IndexName ReportingCurre ReportingCurrencyCode MSCI All Countr Australian Dollar AUD MARSICO Market Review During the month of January, global financial markets sent a powerful growth message. Stocks soared, interest rates surged and commodity prices leapt. The expectation of a major reduction in U.S. corporate tax liabilities gave a particular boost to U.S. equity markets. Sweeping evidence of building global economic momentum was a driver for rising interest rates and commodity prices. Despite the fact that U.S. equities notched a significant rise compared to other asset classes, the U.S. dollar lost considerable ground. For the month, the S&P 500 Index advanced +2.1% and the NASDAQ Composite Index rose by +3.7%. Equities in Europe also did well with the MSCI Euro Index rising +3.5%. The Nikkei 225 Stock Average Index was up +1.2%, and emerging market shares, in general, were also very strong with a monthly gain of +4.6% for the MSCI Emerging Markets Index. U.S. bond yields also soared during the month, as investors tried to square climbing growth expectations with the low U.S. unemployment rate. The yield on the U.S. 10-year Treasury Note climbed by +30 basis points, eclipsing the +25 basis point rise registered by the U.S. 2-year note. The 30-year German bund yield also jumped by nearly +30 basis points, though at a level of 70 basis points, the bund s yield remains remarkably low by historical standards. Short term rates in the U.S. continued their upward march in 2017, as the U.S. central bank extended its tightening regime. The Fed has expressed intentions to raise the federal funds rate three times in 2018, if followed through, this would lift the overnight rate to around 2.25%. Widespread evidence that this may occur played a central role in the January rise for rates across the maturity spectrum. One oddity that persisted in January was the decoupling between U.S. interest rates, which rose relative to those of trading partners, and the poor performance of the U.S. dollar, which fell by over -3% versus both the euro and a broad basket of currencies. Evidence of strong global growth and a weak dollar was a potent elixir for the dollar prices of raw industrial commodities. The CRB BLS Raw Industrials Index of certain commodity prices rose by +2.3% during the period, and the dollar price of West Texas intermediate crude climbed by $4.50/bbl. In the U.S., employment gains were impressive in January, combined with news of firming U.S. wages, which rose +2.9% for the month year-on-year. Given the leap in oil prices, the weak dollar and the climb in wages, Fed officials, at long last, seem justified in expressing sentiment that the risk of deflation appears mostly behind us. Further gains in stocks seem likely, catalyzed by the recent sharp reduction in corporate tax rates, but may not follow the same smooth trajectory they did in January. As the markets digest a strong 2017 and a robust start to 2018, the leap in interest rates that occurred in the first few days of February, and the pullback that followed for stocks, suggest that markets may remain relatively strong while encountering more volatility as rates and inflation rise. In terms of the underlying dynamics of equity market performance, growth outperformed value equities in January, as the MSCI ACWI Growth Index and the MSCI ACWI Value Index posted returns of 2.85% and 1.22%, respectively. Page 1 of 6
Performance (Australian Dollars) Returns Month Quarter FYTD 1 Year 2 Years p.a. 3 Years p.a. Since Inception p.a. (10-Dec-2015) Fund Return (Before fees)^ 7.35% 5.71% 22.06% 40.88% 18.93% - 15.33% Benchmark Return* 2.04% 3.61% 11.29% 19.51% 14.60% - 11.97% Active Return (Before fees) 5.31% 2.10% 10.77% 21.37% 4.33% - 3.37% Fund Return (After fees)^ 7.22% 5.34% 21.07% 38.94% 17.29% - 13.74% Benchmark Return* 2.04% 3.61% 11.29% 19.51% 14.60% - 11.97% Active Return (After fees) 5.18% 1.73% 9.78% 19.43% 2.69% - 1.78% ^ Performance is for the, also referred to as Class A units, and is based on month end unit prices before tax in Australian Dollars. Gross performance is stated excluding all fees, costs and taxation. Net performance is calculated after management fees and operating costs, excluding taxation. This is historical performance data. It should be noted the value of an investment can rise and fall and past performance is not indicative of future performance. * Benchmark refers to the MSCI All Country World Index Net AUD. All data is the property of MSCI. No use or distribution is permitted without written consent. Data provided as is without any warranties. MSCI assumes no liability for or in connection with the data. Performance Commentary Primary Contributors: Stock selection and an overweight posture in the Information Technology sector were the largest contributors during the period. The Fund also benefitted from stock selection in the Consumer Discretionary, Industrials and Health Care sectors. Primary Detractors: Stock selection and an underweight allocation to the Financials sector were the largest detractors to performance during the period. In addition, stock selection in the Energy sector detracted from performance. Page 2 of 6
Top 5 Stock Contributors to Fund Performance (Australian Dollars) Stock Name Sector Fund Weight (Ave.) Monthly Return Contribution Netflix Inc. Retailing 3.18% 36.01% 1.01% Alibaba Group Holding Limited Software & Services 5.49% 14.46% 0.76% Tencent Holdings Ltd Software & Services 6.47% 10.24% 0.66% Amazon.com Inc Retailing 3.56% 19.84% 0.66% NVIDIA Corporation Semiconductors & Semiconductor Equ 3.05% 22.70% 0.64% Bottom 5 Stock Contributors to Fund Performance (Australian Dollars) Stock Name Sector Fund Weight (Ave.) Monthly Return Contribution Schlumberger Ltd Energy 0.77% -8.43% -0.24% Snap Inc. Software & Services 0.93% -10.61% -0.10% Sumitomo Mitsui Financial Group Inc Banks 0.88% -5.18% -0.10% Constellation Brands Inc Food Beverage & Tobacco 1.03% -7.25% -0.08% SAP SE Inhaber-Aktien o.n. Software & Services 1.89% -2.34% -0.06% Contribution to Active Performance by Sector (Australian Dollars) Sector Fund Weight (Ave.) Benchmark Weight (Ave.) Allocation Stock Sel. Currency Total Energy 0.77% 6.43% 0.06% -0.12% -0.04% -0.11% Materials 2.41% 5.54% 0.05% -0.01% -0.11% -0.07% Industrials 5.98% 10.91% 0.02% 0.50% -0.02% 0.49% Consumer Discretionary 20.05% 12.11% 0.16% 0.96% 0.12% 1.23% Consumer Staples 2.24% 8.49% 0.26% -0.01% -0.05% 0.20% Health Care 8.48% 10.71% 0.05% 0.38% -0.03% 0.40% Financials 2.39% 18.84% -0.16% -0.16% -0.07% -0.39% Information Technology 54.88% 18.35% 1.08% 2.07% -0.08% 3.07% Telecommunication Services 0.00% 2.91% 0.14% 0.00% -0.03% 0.12% Utilities 0.00% 2.76% 0.19% 0.00% -0.01% 0.18% Real Estate 0.57% 2.95% 0.16% 0.06% -0.01% 0.20% Cash 2.23% 0.00% 0.05% 0.00% -0.03% 0.02% Total 100.00% 100.00% 2.04% 3.66% -0.36% 5.34% Please note variances between the Fund Performance set out on Page 2 of this report (based on month end unit prices) and the performance attribution set out above (based on the underlying asset portfolio) may arise from time to time. Page 3 of 6
Top 5 Stock Holdings Stock Name Fund Weight Monthly Return Tencent Holdings Ltd 6.10% 10.24% Alibaba Group Holding Limited 5.11% 14.46% UbiSoft Entertainment SA 4.01% 7.71% Salesforce Com Inc 3.80% 7.63% Wirecard AG Inhaber-Aktien o.n. 3.77% 7.99% Allocation by Country Country Fund Weight Benchmark Weight United States 41.97% 52.10% China 13.10% 3.79% France 7.11% 3.55% Netherlands 6.09% 1.28% Japan 5.80% 7.81% Germany 3.77% 3.25% United Kingdom 3.17% 5.10% Republic of Ireland 2.94% 0.16% Canada 2.64% 2.99% Australia 1.80% 2.31% Cash 11.61% 0.00% Total 100.00% 82.34% Page 4 of 6
Market Outlook Over the past year, Marsico's investment outlook anticipated continued slow global GDP growth with low levels of inflation. Because Marsico forecasted that global growth would remain subdued, they believed the best earnings growth opportunities could be found in companies that are innovative and poised to show revenue growth contribution from market share gains, rather than dependence on the macroeconomic environment. Despite the Trump administration s health care policy setback, the stock market has forged ahead, bolstered by a strengthening global economy. The market consensus is that we may see two more rate hikes this year if economic data support them. Confidence is strong among both businesses and individuals, which should provide a tailwind for growth. In fact, consumer confidence, as reported by the Conference Board, jumped in March to the highest level in more than 16 years as Americans grew increasingly more optimistic about present and future conditions. Around the world, much of Europe and Asia are seeing faster growth, marking the first synchronised global expansion since the growth period prior to the financial crisis of 2008-2009. Following the U.S. Presidential election, many of the Information Technology stocks that Marsico held were indiscriminately sold by other market participants as a source of cash as the market rotated to sectors that were expected to benefit more from President Trump s pro-growth agenda. We held firm to our positioning and our patience was rewarded as the market returned to growth stocks in the Information Technology sector with strong underlying fundamentals. The passage during the period of the Trump tax plan provided a strong boost to stock prices, however Marsico don t anticipate changing their long-term portfolio positioning as a result of the outcome. Marsico continue to believe in the long term growth prospects of the companies they own. As of period-end, a significant portion of the Fund s net assets was invested in the Information Technology, Consumer Discretionary and Industrials sectors, with additional select investments in the Financials, Health Care, Materials, Real Estate, Energy and Consumer Staples sectors. Page 5 of 6
Risk Management There have been no breaches of the risk management statement during the period. Investment Team and Process There were no changes to the investment team or process during the period. Contact Details Client Services Channel Capital Pty Ltd Level 25, 1 Eagle Street, Brisbane QLD 4000 GPO Box 206, Brisbane QLD 4001 Ph: (07) 3259 7650 Email: clientservices@channelcapital.com.au This report has been prepared for institutional/wholesale investors only. The information contained in this report is provided by the Investment Manager, Marsico Capital Management, LLC ('Marsico'). Channel Investment Management Limited ( Channel ) ACN 163 234 240 AFSL 439007 is the Responsible Entity and issuer of units in the CC Marsico Global Fund ARSN 610 434 896 ( the Fund ). Neither Channel or Marsico, their officers, or employees make any representations or warranties, express or implied as to the accuracy, reliability or completeness of the information contained in this report and nothing contained in this report is or shall be relied upon as a promise or representation, whether as to the past or the future. Past performance is not a reliable indication of future performance. This information is given in summary form and does not purport to be complete. Information in this report, should not be considered advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling units in the Fund and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. Readers are cautioned not to place undue reliance on forward looking statements. Neither Channel nor Marsico have any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date of this report. For further information and before investing, please read the Information Memorandum available on request. Page 6 of 6