"Equity Fund Managent"
Balanced Fund half-yearly short report for the period 1 January 2009 to 26 June 2009 The Balanced Fund was closed on 15 May this year and its assets transferred into the Diversified Fund. You will receive the short reports for both the Balanced Fund and the Diversified Fund, covering the reporting period from 1 January 2009 to 26 June 2009. Due to a number of fund changes during the reporting period, we have changed the end date of the reporting period from 30 June to 26 June for this interim report only. Some of the terms in this document are of a technical nature. We have highlighted these in bold type and you can find definitions in the glossary near the end of this document. If anything is unclear, we recommend you speak to your financial adviser who will be able to explain further. most from a pick-up in global demand were the best fund objective performers, notably materials and information technology. The Balanced Fund aims to provide investors with Conversely, sectors that are less dependent on the above average long-term capital growth within the IMA economic cycle, such as utilities, telecommunications and Balanced Managed sector. healthcare, underperformed. At a regional level, emerging markets in Asia, Latin investment policy America and Central Europe recorded very strong gains. The Fund comprises a well-diversified global portfolio The UK stock market also posted a positive return, driven with a long-term asset allocation of equities, fixed by small- and medium-sized companies. European and interest securities and property with a bias towards Japanese equities made progress, but these gains were the UK. eroded for sterling-based investors as the British pound strengthened against many of the major currencies. Exposure to the portfolio is via collective investment Meanwhile, the US stock market recorded a loss. schemes (‘funds’), mainly being regulated collective investment schemes that are managed or operated by Government bonds fell over the period, in part due to the Authorised Corporate Director (ACD) or its concerns over the level of debt that governments have associates. Investment may also be made into funds accumulated in funding stimulus packages and providing not managed or operated by the ACD or its associates. support to the banking sector. Meanwhile, as investor These funds have specialist investment advisers which confidence improved, many investors moved out of are continuously monitored by the ACD. government bonds in favour of riskier assets. Corporate bonds also ended the period in negative territory. A rally in risk profile the final stages of the period was not enough to outweigh losses incurred at the start of the year, when the financial The Fund holds a mix of shares and fixed interest segment of the market came under intense pressure on investments from the UK and overseas. This includes concerns over bank nationalisations. On the positive side, some exposure to emerging markets, which tend to be the high yield segment of the corporate bond market less well regulated and more volatile than more performed very well, as did emerging market debt, with established stock markets, so increasing the potential both asset classes benefiting from the improvement in risk to investors. Exchange rate movements between investors’ risk appetite. sterling and other currencies may also increase or decrease the underlying value of this Fund’s holdings. The Skandia Balanced Fund was merged into the Skandia Diversified Fund on 15 May 2009. From 1 January 2009 fund mana¯er’s report until this date, the Fund performed well, recording a positive return and outperforming the IMA Balanced Global equity markets fell sharply during the first two Managed sector. Returns from most of the underlying months of 2009 before staging a strong recovery from equity funds were positive, with particularly strong gains March onwards. While concerns over the global economy seen in the emerging market and Asia Pacific equity and the health of the financial sector initially prevailed, the portfolios. Performance from the bond holdings was rally was driven by tentative signs that the economic mixed, with double-digit gains from the high yield portfolio downturn may be slowing in pace. offset by negative returns elsewhere. The following Nonetheless, the MSCI World Index ended the period in commentary relates to the different components in which negative territory. Sectors that are expected to benefit the Balanced Fund invested over the period. continued fund mana¯er’s report continued UK equities The UK equity portfolios generally performed well, with The QMA mandate nonetheless outperformed the Russell most finishing the period ahead of the UK equity market. 1000 Value Index. The Acadian mandate also fell in value. The Lazard mandate was the strongest performer, posting Finally, the Global Best Ideas Fund performed very well, a double-digit gain. The weakest performing holding was ending the period in positive territory and substantially the Skandia UK Strategic Best Ideas Fund, which fell in ahead of the IMA Active Managed sector. Returns were value over the period. The latter is able to take ‘short’ driven by excellent stock-picking from the underlying positions, which enable it to benefit from falling share managers. The Fund’s bias towards small- and medium- prices, but as the stock market rallied sharply from March sized companies also proved beneficial, as these areas of onwards, many of these positions had a negative impact the market significantly outperformed their larger on performance. counterparts. Overseas equities Fixed interest Within the overseas equity component, Schroders’ Global The BlackRock mandate, with its focus on UK Emerging Markets Fund recorded the best returns, government bonds (gilts) recorded a small loss for the generating double-digit gains. Returns from the Asia period. Following strong performance in 2008, the gilt Pacific equity portfolios were also strong, although both market struggled in early 2009 on concerns about the slightly lagged the broader Asia Pacific ex Japan equity rising indebtedness of the UK government. The Royal markets. Both Japanese equity portfolios outperformed London Corporate Bond portfolio also experienced a loss, the Japanese equity market, with returns from the Alliance hampered by its exposure to bonds issued by financial Bernstein mandate particularly strong. institutions. This segment of the market came under All three of the European equity portfolios outperformed significant pressure early in the year on concerns over the the Continental European equity market over the period. health of the banking sector, before making a partial The RCM mandate performed particularly well, recording a recovery towards the end of the period. positive return, while Argonaut and Alliance Bernstein Within the international bond holdings, the J.P.Morgan experienced small losses against a weak market High Yield Corporate Bond mandate performed very well backdrop. over the period, benefiting from investors’ increased Returns from the US portfolios were mixed. The T. Rowe appetite for riskier assets. This strong positive gain was Price mandate performed very well, recording a strong partly offset by a negative return from the Wellington positive return for the period driven by stock selection International Bond mandate. within the information technology sector. However, the The mention of any particular stock should not be QMA mandate posted a loss due to its focus on value taken as a recommendation to buy or sell stocks (ie shares of companies that appear undervalued investments. compared to their earnings or dividends for example), as these underperformed the broader equity market. fund facts The Fund offered accumulation shares only, which automatically reinvest any income to increase the capital value of your investment. Fund accounting dates Fund payment (ex-dividend dates) dates 31 December 28 February 26 June 31 August The table below shows the net accumulations in pence per share distributed for the calendar years indicated. The Balanced Fund was launched on 14 February 2003. Calendar year Pence per share 2004 Accumulation 1.0338 pence 2005 Accumulation 1.3402 pence 2006 Accumulation 1.6939 pence 2007 Accumulation 1.4789 pence 2008 Accumulation 1.7096 pence 2009 Accumulation* 1.1668 pence * to 31 August total expense ratio (TER) The Total Expense Ratio represents all operating charges and expenses as a percentage of a fund’s value. It includes the Annual Management Charge as well as all the regular administrative costs incurred by a fund. TER as at 26 June 2009 TER as at 31 December 2008 1.90% 1.89% share price performance The table below shows the highest and lowest share prices in pence per share for the calendar years indicated. Calendar year Highest price Lowest price 2004 Accumulation 66.31 pence 59.63 pence 2005 Accumulation 79.90 pence 65.86 pence 2006 Accumulation 86.69 pence 76.73 pence 2007 Accumulation 91.06 pence 82.49 pence 2008 Accumulation 87.74 pence 55.03 pence 2009 Accumulation* 68.11 pence 55.22 pence * to 26 June ** fund performance Date Net asset value Shares in issue Net asset value of Fund per share 31 December 2006 £ 341,222,287 393,374,076 86.74 pence 31 December 2007 £ 172,808,694 197,665,429 87.42 pence 31 December 2008 £ 104,214,392 161,882,317 64.38 pence 26 June 2009 – – – Percentage change to 15 May 2009 6 months 1 year 2 years 3 years 4 years 5 years 6 years Since launch* Fund performance 3.25% -14.63% -25.47% -18.18% -5.79% 6.11% 17.91% 32.70% *from 14 February 2003 Source: Financial Express. Figures are calculated on a total return and single price basis, with net income reinvested in sterling terms. Six months’ performance is from 31 December 2008 to 15 May 2009. Yearly comparatives are from previous half-yearly period end dates to 15 May. You should not view past performance as an indication of future performance. The value of investments and any income from them may fall as well as rise and you may not get back the amount you invested. Where a Fund invests in securities designated in a different currency to the Fund, the value of the Fund may rise and fall purely as a result of exchange rate fluctuations. portfolio information as at 26 June 2009 As the Balanced Fund was merged into Diversified Fund on 15 May 2009, there were no portfolio holdings or major holdings for this Fund at 26 June 2009. portfolio information as at 31 December 2008 UK Equities, 50.05% European Equities, 11.92% UK Fixed Interest, 9.76% US Equities, 7.24% Cash, 5.77% International Equities, 4.92% Far East Equities, 4.20% Japanese Equities, 4.07% International Fixed Interest, 2.07% major holdin¯s The table below shows the top ten holdings of the Fund. All holdings will be shown if there are less than ten holdings. As at 26 June 2009 % As at 31 December 2008 % – – UK Equity Fund mandated to Lazard 12.82 – – UK Securities Fund mandated to UBS 12.59 – – UK Assets Fund mandated to Origin 7.63 – – UK Focus Fund mandated to Mirabaud 7.13 – – Corporate Bond Fund mandated to Royal London 5.14 – – UK Strategic Best Ideas Fund 5.05 – – UK Best Ideas Fund 4.83 – – US Equity Fund mandated to QMA and T.Rowe Price 4.72 – – European Alpha Fund mandated to Argonaut 4.36 – – European Equity Fund mandated to Alliance Berstein 3.80 ¯lossary Asset allocation – deciding which categories of assets, and in what proportions, the investment should be spread across, to offer the most attractive potential returns. Authorised Corporate Director (ACD) – the Authorised Corporate Director provides a professional investment management service in respect of the open-ended investment companies (OEICs) and controls the assets and operation of each fund. The ACD of the Skandia Investment Management OEICs is Skandia Investment Management Limited. Collective investment schemes – are investments, such as OEICs or unit trusts, in which money from individual investors is pooled into a professionally managed fund. Fixed interest securities – a fixed term investment that pays interest at a rate that does not change with any external variable, known as the coupon. Coupons are known in advance and are almost always all for the same amount and paid at regular intervals. report and accounts authorised corporate director Copies of the annual and half-yearly Long Form Report (ACD) and Accounts are available on request, free of charge, from our Edinburgh office. To contact us please call The Balanced Fund is managed by Skandia Investment 0844 892 0996* or write to: Management Limited, which is the Authorised Corporate Director (ACD) of the Fund. Skandia Investment Management Limited Its registered address is: PO Box 23486 12 Blenheim Place Skandia Investment Management Limited Edinburgh Skandia House EH7 5YB Portland Terrace Southampton SO14 7EJ depositary Skandia Investment Management Limited is a company The independent Depositary is the Royal Bank of limited by shares, incorporated in England and Wales Scotland, whose address is: and authorised and regulated by the Financial Services Royal Bank of Scotland plc Authority. Waterhouse Square 138-142 Holborn how to contact us London EC1N 2TH If you have any questions please contact us or call your financial adviser. Our offices are open on business days The Depositary is authorised and regulated by the between the hours of 8.30am and 5.30pm. Financial Services Authority, whose address is: To contact us please call 0844 892 0996* or write to: 25 The North Colonnade Canary Wharf Skandia Investment Management Limited London PO Box 23486 E14 5HS 12 Blenheim Place Edinburgh EH7 5YB auditors If you would like general information on the funds or on The Fund’s independent auditors are KPMG Audit plc, Skandia Investment Management Limited you can visit whose registered address is: our website: KPMG Audit plc www.skandiainvestmentmanagement.com One Canada Square * Calls cost 3 pence per minute from a BT landline. Customers who London have telephone services with other providers may have different E14 5AG call charges. Calls from mobiles or internet services may be considerably higher. Financial Express and Skandia Investment Management Limited have done all they reasonably can to ensure the information contained in this short report is accurate. However, neither can accept any responsibility for decisions made by investors nor for any loss investors may suffer as a result of those decisions. www.skandiainvestmentmanagement.com Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Skandia Investment Management Limited is registered in England & Wales under number 4227837. Registered Office at Skandia House, Portland Terrace, Southampton, SO14 7EJ, United Kingdom. Authorised and regulated by the Financial Services Authority. FSA Register number 208543. VAT number 386 1301 59. When printed by Skandia this item is produced on a mixed grade material, which uses a combination of recycled wood or paper fibre from controlled sources and virgin fibre sourced from well managed, sustainable forests. SK3888/29-1565/August 2009 00000