Schroder UK Mid Cap Fund plc

Half Year Report

For the six months ended 31 March 2026

Schroder UK Mid Cap Fund plc (the "Company") hereby submits its Half Year Report for the six months ended 31 March 2026 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2. 

Harry Morley, Chair of the Company, commented: "The long-term investment case for UK mid caps remains firmly intact, and the Board is optimistic about the Company's prospects."

Key highlights

·      Following successful negotiations with Saba Capital Management, the Company announced on 20 May 2026 its proposal to undertake a tender offer. At the General Meeting held on 24 June 2026, shareholders approved the resolution with a 98.88% majority, with 34.65% of the shares in issue as at 23 June 2026 tendered.

·      The Company's NAV per share total return for the period was -4.4%, compared with -2.9% from the FTSE 250 ex Investment Trusts Index.

·      Over the longer term, the Company has delivered NAV outperformance of its Benchmark over one, five, and ten years, and the share price has outperformed over three years to 31 March 2026.

·      UK mid caps now sit at multi-decade valuation lows relative to their own history, to UK large caps, and to most developed market peers.

The Company's Half Year Report is being published in hard copy format, and an electronic copy of that document will shortly be available to download from the Company's web pages www.schroders.com/ukmidcap.

The Company's Half Year Report will shortly be uploaded to the Financial Conduct Authority's National Storage Mechanism and will be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Enquiries:

Schroder Investment Management Limited

Chair's Statement

I am pleased to share my second interim report as Chair of the Company. Global markets were broadly stable over the period before geopolitical tensions in the Middle East dented investor confidence and increased concerns around oil prices and inflation. UK mid cap shares lagged wider markets and now trade on very low valuations, despite underlying company earnings remaining broadly supportive.

Investment and share price performance

During the six-month period to 31 March 2026, the Company's net asset value ("NAV") declined by 4.4%, which was more than the 2.9% fall in the Company's Benchmark (FTSE 250 ex Investment Trusts Index). The share price declined by 1.9%. Over the same period, the discount narrowed from 7.0% to 4.7%. Over the longer term, the Company has delivered NAV outperformance of its Benchmark over one, five, and ten years, and the share price has outperformed over three years to 31 March 2026.

After a broadly constructive start to the period ending 31 March 2026, with corporate earnings holding up and interest rate expectations moving in a favourable direction, the outbreak of conflict in the Middle East in late February prompted a significant shift in investor sentiment. Risk assets weakened broadly in the final weeks of the period, with UK mid cap equities ending in negative territory, as investor preferences favoured larger, more liquid, and more globally oriented businesses. The Board notes that this relative weakness reflects a shift in market sentiment rather than any material deterioration in the fundamental prospects of the businesses in which the Company is invested. As a result, UK mid caps now sit at multi-decade valuation lows relative to their own history, to UK large caps, and to most developed market peers.

More detailed commentary on the performance of your Company can be found in the Investment Manager's review starting on page 6 of the Half Year Report.

Dividend

In recognition of our commitment to delivering shareholder value and reflecting the ongoing recovery in portfolio income stemming from our underlying company holdings, the Board is pleased to announce an interim dividend of 6.5 pence per share for the financial year ending 30 September 2026, an increase of 3.2% on last year's interim dividend.

This dividend will be payable on 7 August 2026 to shareholders recorded on the register at the close of business on 10 July 2026. The increase in dividend reflects our confidence in the sustainability of income generation from our portfolio companies.

Discount management

The Company has successfully narrowed the discount of its share price to NAV to 4.7% as of 31 March 2026. The Board has committed to a mid-single figure discount in normal market conditions going forward and will utilise the share buy-back programme to ensure that the discount does not widen beyond this level. 556,500 shares were bought back during the six-month period ending 31 March 2026. Since the period end, a further 744,500 shares have been purchased.

Gearing

As at 31 March 2026, the Company's net gearing ratio was 5.4%, and as at 24 June 2026, this has reduced to 3.3%. We anticipate that the Manager will continue to utilise this gearing strategically. The use of gearing is a feature of the investment trust structure which can enhance returns relative to open ended funds.

Tender Offer results

Following successful negotiations with Saba Capital Management, the Company announced on 20 May 2026 its proposal to undertake a tender offer. The Company also confirmed that Saba had agreed to support the proposal, and enter into a three-year standstill arrangement.

I am pleased to report that, at the General Meeting held on 24 June 2026, shareholders approved the resolution with a 98.88% majority, with 34.65% of the shares in issue as at 23 June 2026 tendered.

The Board and Schroders remain confident in the Company's strategy and continue to see attractive long-term investment opportunities within the UK mid cap sector. We are therefore pleased that shareholders will continue to be able to access this strategy through the investment trust structure.

Looking ahead, and as mentioned above, the Board is aiming to maintain the Company's shares at a mid-single digit discount to net asset value in normal market conditions, with a view to minimising discount volatility for those shareholders who remain invested. On behalf of the Board, I would like to thank shareholders for their continued support. We look forward to building on this outcome and to the Company's future.

Schroders combination with Nuveen

On 12 February 2026, the Board of Schroders plc announced that they had agreed terms of a recommended cash acquisition by Nuveen, to combine the two businesses. The transaction is not expected to complete until Q4 2026. The Board of Schroder UK Mid Cap Fund plc have been informed that Nuveen's intention is to maintain continuity across Schroders' existing investment and client-facing functions, and the Board will monitor progress in this regard.

Further details are available on the Schroders website: https://www.schroders.com/en/global/individual/nuveenoffer/.

Outlook

While geopolitical developments and political uncertainty in the UK have weighed on short-term investor sentiment, the Board believes this environment presents an excellent entry point. UK mid cap equities remain among the most attractively valued in the developed world, underpinned by strong fundamentals and meaningful scope for re-rating over time.

Elevated levels of corporate activity, including takeover approaches at significant premiums and sustained share buyback programmes, highlight the extent to which strategic and financial buyers are recognising the value embedded within the sector.

Against this backdrop, and with our highly experienced portfolio management team, the Board remains confident in the Company's future ability to generate attractive total returns for shareholders. The long-term investment case for UK mid caps remains firmly intact, and the Board is optimistic about the Company's prospects.

Harry Morley

Chair

26 June 2026

Investment Manager's Review

Market background

Despite geopolitical events, global equity markets were broadly flat over the period. Resilient corporate earnings, easing inflation and the prospect of further interest rate cuts meant that major indices made steady progress through the last few months of 2025 and into the new year. But the period had a clear pivot point, with the outbreak of hostilities in the Middle East in late February leading to a sharp sell-off. Risk appetite retreated as investors grappled with the implications of conflict in Iran on corporate profits, oil prices, inflation and interest rates.

For the six months ending 31 March 2026, the FTSE 250 ex Investment Trusts Index was -2.9% on a total return basis, underperforming global markets (MSCI World), -0.6%, and the mining and energy-heavy FTSE 100, which returned 10.5%.

As a result, UK mid caps now sit at multi-decade valuation lows relative to their own history, to UK large caps and to most developed market peers. Importantly, this is not, in every case, a reflection of poor or deteriorating fundamentals. Selling has been indiscriminate, driven by sentiment, not by earnings, which generally held up well, with slightly more earnings upgrades than downgrades during the period.

Portfolio performance

The Company's net asset value ("NAV") per share total return for the period was -4.4%, compared with -2.9% from the FTSE 250 ex Investment Trusts Index. In share price terms, the Company delivered a return of -1.9% as the discount to NAV continued to narrow from 7.0% at the start of the period, to 4.7% at period end. In a longer-term context, the Company has delivered NAV outperformance of its benchmark over one, five, and ten years, and the share price has outperformed over three years.

Gearing was a modest detractor to performance.

In Consumer Discretionary, stock picking was positive, more than offsetting the impact of being overweight a weaker part of the market, as the UK consumer battened down the hatches at the end of the period. There were also positive contributions from individual holdings in Financials and Industrials, where stock selection again added value.

Man Group was the portfolio's strongest individual contributor, and a large part of financials' positive contribution to performance. The alternative asset manager reported strong net inflows as it generated better than expected performance fees. The company models strong capital allocation in the form of bolt on acquisitions and regular share buybacks and dividends and it has returned around $3.2 billion to shareholders over the last ten years, reducing its share count by approximately one third.

Both events in Venezuela and the conflict in the Middle East had a positive impact on Clarkson, the world's leading shipbroking and maritime data business. The company benefitted from higher shipping rates, increased sales and purchases of second-hand vessels and increased demand for its data and intelligence services. It also remains a long-term beneficiary of tightening environmental regulation, which is driving the construction of a new generation of compliant vessels. Harbour Energy, now the largest oil and gas company in Europe, benefitted from significantly higher energy prices. Investors also welcomed its new shareholder distribution policy, which targets the return of 45-75% of annual free cash flow to shareholders, from an average of 40% previously.

Mining royalties company Ecora Royalties also contributed positively. As its name suggests, the company operates a royalty-based business model, receiving a share of revenues from a diversified range of mining operations without taking on the operational risks of running mines directly. This diversification reduces mine and commodity-specific risk while still providing meaningful exposure to commodity prices. Ecora benefited from significantly higher commodity prices over the period, which partly offset the relative impact of not owning gold miners, in particular, directly.

Among stocks we do not hold, we were correct to avoid Vistry (balance sheet), Unite (lack of customers), WPP (AI threat) and B&M European Value Retail (lack of direction amid UK consumer weakness) - all of which fell significantly during the period. However, not owning gold miner Hochschild detracted from performance.

Telecom Plus, in the utilities sector, was the largest detractor from performance during the period. The multi-utility company's shares came under pressure despite interim results showing double digit organic customer growth and reasonable conversion into energy supply from their new book of TalkTalk broadband customers. Post period end, the company has announced both a rebalance away from dividends and towards share buybacks, and a strategy re-set, involving a significant level of new investment to drive growth. The business has a strong balance sheet and is holding share in its key energy market, whilst generating substantial free cash. It also has a store of potentially very valuable data related to UK consumer habits. We shall continue to monitor this portfolio position closely as the updated strategy is implemented.

Spire Healthcare also detracted from returns. The private hospital operator had put itself up for sale prior to the period, which had driven the shares higher. When no firm bidder emerged, the shares retraced those gains. While this is disappointing, our conviction in the long-term investment case remains intact. Although higher employment costs and uncertainty around NHS commissioning rates have represented near-term headwinds, the structural backdrop for private healthcare (ageing population and elevated NHS waiting lists) in the UK is positive.

Specialist media business Future also performed poorly. The business, which owns a range of hobbyist websites and niche magazine titles, via around 175 brands, as well as the GoCompare price comparison platform, profit warned at the end of the period, as fears around AI materialised somewhat. We see this as a clearing event - the company still owns a diversified portfolio of leading content brands, proprietary technology and multiple monetisation streams, and is adapting to structural changes driven by AI and search through partnerships, product innovation and regulatory tailwinds. At around three times earnings, with an EBITDA margin of 25%, the shares are attractively valued in our view, and we retain our holding.

Portfolio activity

We initiated several new positions during the period. Bellway is one of the UK's best-regarded housebuilders, with a track record of disciplined capital allocation through the cycle. The shares are trading at valuation levels last seen during the Global Financial Crisis, but without the balance sheet vulnerabilities that characterised that period. This suggests that a bleak scenario for UK housing is already reflected in the share price. Although cost pressures for materials in particular are a headwind, longer-term, the structural shortage of UK housing further augments the opportunity for all housebuilders, particularly best-in-class operators like Bellway.

Helios Towers, which owns and operates mobile telecommunications towers across Africa, is another new holding. Having spent several years reducing a highly geared balance sheet, the company is now generating sufficient free cash flow to both invest for growth and begin returning capital to shareholders - a process already underway through an active share buyback programme. Mobile penetration rates are expected to rise in Africa, which suggests returns on capital can also continue to increase.

Meanwhile, oil and gas supplier Hunting was also added to the portfolio. The company has a strong position in the subsea segment where we see meaningful structural growth potential, and management has a strong track record on capital allocation. A period of internal restructuring has sharpened the business's strategic focus and improved its operational discipline.

Finally, Bloomsbury Publishing was also added as a new holding. This is a unique business - a quality publisher whose roster includes Sarah J Maas, one of the world's most prolific and widely-read authors of popular fiction, and JK Rowling, whose "Harry Potter" titles continue to generate significant recurring revenues. The shares currently trade on an undemanding multiple for such quality characteristics and solid growth prospects. Bloomsbury is currently one of the largest companies in the FTSE Small Cap Index, but we expect it to join the FTSE 250 Index in due course.

In terms of disposals, Just Group, the retirement income specialist, and precision instrumentation business Spectris both exited the portfolio following bids that had been received in the Company's prior financial year. Meanwhile, online trading business IG Group was sold following its promotion to the FTSE 100 Index, in line with our sell discipline. Ground engineering specialist Keller was exited as we concluded that operating margins had reached a cyclical peak following a highly successful turnaround.

Outlook

The valuation case for UK mid caps is as compelling as we can recall. The FTSE 250 Index is trading on approximately 11 times forward earnings - well below its long-run average and at a significant discount to the US, Europe and UK large caps. The portfolio's PEG ratio (price/earnings to growth) of around 1.3 times compares with a long-run norm of more than 2.0 times. In our view, these valuations bear little relation to the underlying quality of the businesses we can find within the index. Balance sheets across the portfolio are strong and, encouragingly, we have seen more earnings upgrades than downgrades across our holdings so far in 2026.

The undervaluation of UK mid caps is increasingly being recognised through corporate activity. Trade buyers and private equity continue to pursue acquisitions at significant premia, seeing the same opportunity we do. And UK companies themselves are buying back their own equity at record rates. The UK has become the buyback capital of the world, which is a clear signal that management teams believe their own shares are too cheap. Each of these is a potential catalyst for closing the gap between price and value. Meanwhile, the return of IPO activity to London - including the listings of branded food business Princes Group and specialist lender Shawbrook in October 2025 - adds a further note of encouragement that confidence in the UK's capital markets is beginning to recover.

The economic outlook remains uncertain, although it is worth noting that the UK economy was making reasonable progress in the early months of 2026. Inevitably, the conflict in Iran will have impacted that momentum, and the outlook now hinges to an extent on how long hostilities last. A de-escalation in the near term may permit the interest rate cutting cycle to resume, which would be positive for the economically sensitive parts of the UK stock market. But a more prolonged conflict would make this less likely, with sustained inflationary pressure keeping rates higher for longer. Importantly, the portfolio is capable of navigating either outcome. The businesses we own are generally well-managed, financially robust and cash generative - these characteristics should provide resilience if conditions remain uncertain and allow a degree of participation should they improve.

It is also worth remembering that the opportunity set is not entirely beholden to UK economic conditions. Almost half of FTSE 250 revenues are generated internationally, and many of our holdings have negligible exposure to the UK economy. The ability to adjust our domestic exposure up or down as conditions evolve is a highly attractive feature of the strategy.

To conclude, starting valuation is the most powerful determinant of long-term investment returns. On that basis, the case for UK mid caps has rarely looked stronger. The businesses we own are well-run, well-capitalised and, in most cases, trading at prices that we believe significantly understate their worth. As active stock pickers with deep knowledge of this market, we see that gap as an opportunity - and one that, in our experience, will not persist indefinitely. We therefore look to the future with great confidence in what the Company can deliver for its shareholders.

Schroder Investment Management Limited

26 June 2026

Investment Portfolio

as at 31 March 2026

Companies in bold represent the 20 largest investments, which by value account for 54.2% (30 September 2025: 55.6% and 31 March 2025: 58.6%) of total investments. All investments are equities, listed on a recognised stock exchange.

Interim Management Statement

Principal risks and uncertainties

The directors consider that the principal risks and uncertainties faced by the Company for the remaining six months of the financial year, which could have a material impact on performance, remain consistent with those on pages 32 and 33 in the Annual Report and Financial Statements for the year ended 30 September 2025.

The Company's principal risks and uncertainties have not materially changed during the six months ended 31 March 2026.

Going concern

Having assessed the principal risks and uncertainties, and the other matters discussed in connection with the viability statement as set out on page 34 of the published Annual Report and Financial Statements for the year ended 30 September 2025, the Directors consider it appropriate to adopt the going concern basis in preparing the financial statements.

Related party transactions

There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 31 March 2026.

Directors' responsibility statement

In respect of the Half Year Report for the six months ended 31 March 2026, the Directors confirm that, to the best of their knowledge:

-    the condensed set of Financial Statements contained within have been prepared in accordance with IAS 34 Interim Financial Reporting and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as at 31 March 2026, as required by the Disclosure Guidance and Transparency Rule 4.2.4R; and

-    the Half Year Report includes a fair review of the information as required by the Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.

The Half Year Report has not been reviewed or audited by the Company's auditor.

The Half Year Report for the six months ended 31 March 2026 was approved by the Board and the above Responsibility Statement has been signed on its behalf.

Harry Morley

Chair

For and on behalf of the Board

26 June 2026

Statement of Comprehensive Income

for the six months ended 31 March 2026 (unaudited)

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 terms of other comprehensive income, and therefore the net return after taxation is also the total comprehensive income for the period.

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

Statement of Changes in Equity

for the six months ended 31 March 2026 (unaudited)

Statement of Financial Position

as at 31 March 2026 (unaudited)

Registered in Scotland as a public company limited by shares

Company registration number: SC082551

Notes to the Financial Statements

for the six months ended 31 March 2026

1. Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's independent auditor.

The figures and financial information for the year ended 30 September 2025 are extracted from the latest published financial statements of the Company and do not constitute statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

Basis of accounting

The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in July 2022.

All of the Company's operations are of a continuing nature.

The accounting policies applied to these financial statements are consistent with those applied in the financial statements for the year ended 30 September 2025.

3. Taxation

The Company's effective corporation tax rate is nil, as deductible expenses exceed taxable income. The tax charge comprises irrecoverable overseas withholding tax.

4. (Loss)/return per share

5. Dividends

A interim dividend of 6.5p (2025: 6.3p) per share, amounting to £2,194,000 (2025: £2,179,000) has been declared payable in respect of the six months ended 31 March 2026.

6. Creditors: amounts falling due within one year

The bank loan comprises a £30 million revolving credit facility agreement with Bank of Nova Scotia, London Branch expiring on 26 February 2027, of which £18 million has been drawn down.

7. Called-up share capital

Changes in the number of shares in issue during the period were as follows:

8. Net asset value per share

9. Financial instruments measured at fair value

The Company's financial instruments that are held at fair value comprise its investment portfolio. At 31 March 2026, all investments in the Company's portfolio were categorised as Level 1 in accordance with the criteria set out in paragraph 34.22 (amended) of FRS 102. That is, they are all valued using unadjusted quoted prices in active markets for identical assets (30 September 2025: same and 31 March 2025: same).

10. Events after the interim period that have not been reflected in the financial statements for the interim period

The Directors have evaluated the period since the interim date and have not noted any significant events which have not been reflected in the financial statements.