Schroder Monthly High Income Fund. Interim Short Report 28 July 2015 to 27 January 2016

Transcription

1 Schroder Monthly High Income Fund Interim Short Report 28 July 2015 to 27 January 2016

2 Schroder Monthly High Income Fund Review of Investment Activities From 27 July 2015 to 27 January 2015, the price of A Accumulation units on selling price to selling price basis fell 1.85%. In comparison, the Investment Association Sterling High Yield Sector Average generated a total return of -4.45% 1 in sterling terms. 1 Source: Lipper for Investment Management. Investor sentiment was largely negative over the second half of 2015 as China s growth concerns, a weakening oil price and negative issuer specific developments weighed on risk assets. The start of 2016 saw an especially sharp deterioration in risk appetite. Total returns from euro high yield bonds were negative and credit spreads wider overall; insurance and energy names facing particularly strong headwinds. Despite the market s challenges, economic data prints for the eurozone remained broadly supportive or improved over the timeframe. The portfolio generated a negative total return but outperformed the peer group. We remained underweight emerging market exposed sectors throughout the period, and amid ongoing volatility in commodity markets continued to hold underweights in energy and basic industry sectors. The positioning, which was consistent over the timeframe, contributed to outperformance. In the context of improving eurozone expansion and declining growth in emerging markets, we continue to favour consumer and telecommunications sectors. Senior bank capital remains vulnerable to Basel 3 regulations, so we favour the subordinated part of the banking capital structure. As we enter 2016, we remain comfortable with the outlook for the European high yield market. Valuations remain attractive relative to corporate fundamentals, while the macroeconomic outlook in Europe continues to improve, especially in the periphery. With the European Central Bank also still firmly committed to its quantitative easing programme, an improving technical backdrop should also be supportive of improved credit performance over the year. Fund Manager: Michael Scott

3 Fund Information Interim Final Accounting dates 27 January 27 July The funds accounting dates are on the 27th of each month with associated revenue allocation dates on the 25th of the following month. For the period For the year Ongoing charges figure to to A Income units 1.37% % A Accumulation units 1.37% % Z Income units 0.72% % Z Accumulation units 0.72% % 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. Performance Record Net Asset Net Asset Value as at Value as at Net Asset Value Fund performance pence per unit pence per unit % change A Income units (3.95) A Accumulation units (1.61) Z Income units (3.62) Z Accumulation units (1.28) 3 months 6 months 5 years Schroder Monthly High Income Fund (2.03)% (1.85)% 20.26% Investment Management Association Sterling High Yield Sector Average (3.67)% (4.45)% 26.39% Fund Source: A Accumulation units on a selling price to selling price basis to Index Source: Lipper Investment Management, total return to Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money.

4 Performance Record (continued) Unit price range A Income units A Accumulation units Highest Lowest Highest Lowest buying selling buying selling Financial year to 27 July p p p p Financial period to 27 January Z Income units Z Accumulation units Highest Lowest Highest Lowest buying selling buying selling Financial year to 27 July p p p p Financial period to 27 January Net revenue A Income units A Accumulation units Financial year to 27 July pence per unit pence per unit Financial period to 27 January Z Income units Z Accumulation units Financial year to 27 July pence per unit pence per unit Financial period to 27 January

5 Portfolio Information % of net % of net assets assets as at as at Spread of investments Euro Denominated Short Term Bonds Euro Denominated Medium Term Bonds Euro Denominated Long Term Bonds Euro Denominated Derivatives (2.05) (1.09) Sterling Denominated Short Term Bonds Sterling Denominated Medium Term Bonds Sterling Denominated Long Term Bonds Swiss Franc Denominated Medium Term Bonds US Dollar Denominated Short Term Bonds US Dollar Denominated Medium Term Bonds US Dollar Denominated Long Term Bonds US Dollar Denominated Derivatives (0.43) (0.53) Net other assets % of net assets as at Major holdings Generali Finance 4.596% Perpetual Notes 1.58 Dakar Finance 9% Bonds BAWAG PSK Bank fuer Arbeit und Wirtschaft und Oesterreichische Postsparkasse 8.125% Notes SIG Combibloc Holdings 7.75% Bonds Cooperatieve Rabobank 6.91% Perpetual Bonds 1.37 Virgin Media Finance 7% Notes Pfleiderer 7.875% Notes Royal Bank of Scotland Group 7% Perpetual Bonds 1.22 Viridian Group Fundco II 7.5% Notes TES Finance 6.75% Bonds % of net assets as at Generali Finance 4.596% Perpetual Notes 1.67 BAWAG PSK Bank fuer Arbeit und Wirtschaft und Oesterreichische Postsparkasse 8.125% Notes Virgin Media Finance 7% Notes SIG Combibloc Holdings 7.75% Bonds TES Finance 6.75% Bonds Infor US 5.75% Notes Pfleiderer 7.875% Notes J Sainsbury 1.25% Bonds Gamenet 7.25% Notes Royal Bank of Scotland Group 6.99% Perpetual Bonds 1.20

6 Investment Objective & Policy The fund s investment objective is to achieve a high level of income from a diversified portfolio of debt securities. The full spectrum of available securities, including unrated issues and those of non-investment grade, will be utilised. Investment will be in directly held transferable securities. The fund may also invest in collective investment schemes, derivatives, warrants and money market instruments. Risk Profile Risk and reward indicator Lower risk Potentially lower reward Higher risk Potentially higher reward The risk category was calculated using historical performance data and may not be a reliable indicator of the fund s future risk profile. The fund is in this category because it can take higher risks in search of higher rewards and its price may rise and fall accordingly. The fund s risk category is not guaranteed to remain fixed and may change over time. A fund in the lowest category does not mean a risk free investment.

7 Risk Profile (continued) Specific risks The fund invests in assets which are exposed to currencies other than sterling. Exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. The fund is index unconstrained and has the potential for greater volatility. The fund invests in higher yielding bonds (non-investment grade). The risk of default is higher with non-investment grade bonds than with investment grade bonds. Higher yielding bonds may also have an increased potential to erode your capital sum than lower yielding bonds. The fund uses derivatives for specific investment purposes. This involves a higher degree of risk and may lead to a higher volatility in the unit prices of the fund. The Manager employs a risk management process to allow the Manager to measure derivative and forward positions and their contribution to the overall risk profile of the fund. As part of this risk management process, the Manager conducts daily value at risk analysis of the fund and performs both stress and back testing of the fund. As a result of the annual management charge being charged wholly to capital, the distributable revenue of the fund may be higher, but the capital value of the fund may be eroded which may affect future performance. For these reasons, the purchase of units should not normally be regarded as a short term investment. Report & Accounts This document is a short report for the Schroder Monthly High Income Fund for the period ended 27 January The long form Report & Accounts for the fund are available on our website or upon written request to Schroders, FREEPOST, RLTZ-CHSY-HBUT, PO Box 1102, Chelmsford, Essex CM99 2XX.

8 Other Information The information contained in this report is designed to enable unitholders to make an informed judgement on the activities of the fund during the period it covers and the results of those activities at the end of the period. For more information about the activities and performance of the fund during this and previous periods, please contact the Manager. The Prospectus, the Key Investor Information Document and details of investment charges and costs are available on request or can be downloaded from our website Schroders is required by the European Union Savings Directive to report payments to HM Revenue and Customs that are made by the fund to investors living in other European Union member states. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. For investors security, calls to Schroder Investor Services may be recorded. Manager: Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Authorised and regulated by the Financial Conduct Authority. Investment Adviser: Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Authorised and regulated by the Financial Conduct Authority. Trustee: J.P. Morgan Europe Limited, Chaseside, Bournemouth BH7 7DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Independent Auditors: PricewaterhouseCoopers LLP, Atria One, 144 Morrison Street, Edinburgh EH3 8EX. For further literature please contact Schroder Investor Services on or at investorservices@schroders.com, or visit our website at Issued in February 2016 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: England. Authorised and regulated by the Financial Conduct Authority. w35659 MR038BI16