PRUDENTIAL PORTFOLIO MANAGERS UNIT TRUSTS LIMITED ANNUAL REPORT

Transcription

1 PRUDENTIAL PORTFOLIO MANAGERS UNIT TRUSTS LIMITED ANNUAL REPORT MANAGING DIRECTOR S REPORT 31 DECEMBER 2017 Dear Investor, 2017: A surprisingly good year for SA investors In the face of poor economic conditions and elevated political risk, 2017 proved to be a year of unexpectedly strong returns from most asset classes. This was thanks partly to a bumper period for global growth and equity returns: global equities, as measured by the MSCI World Index (for developed countries in US$) returned a robust 22.4% for the year, while the MSCI Emerging Markets Index returned an impressive 37.3% (also in US$). Not only did rising corporate earnings growth reflect the synchronised revival in the world s economies and global trade, but commodity prices also received extended support thanks to accelerated demand from the likes of China. Meanwhile, this also drove heightened foreign investor appetite for emerging market assets like South African equities and bonds. The South African Rand consequently appreciated broadly for the year, gaining 10.1% versus the weaker US Dollar and 1.9% versus UK sterling, but depreciating 2.2% against a robust euro. The FTSE/JSE All Share Index managed to produce 21.0% (in South African Rand) in 2017, after nearly three years of disappointing equity performance. However, these returns were very unevenly delivered for the year, as the JSE only started to perform from June onwards. This meant that impatient investors who opted to switch to cash or income funds ahead of the recovery (as many did) effectively lost out, while patient investors were rewarded for sticking with their equity and multi-asset funds. It was a very volatile year for local interestrate-sensitive assets. Bonds and listed property were impacted negatively by the prevailing uncertainty: nominal bonds returned only 5.0% through 31 October, and listed property returned less than 3.0% through 31 May. However, both managed significant relief rallies following Moody s postponement of its credit rating decision in late November, and the Ramaphosa rally amid the post-anc conference exuberance in December. The BEASSA All Bond Index returned a strong 10.2% for the year. Inflation-linked bonds (Composite ILB Index) produced a more muted 2.9% (as inflation continued to fall), while cash as measured by the STeFI Composite Index delivered 7.5%. Finally, SA listed property produced 8.3% in the fourth quarter, for an unexpectedly robust total return of 17.2% in In light of these returns, s multi-asset unit trusts proved to be largely positioned correctly, having been overweight in local equities and bonds (where mandates allowed) throughout the year. Our position in SA listed property was also actively managed to ensure we were overweight in listed property when it was undervalued. And although we were also correct to have been overweight in global equities and underweight global bonds, South African Rand appreciation versus the US Dollar detracted from value in many cases. However, the higher level of absolute returns from most asset classes meant that funds with inflation-linked benchmarks, like s Inflation Plus, were able to beat their targets comfortably. is SA s #1 large asset manager - again I m very pleased to report that, for the third year in a row, was recognised as South Africa s best large asset manager, winning the 2018 Morningstar award for Best House: Larger Range for the strong collective performance across our entire range of SA unit trusts for periods through 31 December This follows on winning the same award in both 2016 and 2017, highlighting that we remain true to our principle of consistency. More consistent top performance from funds A number of our unit trust funds continued to perform strongly in 2017, many of which are consistently ranked in the top quartile (top 25%) of their ASISA categories across various annual periods to 31 December The Balanced was ranked in the top quartile over all annual periods from 1 to 10-years. - The Equity ended 2017 with a top-quartile ranking over all annual periods from 1 to 10-years. The annualised returns (net of fees) of our primary SA unit trusts to the end of 2017 are listed below: type s 1-year return 3-year return 5-year return INCOME Money Market 7.61% 7.01% 6.33% High Interest 8.30% 7.57% 6.76% MULTI-ASSET Enhanced Income 8.17% 7.34% 7.16% Inflation Plus 10.29% 7.48% 9.91% Balanced 11.79% 8.00% 11.77% PROPERTY Enhanced SA Property Tracker 14.44% 11.61% 13.92% EQUITY Dividend Maximiser 15.08% 7.52% 11.75% Equity 16.41% 8.13% 12.47% GLOBAL Global High Yield Bond of s -3.04% 3.57% 8.70% Global Cautious Managed of s 1.31% 5.61% 10.43% Global Value of s 10.03% 10.60% 18.45% - The Inflation Plus was also in the top quartile over annual periods from 1 to 10-years, apart from 2-years. It was ranked as the #1 fund in its category over all annual periods from 6 to 10-years. - The Global High Yield Bond of s was the number-one ranked fund in its category for all annual periods from 2 to 10-years. Looking ahead Globally, 2018 has already gotten off to a volatile start as the major equity markets have experienced corrections after reaching relatively high valuations, despite fundamentals remaining strong. Equally, bonds in developed markets are now experiencing some uncertainty in the face of accelerating global inflation. However, global growth rates and trade remain well underpinned by the synchronised expansion including the US, Europe, Japan and China this should also be supportive of corporate earnings growth going forward. Locally, this is likely to be a key year in determining whether the country is able to take positive steps towards a brighter future, or remain mired in weak growth. The election of Cyril Ramaphosa as President of South Africa has ushered in a new optimism that bodes well for an improvement in general conditions going forward. However, as most analysts agree, much needs to be done to have a positive impact on economic growth and restore business and investor confidence. When it comes to investing, volatility is a permanent feature of the global investment landscape and 2018 has already proved this to be the case. It s important to remember, however, that as active investment managers we take the opportunities presented by volatility to accumulate attractively valued assets to help enhance returns for our client portfolios over time. We look past the short-term market conditions and continue to consistently apply our proven investment process every day to ensure the best possible returns for our clients. Early in 2018, we believe our portfolios are well positioned to deliver on their mandates. In conclusion, as always, we would like to assure you that we continue to take our role as custodians of your hard-earned money very seriously, and would like to thank you for your ongoing support and the trust you place in us. PIETER HUGO Managing Director: Portfolio Managers Unit Trusts Limited

2 OUR FINANCIAL INFORMATION STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 Dividend Maximiser Equity Balanced Inflation Plus High Yield Bond Enhanced Income Securities at market value Other assets Total Total unitholder funds Total liabilities Total Net Income/(loss) Distributions Undistributed income/(deficit) at year end* ( ) ( ) Net (loss)/income after distributions** ( ) ( ) ( ) ( ) Difference (income attributable to unitholders opening balance) ( ) ( ) *Undistributed deficit largely due to performance fees on classes with negative income as well as transaction costs. **Net income as per statement of comprehensive income after adjusting for net fair value gains & losses and transaction costs

3 OUR FINANCIAL INFORMATION STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 (continued) Money Market Enhanced SA Property Tracker Global High Yield Bond of s Global Cautious Managed of s Global Value of s High Interest Securities at market value Other assets Total Total unitholder funds Total liabilities Total Net Income/(loss) ( ) ( ) ( ) Distributions Undistributed income/(deficit) at year end* 13 (95 968) ( ) ( ) ( ) Net (loss)/income after distributions** - (59 403) ( ) ( ) ( ) Difference (income attributable to unitholders opening balance) 13 (36 565) ( ) ( ) ( ) *Undistributed deficit largely due to performance fees on classes with negative income as well as transaction costs. **Net income as per statement of comprehensive income after adjusting for net fair value gains & losses and transaction costs

4 RETAIL (A CLASS) UNITS DISTRIBUTIONS - RETAIL CLASS There are no initial charges levied by Portfolio Managers Unit Trusts Limited. Initial fees may be agreed between the investor and the financial adviser. annual management fee (Excl. VAT) Equity and Dividend Maximiser s* 1.25% Balanced 1.25% Global Cautious Managed of s, Global Value of s and High Yield Bond 0.75% Global High Yield Bond of s 0.50% Money Market 0.35% Inflation Plus 1.25% Enhanced SA Property Tracker 0.65% Enhanced Income 1.00% High Interest 0.55% Income 0.50% *Performance fee for the Equity and Dividend Maximiser s: 20% of the outperformance of the mean return of the South African Equity General Sector, measured over a rolling 36 month period. The performance fee is capped at 1.25% (excl. VAT) on a rolling 12 month basis. RETAIL (X CLASS) UNITS There are no initial charges levied by Portfolio Managers Unit Trusts Limited. Initial fees may be agreed between the investor and the financial adviser. annual management fee (Excl. VAT) Balanced 1.00% Enhanced Income 0.80% High Interest 0.45% Inflation Plus 1.00% Declaration date Cents per unit Dividend Maximiser 31-Dec Jun Equity 31-Dec Jun Balanced 31-Dec Jun Inflation Plus 31-Dec Jun High Yield Bond 31-Dec Sep Jun Mar Enhanced Income 31-Dec Sep Jun Mar Enhanced SA Property Tracker 31-Dec Sep Jun Mar Global High Yield Bond of s 31-Dec Jun Global Cautious Managed of s 31-Dec Jun Global Value of s 31-Dec Jun Note: The Money Market and the High Interest distribute monthly.

5 INSTITUTIONAL (B OR D CLASS) UNITS annual management fee (Excl. VAT) Balanced and Inflation Plus s B 0.60% Money Market B 0.00% (Negotiated fees) High Yield Bond B 0.50% Equity and Dividend Maximiser s B* 0.85% Enhanced Income B 0.75% Enhanced SA Property Tracker D 0.55% High Interest D 0.35% Income 0.40% *Performance fee for the Equity and Dividend Maximiser s: 20% of the outperformance of the mean return of the South African Equity General Sector, measured over a rolling 36 month basis. The performance fee is capped at 1.25% (excl.vat) on a rolling 12 month basis. DISTRIBUTIONS - INSTITUTIONAL CLASS Declaration date Cents per unit Dividend Maximiser B 31-Dec Jun Equity B 31-Dec Jun Balanced B 31-Dec Jun Inflation Plus B 31-Dec Jun High Yield Bond B 31-Dec Sep Jun Mar Enhanced Income B 31-Dec Sep Jun Mar Enhanced SA Property Tracker D 31-Dec Sep Jun Mar Dividend Maximiser D 31-Dec Jun Global Cautious Managed of s B 31-Dec Jun Equity D 31-Dec Jun Enhanced Income D 31-Dec Sep Jun Mar Note: The Money Market and the High Interest distribute monthly.

6 RETAIL (A CLASS) UNITS ANNUALISED PERFORMANCE (%) AS AT 31 DECEMBER year 2 years 3 years 4 years 5 years Since inception inception date Dividend Maximiser August 1999 Equity August 1999 Balanced August 1999 Inflation Plus June 2001 High Yield Bond October 2000 Enhanced Income July 2009 Money Market April 2002 Enhanced SA Property Tracker December 2005 Global High Yield Bond of s November 2000 Global Cautious Managed of s March 2004 Global Value of s February 2000 High Interest December 2010 Income 8.35 n/a n/a n/a n/a December 2016 Source: Morningstar performance figures for the s are based on NAV price. RETAIL (X CLASS) UNITS ANNUALISED PERFORMANCE (%) AS AT 31 DECEMBER year 2 years 3 years 4 years 5 years Since Inception Class inception date Balanced January 2013 Inflation Plus July 2011 Enhanced Income April 2011 Money Market April 2011 High Interest April 2011 Income 8.96 n/a n/a n/a n/a December 2016 Source: Morningstar performance figures for the s are based on NAV price.

7 INSTITUTIONAL (B OR D CLASS) UNITS ANNUALISED PERFORMANCE (%) AS AT 31 DECEMBER year 2 years 3 years 4 years 5 years Since inception Class inception date Dividend Maximiser B January 2007 Equity B January 2007 Balanced B July 2002 Inflation Plus B July 2002 High Yield Bond B April 2003 Enhanced Income B July 2009 Enhanced SA Property Tracker D July 2010 High Interest D December 2010 Global Cautious Managed of s B n/a July 2013 Dividend Maximiser D January 2010 Equity D January 2010 Enhanced Income D July 2011 Income D 8.49 n/a n/a n/a n/a December 2016 Source: Morningstar performance figures for the s are based on NAV price. Stock markets continually rise and fall. Investing in them is always more risky than a deposit-based savings fund. However, the rewards can be much greater, provided you are prepared to take a longer-term view. s Unit Trusts are managed by professional fund managers. Their job is to make sure you have a stake in a portfolio of investments, which over a period of time, is likely to produce a good rate of growth that aims to offset any short-term fluctuations.

8 REPORT OF THE TRUSTEE FOR THE PRUDENTIAL PORTFOLIO MANAGERS UNIT TRUST SCHEME We, the Standard Bank of South Africa Limited, in our capacity as Trustee of the Portfolio Managers Unit Trust Scheme ( the Scheme ) have prepared a report in terms of Section 70(1)(f) of the Collective Investment Schemes Control Act, 45 of 2002, as amended ( the Act ), for the financial year ended 31 December In support of our report we have adopted certain processes and procedures that allow us to form a reasonable conclusion on whether the Manager has administered the Scheme in accordance with the Act and the Scheme Deed. As Trustees of the Scheme we are also obliged to in terms of Section 70(3) of the Act to satisfy ourselves that every statement of comprehensive income, statement of financial position or other return prepared by the Manager of the Scheme as required by Section 90 of the Act fairly represents the assets and liabilities, as well as the income and distribution of income, of every portfolio of the Scheme. The Manager is responsible for maintaining the accounting records and preparing the annual financial statements of the Scheme in conformity with International Financial Reporting Standards. This responsibility also includes appointing an external auditor to the Scheme to ensure that the financial statements are properly drawn up so as to fairly represent the financial position of every portfolio of its collective investment scheme are in accordance with International Financial Reporting Standards and in the manner required by the Act. Our enquiry into the administration of the Scheme by the Manager does not cover a review of the annual financial statements and hence we do not provide an opinion thereon. Based on our records, internal processes and procedures we report that nothing has come to our attention that causes us to believe that the accompanying financial statements do not fairly represent the assets and liabilities, as well as the income and distribution of income, of every portfolio of the Scheme administered by the Manager. We confirm that according to the records available to us, no losses were suffered in the portfolios and no investor was prejudiced as a result thereof. We conclude our report by stating that we reasonably believe that the Manager has administered the Scheme in accordance with: (i) the limitations imposed on the investment and borrowing powers of the manager by this Act; (ii) and the provisions of this Act and the deed; PRUDENTIAL PORTFOLIO MANAGERS UNIT TRUSTS LIMITED COLLECTIVE INVESTMENT SCHEMES ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2017 This summarised report is extracted from the audited information, but is not itself audited. The annual financial statements were audited by KPMG Inc., who expressed an unmodified opinion thereon 23 March The audited annual financial statements and the auditor s report thereon are available for inspection at the Schemes registered office. The directors take full responsibility for the preparation of the abridged report and the financial information has been correctly extracted from the underlying annual financial statements. DISCLAIMER Collective Investment Schemes (unit trusts) are generally medium- to long-term investments. The value of participatory interest (units) may go down as well as up. Past performance is not necessarily a guide to the future. Unit trust prices are calculated on a net asset value basis, which is the total book value of all assets in the portfolio divided by the number of units in issue. Fluctuations or movements in exchange rates may also be the cause of the value of underlying international investments going up or down. Unit trusts are traded at ruling prices and can engage in borrowing and scrip lending. Commissions and incentives may be paid and if so, would be included in the overall costs. Different classes of units apply to the Collective Investment Scheme s and are subject to different fees and charges. A detailed schedule of fees and charges and maximum commissions is available on request from the company. Forward pricing is used. All of the unit trusts may be capped at any time in order for them to be managed in accordance with their mandates. The Money Market fund aims to maintain a constant price of 100 cents per unit. The total return to the investor is primarily made up of interest received but may also include any gain or loss made on any particular instrument held. In most cases this may have the effect of increasing or decreasing the daily yield, but in some cases, for example in the event of a default on the part of an issuer of any instrument held by the, it can have the effect of a capital loss. Such losses will be borne by the Money Market fund and its investors and in order to maintain a constant price of 100 cents per unit, investors unit holdings will be reduced to the extent of such losses. A fund of funds unit trust may invest in other unit trusts, all of which levy their own charges that could result in a higher fee structure for these portfolios. MELINDA MOSTERT Standard Bank of South Africa Limited 19 March 2018 SEGGIE MOODLEY Standard Bank of South Africa Limited A feeder fund is a unit trust fund that, apart from assets in liquid form, consists solely of units in a single portfolio of a collective investment scheme. assets are managed by Investment Managers (SA) Pty Ltd which is a licensed discretionary service provider (FSP#615). Portfolio Managers Unit Trusts Limited Physical address: 7 th Floor, Protea Place, Cnr of Dreyer Street and Protea Road, Claremont, 7708, Cape Town