the collective strength

of our holdings’ balance sheets will provide resilience in a

challenging economic environment. We are sticking to our

sell discipline, avoiding companies whose business models

are in danger of being disrupted while seeking out

companies which have the ability to reinvent themselves, or

which might be the next mid cap disruptor.

100

120

140

160

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 9

Schroder UK Mid Cap Fund plc

Investment Portfolio

as at 30 September 2022

Industrials

Spectris 8,208 4.0

Diploma 8,166 3.9

QinetiQ 7,260 3.5

Oxford Instruments 6,066 2.9

Chemring 5,758 2.8

Grafton 5,169 2.5

Redrow 3,752 1.8

Bodycote International 3,489 1.7

Keller 3,339 1.6

Redde Northgate 3,329 1.6

Paypoint 2,991 1.4

Tyman 2,352 1.1

Clarkson 2,104 1.0

International Workplace 2,019 1.0

Weir 1,857 0.9

XP Power 750 0.4

James Fisher 423 0.2

Total Industrials 67,032 32.3

Financials

Man Group 8,572 4.1

Safestore 6,044 2.9

IG Group 5,993 2.9

Paragon 4,935 2.4

Investec 4,355 2.1

Londonmetric Property 3,560 1.7

Savills 3,526 1.7

OSB 3,195 1.5

Sirius 1,408 0.7

Bridgepoint 1,276 0.6

Just Group 280 0.1

Total Financials 43,144 20.7

Consumer Services

Inchcape 7,979 3.8

4Imprint 6,780 3.3

Dunelm 6,607 3.2

Pets At Home 4,330 2.1

Future 3,954 1.9

888 Holdings 1,392 0.7

Watches of Switzerland 1,077 0.5

Total Consumer Services 32,119 15.5

Consumer Goods

Cranswick 6,159 3.0

Games Workshop 5,964 2.9

A.G. Barr 4,004 1.9

Crest Nicholson 2,673 1.3

Vistry 2,648 1.3

PZ Cussons 1,170 0.6

Ted Baker 451 0.2

Total Consumer Goods 23,069 11.2

Technology

Computacenter 6,182 3.0

IP Group 3,606 1.7

NCC 3,059 1.5

Ascential 2,670 1.3

Total Technology 15,517 7.5

Basic Materials

Victrex 6,513 3.1

Anglo Pacific 3,472 1.7

Synthomer 1,603 0.8

Total Basic Materials 11,588 5.6

Healthcare

Genus 4,186 2.0

Spire Healthcare 2,473 1.2

Total Healthcare 6,659 3.2

Telecommunications

Telecom Plus 6,130 3.0

Total Telecommunications 6,130 3.0

Oil & Gas

Petrofac 2,031 1.0

Total Oil & Gas 2,031 1.0

Total investments 207,289 100.0

£’000 % £’000 %

Stocks in bold are the 20 largest investments, which by value account for 61.4% (30September 2021: 56.2%) of total

investments. Investments are all equities.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 10

Business model

The Board has appointed the Manager, Schroder Unit Trusts Limited, to implement the investment strategy and to manage the

Company’s assets in line with the appropriate restrictions placed on it by the Board, including limits on the type and relative

size of holdings which may be held in the portfolio and on the use of gearing, cash, derivatives and other financial instruments

as appropriate. The terms of the appointment are described in more detail in the Directors’ Report. The Manager also

promotes the Company using its sales and marketing teams. The Board and Manager work together to deliver the Company’s

investment objective, as demonstrated in the diagram above. The investment and promotion processes set out in the diagram

are described in more detail on pages 12 to 14.

Annual Report and Accounts

for the year ended 30 September 2022

Strategic ReportStrategic Report

Strategic Review

Board

Strategy

Investment

Promotion

Competitiveness

Investor

value

—Responsible for overall

strategy and oversight

including risk management

—Activities focused on the

creation of shareholder

value

—Manager implements the

investment strategy by

following an investment

process

—Supported by strong

research and risk

management

environment

—Regular reporting and

interaction with the Board

Board is focused on ensuring:

—that the fees and Ongoing

Charges remain

competitive

—that the vehicle remains

attractive to investors

—satisfactory performance

of the Manager against the

Benchmark and peers

—Marketing and sales

capability of the Manager

—Support from the corporate

broker with secondary

market intervention to

support discount/premium

management

—Sets objectives, strategy

and KPIs

—Appoints Manager and other

service providers to achieve

objectives

—Oversees portfolio

management

—Monitors achievement of

KPIs

—Oversees the use of gearing

—Oversees discount

management

The Strategic Report sets out the Company’s strategy for delivering the investment objective (set out on the

inside front cover), the business model, the risks involved and how the Board manages and mitigates those

risks. It also details the Company’s purpose, values and culture, and how it interacts with stakeholders.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 11

Schroder UK Mid Cap Fund plc

Strategic Review

Investment objective

Schroder UK Mid Cap Fund plc’s (the “Company”) investment

objective is to invest in mid cap equities with the aim of

providing a total return in excess of the FTSE 250

ex Investment Trusts Index.

Investment policy

The Manager applies a high conviction approach, managing a

focused portfolio of resilient companies that are all capable of

delivering excess risk-adjusted returns with rising cash flows

and earnings. Fundamental research forms the basis of each

investment decision taken by the Manager.

The Company will predominantly invest in companies from

the FTSE 250 Index, but may hold up to 20% of its portfolio in

equities and collective investment vehicles outside the

benchmark index.

The Company may also invest in other collective investment

vehicles where desirable, for example to provide exposure to

specialist areas within the universe.

The Company has the ability to use gearing for investment

purposes up to 25% of total assets.

Investment restrictions and spread of

investment risk

Risk in relation to the Company’s investments is spread as a

result of the Manager monitoring the Company’s portfolio with

a view to ensuring that the portfolio retains an appropriate

balance to meet the Company’s investment objective. The key

restrictions imposed on the Manager include: (a) no more than

15% of the Company’s total net assets, at the date of

acquisition, may be invested in any one single company; (b) no

more than 10% of the value of the Company’s gross assets may

be invested in other listed investment companies unless such

companies have a stated investment policy not to invest more

than 15% of their gross assets in other listed investment

companies; (c) no more than 15% of the Company’s gross

assets may be invested in other listed investment companies

(including listed investment trusts); (d) no more than 15% of

the Company’s total net assets may be invested in open-ended

funds; and (e) no holding may represent 20% or more of the

equity capital of any company. No breaches of these

investment restrictions took place during the financial year.

The investment portfolio on page 10 demonstrates that, as at

30 September 2022, the Company held 53 investments spread

over a range of industry sectors. The Board therefore believes

that the objective of spreading investment risk has been

achieved and will continue to be achieved as the Manager

moves towards its target focused portfolio of 40-50

investments.

The Company’s financial instruments comprise its investment

portfolio, cash balances, bank borrowings and debtors and

creditors that arise directly from its operations such as sales

and purchases awaiting settlement and accrued income. The

financial risk management objectives and policies arising

from its financial instruments and the exposure of the

Company to risk are disclosed in note 20 on pages 51 to 55.

Gearing

The Company currently has in place a three year £25million

term loan, converted from a revolving credit facility on

28February 2020. During the year, as disclosed in the

Company's half year report, the Board approved an additional

£10 million three-year revolving loan facility with Scotiabank

in addition to the existing £25 million three-year term loan. In

rising markets the gearing amplifies increases in the NAV and

in falling markets any reduction in NAV would be amplified by

the gearing. The Company’s gearing continues to be operated

within pre-agreed limits so that it does not exceed 25% of

total assets. The flexibility to utilise gearing remains an

important tool in allowing the Manager to pursue investment

opportunities when appropriate. The Manager is currently in

discussion with several providers to secure new borrowing

facilities upon expiry of the current term loan in February

2023. If a new loan cannot be arranged with acceptable

terms, the Board is satisfied that the Company has sufficient

readily realisable assets to repay the term loan.

Promotion

The Company promotes its shares to a broad range of

investors who have the potential to be long-term supporters

of the investment strategy. The Company seeks to achieve

this through its Manager and corporate broker, which

promote the shares of the Company through regular contact

with both current and potential shareholders.

These activities usually consist of investor lunches, one-on-

one meetings, regional road shows and attendances at

conferences for professional investors. In addition, the

Company’s shares are supported by the Manager’s wider

marketing of investment companies targeted at all types of

investors. This includes maintaining close relationships with

adviser and execution-only platforms, advertising in the trade

press, maintaining relationships with financial journalists and

the provision of digital information on Schroders’ website.

The Board also seeks active engagement with investors and

meetings with the Chairman are offered to professional

investors where appropriate.

Shareholders are encouraged to sign up to the Manager’s

Investment Trusts update, to receive information on the

Company directly

https://www.schroders.com/en/uk/

privateinvestor/fund-centre/funds-in-focus/investment-

trusts/ schroders-investment-trusts/never-miss-an-update/

Details of the Board’s approach to discount management

may be found in the Chairman’s Statement and in the Annual

General Meeting – Recommendations on page56.

Key performance indicator – achievement

of the investment objective

The Board measures the development and success of the

Company’s business through achievement of its investment

objective, which is considered to be the most significant key

performance indicator for the Company.

Comment on performance against the investment objective

can be found in the Chairman’s Statement.

The Board continues to review the Company’s Ongoing

Charges to ensure that the total costs incurred by

shareholders in the running of the Company remain

competitive when measured against peer group funds. An

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 12

Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Strategic Review

Investment

Process

Positively and profitably

responding to disruption

Offering their stakeholders

something different, new or

better

Well managed, leading

ESG practices, strong

finances and clear

strategic vision

Exposed to a growing

market and a strong

market position

or potential

High conviction

40-50 stocks

Cha

llenge the

tus quo

Grow

sustainably

Resilie

Reinven

analysis of the Company’s costs, including the management

fee, directors’ fees and general expenses, is submitted to

each board meeting.

Investment process

In order to meet the investment objective, the Manager

applies a high conviction approach, managing a focused

portfolio of high quality companies that are all capable of

delivering excess risk-adjusted returns with rising cash flows

and earnings. These returns can come from “disruptors”,

which change the status quo within the marketplace, or from

established companies which can grow sustainably by

reinventing themselves in response to the disruption.

High conviction: We only invest where we believe there is a

very strong case to do so. We don’t carry any stocks where we

are not convinced that they will make a positive impact on

performance. This is reflected in a high active share.

Resilient: Resilience goes hand in hand with sustainability.

When we say resilience, we mean the ability of a business to

thrive for many years into the future. It is a driver of

investment returns and an approach for reducing risk. With

that in mind, we seek well-managed companies, where

management has a long-term vision, so that the business is

capable of generating risk adjusted returns in excess of cost

of capital. We are aiming for good quality longer-term returns

rather than risking money on a short-term anomaly. We

continue to see Games Workshop as a prime example of a

company demonstrating this quality, alongside Dunelm and

Pets at Home, particularly given the experiences of the

pandemic.

Challenging the status quo: Whether it be a service or a

product, or the delivery of this, the company is “doing it a

different way”. An example of this in the portfolio is fund

management company Man Group, which uses quantitative

methods to deliver novel investment ideas.

Growing sustainably: Sustainability in investment has

multiple facets. We seek out companies which are exposed to

a structural growth market and have a strong or potentially

strong position in this market. The company could also be

creating a new market (a “disruptor”). While the Company

does not automatically exclude sectors or particular

companies based on specific ESG metrics, ESG factors are

incorporated into the Managers’ investment decision making

process. Another form of sustainability comes from acting

responsibly, ethically and in an environmentally sound way

and Schroders’ proprietary Sustainability tools, SustainEx and

Context, assist us in examining whether companies are

targeting the correct behaviours. Examples in the portfolio

which tick both boxes include Victrex and Oxford

Instruments.

Reinvent: Established companies which do not continually

reinvent themselves are exposed to an existential threat in

the Manager’s view. Examples of companies which are

avoiding this threat in the portfolio include Grafton, which

has moved away from commodity products and into high

value niche markets, and Inchcape, which is assisting its

customers (the original equipment manufacturers), using its

technology and vast store of data, thus helping to modernise

the car distribution industry.

Sustainable growth is key to the

investment strategy

As Manager of the Company, we are stewards of capital,

focusing on the long-term prospects of the assets in which

we invest. We analyse each investment’s ability to create,

sustain and protect value to ensure that it can deliver returns

in line with our shareholders’ objectives. Sustainability is key

and that is reflected in our approach to investing.

Sustainable companies can continue for an extended period

or without interruption. They will possess many, if not all, of

the following characteristics:

• Capable of compound growth, often due to exposure to

a structural growth market, or gaining significant share

in a static or declining market

• Possessing a unique or rare business model, relative to

the investment universe

• Led by a proven, strong management team, or one

where we see potential for this

• With business practices which are transparent, clearly

laid out and explained

• Having accounting practices which are of a high standard

• Generating cash which allows the business to grow

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 13

• Underpinned by a strong or strengthening (thanks to

cash conversion) balance sheet

• Management will not destroy value, e.g. by making

frequent or unsuitable acquisitions or over gearing the

balance sheet.

ESG and sustainability benchmarking

Internal accreditation

• Sustainability is a building block of the investment

process and can be clearly evidenced

• The investment process applied by the portfolio

managers of Schroder UK Mid Cap Fund plc is ESG

“integrated”

In 2019 Schroders rolled out an internal ESG accreditation

process. As part of this, the portfolio's integration process has

been reviewed and approved every year since 2020. This

means that sustainability is a building block of the investment

process and can be clearly evidenced.

External benchmarking

We are pleased to report that the Company has been given a

Morningstar Sustainability Rating (“Globe” rating) of 5, out of

a maximum of 5. This means that it is in the top 10% of

Morningstar’s UK Equity Mid/Small Cap global category.

This fund-level rating evaluates how much ESG risk is

embedded in a fund relative to its Morningstar peer group,

i.e. the risk of something going wrong in an ESG context.

Under the widely accepted premise that the world is

transitioning to a more sustainable economy, Morningstar’s

view is that a risk-based evaluation is the best available

technique to assess the ESG characteristics of a fund.

Morningstar Sustainability Rating

If we look specifically at carbon intensity, one measure of this,

which we source from MSCI data, indicates that the

Company’s carbon intensity is around half that of the

benchmark. For this we use Scope 1+2 Carbon Intensity –

which is the average carbon intensity (tonnes CO2e/$ million

of revenues) of portfolio companies, weighted by position

size.

Extensive engagement with portfolio

companies

The Manager believes that, as external research on mid cap

companies is limited in scope and often in quality, this

provides an opportunity to deliver excess returns to

shareholders. Detailed analysis of company reports and

accounts, company meetings and visits, ESG analysis and

engagements and the use of industry experts are all a vital

part of the Manager’s research process. It is the application of

experience to these varied inputs, coupled with an extensive

global in-house analytical resource that the Board believes

gives the team the potential to deliver attractive returns.

As part of our process, we meet with company management

teams in advance of investing, as well as meeting with the

management of all portfolio companies at least once a year.

In many cases, we meet with them more often than this, as

well as engaging with Board members. In addition, we will

attend meetings with most management teams of

companies in this dynamic Benchmark over the course of a

year as we regularly review the investment cases of

companies not held in the portfolio. We believe it is just as

important to understand why you don’t hold something as it

is to know why you do.

Dedicated team of ESG specialists

We have always taken pride in our level of engagement with

companies. Our brand, as well as extensive analytical

resource, affords us the ability to regularly engage with

companies on all aspects of corporate strategy, including

specific ESG/sustainability matters.

We are fortunate at Schroders to have access to a dedicated

team of over 50 ESG/sustainability specialists. Their role is to

research ESG/sustainability themes within sectors, provide

proprietary analytics and tools, as well as to analyse and

engage with individual companies on these issues. We

engage with the output of this team regularly to ensure that

these factors inform the investment process.

The next table shows the number of company resolutions the

Company voted on in the last one and three years.

Year ended 3 years to

30 September 30 September

Proxy voting 2022 2022

Meetings 65 195

Resolutions 976 3,032

Voted against management 14 73

Did not vote 0 0

Source: Schroders

Carbon intensity

Tonnes of CO2 per $million sales

Fund Benchmark

Source: MSCI.

2021: Fund coverage: 93%, Benchmark coverage: 95%

2022: Fund coverage: 92%, Benchmark coverage: 96%

100

150

47.0 47.0

119.0

114.2

2021

2022

2021 2022

Schroder UK Mid Cap Fund plc

Strategic Review

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 14

Source: Schroders, September 2022.

Carbon Disclosure Project.

UN Principles for Responsible Investing.

UN Global Compact.

Strategy and Governance module.

For certain businesses acquired during the course of 2020 and 2021 we have not yet integrated

ESG factors into investment decision-making. There are also a small number of strategies for which ESG integration is not practicable or now possible, for example passive index tracking or legacy businesses or investments

in the process of or soon to be liquidated, and certain joint venture businesses are excluded.

’Issues such as climate change, resource scarcity, population growth and corporate failure have put responsible investment at the forefront of

esults for our

clients.’

Peter Harrison, Group Chief Executive, Schroders plc

1998 2001 2006 2007 2008 2011 2016 2017 2019 2020 2021 2022

Published corporate

governance policy

Published first socially

responsible policy

Became a CDP

signatory

Became a UNPRI

signatory

Top 5 in 2017

AODP Global

Climate 50 Asset

Manager Index

Developed responsible

fixed income policy

6 years of

A+ UNPRI

rating

Became a

UNGC

signatory

Developed

responsible real

estate investment

policy

Acquired majority

stake in

BlueOrchard

Launched first

sustainable

strategy

Launched SustainEx &

Climate Progress

Dashboard

Linked ESG to

revolving credit

facility

Business

operating on a

carbon-

neutral basis

Achieved

full ESG

integration

Science-based

targets

validated by

SBTi

Launched

CONTEXT

Natural Capital

Research

partnership

#1 in ShareAction

European RI asset

management survey

CEO letter to

FTSE350

companies on

climate change

First dedicated

ESG resource

Founding

Signatory to

Net Zero Asset

Managers

Initiative

Became a

member of

the UN Race

to Net Zero

Initiative

Published

Engagement

Blueprint

Published

Climate

Transition

Action Plan

Became a Natural Capital

Investment Alliance

member

Acquired 75%

shareholding in

Greencoat Capital

Partnership with

Akaria Natural

Capital

Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Strategic Review

Sustainability at Schroders

Our policies on sustainability are based on what we have learned from more than 20 years of including ESG analysis into the

investment decisions we take on behalf of our clients. The below chart shows a number of sustainability-related milestones hit

over the last 20 years at Schroders.

Source: Schroders. Most significant engagement topics over 3 years to 31 December 2020. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Most significant engagement topics

100

150

200

250

300

350

400

Remuneration Corporate Strategy Governance oversight Climate Change Human Capital

Management

Environmental Policy/

Strategy

Other - Environmental &

Social



Schroders Engagement

Extensive resources ensure we engage fully on ESG matters with UK companies

Schroder UK Equity team ESG engagements – past 3 years

A continually evolving approach

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 15

Purpose, Values and Culture

The Company’s purpose is to create long- term shareholder

value through the achievement of the investment objective.

The Board endeavours to create an open and constructive

dialogue with all stakeholders and its values are all centred

on achieving returns for shareholders in line with the

Company’s investment objective. The Board also promotes

the effective management or mitigation of the risks faced by

the Company and, to the extent it does not conflict with the

investment objective, aims to structure the Company’s

operations with regard to all its stakeholders and take

account of the impact of the Company’s operations on the

environment and community.

As the Company has no employees and acts through its

service providers, its culture is represented by the values and

behaviour of the Board and third parties to which it delegates

functions. The Board aims to fulfil the Company’s investment

objective by encouraging a culture of constructive challenge

with all key suppliers and openness with all stakeholders. The

Board is responsible for embedding the Company’s culture in

the Company‘s operations.

The Board recognises the Company’s responsibilities with

respect to corporate and social responsibility and engages

with its outsourced service providers to safeguard the

Company’s interests. As part of this ongoing monitoring, the

Board receives reporting from its service providers with

respect to their anti- bribery and corruption policies; Modern

Slavery Act 2015 statements; diversity policies; and

greenhouse gas and energy usage reporting.

Corporate and social responsibility

Diversity

As at 30 September 2022, the Board comprised two female

and two male directors. With respect to recruitment of non-

executive Directors, the Board recognises that its debates and

decision-making are greatly enriched by a wider range of

perspectives and thinking, fostered by diversity of experience

and knowledge, social and ethnic backgrounds, gender, and

cognitive and personal strengths. It will encourage any

recruitment agencies it engages to find a diverse range of

candidates that meet the objective criteria agreed for each

appointment. Appointments will always be based on merit

alone. Candidates for Board vacancies are selected based on

their skills and experience, which are matched against the

balance of skills and experience of the overall Board taking

into account the criteria for the role being offered.

Financial crime policy

The Company continues to be committed to carrying out its

business fairly, honestly and openly operates a financial crime

policy (available on the Company’s website), covering bribery

and corruption, tax evasion, money laundering, terrorist

financing and sanctions, as well as seeking confirmations that

the Company’s service providers’ policies are operating

soundly.

Modern Slavery Act 2015

As an investment trust, the Company does not provide goods

or services in the normal course of business and does not

have customers. Accordingly, the Directors consider that the

Company is not required to make any slavery or human

trafficking statement under the Modern Slavery Act 2015.

Greenhouse gas emissions and energy usage

As the Company outsources its operations to third parties, it

consumed less than 40,000 kWh during the year and so has

no greenhouse gas emissions, energy consumption or

energy efficiency action to report.

Under listing rule 15.4.29(R), the Company, as a closed ended

investment fund, is exempt from complying with the Task

Force on Climate related Financial Disclosures. The Company

is aware that the UK’s Climate Change Act places obligations

on the UK Government to decarbonise the economy by 2050

and to manage the impacts of climate change. Sustainability

is a key focus for the Company and further details are

provided in the ESG Report on pages 14 to 16.

Responsible investment

The Company delegates to the Manager the responsibility for

taking environmental, social and governance (“ESG”) issues

into account when assessing the selection, retention and

realisation of investments. The Board expects the Manager to

engage with investee companies on social, environmental

and business ethics issues and to promote best practice and

to exercise the Company’s voting rights in consideration of

these issues.

A description of the Manager’s policy on these matters can be

found on the Schroders website at

https://www.schroders.com/en/sustainability/active-

ownership/

The Board notes that Schroders believes that companies with

good ESG management can deliver superior returns over

time. Engaging with companies to understand how they

approach ESG management is an integral part of the

investment process. Schroders is compliant with the UK

Stewardship Code and its compliance with the principles

therein is reported on its website. Schroders became a

signatory to the UNPRI on 29October 2007, although it has

been considering ESG and sustainable investment since 2000.

After a delay in the UNPRI reporting cycle, Schroders has now

received its 2021 scores, reflecting its activity during 2020.

The 2021 reporting cycle introduced a new reporting and

assessment framework. Schroders has received scores of 4

and 5 stars across all of the modules in the new reporting

structure; which ranges from 1-5stars (5being the top score).

The Board has received reporting from the Manager on the

application of its policy.

Schroder UK Mid Cap Fund plc

Strategic Review

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 16

Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Strategic Review

Section 172 of the Companies Act 2006

During the period, the Board discharged its duty under section 172 of the Companies Act 2006 to promote the success of the

Company for the benefit of its members as a whole, having regard to the interests of its stakeholders. The Board has identified

its key stakeholders as the Company’s shareholders, the Manager and service providers. As an externally managed investment

trust, the Company has no employees, operations or premises and the impact of its own operations on the environment and

local community is through the impact its service providers or investee companies have. The Board take a long-term view of the

consequences of their decisions, as well as aim to maintain a reputation for high standards of business conduct and fair

treatment among the Company’s shareholders.

Fulfilling this duty naturally supports the Company in achieving its investment objective and helps to ensure that all decisions

are made in a responsible way, taking sustainability into account. In accordance with the requirements of the Companies

(Miscellaneous Reporting) Regulations 2018, the Directors explain below how they have individually and collectively discharged

their duties under section 172 of the Companies Act 2006 over the course of the reporting period and key decisions made

during the period and related engagement activities.

Stakeholder Stakeholder considerations, engagement and key decisions

Shareholders The Company welcomes attendance and participation from shareholders at the Annual General Meeting. If

attending, shareholders have the opportunity to meet the Directors and ask questions at the AGM. The

Board values the feedback and questions which it receives from shareholders. Shareholder relations are

given high priority by both the Board and the Manager and are detailed further in ‘Promotion’ on page 12.

In addition to the AGM, shareholders may also contact the Board by writing to the Company Secretary

(Company Secretary, Schroder UK Mid Cap Fund plc, 1 London Wall Place, London EC2Y 5AU), or emailing

amcompanysecretary@schroders.com. Shareholders are also encouraged to register for updates on the

Company on the Company’s website. To sign up please visit

https://www.schroders.com/en-

gb/uk/individual/nevermiss-an-update/.

The annual and half year results presentations, as well as monthly updates are available on the

Company’s website, with results announced via a regulatory news service. Feedback and/or questions

received from shareholders enable the Company to evolve its reporting which, in turn, helps to deliver

transparent and understandable updates.

The Manager communicates with shareholders periodically. All investors are offered the opportunity to

meet the Chairman and other Board members without using the Manager or Company Secretary as a

conduit, by writing to the Company’s registered office.

At Board meetings, the Directors receive updates on the share trading activity, share price performance

and any shareholders’ feedback, as well as any publications or comments in the press. The Board also

engages external providers, such as its broker, to obtain a more detailed view on specific aspects of

shareholder communications, such as developing more effective ways to communicate with investors.

The Board is responsible for discount and premium management and is cognisant of the prevailing

discount to NAV. During the year, the Board bought back shares to seek to maintain the price at which

the ordinary shares trade relative to their prevailing NAV and determined that current market conditions

had seen high, unforeseen levels of volatility which the Board does not regard as normal market

conditions.

For key decisions, the Board took into account feedback from shareholders either directly or through

service providers, including the Manager.

The views of shareholders are also taken into account by the Board when considering the levels of

gearing the Company employs and the renewal and cost of loan facilities.

Manager The Manager aims to continue to achieve consistent, long-term returns in line with the investment

objective and maintains a close and collaborative working relationship with the Board.

The Board maintains a constructive relationship with the Manager, encouraging open discussion and

recognising that the interests of shareholders and the Portfolio Managers are well aligned.

The Board invites the Manager to attend all Board meetings and receives regular reports on the

performance of the investments and the implementation of the investment strategy, policy and objective.

The portfolio activities undertaken by the Manager and the impact of decisions affecting investment

performance are set out in the Managers’ Review on pages 6 to 9.

The Management Engagement Committee reviews the performance of the Manager, its remuneration

and the discharge of its contractual obligations at least annually.

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Schroder UK Mid Cap Fund plc

Strategic Review

Principal Risks and Uncertainties, including Emerging Risks

The Board is responsible for the Company’s system of risk management and internal control and for reviewing its

effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company’s business as an investment

trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks,

which are monitored by the audit and risk committee on an ongoing basis. This system assists the Board in determining the

nature and extent of the risks it is willing to take in achieving the Company’s strategic objectives. Both the principal risks

and the monitoring system are also subject to robust review at least annually.

Last year the following risks were identified as emerging risks, which this year the Board has re-categorised as principal

risks: political risk, climate change risk and inflation risk. Additionally, the Board has considered the ongoing global supply

chain issues to represent a new principal risk. In all other respects, the Company’s principal risks and uncertainties have not

changed materially since the date of the previous Annual Report and are not expected to change materially for the current

financial year.

Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable,

and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

Actions taken by the Board and, where appropriate, its committees, to manage and mitigate the Company's principal risks

and uncertainties are set out in the table below.

Stakeholder Stakeholder considerations, engagement and key decisions

Service

providers

The Board maintains regular contact with its key external providers, both through the Board and

committee meetings, as well as outside of the regular meeting cycle. Their advice, as well as their needs

and views, are routinely taken into account.

During the period, the Management Engagement Committee continued to undertake reviews of the

third-party service providers and agreed that their continued appointment remained in the best interests

of the Company and its shareholders. The Committee periodically reviews the market rates for services

received, to ensure that the Company continues to receive high quality service at a competitive cost.

During the year, Directors attended a meeting to assess the internal controls of certain service providers

including the Company’s Depositary and Custodian HSBC, the share Delegated Administrator,

Computershare and Schroder’s Group Internal Audit. These meetings enable the Board to conduct due

diligence on operations and IT risks amongst service providers; and to receive up to date information

changes in regulation and market practice in the industry.

The Board regularly considers how it meets various regulatory and statutory obligations and follows

voluntary and best-practice guidance, while being mindful of how any decisions which it makes can affect

its shareholders and wider stakeholders, in the short and the long-term. The Board receives reports from

the Manager, Corporate Broker and Company Secretary on recent and proposed changes in regulation

and market practice, as well as any likely reputational threats which, in turn, influence the Board’s

decision-making process.

Risk Mitigation and management

Strategic

The requirements of investors change or diverge in such a

way as to diverge from the Company’s investment

objectives, resulting in a wide discount of the share price to

underlying NAV per share.

The appropriateness of the Company’s investment remit is

periodically reviewed and the success of the Company in

meeting its stated objectives is monitored.

The share price relative to NAV per share is monitored and

the use of buy back authorities is considered on a regular

basis.

Marketing and distribution activity is actively reviewed.

The Company engages proactively with investors.

The Company’s cost base could become uncompetitive,

particularly in light of open ended alternatives.

The ongoing competitiveness of all service provider fees is

subject to periodic benchmarking against their competitors.

Annual consideration of management fee levels is

undertaken.

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Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Strategic Review

Risk Mitigation and management

Investment management

The Manager’s investment strategy, if inappropriate, may

result in the Company underperforming the market and/or

peer group companies, leading to the Company and its

objectives becoming unattractive to investors.

Review of the Manager’s compliance with its agreed

investment restrictions, investment performance and risk

against investment objectives and strategy; relative

performance; the portfolio’s risk profile; and whether

appropriate strategies are employed to mitigate any

negative impact of substantial changes in markets. The

Manager also reports on the Company’s portfolio, and the

market generally.

Annual review of the ongoing suitability of the Manager,

including resources and key personnel risk.

Financial and market risk

The Company is exposed to the effect of market fluctuations

due to the nature of its business. A significant fall in equity

markets could have an adverse impact on the market value

of the Company’s underlying investments.

The risk profile of the portfolio is considered and

appropriate strategies to mitigate any negative impact of

substantial changes in markets are discussed with the

Manager. See note 20 of the notes to the accounts.

Custody

Safe custody of the Company’s assets may be compromised

through control failures by the depositary, including cyber

hacking.

The depositary reports on the safe custody of the Company’s

assets, including cash and portfolio holdings which are

independently reconciled with the Manager’s records.

The review of audited internal controls reports covering

custodial arrangements is undertaken.

An annual report from the depositary on its activities,

including matters arising from custody operations is received.

Gearing and leverage

The Company utilises credit facilities. These arrangements

increase the funds available for investment through

borrowing. While this has the potential to enhance

investment returns in rising markets, in falling markets the

impact could be detrimental to performance.

Gearing is monitored and strict restrictions on borrowings

are imposed: gearing continues to operate within pre-

agreed limits so as not to exceed 25% of total assets.

The Manager is currently in discussion with several providers

to secure new borrowing facilities upon expiry of the current

term loan in February 2023. If a new loan cannot be

arranged with acceptable terms, the Board is satisfied that

this does not represent a significant risk to the Company

since it has sufficient readily realisable assets to repay the

loan.

The Board also reviews the cost of gearing.

Accounting, legal and regulatory

In order to continue to qualify as an investment trust, the

Company must comply with the requirements of section

1158 of the Corporation Tax Act 2010.

Breaches of the UK Listing Rules, the Companies Act or

other regulations with which the Company is required to

comply, could lead to a number of detrimental outcomes.

The confirmation of compliance with relevant laws and

regulations by key service providers is reviewed.

Shareholder documents and announcements, including the

Company’s published annual report are subject to stringent

review processes.

Procedures are established to safeguard against the

disclosure of inside information.

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Schroder UK Mid Cap Fund plc

Strategic Review

Risk Mitigation and management

Service provider

The Company has no employees and has delegated certain

functions to a number of service providers. Failure of

controls, including as a result of cyber hacking, and poor

performance of any service provider, could lead to

disruption, reputational damage or loss.

Service providers are appointed subject to due diligence

processes and with clearly-documented contractual

arrangements detailing service expectations.

Regular reports are provided by key service providers and

the quality of their services is monitored.

Review of annual audited internal controls reports from key

service providers, including confirmation of business

continuity arrangements and IT controls is undertaken.

Cyber

The Company’s service providers are all exposed to the risk

of cyber attacks. Cyber attacks could lead to loss of personal

or confidential information or disrupt operations.

Service providers report on cyber risk mitigation and

management at least annually, which includes confirmation

of business continuity capability in the event of a cyber

attack.

Political risk

This includes trade wars, regional tensions and UK political

risks specifically.

The Board continues to monitor the impact of the UK’s

departure from the European Union and to assess the

potential consequences for the Company’s future activities.

The Board is also mindful that changes to public policy in

the UK could impact the Company in the future.

Climate change risk

A failure to understand the pricing of assets affected by

climate change or a lower demand for impacted assets

could lead to poor investment decisions or more volatile

pricing as asset prices adjust to reflect the increasing

regulation of carbon emissions.

The Manager has developed a range of proprietary tools to

better understand the impacts of climate change on the

portfolio. The investment process applied by the portfolio

managers is ESG “integrated”. The Manager monitors the

emissions of investee companies and can engage with

companies to reduce their emissions or aim to invest in

companies committed to reaching net zero carbon

emissions. The Board receives updates from the Manager at

Board meetings and in 2022 held a session with the

Manager and the Schroders sustainability team to discuss

ESG matters, including climate change. The Board has

challenged the Manager regarding the need to carefully

consider and monitor sustainability and environmental and

societal impacts when assessing investment opportunities,

in addition to the well founded attention to good corporate

governance principles, which have been in place for many

years.

Inflation & Global supply chain risk

Rising supplier costs and availability of supply.

The Board has, in conjunction with the Manager, considered

the risks relating to elevated levels of price inflation,

generally, together with the evolution in the way that supply

chains are operating and the concomitant risks of rising

supplier costs and availability of supply. It is the Board’s view

that the complexion of these risks has changed over the

past year in a way that requires them now to be assessed as

principal risks. The key mitigation to these risks comes from

diligent appraisal and monitoring of investments by the

Manager, including engagement with the management of

investee companies, together with a critical assessment of

investee companies’ ability to pass on rising costs to

customers as a result of their pricing power and strong

market positions alongside their ability to control costs.

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Annual Report and Accounts

for the year ended 30 September 2022

Strategic Report

Strategic Review

Risk assessment and internal controls review by the Board

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key

service providers, and ensures regular communication of the results of monitoring by such providers to the audit and risk

committee, including the incidence of significant control failings or weaknesses that have been identified at any time and

the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the

Company’s performance or condition.

No significant control failings or weaknesses were identified from the audit and risk committee’s ongoing risk assessment

which has been in place throughout the financial year and up to the date of this report.

A full analysis of the financial risks facing the Company is set out in note 20 to the accounts on pages 51 to 55.

Viability statement

The directors have assessed the viability of the Company over

a five year period, to 30 September 2027, taking into account

the Company’s position at 30 September 2022 and the

potential impact of the principal risks and uncertainties it

faces for the review period.

A period of five years has been chosen as the Board believes

that this reflects a suitable time horizon for strategic

planning, taking into account the investment policy, liquidity

of investments, potential impact of economic cycles, nature

of operating costs, dividends and availability of funding.

In its assessment of the viability of the Company, the

directors have considered each of the Company’s principal

risks and uncertainties detailed on pages 18 to 20 and in

particular the impact of a significant fall in UK equity markets

on the value of the Company’s investment portfolio. The

directors have also considered the Company’s income and

expenditure projections and the fact that the Company’s

investments comprise readily realisable securities which can

be sold to meet funding requirements if necessary and on

that basis consider that five years is an appropriate time

period.

The directors have also considered a stress test which

represents a severe but plausible scenario along with

movement in foreign exchange rates. This scenario assumes

a severe stock market collapse and/or exchange rate

movements at the beginning of the five year period, resulting

in a 50% fall in the value of the Company’s investments and

investment income and no subsequent recovery in either

prices or income in the following five years. For this purpose

it is assumed that the Company continues to pay an annual

dividend in line with current levels and that the borrowing

facility remains available and remains drawn, subject to the

gearing limit. The Company’s term loan expires on

28February 2023. If a new loan cannot be arranged with

acceptable terms, the Board is satisfied that the Company

has sufficient readily realisable assets to repay the loan.

The Company’s investments comprise highly liquid, large,

listed companies and so its assets are readily realisable

securities and could be sold to meet funding requirements or

the repayment of the gearing facilities should the need arise.

There is no expectation that the nature of the investments

held within the portfolio will be materially different in the

future.

The operating costs of the Company are predictable and

modest in comparison with the assets and there are no

capital commitments foreseen which would alter that

position.

Furthermore, the Company has no employees and

consequently no redundancy or other employment related

liabilities.

The Board reviews the performance of the Company’s service

providers regularly, including the Manager, along with

internal controls reports to provide assurance regarding the

effective operation of internal controls as reported on by

their reporting accountants. The Board also considers the

business continuity arrangements of the Company’s key

service providers.

The Board monitors the portfolio risk profile, limits imposed

on gearing, counterparty exposure, liquidity risk and financial

controls at its quarterly meetings.

The directors have concluded that there is a reasonable

expectation that the Company will be able to continue in

operation and meet its liabilities as they fall due over the five

year period of their assessment. Such conclusion is based on

the Company’s processes for monitoring operating costs, the

Board’s view that the Manager has the appropriate depth and

quality of resource to achieve superior returns in the longer

term, as well as the portfolio risk profile, limits imposed on

gearing, counterparty exposure, liquidity risk and financial

controls.

Going concern

Having assessed the Company’s principal risks, its current

financial position, its cash flows, its liquidity position and

Financial Reporting Council (“FRC”) guidance, the directors

consider it appropriate to adopt the going concern basis in

preparing the accounts as detailed in note 1(a) of the

accounts.

By order of the Board

Schroder Investment Management Limited

Company Secretary

5 December 2022

176289 Schroder UK Mid Cap Fund plc Annual Report Pt1.qxp_176289 Schroder UK Mid Cap Fund plc Annual Report Pt1 06/12/2022 09:49 Page 21

Schroder UK Mid Cap Fund plc

Board of Directors

Robert Talbut

Status: independent non-executive Chairman

Length of service: 6 years – appointed a director in February 2016

Experience: Mr Talbut is an experienced non-executive director having had a

range of investment, pensions, charity and insurance roles. He is currently

chairman of Shires Income plc and a director of JPMorgan American Investment

Trust plc and Pacific Assets Trust plc. He was formerly the chief investment officer

of Royal London Asset Management and has over 30 years of experience in the

asset management industry. He has represented the asset management industry

through the chairmanship of both the ABI Investment Committee and the Asset

Management Committee of the Investment Association. He was also a member of

the Financial Conduct Authority’s Listing Advisory Panel.

Committee membership: audit and risk, management engagement (chairman),

nomination (chairman) and remuneration committees

Current remuneration: £38,500 per annum

Shares held: 8,176*

Wendy Colquhoun

Status: independent non- executive director

Length of service: 2 years - appointed a director in January 2020

Experience: Ms Colquhoun is Chairman of Henderson Opportunities Trust plc and

a non-executive director of Capital Gearing Trust P.l.c. She is a qualified solicitor

and was formerly a senior corporate partner at CMS Cameron McKenna Nabarro

Olswang LLP where she specialised in financial services. She has extensive

experience of investment trusts having advised investment trust clients for over 25

years.

Committee membership: audit and risk, management engagement, nomination

and remuneration committees

Current remuneration: £26,000 per annum

Shares held: 2,000*

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 22

Governance

Annual Report and Accounts

for the year ended 30 September 2022

Board of Directors

Helen Galbraith

Status: independent non-executive director

Length of service: Appointed a director in April 2022

Experience: Mrs Galbraith is Audit Chair of CT UK High Income Trust plc, Vice

Chair of Orwell Housing Association and a Director of Orwell Homes. She was

formerly Head of Investor Relations at Aviva plc, Head of Global Equities at Aviva

Investors and has over 20 years' experience in the insurance and asset

management industry. She is a Chartered Financial Analyst and a passionate

advocate of financial education for children having established an online platform

and previously worked with charity MyBnk.

Committee membership: audit and risk, management engagement, nomination

and remuneration committees

Current remuneration: £26,000 per annum

Shares held: 5,500

Andrew Page

Status: senior independent director

Length of service: 8years – appointed a director in October 2014

Experience: MrPage was, until August 2014, the chief executive officer of The

Restaurant Group plc (“TRG”), a FTSE 250 company which operates 460 restaurants

throughout the UK. He has previously served as both chairman and senior

independent director on several listed and private equity-backed company boards.

He is senior independent director of JP Morgan Emerging Markets Investment

Trust plc. Prior to joining TRG in 2001, MrPage held a number of senior positions

within the leisure and hospitality sector including senior vice president with

InterContinental Hotels. Before that he spent sixyears working in Kleinwort

Benson’s Corporate Finance department. MrPage is a Chartered Accountant.

Committee membership: audit and risk (chairman), management engagement,

nomination and remuneration (chairman) committees

Current remuneration: £31,250 per annum

Shares held: 23,128*

Shareholdings are as at 5 December 2022. Full details of directors’ shareholdings, including those of persons closely associated as defined in the Market

Abuse Regulation, are set out in the Directors’ Remuneration Report on page 34.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 23

Schroder UK Mid Cap Fund plc

Directors’ Report

The directors submit their report and the audited financial

statements of the Company for the year ended

30 September 2022.

Directors and officers

The Directors as at 30 September 2022 and their biographies

are set out on pages 22 and 23.

Chairman

The Chairman is an independent non-executive director who

is responsible for leadership of the Board and ensuring its

effectiveness in all aspects of its role. The Chairman’s other

significant commitments are detailed on page 22.

Company Secretary

Schroder Investment Management Limited provides

company secretarial support to the Board and is responsible

for assisting the Chairman with board meetings and advising

the Board with respect to governance. The Company

Secretary also manages the relationship with the Company’s

service providers, except for the Manager. Shareholders

wishing to lodge questions in advance of the AGM are invited

to do so by writing to the Company Secretary at the address

given on the outside back cover.

Role and operation of the Board

The Board is the Company’s governing body; it sets the

Company’s strategy and is collectively responsible to

shareholders for its long-term success. The Board is

responsible for appointing and subsequently monitoring the

activities of the Manager and other service providers to

ensure that the investment objective of the Company

continues to be met. The Board also ensures that the

Manager adheres to the investment restrictions set by the

Board and acts within the parameters set by it in respect of

any gearing. The Strategic Review on pages 11 to 21 sets out

further detail of how the Board reviews the Company’s

strategy, risk management and internal controls and also

includes other information required for the Directors’ Report,

and is incorporated by reference.

A formal schedule of matters specifically reserved for

decision by the Board has been defined and a procedure

adopted for directors, in the furtherance of their duties, to

take independent professional advice at the expense of the

Company.

The Chairman ensures that all directors receive relevant

management, regulatory and financial information in a

timely manner and that they are provided, on a regular

basis, with key information on the Company’s policies,

regulatory requirements and internal controls. The Board

receives and considers reports regularly from the Manager

and other key advisers and ad hoc reports and information

are supplied to the Board as required.

The Board is satisfied that it is of sufficient size with an

appropriate balance of diverse skills and experience,

independence and knowledge of the Company, its sector and

the wider investment trust industry, to enable it to discharge

its duties and responsibilities effectively and that no

individual or group of individuals dominates decision

making.

The Board has approved a policy on directors’ conflicts of

interest. Under this policy, directors are required to disclose

all actual and potential conflicts of interest to the Board as

they arise for consideration and approval. The Board may

impose restrictions or refuse to authorise such conflicts if

deemed appropriate. No directors have any connections with

the Manager, shared directorships with other directors or

material interests in any contract which is significant to the

Company’s business.

Key service providers

The Board has adopted an outsourced business model and

has appointed the following key service providers:

Manager

The Company is an alternative investment fund as defined by

the AIFM Directive and has appointed Schroder Unit Trusts

Limited (“SUTL”) as the Manager in accordance with the

terms of an alternative investment fund manager (“AIFM”)

agreement. The AIFM agreement, which is governed by the

laws of England and Wales, can be terminated by either

party on sixmonths’ notice or on immediate notice in the

event of certain breaches or the insolvency of either party. As

at the date of this report no such notice had been given by

either party.

SUTL is authorised and regulated by the Financial Conduct

Authority (“FCA”) and provides portfolio management, risk

management, and administrative, accounting and company

secretarial services to the Company under the AIFM

agreement. The Manager also provides general marketing

support for the Company and manages relationships with

key investors, in conjunction with the Chairman, other board

members or the corporate broker as appropriate. The

Manager has delegated investment management and

administrative accounting and company secretarial services

to another wholly owned subsidiary of Schroders plc,

Schroder Investment Management Limited. The Company

Secretary has an independent reporting line to the Manager

and distribution functions within Schroders. The Manager

has in place appropriate professional indemnity cover.

The Schroders Group manages £752.4 billion (as at

30September 2022) on behalf of institutional and retail

investors, financial institutions and high net worth clients

from around the world, invested in a broad range of asset

classes across equities, fixed income, multi-asset and

alternatives.

For the financial year ended 30 September 2022, the

Manager was entitled to a management fee at a rate of

0.65% per annum of chargeable assets up to £250 million

and 0.60% of any amounts in excess of that. Chargeable

assets are defined as total assets less current liabilities other

than short-term borrowings, provided that if there are any

short-term borrowings, the value of cash up to the level of

such borrowings is deducted from the calculation of assets.

The management fee payable in respect of the year ended

30 September 2022 amounted to £1,623,000

(2021:£1,736,000), paid quarterly in arrears.

The Manager is also entitled to receive a fee for providing

administrative, accounting and company secretarial services

to the Company. For these services, for the year ended

30September 202

2 it received a fee of £144,000

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 24

Governance

Annual Report and Accounts

for the year ended 30 September 2022

(2021:£137,000), including VAT. The fee continues to be

subject to annual adjustment in line with changes in the

Retail Prices Index.

Details of all amounts payable to the Manager are set out in

note17 on page51.

The Board has reviewed the performance of the Manager

during the year under review and continues to consider that

it has the appropriate depth and quality of resource to

deliver superior returns over the longer term. Thus, the

Board considers that the Manager’s appointment under the

terms of the AIFM agreement, is in the best interests of

shareholders as a whole.

Depositary

HSBC Bank plc, which is authorised by the Prudential

Regulation Authority and regulated by the FCA and the

Prudential Regulation Authority, carries out certain duties of

a depositary specified in the AIFM Directive including, in

relation to the Company, as follows:

– safekeeping of the assets of the Company which are

entrusted to it;

– cash monitoring and verifying the Company’s cash flows;

and

– oversight of the Company and the Manager.

The Company, the Manager and the depositary may

terminate the depositary agreement at any time by giving

90days’ notice in writing. The depositary may only be

removed from office when a new depositary is appointed by

the Company.

Registrar

Equiniti Limited is the Company’s registrar. Equiniti’s services

to the Company include share register maintenance

(including the issuance, transfer and cancellation of shares

as necessary), acting as agent for the payment of any

dividends, management of company meetings (including the

registering of proxy votes and scrutineer services as

necessary), handling shareholder queries and

correspondence and processing corporate actions.

Revenue and final dividend

The net revenue return for the year, after finance costs and

taxation, was £7,823,000 (2021:£5,322,000), equivalent to a

revenue return per share of 22.43pence (2021:15.18pence).

The directors have recommended the payment of a final

dividend for the year of 14.0pence per share (2021:

11.0pence) payable on 27 February 2023. The dividend will

be payable to shareholders on the register on 13January

2023 and the ex-dividend date will be 12January 2023.

Compliance with the Association of

Investment Companies (“AIC”) Code of

Corporate Governance

The Board of the Company has considered the principles and

provisions of the AIC Code of Corporate Governance (the

“AIC Code”). The AIC Code addresses the Principles and

Provisions set out in the UK Corporate Governance Code (the

“UK Code”), as well as setting out additional Provisions on

issues that are of specific relevance to the Company.

The Board considers that reporting against the Principles

and Provisions of the AIC Code, which has been endorsed by

the FRC, provides more relevant information to shareholders.

The FCA requires all UK listed companies to disclose how

they have complied with the provisions of the UK Code. This

statement, together with the Statement of Directors’

Responsibilities, viability statement and going concern

statement set out on pages 35 and 21 respectively indicates

how the Company has complied with the principles of good

governance of the UK Code and its requirements on internal

control. The Strategic Report and Directors’ Report provide

further details on the Company's internal controls (including

risk management) governance and diversity policies.

The Company has complied with the Principles and Provisions

of the AIC Code throughout the year under review. The UK

Code includes provisions relating to the role of the chief

executive, executive directors’ remuneration and the need for

an internal audit function. For the reasons set out in the AIC

Code, the Board considers that these provisions are not

relevant to the position of the Company, being an externally

managed investment company. The Company has therefore

nothing to report in respect of these provisions.

The AIC Code is available on the AIC website

(

www.theaic.co.uk). It includes an explanation of how the AIC

Code adapts the Principles and Provisions set out in the UK

Code to make them relevant for investment companies. The

UK Code is available from the Financial Reporting Council’s

website at

www.frc.org.uk.

Committees

In order to assist the Board in fulfilling its governance

responsibilities, it has delegated certain functions to

committees. The roles and responsibilities of these

committees, together with details of work undertaken during

the year under review, are outlined over the next few pages.

The reports of the audit and risk committee, nomination

committee, management engagement committee and

remuneration committee are incorporated into and form

part of the Directors’ Report. Given the Board’s size and

composition, it considers all directors being members of its

delegated committees appropriate.

Other required Directors’ Report

disclosures under laws, regulations,

and the AIC Code

Status

The Company is domiciled in the UK and is an investment

company within the meaning of section 833 of the

Companies Act 2006.

The Company carries on business as an investment trust. Its

shares are listed and admitted to trading on the premium

segment of the main market of the London Stock Exchange. It

has been approved by HM Revenue & Customs as an

investment trust in accordance with section 1158 of the

Corporation Tax Act 2010, by way of a one-off application and

it is intended that the Company will continue to conduct its

affairs in a manner which will enable it to retain this status.

The Company is not a “close” company for taxation purposes.

Directors’ Report

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 25

Schroder UK Mid Cap Fund plc

Directors’ Report

Information included in Strategic Report

The Company’s disclosures on future developments and

carbon emissions are included in the Strategic Report on

pages 18 and 16 respectively.

Financial risk management

Details of the Company’s financial risk management

objectives and exposure to risk can be found in note 20 on

pages 51 to 55.

Share capital and substantial interests

As at the date of this report, the Company had 36,143,690

ordinary shares of 25p in issue. 1,562,500 shares were held

in treasury. Accordingly, the total number of voting rights in

the Company at the date of this report is 34,581,190. No

shares have been repurchased since the year end and the

date of this report. Further information is provided in note14

on page 49. All shares in issue rank equally with respect to

voting, dividends and any distribution on winding up. There

are no restrictions concerning the transfer of securities in the

Company; no special rights with regard to control attached

to securities; no restrictions on voting rights; no agreements

between holders of securities regarding their transfer known

to the Company; and no agreements to which the Company

is a party which might change or fall away on a change of

control or trigger any compensatory payments for Directors

following a successful takeover bid.

The Company is aware that certain changes to the interests

held in the Company of 3% or more of the voting rights

attaching to the Company’s issued share capital have taken

place since the last notification made by investors to the

Company. As a result, the following table is based on what

the Board believes to be the correct interests in the

Company, using the shareholder analysis prepared by

Richard Davies Investor Relations Limited, and which is

reviewed at every Board meeting.

As at

30 September % of total

2022 voting rights

Clients of Hargreaves

Lansdown, stockbrokers (EO) 3,853,217 11.14

Evelyn Partners 3,583,010 10.36

Clients of Interactive Investor (EO) 2,913,360 8.42

Charles Stanley Group plc 2,742,653 7.93

Clients of Redmayne Bentley,

stockbrokers 1,867,043 5.40

Rathbone Brothers PLC 1,693,127 4.90

Saba Capital Management 1,403,155 4.06

Allspring Global Investments 1,330,447 3.85

Clients of AJ Bell, stockbrokers (EO) 1,173,109 3.39

Source: Richard Davies Investor Relations Limited

Following the year end and at the date of this report, there

have been no changes to the interests disclosed above.

Provision of information to the auditor

The directors who held office at the date of approval of this

report confirm that, so far as each of them is aware, there is

no relevant audit information of which the Company’s

auditor is unaware; and each director has taken all the steps

that he or she ought to have taken as a director in order to

make himself or herself aware of any relevant audit

information and to establish that the Company’s auditor is

aware of that information.

Directors’ attendance at meetings

Four board meetings are usually scheduled each year to deal

with matters including: the setting and monitoring of

investment strategy; approval of borrowings and/or cash

positions; review of investment performance; the level of

discount of the Company’s shares to underlying NAV per

share; promotion of the Company; and services provided by

third parties. Additional meetings of the Board are arranged

as required.

The number of scheduled meetings of the Board and its

committees held during the financial year and the

attendance of individual directors is shown below. Whenever

possible all directors attend the AGM.

Audit Management

Nomination and Risk Engagement Remuneration

Director Board Committee Committee Committee Committee

Robert Talbut 4/4 1/1 2/2 1/1 1/1

Wendy Colquhoun 4/4 1/1 2/2 1/1 1/1

Clare Dobie* 4/4 1/1 2/2 1/1 1/1

Helen Galbraith** 2/2 1/1 1/1 1/1 1/1

Andrew Page 4/4 1/1 2/2 1/1 1/1

*Clare Dobie retired on 15 September 2022

**Helen Galbraith was appointed on 7 April 2022

In addition to the above meetings, the Board met once on an

ad-hoc basis during the year to discuss the Company’s

discount level and the Nomination Committee met once on

an ad-hoc basis to approve the appointment of Helen

Galbraith.

The Board is satisfied that the Chairman and each of the

other non-executive directors commits sufficient time to the

affairs of the Company to fulfil their duties as directors.

Directors’ and officers’ liability insurance and

indemnities

Directors’ and officers’ liability insurance cover was in place

for the directors throughout the year. The Company’s articles

of association provide, subject to the provisions of UK

legislation, an indemnity for directors in respect of costs

which they may incur relating to the defence of any

proceedings brought against them arising out of their

positions as directors, in which they are acquitted or

judgment is given in their favour by the court. This is a

qualifying third party indemnity policy and was in place

throughout the year under review for each director and to

the date of this report.

By order of the Board

Schroder Investment Management Limited

Company Secretary

5 December 2022

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 26

Governance

Annual Report and Accounts

for the year ended 30 September 2022

Audit and Risk Committee Report

The responsibilities and work carried out by the audit and risk committee during the year under review are set out in the

following report. The duties and responsibilities of the committee, which include monitoring the integrity of the Company’s

financial reporting and internal controls, are set out in further detail below, and may be found in the terms of reference which

are set out on the Company’s website, www.schroders.co.uk/midcap.

All directors are members of the committee. Andrew Page is the chairman of committee. The Chair of the Board is a member

of the Committee, and was independent on appointment. The Board has satisfied itself that at least one of the committee’s

members has recent and relevant financial experience and that the committee as a whole has competence relevant to the

sector in which the company operates.

The below table sets out how the committee discharged its duties during the year. The committee met twice during the year.

evaluation of the committee’s effectiveness and review of its terms of reference was completed during the year.

The committee identified one potentially significant financial reporting risk, which is unchanged from the prior period, being the

valuation and existence of investments, as well as several other financial reporting risks. Each of the matters considered during

the committee's review are outlined below.

Approach

The committee’s key roles and responsibilities are set out below.

Risks and Internal Controls

Financial Reports and Valuation

Audit

Principal risks

To establish a process for identifying,

assessing, managing and monitoring

emerging and principal risks of the

Company.

Financial statements

To monitor the integrity of the financial

statements of the Company and any

formal announcements relating to the

Company’s financial performance and

valuation. To review the half year report.

Audit results

To discuss any matters arising from the

audit and recommendations made by

the auditor.

Emerging risks and uncertainties

To ensure a robust assessment of the

Company’s emerging and principal risks

and procedures are in place to identify

emerging risks, and an explanation of

how these are being managed or

mitigated.

Going concern

To review the position and make

recommendations to the Board in

relation to whether it considers it

appropriate to adopt the going concern

basis of accounting in preparing its

annual and half-yearly financial

statements.

Auditor appointment, independence

and performance

To make recommendations to the Board,

in relation to the appointment, re-

appointment, effectiveness and removal

of the external auditor, to review their

independence, and to approve their

remuneration and terms of

engagement. Reviewing the audit plan

and engagement letter.

Ongoing risk review

Half year

report

Audit

planning

Audit

Annual

report

Post-audit

review

Application during the year

Risks and Internal Controls

Financial Reports and Valuation

Audit

Service provider controls

Reviewing the operational controls

maintained by the Manager, depositary

and registrar.

Recognition of investment income

Considered dividends received against

forecast and the allocation of special

dividends to income or capital.

Effectiveness of the independent

audit process and auditor

performance

Evaluated the effectiveness of the

independent audit firm and process

prior to making a recommendation that

it should be re-appointed at the

forthcoming AGM. Evaluated the

auditor’s performance against agreed

criteria including: qualification;

knowledge, expertise and resources;

independence policies; effectiveness of

audit planning; adherence to auditing

standards; and overall competence was

considered, alongside feedback from the

Manager on the audit process.

Professional scepticism of the auditor

was questioned and the committee was

satisfied with the auditor’s replies.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 27

Schroder UK Mid Cap Fund plc

Audit and Risk Committee Report

Recommendations made to, and approved by, the Board:

As a result of the work performed, the committee has concluded that the annual report for the year ended 30 September 2022,

taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the

Company’s position, performance, business model and strategy, and has reported on these findings to the Board. The Board’s

conclusions in this respect are set out in the Statement of Directors’ Responsibilities on page 35.

Having reviewed the performance of the auditors as described above, the committee considered it appropriate to recommend the

firm’s re-appointment. Resolutions to re-appoint KPMG LLP as auditor to the Company, and to authorise the directors to determine

their remuneration will be proposed at the AGM.

Application during the year

Risks and Internal Controls Financial Reports and Valuation Audit

Internal controls and risk

management

Consideration of several key aspects of

internal control and risk management

operating within the Manager, depositary

and registrar, including assurance

reports and presentations on these

controls.

It is considered that the Company does

not require an internal audit function,

principally because the Company

delegates its day-to-day operations to

third parties, which are monitored by the

Committee and provide control reports

on their operations annually.

Calculation of the investment

management fee and performance fee

Consideration of methodology used to

calculate the fees, matched against the

criteria set out in the AIFM agreement.

Auditor independence

The committee last undertook an audit

tender process in 2017 when KPMG LLP was

appointed as auditor in respect of the

financial year ended 30 September 2017.

The Company is required to tender the

external audit no later than for year ending

30 September 2027. In accordance with

professional and regulatory standards, the

senior statutory auditor responsible for the

audit is rotated at least every five years in

order to protect independence and

objectivity and to provide fresh challenge to

the business. This is the third year that the

senior statutory auditor, Gary Fensom, has

conducted the audit of the Company’s

financial statements.

There are no contractual obligations

restricting the choice of independent

auditor.

Compliance with the investment trust

qualifying rules in S1158 of the

Corporation Tax Act 2010

Consideration of the Manager’s report

confirming compliance.

Overall accuracy of the annual report

and accounts

Consideration of the draft annual report

and accounts and the letter from the

Manager in support of the letter of

representation to the auditor.

Audit results

Met with and reviewed a comprehensive

report from the auditor which detailed the

results of the audit, compliance with

regulatory requirements, safeguards that

have been established, and on their own

internal quality control procedures.

Principal risks

Reviewing the principal risks faced by the

Company and the system of internal

control.

Valuation and existence of holdings

Quarterly review of portfolio holdings

and assurance reports.

Meetings with the auditor

Met the auditors without representatives of

the Manager present. Representatives of

the auditors attended the committee

meeting at which the draft annual report

and accounts was considered.

Fair, balanced and understandable

Reviewed the annual report and accounts

to ensure that it was fair, balanced and

understandable.

Provision of non-audit services by the

auditor

The committee has reviewed the FRC’s

Guidance on Audit Committees and has

formulated a policy on the provision of non-

audit services by the Company’s auditor.

The committee has determined that the

Company’s appointed auditor will not be

considered for the provision of certain non-

audit services, such as accounting and

preparation of the financial statements,

internal audit and custody. The auditor may,

if required, provide other non-audit services

which will be judged on a case-by-case basis.

The auditor did not provide any non-audit

services to the Company during the year.

Going concern and viability

Reviewing the impact of risks on going

concern and longer-term viability.

Consent to continue as auditor

KPMG LLP indicated to the committee their

willingness to continue to act as auditor.

Andrew Page

Chairman of Audit and Risk Committee

5 December 2022

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 28

Governance

Annual Report and Accounts

for the year ended 30 September 2022

The committee undertook a detailed review of the

Manager’s performance and agreed that it has the

appropriate depth and quality of resource to deliver

superior returns over the longer term.

The committee reviewed the management fee

structure and agreed that no changes would be

proposed.

The committee also reviewed the terms of the AIFM

agreement and agreed they remained fit for purpose.

The committee reviewed the other services provided by

the Manager and agreed they were satisfactory.

The annual review of each of the other service

providers was satisfactory.

Oversight of other service providers

The committee reviews the performance and

competitiveness of the following service providers on at

least an annual basis:

• Depositary and custodian

• Corporate broker

• Registrar

• Lender

The committee also receives a report from the

Company Secretary on ancillary service providers, and

considers any recommendations.

Oversight of the Manager

The committee:

• reviews the Manager’s performance, over the short-

and long-term, against the Benchmark, peer group

and the market.

• considers the reporting it has received from the

Manager throughout the year, and the reporting

from the Manager to the shareholders.

• assesses management fees on an absolute and

relative basis, receiving input from the Company’s

broker, including peer group and industry figures, as

well as the structure of the fees.

• reviews the appropriateness of the Manager’s

contract, including terms such as notice period.

• assesses whether the Company receives appropriate

administrative, accounting, company secretarial and

marketing support from the Manager.

Application during the year

Management Engagement Committee Report

The management engagement committee is responsible for (1) the monitoring and oversight of the Manager’s performance

and fees, and confirming the Manager’s ongoing suitability, and (2) reviewing and assessing the Company’s other service

providers, including reviewing their fees. All directors are members of the committee. Robert Talbut is the chairman of the

committee. Its terms of reference are available on the Company’s website, www.schroders.co.uk/ukmidcap.

Approach

Recommendations made to, and approved by, the Board:

• That the ongoing appointment of the Manager on the terms of the AIFM agreement was in the best interests of

shareholders as a whole.

• That the Company’s service providers’ performance remained satisfactory.

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Schroder UK Mid Cap Fund plc

Selection and induction

• Committee prepares a job

specification for each role, which

is shared with an independent

recruitment firm. For the

Chairman and the chairs of

committees, the committee

considers current board

members too.

• Job specification outlines the

knowledge, professional skills,

personal qualities and

experience requirements.

• Potential candidates assessed

against the Company’s diversity

policy.

• Committee discusses the long

list, invites a number of

candidates for interview and

makes a recommendation to the

Board.

• Committee reviews the induction

and training of new directors. On

appointment, directors receive a

full, formal and tailored

induction. Directors are also

regularly provided with key

information on the Company’s

policies, regulatory and statutory

requirements and internal

controls. Changes affecting

directors’ responsibilities are

advised to the Board as they

arise. Directors also regularly

participate in relevant training

and industry seminars.

• The terms of directors’ letters of

appointment are available for

inspection at the Company’s

registered office address during

normal business hours and

during the AGM at the location of

such meeting.

Board evaluation

• Committee assesses each director annually

and considers whether an external

evaluation should take place.

• Evaluation focuses on whether each director

continues to demonstrate commitment to

their role and provides a valuable

contribution to the Board during the year,

taking into account time commitment,

independence, conflicts and training needs.

• Following the evaluation, the committee

provides a recommendation to shareholders

with respect to the annual re-election of

directors at the AGM.

• All directors retire at the AGM and their

election, or re-election, as appropriate is

subject to shareholder approval.

Succession

• Having considered diversity and

the need for regular refreshment

the Board’s policy is that

directors’ tenure, including the

Chairman of the Board, will be for

no longer than nine years, except

in exceptional circumstances,

and that each director will be

subject to annual re-election at

the AGM.

• Committee reviews the Board’s

current and future needs at least

annually. Should any need be

identified the committee will

initiate the selection process.

• Committee oversees the

handover process for retiring

directors.

Nomination Committee Report

The nomination committee is responsible for (1) the recruitment, selection and induction of directors, (2) their assessment

during their tenure, and (3) the Board’s succession. All directors are members of the committee. Robert Talbut is the chairman

of the committee. Its terms of reference are available on the Company’s website, www.schroders.co.uk/ukmidcap.

Approach

Oversight of directors

Selection

Induction

Annual

evaluation

Annual review

of succession

policy

Application

of succession

policy

For application, see page 31

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 30

Governance

Annual Report and Accounts

for the year ended 30 September 2022

Succession

• The committee reviewed the

board tenure policy and agreed it

was still fit for purpose.

• Claire Dobie retired in September

2022 in accordance with the

Board’s policy on tenure.

• Helen Galbraith was appointed in

April 2022 and will be subject to

election at the next AGM in

accordance with the Company’s

Articles of Association.

Board evaluation and directors’ fees

• The Board and committee evaluation process

was undertaken in September 2022 using a

comprehensive questionnaire which was

completed by all Directors.

• The evaluation of the Chairman was led by the

SID, who held a subsequent meeting with the

Chairman to discuss the results..

• The committee also reviewed each director’s

time commitment and independence by

reviewing a complete list of appointments,

including pro bono not for profit roles, to

ensure that each director remained free from

conflict and had sufficient time available to

discharge each of their duties effectively. All

directors were considered to be independent

in character and judgement.

• The committee considered each director’s

contributions, and noted that in addition to

extensive experience as professionals and

non-executive directors, each director had

valuable skills and experience, as detailed in

their biographies on pages 22 and 23, which

was supported by the completion of a

detailed skills matrix by each Director.

• Based on its assessment, the committee

provided individual recommendations for

each director’s election, or re-election, as

appropriate.

Selection and induction

• The committee commenced its

search process for a new director

and engaged Trust Associates, an

external search firm with no

other connection to the Board or

individual directors.

Nomination Committee Report

Recommendations made to, and approved by, the Board:

• That all directors continue to demonstrate commitment to their roles, provide a valuable contribution to the

deliberations of the Board, contribute towards the Company’s long-term sustainable success, and remain free from

conflicts with the Company and its directors, so should all be recommended for election, or re-election, as

appropriate by shareholders at the AGM.

• The appointment of Helen Galbraith as a non-executive director in April 2022.

Application during the year

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 11:32 Page 31

Schroder UK Mid Cap Fund plc

Introduction

The following remuneration policy is currently in force and is

subject to a binding vote every three years. The next vote will

take place at the forthcoming AGM in 2023 and the current

policy provisions will continue to apply until that date. An

ordinary resolution to approve the directors’ remuneration

policy will be put to shareholders at the forthcoming AGM

(no changes are proposed). The below Directors’

Remuneration Report is subject to an annual advisory vote.

An ordinary resolution to approve this report will be put to

shareholders at the forthcoming AGM.

At the AGM held on 28 January 2020, 99.91% of the votes cast

(including votes cast at the Chairman’s discretion) in respect

of approval of the Directors’ Remuneration Policy were in

favour while 0.09% were against. 2,706 votes were withheld.

At the AGM held on 9 February 2022, 99.84% of the votes

cast (including votes cast at the Chairman’s discretion) in

respect of approval of the Directors’ Remuneration Report for

the year ended 30September 2021 were in favour while

0.16% were against. 49,870votes were withheld.

Directors’ remuneration policy

It is the Board’s policy to determine the level of directors’

remuneration having regard to amounts payable to

non-executive directors in the industry generally, the role

that individual directors fulfil in respect of Board and

committee responsibilities, and time committed to the

Company’s affairs, taking into account the aggregate limit of

fees set out in the Company’s articles of association. This

aggregate level of directors’ fees is currently set at £200,000

per annum and any increase in this level requires approval by

the Board and the Company’s shareholders.

The Chairman and the chairman of the audit and risk

committee each receives fees at a higher rate than the other

directors to reflect their additional responsibilities. Directors’

fees are set at a level to recruit and retain individuals of

sufficient calibre, with the level of knowledge, experience and

expertise necessary to promote the success of the Company

in reaching its short and long-term strategic objectives.

The Board and its committees exclusively comprise non-

executive directors. No director past or present has an

entitlement to a pension from the Company, and the

Company has not, and does not intend to, operate a share

scheme for directors or to award any share options or long-

term performance incentives to any director. No director has

a service contract with the Company, however directors have

a letter of appointment. Directors do not receive exit

payments and are not provided with any compensation for

loss of office. No other payments are made to directors other

than the reimbursement of reasonable out-of-pocket

expenses incurred in attending to the Company’s business.

Implementation of policy

The Board did not seek the views of shareholders in setting

this remuneration policy. Any comments on the policy

received from shareholders would be considered on a case-

by-case basis.

As the Company does not have any employees, no employee

pay and employment conditions were taken into account

when setting this remuneration policy and no employees

were consulted in its construction.

Directors’ fees are reviewed annually and take into account

research from third parties on the fee levels of directors of

peer group companies, as well as industry norms and factors

affecting the time commitment expected of the directors.

New directors are subject to the provisions set out in this

remuneration policy.

Directors’ annual report on remuneration

This report sets out how the directors’ remuneration policy

was implemented during the year ended 30September 2022.

Consideration of matters relating to directors’

remuneration

Directors’ remuneration was last reviewed by the

remuneration committee in September 2022. Although no

external advice was sought in considering the levels of

directors’ fees, information on fees paid to directors of other

investment trusts managed by Schroders and peer group

companies was provided by the Manager and corporate

broker and was taken into consideration.

Following this review, the remuneration committee

recommended that with effect from 1 October 2022, the

Chairman's annual fee be increased to £40,000, the chairman

of the audit and risk committee's annual fee be increased to

£32,500 and the annual fee for non-executive directors be

increased to £27,000. Directors' fees were last increased with

effect from 1 October 2021.

The terms of Directors’ letters of appointment are available

for inspection at the Company’s registered office address

during normal business hours and during the AGM at the

location of such meeting.

Remuneration Committee Report

The remuneration committee is responsible for making recommendations to the Board on the remuneration of the directors.

All directors are members of the committee and Andrew Page is the chairman. Its terms of reference are available on the

Company’s website, www.schroders.co.uk/ukmidcap.

Recommendations made to, and approved by, the Board:

• That with effect from 1 October 2022, the Chairman's annual fee be increased to £40,000, the chairman of the audit

and risk committee's annual fee be increased to £32,500 and the annual fee for non-executive directors be increased

to £27,000.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 32

Governance

Annual Report and Accounts

for the year ended 30 September 2022

Remuneration Committee Report

Fees paid to directors

The following amounts were paid by the Company to directors for their services in respect of the year ended 30September

2022 and the preceding financial year. Directors’ remuneration is all fixed; they do not receive any variable remuneration. The

performance of the Company over the financial year is presented on page 2, under the heading “Financial highlights”.

Fees Taxable benefits

Total

2022 2021 2022 2021 2022 2021 2020 2019

Director £ £ £ £ £ £ £ £

Robert Talbut (Chairman)

38,500 32,789 395 – 38,895 32,789 25,411 24,412

Wendy Colquhoun

26,000 25,000 774 – 26,774 25,000 18,750 –

Clare Dobie

24,917 25,000 – – 24,917 25,000 25,141 24,273

Helen Galbraith

12,543 – – – 12,543 – – –

Andrew Page 31,250 30,000 – – 31,250 30,000 30,105 29,000

Robert Rickman

– – – – – – 9,652 24,787

Eric Sanderson

– 13,144 – 916 – 14,060 39,588 41,470

133,210 125,933 1,169 916 134,379 126,849 148,647 143,942

Comprise amounts reimbursed for expenses incurred in carrying out business for the Company, and which have been grossed up to include PAYE and

NI contributions.

Appointed Chairman on 8February 2021.

Appointed as a director on 1 January 2020.

Retired from the board on 15September 2022.

Appointed as a director on 7April 2022.

Retired from the board on 28January 2020.

Retired as Chairman and from the board on 8February 2021.

Change in annual fees payable

Year Year Year

ended ended ended

30Sep 30Sep 30Sep

2022 2021 2020

Director % % %

Robert Talbut (Chairman)

18.6 29.0 4.1

Wendy Colquhoun

7.1 33.3 N/a

Clare Dobie

N/a (0.6) 3.6

Helen Galbraith

N/a N/a N/a

Andrew Page 4.2 (0.3) 3.8

Robert Rickman

N/a N/a (61.1)

Eric Sanderson

N/a (64.5) (4.5)

Appointed Chairman on 8 February 2021.

Appointed as a director on 1 January 2020.

Retired from the board on 15 September 2022.

Appointed as a director on 7 April 2022.

Retired from the board on 28 January 2020.

Retired as Chairman and from the board on 8 February 2021.

The information in the above tables has been audited.

Expenditure by the Company on remuneration

and distributions to shareholders

The table below compares the remuneration payable to

directors to distributions made to shareholders during the

year under review and the prior financial year. In considering

these figures, shareholders should take into account the

Company’s investment objective.

Year Year

ended ended

30Sep 30Sep

2022 2021 Change

£’000 £’000 %

Remuneration payable

to directors 134 127 5.5

Distributions paid to

shareholders

Dividends

5,586 4,664

Share buybacks 2,675 –

Total distributions paid

to shareholders 8,261 4,664 77.1

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 33

Ten year share price and Benchmark total returns

Source: Morningstar/Thomson Reuters. Rebased to 100 at 30September

2012. Definitions of terms and Alternative Performance Measures are

given on pages 60 and 61.

Directors’ share interests

The Company’s articles of association do not require

directors to own shares in the Company.

The interests of the directors, including those of persons

closely associated, in the Company’s share capital at the

beginning and end of the financial year under review are set

out below:

30 September 30 September

2022 2021

Wendy Colquhoun 2,000 2,000

Clare Dobie

2,044 2,044

Helen Galbraith

5,500 –

Andrew Page 23,128 9,128

Robert Talbut 8,176 8,176

Clare Dobie retired from the Board on 15 September 2022.

Helen Galbraith was appointed on 7 April 2022.

There have been no changes notified since the year end.

The information in the above table has been audited.

On behalf of the Board

Andrew Page

Chairman of Remuneration Committee

5 December 2022

Benchmark total return

Share price total return

30-Sep-12

30-Sep-13

30-Sep-14

30-Sep-15

30-Sep-16

30-Sep-17

30-Sep-18

30-Sep-19

30-Sep-20

30-Sep-21

30-Sep-22

100

150

200

250

300

350

400

450

Schroder UK Mid Cap Fund plc

Remuneration Committee Report

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 34

Governance

Annual Report and Accounts

for the year ended 30 September 2022

The directors are responsible for preparing the Annual

Report and financial statements in accordance with

applicable law and regulations.

Company law requires the directors to prepare financial

statements for each financial year. Under that law they have

elected to prepare the financial statements in accordance

with UK accounting standards and applicable law (UK

Generally Accepted Accounting Practice), including FRS 102

The Financial Reporting Standard applicable in the UK and

Republic of Ireland.

Under company law the directors must not approve the

financial statements unless they are satisfied that they give a

true and fair view of the state of affairs of the Company and

of the profit or loss of the company for that period. In

preparing these financial statements, the directors are

required to:

• select suitable accounting policies and then apply them

consistently;

• make judgements and estimates that are reasonable

and prudent;

• state whether applicable UK accounting standards have

been followed, subject to any material departures

disclosed and explained in the financial statements;

• assess the Company’s ability to continue as a going

concern, disclosing, as applicable, matters related to

going concern; and

• use the going concern basis of accounting unless they

either intend to liquidate the Company or to cease

operations or have no realistic alternative but to do so.

The directors are responsible for keeping adequate

accounting records that are sufficient to show and explain

the Company’s transactions and disclose with reasonable

accuracy at any time the financial position of the Company

and enable them to ensure that the financial statements

comply with the Companies Act 2006. They are responsible

for such internal control as they determine is necessary to

enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error,

and have general responsibility for taking such steps as are

reasonably open to them to safeguard the assets of the

Company and to prevent and detect fraud and other

irregularities.

The directors are responsible for the maintenance and

integrity of the corporate and financial information included

on the company’s website. Legislation in the UK governing

the preparation and dissemination of financial statements

may differ from legislation in other jurisdictions.

Responsibility statement of the Directors

in respect of the annual financial report

Each of the Directors, whose names and functions are listed

on pages 22 and 23 confirm that to the best of their

knowledge:

• the financial statements, prepared in accordance with

the applicable set of accounting standards, give a true

and fair view of the assets, liabilities, financial position

and profit or loss of the Company; and

• the Strategic Report includes a fair review of the

development and performance of the business and the

position of the Company, together with a description of

the principal risks and uncertainties that it faces.

We consider the annual report and accounts, taken as a

whole, is fair, balanced and understandable and provides the

information necessary for shareholders to assess the

Company’s position and performance, business model and

strategy.

On behalf of the Board

Robert Talbut

Chairman

5 December 2022

Statement of Directors’ Responsibilities in respect

of the Annual Report and Accounts

176289 Schroder UK Mid Cap Fund plc Annual Report Pt2_176289 Schroder UK Mid Cap Fund plc Annual Report Pt2 06/12/2022 09:52 Page 35

Schroder UK Mid Cap Fund plc

Independent Auditor’s Report to the

Members of Schroder UK Mid Cap Fund Plc

1. Our opinion is unmodified

We have audited the financial statements of Schroder UK Mid Cap Fund Plc (“the Company”) for the year ended 30 September

2022 which comprise the Income Statement, Statement of Changes in Equity, Statement of Financial Position and the related

notes, including the accounting policies in note 1.

In our opinion the financial statements:

– give a true and fair view of the state of the Company’s affairs as at 30 September 2022 and of its return for the year

then ended;

– have been properly prepared in accordance with UK accounting standards, including FRS 102 The Financial Reporting

Standard applicable in the UK and Republic of Ireland; and

– have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our

responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis

for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were first appointed as auditor by the Directors on 21 June 2017. The period of total uninterrupted engagement is for the

six financial years ended 30 September 2022. We have fulfilled our ethical responsibilities under, and we remain independent

of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public

interest entities. No non-audit services prohibited by that standard were provided.

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial

statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified

by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and

directing the efforts of the engagement team. We summarise below the key audit matter (unchanged from 2021), in arriving

at our audit opinion above, together with our key audit procedures to address this matter and, as required for public interest

entities, our results from those procedures. This matter was addressed, and our results are based on procedures undertaken,

in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion

thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on this matter.

The risk Our response

Carrying amount of

quoted investments

(£207.3m; 2021: £300.1m)

Refer to page 28 (Audit

Committee Report), page 44

(accounting policy) and

page 48 (financial

disclosures).

Low risk, high value

The Company’s portfolio of quoted

investments makes up 97.4% (2021: 98.4%)

of the Company’s total assets (by value) and

is one of the key drivers of results. We do

not consider these investments to be at a

high risk of significant misstatement, or to

be subject to a significant level of judgement

because they comprise liquid, quoted

investments. However, due to their

materiality in the context of the financial

statements as a whole, they are considered

to be one of the areas which had the

greatest effect on our overall audit strategy

and allocation of resources in planning and

completing our audit.

We performed the detailed tests below

rather than seeking to rely on the

Company’s controls, because the nature of

the balance is such that we would expect to

obtain audit evidence primarily through the

detailed procedures described below.

Our procedures included:

– Tests of detail: Agreeing the valuation

of 100% of the quoted investments in

the portfolio to externally quoted prices;

and

– Enquiry of Depositary: Agreeing 100%

of quoted investment holdings in the

portfolio to independently received third

party confirmations from the investment

depository.

Our results: We found the carrying amount

of quoted investments to be acceptable

(2021: acceptable).

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 36

Financial

Annual Report and Accounts

for the year ended 30 September 2022

Independent Auditor’s Report to the

Members of Schroder UK Mid Cap Fund Plc

3. Our application of materiality and an overview of the scope of our audit

Materiality for the financial statements as a whole was set at £2.13m (2021: £3.05m), determined with reference to a

benchmark of total assets, of which it represents 1% (2021: 1%).

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower

threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements

in individual account balances add up to a material amount across the financial statements as a whole. Performance

materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £1.59m (2021:

£2.29m). We applied this percentage in our determination of performance materiality because we did not identify any factors

indicating an elevated level of risk.

In addition, we applied materiality of £390k (2021: £266k) and performance materiality of £292k (2021: £199k) to income (as

disclosed in Note 3), for which we believe misstatements of lesser amounts than materiality for the financial statements as a

whole could reasonably be expected to influence the Company’s members’ assessment of the financial performance of the

Company.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £106k (2021:

£152k), or £39k in relation to income (2021: £26k) in addition to other identified misstatements that warranted reporting on

qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above and was performed by a single audit team.

The scope of the audit work performed was fully substantive as we did not rely upon the Company’s internal control over

financial reporting.

4. Going Concern

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the

Company or to cease its operations, and as they have concluded that the Company’s financial position means that this is

realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its

ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going

concern period”).

We used our knowledge of the Company, its industry, and the general economic environment to identify the inherent risks to

its business model and analysed how those risks might affect the Company’s financial resources or ability to continue

operations over the going concern period. The risks that we considered most likely to adversely affect the Company’s available

financial resources and its ability to operate over this period were:

– The impact of a significant reduction in the valuation of investments and the implications for the Company’s debt

covenants;

– The liquidity of the investment portfolio and its ability to meet the liabilities of the Company as and when they fall due;

and

– The operational resilience of key service organisations.

We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by

assessing the degree of downside assumption that, individually and collectively, could result in a liquidity issue, taking into

account the Company’s current and projected cash and liquid investment position.

We considered whether the going concern disclosure in Note 1 to the financial statements gives a full and accurate

description of the directors’ assessment of going concern, including the identified risks and related sensitivities.

Our conclusions based on this work:

– we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements

is appropriate;

– we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to

events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a

going concern for the going concern period;

– we have nothing material to add or draw attention to in relation to the directors’ statement in Note 1 to the financial

statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant

doubt over the Company’s use of that basis for the going concern period, and we found the going concern disclosure in

Note 1 to be acceptable; and

– the related statement under the Listing Rules set out on page 21 is materially consistent with the financial statements and

our audit knowledge.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 37

Schroder UK Mid Cap Fund plc

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are

inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee

that the Company will continue in operation.

5. Fraud and breaches of laws and regulations – ability to detect

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an

incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

– Enquiring of directors as to the Company’s high-level policies and procedures to prevent and detect fraud, as well as

whether they have knowledge of any actual, suspected or alleged fraud;

– Assessing the segregation of duties in place between the directors, the administrator and the Company’s Manager; and

– Reading Board and Audit and Risk Committee minutes.

As required by auditing standards, we perform procedures to address the risk of management override of controls, in

particular to the risk that management may be in a position to make inappropriate accounting entries. We evaluated the

design and implementation of the controls over journal entries and other adjustments and made inquiries of the

administrator about inappropriate or unusual activity relating to the processing of journal entries and other adjustments.

Based on the results of our risk assessment procedures and understanding of the process, including the segregation of the

duties between the directors and the administrator, no high-risk journal entries or other adjustments were identified.

On this audit we do not believe there is a fraud risk related to revenue recognition because the revenue is non-judgemental

and straightforward, with limited opportunity for manipulation. We did not identify any significant unusual transactions or

additional fraud risks.

Identifying and responding to risks of material misstatement due to non-compliance with laws and

regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial

statements from our general commercial and sector experience and through discussion with the directors, the manager and

the administrator (as required by auditing standards) and discussed with the directors the policies and procedures regarding

compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an

understanding of the control environment including the entity’s procedures for complying with regulatory requirements.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Company is subject to laws and regulations that directly affect the financial statements including financial reporting

legislation (including related companies legislation), distributable profits legislation, and its qualification as an Investment

Trust under UK taxation legislation, any breach of which could lead to the Company losing various deductions and exemptions

from UK corporation tax, and we assessed the extent of compliance with these laws and regulations as part of our procedures

on the related financial statement items.

We assessed the legality of the distributions made by the Company in the period based on comparing the dividends paid to

the distributable reserves prior to each distribution.

Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have

a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or

litigation. We identified the following areas as those most likely to have such an effect: money laundering, data protection,

bribery and corruption legislation and certain aspects of company legislation recognising the financial and regulated nature of

the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance

with these laws and regulations to enquiry of the directors and the administrator and inspection of regulatory and legal

correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant

correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material

misstatements in the financial statements, even though we have properly planned and performed our audit in accordance

with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and

transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing

standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect

material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect

non-compliance with all laws and regulations.

Independent Auditor’s Report to the

Members of Schroder UK Mid Cap Fund Plc

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 38

Financial

Annual Report and Accounts

for the year ended 30 September 2022

6. We have nothing to report on the other information in the Annual Report

The directors are responsible for the other information presented in the Annual Report together with the financial statements.

Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit

opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit

work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.

Based solely on that work we have not identified material misstatements in the other information.

Strategic report and Directors’ report

Based solely on our work on the other information:

– we have not identified material misstatements in the strategic report and the Directors’ report;

– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

– in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with

the Companies Act 2006.

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency between the directors’

disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit

knowledge.

Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw

attention to in relation to:

– the directors’ confirmation within the viability statement on page 21 that they have carried out a robust assessment of the

emerging and principal risks facing the Company, including those that would threaten its business model, future

performance, solvency and liquidity;

– the principal risk and uncertainties disclosures describing these risks and how emerging risks are identified, and

explaining how they are being managed and mitigated; and

– the directors’ explanation in the viability statement of how they have assessed the prospects of the Company, over what

period they have done so and why they considered that period to be appropriate, and their statement as to whether they

have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall

due over the period of their assessment, including any related disclosures drawing attention to any necessary

qualifications or assumptions.

We are also required to review the viability statement, set out on page 21 under the Listing Rules. Based on the above

procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our

audit knowledge.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements

audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are

inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these

statements is not a guarantee as to the Company’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate

governance disclosures and the financial statements and our audit knowledge.

Based on those procedures, we have concluded that each of the following is materially consistent with the financial

statements and our audit knowledge:

– the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair,

balanced and understandable, and provides the information necessary for shareholders to assess the Company’s position

and performance, business model and strategy;

– the section of the annual report describing the work of the audit and risk committee, including the significant issues that

the audit and risk committee considered in relation to the financial statements, and how these issues were addressed;

and

Independent Auditor’s Report to the

Members of Schroder UK Mid Cap Fund Plc

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 39

Schroder UK Mid Cap Fund plc

Independent Auditor’s Report to the

Members of Schroder UK Mid Cap Fund Plc

– the section of the annual report that describes the review of the effectiveness of the Company’s risk management and

internal control systems.

We are required to review the part of Corporate Governance Statement relating to the Company’s compliance with the

provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in

this respect.

7. We have nothing to report on the other matters on which we are required to

report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

– adequate accounting records have not been kept, or returns adequate for our audit have not been received from

branches not visited by us; or

– the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

– certain disclosures of Directors’ remuneration specified by law are not made; or

– we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

8. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 35, the directors are responsible for: the preparation of the

financial statements including being satisfied that they give a true and fair view; such internal control as they determine is

necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud

or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease

operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high

level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial

statements.

A fuller description of our responsibilities is provided on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities.

9. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies

Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are

required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not

accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit

work, for this report, or for the opinions we have formed.

Gary Fensom (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Saltire Court

20 Castle Terrace

Edinburgh

EH1 2EG

5 December 2022

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 40

Financial

Annual Report and Accounts

for the year ended 30 September 2022

Income Statement

for the year ended 30 September 2022

2022 2021

Revenue Capital Total Revenue Capital Total

Note £’000 £’000 £’000 £’000 £’000 £’000

(Losses)/gains on investments held at fair

value through profit or loss 2

– (88,419) (88,419) – 78,136 78,136

Income from investments 3

8,958 88 9,046 6,453 736 7,189

Other interest receivable and similar income 3 10 – 10 – – –

Gross return/(loss) 8,968 (88,331) (79,363) 6,453 78,872 85,325

Investment management fee 4

(487) (1,136) (1,623) (521) (1,215) (1,736)

Administrative expenses 5 (542) – (542) (494) – (494)

Net return/(loss) before finance costs

and taxation 7,939 (89,467) (81,528)

5,438 77,657 83,095

Finance costs 6 (116) (271) (387) (116) (270) (386)

Net return/(loss) before taxation 7,823 (89,738) (81,915) 5,322 77,387 82,709

Taxation 7 – – – – – –

Net return/(loss) after taxation 7,823 (89,738) (81,915) 5,322 77,387 82,709

Return/(loss) per share 9 22.43p (257.32)p (234.89)p 15.18p 220.69p 235.87p

The “Total” column of this statement is the profit and loss account of the Company. The “Revenue” and “Capital” columns

represent supplementary information prepared under guidance issued by The Association of Investment Companies. The

Company has no other items of other comprehensive income, and therefore the net return/(loss) after taxation is also the

total comprehensive income/(loss) for the year.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or

discontinued in the year.

The notes on pages 44 to 55 form an integral part of these accounts.

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Schroder UK Mid Cap Fund plc

Statement of Changes in Equity

for the year ended 30 September 2022

Called-up Capital Share

share Share redemption Merger purchase Capital Revenue

capital premium reserve reserve reserve reserves reserve Total

Note £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 30 September 2020 9,036 13,971 220 2,184 9,908 157,980 6,225 199,524

Net return after taxation – – – – – 77,387 5,322 82,709

Dividends paid in the year 8 – – – – – – (4,664) (4,664)

At 30 September 2021

9,036 13,971 220 2,184 9,908 235,367 6,883 277,569

Repurchase of the Company’s

own shares into treasury

– – – – (2,675) – – (2,675)

Net (loss)/return after taxation – – – – – (89,738) 7,823 (81,915)

Dividends paid in the year 8 – – – – – – (5,586) (5,586)

At 30 September 2022 9,036 13,971 220 2,184 7,233 145,629 9,120 187,393

The notes on pages 44 to 55 form an integral part of these accounts.

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Financial

Annual Report and Accounts

for the year ended 30 September 2022

Statement of Financial Position

at 30 September 2022

2022 2021

Note £’000 £’000

Fixed assets

Investments held at fair value through profit or loss 10 207,289 300,061

Current assets

Debtors 11 853 1,389

Cash at bank and in hand 4,786 3,564

5,639 4,953

Current liabilities

Creditors: amounts falling due within one year 12 (25,535) (2,445)

Net current (liabilities)/assets (19,896) 2,508

Total assets less current liabilities 187,393 302,569

Creditors: amounts falling due after more than one year 13 – (25,000)

Net assets 187,393 277,569

Capital and reserves

Called-up share capital 14 9,036 9,036

Share premium 15

13,971 13,971

Capital redemption reserve 15

220 220

Merger reserve 15

2,184 2,184

Share purchase reserve 15

7,233 9,908

Capital reserves 15

145,629 235,367

Revenue reserve 15 9,120 6,883

Total equity shareholders’ funds 187,393 277,569

Net asset value per share 16 541.89p 791.56p

These accounts were approved and authorised for issue by the board of directors on 5 December 2022 and signed on its

behalf by:

Robert Talbut

Chairman

The notes on pages 44 to 55 form an integral part of these accounts.

Registered in Scotland as a public company limited by shares

Company registration number: SC082551

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Schroder UK Mid Cap Fund plc

Notes to the Accounts

1. Accounting Policies

(a) Basis of accounting

Schroder UK Mid Cap Fund plc (“the Company”) is registered in Scotland as a public company limited by shares. The

Company’s registered office is 1 Exchange Crescent, Conference Square, Edinburgh EH3 8UL.

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting

Practice (“UK GAAP”), in particular in accordance with Financial Reporting Standard (FRS) 102 “The Financial Reporting

Standard applicable in the UK and Republic of Ireland”, and with the Statement of Recommended Practice “Financial

Statements of Investment Trust Companies and Venture Capital Trusts” (the “SORP”) issued by the Association of Investment

Companies in July 2022. All of the Company’s operations are of a continuing nature.

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the

revaluation of investments held at fair value through profit or loss. The directors believe that the Company has adequate

resources to continue operating for at least 12 months from the date of approval of these accounts. In forming this opinion,

the directors have taken into consideration: stress testing prepared by the Manager which modelled a 50% decline in

valuation of investments and investment income and demonstrated the Company’s ability to comply with the covenants of its

borrowing agreements and pay its operating expenses; the controls and monitoring processes in place; the Company’s level

of debt and other payables; the low level of operating expenses, comprising largely variable costs which would reduce pro-

rata in the event of a market downturn; and that the Company’s assets comprise cash and readily realisable securities quoted

in active markets. In forming this opinion, the directors have also considered any potential impact of the economic

aftershocks of the COVID-19 pandemic and climate change on the viability of the Company. The Company’s term loan expires

on 28February 2023. If a new loan cannot be arranged with acceptable terms, the Board is satisfied that the Company has

sufficient readily realisable assets to repay the loan. Further details of directors’ considerations regarding this are given in the

Chairman’s Statement, Portfolio Managers’ Review, Going Concern Statement, Viability Statement and under the Principal

Risks and Uncertainties, including Emerging Risks heading on page 18.

The Company has not presented a statement of cash flows, as it is not required for an investment fund whose investments

are highly liquid, carried at market value and which presents a statement of changes in equity.

The accounts are presented in sterling and amounts have been rounded to the nearest thousand.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended

30September 2021.

Other than the directors’ assessment of going concern, no significant judgements, estimates or assumptions have been

required in the preparation of the accounts for the current or preceding financial year.

(b) Valuation of investments

The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income

and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in

accordance with a documented investment objective and information is provided internally on that basis to the Company’s

board of directors. Accordingly, upon initial recognition the investments are designated by the Company as “held at fair value

through profit or loss”. They are included initially at fair value which is taken to be their cost, excluding expenses incidental to

purchase which are written off to capital at the time of acquisition. Subsequently the investments are valued at fair value,

which are quoted bid prices.

Any investments that are unlisted or not actively traded would be valued using a variety of techniques to determine their fair

value; any such valuations would be reviewed by both the AIFM’s fair value pricing committee and by the directors.

All purchases and sales are accounted for on a trade date basis.

Gains and losses on sales of investments and the management fee or finance costs allocated to capital, are included in the

Income Statement and dealt with in capital reserves. Increases and decreases in the valuation of investments held at the year

end, are included in the Income Statement and in capital reserves within “Investment holding gains and losses”.

(d) Income

Dividends receivable are included in revenue on an ex-dividend basis except where, in the opinion of the board, the dividend

is capital in nature, in which case it is included in capital.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of

the cash dividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of the

cash dividend is recognised in capital.

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Financial

Annual Report and Accounts

for the year ended 30 September 2022

Notes to the Accounts

(e) Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to the revenue column of the Income

Statement with the following exceptions:

– The management fee is allocated 30% to revenue and 70% to capital in line with the board’s expected long-term split of

revenue and capital return from the Company’s investment portfolio.

– Expenses incidental to the purchase and sale of investments are written off to capital at the time of the transaction.

These expenses are commonly referred to as transaction costs and comprise brokerage commission and stamp duty.

Details of transaction costs are given in note 10 on page 48.

(f) Finance costs

Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an

accruals basis using the effective interest method and in accordance with FRS 102.

Finance costs are allocated 30% to revenue and 70% to capital in line with the board’s expected long-term split of revenue and

capital return from the Company’s investment portfolio.

(g) Financial instruments

Cash at bank and in hand may comprise cash and demand deposits which are readily convertible to a known amount of cash

and are subject to insignificant risk of changes in value.

Debtors, outstanding settlements, other creditors and accruals do not carry any interest, are short-term in nature and are

accordingly stated at nominal value, with debtors reduced by appropriate allowances for estimated irrecoverable amounts.

Bank loans and overdrafts are initially measured at fair value and subsequently at amortised cost. They are recorded at the

proceeds received net of direct issue costs.

(h) Taxation

Taxation comprises amounts expected to be received or paid.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date.

Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the

extent that it is probable that taxable profits will be available against which those timing differences can be utilised.

Tax relief is allocated to expenses charged to the capital column of the Income Statement on the “marginal basis”. On this

basis, if taxable income is capable of being entirely offset by revenue expenses, then no tax relief is transferred to the capital

column.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expected

to reverse, based on tax rates that have been enacted or substantively enacted at the accounting date and is measured on an

undiscounted basis.

(i) Value added tax (“VAT”)

Expenses are disclosed inclusive of the related irrecoverable VAT.

(j) Dividends payable

In accordance with FRS 102, the final dividend is included in the accounts in the year in which it is approved by shareholders.

(k) Repurchases of shares into treasury and subsequent reissues

The cost of repurchasing shares into treasury, including the related stamp duty and transaction costs is dealt with in the

Statement of Changes in Equity and charged to “Share purchase reserve”. Share repurchase transactions are accounted for on

a trade date basis.

The sales proceeds of treasury shares reissued are treated as a realised profit up to the amount of the purchase price of those

shares and is transferred to capital reserves. The excess of the sales proceeds over the purchase price is transferred to “share

premium”.

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Schroder UK Mid Cap Fund plc

2. (Losses)/gains on investments held at fair value through profit or loss

2022 2021

£’000 £’000

Gains on sales of investments based on historic cost 17,274 5,867

Amounts recognised in investment holding gains and losses in the previous year in

respect of investments sold in the year (12,932) (8,897)

Gains/(losses) on sales of investments based on the carrying value at the previous balance

sheet date

4,342 (3,030)

Net movement in investment holding gains and losses (92,761) 81,166

(Losses)/gains on investments held at fair value through profit or loss (88,419) 78,136

3. Income

2022 2021

Revenue: £’000 £’000

Income from investments:

UK dividends 8,533 6,125

UK property income distributions

388 328

Stock dividends 37 –

8,958 6,453

Other interest receivable and similar income:

Deposit interest 10 –

8,968 6,453

Capital:

Special dividends allocated to capital 88 736

4. Investment management fee

2022 2021

Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Management fee 487 1,136 1,623 521 1,215 1,736

The bases for calculating the investment management fee and performance fee are set out in the Directors’ Report on

page24 and details of all amounts payable to the Manager are given in note 17 on page 51.

5. Administrative expenses

2022 2021

£’000 £’000

Other administrative expenses 213 189

Secretarial fee

144 137

Directors’ fees

134 126

Auditor’s remuneration for audit services

51 42

542 494

Includes £9,000 (2021: £7,000) irrecoverable VAT.

Notes to the Accounts

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Financial

Annual Report and Accounts

for the year ended 30 September 2022

Notes to the Accounts

6. Finance costs

2022 2021

Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Interest on bank loans and overdrafts 116 271 387 116 270 386

7. Taxation

(a) Analysis of charge in the year:

2022 2021

£’000 £’000

Taxation for the year – –

(b) Factors affecting tax charge for the year

The tax assessed for the year is higher (2021: lower) than the Company’s applicable rate of corporation tax in for the year of

19.0% (2021: 19.0%).

The factors affecting the current tax charge for the year are as follows:

2022 2021

Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Net return/(loss) on ordinary activities before taxation 7,823 (89,738) (81,915) 5,322 77,387 82,709

Net return/(loss) on ordinary activities before taxation

multiplied by the Company’s applicable rate of

corporation tax for the year of 19.0% (2021: 19.0%)

1,486 (17,050) (15,564) 1,011 14,704 15,715

Effects of:

Capital returns on investments

– 16,800 16,800 – (14,846) (14,846)

Income not chargeable to corporation tax

(1,628) (17) (1,645) (1,164) (140) (1,304)

Unrelieved expenses 142 267 409 153 282 435

Taxation for the year – – – – – –

The Company has an unrecognised deferred tax asset of £9,357,000 (2021: £8,818,000) based on a prospective corporation tax

rate of 25.0% (2021: 25%). In its 2021 budget, the UK government announced that the main rate of corporation tax would

increase to 25% for the fiscal year beginning on 1April 2023.

The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the

composition of the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable future and therefore

asset has been recognised in the accounts.

Given the Company’s intention to meet the conditions required to retain its status as an Investment Trust Company, no

provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

8. Dividends

(a) Dividends paid and declared

2022 2021

£’000 £’000

2021 final dividend of 11.0p (2020: 9.5p) paid out of revenue profits 3,857 3,331

Interim dividend of 5.0p (2021: 3.8) paid out of revenue profits 1,729 1,333

Total dividends paid in the year 5,586 4,664

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Schroder UK Mid Cap Fund plc

Notes to the Accounts

2022 2021

£’000 £’000

2022 final dividend declared of 14.0p (2021: 11.0p) to be paid out of revenue profits 4,841 3,857

(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 (“Section 1158”)

The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year as shown

below. The revenue available for distribution by way of dividend for the year is £7,823,000 (2021: £5,322,000).

2022 2021

£’000 £’000

Interim dividend of 5.0p (2021: 3.8p) 1,729 1,333

Final dividend of 14.0p (2021: 11.0p) 4,841 3,857

6,570 5,190

9. Return/(loss) per share

2022 2021

£’000 £’000

Revenue return 7,823 5,322

Capital (loss)/return (89,738) 77,387

Total (loss)/return (81,915) 82,709

Weighted average number of shares in issue during the year

34,874,738 35,066,190

Revenue return per share

22.43p 15.18p

Capital (loss)/return per share (257.32)p 220.69p

Total (loss)/return per share (234.89)p 235.87p

10. Investments held at fair value through profit or loss

2022 2021

£’000 £’000

Opening book cost 210,126 192,495

Opening investment holding gains 89,935 17,666

Opening fair value

300,061 210,161

Analysis of transactions made during the year

Purchases at cost 50,360 71,850

Sales proceeds

(54,713) (60,086)

(Losses)/gains on investments held at fair value (88,419) 78,136

Closing fair value 207,289 300,061

Closing book cost

223,047 210,126

Closing investment holding (losses)/gains (15,758) 89,935

Closing fair value 207,289 300,061

Sales proceeds amounting to £54,713,000 (2021: £60,086,000) were receivable from disposals of investments in the year. The

book cost of these investments when they were purchased was £37,439,000 (2021: £54,219,000). These investments have

been revalued over time and until they were sold any unrealised gains and losses were included in the fair value of the

investments.

All investments are listed on a recognised stock exchange.

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Financial

Annual Report and Accounts

for the year ended 30 September 2022

Notes to the Accounts

The following transaction costs, comprising stamp duty and brokerage commission were incurred during the year:

2022 2021

£’000 £’000

On acquisitions 226 335

On disposals 28 30

254 365

11. Debtors

2022 2021

£’000 £’000

Securities sold awaiting settlement 45 236

Dividends and interest receivable

793 1,143

Other debtors 15 10

853 1,389

The directors consider that the carrying amount of debtors approximates to their fair value.

12. Creditors: amounts falling due within one year

2022 2021

£’000 £’000

Bank loan 25,000 –

Securities purchased awaiting settlement

– 1,783

Other creditors and accruals 535 662

25,535 2,445

The bank loan comprises a £25million three-year term loan from Scotiabank Europe plc, expiring on 28February 2023,

carrying a fixed rate of interest of 1.546% per annum. The loan is unsecured but is subject to the usual undertakings and

restrictions for a loan of this nature, and all of which have been complied with. The directors consider that the carrying

amount of the loan approximates to its fair value.

The directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

13. Creditors: amounts falling due after more than one year

2022 2021

£’000 £’000

Bank loan – 25,000

The bank loan is now included in note 12 above, as it falls due within one year of the accounting date.

14. Called-up share capital

2022 2021

£’000 £’000

Allotted, called-up and fully paid:

Ordinary shares of 25p each:

Opening balance of 35,066,190 (2021: same) shares, excluding shares held in treasury

8,766 8,766

Repurchase of 485,000 (2021: nil) shares into treasury (121) –

Subtotal of 34,581,190 (2021: 35,066,190) shares

8,645 8,766

1,562,500 (2021: 1,077,500) shares held in treasury 391 270

Closing balance

9,036 9,036

Represents 36,143,690 (2021: 36,143,690) shares of 25p each, including 1,562,500 (2021: 1,077,500,500) shares held in treasury. During the year, the

Company purchased 485,000 of its own shares, nominal value £121,250 to hold in treasury for a total consideration of £2,675,000, r

epresenting 1.4% of

the shares outstanding at the beginning of the year, excluding shares held in treasury. The reason for these share repurchases was to seek to manage

the volatility of the share price discount to net asset value per share.

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Schroder UK Mid Cap Fund plc

15. Reserves

Year ended 30September 2022

Capital reserves

Capital Gains and Investment

redemp- Share losses on holding

Share tion Merger purchase sales of gains and Revenue

premium

reserve

investments

losses

reserve

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balance 13,971 220 2,184 9,908 145,432 89,935 6,883

Gains on sales of investments based

on the carrying value at the previous

balance sheet date

– – – – 4,342 – –

Net movement in investment holding

gains and losses

– – – – – (92,761) –

Transfer on disposal of investments – – – – 12,932 (12,932) –

Management fee allocated to capital – – – – (1,136) – –

Special dividend allocated to capital – – – – 88 – –

Finance costs allocated to capital – – – – (271) – –

Repurchase of shares into treasury – – – (2,675) – – –

Dividends paid – – – – – – (5,586)

Retained revenue for the year – – – – – – 7,823

Closing balance 13,971 220 2,184 7,233 161,387 (15,758) 9,120

Year ended 30September 2021

Capital reserves

Capital Gains and Investment

redemp- Share losses on holding

Share tion Merger purchase sales of gains and Revenue

premium

reserve

investments

losses

reserve

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balance 13,971 220 2,184 9,908 140,314 17,666 6,225

Losses on sales of investments based on

the carrying value at the previous balance

sheet date – – – – (3,030) – –

Net movement in investment holding

gains and losses – – – – – 81,166 –

Transfer on disposal of investments – – – – 8,897 (8,897) –

Management fee allocated to capital – – – – (1,215) – –

Special dividend allocated to capital – – – – 736 – –

Finance costs allocated to capital – – – – (270) – –

Dividends paid – – – – – – (4,664)

Retained revenue for the year – – – – – – 5,322

Closing balance 13,971 220 2,184 9,908 145,432 89,935 6,883

These reserves are not distributable. The “Merger reserve” represents the premium over the nominal value of shares issued following a merger in 1989.

These are realised (distributable) capital reserves which may be used to repurchase the Company’s own shares or distributed as dividends. The “Share

purchase reserve” is for the purpose of financing share buy-backs and was created following the cancellation of the “Warrant reserve” in 2003.

This reserve comprises holding gains on liquid investments (which may be deemed to be realised) and other amounts which are unrealised. An analysis

has not been made between those amounts that are realised (and may be distributed as dividends or used to repurchase the Company

’s own shares)

and those that are unrealised.

The revenue reserve may be distributed as dividends or used to repurchase the Company’s own shares.

Notes to the Accounts

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Financial

Annual Report and Accounts

for the year ended 30 September 2022

Notes to the Accounts

16. Net asset value per share

2022 2021

Net assets attributable to the Ordinary shareholders (£’000) 187,393 277,569

Shares in issue at the year end, excluding shares held in treasury 34,581,190 35,066,190

Net asset value per share 541.89p 791.56p

17. Transactions with the Manager

Under the terms of the AlFM Agreement, the Manager is entitled to receive a management fee and a company secretarial fee.

Details of the basis of these calculations are given in the Directors’ Report on page 24. Any investments in funds managed or

advised by the Manager or any of its associated companies, are excluded from the assets used for the purpose of the

management fee calculation and therefore incur no fee.

The management fee payable in respect of the year ended 30September 2022 amounted to £1,623,000. (2021: £1,736,000) of

which £340,000 (2021: £484,000) was outstanding at the year end. The secretarial fee payable for the year amounted to

£144,000 (2021: £137,000) including VAT, of which £36,000 (2021: £34,000) was outstanding at the year end.

No director of the Company served as a director of any member of the Schroder Group, at any time during the year.

18. Related party transactions

Details of the remuneration payable to directors are given in the Remuneration Report on page 33 and details of directors’

shareholdings are given in the Remuneration Report on page 34. Details of transactions with the Manager are given in note

17 above. There have been no other transactions with related parties during the year (2021: nil).

19. Disclosures regarding financial instruments measured at fair value

The Company’s financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio.

FRS 102 requires that financial instruments held at fair value are categorised into a hierarchy consisting of the three levels

below. A fair value measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair

value measurement.

Level 1: valued using unadjusted quoted prices in an active market for identical assets.

Level 2: valued using inputs other than quoted prices included within Level 1, that are observable (ie developed using market

data).

Level 3: valued using inputs that are unobservable (ie for which market data is unavailable).

Details of the Company’s valuation policy are given in note 1(b) on page 44.

At 30September 2022, the Company’s investments were all categorised in Level 1 (2021: same).

20. Financial instruments’ exposure to risk and risk management policies

The Company’s investment objective is to invest in mid cap equities with the aim of providing a total return in excess of the

FTSE 250 (ex-Investment Companies) Index. In pursuing this objective, the Company is exposed to a variety of financial risks

that could result in a reduction in the Company’s net assets or a reduction in the profits available for dividends.

These financial risks include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. The

directors’ policy for managing these risks is set out below. The board coordinates the Company’s risk management policy. The

Company has no significant exposure to foreign exchange risk.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out

below, have not changed from those applying in the comparative year.

The Company’s classes of financial instruments are as follows:

– investments in shares which are held in accordance with the Company’s investment objective;

– short-term debtors, creditors and cash arising directly from its operations; and

– a sterling term loan with Scotiabank, the purpose of which is to assist with financing the Company’s operations.

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Schroder UK Mid Cap Fund plc

(a) Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market

prices. This market risk comprises two elements: interest rate risk and other price risk. Information to enable an evaluation of

the nature and extent of these two elements of market risk is given in parts (i) and (ii) of this note, together with sensitivity

analyses where appropriate. The board reviews and agrees policies for managing these risks and these policies have

remained unchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when

making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on an

ongoing basis.

(i) Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on any variable

rate borrowings when interest rates are re-set. The Company’s three-year term loan carries a fixed rate of interest and does

not give rise to any interest rate risk.

Management of interest rate risk

Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The board’s policy is to permit

gearing up to 25%, where gearing is defined as borrowings used for investment purposes less cash, expressed as a

percentage of net assets.

Interest rate exposure

The exposure of financial assets and financial liabilities to floating interest rates, giving cash flow interest rate risk when rates

are re-set, is shown below:

2022 2021

£’000 £’000

Exposure to floating interest rates:

Cash at bank and in hand 4,786 3,564

Total exposure 4,786 3,564

Cash balances earn interest at a floating rate based on the Sterling Overnight Index Average (2021: LIBOR).

The Company’s revolving credit facility with Scotiabank Europe plc expires on 28February 2023 and has a limit set at

£25million. The facility is unsecured but subject to covenants and restrictions which are customary for a facility of this natur

Interest is payable at a rate of LIBOR, or its replacement reference rate, as quoted in the market for the loan period, plus a

margin, plus Mandatory Costs, which are the lender’s costs of complying with certain regulatory requirements of the Bank of

England. At 30September 2022, the Company had drawn down the entire £25million at an interest rate of 1.546%, repayable

on 28February 2023 (2021: same).

The above year end amounts are not representative of the exposure to interest rates during the year due to fluctuations in

the level of cash balances. The maximum and minimum exposure during the year was as follows:

2022 2021

£’000 £’000

Minimum interest rate exposure during the year – net debt (13,365) (8,496)

Maximum interest rate exposure during the year – net debt (22,681) (21,436)

Interest rate sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1.0% (2021: 1.0%)

increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This level

of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity

analysis is based on the Company’s monetary financial instruments held at the accounting date with all other variables held

constant.

Notes to the Accounts

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 52

Financial

Annual Report and Accounts

for the year ended 30 September 2022

Notes to the Accounts

2022 2021

1.0% increase 1.0% decrease 1.0% increase 1.0% decrease

in rate in rate in rate in rate

£’000 £’000 £’000 £’000

Income statement – return after taxation

Revenue return

48 (48) 36 (36)

Capital return – – – –

Total return after taxation 48 (48) 36 (36)

Net assets 48 (48) 36 (36)

In the opinion of the directors, this sensitivity analysis may not be representative of the Company’s future exposure to interest

rate changes due to fluctuations in the level of cash balances and drawings on the credit facility.

(ii) Other price risk

Other price risk includes changes in market prices, other than those arising from interest rate risk, which may affect the value

of investments.

Management of market price risk

The board meets on at least four occasions each year to consider the asset allocation of the portfolio and the risk associated

with particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which is

selected in accordance with the Company’s investment objective and seeks to ensure that individual stocks meet an

acceptable risk/reward profile.

Market price risk exposure

The Company’s total exposure to changes in market prices at 30September comprises the following:

2022 2021

£’000 £’000

Investments held at fair value through profit or loss 207,289 300,061

The above data is broadly representative of the exposure to market price risk during the year.

Concentration of exposure to market price risk

An analysis of the Company’s investments is given on page 10. The Company’s investments are all listed in the United

Kingdom. Accordingly there is a concentration of exposure to this country. However it should be noted that an investment

may not be entirely exposed to the economic conditions in its country of listing.

Market price risk sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease

of 20% (2021: 20%) in the fair values of the Company’s investments. This level of change is considered to be a reasonable

illustration based on observation of current market conditions. The sensitivity analysis is based on the Company’s exposure

through its investments and includes the impact on the management fee, but assumes that all other variables are held

constant.

2022 2021

20% increase 20% decrease 20% increase 20% decrease

in fair value in fair value in fair value in fair value

£’000 £’000 £’000 £’000

Income statement – return after taxation

Revenue return

(81) 81 (108) 108

Capital return 41,269 (41,269) 59,760 (59,760)

Total return after taxation and net assets 41,188 (41,188) 59,652 (59,652)

Percentage change in net asset value

22.0 (22.0) 21.5 (21.5)

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 53

Schroder UK Mid Cap Fund plc

Notes to the Accounts

(b) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are

settled by delivering cash or another financial asset.

Management of the risk

Liquidity risk is not significant as the Company’s assets comprise mainly readily realisable securities, which can be sold to

meet funding requirements if necessary.

Liquidity risk exposure

Contractual maturities of financial liabilities, based on the earliest date on which payment can be required are as follows:

2022 2021

Within Within One to

one one two

year Total year years Total

£’000 £’000 £’000 £’000 £’000

Creditors: amounts falling due within one year

Securities purchased awaiting settlement – – 1,783 – 1,783

Other creditors and accruals

502 502 627 – 627

Other payables: drawings on the revolving credit facility

(including interest)

25,160 – – – –

Creditors: amounts falling due after more than one year

Other payables: drawings on the revolving credit facility

(including interest) – – 422 25,155 25,577

25,662 502 2,832 25,155 27,987

Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction

could result in loss to the Company.

Management of credit risk

This risk is not significant and is managed as follows:

Portfolio dealing

The Company invests in markets that operate a “Delivery Versus Payment” settlement process which mitigates the risk of

losing the principal of a trade during settlement. The Manager continuously monitors dealing activity to ensure best

execution, which involves measuring various indicators including the quality of trade settlement and incidence of failed trades.

Counterparties must be pre-approved by the Manager’s credit committee.

Exposure to the Custodian

The custodian of the Company’s assets is HSBC Bank plc which has Long-Term Credit Ratings of AA- with Fitch and Aa3 with

Moody’s. The Company’s investments are held in accounts which are segregated from the custodian’s own trading assets. If

the custodian were to become insolvent, the Company’s right of ownership of its investments is clear and they are therefore

protected. However the Company’s cash balances are all deposited with the custodian as banker and held on the custodian’s

balance sheet. Accordingly, in accordance with usual banking practice, the Company will rank as a general creditor to the

custodian in respect of cash balances.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt3_176289 Schroder UK Mid Cap Fund plc Annual Report Pt3 06/12/2022 09:53 Page 54

Financial

Annual Report and Accounts

for the year ended 30 September 2022

Notes to the Accounts

Credit risk exposure

The following amounts shown in the Statement of Financial Position, represent the maximum exposure to credit risk at the

current and comparative year end.

2022 2021

Balance Maximum Balance Maximum

sheet exposure sheet exposure

£’000 £’000 £’000 £’000

Current assets

Debtors – securities sold awaiting settlement, dividends and

interest receivable and other debtors

853 838 1,389 1,379

Cash at bank and in hand 4,786 4,786 3,564 3,564

5,639 5,624 4,953 4,943

No debtors are past their due date and none have been written down or deemed to be impaired.

(d) Fair values of financial assets and financial liabilities

All financial assets and liabilities are either carried in the Statement of Financial Position at fair value or the amount is a

reasonable approximation of fair value.

21. Capital management policies and procedures

The Company’s objectives, policies and processes for managing capital are unchanged from the preceding year.

The Company’s debt and capital structure comprises the following:

2022 2021

£’000 £’000

Debt

Bank loan 25,000 25,000

Equity

Called-up share capital 9,036 9,036

Reserves 178,357 268,533

187,393 277,569

Total debt and equity 212,393 302,569

The Company’s capital management objectives are to ensure that it will continue as a going concern and to maximise the

capital return to its equity shareholders through an appropriate level of gearing.

The board’s policy is to permit gearing up to 25% where gearing is defined as borrowings used for investment purposes less

cash, expressed as a percentage of net assets. If the figure so calculated were to be negative, this would be shown as a “net

cash” position.

2022 2021

£’000 £’000

Borrowings used for investment purposes, less cash 20,214 21,436

Net assets 187,393 277,569

Gearing

10.8% 7.7%

The board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an

ongoing basis. This review includes:

– the planned level of gearing, which takes into account the Manager’s views on the market;

– the need to buy back the Company’s own shares for cancellation or to hold in treasury, which takes into account the share

price discount;

– the opportunities for issues of new shares; and

– the amount of dividends to be paid, in excess of that which is required to be distributed.

22. Events after the end of the reporting period

The market prices of the Company’s investments have risen post the accounting date. As a result, the NAV per share was

639.3p and the share price was 553.0p as at close of business on 2 December 2022. This represents an increase of 18.0% and

15.2% in the NAV and share price respectively, versus that reported in the accounts.

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Schroder UK Mid Cap Fund plc

Annual General Meeting – Recommendations

The Annual General Meeting (“AGM”) of the Company

will be held on Tuesday, 21 February 2023 at noon. The

formal Notice of Meeting is set out on page 57.

The following information is important and requires

your immediate attention. If you are in any doubt

about the action you should take, you should consult an

independent financial adviser, authorised under the

Financial Services and Markets Act 2000. If you have

sold or transferred all of your ordinary shares in the

Company, please forward this document with its

accompanying form of proxy at once to the purchaser

or transferee, or to the stockbroker, bank or other

agent through whom the sale or transfer was effected

for onward transmission to the purchaser or transferee.

Attendance at the meeting

The meeting will be held at the Manager’s office at 1London

Wall Place, London, EC2Y 5AU.

It will also be available to watch online and the details are set

out below. Shareholders watching online will be able to

submit questions in writing during the meeting. Any

shareholders planning on attending the AGM will also be

able to watch the Manager’s presentation. To sign up to

watch the meeting and presentation, please click on this link

https://schroders.zoom.us/webinar/register/WN_Zy1kUakRS_

WRiTD-sxsLsA. After registering, you will receive a

confirmation email containing information about how to join.

Ordinary business

Resolutions 1 to 10 are all ordinary resolutions. Resolution

1 is a required resolution. Resolution 2 invites shareholders

to approve the final dividend. Resolutions 3 and 4 concern

the Directors’ Remuneration Policy and the Directors’

Remuneration Report, on pages 32 to 34. Resolutions 5 to 8

invite shareholders to re-elect each of the directors who have

put themselves forward for re-election for another year,

following the recommendations of the Nomination

Committee, set out on pages 30 and 31 (their biographies

are set out on pages 22 and 23). Resolutions 9 and 10

concern the re-appointment and remuneration of the

Company’s auditor, discussed in the Audit and Risk

Committee Report on pages 27 and 28.

Special business

Resolution 11 – directors’ authority to allot shares

(ordinary resolution) and resolution 12 – power to

disapply pre-emption rights (special resolution)

The directors are seeking authority to allot a limited number

of unissued ordinary shares for cash without first offering

them to existing shareholders in accordance with statutory

preemption procedures.

Appropriate resolutions will be proposed at the forthcoming

AGM and are set out in full in the Notice of AGM. An ordinary

resolution will be proposed to authorise the directors to allot

shares up to a maximum aggregate nominal amount of

£864,529.75 (being 10% of the issued share capital (excluding

any shares held in treasury) as at the date of the Notice of

the AGM). A special resolution will also be proposed to give

the directors authority to allot securities for cash on a non

preemptive basis up to a maximum aggregate nominal

amount of £864,529.75 (being 10% of the Company’s issued

share capital (excluding any shares held in treasury) as at the

date of the Notice of the AGM). This authority includes shares

that the Company sells or transfers that have been held in

treasury. The Board has established guidelines for treasury

shares and will only reissue shares held in treasury at a price

equal to or greater than the Company’s net asset value

(inclusive of current year income) plus any applicable costs.

The directors do not intend to allot shares pursuant to these

authorities other than to take advantage of opportunities in

the market as they arise and only if they believe it to be

advantageous to the Company’s existing shareholders to do

so and when it would not result in any dilution of NAV per

share.

If approved, both of these authorities will expire at the

conclusion of the AGM in 2024 unless renewed, varied or

revoked earlier.

Resolution 13: Authority to make market

purchases of the Company’s own shares (special

resolution)

At the AGM held on 9 February 2022, the Company was

granted authority to make market purchases of up to

5,256,421 ordinary shares of 25p each for cancellation or

holding in treasury. 485,000 shares have been bought back

into treasury under this authority and the Company

therefore has remaining authority to purchase up to

4,771,421 ordinary shares. This authority will expire at the

forthcoming AGM.

The directors believe it is in the best interests of the

Company and its shareholders to have a general authority

for the Company to buy back its ordinary shares in the

market as they keep under review the share price discount to

net asset value and the purchase of ordinary shares.

Aspecial resolution will be proposed at the forthcoming

AGM to give the Company authority to make market

purchases of up to 14.99% of the ordinary shares in issue as

at the date of the Notice of the AGM. The directors will

exercise this authority only if the directors consider that any

purchase would be for the benefit of the Company and its

shareholders, taking into account relevant factors and

circumstances at the time. Any shares so purchased would

be cancelled or held in treasury for potential reissue. If

renewed, the authority to be given at the 2023 AGM will

lapse at the conclusion of the AGM in 2024 unless renewed,

varied or revoked earlier.

Recommendations

The Board considers that the resolutions relating to the

above items of business are in the best interests of

shareholders as a whole. Accordingly, the Board

unanimously recommends to shareholders that they vote in

favour of the resolutions to be proposed at the forthcoming

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 56

Annual Report and Accounts

for the year ended 30 September 2022

Annual General Meeting

Notice is hereby given that the Annual General Meeting of

Schroder UK Mid Cap Fund plc will be held at 1 London Wall

Place, London EC2Y 5AU at noon on Tuesday, 21 February

2023 to consider the following resolutions of which

resolutions 1 to 11 will be proposed as ordinary resolutions

and resolutions 12 and 13 will be proposed as special

resolutions:

1. To receive the Report of the Directors and the audited

accounts for the year ended 30 September 2022.

2. To approve a final dividend of 14.0 pence per share for

the financial year ended 30 September 2022.

3. To approve the Directors’ Remuneration Report for the

year ended 30 September 2022.

4. To approve the Directors’ Remuneration Policy.

5. To elect Helen Galbraith as a director of the Company.

6. To re-elect Wendy Colquhoun as a director of the

Company.

7. To re-elect Andrew Page as a director of the Company.

8. To re-elect Robert Talbut as a director of the Company.

9. To re-appoint KPMG LLP as auditor to the Company.

10. To authorise the directors to determine the remuneration

of KPMG LLP as auditor to the Company.

11. To consider, and if thought fit, pass the following

resolution as an ordinary resolution:

“THAT the directors be generally and unconditionally

authorised pursuant to section 551 of the Companies Act

2006 (the “Act”) to exercise all the powers of the Company

to allot relevant securities (within the meaning of section

551 of the Act) up to an aggregate nominal amount of

£864,529.75 (being 10% of the issued ordinary share

capital at the date of this Notice) for a period expiring

(unless previously renewed, varied or revoked by the

Company in general meeting) at the conclusion of the

next Annual General Meeting of the Company, but that

the Company may make an offer or agreement which

would or might require relevant securities to be allotted

after expiry of this authority and the Board may allot

relevant securities in pursuance of that offer or

agreement.”

12.

To consider and, if thought fit, to pass the following

resolution as a special resolution:

“THAT, subject to the passing of resolution 11 set out

above, the directors be and are hereby empowered,

pursuant to Section 571 of the Act, to allot equity

securities (including any shares held in treasury) (as

defined in section 560(1) of the Act) pursuant to the

authority given in accordance with section 551 of the Act

by the said resolution 11 and/or where such allotment

constitutes an allotment of equity securities by virtue of

section 560(2) of the Act as if Section 561(1) of the Act did

not apply to any such allotment, provided that this power

shall be limited to the allotment of equity securities up to

an aggregate nominal amount of £864,529.75

(representing 10% of the aggregate nominal amount of

the share capital in issue at the date of this Notice); and

provided that this power shall expire at the conclusion of

the next Annual General Meeting of the Company but so

that this power shall enable the Company to make offers

or agreements before such expiry which would or might

require equity securities to be allotted after such expiry.”

13. To consider and, if thought fit, to pass the following

resolution as a special resolution:

“THAT the Company be and is hereby generally and

unconditionally authorised in accordance with Section

701 of the Act to make market purchases (within the

meaning of Section 693 of the Act) of ordinary shares of

25p each in the capital of the Company (“Shares”) at

whatever discount the prevailing market price represents

to the prevailing net asset value per Share provided that:

(a) the maximum number of Shares which may be

purchased is 5,417,939 representing 14.99% of the

Company’s issued ordinary share capital as at the

date of this Notice;

(b) the maximum price (exclusive of expenses) which

may be paid for a Share shall not exceed the higher

of;

i) 105% of the average of the middle market

quotations for the Shares as taken from the

London Stock Exchange Daily Official List for the

five business days preceding the date of

purchase; and

ii) the higher of the last independent bid and the

highest current independent bid on the London

Stock Exchange;

may be paid for a Share shall be 25p, being the

nominal value per Share;

(d) this authority hereby conferred shall expire at the

conclusion of the next Annual General Meeting of the

Company in 2024 (unless previously renewed, varied

or revoked by the Company prior to such date);

(e) the Company may make a contract to purchase

Shares under the authority hereby conferred which

will or may be executed wholly or partly after the

expiration of such authority and may make a

purchase of Shares pursuant to any such contract;

and

(f) any Shares so purchased will be cancelled or held in

treasury for potential reissue.”

Notice of Annual General Meeting

By order of the Board

Schroder Investment Management Limited

Company Secretary

5 December 2022

Registered Office:

1 Exchange Crescent,

Conference Square,

Edinburgh EH3 8UL

Registered number: SC082551

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 57

Schroder UK Mid Cap Fund plc

1. Ordinary shareholders are entitled to attend and vote at

the meeting and to appoint one or more proxies, who

need not be a shareholder, as their proxy to exercise all

or any of their rights to attend, speak and vote on their

behalf at the meeting.

A proxy form is attached. If you wish to appoint a person

other than the Chairman as your proxy, please insert the

name of your chosen proxy holder in the space provided

at the top of the form. If the proxy is being appointed in

relation to less than your full voting entitlement, please

enter in the box next to the proxy holder’s name the

number of shares in relation to which they are

authorised to act as your proxy. If left blank your proxy

will be deemed to be authorised in respect of your full

voting entitlement (or if this proxy form has been issued

in respect of a designated account for a shareholder, the

full voting entitlement for that designated account).

Additional proxy forms can be obtained by contacting

the Company’s Registrars, Equiniti Limited, on 0800 032

0641 or +44(0) 121 415 0207 for overseas callers, or you

may photocopy the attached proxy form. Please indicate

in the box next to the proxy holder’s name the number

of shares in relation to which they are authorised to act

as your proxy. Please also indicate by ticking the box

provided if the proxy instruction is one of multiple

instructions being given. Completion and return of a

form of proxy will not preclude a member from

attending the Annual General Meeting and voting in

person.

On a vote by show of hands, every ordinary shareholder

who is present in person has one vote and every duly

appointed proxy who is present has one vote. On a poll

vote, every ordinary shareholder who is present in

person or by way of a proxy has one vote for every share

of which he/she is a holder.

The “Vote Withheld” option on the proxy form is

provided to enable you to abstain on any particular

resolution.

However it should be noted that a “Vote Withheld” is not

a vote in law and will not be counted in the calculation of

the proportion of the votes “For” and “Against” a

resolution.

A proxy form must be signed and dated by the

shareholder or his or her attorney duly authorised in

writing. In the case of joint holdings, any one holder may

sign this form. The vote of the senior joint holder who

tenders a vote, whether in person or by proxy, will be

accepted to the exclusion of the votes of the other joint

holder and for this purpose seniority will be determined

by the order in which the names appear on the Register

of Members in respect of the joint holding. To be valid,

proxy form(s) must be completed and returned to the

Company’s Registrars, Equiniti Limited, Aspect House,

Spencer Road, Lancing, West Sussex BN99 6DA, in the

enclosed envelope together with any power of attorney

or other authority under which it is signed or a copy of

such authority certified notarially, to arrive no later than

48 hours before the time fixed for the meeting, or an

adjourned meeting, excluding non-working days.

Shareholders may also appoint a proxy to vote on the

resolutions being put to the meeting electronically at

www.sharevote.co.uk. Shareholders who are not

registered to vote electronically, will need to enter the

Voting ID, Task ID & Shareholder Reference Number set

out in their personalised proxy form. Alternatively,

shareholders who have already registered with Equiniti’s

Shareview service can appoint a proxy by logging onto

their portfolio at

www.shareview.co.uk and clicking on

the link to vote. The on-screen instructions give details

on how to complete the appointment process. Please

note that to be valid, your proxy instructions must be

received by Equiniti no later than 12.00 noon on

17February 2023. If you have any difficulties with online

voting, you should contact the shareholder helpline on

0800 032 0641 (or +44(0) 121 415 0207 for overseas

callers).

If an ordinary shareholder submits more than one valid

proxy appointment, the appointment received last

before the latest time for receipt of proxies will take

precedence.

Shareholders may not use any electronic address

provided either in this Notice of Annual General Meeting

or any related documents to communicate with the

Company for any purposes other than expressly stated.

Representatives of shareholders that are corporations

will have to produce evidence of their proper

appointment when attending the Annual General

Meeting.

2. Any person to whom this notice is sent who is a person

nominated under section 146 of the Companies Act 2006

to enjoy information rights (a “Nominated Person”) may,

under an agreement between him or her and the

shareholder by whom he or she was nominated, have a

right to be appointed (or to have someone else

appointed) as a proxy for the Annual General Meeting.

Ifa Nominated Person has no such proxy appointment

right or does not wish to exercise it, he or she may,

under any such agreement, have a right to give

instructions to the shareholder as to the exercise of

voting rights.

The statement of the rights of ordinary shareholders in

relation to the appointment of proxies in note 1 above

does not apply to Nominated Persons. The rights

described in that note can only be exercised by ordinary

shareholders of the Company.

3. Pursuant to Regulation 41 of the Uncertificated

Securities Regulations 2001, the Company has specified

that only those shareholders registered in the Register

of members of the Company at 6.30 p.m. on 17 February

2023, or 6.30 p.m. two days prior to the date of an

adjourned meeting, excluding non-working days, shall

be entitled to attend and vote at the meeting in respect

of the number of shares registered in their name at that

time. Changes to the Register of Members after

6.30p.m. on 17 February 2023 shall be disregarded in

determining the right of any person to attend and vote

at the meeting.

4. CREST members who wish to appoint a proxy or proxies

through the CREST electronic proxy appointment service

Explanatory Notes to the Notice of Meeting

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 58

Annual Report and Accounts

for the year ended 30 September 2022

Annual General Meeting

Explanatory Notes to the Notice of Meeting

may do so by using the procedures described in the

CREST manual. The CREST manual can be viewed at

www.euroclear.com. A CREST message appointing a

proxy (a “CREST proxy instruction”) regardless of

whether it constitutes the appointment of a proxy or an

amendment to the instruction previously given to a

previously appointed proxy must, in order to be valid, be

transmitted so as to be received by the issuer’s agent

(IDRA19) by the latest time for receipt of proxy

appointments.

5. Copies of the terms of appointment of the non-executive

directors and a statement of all transactions of each

director and of his family interests in the shares of the

Company, will be available for inspection by any

member of the Company at the registered office of the

Company during normal business hours on any weekday

(English public holidays excepted) and at the Annual

General Meeting by any attendee, for at least 15 minutes

prior to, and during, the Annual General Meeting. None

of the directors has a contract of service with the

Company.

6. The biographies of the directors offering themselves for

re-election are set out on pages 22 and 23 of the

Company’s annual report and accounts for the year

ended 30September 2022.

7. As at 5 December 2022, 36,143,690 ordinary shares of

25p each were in issue and 1,562,500 shares were

held in treasury. Therefore the total number of voting

rights of the Company as at 5 December 2022 was

34,581,190.

8. A copy of this Notice of Meeting, which includes details

of shareholder voting rights, together with any other

information as required under Section 311A of the

Companies Act 2006, is available from the website

dedicated to the Company:

www.schroders.co.uk/ukmidcap.

9. Pursuant to Section 319A of the Companies Act 2006,

the Company must cause to be answered at the Annual

General Meeting any question relating to the business

being dealt with at the AGM which is put by a member

attending the meeting, except in certain circumstances,

including if it is undesirable in the interests of the

Company or the good order of the meeting that the

question be answered or if to do so would involve the

disclosure of confidential information.

10. Members satisfying the thresholds in section 527 of the

Companies Act 2006 can require the Company to publish

a statement on its website setting out any matter

relating to: (a) the audit of the Company’s Accounts

(including the auditor’s report and the conduct of the

audit) that are to be laid before the Meeting; or (b) any

circumstance connected with an auditor of the Company

ceasing to hold office since the last AGM, that the

members propose to raise at the Meeting. The Company

cannot require the members requesting the publication

to pay its expenses. Any statement placed on the

website must also be sent to the Company’s auditors no

later than the time it makes its statement available on

the website. The business which may be dealt with at the

meeting includes any statement that the Company has

been required to publish on its website.

11. Members satisfying the thresholds in section 338 of the

Companies Act 2006 may require the Company to give,

to members of the Company entitled to receive notice of

the Annual General Meeting, notice of a resolution which

those members intend to move (and which may properly

be moved) at the Annual General Meeting. A resolution

may properly be moved at the Annual General Meeting

unless (i) it would, if passed, be ineffective (whether by

reason of any inconsistency with any enactment or the

Company’s constitution or otherwise); (ii) it is defamatory

of any person; or (iii) it is frivolous or vexatious. A

request made pursuant to this right may be in hard copy

or electronic form, must identify the resolution of which

notice is to be given, must be authenticated by the

person(s) making it and must be received by the

Company not later than six weeks before the date of the

Annual General Meeting.

12. Members satisfying the thresholds in section 338A of the

Companies Act 2006 may request the Company to

include in the business to be dealt with at the Annual

General Meeting any matter (other than a proposed

resolution) which may properly be included in the

business at the Annual General Meeting. A matter may

properly be included in the business at the Annual

General Meeting unless (i) it is defamatory of any person

or (ii) it is frivolous or vexatious. A request made

pursuant to this right may be in hard copy or electronic

form, must identify the matter to be included in the

business, must be accompanied by a statement

setting

out the grounds for the request, must be authenticated

by the person(s) making it and must be received by the

Company not later than six weeks before the date of the

Annual General Meeting.

13. The Company’s privacy policy is available on its website.

Shareholders can contact Equiniti for details of how

Equiniti processes their personal information as part of

the AGM.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 59

Schroder UK Mid Cap Fund plc

The terms and performance measures below are those

commonly used by investment companies to assess

values, investment performance and operating costs.

Numerical calculations are given where relevant. Some

of the financial measures below are classified Alternative

Performance Measures (“APMs”) as defined by the

European Securities and Markets Authority. Under this

definition, APMs include a financial measure of historical

financial performance or financial position, other than a

financial measure defined or specified in the applicable

financial reporting framework. APMs have been marked

with an asterisk.

Net asset value (”NAV”) per share

The NAV per share of 541.89p (2021: 791.56p) represents the

net assets attributable to equity shareholders of

£187,393,000 (2021: £277,569,000) divided by the number of

shares in issue, excluding any shares held in treasury, of

34,581,190 (2021: 35,066,190).

The change in the NAV amounted to -31.5% (2021: +39.1%)

over the year. However this performance measure excludes

the positive impact of dividends paid out by the Company

during the year. When these dividends are factored into the

calculation, the resulting performance measure is termed

the “total return”. Total return calculations and definitions are

given below.

Total return*

Total return is the combined effect of any dividends paid,

together with the rise or fall in the NAV per share or share

price. Total return statistics enable the investor to make

performance comparisons between investment companies

with different dividend policies. Any dividends received by a

shareholder are assumed to have been reinvested in either

the assets of the Company at its NAV per share at the time

the shares were quoted ex-dividend (to calculate the NAV per

share total return) or in additional shares of the Company (to

calculate the share price total return).

The NAV total return for the year ended 30 September 2022

is calculated as follows:

NAV at 30/9/21 791.56p

NAV at 30/9/22 541.89p

NAV on Cumulative

Dividend XD date XD date Factor factor

11.0p 13/1/2022 764.79p 1.0144 1.0144

5.0p 14/7/2022 612.27p 1.0082 1.0227

NAV total return, being the closing NAV,

multiplied by the cumulative factor, expressed

as a percentage change in the opening NAV -30.0%

The NAV total return for the year ended 30 September 2021

is calculated as follows:

NAV at 30/9/20 568.99p

NAV at 30/9/21 791.56p

Nav on Cumulative

Dividend XD date XD date Factor factor

9.5p 14/1/2021 656.71p 1.0144 1.0144

3.8p 8/7/2021 764.31p 1.0050 1.0195

NAV total return, being the closing NAV,

multiplied by the cumulative factor, expressed

as a percentage change in the opening NAV +41.8%

The share price total return for the year ended 30 September

2020 is calculated as follows:

Share price at 30/9/21 730.00p

Share price at 30/9/22 480.00p

Share price Cumulative

Dividend XD date on XD date Factor factor

11.0p 13/1/2022 686.00p 1.0160 1.0160

9.5p 14/7/2022 510.00p 1.0098 1.0260

Share price total return, being the closing

share price, multiplied by the cumulative

factor, expressed as a percentage change

in the opening share price -32.5%

The share price total return for the year ended 30 September

2021 is calculated as follows:

Share price at 30/9/20 458.50p

Share price at 30/9/21 730.00p

Share price Cumulative

Dividend XD date on XD date Factor factor

9.5p 14/1/2021 608.00p 1.0156 1.0156

3.8p 8/7/2021 702.00p 1.0054 1.0211

Share price total return, being the closing

share price, multiplied by the cumulative

factor, expressed as a percentage change

in the opening share price +62.6%

Annualised total return*

The annualised total return is the compound annual rate of

return which equates to the total return as calculated above,

for a period of more than one year.

Benchmark

A measure against which the performance of an investment

company is compared, or against which it sets its objective.

The Company’s benchmark is the FTSE 250 (ex-Investment

Companies) Index.

Discount/premium*

The amount by which the share price of an investment trust

is lower (discount) or higher (premium) than the NAV per

share. If shares are trading at a discount, investors would be

paying less than the value attributable to the shares by

Definitions of Terms and Alternative Performance

Measures

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 60

Annual Report and Accounts

for the year ended 30 September 2022

Annual General Meeting

reference to the underlying assets. A premium or discount is

generally the consequence of supply and demand for the

shares on the stock market. The discount or premium is

expressed as a percentage of the NAV per share. The

discount at the year end amounted to 11.4% (2021: discount

of 7.8%), as the closing share price at 480.00p (2021: 730.00p)

was 11.4% (2021: 7.8%) lower than the closing NAV of

541.89p (2021: 791.56p).

Gearing*

The gearing percentage reflects the amount of borrowings

(i.e. bank loans or overdrafts) which the Company has drawn

down and invested in the market. This figure is indicative of

the extra amount by which shareholders’ funds would move

if the Company’s investments were to rise or fall. This

represents borrowings used for investment purposes, less

cash, expressed as a percentage of net assets. If the figure

so calculated is negative, this is shown as a “Net cash”

position. The gearing figure at the year end is calculated as

follows:

2022 2021

£’000 £’000

Borrowings used for investment

purposes, less cash 20,214 21,436

Net assets 187,393 277,569

Gearing 10.8% 7.7%

Ongoing Charges*

Ongoing Charges is calculated in accordance with the AIC’s

recommended methodology and represents the

management fee and all other operating expenses excluding

finance costs and transaction costs amounting to £2,165,000

(2021:£2,230,000), expressed as a percentage of the average

daily net asset values during the year of £243,523,000

(2021:£247,871,000).

Leverage*

For the purpose of the Alternative Investment Fund

Managers (AIFM) Directive, leverage is any method which

increases the Company’s exposure, including the borrowing

of cash and the use of derivatives. It is expressed as the ratio

of the Company’s exposure to its net asset value and is

required to be calculated both on a “Gross” and a

“Commitment” method. Under the Gross method, exposure

represents the sum of the absolute values of all positions, so

as to give an indication of overall exposure. Under the

Commitment method, exposure is calculated in a similar

way, but after netting off hedges which satisfy certain strict

criteria.

Definitions of Terms and Alternative Performance

Measures

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 61

Schroder UK Mid Cap Fund plc

Notes

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 62

Annual Report and Accounts

for the year ended 30 September 2022

Notes

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 63

Schroder UK Mid Cap Fund plc

Notes

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 64

Shareholder Information

Website and share price information

The Company has a dedicated website, which may be found

www.schroders.co.uk/ukmidcap. The website has been

designed to be utilised as the Company’s primary method of

electronic communication with shareholders. It contains

details of the Company’s ordinary share price and copies of

annual report and accounts and other documents published

by the Company as well as information on the directors,

terms of reference of committees and other governance

arrangements. In addition, the website contains links to

announcements made by the Company to the market,

Equiniti’s shareview service and Schroders’ website.

The Company releases its NAV per share on both a cum and

ex-income basis to the market on a daily basis.

Share price information may also be found in the Financial

Times and on the Company’s website.

The Manager publishes monthly and quarterly updates on

the Company and other Schroders investment trusts, which

may be found under the “Documents” section on the website

www.schroders.co.uk/ukmidcap.

Association of Investment Companies

The Company is a member of the Association of Investment

Companies. Further information on the Association can be

found on its website,

www.theaic.co.uk.

Individual Savings Account (“ISA”) status

The Company’s shares are eligible for stocks and shares ISAs.

Non-Mainstream Pooled Investments

status

The Company currently conducts its affairs so that its shares

can be recommended by IFAs to ordinary retail investors in

accordance with the FCA’s rules in relation to

non-mainstream investment products and intends to

continue to do so for the foreseeable future. The Company’s

shares are excluded from the FCA’s restrictions which apply

to non-mainstream investment products because they are

shares in an investment trust.

Financial calendar

Annual General Meeting February

Final dividend paid February

Half year results announced May/June

Interim dividend paid June

Financial year end 30 September

Annual results announced December

Alternative Investment Fund Managers

Directive (“AIFMD”) disclosures

(unaudited)

The AIFMD, as transposed into the FCA Handbook in the UK,

requires that certain pre-investment information be made

available to investors in Alternative Investment Funds (such

as the Company) and also that certain regular and periodic

disclosures are made. This information and these disclosures

may be found either below, elsewhere in this annual report,

or in the Company’s AIFMD information disclosure document

published on the Company’s website.

Leverage

Leverage The Company’s leverage policy and details of its

leverage ratio calculation and exposure limits as required by

the AIFMD are published on the Company’s website and

within this report. The Company is also required to

periodically publish its actual leverage exposures. As at

30September 2022 these were:

Leverage exposure Maximum ratio Actual ratio

Gross Method 2.00 1.27

Commitment Method 2.00 1.10

Illiquid assets

As at the date of this Report, none of the Company’s assets

are subject to special arrangements arising from their illiquid

nature.

Remuneration disclosures

Quantitative remuneration disclosures to be made in this

annual report in accordance with FCA Handbook rule

FUND3.3.5 may also be found in the Company’s AIFM

Directive information disclosure document published on the

Company’s website.

Publication of Key Information Document (“KID”)

by the AIFM

Pursuant to the Packaged Retail and Insurance Based

Products (“PRIIPs”) Regulation, the Manager, as the

Company’s AIFM, is required to publish a short KID on the

Company. KIDs are designed to provide certain prescribed

information to retail investors, including details of potential

returns under different performance scenarios and a

risk/reward indicator. The Company’s KID is available on its

website.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 65

Directors

Robert Talbut (Chairman)

Wendy Colquhoun

Helen Galbraith

Andrew Page

Advisers

Alternative Investment Fund Manager

(the “Manager”)

Schroder Unit Trusts Limited

1 London Wall Place

London EC2Y 5AU

Investment Manager and Company Secretary

Schroder Investment Management Limited

1 London Wall Place

London EC2Y 5AU

Telephone: 020 7658 6596

Registered Office

1 Exchange Crescent

Conference Square

Edinburgh EH3 8UL

Depositary and Custodian

HSBC Bank plc

8 Canada Square

London E14 5HQ

Lending Bank

Scotiabank Europe plc

201 Bishopsgate

6th Floor

London EC2M 3NS

Corporate Broker

Panmure Gordon & Co

1 New Change

London EC4M 9AF

Independent auditor

KPMG LLP

Saltire Court

20 Castle Terrace

Edinburgh

EH1 2EG

Registrar

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

Shareholder Helpline: 0800 032 0641*

Website:

www.shareview.co.uk

*Calls to this number are free of charge from UK landlines.

Communications with shareholders are mailed to the

address held on the register. Any notifications and enquiries

relating to shareholdings, including a change of address or

other amendment should be directed to Equiniti Limited at

the address above.

Lawyers

Shepherd and Wedderburn

1 Exchange Crescent

Edinburgh EH3 8UL

Shareholder enquiries

General enquiries about the Company should be addressed

to the Company Secretary at the address set out above.

Dealing Codes

ISIN: GB0006108418

SEDOL: 0610841

Ticker: SCP

Global Intermediary Identification Number (GIIN)

9GN3DU.99999.SL.826

Legal Entity Identifier (LEI)

549300SOEWCYZTK2SP87

www.schroders.co.uk/ukmidcap

The Company’s privacy notice is

available on its website.

176289 Schroder UK Mid Cap Fund plc Annual Report Pt4_176289 Schroder UK Mid Cap Fund plc Annual Report Pt4 06/12/2022 09:57 Page 66