TB WALKER Crips Corporate bond. Annual Short Report For the year ended 31 July 2014

Transcription

1 TB WALKER Crips Corporate bond Annual Short Report For the year ended 31 July 2014

2 INVESTMENT OBJECTIVE & POLICY The investment objective of the Fund is to provide unitholders with a high income level giving attention to capital preservation from a portfolio of predominantly UK listed corporate bonds and fixed interest securities. The benchmark for performance comparison purposes is the Investment Management Association Corporate Bond Sector Average. FUND FACTS Launch date: 12 September 2002 Ex-dividend dates: 1 February, 1 August Dividend payment dates: 31 March, 30 September Synthetic Risk and Reward Indicator Ranking 1 : 3 Ongoing Charges Figures 2 A Units B Units C Units 1.16% p.a. 0.86% p.a. 0.66% p.a. 1 As calculated in accordance with the ESMA guidelines. It is based on historical data and uses a scale of 1 to 7. The higher the rank the greater the potential reward but the greater the risk of losing money. 2 To 31 July As calculated in accordance with the ESMA guidelines. The Ongoing Charge Figure ( OCF ) includes annual management charges ( AMCs ) and other operating expenses (Trustee fee, audit fee etc.) Change of AUTHORISED FUND MANAGER From 1 February 2014 the Authorised Fund Manager of the Fund changed from Capita Financial Managers Limited to T. Bailey Fund Managers Limited. As a result the name of the Fund changed from CF Walker Crips Corporate Bond Fund to TB Walker Crips Corporate Bond Fund. Also on this date the Trustee of the Fund changed from BNY Mellon Trust & Depositary (UK) Limited to National Westminster Bank Plc and the Auditors changed from KPMG Audit Plc to Deloitte LLP. The above changes were classified as a significant change under the FCA Handbook and were therefore notified to unitholders in advance.

3 INVESTMENT REVIEW Cumulative returns for the periods ended 31 July 2014 (%) 1 year 3 years 5 years TB Walker Crips Corporate Bond Fund IMA Corporate Bond Sector Average Performance based on A Accumulation Units. Source: Financial Express. Total return, bid to bid. Past performance is not a reliable indicator of future results. Investors are reminded that the of units and the revenue derived from them is not guaranteed and may go down as well as up

4 As indicated in previous factsheets and annual reports, we still believe that bond markets are fairly valued. Gilt yields have fallen from a peak of around 2.9% to close the period at about 2.6%. This reflects the growing consensus that interest rates will stay at the current all-time low of 0.5% for a longer period than initially anticipated. Our expectation is now that the Bank of England will likely start to raise rates in Q albeit steadily. The Fund performance was duly 2.29% for the year. The general defensive qualities of the Fund proved their mettle with the low duration, diversification and low banking exposure supporting the unit. However, the portfolio was adversely affected by a few isolated holdings which impacted performance, including a small holding in Gazprom. We endeavoured to adjust the characteristics of the portfolio by selling three of the longer dated holdings of the fund, namely BT, Vodafone and GlaxoSmithKline, where yields were down at 4%. We felt that the portfolio was not being adequately rewarded for the inherent interest rate risk of these holdings. Similarly, at the short end we saw little value in holdings with less than five years until maturity which were yielding around 2%. We subsequently sold Scottish and Southern Energy, Rolls Royce and Lafarge bonds. With the yield curve sloping steeply upwards to a peak and flattening at around 7-10 years we looked to concentrate positions on this area of the curve. This is because investors are better rewarded with a higher yield without taking undue interest rate risk. With this in mind, we have purchased issues in Close Brothers, Phoenix Group, Debenhams and Experian which all lie in this area. The net effect at portfolio level is a fall in duration since the previous yearly report from, 6 years to 5.63 years. We expect defaults to remain low and so have increased credit risk around the aforementioned 7-10 year sweet spot in an effort to maximise return. That said, any high yield paper would still be towards the higher quality end of the non-investment grade spectrum. The UK economy has been stronger than expected with recent growth in the services sector, improvements in consumer confidence and falling unemployment. This contributed to strength in sterling, which adversely impacted our Australian Dollar, Canadian Dollar, Norwegian Krone and US Dollar holdings. However, towards the end of the quarter, sterling strength abated as investor concern grew over uncertainty surrounding a possible Scottish Yes vote and a change of government at the next General Election. We have retained the fund s US Dollar exposure. Innovative and cheap energy sources in the US helped funding of government deficits. This cheap energy, along with a rise in wages in China, encouraged many companies to onshore manufacturing processes creating new jobs. Over the medium term, we believe that this will create a steady tailwind for the US Dollar.

5 OUTLOOK Contrary to growing opinion, we still believe UK inflation will be above consensus estimates in the coming years so we have retained our inflation-linked holdings. These bonds are currently d in such a way that indicates low inflation in the near term. The Bank of England has shown no intention to reverse Quantitative Easing and reduce the burden on its balance sheet. As the velocity of money increases, there should be upwards pressure on s. Furthermore, the first signs of a stretched labour market, and subsequent rise in wages, are beginning to materialise with employment well above pre-recession levels. Geopolitical events in the Middle East and a burgeoning supermarket war have kept a lid on s, but we see these as one-offs that we hope will reverse over time and feed into inflation. The fund has advanced against many of its peers which have used derivatives to shorten duration. This has proved costly for them as the Bank of England s forward guidance has pushed back the prospect of a rate rise, benefiting longer dated funds. However, with the rate hike likely in the first half of next year, we remain biased towards the shorter end, whilst we are mindful of the requirement for income. We expect rates to rise higher, but not dramatically higher over the next couple of years and we shall construct the fund accordingly. Chris Kitchenham Fund Manager Walker Crips Stockbrokers Limited 10 November2014 Nick Hawkins Fund Manager Walker Crips Stockbrokers Limited 10 November 2014

6 TOP TEN HOLDINGS Top Ten Holdings as at 31 July 2014 (%) Top Ten Holdings as at at 31 July 2013 (%) European Investment Bank 3.75% 31/10/2018 British Telecommunications 3.5% 25/04/ European Investment Bank 3.75% 31/10/ British Telecommunications 3.5% 25/04/2025 Old Mutual 8% 03/06/ GE Capital UK Funding 5.125% Marks & Spencer 6.125% 06/12/ Severn Trent 11/07/ Friends Life Group 8.25% 21/04/ Places for People 1% 31/01/ Severn Trent 11/07/ Alpha Plus Holdings 5.75% EDF Energy 6% 31/12/ Aberdeen Asset Management 7% Places for People 1% 31/01/ Chorus 6.75% Close Brothers Finance 3.875% 27/06/ Imperial Tobacco 8.125% Experian Finance 3.5% 15/10/ William Hill 4.25%

7 Performance Unit Prices and Revenue A Income Units A Accumulation Units Calendar year Highest Lowest Net revenue distributed Highest Lowest Net revenue accumulated B Income Units B Accumulation Units Calendar year Highest Lowest Net revenue distributed Highest Lowest Net revenue accumulated C Income Units C Accumulation Units Calendar year Highest Lowest Net revenue distributed Highest Lowest Net revenue accumulated Prices to 31 July and net revenue to 30 September Note: Past performance is not a reliable indicator of future results. Investors are reminded that the of units and the revenue derived from them is not guaranteed and may go down as well as up.

8 Distributions for the year ended 31 July 2014 Unit Class 31 January 2014 (pence ) Period Ended 31 July 2014 (pence ) A Income B Income N/A C Income N/A A Accumulation B Accumulation N/A C Accumulation N/A Note: Past performance is not a reliable indicator of future results. Investors are reminded that the of units and the revenue derived from them is not guaranteed and may go down as well as up.

9 Net Asset Values A Income units A Accumulation Units Date Total units in issue ( ) Total units in issue ( ) 31 Jul ,658, ,288,688 7,869, ,383, Jul ,551, ,179,799 8,187, ,318, Jul ,545, ,202,368 5,850, ,060,497 B Income units B Accumulation Units Date Total units in issue ( ) Total units in issue ( ) 31 Jul , , ,585 C Income units C Accumulation Units Date Total units in issue ( ) Total units in issue ( ) 31 Jul ,083, ,076,438 2,261, ,260,958 Note: Past performance is not a reliable indicator of future results. Investors are reminded that the of units and the revenue derived from them is not guaranteed and may go down as well as up.

10 RISK PROFILE Please remember that both the of units and the revenue derived from them may go down as well as up and that you may not get back the amount originally invested. Furthermore, changes in interest rates and foreign currency exchange rates may cause the value of your investment to increase or diminish. Capital appreciation in the early years will be adversely affected by the impact of initial charges which by their nature are not levied uniformly throughout the life of the investment. You should, therefore, regard your investment as medium to long term. Past performance is not a reliable indicator of future results.

11 OTHER INFORMATION Authorised Fund Manager (to 1 February 2014) Capita Financial Managers Limited Ibex House Minories London EC3N 1DX Authorised and regulated by the Financial Conduct Authority. Authorised Fund Manager (from 1 February 2014) T. Bailey Fund Managers Limited 64 St. James s Street Nottingham NG1 6FJ Tel: Fax: Website: Authorised and regulated by the Financial Conduct Authority. Directors of the Authorised Fund Manager Mr Q F Baer Mr N J Forman Hardy Mr M Hughes Mr P A Letley Investment Manager Walker Crips Stockbrokers Limited Finsbury Tower Bunhill Row London EC1Y 8LZ Authorised and regulated by the Financial Conduct Authority. Trustee (to 1 February 2014) BNY Mellon Trust & Depositary (UK) Limited The Bank of New York Mellon Centre 160 Queen Victoria Street London EC4V 4LA Authorised and regulated by the Financial Conduct Authority and by the Prudential Regulation Authority Trustee (from 1 February 2014) National Westminster Bank Plc 135 Bishopsgate London EC2M 3UR Authorised and regulated by the Financial Conduct Authority and by the Prudential Regulation Authority. Registrar and Unit Dealing T. Bailey Asset Management Limited 64 St. James s Street Nottingham NG1 6FJ Tel: Fax: Dealing Line: Authorised and regulated by the Financial Conduct Authority. Auditors (from 1 February 2014) Deloitte LLP 4 Brindleyplace Birmingham B1 2HZ Registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. Further information regarding the activities and performance of the Fund for this period is available on request from the Manager as are copies of the Report and Financial Statements.

12 Issued by T. Bailey Fund Managers Limited ( TBFM ). TBFM is a Regulated Collective Investment Scheme Manager and is authorised and regulated by the Financial Conduct Authority. Registered in England No: