Interim Management Report of Fund Performance

Transcription

1 Interim Report of Fund Performance Standard Life Short Term Bond Fund 30,

2 Standard Life Short Term Bond Fund This interim management report of fund performance contains financial highlights but does not contain either the interim financial report or annual financial statements of the investment fund. You may obtain a copy of the interim financial report or annual financial statements at your request, and at no cost, by calling the toll-free number , by writing to us at Standard Life Mutual Funds Ltd., 1245 Sherbrooke Street West, Suite 1200, Montréal, Québec H3G 1G3 or by visiting our website at or by visiting the SEDAR website at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure relating to the investment fund. Discussion of Fund Performance Results of Operations Bond yields rose early in the period, as slowing global economies caused fixed-income yields to rise. Fixed-income yields tumbled toward the end of the period due to the sustained, solid growth of the U.S. economy and stimulated economies in Europe and Japan. The Government of Canada 10-year bond yield fell to approximately 2.2% by the end of May, down from approximately 2.8% at the beginning of the period. With no significant interest rate increase expected in the United States until next year, the only means of boosting returns from fixed income investments, as per the portfolio manager, was to move up the maturity curve into more risky longer term issues, or to move into riskier corporates. As a result, bonds with long duration produced the best performance. The A-Series return of the Fund was 1.26%, after fees, expenses and applicable taxes, and was below its benchmark return for the period. The net returns of other Series of this Fund are similar to those of A-Series, except for differences attributable to their structure. For a description of the Fund s benchmark, see the Past Performance section of the Fund s most recent annual management report of fund performance. Performance was driven by the overweight exposure to corporate bonds, as well as by the underweighting in government issues although the benchmark five-year Government of Canada bond declined by 10 basis points during the second quarter. The portfolio s short average duration detracted from value, as economic data exceeded expectations. Among individual securities, City of Montreal and Bell Canada issues contributed to performance, while EnCana Corporation detracted from value. The Fund has a significantly overweight position in corporate bonds, specifically in Financial Services, Banks and Real Estate. Financial Services were favoured in anticipation of a positive regulatory ruling on bail-in debt a federal contingency plan should a troubled financial institution require capital to stabilize itself. Existing bank securities stand to benefit should they be a grandfathered under the new framework. The Real-Estate overweighting was to take advantage of narrowing spreads as companies improve their credit positions. The portfolio was underweight in federal and provincial government issues, as they present lower potential returns, especially as corporate spreads continue to tighten. The portfolio manager added debt securities of General Motors Financial Company of Canada and Choice Properties Real Estate Investment Trust to the Fund s holdings, and increased existing positions in Laurentian Bank of Canada and Morgan Stanley. Exposure to the Communications sector was reduced, and a position in Shaw Communications Inc. was sold off. The largest individual holdings and the end of the period included Laurentian Bank of Canada, which offered very good spread compared to the six major Canadian banks, which is expected to tighten with time as the bank s earnings improve. Other major positions were in Choice Properties Real Estate Investment Trust, which represented an opportunity to own real estate debt that has no encumbered assets, and Royal Bank of Canada, which had spreads trading wider than the other major banks. The portfolio manager also considers that Royal Bank of Canada also is positioned to benefit from any positive regulatory action regarding bail-in debt. Recent Developments With bond yields near their lows, the portfolio manager anticipates higher yields and interest rates in fixed-income markets in the coming months. The portfolio manager intends to take profits from corporate issues, and reduce the portfolio s exposure there. The portfolio s average duration will remain short, as prices have not risen as much as expected in the face of rising interest rates. In the money market, the portfolio manager will continue to favour credit securities in this low yield environment. The low weighting in Canada treasury bills 5% at the end of the period will be increased if an anticipated interest-rate hike is priced into the market. International Financial Reporting Standards Canadian Investment Funds have adopted International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board and required by Canadian securities legislation and the Canadian Accounting Standards Board, for periods beginning January 1,. 02/06 Interim Report of Fund Performance as at 30, 5977H(e11) 08-

3 The adoption of IFRS had no significant impact on the Fund s net assets attributable to unitholders per unit and therefore, comparative periods have not been restated. The main impact of IFRS was the requirement to prepare a statement of cash flows and to provide additional disclosures in the Fund s financial statements. Year-by-Year Returns The bar charts below illustrate the Fund s annual performance in each of the past 10 years to ember 31, 2013 and interim period to 30,. The charts show in percentage terms how an investment made on January 1 in the previous year would have increased or decreased by the end of the period. Related Party Transactions Standard Life Mutual Funds Ltd. ( SLMF ), the investment fund manager of the Fund, is responsible for general and administrative management services. Standard Life Trust Company ( SLTC ) acts as the trustee and custodian of the Fund. Standard Life Investments Inc. ( SLI ) is the portfolio manager of the Fund. SLMF and SLTC are wholly owned subsidiaries of Standard Life Financial Inc., a holding company whose ultimate parent is Standard Life plc (the Ultimate Parent ). SLI is a company under the common control of the Ultimate Parent. The services provided by these companies, who are related parties, are part of the normal course of operations and are recorded at the amount of the consideration agreed to by the parties and are therefore related party transactions. Under the agreement between the Fund and SLMF, the Fund pays the management fees. These fees are calculated based on the net asset value of the respective Series of the Fund. A-Series 5% 0% -5% '04 '05 (*) Since July 9, 2012 Legend Series 5% '06 '07 '08 '09 '10 ' '12* ' '14 Past Performance Each Series respective performance is referable to the same portfolio of assets. The performance figures for each Series will differ to the extent that management fees and other expenses vary by Series. 0% The Fund s performance numbers assume that all distributions are reinvested in additional units of the Fund. If you hold this Fund outside of a registered plan, income and capital gains distributions that are paid to you increase your income for tax purposes whether paid to you in cash or reinvested in additional units. The amount of the reinvested taxable distributions is added to the adjusted cost base of the units that you own. This would decrease your capital gains or increase your capital loss when you later redeem from the Fund. Please consult your tax advisor regarding your personal tax situation. The performance information does not take into account sales, redemptions, distribution or other optional charges that would have reduced returns or performance. Please remember the Fund s performance in the past does not indicate how it will perform in the future. The past performance of the Fund is set out in the following chart(s). -5% '04 '05 '06 (*) Since November 06, 2012 E-Series 5% 0% -5% '04 '05 '06 (*) Since November 06, 2012 '07 '07 '08 '08 '09 '09 '10 '10 '11 '11 '12* 0.05 '12* ' '13 ' ' H(e11) 08- Interim Report of Fund Performance as at 30, 03/06

4 Summary of Investment Portfolio Portfolio Composition % of net asset value Fixed Income Canadian Bonds - Corporate Canadian Bonds - Federal Canadian Bonds - Municipals 2.68 Canadian Bonds - Provincial 0.88 U.S. Bonds - Corporate 5.36 Sub-Total Cash and cash equivalents 0.16 Other assets, less liabilities 2.21 Total Top 25 Holdings % of net asset value 1. Canada Housing Trust No. 1, 1.700%, 2017/12/ Government of Canada, 1.750%, 2019/03/ Government of Canada, 1.250%, 2018/09/ NHA MBS, Toronto-Dominion Bank, (The), 1.000%, 2016/06/ Laurentian Bank of Canada, 3.700%, 2015/11/ Caisse centrale Desjardins, 2.281%, 2016/10/ Government of Canada, 1.500%, 2017/02/ Ville de Montréal, 5.000%, 2018/12/ HSBC Bank Canada, 2.572%, 2015/11/ Enbridge Gas Distribution Inc., 1.850%, 2017/04/ Choice Properties Limited Partnership, 3.000%, 2016/04/ Royal Bank of Canada, 2.364%, 2017/09/ General Motors Financial Company of Canada, Ltd., 3.250%, 2017/05/ Morgan Stanley, 4.850%, 2016/02/ Bank of Nova Scotia, (The), 2.740%, 2016/12/ Inter Pipeline Ltd., 1.758%, 2017/05/ Royal Bank of Canada, 2.680%, 2016/12/ MCAP RMBS Issuer Corporation, 2.171%, 2019/04/ Bell Canada, 5.000%, 2017/02/ Canada Housing Trust No. 1, 1.379%, 2017/09/ Choice Properties Limited Partnership, 3.000%, 2017/04/ JPMorgan Chase & Co., 2.920%, 2017/09/ Bank of Montreal, 2.960%, 2016/08/ Master Credit Card Trust, 2.626%, 2017/01/ Royal Bank of Canada, 2.260%, 2018/03/ The summary of investment portfolio may change due to ongoing portfolio transactions of the Fund. A quarterly update is available. Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the six-month period ended 30, and for each of the past five years ended ember 31, as applicable. The Fund s Net Assets per Unit ($) (1) A-Series 2013 (2) 2012 (2) 2011 (2) 2010 (2) 2009 (2) Net assets, beginning of period N/A N/A N/A Increase (decrease) from operations: Total revenue N/A N/A N/A Total expenses (excluding distributions) (0.07) (0.14) (0.07) N/A N/A N/A Realized gains (losses) for the period 0.05 (0.06) (0.01) N/A N/A N/A Unrealized gains (losses) for the period 0.06 (0.09) (0.10) N/A N/A N/A Total increase (decrease) from operations (3) (0.01) N/A N/A N/A Distributions: From net investment income (excluding dividends) N/A N/A N/A From dividends N/A N/A N/A From capital gains N/A N/A N/A Return of capital N/A N/A N/A Total distributions for the period (4) N/A N/A N/A Net assets, end of period N/A N/A N/A Legend Series 2013 (2) 2012 (2) 2011 (2) 2010 (2) 2009 (2) Net assets, beginning of period N/A N/A N/A Increase (decrease) from operations: Total revenue N/A N/A N/A Total expenses (excluding distributions) (0.05) (0.11) (0.01) N/A N/A N/A Realized gains (losses) for the period (0.01) (0.08) - N/A N/A N/A Unrealized gains (losses) for the period 0.07 (0.05) (0.04) N/A N/A N/A Total increase (decrease) from operations (3) N/A N/A N/A Distributions: From net investment income (excluding dividends) N/A N/A N/A From dividends N/A N/A N/A From capital gains N/A N/A N/A Return of capital N/A N/A N/A Total distributions for the period (4) N/A N/A N/A Net assets, end of period N/A N/A N/A 04/06 Interim Report of Fund Performance as at 30, 5977H(e11) 08-

5 E-Series 2013 (2) 2012 (2) 2011 (2) 2010 (2) 2009 (2) Net assets, beginning of period N/A N/A N/A Increase (decrease) from operations: Total revenue N/A N/A N/A Total expenses (excluding distributions) (0.08) (0.15) (0.02) N/A N/A N/A Realized gains (losses) for the period (0.01) (0.08) - N/A N/A N/A Unrealized gains (losses) for the period 0.08 (0.05) (0.03) N/A N/A N/A Total increase (decrease) from operations (3) N/A N/A N/A Distributions: From net investment income (excluding dividends) N/A N/A N/A From dividends N/A N/A N/A From capital gains N/A N/A N/A Return of capital N/A N/A N/A Total distributions for the period (4) N/A N/A N/A Net assets, end of period N/A N/A N/A (1) This information is derived from the Fund s condensed interim unaudited financial statements and audited annual financial statements. (2) The net assets per security presented in the financial statements differ from the net asset value calculated for fund pricing purposes. An explanation of these differences can be found in the notes to the financial statements. (3) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. (4) Distributions were either paid in cash or reinvested in additional units of the Fund, or both. Ratios and Supplemental Data A-Series (000 s) (1) 10,861 9,289 1,636 N/A N/A N/A Number of units outstanding (1) 1,099, , ,243 N/A N/A N/A expense ratio (%) (2) N/A N/A N/A expense ratio before waivers or absorptions (%) N/A N/A N/A Portfolio turnover rate (%) (3) N/A N/A N/A Trading expense ratio (%) (4) N/A N/A N/A N/A N/A N/A per unit N/A N/A N/A Legend Series (000 s) (1) N/A N/A N/A Number of units outstanding (1) 1,001 1,001 1,001 N/A N/A N/A expense ratio (%) (2) N/A N/A N/A expense ratio before waivers or absorptions (%) N/A N/A N/A Portfolio turnover rate (%) (3) N/A N/A N/A Trading expense ratio (%) (4) N/A N/A N/A N/A N/A N/A per unit N/A N/A N/A E-Series (000 s) (1) N/A N/A N/A Number of units outstanding (1) 1,001 1,001 1,001 N/A N/A N/A expense ratio (%) (2) N/A N/A N/A expense ratio before waivers or absorptions (%) N/A N/A N/A Portfolio turnover rate (%) (3) N/A N/A N/A Trading expense ratio (%) (4) N/A N/A N/A N/A N/A N/A per unit N/A N/A N/A (1) This information is provided as at 30 or ember 31 of the period shown, as applicable. (2) expense ratio is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (3) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. The portfolio turnover rate of the Fund is expressed as an annualized percentage for the periods that are less than one year. (4) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. 5977H(e11) 08- Interim Report of Fund Performance as at 30, 05/06

6 Fees The Fund is managed by SLMF. The Fund pays management fees monthly to SLMF. The fees are accrued daily and are calculated on the daily net asset value of the Fund by applying the following annual rates (excluding GST/HST), which are unique to each Series. Series A-Series Legend E-Series Series Annual management fee rates 1.15% 0.80% 1.15% fees are used to cover the expenses of administering and managing the Fund as well as to cover sales commission payments, trailing commissions and other promotional activities of the Fund. The information below shows these expenses as an approximate percentage of the management fees. Series A-Series Legend E-Series Series Sales commissions* and trailing commissions 100% 31% 43% Administration, and other - 69% 57% * Since sales commissions may be paid to dealers at the time of purchase (A-Series only), this amount may exceed 100% of the management fees earned during the year. However, a maximum of 100% is shown in this table. This document may contain forward-looking statements about the Fund, including its strategy, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future class action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Fund and economic factors. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these disgressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. SLMF stresses that the above-mentioned list is not exhaustive. SLMF encourages you to consider these and other factors carefully before making any investment decisions and SLMF urges you to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating forward-looking statements whether as a result of new information, future events or otherwise, unless required by applicable law. 06/06 Interim Report of Fund Performance as at 30, 5977H(e11) 08-