SCHRODER SINGAPORE FIXED INCOME FUND Semi-Annual Report & Financial Statements December 2018

Transcription

1 Semi-Annual Report & Financial Stements December 2018

2 Manager Schroder Investment Management (Singapore) Ltd 138 Market Street #23-01 CapitaGreen Singapore Company Registrion No H Trustee HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #13-02 HSBC Building Singapore Company Registrion No R Audir PricewerhouseCoopers LLP 7 Straits View Marina One East Tower, Level 12 Singapore Solicir the Manager Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore Solicir the Trustee Shook Lin & Bok LLP 1 Robinson Road #18-00 AIA Tower Singapore Further Informion Schroders is a Foreign Account Tax Compliance Act ( FATCA ) compliant organision. Please find the FATCA classificion of this Fund and its Global Intermediary Identificion Number ( GIIN ) below. FATCA entity classificion: GIIN: Nonreporting IGA FFI / Sponsored Investment Entity WM9S4Z SF.702 1

3 COMMENTARY 2018 was a challenging period for bonds. The second half of the year started with US economic growth and earnings da on robust footing, overshadowing simmering concerns over the escaling US-Sino trade war. The US targeted $34 billion of Chinese products with a 25% tariff in early July, an additional $16 billion in August, and a 10% tariff was implemented on a further $200 billion of Chinese goods in September a figure set rise 25% in January Stability in US growth and employment figures allowed the Federal Reserve (Fed) raise res by 25 basis points (bps) in September and December respectively, but the Fed lowered the number of projected re hikes two in US Treasury yields fell on the back of decreased re hike expections, with the 10-year yields ending the year 2.69%. In Europe, growth momentum waned over the period under review, with Eurozone PMI ending 51.4 in December. Business surveys also weakened, with ongoing political tensions in France and Italy. The European Central Bank (ECB) also halted its quantitive easing programme in December. Meanwhile, the trade dispute between the US and China continued domine headlines with tit-for-t thres and tariff impositions. Growth in China slowed across the second half of the year, impacted by the Chinese authorities efforts deleverage and the ongoing trade war with the US. Asian markets were buffeted as a result. China s leadership expressed support for the economy with the introduction of various measures including several rounds of Reserve Requirement Rio (RRR) cuts, further tax cuts and various support for prive enterprises such as the creion of a targeted Medium Term Lending Facility (TMLF) by the PBOC support credit supply SMEs and prive companies. Over in Singapore, economic da released the start of the third quarter was relively sanguine but weakened gradually over the period. Economic indicors released in December were lacklustre as the impact of slowing global growth and weak sentiment in China flowed through the Singapore economy. Both headline and core inflion slipped down 0.3% year-on-year (Yoy) and 1.7% Yoy respectively in November, and fourth quarter (Q4) GDP da disappointed 2.2% Yoy. Against this backdrop, Singapore dollar (SGD) denomined bonds rose and delivered positive returns over the period under review. This was led by the government secr which returned 4.3% whilst the corpore secr lagged with a return of 2.7%. The returned 2.7% (Class A) and 2.9% (Class I) over the second half of 2018, while the benchmark returned of 3.7% over the same period. The main detracr of performance came from durion positioning, in particular underweighting Singapore durion as res fell over the period. Conversely, secr allocion and security selection contributed positively performance, in particular the allocion government-reled secr and selective bonds in the financial secr. Outlook Going in 2019, the outlook on global growth remains uncertain and China may continue slow. However, we expect US dollar (USD) strength wane, easing pressure on Asian currencies. This is especially true for India, Indonesia and the Philippines which have struggled this year. 2

4 The pause in an upward USD trend should provide brehing space for central banks in Asia adjust monetary policy limit any further downside growth or currency weakness. With regards China, we believe it would be positive for the Chinese bond market if policymakers continue engage in further RRR cuts and provide further targeted stimulus stabilise growth. We expect these policy actions support the Chinese economy in early This should in turn, be a positive for other Asian countries th are dependent on trade with China. We do not expect a resolution in the ongoing trade war between the US and China in the near future. However, tensions appear have eased slightly. Both sides seem eager limit the negive impact trade wars can have on growth for their respective economies. We believe this paints a constructive backdrop for Asian currencies and local currency sovereign bond markets as markets are currently still pricing in a deteriorion of the situion. Turning USD denomined (hard currency) credit markets, trade reled tensions may have slowed the strong economic growth witnessed last year. However, it is worth noting th a large part of the Asian USD denomined credit universe comprises of issuers th do not have export driven businesses. We expect domestic conditions across a large swhe of emerging Asia China, India, Indonesia, Philippines and Thailand - continue power ahead in The flip side of this is th the more export oriented economies of Hong Kong, Singapore, South Korea and Taiwan could experience a slowdown. As a result, we expect performance be differentied amongst countries in the region given the differing economic dynamics. With less pressure from a rising USD and the likelihood of a more gradual monetary policy normalision in the US, regional Asian central banks are likely ease off on their monetary tightening bias. This should ease the cost of funding pressures for corpores in local markets. The credit fundamentals of high-grade Asian economies continue be robust. Most have strong reserves and fiscally prudent policies th should enable them continue weher volile macroeconomic conditions. Similarly, we expect credit fundamentals for USD denomined investment grade corpore bonds remain robust, with South East Asian companies likely hold up better than their North Asian counterparts. Across both the investment grade and high yield space, credits with solid fundamentals have weakened significantly due numerous facrs including oil price declines, Fed guidance and policy risks. This provides an opportunity for invesrs seeking positive medium long-term returns. Increasing evidence of Chinese policy support in an effort address slowing growth and tight liquidity concerns should help boost invesr confidence and we expect sentiment improve as we progress through The realities of quantitive easing in Europe ending mean invesrs are likely remain relively cautious. Th said, we also doubt an extreme risk-off scenario will develop, as signals th portend a global recession remain largely absent. In the coming year, we expect the Singapore government yield curve remain fl, especially the front-end. Credit spreads should widen out a bit more, but we will look selectively invest in tractive credit issues. December

5 STATEMENT OF TOTAL RETURN For the financial period ended 31 December 2018 (Unaudited) 31 Dec 2017 $ $ Income Interest on deposits with banks 51,643 14,691 Less : Expenses Management fees 852, ,158 Trustee fees 83,489 74,225 Valuion fees 60,674 52,700 Cusdian fees 47,125 40,740 Registrion fees 141, ,579 Audit fees 11,571 9,557 Transaction costs 1,105 1,648 Others 47,197 49,438 1,244,884 1,068,045 Net expense (1,193,241) (1,053,354) Net gains or losses on value of investments and financial derivives Net gains on investments 17,710,317 4,228,841 Net losses on spot foreign exchange contracts (120) (2,680) Net gains on futures contracts - 143,500 Net losses on swap contracts (2,478,755) (34,381) Net foreign exchange losses (8,786) (81,448) 15,222,656 4,253,832 Total return for the period before income tax 14,029,415 3,200,478 Less : Income tax (2,225) (3,144) Total return for the period 14,027,190 3,197,334 4

6 STATEMENT OF FINANCIAL POSITION As 31 December 2018 (Unaudited) ASSETS 30 Jun 2018 $ $ Portfolio of investments 506,571, ,778,516 Bank balances 5,696,985 1,630,237 Sales awaiting settlement - 16,639,598 Receivables 1,183,008 2,232,407 Margin account 5,892,789 4,847,096 Total 519,343, ,127,854 LIABILITIES Purchases awaiting settlement - 12,164,365 Payables 720, ,174 Financial derivives 2,723, ,876 Total liabilities 3,444,221 12,975,415 EQUITY Net tributable unitholders 515,899, ,152,439 5

7 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the financial period ended 31 December 2018 (Unaudited) 30 Jun 2018 $ $ Net tributable unitholders the beginning of the financial period/year 491,152, ,026,218 Operions Change in net tributable unitholders resulting from operions 14,027,190 (3,314,388) Unitholders contributions/(withdrawals) Creion of units 45,610, ,384,264 Cancellion of units (34,890,410) (48,943,655) Change in net tributable unitholders resulting from net creion and cancellion of units 10,719,993 66,440,609 Total increase in net tributable unitholders 24,747,183 63,126,221 Net tributable unitholders the end of the financial period/year 515,899, ,152,439 6

8 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Primary Nominal value Fair value tributable unitholders By geography $ $ % Quoted Fixed income CHINA Bank of China Ltd / Singapore EMTN 2.75% 30 Jun ,000,000 3,004, China Construction Bank Corp / Singapore EMTN 2.08% 26 Oct ,000,000 1,985, China Construction Bank Corp / Singapore EMTN 2.643% 21 Sep ,750,000 4,761, Huarong Finance 2017 Co Ltd 3.2% 27 Apr ,000,000 5,815, ,567, HONG KONG Sun Hung Kai Properties Capital Market Ltd EMTN 3.25% 20 May , , SINGAPORE Ascendas Real Este Investment Trust MTN 2.47% 10 Aug ,000,000 2,939, Ascendas Real Este Investment Trust MTN 3.14% 2 Mar ,250,000 3,253, CapitaLand Treasury Ltd MTN 4.3% 31 Aug ,000,000 5,131, DBS Group Hldg Ltd MTN Var Perp 5,000,000 4,975, Housing & Development Board MTN 1.52% 18 Jun ,000,000 1,995, Housing & Development Board MTN 1.825% 28 Aug ,000,000 9,917, Housing & Development Board MTN 1.91% 10 Aug ,000,000 15,844, Housing & Development Board MTN % 21 Feb ,000,000 9,046, Housing & Development Board MTN 2.32% 24 Jan ,000,000 9,926,

9 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Primary (continued) Nominal value Fair value tributable unitholders By geography $ $ % Quoted Fixed income SINGAPORE (continued) Housing & Development Board MTN 2.625% 17 Sep ,000,000 6,124, Housing & Development Board MTN 2.815% 26 Jul ,750,000 1,781, Housing & Development Board MTN 3.008% 26 Mar ,000,000 8,160, Land Transport Authority MTN 3.45% 30 Jul ,250,000 4,432, Mapletree Commercial Trust Treasury Co Pte Ltd MTN 3.28% 23 Sep ,750,000 2,760, Mapletree Treasury Services Ltd MTN 2.92% 21 Jan ,500,000 8,501, MAS Bill Series Jan ,000,000 7,989, MAS Bill Series 84 1 Feb ,500,000 36,439, MAS Bill Series 84 1 Mar ,000,000 4,984, MAS Bill Series 84 8 Mar ,000,000 2,989, MAS Bill Series Mar ,000,000 21,912, MAS Bill Series Apr ,000,000 14,919, NTUC Income Insurance Cooperive Ltd Var 23 Aug ,000,000 1,026, Oversea-Chinese Banking Var Perp 5,000,000 5,031, Singapore Government Bond 1.75% 1 Feb ,000,000 63,640, Singapore Government Bond 2.25% 1 Jun ,000,000 25,222, Singapore Government Bond 2.25% 1 Aug ,369,000 19,232, Singapore Government Bond 2.375% 1 Jun ,200,000 5,330, Singapore Government Bond 2.75% 1 Jul ,000,000 25,913,

10 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Primary (continued) Nominal value Fair value tributable unitholders By geography $ $ % Quoted Fixed income SINGAPORE (continued) Singapore Government Bond 2.75% 1 Apr ,000,000 20,180, Singapore Government Bond 2.75% 1 Mar ,000,000 25,566, Singapore Government Bond 2.875% 1 Jul ,000,000 8,613, Singapore Government Bond 2.875% 1 Sep ,700,000 6,140, Singapore Government Bond 3% 1 Sep ,400,000 23,674, Singapore Government Bond 3.125% 1 Sep ,400,000 3,547, Singapore Government Bond 3.25% 1 Sep ,250,000 3,322, Singapore Government Bond 3.375% 1 Sep ,942,000 32,979, Singapore Government Bond 3.5% 1 Mar ,000,000 5,574, Singapore Tech Telemedia Series % 2 Dec ,000,000 5,161, Surbana Jurong Pte Ltd EMTN 4.11% 3 Oct ,500,000 4,623, Temasek Financial I Ltd GMTN 3.785% 5 Mar ,000,000 5,348, United Overseas Bank Ltd MTN Var 27 Feb ,000,000 7,072, UOL Treasury Services Pte Ltd MTN 2.5% 29 Sep ,000,000 2,984, ,217,

11 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Primary (continued) Nominal value Fair value tributable unitholders By geography $ $ % Quoted Fixed income SOUTH KOREA Export-Import Bank of Korea EMTN 2.318% 27 Sep ,000,000 2,980, Accrued interest on fixed income securities 3,551, Portfolio of investments 506,571, Other net 9,328, Net tributable unitholders 515,899,

12 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Primary (continued) tributable unitholders tributable unitholders 30 Jun 2018 By geography (summary) % % Quoted China Hong Kong Singapore South Korea Accrued interest on fixed income securities Portfolio of investments Other net Net tributable unitholders

13 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Secondary Fair value tributable unitholders tributable unitholders 30 Jun 2018 By industry $ % % Bank 29,812, Central Bank 89,235, Construction & Engineering 4,623, Government 268,940, Insurance 1,026, Investment 13,850, Miscellaneous 8,576, Real Este 14,562, Sovereign Agency 67,230, Telecommunicions 5,161, Accrued interest on fixed income securities 3,551, Portfolio of investments 506,571, Other net 9,328, Net tributable unitholders 515,899,

14 STATEMENT OF PORTFOLIO As 31 December 2018 (Unaudited) Secondary (continued) Fair value tributable unitholders tributable unitholders 30 Jun 2018 By credit ring $ % % AAA / Aaa 325,149, AA / Aa2 2,980, A+ / A1 4,284, A / A2 13,819, A- / A3 6,192, BBB+ / Baa1 13,552, BBB- / Baa3 5,031, Not red debt securities 132,008, Accrued interest on fixed income securities 3,551, Portfolio of investments 506,571, Other net 9,328, Net tributable unitholders 515,899,

15 UNITS IN ISSUE For the financial period ended 31 December 2018 (Unaudited) Class A 30 Jun 2018 Units Units At the beginning of the financial period/year 193,900, ,506,964 Creed 7,235,858 70,404,066 Cancelled (14,852,566) (12,010,653) At the end of the financial period/year 186,283, ,900,377 $ $ Net tributable unitholders 232,697, ,855,265 Net tributable unitholders per unit Class I 30 Jun 2018 Units Units At the beginning of the financial period/year 174,499, ,079,021 Creed 24,927,629 19,743,109 Cancelled (11,296,036) (23,322,311) At the end of the financial period/year 188,131, ,499,819 $ $ Net tributable unitholders 283,202, ,297,174 Net tributable unitholders per unit The Fund currently offers 2 Classes of units, namely Class A units and Class I units. Both Classes of units constitute the Fund and have different feures. The key difference between the Classes is the management fee re applicable each Class. Net tributable unitholders ( NAV ) is apportioned between both Classes of units based on the proportion of NAV of each Class, which is determined by computing the equivalent number of units of Class A and Class I units in issue. Any expense, income and/or gain which is tributable a particular Class shall be deducted from or added the net tributable th Class. 14

16 FINANCIAL RATIOS For the financial period ended 31 December 2018 (Unaudited) 31 Dec 2017 Class A Class I Class A Class I Expense rio % 0.32% 0.70% 0.32% Fund Fund Turnover rio % % 1 The expense rio has been computed based on the guidelines laid down by the Investment Management Associion of Singapore ( IMAS ). The calculion of the expense rio was based on tal opering expenses divided by the average net asset values for each Class for the year. The tal opering expenses do not include brokerage and other transaction costs, performance fee, interest expense, distribution paid out unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted source or arising out of income received. Expenses which are common all Classes are apportioned based on the proportion of NAV of each Class. The Fund does not pay any performance fee. The respective values used in the calculion of the expense rio are disclosed below. The average net asset values are based on the daily balances. 31 Dec 2017 Expense rio calculions Class A Class I Class A Class I $ $ $ $ Total opering expenses 1,580, ,394 1,158, ,259 Average net asset value 226,319, ,008, ,502, ,635,153 2 The portfolio turnover rio is calculed in accordance with the formula sted in the Code on Collective Investment Schemes. The calculion of the portfolio turnover rio was based on the lower value of purchases or sales of the underlying investments divided by the average daily net asset value. 31 Dec 2017 Turnover rio calculions Fund Fund $ $ Lower of purchases or sales 267,837,557 (sales) 455,886,571 (sales) Average net asset value 501,802, ,707,280 15

17 REPORT TO UNITHOLDERS 31 December 2018 The following is a report on the (the Fund ): 1. Top 10 holdings of the Fund as 31 December 2018: tributable Fair value unitholders $ % Singapore Government Bond 1.75% 1 Feb ,640, MAS Bill Series 84 1 Feb ,439, Singapore Government Bond 3.375% 1 Sep ,979, Singapore Government Bond 2.75% 1 Jul ,913, Singapore Government Bond 2.75% 1 Mar ,566, Singapore Government Bond 2.25% 1 Jun ,222, Singapore Government Bond 3% 1 Sep ,674, MAS Bill Series Mar ,912, Singapore Government Bond 2.75% 1 Apr ,180, Singapore Government Bond 2.25% 1 Aug ,232, Top 10 holdings of the Fund as 31 December 2017: tributable Fair value unitholders $ % MAS Bill Series 84 9 Mar ,791, Singapore Government Bond 3% 1 Sep ,902, Singapore Government Bond 2.75% 1 Jul ,197, Singapore Government Bond 1.75% 1 Apr ,089, Singapore Government Bond 2.25% 1 Jun ,475, Singapore Government Bond 2.875% 1 Sep ,390, Singapore Government Bond 1.625% 1 Oct ,988, Housing & Development Board MTN 1.91% 10 Aug ,914, Singapore Government Bond 3.375% 1 Sep ,904, MAS Bill Series 84 2 Mar ,953, The Fund was not invested in other unit trusts, mutual funds or collective investment schemes as 31 December For the full composition of investments of the Fund as 31 December 2018 and an analysis of the investments by credit rings, refer the Stement of Portfolio on pages

18 REPORT TO UNITHOLDERS 31 December The Fund has the following exposure financial derivives as 31 December 2018: tributable Fair value unitholders $ % Contracts: Swap (2,723,712) (0.53) The net gain on financial derivives realised during the period 1 July December 2018 amounted S$244,837. The net loss on outstanding financial derivives marked market as 31 December 2018 amounted S$2,723, The Fund did not have any borrowings as 31 December The amount of subscriptions and redemptions during the period 1 July December 2018 were as follows: Subscriptions 45,610,403 Redemptions 34,890, Expense Rio Class A 1 January December % 1 January December % Class I 1 January December % 1 January December % 6. Turnover of Portfolio 1 July December % 1 July December % $ 17

19 REPORT TO UNITHOLDERS 31 December Soft dollar commissions/arrangements: In the management of the Fund, the Manager may accept soft dollar commissions from, or enter in soft dollar arrangements with, sckbrokers who execute trades on behalf of the Fund and the soft dollars received are restricted the following kinds of services: (i) (ii) (iii) (iv) research, analysis or price informion; performance measurement; portfolio valuions; and administrion services. The Manager may not receive or enter in soft dollar commissions or arrangements unless (a) such soft dollar commissions or arrangements shall reasonably assist the Manager in their management of the Fund, (b) best execution is carried out for the transactions, and (c) th no unnecessary trades are entered in in order qualify for such soft dollar commissions or arrangements. The Manager shall not receive goods and services such as travel, accommodion and entertainment. 8. Reled Party Transactions. The Manager of the Fund is Schroder Investment Management (Singapore) Ltd. The Registrar for the Fund is Schroder Investment Management (Europe) SA (formerly known as Schroder Investment Management (Luxembourg) SA), a reled party of the Manager. The Trustee is HSBC Institutional Trust Services (Singapore) Limited, a subsidiary of the HSBC Group. The management fees paid the Manager and registrion fees paid the Registrar; trustee fees, valuion fees and cusdian fees charged by the HSBC Group are shown in the Stement of Total Return. As reporting de, the Fund maintained with the HSBC Group, the following bank balances: 30 Jun 2018 $ $ Current accounts 5,696,985 1,630,237 18

20 REPORT TO UNITHOLDERS 31 December Performance of Fund for periods ended 31 December mths 6 mths 1 yr 3 yrs* 5 yrs* 10 yrs* Since Launch* # Class A 2.2% 2.7% 1.2% 2.7% 2.6% - 2.5% Benchmark** 3.0% 3.7% 2.1% 3.3% 2.9% - 2.6% Class I 2.3% 2.9% 1.6% 3.0% 2.9% 2.8% 3.1% Benchmark** 3.0% 3.7% 2.1% 3.3% 2.9% 2.4% 3.0% * Returns of more than 1 year are annualised # Since launch figures from 19 November 2009 (Class A) and 3 Ocber 2005 (Class I) ** Benchmark: The benchmark of the Fund has been changed from the UOB Singapore Government Securities Index - All the Markit iboxx ALBI Singapore Index with effect from 1 March Source: Schroders, S$, bid bid, net income reinvested. 19

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