Phoenix unit trust managers. manager s annual report. Putm BothWeLL sub-sovereign BonD FunD. For the period: 3 August 2016 to 15 April 2017

Transcription

1 Phoenix unit trust managers manager s annual report For the period: 3 August 2016 to 15 April 2017 Putm BothWeLL sub-sovereign BonD FunD

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3 investment review* 2-3 Portfolio of investments* 4-8 top ten purchases and sales 9 statistical information* statements of total return & change in unitholders funds 13 Balance sheet 14 notes to the financial statements Distribution table 25 responsibilities of the manager and trustee 26 trustee s report and directors statement 27 independent auditor s report appendix Corporate information* *these collectively comprise the authorised Fund manager s report. 1

4 investment review Dear Investor Welcome to the Putm Bothwell sub sovereign Bond Fund annual report for the period to 15 april Performance Review since inception on 3 august 2016, the Putm Bothwell sub sovereign Bond Fund returned -1.0%. (source: hsbc, gross of amc, gbp, based upon the movement in the Cancellation Price for the 12 months to 15/04/17). this was compared to a return of -0.9% from its benchmark index. (source: Datastream, iboxx sterling sub-sovereigns from Bloomberg for 06/08/16 to 15/04/17). the Fund only launched on 3 august 2016 so there is no full-year performance to report. Standardised Past Performance Apr Apr Apr Apr Apr % growth % growth % growth % growth % growth PUTM Bothwell Sub Sovereign Bond Fund Benchmark Index source: Fund performance is hsbc, gross of amc, gbp, based upon the movement in the Cancellation Price to 15 april for each year. Benchmark index performance is Datastream, Composite of iboxx non-financials, iboxx Collateralized and iboxx Dom Financials sourced from Bloomberg to 15 april for each year. Past performance is not a guide to future performance. the value of units and the income from them can go down as well as up and is not guaranteed. You may not get back the full amount invested. Please note that all past performance figures are calculated without taking the initial charge into account. 2

5 investment review Portfolio and Market Review since inception, the fund has underperformed the benchmark index. Broadly, the macro rates positions contributed a small loss, with a difficult period from august to December being largely offset with positive performance into the first quarter as the flexibility of the Fund has increased. over the period however, both the asset allocation and stock selection were negative contributors to performance with an underweight to german issuers costing performance as the market worried about both French elections and peripheral europe. throughout the period from august 2016 until the end of the year, the main driver of rates performance was an overweight duration position that detracted from performance. the election of Donald trump, in conjunction with an apparently broad based pick up in global economic activity, led to a re-pricing of global interest rate expectations. Positioning was changed to reflect the changing policy circumstances, and since the beginning of this year the rates positions have contributed positively through expressing cautious optimism in the global economy. the Fund is short duration, primarily through us treasuries, in anticipation of tightening by the Federal reserve against a positive growth and inflationary backdrop. We have offset this optimism with long bond exposure in other markets, in particular the front end of the australian yield curve, and the belly of the swedish curve. We think these are markets where rate pricing is too aggressive, and central banks are likely to keep policy lower for longer. otherwise, steepener positions in the euro and sterling markets have contributed positively through on-going carry and strong performance at the front end of those respective yield curves. recently, we have begun to implement interest rate swap strategies following the conclusion of the necessary legal documentation. as of march we have been taking the opportunity to add a variety of positions at favourable levels. examples of these include a euro four year forward 10-year to 30-year steepener, which expresses the view that the flatness of the forward curve is unlikely to be realised and offers the receiver attractive on-going carry. We also switched our australian exposure into 2-year 2- years forward swaps, which is the part of the curve that offers the most attractive rate to receive rates and express the view that the reserve Bank of australia is likely to keep policy at current levels or looser for a considerable period of time. Lastly, we have entered into a position to receive of swedish 5-year 5-years forward rates versus bunds. Despite optically impressive growth and sentiment indicators, we think optimism in the swedish economy is fully priced and the risks are for the riksbank to continue to miss its inflation target given weak wage dynamics. in terms of credit, over the period since inception the performance of the supranational bonds has been driven in part by the movement in the swap curve relative to the underlying gilt curve. this led to a clear differential in spread performance between longer and shorted-dated bonds, with the latter underperforming thanks to a negative differential between the gilt and swap curve. Compounding this was the on-going issuance from supranational issuers as they took advantage of relatively cheap funding in the short-dated part of the maturity curve. We have taken advantage of this issuance to bring us back to a more neutral positioning versus the index. We currently have a zero weighting to ipic, an issuer from the uae. this was the key negative contributor to stock selection, costing the Fund 5 basis points as markets became more comfortable with the outlook for oil over the medium term. Market Outlook and Fund Strategy We look for portfolio strategies that lean towards yield and curve normalisation on the basis of policy withdrawal but offer yield carry while we await a slow unwind; i.e. forward yield curve steepeners. We look to be flexible on market selection and seek opportunities at key yield differentials but are, in general, negative on us and european rates against positive on uk, australian and swedish rates. the Fund is currently neutrally positioned in most issuers and we believe this to be a prudent stance given the uncertain outlook over the next few quarters. We will however look for opportunities to add to French and peripheral european issuers once the outlook becomes more certain. higher inflation in the uk is an uncomfortable headache for the Bank of england faced by political pressures. We ultimately expect this to suppress the consumer and for negative Brexit effects to emerge. We cautiously favour short dated uk yields as rate expectations will lower. We view bond markets warily as central bank interference remains but expect a gradual grind higher in yields though the road remains technically treacherous. 3

6 Portfolio of investments Investments held at 15 April 2017 market Percentage of value total net assets holding investment 000 % Government Bonds United Kingdom ,827,000 affordable housing Finance 2.893% 11/08/ , ,784,000 affordable housing Finance 3.8% 20/05/2044 7, ,440,000 LCr Finance 4.5% 07/12/ , ,000 LCr Finance 4.5% 07/12/ ,228,000 LCr Finance 4.5% 07/12/2038 7, ,057,000 LCr Finance 5.1% 07/03/ , ,934,000 network rail infrastructure Finance 4.625% 21/07/ , ,711,000 network rail infrastructure Finance 4.75% 22/01/ , ,820,000 network rail infrastructure Finance 4.375% 09/12/ , ,409,000 network rail infrastructure Finance 4.75% 29/11/ , Austria ,394,000 Österreichische Kontrollbank 5.75% 07/12/ , Channel Islands ,235,000 guernsey 3.375% 12/12/2046 1, ,488,000 Jersey government 3.75% 09/06/2054 7, Germany ,853,000 KFW 2% 06/12/2018 8, ,000,000 KFW 1.125% 23/12/ , ,420,000 KFW 1.625% 05/06/ , ,900,000 KFW 1.375% 01/02/ , ,700,000 KFW 5.55% 07/06/ , ,000,000 KFW 0.875% 15/03/ , ,000 KFW 5% 10/09/2024 1, ,523,000 KFW 5.5% 18/06/ , ,425,000 KFW 6% 07/12/ , ,604,000 KFW 5.75% 07/06/ , ,103,000 KFW 5% 09/06/ , ,304,000 KFW 4.875% 15/03/2037 1, ,629,000 Landwirtschaftliche rentenbank 1.375% 15/12/ , Isle of Man ,200,000 isle of man 5.375% 14/08/2034 7, Japan ,870,000 Japan Finance Corp 5.75% 09/08/2019 2, Corporate Bonds 2.99 United Kingdom ,200,000 Prs Finance 1.75% 24/11/2026 5, France ,600,000 Dexia Credit Local 1.125% 24/02/2019 6, ,900,000 Dexia Credit Local 2% 17/06/ , ,400,000 Dexia Credit Local 2.125% 12/02/2025 9, ,877,000 natixis 5.875% 24/02/2020 3,

7 Portfolio of investments Investments held at 15 April 2017 market Percentage of value total net assets holding investment 000 % Netherlands ,938,000 Bank nederlandse gemeenten 1.875% 07/12/2018 1, ,014,000 nederlandse Waterschapsbank 5.375% 07/06/ , Supranational Bonds ,000,000 african Development Bank 0.875% 13/12/2018 3, ,000,000 african Development Bank 0.875% 20/12/2021 5, ,913,000 asian Development Bank 1% 18/12/2018 2, ,000 Council of europe 1.875% 22/12/ ,226,000 Council of europe 1.125% 07/03/2019 7, ,646,000 Council of europe 1.25% 23/12/ , ,803,000 european Bank for reconstruction and Development 5.625% 07/12/ , ,980,000 european Coal & steel % 18/07/2019 2, ,034,000 european investment Bank 4.75% 15/10/2018 2, ,567,000 european investment Bank 1.5% 01/02/ , ,360,000 european investment Bank 5.375% 07/03/2019 1, ,500,000 european investment Bank 0.625% 17/01/2020 7, ,812,000 european investment Bank 2.25% 07/03/2020 8, ,690,000 european investment Bank 1.125% 07/09/2021 6, ,235,000 european investment Bank 5.375% 07/06/ , ,914,000 european investment Bank 4.25% 07/12/ , ,846,600 european investment Bank 2.5% 31/10/ , ,649,000 european investment Bank 5.5% 15/04/ , ,000,000 european investment Bank 1.0% 21/09/ , ,998,000 european investment Bank 3.75% 07/12/2027 6, ,159,000 european investment Bank 6% 07/12/ , ,968,000 european investment Bank 4.5% 07/06/ , ,006,000 european investment Bank 5.625% 07/06/ , ,318,000 european investment Bank 3.875% 08/06/ , ,555,000 european investment Bank 5% 15/04/ , ,127,000 european investment Bank 4.5% 07/03/ , ,965,000 european investment Bank 4.625% 12/10/ , ,662,000 inter american Development Bank 1.125% 17/12/2019 4, ,774,000 inter american Development Bank 5.25% 07/06/2021 5, ,011,000 international Bank for reconstruction and Development 1.375% 15/12/ , ,000 international Bank for reconstruction and Development 5.4% 07/06/ ,000,000 international Bank for reconstruction and Development 0.375% 15/06/2021 8, ,000,000 international Bank for reconstruction and Development 0.75% 07/12/2021 7, ,672,000 international Bank for reconstruction and Development 4.875% 07/12/ , ,526,000 international Bank for reconstruction and Development 5.75% 07/06/2032 8,

8 Portfolio of investments Investments held at 15 April 2017 market Percentage of value total net assets holding investment 000 % Supranational Bonds (continued) 12,057,000 nordic investment Bank 1% 07/03/ , ,541,000 nordic investment Bank 5.25% 26/11/2019 1, ,000,000 nordic investment Bank 0.625% 02/11/ , Public Authorities United Kingdom ,690 newport Borough Council 8.875% 10/04/ ,874,000 transport for London 2.25% 09/08/2022 7, ,557,000 transport for London 2.125% 24/04/ , ,996,000 transport for London 4.5% 31/03/2031 7, ,000 transport for London 4% 12/09/ ,405,000 transport for London 5% 31/03/2035 8, ,642,000 transport for London 3.875% 23/07/ , ,000 transport for London 3.625% 15/05/2045 1, ,170,000 transport for London 4% 07/04/2064 8, Australia 50,000 new south Wales treasury 5% 25/02/ Belgium ,650,000 Belgium Kingdom 5.7% 28/05/2032 6, Canada ,000,000 alberta Canada (Province of) 1% 15/11/ , ,137,000 export Development Canada 1.875% 17/12/2018 6, ,723,000 export Development Canada 1.375% 16/12/2019 9, ,500,000 export Development Canada 0.875% 07/12/2021 6, ,000,000 nova scotia 11.75% 18/04/2019 3, Denmark ,413,000 Kommunekredit 1.125% 07/12/2018 5, Finland ,000,000 municipality Finance PLC 0.75% 15/12/2020 5, France ,059,000 Caisse Damort Dette soc 1% 07/03/ , ,923,000 sncf mobilites 5.375% 18/03/2027 7, ,461,000 sncf reseau 5.5% 01/12/ , ,410,000 sncf reseau 5.25% 07/12/ , ,297,000 sncf reseau 5.25% 31/01/ , ,924,000 sncf reseau 5% 11/03/ , ,605,000 sncf reseau 4.83% 25/03/2060 5, Germany ,000,000 erste abwicklungsanstalt 1% 07/03/2019 4, ,300,000 Fms Wertmanagement 1.875% 07/12/2018 3, ,700,000 Fms Wertmanagement 1.25% 08/03/ , ,800,000 Fms Wertmanagement 1.125% 13/12/2019 1, ,000,000 Fms Wertmanagement 0.625% 06/03/ , ,000,000 Fms Wertmanagement 0.875% 14/05/ , ,000,000 Fms Wertmanagement 0.875% 14/02/ , ,330,000 L Bank Bw Foerderbank 1.125% 17/05/2021 9, ,490,000 Landwirtschaftliche rentenbank 1.5% 23/12/2019 5, ,000,000 Landwirtschaftliche 1.125% 15/12/2023 7,

9 Portfolio of investments Investments held at 15 April 2017 market Percentage of value total net assets holding investment 000 % Netherlands ,550,000 Bank nederlandse gemeenten 5.75% 18/01/2019 4, ,024,000 Bank nederlandse gemeenten 1.125% 07/03/ , ,000,000 Bank nederlandse gemeenten 1.125% 24/05/ , ,000 Bank nederlandse gemeenten 5.375% 07/06/ ,454,000 Bank nederlandse gemeenten 5.375% 07/06/2021 8, ,000,000 Bank nederlandse gemeenten 1% 15/03/ , ,050,000 Bank nederlandse gemeenten 5.2% 07/12/ , ,596,000 Deutsche Bahn Finance BV 3.125% 24/07/2026 8, ,449,000 nederlandse Waterschapsbank 1% 09/12/2019 6, Norway ,000,000 Kommunalbanken as 0.875% 08/12/ , Singapore ,782,000 temasek Financial 4.625% 26/07/2022 3, ,235,000 temasek Financial 1.5% 01/03/2028 7, ,000 temasek Financial 5.125% 26/07/ Sweden ,950,000 Kommuninvest i sverige 1.125% 06/09/ , ,000,000 svensk exportkredit ab 0.625% 07/12/2020 9, ,000,000 swedish export Credit 1.875% 21/12/2018 5, United States ,000 Federal national mortgage association 5.375% 07/06/ ,422,000 Federal national mortgage association 5.375% 07/12/2028 8, ,200,000 tennessee Valley authority 5.625% 07/06/2032 7, ,709,000 tennessee Valley authority 4.625% 07/06/2043 2, Money Markets ,792 standard Life investments sterling Liquidity Fund Class 0 gbp~ Futures (0.12) United Kingdom (0.03) (310) icf ice Long gilt Future June 2017 (537) (0.03) Germany (30) eux euro Bund Future June United States (0.09) (526) CBt us 10Yr note Future June 2017 (728) (0.04) (1,022) CBt us 5Yr note Future June 2017 (793) (0.05) Interest Rate Swaps 0.08 ( 6,925,000) irs Cit 0.97% 29/03/2057 Fixed (459) (0.03) 6,925,000 irs Cit LiBor 29/03/2057 Floating aud23,478,000 irs Cit 2.573% 08/04/2021 Fixed (aud23,478,000) irs Cit BBsW 08/04/2021 Floating (662) (0.04) 7

10 Portfolio of investments Investments held at 15 April 2017 market Percentage of value total net assets holding investment 000 % Interest Rate Swaps (continued) 82,100,000 irs LLo 0.888% 05/04/2021 Fixed 1, ( 82,100,000) irs LLo 0.888% 05/04/2021 Floating (1,308) (0.08) ( 17,200,000) irs LLo 1.390% 05/04/2029 Fixed (2,279) (0.14) 17,200,000 irs LLo 1.390% 05/04/2029 Floating 2, aud348,600,000 irs mel 2.827% 08/03/2021 Fixed 11, (aud348,600,000) irs mel BBsW 08/03/2021 Floating (9,782) (0.59) ($21,860,000) irs mor 2.68% 19/04/2047 Fixed (4,350) (0.26) $21,860,000 irs mor LiBor 19/04/2047 Floating 4, $46,735,000 irs mor 2.61% 19/04/2027 Fixed 4, ($46,735,000) irs mor LiBor 19/04/2027 Floating (4,195) (0.25) $46,735,000 irs mor 2.595% 19/04/2027 Fixed 4, ($46,735,000) irs mor LiBor 19/04/2027 Floating (4,195) (0.25) ($21,860,000) irs mor 2.665% 19/04/2047 Fixed (4,325) (0.26) $21,860,000 irs mor LiBor 19/04/2047 Floating 4, ,050,000 irs sgs 1.48% 12/04/2031 Fixed 2, ( 20,050,000) irs sgs eurib 12/04/2031 Floating (2,283) (0.14) ( 8,050,000) irs sgs 1.57% 12/04/2051 Fixed (2,662) (0.16) 8,050,000 irs sgs eurib 12/04/2051 Floating 2, ( 8,169,000) irs ubs 1.56% 12/04/2051 Fixed (2,684) (0.16) 8,169,000 irs ubs eurib 12/04/2051 Floating 2, ,084,000 irs ubs 1.475% 12/04/2031 Fixed 2, ( 20,084,000) irs ubs eurib 12/04/2031 Floating (2,287) (0.14) Portfolio of investments^ 1,622, Net other assets 29, Net assets 1,651, all investments with the exception of interest rate swaps are listed on recognised stock exchanges and are approved securities within the meaning of the FCa rules unless otherwise stated. the counterparty for the Futures is ubs. the counterparties for the interest rate swaps are Citibank, Lloyds Bank, merill Lynch, morgan stanley, societe generale and ubs. ^ includes investment liabilities. ~sicavs (open ended investment schemes registered outside the uk). Credit Ratings 000 % investment grade 1,608, unrated 13, Total investment in bonds 1,622,

11 top ten purchases and sales For the period ended 15 april 2017 Purchases Cost 000 standard Life investments sterling Liquidity Fund Class 0 gbp 340,838 european investment Bank 1.375% 15/01/ ,295 european investment Bank 1.5% 01/02/ ,169 KFW 6% 07/12/ ,254 european investment Bank 5% 15/04/ ,485 KFW 1.125% 23/12/ ,773 european investment Bank 5.625% 07/06/ ,240 network rail infrastructure Finance 4.625% 21/07/ ,183 KFW 2% 06/12/ ,462 european investment Bank 4.75% 15/10/ ,370 Sales Proceeds 000 standard Life investments sterling Liquidity Fund Class 0 gbp 340,485 european investment Bank 1.375% 15/01/ ,170 KFW 1% 07/12/ ,322 european investment Bank 4.75% 15/10/ ,153 KFW 2% 06/12/ ,404 Lloyds Bank 1.5% 02/05/ ,843 international Bank for reconstruction and Development 1.375% 15/12/ ,539 network rail infrastructure Finance 4.375% 09/12/ ,048 european investment Bank 4.125% 07/12/ ,487 Fms Wertmanagement 1% 10/04/ ,184 Total purchases 2,506,261 Total sales 864,504 9

12 statistical information Comparative tables Class B Accumulation** 15/04/17 pence Change in net assets per unit opening net asset value per unit return before operating charges* (1.21) operating charges (0.02) return after operating charges* (1.23) Distributions on accumulation units (0.70) retained distributions on accumulation units 0.70 Closing net asset value per unit *after direct transaction costs of: 0.00 Performance return after charges (1.23%) Other information Closing net asset value ( 000) 1,651,815 Closing number of units 1,672,427,139 operating charges 0.03% Direct transaction costs 0.00% Prices + highest unit price (pence) Lowest unit price (pence) high and low price disclosures are based on quoted unit price. therefore, the opening and closing nav prices may fall outside the high/low price threshold. **the Fund was launched on 3rd august

13 statistical information Investment objective the Fund aims to produce a total return. there is no guarantee that this return will be achieved and capital is at risk. Investment policy the investment policy of the Fund is to invest primarily in sterling fixed interest or index-linked sub-sovereign bonds. For the purpose of diversification and liquidity, the Fund may also invest in nonsterling denominated fixed interest or index-linked sub-sovereign bonds, bonds issued by governments, companies, or institutions worldwide which may be denominated in any currency, collective investment schemes, cash, near cash, deposits and money market instruments. stock lending and borrowing may be used. the Fund has the ability to invest in derivatives such as foreign exchange forwards, stock and index futures, options, and other contracts for difference for the purpose of efficient portfolio management only (including the use of hedging techniques). the Fund may invest more than 35% in individual issuers of government and Public securities. Revenue distribution and pricing units of the Fund are available as B accumulation units (where revenue is reinvested to enhance the unit price). there will be two potential distributions in each accounting year: an interim distribution as at 15 october and a final distribution as at 15 april. at each distribution the net revenue after deduction of expenses, arising in the preceding six months from the investments of the Fund is apportioned amongst the unitholders. unitholders receive a tax voucher giving details of the distribution and the manager s report no later than two months after these dates. 11

14 statistical information Risk and reward profile the risk and reward indicator table demonstrates where the Fund ranks in terms of its potential risk and reward. the higher the rank the greater the potential reward but the greater the risk of losing money. it is based on past data, may change over time and may not be a reliable indication of the future risk profile of the Fund. the shaded area in the table below shows the Fund s ranking on the risk and reward indicator. fi Typically lower rewards, Typically higher rewards, lower risk higher risk fi this Fund is ranked at 3 because funds of this type have experienced low to medium rises and falls in value in the past. the above figure applies to the following unit class: Class B accumulation Please note that even the lowest risk class can lose you money and that extreme market circumstances can mean you suffer severe losses in all cases. Please note the Fund's risk category may change in the future. the indicator does not take into account the following risks of investing in this Fund: Bonds are affected by changes in interest rates, inflation and any decline in creditworthiness of the security issuer. securities that produce a higher level of income usually also carry greater risk as such security issuers may have difficulty in paying their debts. there may be cases where the organisation from which we buy a security fails to carry out its obligations, which could cause losses to the Fund. there is no guarantee that an asset which provides the security for a bond will maintain its value. although the investment manager will use currency trades to reduce exchange rate risk on investments not priced in sterling, this may not completely eliminate the Fund s exchange rate risk. For more information on the risk and reward profiles of our Funds, please refer to the most up to date relevant fund and unit Class Key investor information Documents (KiiDs). these are available online at 12

15 annual financial statements For the period ended 15 april 2017 Statement of total return 15/04/17 notes income net capital losses 4 (22,315) revenue 5 11,199 expenses 6 (330) interest payable and similar charges (18) net revenue before taxation 10,851 taxation 7 net revenue after taxation 10,851 total deficit before distributions (11,464) Distributions 8 (10,910) Change in unitholders funds from investment activities (22,374) Statement of change in unitholders funds 15/04/ opening net assets amounts receivable on issue of units 90,163 amounts receivable on in-specie transfer* 1,775,896 amounts payable on cancellation of units (203,536) 1,662,523 Change in unitholders funds from investment activities (22,374) retained distributions on accumulation units 11,666 Closing net assets 1,651,815 *represents the value of units issued by in-specie transfer of assets during the period. 13

16 annual financial statements as at 15 april 2017 Balance sheet 15/04/17 notes Assets: Fixed assets: investments 1,624,672 Current assets: Debtors 9 39,036 Cash and bank balances 10 3,543 total current assets 42,579 total assets 1,667,251 Liabilities: investment liabilities (2,577) Creditors: other creditors 11 (12,859) total creditors (12,859) total liabilities (15,436) net assets 1,651,815 unitholders funds 1,651,815 14

17 notes to the financial statements Note 1 (a) (b) (c) (d) (e) (f) Accounting policies Basis of preparation the financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments and in compliance with Financial reporting standard (Frs102) and in accordance with the statement of recommended Practice (2014 sorp) for financial statements of authorised Funds issued by the investment association in may the financial statements have been prepared on a going concern basis. Valuation of investments the quoted investments of the Fund have been valued at bid dealing prices as at close of business, 13 april 2017 in accordance with the trust Deed. investments in collective investment schemes have been valued at bid price for dual priced funds or the single price for single priced funds. Where these investments are managed by the manager or an associate of the manager, the holdings have been valued at the cancellation price for dual priced funds or the single price for single priced funds. this price is the last available published price at the period end. unquoted securities are valued by the manager and are subject to constant review. Derivatives are valued as at close of business on the last working day of the accounting period. exchange traded derivatives are priced at fair value, which is deemed to be the bid price. over-the-counter derivatives are priced at fair value using valuation models or data sourced from market data providers. Foreign exchange transactions in foreign currencies during the period are translated into sterling at the rates of exchange ruling on the transaction date. amounts held in foreign currencies have been translated at the rate of exchange ruling at close of business, 13 april Revenue interest receivable on bank deposits and money market funds is accounted for on an accruals basis. interest receivable from debt securities is accounted for on an effective interest rate basis. accrued interest purchased or sold is excluded from the cost of the security and is accounted for as revenue. any commission arising from stocklending is recognised on an accruals basis and is disclosed net of fees. interest received from or paid to the Fund from over-the-counter derivatives designed to protect income is treated as revenue. interest received from or paid to the Fund from over-the-counter derivatives designed to protect capital is treated as capital. Expenses expenses are accounted for on an accruals basis. expenses of the Fund are charged against revenue, except for costs associated with the purchase and sale of investments, which are charged to capital. Taxation the Fund satisfied the rules of si 2006/964, reg 19 throughout the period. all distributions made are therefore made as interest distributions. the Fund has no corporate tax liability as interest distributions are tax deductible. 15

18 notes to the financial statements Note 1 (g) Note 2 (a) (b) (c) (d) (e) Note 3 (a) Accounting policies (continued) Deferred taxation Deferred tax is provided at current rates of corporation tax on all timing differences which have originated but not reversed by the Balance sheet date. Deferred tax is not recognised on permanent differences. Deferred tax assets are recognised only to the extent that the manager considers it is more likely than not that there will be taxable profits from which underlying timing differences can be deducted. Distribution policies Basis of distribution revenue produced by the Fund s investments accumulates during each accounting period. if, at the end of each accounting period, revenue exceeds expenses, the net revenue of the Fund is available to be accumulated to unitholders. the Fund is more than 60% invested in qualifying investments (as defined by si 2006/964, reg 20) and will pay an interest distribution. Unclaimed distributions Distributions remaining unclaimed after six years are paid into the Fund as part of the capital property. Interest from debt securities Future cash flows on all assets are considered when calculating revenue on an effective interest rate basis and where, in the manager s view there is doubt as to the final maturity value, an estimate of the final redemption proceeds will be made in determining those cash flows. the impact of this will be to reduce the revenue from debt securities, and therefore the revenue distributed, whilst preserving capital within the Fund. Distributions from collective investment schemes it is the policy of the Fund to distribute revenue from both income and accumulation distributions. Expenses in determining the net revenue available for distribution, charges in relation to the safe custody, of investments are ultimately borne by capital. Risk management policies the main risks arising from the Fund s financial instruments are market price risk, interest rate risk, foreign currency risk, liquidity risk, credit risk and counterparty risk. the manager s policies for managing these risks are summarised below and have been applied throughout the period. Market price risk market price risk arises mainly from uncertainty about future prices of financial instruments held. it represents the potential loss the Fund might suffer through holding market positions in the face of price movements. the Fund s investment portfolio is exposed to market fluctuations which are monitored by the manager in pursuit of the investment objectives and policies. adherence to investment guidelines and to investment and borrowing powers set out in the trust Deed, the Prospectus and in the Collective investment schemes sourcebook ( the sourcebook ) mitigates the risk of excessive exposure to any particular type of security or issuer. 16

19 notes to the financial statements Note 3 (b) (c) (d) (e) (f) Risk management policies (continued) Interest rate risk the Fund s assets are comprised of mainly fixed interest rate securities. there is therefore a risk that the capital value of investments will vary as a result of the market s sentiment regarding future interest rates. expectations of future rates may result in an increase or decrease in the value of investments held. in general, if interest rates rise the revenue potential of the Fund also rises but the value of fixed interest rate securities will decline. a decline in interest rates will in general have the opposite effect. any transactions in fixed interest securities must be used in accordance with the investment objective of the Fund and must be deemed by the investment manager to be economically appropriate. regular production of portfolio risk reports highlight concentrations of risk, including interest rate risk, for this Fund. interest receivable on bank deposits or payable on bank overdraft positions will be affected by fluctuations in interest rates. Foreign currency risk a substantial proportion of the Fund s investment portfolio is invested in overseas securities and the Balance sheet can be significantly affected by movements in foreign exchange rates. the Fund may be subject to short term exposure to exchange rate movements between placing the purchase or sale of securities and agreeing a related currency transaction albeit usually the two transactions are agreed at the same time. any such currency transactions must be used in accordance with the investment objective of the Fund and must be deemed by the investment manager to be economically appropriate. regular production of portfolio risk reports highlight concentrations of risk, including currency risk, for the Fund. Liquidity risk the Fund s assets are comprised of mainly readily realisable securities. if insufficient cash is available to finance unitholder redemptions then securities held by the Fund may need to be sold. the risk of low market liquidity, through reduced trading volumes, may affect the ability of the Fund to trade financial instruments at values previously indicated by financial brokers. From time to time, liquidity may also be affected by stock specific or economic events. to manage these risks the manager performs market research in order to achieve the best price for any transactions entered into on behalf of the Fund. all stocks are valued daily but those stocks identified as being less liquid are reviewed on a regular basis for pricing accuracy. Credit risk at the Balance sheet date 34.67% of the Fund s assets were held in supranational bonds, 31.85% in government bonds 28.71% in public authorities and 2.99% in corporate bonds. surpranational, government, public authority and corporate bonds involve the risk that the bond issuer will be unable to meet its liability to pay interest or redeem the bond. the Fund manager selects bonds taking into account the credit rating, bearing in mind the Fund s objective. Counterparty risk Certain transactions in securities that the Fund enters into expose it to the risk that the counterparty will not deliver the investment (purchase) or cash (sale) after the Fund has fulfilled its responsibilities. the Fund only buys and sells investments through brokers which have been approved by the manager as an acceptable counterparty. this list is reviewed annually. 17

20 notes to the financial statements Note 3 (g) Note 4 Risk management policies (continued) Derivatives Derivative transactions may be used by the Fund for the purposes of meeting its investment objectives and also for hedging. in doing so the manager may make use of a variety of derivative instruments in accordance with the sourcebook. the use of derivatives for investment purposes means that the net asset value of the Fund may at times have high volatility, although derivatives will not be used with the intention of raising the risk profile of the Fund. Where derivatives are used for hedging this will not compromise the risk profile of the Fund. use of derivatives will not knowingly contravene any relevant investment objective or limits. the manager has used exchange traded futures to hedge the value of those assets denominated in foreign currency. interest rate swaps have been used to hedge the interest rate risk of holding fixed rate bonds during the period. the derivative counterparties are shown at the bottom of the Portfolio of investments on page 8. Net capital losses the net capital losses during the period comprise: 15/04/ Losses on non-derivative securities (18,987) Losses on derivative contracts (3,331) Currency gains 4 handling charges (1) net capital losses (22,315) Note 5 Revenue 15/04/ interest on debt securities 11,189 Bank interest 4 Liquidity interest 6 total revenue 11,199 18

21 notes to the financial statements Note 6 Expenses 15/04/ (a) Payable to the manager or associates of the manager and agents of either of them: manager s periodic charge 159 (b) (c) Payable to the trustee or associates of the trustee and agents of either of them: trustee s fees 74 other expenses: audit fee 6 Professional fees 29 safe custody charges 61 Printing and stationery 1 97 total expenses 330 Note 7 Taxation 15/04/ (a) analysis of tax charge for the period overseas tax total taxation (b) Factors affecting the tax charge for the period the tax assessed for the period is lower than that calculated when the standard rate of corporation tax for authorised unit trusts is applied to total revenue return. the differences are explained below: net revenue before taxation 10,851 Corporation tax at 20% 2,170 effects of: tax deductible interest distributions (2,170) tax relief for overseas tax suffered overseas tax total tax charge for the period (note 7(a)) authorised unit trusts are exempt from tax on capital gains in the uk. (c) Provision for deferred taxation no deferred tax asset has been recognised in the period. 19

22 notes to the financial statements Note 8 Distributions the distributions take account of amounts added on the issue of units and amounts deducted on the cancellation of units, and comprise: 15/04/ Final 11,666 amounts deducted on cancellation of units 538 amounts added on issue of units (1,294) net distribution for the period 10,910 net revenue after taxation 10,851 movement of undistributed revenue (2) expenses taken to capital 61 net distribution for the period 10,910 Details of the distribution per unit are set out in the tables on page 26. Note 9 Debtors 15/04/ sales awaiting settlement 17,054 accrued income 21,976 income tax recoverable 6 total debtors 39,036 Note 10 Cash and bank balances 15/04/ Cash and bank balances 60 amounts held at futures clearing houses 3,483 total cash and bank balances 3,543 Note 11 Other creditors 15/04/ Cancellations awaiting settlement 5,400 Purchases awaiting settlement 7,424 management fee payable 10 trustee s fees payable 14 safe custody charges payable 4 audit fee payable 7 total other creditors 12,859 Note 12 Reconciliation of units Class B accumulation opening units issued at 03/08/16 unit movements in period: units issued 1,880,648,003 units cancelled (208,220,864) Closing units at 15/04/17 1,672,427,139 20

23 notes to the financial statements Note 13 Contingencies and commitments at 15 april 2017 the Fund had no outstanding calls on partly paid shares, no potential underwriting commitments or any other contingent liabilities. Note 14 Stocklending the total value of securities on loan at the Balance sheet date was 40,630,930. Collateral is held in the following form: 15/04/ government bonds 43,050 43,050 the gross earnings and fees paid for the period were 113 and 20 respectively. the counterparty at the period end was Bank of new York. Note 15 Unitholders Funds there is one unit class, Class B accumulation in issue within the Fund. the manager s periodic charge in respect of Class B units is expressed as an annual percentage of the value of the property of the Fund attributable to class is currently is 0.015%. Note 16 Related party transactions the manager is a related party to the Fund by virtue of its controlling influence. the manager is part of the Phoenix group. Phoenix Life Limited which is also part of the Phoenix group, is a material unitholder in the Fund and therefore a related party, holding 100% of the units at the period end. manager s periodic charge paid to the manager, Phoenix unit trust managers Limited thereafter, or its associates, are shown in note 6(a) and details of the units issued and cancelled by the manager are shown in the statement of change the units issued and cancelled by the manager are shown in the statement of change in unitholders funds and note 8. any balances due to/from the manager or its associates at 15 april 2017 in respect of these transactions are shown in notes 9 and 11. Note 17 Financial instruments in accordance with the investment objective, the Fund holds certain financial instruments. these comprise: securities held in accordance with the investment objective and policies; derivative transactions which the Fund may also enter into, the purpose of which is to manage the currency and market risks arising from the Fund s investment activities; and cash and short term debtors and creditors arising directly from operations. 21

24 notes to the financial statements Note 17 Financial instruments (continued) Counterparty exposure at 15 april 2017, the Fund had the following counterparty exposure on interest rate swaps: Lloyds Bank 18,840 merill Lynch 1,441,539 morgan stanley 11,987 the economic exposure of future derivative contracts is equal to the market value. the value of exposure and the related counterparties are disclosed in the Portfolio of investments. Currency exposure an analysis of the monetary assets and liabilities at the period end is shown below: net currency assets/(liabilities) 15/04/17 monetary non-monetary total Currency exposure exposure exposure sterling 38,652 1,614,869 1,653,521 australian Dollar 1,466 1,466 euro (7,411) 7,269 (142) us Dollar (1,521) (1,509) (3,030) 29,720 1,622,095 1,651,815 income received in other currencies is converted to sterling on or near the date of receipt. the Fund does not hedge or otherwise seek to avoid, movement risk on accrued income. Interest profile the interest rate risk profile of fixed interest assets and liabilities at 15 april 2017 was: Currency Fixed rate Floating rate Financial assets total financial assets financial assets not carrying interest sterling 1,615,211 5,417 39,023 1,659,651 australian Dollar 1,466 1,466 euro 7, ,596 us Dollar 59 (1,521) (1,462) 1,624,318 3,896 39,037 1,667,251 Currency Fixed rate Floating rate Financial liabilities total financial liabilities financial liabilities not carrying interest sterling (158) (5,972) (6,130) euro (314) (7,424) (7,738) us Dollar (47) (1,521) (1,568) (519) (14,917) (15,436) 22

25 notes to the financial statements Note 17 Financial instruments (continued) the interest rate risk profile of fixed interest rate financial assets was: 15/04/17 Weighted average of fixed interest rates: % sterling 1.05 euro 1.01 Weighted average period to maturity for financial assets with fixed interest rates: years sterling euro interest rates earned/paid on deposits are earned/paid at a rate linked to LiBor (London interbank offered rate) or international equivalent. Sensitivity analysis Interest rate risk sensitivity Changes in interest rates or changes in expectation of future interest rates may result in an increase or decrease in the the market value of the investments held. a one percent increase in interest rates (based on current parameters used by the manager s investment risk department) would have the effect of increasing the return and net assets by by 118,598,522. a one percent decrease would have an equal and opposite effect. Foreign currency risk sensitivity a five percent increase in the value of the Fund s foreign currency exposure would have the effect of increasing the return and net assets by 305,581. a five percent decrease would have an equal and opposite effect. Price risk sensitivity a five percent increase in the value of the Fund s portfolio would have the effect of increasing the return and net assets by 82,589,500. a five percent decrease would have an equal and opposite effect. 23

26 notes to the financial statements Note 18 Fair value of investments the fair value of the Fund s investments has been determined using the hierarchy below. this complies with the amendments to Frs102 Fair value hierarchy disclosures issued by the Financial reporting Council in march Level 1 the unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable (ie for which market data is unavailable) for the asset or liability. For the period ended 15/04/17 Level Total Investment assets Bonds 1,572,644 49, ,622,417 Derivatives 1 1,901 1,902 money markets ,572,998 51, ,624,672 Investment liabilities Derivatives (2,058) (519) (2,577) (2,058) (519) (2,577) Note 19 Portfolio transaction costs For the year ended 15/04/17 Value Commission Taxes Analysis of total purchases costs % 000 % Bond transactions 2,506,261 total 2,506,261 Value Commission Taxes Analysis of total sales costs % 000 % Bond transactions 864,504 total 864,504 Commissions and taxes as % of average net assets: Commissions 0.00% taxes 0.00% the purchases and sales of securities incurred no direct transaction costs during the period. Portfolio transaction costs are incurred by the Fund when buying and selling underlying investments. these costs vary depending on the class of investment, country of exchange and method of execution. these costs can be classified as either direct or indirect transaction costs: Direct transaction costs: Broker commissions, fees and taxes. indirect transaction costs: Dealing spread the difference between buying and selling prices of the underlying investments. at the Balance sheet date the portfolio dealing spread was 0.45% being the difference between the respective bid and offer prices for the Fund s investments. 24

27 Distribution table For the period ended 15 april 2017 Interest distribution Final distribution in pence per unit group 1: units purchased prior to 3 august 2016 group 2: units purchased 3 august 2016 to 15 april pence per unit gross payable income equalisation 15 Jun Class B Accumulation group group Equalisation this applies only to units purchased during the distribution period (group 2 units). it is the average amount of revenue included in the purchase price of all group 2 units and is refunded to the holders of these units as a return of capital. Being capital it is not liable to income tax but must be deducted from the cost of the units for capital gains tax purposes. 25

28 responsibilities of the manager and the trustee a) the manager of the Fund is required by the Financial Conduct authority s Collective investment schemes sourcebook ( the sourcebook ) to prepare financial statements for each annual accounting period which give a true and fair view of the financial position of the Fund at the end of that period and the net revenue or expense and the net gains or losses on the property of the Fund for the period then ended. in preparing these financial statements, the manager is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are prudent and reasonable; state whether applicable accounting standards have been followed subject to any material departure disclosed and explained in the financial statements; and prepare the financial statements on the basis that the Fund will continue in operation unless it is inappropriate to presume this. the manager is also required to manage the Fund in accordance with the trust Deed, the Prospectus and the sourcebook, maintain proper financial records to enable them to ensure that the financial statements comply with the statement of recommended Practice for authorised Funds as issued by the ia in may 2014 and the sourcebook and take reasonable steps for the prevention and detection of fraud and other irregularities. b) the trustee is responsible for the safekeeping of all property of the trust which is entrusted to it and ensuring proper registration of tangible moveable property, and for the collection of income arising from all such scheme property. it is the duty of the trustee to take reasonable care to ensure that the trust is managed and operated in accordance with the Financial Conduct authority s Collective investment schemes sourcebook ( the sourcebook ), the Financial services and markets act 2000, as amended, and the trust Deed and the Prospectus of the trust, concerning: the pricing of and dealing in trust units; the application of income of the scheme; and the trust investment portfolio and borrowing activities. 26

29 trustee s report and directors statement Trustee s report having carried out procedures and enquiries considered duly necessary to discharge our responsibilities as trustee of the scheme, based on information and explanations provided to us, we believe that, in all material respects, the manager: i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the scheme s units and the application of the scheme s income in accordance with the sourcebook, the trust Deed and Prospectus; ii) has observed the investment and borrowing powers and restrictions applicable to the scheme; and iii) has, otherwise, ensured the proper operation of the trust. London Citibank europe plc 11 august 2017 uk Branch Directors statement in accordance with the requirements of the Collective investment schemes sourcebook as issued and amended by the Financial Conduct authority, we hereby certify the report on behalf of the Directors of Phoenix unit trust managers Limited. Birmingham Craig Baker, Director 11 august 2017 andrew moss, Director 27

30 independent auditor s report to the unitholders of the Putm Bothwell sub-sovereign Bond Fund We have audited the financial statements of the Putm Bothwell sub-sovereign Bond Fund ( the Fund ) for the period ended 15 april 2017 which comprise the statement of total return, the statement of Change in unitholders Funds, the Balance sheet, the related notes 1 to 19 and the Distribution tables. the financial reporting framework that has been applied in their preparation is applicable law and united Kingdom accounting standards (united Kingdom generally accepted accounting Practice) including Frs102 the Financial reporting standard applicable to the uk and the republic of ireland. this report is made solely to the unitholders of the Fund, as a body, pursuant to Paragraph of the rules of the Collective investment schemes sourcebook of the Financial Conduct authority. our audit work has been undertaken so that we might state to the unitholders 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 Fund and the unitholders as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Manager and Auditor as explained more fully in the manager s responsibilities statement set out on page 26, the manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and international standards on auditing (uk and ireland). those standards require us to comply with the auditing Practices Board s ethical standards for auditors. Scope of the audit of the financial statements an audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. this includes an assessment of: whether the accounting policies are appropriate to the Fund s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the manager; and the overall presentation of the financial statements. in addition, we read all the financial and non-financial information in the manager s annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. if we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 28