Issue link: https://maltatoday.uberflip.com/i/1477850
3 NEWS 1.9.2022 FROM PAGE 1 e sub-fund invests primarily in Malta government bonds and corpo- rate bonds listed on the Malta Stock Exchange, predominantly in euro and which may be at a fixed or floating rate, rated or unrated. During the period from 31 December 2021 to 30 June 2022, the share price of the APS Income Fund Accumula- tor Shares decreased by 7.09% from €189.7413 to €176.2839. e share price of the APS Income Fund Distributor Shares decreased by 8.13% from €125.1633 to €114.9902. e share class distributed a dividend of €1.39485 per share during the six- month period ending 30 June 2022. In the primary market, the sub-fund was active in Malta government stocks as well as in the debut equity offering by APS Bank plc. Meanwhile, the In- vestment Manager reduced exposure to international corporate bonds due to its less favourable outlook on credit spreads. At the same time, tactical du- ration plays were implemented via pur- chases and sales of high-quality bonds issued by Eurozone member states. At the end of 30 June 2022, the APS Income Fund's asset allocation was made up as follows: • Local corporate bonds – 41.18% • Local equities – 24.48% • Local government bonds – 22.85% • International corporate bonds – 6.07% • International government bonds – 0.38% • Term deposits – 1.73% • Cash and foreign exchange for- ward contracts – 3.31% APS Regular Income Ethical Fund e Net Asset Value of the APS Regu- lar Income Ethical Fund decreased from €43.31 million to €35.42 million during the six-month period under review. e sub-fund invests primarily in in- ternational government and corporate bonds, and in direct equities. In the first six months of 2022, the share price of the APS Regular Income Ethical Fund Class A Shares decreased by 13.70% from €1.5665 to €1.3519. e share price of the APS Regular Income Ethical Fund Class B Shares decreased by 14.93% from €1.2149 to €1.0335. e Share Class distributed a dividend of €0.01633 per share. e share price of the APS Regular Income Ethical Fund Class C Shares decreased by 13.73% from €1.5589 to €1.3448, while the price of the APS Reg- ular Income Ethical Fund Class D Shares decreased by 14.94% from €1.2112 to €1.0302. e Share Class distributed a dividend of €0.01606 per share. During the period under review, the investment manager reduced its equi- ty exposure both direct and via collec- tive investment schemes, crystalised gains on selected credit positions and reinvested the proceeds into more at- tractively priced bonds. ey reduced exposure to Japanese and Australian government bonds and added exposure to New Zealand and Greek government bonds. As a result of Russia's invasion of Ukraine, and weakness in the price of bonds issued by European peripheral governments, the investment manager liquidated the position in Italian Gov- ernment Bonds. e challenging eco- nomic outlook led to a more conserva- tive approach as exposure to corporate bonds was trimmed and cash balances were increased. At the end of June 2022, the sub-fund's asset allocation was made up as follows: • Corporate bonds – 31.47% • Government and supranational bonds – 32.82% • Equities– 27.41% • Cash – 8.29% APS Diversified Bond Fund e net asset value of the APS Diversi- fied Bond Fund decreased from €52.25 million to €44.63 million. e share price of the Class A Shares decreased by 13.75% from €1.1185 to €0.9647, that of Class B Shares decreased by 15.05% from €0.9894 to €0.8405. e share class distributed a dividend of €0.01402 per share during the six-month period ending 30 June 2022. In the first six months of 2022, the price of the APS Diversified Bond Fund Class C Shares decreased by 13.74% from €1.0930 to €0.9428, Class D Shares decreased by 15.06% from €0.9893 to €0.8403, and Class G Shares decreased by 14.91% from £0.9980 to £0.8492. At the beginning of the year, the in- vestment manager initiated exposure to Chinese sovereign and corporate bonds, based on the divergent monetary policy between China and other major econ- omies. Soon after, war broke out in Ukraine and the investment manager sought to protect the sub-fund's capital by increasing portfolio duration, selling credit that was deemed to be too expen- sive, reducing exposure to Chinese cor- porate bonds, and shedding exposure to the Hungarian Forint. At the end of June this year, the sub- fund's asset allocation was made up as follows: • Government and supranational bonds – 47.37% • Corporate bonds – 41.84% • Exchange traded funds – 2.39% • Cash and foreign exchange for- ward contracts – 8.40% APS Global Equity Fund e net asset value of the APS Glob- al Equity Fund decreased from €11.59 million to €10.63 million during the pe- riod under review. e investment seeks to achieve long- term capital appreciation through in- vestment, primarily, in a diversified portfolio of equity securities. It also in- vests in other types of securities such as preferred stock, rights, warrants, con- tingent convertible bonds and securities convertible into common equity shares. During the period from 31 December 2021 to 30 June 2022, the share price of the Accumulator Shares decreased by 16.47% from €1.2036 to €1.0054, while the share price of the Distributor Shares decreased by 17.67% from €1.1997 to €0.9877. e share class distributed a dividend of €0.01613 during the period ending 30 June 2022. e investment manager continued to increase exposure to travel related stocks as global mobility indicators improved following a pivot on stance towards the Covid-19 pandemic. Following the inva- sion of Ukraine, exposure to Taiwanese equities and Nordic exposures on in- creased geopolitical risk was reduced. At the end June, the Sub-Fund's asset allocation was made up as follows: • Equity – 90.00% • Cash – 10.00% Turbulent six months In its interim report APS Funds SI- CAV plc describes the first half of 2022 as one of the most turbulent six months global markets have ever seen. Nearly all asset classes suffered sig- nificant losses across geographies with developed market equities experiencing the worst half in over 50 years and the US 10-year Treasury bond fairing the worst since 1788, according to Deutsche Bank estimates. 13 trillion US dollars were wiped off the value of global stocks, the dollar rose by 9% against a basket of the main world currencies and commodities had the strongest rally since World War I. e ongoing Covid-19 pandemic was overshadowed by central banks tighten- ing monetary policy in response to re- cord levels of inflation. e US Federal Reserve is set for the fastest course of interest rate rises since 1994 and the Eu- ropean Central Bank has raised interest rates for the first time in a decade. Markets were also impacted by in- creasing concerns around growth and the rising risks of recession as inflation erodes discretionary income and accu- mulated savings. And Russia's invasion of Ukraine which began in February 2022, increased geo- political uncertainty, market volatility and added to inflationary concerns. e war immediately dampened the economic recovery from the Covid pan- demic and cemented the global econo- my on a course of lower growth and higher inflation. It also heightened the risk of an ener- gy crisis in Europe which could have far reaching political and economic conse- quences. e European Union, the United States and other allied countries were quick to respond to Russian aggression by imposing stringent sanctions on Russia and Belarus. In terms of market performance, the first half of 2022 saw traditional cor- relations between asset classes break down with both safe-haven Govern- ment bonds and risky assets registering losses. e US 10-year yield rose from 1.51% at the end of 2021 to 3.01% at the end of June 2022, after peaking at 3.49% on 14 June 2022. Meanwhile, yields on 10-year bench- mark government debt issued by Ger- many and the UK, rose to 1.33% and 2.23% respectively. e yield on Japa- nese 10-year debt increased to 0.23%. H1 2022 among 'the most turbulent six months global markets have ever seen' APS Funds SICAV p.l.c. 2022 Interim Report and Unaudited Financial Statements 8 Investment Manager's Report (Continued) Figure 3 Source: Bloomberg Generic 10-Year Yields as at the end of Country 31/12/2021 30/06/2022 Change Germany -0.18% 1.33% 1.52% Japan 0.07% 0.23% 0.16% UK 0.97% 2.23% 1.26% US 1.51% 3.01% 1.50% Table 1 Source: Bloomberg Table 2 below shows that in equity markets, the MSCI All World Index fell by 21.2% in terms of price return. The S&P declined 20.58% moving into bear market territory and the growth stock heavy Nasdaq composite index shed 29.51%. The Eurostoxx 50 index slightly outperformed the US but still ended the period down 19.62%. The FTSE 100 outperformed most indices shedding just 2.92%. The performance of bond markets was equally dismal with Euro High Yield Corporate Bonds falling by 14.44%, US High Yield Corporate Bonds falling by 14.19% and Bloomberg Global Aggregate Treasuries Total Return Index Euro Hedged declining by 8.84%. Index 31/12/2021 30/06/2022 Change Dow Jones Industrial Average 36,338.30 30,775.43 -15.31% S&P 500 Index 4,766.18 3,785.38 -20.58% NASDAQ Composite 15,644.97 11,028.74 -29.51% EURO STOXX 50 Index 4,298.41 3,454.86 -19.62% FTSE 100 Index 7,384.54 7,169.28 -2.92% MSCI World SRI Net Return Index (€) 4,494.90 3,738.73 -16.82% MSCI All World Index 3231.73 2546.19 -21.21% Table 2 Source: Bloomberg On the foreign exchange front, the value of the euro weakened by 8.5% against the dollar, driven primarily by the more hawkish US Federal Reserve when compared to the ECB. By the end of the first half of 2022, the euro also depreciated by 3.07% against the Australian dollar. The euro strengthened against the pound sterling and the Japanese yen. 0.00 1.00 2.00 3.00 4.00 5.00 6.00 The US 10-Year Treasury Yield The US 10-Year Treasury Yield