Marlborough High Yield Fixed Interest Fund

Transcription

1 Marlborough High Yield Fixed Interest Fund Short Report For the period from 1st January 2015 to 31st December 2015

2 Fund Details Marlborough High Yield Fixed Interest Fund Manager and Registrar Marlborough Fund Managers Ltd Marlborough House 59 Chorley New Road Bolton BL1 4QP Investor Support: (FREEPHONE) Authorised and regulated by the Financial Conduct Authority Trustee HSBC Bank plc 8 Canada Square London E14 5HQ Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Investment Adviser Aberdeen Asset Managers Limited 10 Queens Terrace Aberdeen Aberdeenshire AB10 1YG Authorised and regulated by the Financial Conduct Authority Auditor Barlow Andrews LLP Carlyle House 78 Chorley New Road Bolton BL1 4BY Directors of Marlborough Fund Managers Ltd Andrew Staley Nicholas F J Cooling Allan Hamer Wayne D Green Dom M Clarke Geoffrey Hitchin Keith Ounsworth John R Heap B John Leyland Helen Derbyshire Chairman Deputy Chairman Joint Managing Director Joint Managing Director Finance Director Investment Director Director Sales Director Strategic Development Director Director Compliance & Risk

3 GENERAL INFORMATION Investment Objective The investment objective is to provide a high level of income with the opportunity for some long-term capital growth. The Fund will be invested in a portfolio largely comprising fixed and variable rate and index related securities issued by corporates, government, supranational institutions and local and regional agencies, both in the UK and internationally, as well as other securities deemed to be appropriate by the manager. At times it may be appropriate for the Fund not to be fully invested but to hold cash and near cash. The Fund is permitted to invest in derivatives and forward transactions for the purposes of hedging only. Risk Profile The Fund aims to provide a high level of income from a portfolio of securities which mainly pay a regular fixed income in sterling or euros. The main risks are market price risks, due to market fluctuations or a change in credit risk, and foreign currency risk as a result of movement in the sterling/euro exchange rate. Both risks may affect the level of income arising in the Fund but will be monitored by the manager in accordance with the investment objective and policy set out in the Prospectus. Changes in interest rates can affect the value of investments in the portfolio although the short dated nature of most holdings limits fluctuations. Some holdings may be subject to liquidity risk from time to time although most are readily realisable. Risk Warning The past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested. The Fund is subject to an initial charge and consequently charges are not made uniformly throughout the period of the investment. Changes in exchange rates between currencies may cause the value of the investment to diminish or increase. Investments in fixed interest securities are subject to market and credit risk and will be impacted by interest rates. Investments in higher yielding bonds issued by borrowers with lower credit ratings may result in a higher risk of default and have a negative impact on income and capital value. The Fund may use derivatives to protect the value of the Fund's assets or to reduce the costs of investing, although this may not be achieved. It is not anticipated that the use of derivatives will have any significant effect on the risk profile of the Fund. To ensure that the principal objective of providing a high level of income can be met, 50% of the annual management charge is deducted from capital rather than income. Future capital growth may be constrained as a result. Reports and Accounts The purpose of sending this Short Report is to present you with a summary of how the Fund has performed during the accounting period in accordance with the FCA rules. If you wish to request further information, the more detailed long form report is available. For a copy please write to Marlborough Fund Managers Ltd, Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP or telephone Investor Support on Change in Prospectus No changes have been made since the last report. Up to date key investor information documents, prospectus and manager s reports and accounts for any fund within the manager s range, can be requested by the investor at any time. 1

4 AUTHORISED INVESTMENT ADVISER S REPORT For the year ended 31 December 2015 Percentage change and sector position to 31 December 2015 Six months 1 year 3 years 5 years Since launch ** Marlborough High Yield Fixed Interest Fund 0.57% 3.82% 12.51% 26.98% 72.94% Quartile Ranking * * Based on ranking within The Investment Association High Yield sector ** launched 8 November 2004 External Source of Economic Data: Morningstar (bid to bid, net income reinvested) A year in which World growth has continued to disappoint and oil and commodity prices have plummeted and Emerging markets have remained under pressure, so the performance of the high yield market in Europe has been positive, as the asset class continues to mature and offer more diversity for investors. As mentioned in the last annual report we expected USA interest rates to be increased in q3 2015, and was only a quarter out, so this move was very expected and part of a move from the FED to normalise interest rates which would imply a move back to interest rates around 1.5% in the USA over the next 2 years. The high yield market has remained somewhat isolated from the Energy sector impact seen in credit markets, given the weighting of only 3% in the European high yield index, compared to 17% in the USA high yield market. Companies have continued to refinance their debt to lock into low coupon rates as government bond yields in Europe have been at historical low levels and the coupon rate on the market has now reached a rate of 5.64% and the average leverage of European high yield companies remains sensible at 4 times compared to 6 times in the USA. Portfolio review The number of holdings was at 135 at the year-end, with a currency split of 60% in euro currency and rest in Sterling currency. We ended the year with 9.2% in CCC rated bonds, and 21.9% in BB rated bonds. We had no defaults in the Fund during the time period and generally within the asset class defaults have remained subdued with the latest number from Moody s being 2.5% for European high yield. The top 10 holdings now represent 16% of the Fund as we try to avoid concentration issues and weight holdings appropriately and effective duration of the Fund was 3.21 years. Outlook With the steady increase in the macro picture for European growth we should see a 2% GDP number for 2016, but no sign of interest rates moving up in Europe before 2017,as deflation trends remain strong given the weakness in oil and commodity markets. The sterling credit market will have to deal with Brexit vote in 2016 and this will cause uncertainty for investors in the short term and a weaker currency. With European high yield spreads at 576 bps at the year-end using JP Morgan data, you can claim that the market is factoring in higher volatility in markets and higher probability of defaults than expected by Moody s which forecasts 2.8% in November

5 AUTHORISED INVESTMENT ADVISER S REPORT (CONTINUED) Distributions Year 2016 Year 2015 Year 2014 Year 2013 Class A Net income paid 28 February ppu ppu ppu ppu Net income paid 31 May ppu ppu ppu Net income paid 31 August ppu ppu ppu Net income paid 30 November ppu ppu ppu Class B Net income paid 28 February ppu ppu ppu Net income paid 31 May ppu ppu ppu Net income paid 31 August ppu ppu ppu Net income paid 30 November ppu ppu ppu Class P Net income paid 28 February ppu ppu ppu Net income paid 31 May ppu ppu ppu Net income paid 31 August ppu ppu ppu Net income paid 30 November ppu ppu ppu Steven Logan 10 February 2016 This report contains FTSE data. Source: FTSE International Limited ( FTSE ) FTSE FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE s express written consent. 3

6 AUTHORISED INVESTMENT ADVISER S REPORT (CONTINUED) Material Portfolio Changes For the year ended 31 December 2015 Major Purchases Cost ( ) Major Sales Proceeds ( ) International Personal Fin 5.75% ,722 House of Fraser 8.875% ,937 Convatec Healthcare % ,849 Verisure Holdings 8.75% ,780 Wind Acquisition 7% ,697 Moto Finance 10.25% ,938 Valeant Pharmaceuticals 4.5% ,106 Lecta 8.875% ,563 Matterhorn Telecom 3.875% ,307 Debenhams 5.25% ,100 Novafives SAS 4.5% ,178 LBG Capital No2 15% ,131 Obrascon Huarte Lain 5.5% ,150 International Personal Fin 11.5% ,165 LGE Holdco VI 7.125% ,923 Matterhorn Telecom 3.875% ,511 Co-op Group Holdings 6.875% ,721 Wepa Hygieneprodukte 6.5% ,944 AXA 3.941% Perp 498,925 Loxama 7.375% ,429 Crown Euro Holdings 3.375% ,272 Medi-Partenaires 7% ,588 R & R Ice Cream 5.5% ,103 Hastings Insurance Group 8% ,421 Alliance Data Systems 5.25% ,700 R & R Ice Cream 5.5% ,925 Tesco 6.125% ,663 Ardagh Glass Finance 8.75% ,071 Jaguar Land Rover Auto 5% ,868 British Airways 6.75% Cum Prf 516,358 Assicurazioni Generali 6.416% Perp 456,030 Eco-Bat Finance 7.75% ,453 Homevi 6.875% ,359 DFS Furniture 7.625% ,252 Autostrada 2.375% ,096 Galapagos Holdings 4.832% ,514 Telenet Finance VI 4.875% ,522 Matterhorn Midco 7.75% ,438 Barclays 6.5% Var Perp 357,785 Autostrada 2.375% ,182 Other purchases 14,378,493 Other sales 10,709,364 Total purchases for the year 24,744,469 Total sales for the year 22,380,064 TOP TEN HOLDINGS AS AT 31 DECEMBER 2015 TOP TEN HOLDINGS AS AT 31 DECEMBER 2014 % % PGH Capital 6.625% Verisure Holdings 8.75% Cegedim 6.75% Pearl Group Holdings % FRN 1.84 Deutsche Raststatten 6.75% House of Fraser 8.875% Lloyds Bank 13% Step-Up Perp 1.60 Matalan Finance 8.875% International Personal Finance 5.75% Cegedim 6.75% Interxion Holding 6% Cirsa Funding Luxembourg 8.75% Crown Newco % Deutsche Raststatten 6.75% Convatec Healthcare % Lecta 8.875% Matalan Finance 8.875% Moto Finance 10.25% CE Energy 7% Lloyds TSB Bank 13% Step-Up Perp

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8 COMPARATIVE TABLE Class A income units Change in net assets per unit Year to p p p Opening net asset value per unit Return before operating charges* Operating charges (1.19) (1.21) (1.21) Return after operating charges* Distribution on income units (3.41) (3.92) (5.28) Closing net asset value per unit * after direct transaction costs of: Performance Return after charges 3.68% 1.58% 7.06% Other information Closing net asset value ( ) 17,896,103 25,869,140 42,691,604 Closing number of units 24,891,501 35,610,472 56,641,123 Operating charges 1.60% 1.59% 1.60% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 79.66p 82.46p 83.27p Lowest unit price 71.87p 72.61p 72.52p Class B income units Change in net assets per unit Year to p p p Opening net asset value per unit **76.08 Return before operating charges* Operating charges (0.82) (0.83) (0.85) Return after operating charges* Distribution on income units (3.69) (4.17) (5.37) Closing net asset value per unit * after direct transaction costs of Performance Return after charges 4.27% 2.14% 6.39% Other information Closing net asset value ) 816, , ,590 Closing number of units 1,126, , ,665 Operating charges 1.10% 1.09% 1.11% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 80.03p 82.63p 83.18p Lowest unit price 72.38p 73.16p 73.10p ** Opening net asset value per unit on

9 COMPARATIVE TABLE (CONTINUED) Class P income units Change in net assets per unit Year to p p p Opening net asset value per unit **76.08 Return before operating charges* Operating charges (0.64) (0.64) (0.65) Return after operating charges* Distribution on income units (3.73) (4.28) (5.80) Closing net asset value per unit * after direct transaction costs of Performance Return after charges 4.44% 2.41% 7.07% Other information Closing net asset value ( ) 29,922,151 25,048,502 9,481,468 Closing number of units 41,149,175 34,220,472 12,531,508 Operating charges 0.85% 0.84% 0.86% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 77.18p 79.65p 80.05p Lowest unit price 72.62p 73.52p 72.95p ** Opening net asset value per unit on Operating charges are the same as the ongoing charges and are the total expenses paid by each unit class in the year. Direct transaction costs are the total charges for the year, included in the purchase and sale of investments in the portfolio of the Fund. These amounts are expressed as a percentage of the average net asset value over the year and the average units in issue for the pence per unit figures. 7

10 GEOGRAPHICAL BREAKDOWN Cash as at Australia as at Austria Belgium Canada Cayman Islands Croatia Czech Republic France Germany Ireland Italy Jersey Luxembourg Netherlands Norway Spain Sweden United Kingdom United States % of total net asset value 8

11 Marlborough Fund Managers Ltd Marlborough House 59 Chorley New Road Bolton BL1 4QP Investor Support: Dealing: Fax: Website: Marlborough Fund Managers Ltd Registered in England No Authorised and regulated by the Financial Conduct Authority and a member of The Investment Association