GLOBAL GROWTH UNIT TRUST

Transcription

1 GLOBAL GROWTH UNIT TRUST FOR THE PERIOD ENDED 31 JULY 2018

2 Manager St. James's Place Unit Trust Group Limited PO Box 9034, Chelmsford, CM99 2XA United Kingdom Freephone: (Authorised and regulated by the Financial Conduct Authority) Directors of the Manager A. M. Croft I. S. Gascoigne C. G. Gentle D. J. Lamb On 1 January 2018 C. G. Gentle joined and D. C. Bellamy retired from the board of St. James's Place Unit Trust Group Limited. Investment Adviser Sands Capital Management, LLC* 1000 Wilson Blvd, Suite 3000 Arlington, VA United States of America Magellan Asset Management Limited** MLC Centre, Level 36, 19 Martin Place Sydney, NSW 2000 Australia EdgePoint Investment Group Inc*** Select Equity Group, L.P.* 150 Bloor Street West 380 Lafayette Street Suite 500 New York Toronto NY Ontario, M5S 2X9 United States of America Canada *(Authorised and regulated by the Securities and Exchange Commission) **(Authorised and regulated by the Australian Securities and Investment Commission) ***(Authorised and regulated by the Ontario Securities Commission) Trustee National Westminster Bank Plc 250 Bishopsgate London, EC2M 4AA United Kingdom (Authorised and regulated by the Financial Conduct Authority) Registrar DST Financial Services Europe Limited DST House St. Nicholas Lane Basildon, SS15 5FS United Kingdom (Authorised and regulated by the Financial Conduct Authority) Independent Auditors PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh, EH3 8EX United Kingdom 1

3 (continued) Prospectus and Manager's Reports Copies of the up to date Prospectus (Scheme Particulars) and latest Manager's Report and Financial Statements for the range of St. James's Place Unit Trusts can be requested from a member of the St. James's Place Partnership or, at any time during normal business hours, from the Administration Centre at PO Box 9034, Chelmsford CM99 2XA. Freephone:

4 Report of the Manager The Report of the Manager consists of The Trust, Investment Objectives & Policy, The Trust's Performance, Risk and Reward Profile, Investment Adviser's Comments and Portfolio Statement. The Trust is an authorised Unit Trust scheme under section 243 of the Financial Services and Markets Act (2000) and is constituted by a Trust Deed dated 13 October The Unit Trust is subject to the rules of the Financial Conduct Authority's Collective Investment Scheme Sourcebook and is classified as a Non-UCITS retail scheme. Investment Objectives & Policy The investment objective of the Scheme is to achieve capital growth over the medium to long term. The Scheme will aim to achieve this objective by investing predominantly in global equities via collective investment schemes managed by the Manager. The Scheme is permitted to invest directly into global equities and up to 100% in other collective investment schemes (which may include exchange traded funds). It is anticipated that such schemes will be established in England and Wales as FCA authorised funds. The Scheme is also permitted to invest in other types of transferable securities, money market instruments, and deposits. The Scheme is permitted to use derivatives and forward transactions for the purposes of efficient portfolio management (including hedging). The Trust's Performance The performance of the Trust since its launch in November 2017 is shown below. L Income units (offer to offer)* L Accumulation units (offer to offer)* H Accumulation units (offer to offer)* Z Accumulation units (offer to offer)* Source: Lipper for Fund returns 06/11/17 to 31/07/18 % change * Class L Income, L Accumulation, H Accumulation and Z Accumulation units were made available on 6 November 2017 and the performance shown is from that date. REMEMBER THAT THE PRICE OF UNITS AND REVENUE FROM THEM MAY GO DOWN AS WELL AS UP. PLEASE BE AWARE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. Risk and Reward Profile The synthetic risk and reward indicator for the, as disclosed in its most recent Non-UCITS Retail Scheme Key Investor Information Document (NURS- KIID), is a 5. It was calculated using indicative performance data for the type of investments held, as the Scheme itself was only launched on 6 November

5 Report of the Manager (continued) Investment Adviser's Comments The St. James s Place Global Growth Unit Trust is structured as a multi-manager fund of funds, where each Investment Adviser invests their segment of the fund into units in underlying St. James s Place unit trusts, of which they are the sole Investment Adviser: Investment Adviser Sands Capital Management LLC EdgePoint Investment Group Inc Select Equity Group L.P. Magellan Asset Management Limited Underlying Unit Trust St. James s Place Equity A Unit Trust St. James s Place Equity B Unit Trust St. James s Place Equity C Unit Trust St. James s Place International Equity Unit Trust Each of the following Investment Adviser s Comments relate to the holdings of those underlying unit trusts. When the fund launched, the general market was in the midst of an unprecedented lull in volatility. Even though bouts of volatility occurred soon after, they weren t widespread or longstanding. While we re waiting for the market to change, we aren t doing so idly, and we continue to research potential future holdings in anticipation of a return to more volatility. An example of a misunderstood but attractively-priced company that suffered despite a lack of volatility is Affiliated Managers Group. It buys equity stakes in asset managers and uses in-house expertise to help guide future growth. The rise in passive management, general market valuation fears and the departure of its CEO (for health reasons) have weighed on the stock price recently. Despite these issues, Affiliated Managers still has a diversified business, 40% of which is alternative platforms such as private equity and real estate. It s never been valued lower, and with nine times free cash flow, it still returns an 11% yield without any growth. We spoke with management and have confidence that, despite the CEO change, their vision of the company in five years is unchanged, and that they can continue on the path. Consumer staples and health care were the strongest sectors. Top performer Shiseido came from the former sector, while the third and fourth-biggest contributors, Swedish Orphan Biovitrum and Bioverativ, belonged to the latter. Our Shiseido thesis focused on the changes made by management such as reinvestments in advertising and R&D to capitalize on the strength of their core offerings, specifically luxury brands. We sold Bioverativ holdings after an acquisition by Sanofi at a 64% premium and Microsemi Corp. after an acquisition announcement. The only holding belonging to the weakest sector, energy, was PrairieSky Royalty. Natural gas price drops hurt PrairieSky, but it deployed its free cash to create new royalties and buy land at attractive valuations. Key purchases included paint manufacturer Sherwin-Williams, Fairfax Financial Holdings and global high-end restaurant and industrial food processing equipment manufacturer Middleby. In addition to the acquisitions of Bioverativ and Microsemi, we sold Live Nation Entertainment, Aena, Anthem, Deutsche Wohnen and Brenntag after our theses on these companies played out. Threats of trade wars can have significant short-term effects on global portfolios, but there is great potential for rewards for those with a willingness to wait. Making macro level predictions isn t our biggest strength. Instead, we rely on our ability to analyse businesses to help us act decisively when price disjunctions relative to their value occur, whether in new or existing holdings. EdgePoint Investment Group Inc 14 August

6 Report of the Manager (continued) Global stocks rose over the six months after companies posted higher-than-expected earnings, the US economy expanded briskly, the Federal Reserve tightened monetary policy only as much as had been expected, Germany and Italy formed workable coalitions, and Japan promised to keep up monetary stimulus. Gains were capped when the US imposed import restrictions that could lead to trade wars with the EU and China, and concerns mounted that US inflation might accelerate. The portfolio is running a relatively high allocation to cash because macroeconomic risks are elevated and recorded a positive return for the period. The stocks that performed best included the investments in Apple and HCA Healthcare. Apple rose on the strong growth in its services division. HCA Healthcare rose on increasing patient numbers and a rise in the percentage of more profitable treatments. Stocks that lagged included the investments in Kraft Heinz and Wells Fargo. Kraft Heinz fell as investors discounted the perceived cost of the company undertaking a major acquisition, and as revenue growth slowed. Wells Fargo slid after the Federal Reserve took the unusual step of banning the bank from expanding its assets until the lender can show it has resolved compliance and other issues. Over the period, we exited from Sanofi and Tesco on relative valuation grounds and established positions in SAP and Reckitt Benckiser. Global stocks might be around record highs but risks abound. The main one is interest rate policy. We see a fifty-fifty chance of a disruptive rise in US interest rates if the Federal Reserve sees the need to respond to inflationary pressures. Another concern is trade tensions between the US and China, which could delay investment and hiring decisions or result in permanent trade barriers, outcomes that would slow economic growth. Magellan Asset Management Limited 14 August 2018 Global equity markets (as measured by the MSCI All Country World Index) traded higher during the period, despite a number of volatility-inducing factors, including diverging regional growth prospects, trade policy uncertainty, fluctuating international relations, and increases in each of the US Dollar, 10-Year Treasury yield, and benchmark oil prices. Notably, a number of these factors weighed on some of the more fragile emerging markets, which saw sharp declines in their equity markets and currencies. The impact was particularly severe in Argentina, Brazil, and Turkey. The US was a bright spot, posting broad-based sales and earnings growth. Additionally, the US extended its economic expansion, and the unemployment rate fell to its lowest since This landscape especially relative to the dampening prospects elsewhere in the world resulted in strong stock returns, especially for faster-growing sectors. The consumer discretionary and financials sectors were the top contributors to relative investment results, while energy was the sole detractor. From a regional perspective, the US/Canada and Emerging Asia were the top relative contributors, while the Middle East & Africa region was a modest detractor. On a relative basis, the top five contributors to investment results for the period were Amazon, Netflix, Illumina, Nike, and Visa. The top relative detractors were Incyte, Regeneron Pharmaceuticals, Rolls-Royce, Facebook, and Keyence. Continued economic expansion and earnings growth benefited many of our consumer discretionary businesses during the period. Not confined to any one region, contributing businesses were from the US (Amazon, Netflix, Nike), Japan (Fast Retailing), and the UK (Zalando). 5

7 Report of the Manager (continued) The strategy has maintained a zero-percent weighting to energy businesses since the fourth quarter of 2015, which detracted from results during the period, as energy stocks rose along with recovering oil prices and earnings. While we are not averse to owning energy businesses, today we see a large and compelling investable universe of companies benefiting from secular growth drivers and without exposure to such significant and inherent exogenous risks such as oil price volatility. During the period, we purchased Adyen, Align Technology, Atlassian, and Keyence. We sold Chipotle Mexican Grill and Rolls-Royce. We don t attempt to predict the leading or lagging sectors and countries on a quarterly basis. Rather, we continue to believe that investing in leading franchises capable of generating aboveaverage earnings growth across economic cycles is the most prudent way to add value over time. Sands Capital Management LLC 14 August 2018 The beginning of the first half of 2018 put an end to the market tranquillity of 2017, with a few bouts of volatility but with broader volatility still at historically low levels. Given the ongoing cyclical and structural monetary normalization occurring after many years of significant policymaker involvement in the setting of asset prices, we should expect and be prepared for more volatility for the foreseeable future. In addition, US protectionism represents a growing threat to economies and capital markets the world over. Global economic prospects are diverging and becoming more uncertain, threatening the synchronized growth that powered markets higher and with so little volatility in Global equities (in sterling terms) posted gains during the period from the SJP Global Growth Fund s inception in November 2017 through July Moreover, the fund outperformed the wider market. Our top 10 contributors included eight US and two non-us companies, in a period in which virtually all of the return in the MSCI All Country World Index (sterling-based) was contributed by US equities. Our top US contributors included Thermo Fisher, the largest global distributor and manufacturer of laboratory equipment and supplies, and Alphabet, the largest provider of digital advertising services. Our top non-us contributors included AIA Group, a provider of life insurance in emerging Asia, and Adidas, the world s second-largest maker of athletic apparel and footwear. All four of these companies reported very strong top-line growth and robust earnings during the period. The top two detractors over the period were Grupo Televisa, the dominant broadcaster in Mexico, and Mohawk Industries, the largest global flooring manufacturer. Grupo Televisa s management launched an ambitious new investment program, which will weigh on margins just as the company should have been enjoying a rebound in profitability, and we exited our position. During the first half of 2018 through July, we took advantage of market and share price weakness to initiate new positions in Waters, Alibaba Group and Berkshire Hathaway. We exited our positions in Ecolab, Safran and Coloplast, in each case selling into valuation. Select Equity Group 14 August

8 Comparative Table as at 31 July 2018 (unaudited) Net Asset Value and Ongoing Charges Figure 31/07/18 L Income Closing net asset value ( 000) 1,089 Closing number of units 1,055,757 Closing net asset value per unit (p) Operating charges* 1.91% 31/07/18 L Accumulation Closing net asset value ( 000) 103,840 Closing number of units 100,601,852 Closing net asset value per unit (p) Operating charges* 1.92% 31/07/18 H Accumulation Closing net asset value ( 000) 10 Closing number of units 9,543 Closing net asset value per unit (p) Operating charges* 2.40% 31/07/18 Z Accumulation Closing net asset value ( 000) 243,126 Closing number of units 233,787,024 Closing net asset value per unit (p) Operating charges* 0.66% L Income, L Accumulation, H Accumulation and Z Accumulation units were made available on 6 November *Operating charges are prepared using the same methodology as the ongoing charges appearing in the NURS-KIID, based on the information in this report. Please note that the Manager estimates that the Ongoing Charges Figure for the newly launched L Income and L Accumulation units will normally be 1.82%, for H Accumulation 2.32% and for Z Accumulation 0.55%. 7

9 Portfolio Statement as at 31 July 2018 (unaudited) Security Holdings Market Value 000 % of Net Assets COLLECTIVE INVESTMENT SCHEMES 344, St. James's Place Equity A Unit Trust Z Acc 97,682, , St. James's Place Equity B Unit Trust Z Acc 99,056, , St. James's Place Equity C Unit Trust Z Acc 33,274,229 34, St. James's Place International Equity Unit Trust L Acc 11,888, , Investment Assets 344, Total other assets (net) 3, Net assets 348, All investments are approved securities as defined in the Collective Investment Schemes sourcebook unless otherwise stated. All investments are related parties. 8

10 Material Portfolio Changes Cost Purchases 000 St. James's Place International Equity Unit Trust L Acc 96,785 St. James's Place Equity A Unit Trust Z Acc 96,784 St. James's Place Equity B Unit Trust Z Acc 96,784 St. James's Place Equity C Unit Trust Z Acc 32,262 This investment is a related party. 9

11 Statement of Total Return for the period 06 November 2017 to 31 July 2018 (unaudited) Income Net capital gains Revenue Expenses Interest payable and similar charges Net expenses before taxation Taxation Net expenses after taxation Total return before equalisation Equalisation Change in net assets attributable to unitholders from investment activities 06/11/17 to 31/07/ (453) - (67) - 21,842 (67) 21,775-21,775 Statement of Change in Net Assets Attributable to Unitholders for the period 06 November 2017 to 31 July 2018 (unaudited) Opening net assets attributable to unitholders Movement due to creation and cancellation of units: Amounts receivable on creation of units Amounts payable on cancellation of units Change in net assets attributable to unitholders from investment activities (see above) 06/11/17 to 31/07/ ,465 (175) 326,290 21,775 Closing net assets attributable to unitholders No comparatives are shown as the fund was launched on 6 November ,065 10

12 Balance Sheet as at 31 July 2018 (unaudited) Assets Investments Current assets Debtors Cash and bank balances Total assets Liabilities Creditors Other creditors Total liabilities Net assets attributable to unitholders No comparatives are shown as the fund was launched on 6 November /07/ ,456 6,302 2, ,775 (4,710) (4,710) 348,065 Accounting and Distribution policies for the period 06 November 2017 to 31 July 2018 (unaudited) Basis of accounting The Financial Statements have been prepared under the historical cost basis, as modified by the revaluation of investments, in compliance with the Financial Conduct Authority's Collective Investment Schemes Sourcebook. They have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland FRS 102) and in accordance with the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the Investment Management Association May 2014 (IMA SORP 2014). The financial statements are prepared on the going concern basis. Directors of the Managers' Certificate This report is certified in accordance with the requirements of the rules in the Financial Conduct Authority's Collective Investment Schemes Sourcebook. C. G. Gentle D. J. Lamb London 20 September

13 General Information Unit Dealings Dealings on the Trust take place on a daily basis. Purchase or sale instructions can be made by telephone or in writing to St. James's Place Unit Trust Group Limited, PO Box 9034, Chelmsford, CM99 2XA, United Kingdom, freephone: The Manager adopts a policy of forward pricing, i.e. the order will be transacted on the dealing day following receipt of the client's instructions, or if received before noon, on that dealing day. In the case of telephone purchases of units from the Manager, settlement must be by return of post after receipt of the contract note. In the case of telephone redemptions, the proceeds will not become payable until the receipt at the Administration Centre of a written request. A contract note confirming the subscription or redemption price and the number of units involved will be forwarded, together with a cancellation notice, where appropriate, on the next business day. The most recent issue and redemption prices for Class L and Class H units will be published on the Manager's website: Prices for all units are available by calling the Administration Centre on Minimum Investment Class H and Class L - The minimum lump sum investment is 1,500, thereafter the minimum additional investment is 1,000. The minimum monthly investment is 150 and the minimum monthly increment is 50. The minimum annual investment is 1,500 and the minimum annual increment is 500. Class Z - The minimum lump sum investment is 10,000,000 thereafter the minimum additional investment is 10,000. Management Charges The Trust Deed permits the following management charges which are receivable by the Manager: (a) A Preliminary Charge of 5 per cent which is included in the offer price of the Units. For Class Z units the Preliminary Charge is 0 per cent. (b) An Annual Management Charge at a rate of 1.28 per cent for Class L Income and Accumulation Units; 1.78 per cent for Class H Accumulation Units; 0.01 per cent for Class Z Accumulation Units of the value of the Trust. Income Distributions Income distributions are made annually on or before 30 April. Accumulation Distributions Revenue due to accumulation unitholders is reflected in the price of their units. Tax Certificates Income unitholders that receive income distributions by direct credit and accumulation unitholders (where the distribution income is reinvested) receive an annual consolidated tax voucher in May with all the relevant payment and tax information required to complete a tax return. Capital Gains Tax The Trust is not liable to tax on capital gains and any individual holding units will not be liable to capital gains tax unless the total chargeable gains for the tax year 2018/2019 exceed 11,700. To calculate capital gains on accumulation units, the total amount of reinvested net revenue (shown on the annual tax credit vouchers) should be added to the base cost of the units purchased. Unitholders should consult their professional advisers for any advice regarding their tax position. 12

14 St. James s Place Unit Trust Group Ltd is authorised and regulated by the Financial Conduct Authority. St. James s Place Unit Trust Group Ltd Registered Office: St. James s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number Perivan Financial Print Global Growth (09/18)