FP Verbatim Portfolio 5 Income Fund

Transcription

1 FP Verbatim Portfolio 5 Income Fund Short Report for the six months ended 30 June 2016 Investment Objective and Policy The Fund will use a broadly cautious balanced investment strategy with the aim of achieving income with some potential for capital growth over the medium to longer term. The Fund will seek to achieve its objective through investment in Collective Investment Schemes (regulated and unregulated) as well as directly held transferable securities, derivatives, cash, deposits, warrants and money market instruments. Investment may be made globally but foreign currency exposure through non UK investments may be hedged back into Sterling. The Fund may also gain exposure (directly and indirectly) to alternatives, including but not limited to, property, commodities, hedge funds, private equity, infrastructure and loans, through investment in Collective Investment Schemes and transferable securities. The equity element of the portfolio will have a bias towards stocks generating a high and sustainable income. Use may also be made of stock lending, borrowing, cash holdings and derivatives. It is intended that derivatives may be used for investment purposes as well as for efficient portfolio management but the ACD does not anticipate that such use of derivatives will have any significant adverse effect on the risk profile of the Fund. In particularly volatile markets, the Manager may temporarily hold more than 10% in cash provided it is in accordance with the investment objective of the Fund. As the Manager has the discretion to borrow up to 10% of the value of the property of the Fund, this facility may be used to help manage liquidity. Fund Facts Risk Profile Interim/Annual Accounting End Dates 30 June 31 December Ex-dividend (xd) Dates 1 April 1 July 1 October 1 January Income Distribution/ Accumulation Dates 31 May 31 August 30 November 28 February Please refer to the Full Prospectus for details of all the risks. The Fund has exposure to credit, counterparty and usual market risks. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. You should always regard investments in the Fund as medium to long term. Page 1

2 Charges Share Class Initial Charge Annual Management Charge Total Expense Ratios Total Expense Ratios 31/12/15 Share Class A Income 5.00% 1.40% 1.97% 1.97% Share Class B Income 5.00% 0.65% 1.22% 1.22% Distributions/Accumulations Share Class A Income Share Class B Income Distribution payable 31/08/ Distribution paid 31/05/ Distribution paid 31/08/ Distribution paid 31/05/ Comparative Tables Net Asset Value Date Net Asset Value of Share Class ( ) Shares in issue Net Asset Value pence per Share Percentage Change (%) Share Class A Income 31/12/15 3,579,545 3,127, ,627,514 2,193, Share Class B Income 31/12/15 16,333,531 13,747, ,058,992 14,470, Major Holdings Top 10 Holdings Sarasin Global Higher Dividend Sterling Hedge Sarasin Global Higher Dividend GlaxoSmithKline 1.78 Kimberly-Clark 1.48 National Grid 1.35 Reckitt Benckiser 1.28 Vodafone 1.28 Equinix* 1.25 Duke Energy 1.23 Manchester Airport Group Funding 4.75% Bonds 31/03/2034 * Real Estate Investment Trust 1.20 Top 10 Holdings 31/12/15 Sarasin Global Higher Dividend Sarasin Global Dividend Sarasin Global Higher Dividend Sterling Hedge 8.50 Kimberly-Clark 1.29 Cisco Systems 1.29 Investor AB 1.26 Scottish Widows 7% Bonds 16/06/ Reckitt Benckiser 1.11 Vodafone 1.11 Barclays 1.10 Page 2

3 Portfolio Information Breakdown by Investment type % 36.03% % 3.10% 2.81% 2.58% 2.54% 2.29% 2.17% 1.88% 1.78% 1.48% 1.28% 0.83% 0.61% 0.34% 0 Sector 31/12/15 Health Care Automobiles & Parts Comparative figures shown above in square brackets relate to 31 December Investment Manager s Report Investment Review At the start of the year, Japan s additional stimulus plans set alongside European Central Bank sentiments evidenced the disparity in global monetary policy following the US Federal Reserve s first rate rise in 7 years in December The period under review hosted a wave of political turbulence, including the UK S EU referendum, Brazil aflame with reported corruption, wars in the Middle East and US presidential nominations seemingly dominated by personality politics. Add in the mix the Chinese authorities favouring a weakening currency in order to protect Chinese manufacturing and equity markets experienced a violent sell-off and after the worst January since 2009, though, markets recovered some of their composure and the oil price lifted off a low of $26. Page 3

4 Investment Manager s Report (continued) Investment Review (continued) We reacted to this volatility with modest additions to risk: we bought shares in BP to increase our energy exposure whilst experiencing a strong contribution from the global network company Equinix with its Security of Supply characteristics. Elsewhere, despite successful turnarounds such as Jardine Matheson delivering a total return of over 20% (including dividend) and a welcome recovery in Senior Property Housing Trust our Corporate Restructuring theme was weak. We sold down financials, including Barclays, Swedbank and reduced Lloyds after receiving its April special dividend. We believe the business models for banks are challenged in a low growth world, with little scope to pass on the costs of negative interest rates. Whilst we believe in the thesis for recovery, the process may be best served by maintaining relatively high exposure in debt. To this end, we switched into Barclays subordinated bonds with a 7% coupon and a running yield approaching 8% per annum. We added modestly to healthcare - GlaxoSmithkline on account of its revival - and increased our Asian equity exposure with Schroder Oriental Income Fund to complement relatively large positions in global consumer companies i.e. Kimberly-Clark, Reckitt Benckiser and Nestle with large market shares in developing countries with growing populations and disposable incomes. Of course, Q2 belonged to the UK s European Union (EU) membership referendum. Global markets were left reeling when in a narrow vote the UK electorate chose to leave the EU, sending sterling into a downward spiral and the political sphere into disarray. However, Central banks demonstrated that they were well prepared for the shock outcome, triggering another massive injection of liquidity into the global financial system. This has been the catalyst for a very welcome rally in equity prices and narrowing of corporate bond spreads, following the selloff in the immediate aftermath of the referendum vote. *Unless otherwise stated, all data has been sourced from Bloomberg and/or Sarasin & Partners LLP Outlook From a macro-economic perspective, the referendum outcome has reinforced the slowdown in global GDP and inflation. Government bonds continued to attract strong support and for UK gilts the yield on the ten-year fell to 0.90% by quarter end. Expectations for interest rates have turned again to the extent that the most likely move in US and UK rates is now down, not up. As negotiations with the EU unfold, politics will continue to dominate market sentiment. However, remaining as we are, invested in companies with relatively predictable cash flows will continue to be rewarded by investors hunting for earnings and dividends that can keep pace with inflation. On a selective basis this gives shares bond characteristics compared with government debt that yields virtually nothing. In the meantime, over a third of portfolio income is underpinned by higher yielding investment grade corporate bonds with an average credit rating of A-, where the capacity to meet financial obligations remains strong. Page 4

5 Investment Manager s Report (continued) Outlook (continued) It is not long since the IMF [International Monetary Fund] predicted that the collapse in oil prices would be a shot in arm for the global economy, but the IMF is now predicted to cut its forecast to 3.4% growth for 2016 (source: Financial Times). Looking further ahead, markets will also have to contend with the surprising progression of the US presidential campaign. We will have to accept that there is going to be a lot of political noise to absorb over the next 12 months, not to mention the deepening refugee and on-going terrorist crises. The challenge, of course, is to see through the fog to economic and corporate fundamentals which generally look quite supportive. In this environment we maintain our view that shares in higher quality companies those which are profitable, benefiting from non-cyclical sales growth opportunities and boast a growing dividend will continue to perform well. And with industry leaders outperforming in most sectors, it would appear that quality works, whatever the business. We anticipate that the strength of high quality equity income names will play out globally, across the board, as the second half of the year continues. *Unless otherwise stated, all data has been sourced from Bloomberg and/or Sarasin & Partners LLP Investment Manager Sarasin & Partners LLP 10 July 2016 Significant Information Under the Alternative Investment Fund Managers Directive ("AIFMD"), acting as the AIFM, Fund Partners is required to disclose how those whose actions have a material impact on the Fund are remunerated. The remuneration strategy across Fund Partners is governed by the Remuneration Committee, a committee appointed by the Fund Partners' Board. The Remuneration Committee has established an AIFM Remuneration Policy designed to ensure the AIFM Remuneration Code in the UK Financial Authority handbook is met proportionately for all AIFM Remuneration Code Staff. Fund Partners considers its activities as non complex due to the fact that regulation limits the AIF strategies conducted and the scope of investment in such a way that investor risk is mitigated. The discretion of Fund Partners and the portfolio manager is strictly controlled within certain pre-defined parameters as determined in the prospectus of each Alternative Investment Fund. Page 5

6 Significant Information (continued) In its role as an AIFM, Fund Partners deems itself as lower risk due to the nature of the activities it conducts. Fund Partners does not pay any form of variable remuneration currently. Therefore Fund Partners has provided a basic overview of how staff whose actions have a material impact on the Fund are remunerated. June 2016 Number of Beneficiaries Total remuneration paid Fixed remuneration Variable remuneration paid Carried interest paid by the AIF Total remuneration paid by the AIFM during the financial year 44 1,837,866 1,837, Remuneration paid to employees of the AIFM who have a material impact on the risk profile of the AIF 8 559, , Due to the size and structure of Fund Partners, it is determined that employees of the AIFM who have a material impact on the risk profile of the AIF include the Board and the Head of Product Management and Client Relations and Head of Finance. The delegated investment manager is subject to regulatory requirements on remuneration that Fund Partners deem to be equally as effective as those detailed in the AIFMD, which would include the Capital Requirements Directive or Markets in Financial Instruments Directive. The information in this report is designed to enable Shareholders to make an informed judgment on the activities of the Fund during the period it covers and the result of those activities at the end of the period. The long Report and Accounts are available free of charge on request. For more information about the activities and performance of the Fund during the period and previous periods, please contact: Authorised Corporate Director Fund Partners Limited Cedar House, 3 Cedar Park Cobham Road, Wimborne Dorset BH21 7SB Customer Service Centre: Authorised and regulated by the Financial Conduct Authority (FCA) Depositary Northern Trust Global Services Ltd 50 Bank Street, Canary Wharf, London E14 5NT Authorised by the Prudential Regulation Authority (PRA) and regulated by the FCA and the PRA Investment Manager Sarasin & Partners LLP Juxon House 100 St Paul s Churchyard London EC4M 8BU Authorised and regulated by the FCA Auditor Please note that telephone calls may be recorded for monitoring and training purposes, and to confirm investors' instructions Deloitte LLP Chartered Accountants and Statutory Auditor Saltire Court, 20 Castle Terrace, Edinburgh EH1 2DB Page 6