PHOENIX UNIT TRUST MANAGERS MANAGER S INTERIM REPORT PUTM FAR EASTERN UNIT TRUST. For the half year: 1 October 2016 to 31 March 2017

Transcription

1 PHOENIX UNIT TRUST MANAGERS MANAGER S INTERIM REPORT For the half year: 1 October 2016 to 31 March 2017 PUTM FAR EASTERN UNIT TRUST

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3 Contents Investment review 2-3 Portfolio of investments 4-7 Top ten purchases and sales 8 Statistical information 9-12 Statements of total return & change in net assets attributable to unitholders 13 Balance sheet 14 Distribution table 15 Corporate information

4 Investment review Dear Investor Welcome to the PUTM Far Eastern Unit Trust interim report for the six months to 31 March Performance Review Over the review period, the PUTM Far Eastern Unit Trust returned 11.8% compared to a return of 11.5% by its sector average. (Source: Lipper, bid to bid, net income reinvested for six months to 31/03/17). In the table below, you can see how the Fund performed against its sector average over the last five discrete one year periods. Standardised Past Performance Mar Mar Mar Mar Mar % growth % growth % growth % growth % growth PUTM Far Eastern Unit Trust Sector Average Source: Lipper, bid to bid, net income reinvested to end March 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 Far East equites were subdued over the latter stages of 2016, before rebounding strongly at the start of The initial response was in reaction to Donald Trump s surprise election win. Many were concerned about his protectionist rhetoric and worried that his pro-growth policies would lead to higher US interest rates (a negative for Far East nations). Thereafter, investors looked beyond the White House and towards a raft improving Chinese economic data. India was also a standout performer, as foreign investors snapped-up the country s equities. Concerns about the negative effects of the government s currency ban also receded. Meanwhile, the ruling party s comprehensive victory in key state elections supported the government s reform agenda. Korea also outperformed the region, with heavyweight Samsung Electronics delivering strong earnings (the Fund holds the stock). The impeachment of President Park also ushered in hopes of a more stable political backdrop. Markets were even able to shrug-off the US Federal Reserve (Fed) March interest rate hike. Performance Looking at the positives first, strong results lifted China State Construction, with the company continuing to move away from lower margin affordable housing to more lucrative infrastructure programmes. Staying in the region, China Lodging was another highlight, with the market starting to appreciate the strong margin story at this domestic hotel operator. Operational gearing as occupancy rates recover, plus the shift to a franchise model, are also positive drivers of this stock. Additional positives included Samsung SDI, Challenger Limited and Bharat Heavy Electric. By contrast, graphite miner Syrah Resources suffered despite no change to operating fundamentals. Environmental stocks, including this electric vehicle (EV) supplier, have generally taken a hit on worries that environmental legislation will be rolled back post-us election. However, we remain confident that the shift to EVs will not be affected by the tone of political rhetoric, as battery costs gradually become competitive with petrol without the need for subsidy. A position in Taiwanese information technology business Pegatron hurt relative returns after it delivered disappointing results and trimmed its outlook. Further laggards included China Mobile, Axis Bank and Cheung Kong Property. Activity In Indonesia, we bought shares in mining services company United Tractors. After a multi-year downturn, signs of more stable pricing and end market demand from China are encouraging a revival in the Indonesian mining sector, benefiting United Tractors contract mining and construction machinery divisions. Meanwhile, we purchased Hong Kong/China property developer Hang Lung Properties. After a difficult few years, spending on luxury items in China is starting to recover, with Hang Lung positioned to capitalise thanks to its extensive shopping mall exposure. The purchase was partly funded by the sale of fellow property developer Wharf. Following our analyst s trip to Korea, we reduced exposure to carmaker Hyundai Motor. Although potential for group restructuring and better shareholder attitudes remains, it appears that competitive conditions are worsening in all of its end markets, and the increased mix of SUVs is not enough to offset margin pressure. Elsewhere, Australia s JB Hi-fi significantly outperformed the wider market; so much so, that its valuation is no longer attractive. In addition, Amazon recently entered the market and sales have started to slow. We therefore sold the stock. Outlook and Fund Strategy In the short term, Far East equity markets will continue to take their lead from global events. These include President Trump s stance on trade, the strength of economic growth in the developed world, Fed interest rate policy and the possibility of further geopolitical upheaval (Russia/ the Middle East). The fortunes of China, including any growth-orientated policy measures enacted by the leadership in Beijing, will also continue to drive sentiment. From a long-term perspective, we continue to believe that the region is in a strong position. Demographics remain supportive and the ongoing reorientation of economies away from exports towards consumption should help create more stable growth. Against this backdrop, we believe a bottom-up approach remains the best way to generate robust long-term returns. 3

6 Portfolio of investments Investments held at 31 March 2017 Market Percentage of value total net assets Holding Investment % Australia (30/09/ %) Basic Materials 138,087 Metals X 66, ,905 Syrah Resources 110, ,000 Westgold Resources 47, Consumer Goods 45,760 Treasury Wine Estates 342, Consumer Services 37,504 Aristocrat Leisure 413, ,245 Woolworths 394, Financials 19,701 Australia & New Zealand Banking Group 384, ,530 Challenger 404, ,545 DEXUS Property Group 236, ,821 National Australia Bank 813, ,829 QBE Insurance Group 250, ,130 Stockland Trust 230, ,800 Westpac Banking Group 684, Healthcare 3,962 CSL 304, Industrials 11,489 Brambles 65, Telecommunications 29,331 Telstra 83, Utilities 136,115 Spark Infrastructure Group 197, Bermuda (30/09/ %) 0.13 Consumer Services 2,650,000 Rexlot Holdings 32, Cayman Islands (30/09/ %) Consumer Goods 92,464 ANTA Sports Products 204, Consumer Services 8,429 Alibaba Group Holding ADR* 736, ,588 China Lodging Group ADR* 330, ,357 CK Hutchison Holdings 122, ,166 Ctrip ADR* 405, ,925 Sands China 174, ,618 Vipshop Holdings ADR* 157, Financials 58,727 Cheung Kong Property Holdings 317, ,976 China Resources Land 310, Healthcare 23,000 Ginko International 169,

7 Portfolio of investments Investments held at 31 March 2017 Market Percentage of value total net assets Holding Investment % Technology 2,743 Baidu ADR* 379, ,620 JD Com ADR* 345, ,889 Tencent Holdings 780, China (30/09/ %) 8.27 Financials 951,904 China Construction Bank 614, ,482 China Merchants Bank H 350, ,334 Ping An Insurance H 464, Industrials 510,000 Shanghai Electric 202, Oil & Gas 525,887 China Petroleum & Chemical H 342, ,259 PetroChina H 72, Hong Kong (30/09/ %) Consumer Goods 133,940 China Mengniu Dairy 222, Financials 86,447 AIA Group 437, ,694 Bank of China (Hong Kong) Holdings 294, ,329 Hang Lung Properties 273, ,174 Sun Hung Kai Properties 131, Healthcare 151,206 Sino Biopharmaceutical 100, Industrials 122,255 China Resources Beer Holdings 223, ,126 China State Construction International Holdings 376, Telecommunications 59,713 China Mobile (HK) 524, ,940 China Unicom 135, India (30/09/ %) 7.29 Basic Materials 41,397 Coal India 149, Consumer Goods 101,587 ITC 352, Financials 20,753 Axis Bank 125, Industrials 111,696 Bharat Heavy Electricals 224, ,665 Larsen & Toubro 383, ,798 Tata Motors A 6, ,709 Voltas 324,

8 Portfolio of investments Investments held at 31 March 2017 Market Percentage of value total net assets Holding Investment % Technology 5,200 Tata Consultancy Services 156, ,472 Tech Mahindra 82, Indonesia (30/09/ %) 1.57 Financials 248,358 Bank Mandiri 175, Industrials 155,295 AKR Corporindo 58, ,985 United Tractors 156, Malaysia (30/09/ %) 0.32 Consumer Services 140,378 AirAsia 79, New Zealand (30/09/ %) Papua New Guinea (30/09/ %) 0.55 Oil & Gas 30,794 Oil Search 136, Philippines (30/09/ %) 0.22 Telecommunications 1,692 Globe Telecom 54, Singapore (30/09/ %) 4.55 Financials 158,000 CapitaLand 329, ,464 DBS Group 127, ,099 United Overseas Bank 331, Industrials 148,391 Sembcorp Marine 162, Telecommunications 78,000 Singapore Telecommunications 175, South Korea (30/09/ %) Consumer Goods 2,095 Hyundai Motor Preference Shares 154, Financials 454 Samsung Fire & Marine Insurance 87, ,070 Shinhan Financial Group 336, Industrials 670 Samsung Electronics 991, Samsung Electronics Preference Share 433, ,103 Samsung Engineering 167, ,216 Samsung SDI 416, Technology 8,242 SK Hynix 298, Telecommunications 11,542 Korea Telecom 264,

9 Portfolio of investments Investments held at 31 March 2017 Market Percentage of value total net assets Holding Investment % Taiwan (30/09/ %) 9.36 Basic Materials 81,246 Formosa Plastics 194, Financials 253,461 Cathay Financial Holdings 326, Industrials 152,264 Hon Hai Precision Industry 366, Technology 235,175 Taiwan Semiconductor Manufacturing 1,174, Telecommunications 130,067 Far EasTone Telecommunications 255, Thailand (30/09/ %) 1.22 Financials 32,920 Kasikornbank 145, Telecommunications 4,795 Advanced Info Service 19, ,429 Total Access Communications 135, United Kingdom (30/09/ %) 1.79 Basic Materials 24,472 BHP Billiton 303, ,397 Rio Tinto 140, Portfolio of investments 24,067, Net other assets 699, Net assets 24,767, All investments are listed on recognised stock exchanges and are approved securities within the meaning of the FCA rules unless otherwise stated. * ADR - American Depositary Receipt 7

10 Top ten purchases and sales For the half year ended 31 March 2017 Purchases Cost Ctrip ADR 384,655 Hon Hai Precision Industry 334,954 Bank of China (Hong Kong) Holdings 321,987 Cathay Financial Holdings 308,296 Hang Lung Properties 266,327 QBE Insurance Group 251,840 Rio Tinto 237,521 Woolworths 230,779 Spark Infrastructure Group 194,449 Sembcorp Marine 169,831 Sales Proceeds Samsung Electronics 442,483 Bharat Petroleum 348,680 Hermes Microvision 326,653 Telstra 293,495 JB Hi-Fi 280,418 Pegatron 276,475 Galaxy Entertainment G 256,644 Wharf Holdings 252,177 Infosys 239,068 Ayala Land 236,020 Total purchases 6,293,105 Total sales 7,155,334 8

11 Statistical information Comparative tables Income 31/03/17 30/09/16 30/09/15 30/09/14 pence pence pence pence Change in net assets per unit Opening net asset value per unit Return before operating charges* (27.04) Operating charges (2.87) (4.98) (5.34) (4.23) Return after operating charges* (32.38) Distributions on income units (1.15) (5.32) (5.87) (5.91) Closing net asset value per unit *after direct transaction costs of: Performance Return after charges 11.20% 33.89% (8.68%) 7.11% Other information Closing net asset value ( 000) Closing number of units ,646 1,066 Operating charges 1.25% 1.37% 1.41% 1.15% Direct transaction costs 0.16% 0.28% 0.34% 0.32% Prices + Highest unit price (pence) Lowest unit price (pence) High and low price disclosures are based on quoted prices. Therefore the opening and closing NAV prices may fall outside the high/low price threshold. 9

12 Statistical information Comparative tables Accumulation 31/03/17 30/09/16 30/09/15 30/09/14 pence pence pence pence Change in net assets per unit Opening net asset value per unit Return before operating charges* (41.08) Operating charges (4.38) (7.54) (7.21) (6.15) Return after operating charges* (48.29) Distributions on accumulation units (1.75) (8.81) (9.15) (8.62) Retained distributions on accumulation units Closing net asset value per unit *after direct transaction costs of: Performance Return after charges 11.19% 33.93% (8.75%) 7.14% Other information Closing net asset value ( 000) 24,765 23,108 19,075 24,202 Closing number of units 3,302,011 3,425,998 3,787,674 4,385,320 Operating charges 1.25% 1.36% 1.24% 1.15% Direct transaction costs 0.16% 0.28% 0.34% 0.32% Prices + Highest unit price (pence) Lowest unit price (pence) High and low price disclosures are based on quoted prices. Therefore the opening and closing NAV prices may fall outside the high/low price threshold. 10

13 Statistical information Investment objective The objective of the Fund is to maximise the long term return, mainly through capital growth, by investment in a broadly based portfolio of securities in Far Eastern markets, including Australasia. Investment policy The Fund will primarily invest in equity shares quoted in Far Eastern Markets, excluding Japan.The Fund may hold cash and near cash assets where reasonably necessary to fund redemption of units, for the efficient management of the Fund, or for purposes ancillary to the objectives of the Fund. It may borrow providing such borrowing is on a temporary basis, and does not exceed the limits applicable to the Fund. Revenue distribution and pricing Units of the Fund are available as either Income units (where revenue is distributed to unitholders) or 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 31 March and a final distribution as at 30 September. 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 6 because funds of this type have experienced high rises and falls in value in the past. Although this is a high risk ranking it is not the highest. The above figure applies to the following unit classes: Income 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 risk of investing in this Fund: Investing overseas can bring additional returns and spread risk to different markets. There are risks, however, that changes in currency rates will reduce the value of your investment. The Fund may use derivatives to reduce risk or cost or to generate additional capital or income at low risk, or to meet its investment objective. 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 Directors statement This report has been prepared in accordance with the requirements of the Collective Investment Schemes Sourcebook as issued and amended by the Financial Conduct Authority. Craig Baker, Director 25 May 2017 Shamira Mohammed, Director 12

15 Interim financial statements (unaudited) For the half year ended 31 March 2017 Statement of total return 31/03/17 31/03/16 Income Net capital gains 2,470,939 1,683,883 Revenue 212, ,452 Expenses (136,752) (116,319) Interest payable and similar charges (169) (104) Net revenue before taxation 75,232 99,029 Taxation (16,764) (16,065) Net revenue after taxation 58,468 82,964 Total return before distributions 2,529,407 1,766,847 Distributions (58,470) (86,688) Change in net assets attributable to unitholders from investment activities 2,470,937 1,680,159 Statement of change in net assets attributable to unitholders 31/03/17 31/03/16* Opening net assets attributable to unitholders 23,110,810 19,083,738 Amounts receivable on issue of units 47,496 Amounts payable on cancellation of units (919,357) (913,605) (871,861) (913,605) Change in net assets attributable to unitholders from investment activities 2,470,937 1,680,159 Retained distributions on accumulation units 57,624 85,445 Closing net assets attributable to unitholders 24,767,510 19,935,737 *Please note that the comparative figures are for the comparative interim period. The brought forward net assets for the current period do not, therefore equal the carried forward figure in the comparative. 13

16 Interim financial statements (unaudited) As at 31 March 2017 Balance sheet 31/03/17 30/09/16 Assets: Fixed assets: Investments 24,067,769 22,414,120 Current assets: Debtors 117, ,914 Cash and bank balances 635, ,488 Total current assets 752, ,402 Total assets 24,820,649 23,140,522 Liabilites: Creditors: Other creditors (53,132) (29,685) Distribution payable (7) (27) Total liabilities (53,139) (29,712) Net assets attributable to unitholders 24,767,510 23,110,810 Notes to the interim financial statements Accounting Policies The interim financial statements have been prepared under the historical cost basis, as modified by the revalution of investments and in compliance with 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 Unless otherwise stated all accounting policies applied are consistent with those of the Annual Report for the year ended 30 September 2016 and are described in those financial statements. 14

17 Distribution table For the half year ended 31 March 2017 Interim distribution in pence per unit Group 1: units purchased prior to 1 October 2016 Group 2: units purchased 1 October 2016 to 31 March pence pence per unit per unit Net payable paid income Equalisation 31 May 31 May Income Group Group 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. 15

18 Corporate information The information 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. Phoenix Unit Trust Mangers Limted is part of the Phoenix Group. Ignis Investment Services Limited is part of the Standard Life Investments group (Standard Life Investments (Holdings) Limited) and its subsidiaries. Unit prices appear daily on our website Dealing: Administration: Remuneration The Manager has adopted a remuneration policy, up-to-date details of which can be found on These details describe how remuneration and benefits are calculated and identify the committee which oversees and controls the policy. A paper copy of these details can be requested free of charge from the Manager. Following the implementation of UCITS V in the UK on 18 March 2016, all authorised UCITS Managers are required to comply with the UCITS V Remuneration Code from the start of their next accounting year. Under the UCITS V Directive, the Manager is required to disclose information relating to the remuneration paid to its staff for the financial year, split into fixed and variable remuneration. The Manager s Financial Year end is 31 December, it is therefore anticipated that the Manager's Remuneration Policy and associated financial disclosures will be made within the Annual Reports starting from 31 December 2017, following its first full performance period. Prior to this date, and in line with the FCA s guidance on the UCITS V remuneration disclosures, the Manager would be part way through its first performance period and the information available would not be relevant or provide a proper basis for comparison. Risks The price of units and the revenue from them can go down as well as up and investors may not get back the amount they invested, particularly in the case of early withdrawal. Tax levels and reliefs are those currently applicable and may change. The value of any tax relief depends on personal circumstances. Depending on the fund, the value of your investment may change with currency movements. 16

19 Corporate information Manager Phoenix Unit Trust Managers Limited (PUTM) 1 Wythall Green Way, Wythall, Birmingham, B47 6WG Tel: Registered in England No Authorised and regulated by the Financial Conduct Authority Directors Andrew Moss PUTM Director, Chief Executive Phoenix Life; Shamira Mohammed PUTM Director, Finance Director Phoenix Life; Craig Baker PUTM Director, Head of Investment Management Phoenix Life; Mike Urmston Non Executive Director of PUTM Registrar and correspondence address Phoenix Unit Trust Managers Limited PO Box Chelmsford CM99 2EN Authorised and regulated by the Financial Conduct Authority Investment Adviser Ignis Investment Services Limited 1 George Street Edinburgh, EH2 2LL Registered in Scotland No.SC Authorised and regulated by the Financial Conduct Authority Trustee (appointed 1 March 2017) HSBC Bank plc 1-2 Lochside Way Edinburgh Park Edinburgh EH12 9DT Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Trustee (resigned 28 February 2017) National Westminster Bank Younger Building, 1st Floor 3 Redheughs Avenue Edinburgh EH12 9RH Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Independent Auditor to the Fund Ernst & Young LLP Ten George Street Edinburgh EH2 2DZ Authorised status This Fund is an Authorised Unit Trust scheme under section 243 of the Financial Services & Markets Act 2000 and is categorised under the Collective Investment Schemes Sourcebook as a UCITS fund. 17

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24 Contact: Client Services Call: Correspondence Address: PO Box Chelmsford CM99 2EN Visit: phoenixunittrust.co.uk Telephone calls may be monitored and/or recorded for the purposes of security, internal training, accurate account operation, internal customer monitoring and to improve the quality of service. Please note the Key Investor Information Document (KIID), the supplementary Information Document (SID) and the full prospectus are available free of charge. These are available by contacting Client Services on Phoenix Unit Trust Managers Limited does not accept liability for any claims or losses of any nature arising directly or indirectly from use of the data or material in this report. The information supplied is not intended to constitute investment, tax, legal or other advice. Phoenix Unit Trust Managers Limited* is a Phoenix Group Company. Registered in England No Registered office: 1 Wythall Green Way, Wythall, Birmingham B47 6WG. Authorised and regulated by the Financial Conduct Authority. Phoenix Unit Trust Managers Limited and its subsidiaries are part of the Phoenix Group (Phoenix Group plc and its subsidiaries). B