FP Octopus Global Growth Fund Short Report for the six months ended 30 April 2016 Investment Objective and Policy The Fund aims to achieve capital growth for investors over the medium to longer term. The Fund will seek to achieve its objective through investments primarily in a range of global equities, through shares and units of Collective Investment Schemes (such as unit trusts and OEICs, both regulated and unregulated), but also through closed ended schemes. Foreign currency exposure may be hedged back into GBP-Sterling. The Fund may also invest, at the ACD s discretion, in other transferable securities, money market instruments, cash and near cash, and deposits. The portfolio will be actively managed and the Fund may hold derivatives for investment purposes as well as for efficient portfolio management purposes (including hedging). Borrowing will be permitted up to the levels stated in the Regulations. Fund Facts Risk Profile Interim/Annual Accounting End Dates 30 April 31 October Ex-dividend (xd) Dates 01 May 01 November Income Distribution/ Accumulation Dates 30 June 31 December Please refer to the Full Prospectus for details of all the risks. The Fund has exposure to credit, counterparty and usual market risks. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. You should always regard investments in the Fund as medium to long term. Charges Share Class Initial Charge Annual Management Charge as at 30/04/16 Total Expense Ratios as at 30/04/16 Total Expense Ratios as at 31/10/15 Share Class B 0.00% 0.55% 1.26% 1.30% Share Class C 0.00% 0.45% 1.16% 1.20% Share Class D 1 0.00% 0.75% 1.46% 1.50% 1 Share class D was launched 1 April 2015. Page 1
Distributions/Accumulations Distributions Distribution payable 30/06/16 Distribution paid 30/06/15 Share Class B Accumulation 0.3175 0.1120 Share Class C Accumulation 0.3796 0.1731 Share Class D Accumulation 0.2560 0.6371 Comparative Tables Net Asset Value Date Share Class B Accumulation Net Asset Value of Share Class ( ) Shares in Issue Net Asset Value per Share (p) 31/10/15 2,219,828 1,844,831 120.33 Percentage Change (%) 30/04/16 2,324,854 1,913,899 121.47 0.95 Share Class C Accumulation 31/10/15 16,022,765 13,229,610 121.11 30/04/16 15,618,938 12,768,529 122.32 1.00 Share Class D Accumulation 31/10/15 3,276 3,469 94.44 30/04/16 3,303 3,468 95.24 0.85 Major Holdings Top 10 Holdings % of Fund as at 30/04/16 Vanguard S&P 500 9.54 Artemis US Extended Alpha 5.74 JPMorgan US Equity Income 5.56 Artemis Global Income 4.85 JO Hambro Global Select 4.37 Vanguard US Opportunities 4.15 Hermes Asia ex-japan Equity 3.96 Odey Allegra International 3.55 Verrazzano Advantage European 3.45 M&G Global Dividend 3.27 Top 10 Holdings % of Fund as at 31/10/15 Vanguard S&P 500 7.06 Artemis US Extended Alpha 5.43 db x-trackers EURO STOXX 50 5.38 JPMorgan US Equity Income 5.15 ishares MSCI Japan GBP Hedged 4.97 Verrazzano Advantage European 4.86 Artemis Global Income 4.74 Odey Allegra International 4.14 JO Hambro Global Select 4.13 Vanguard US Opportunities 3.84 Page 2
Portfolio Information Breakdown by Investment type 45 40 41.15% 35 30 25 20 15 29.85% 24.79% 10 5 0 Offshore Funds [39.56%*] Exchange Traded Funds [33.60%] Collective Investment Schemes [24.07%*] 4.21% Net other assets [2.77%] Comparative figures shown above in square brackets relate to 31 October 2015. * Since the previous report classification headings have been updated by data providers. Comparative figures have been updated where appropriate. Investment Manager s Report Investment Review The FP Octopus Global Growth Fund produced a positive performance in the six months from 1 November 2015 to 30 April 2016, with a 1.33% increase during the period (Source: Lipper.01/11/15 29/04/16. returns, net income reinvested). It was a volatile six months for the portfolio. Investor uncertainty about global economic growth and the ongoing debate around the interest rate policies of the main central banks affected performance. At the beginning of the period, we maintained a balanced spread of holdings across regions. We reduced several US investments that had benefited from a recovering US economy, including ishares S&P 500 exchange-traded fund (ETF). Weaker Asian and emerging markets meant returns were disappointing from Macquarie Asia New Stars and First State Asia Pacific Leaders. Meanwhile, Longleaf Partners Global and M&G Global Dividend suffered from their exposure to the volatile Chinese economy. Page 3
Investment Manager s Report (continued) Investment Review (continued) In December, we invested in a new fund, RWC Global Emerging Markets, launched by a USbased management team with analysts in the US and Asia, by reducing L&G Pacific Index. The outperformance of Asian compared with non- Asian emerging markets in December benefited Macquarie Asia New Stars. A weak sterling, compared with the euro and yen, had a negative impact on funds which use strategies to shield investors from a strong sterling, particularly Verrazzano European Advantage and ishares MSCI Japan GBP Hedged ETF. January was disappointing for the portfolio, although a good return from Hermes Asia ex Japan that was ahead of its Asian benchmark provided a highlight. We made a small initial investment in Mirabaud Europe ex UK Small and Mid Cap, as we believe the manager has an opportunity to deliver good returns from investing in smaller companies. We saw a rebound in global equity markets from mid-february lows as a result of Chinese economic stimulus measures and the US Federal Reserve s (Fed) decision not to raise interest rates, which boosted the performance of commodities, as well as Asian and other emerging stock markets. This helped RWC Global Emerging Markets and Hermes Asia Pacific ex Japan, in particular. Funds with more cautious investment strategies suffered somewhat as markets picked up, notably Odey Allegra International and Artemis US Extended Alpha. We reduced the portfolio s European exposure, notably with Verrazzano Advantage European, following continued market concerns about how the euro will be affected by the European Central Bank s (ECB) efforts to stimulate eurozone economic growth. In April, we made a new purchase in CRUX European Special Situations, managed by Richard Pease, a highly regarded manager we have known for some time from his days at both New Star and Henderson. Market Overview Interest rates were a key concern during the six months under review, with investors keeping a close eye on central banks for signs of potential interest rate rises. The US Fed led the way by raising interest rates in December, with expectations of further rises throughout 2016. These have yet to materialise, as the Fed reverted to a more cautious tone on the prospects of global growth. For as long as it remains low, the oil price will continue to be a deflationary factor for countries in the developed world. For oil-producing nations, it is likely to be a drag on growth. There has been little success in controlling oil production, and it seems the oil price is likely to remain low for a while. Global equity markets have struggled; however, efforts to stimulate economic growth in China and a weakening US dollar provided significant relief to Asian and emerging market equities. This helped to drive the rebound in global equity markets from lows in mid-february. In Europe, investor attention turned towards the Brexit referendum, which will decide whether Britain should remain in the European Union. While this added to uncertainty for investors, the ECB caused a surprise with the extent of its continued measures to stimulate economic growth in the eurozone, which should provide welcome support to markets there. Page 4
Investment Manager s Report (continued) Outlook We feel it is prudent to remain cautious given the current level of uncertainty and resultant market volatility. We have adopted a more neutral position relative to our longer-term strategic asset allocations which we feel is sensible when unsure of which direction the market is likely to take in the near term. As a reflection of our cautious stance and neutral positioning, we have reduced our equity market exposure across the board, allocating to cash instead. We have tempered our previous long-term preference for developed markets by adding to our emerging markets exposure. This is a short-term tactical decision that served us well in March and April, but we remain conscious of the Fed s longer-term desire to raise rates and the impact this will have on both the US dollar and the emerging markets themselves. It is less clear how the emerging markets might fare over a slightly longer time frame. We will be following the prospects for this region closely in the coming months. We expect sterling to be weak and unpredictable in the run-up to the Brexit referendum. We have therefore reduced our investments in certain funds that aim to shield UK investors from a strong sterling. Given that there is no certainty of the outcome of the referendum in June, we prefer to focus on assessing and controlling portfolio risk rather than attempting to speculate on a particular outcome. We do know that this particular issue is likely to dominate headlines over the coming months and, if the Scottish referendum is anything to go by, volatility is likely to increase as we approach the actual referendum date on 23 June 2016. The value of an investment, and any income from it, can fall or rise. You may not get back the full amount invested. Past performance is not a reliable indicator of future results. Personal opinions may change and should not be seen as advice or a recommendation. These products are not suitable for everyone. Any recommendation should be based on a holistic review of your financial situation, objectives and needs. We do not offer investment or tax advice. We recommend you seek professional advice before deciding to invest. Investment Manager Octopus Investments Limited 23 May 2016 Page 5
Significant Information Under the Alternative Investment Fund Managers Directive, ( AIFMD ), acting as the Alternative Investment Fund Manager ( AIFM ), Fund Partners is required to disclose how those whose actions have a material impact on the Fund are remunerated. The remuneration strategy across Fund Partners is governed by the Remuneration Committee, a committee appointed by the Fund Partners Board. The Remuneration Committee has established an AIFM Remuneration Policy designed to ensure the AIFM Remuneration Code in the UK Financial Authority handbook is met proportionately for all AIFM Remuneration Code Staff. Fund Partners considers its activities as non complex due to the fact that regulation limits the AIF strategies conducted and the scope of investment in such a way that investor risk is mitigated. The discretion of Fund Partners and the portfolio manager is strictly controlled within certain pre-defined parameters as determined in the prospectus of each Alternative Investment Fund. In its role as an AIFM, Fund Partners deems itself as lower risk due to the nature of the activities it conducts. Fund Partners does not pay any form of variable remuneration currently. Therefore Fund Partners have provided a basic overview of how staff whose actions have a material impact on the Funds are remunerated. April 2016 Number of Beneficiaries Total remuneration paid Fixed remuneration Variable remuneration paid Carried interest paid by the AIF Total remuneration paid by the AIFM during the financial year 45 1,442,249 1,442,249 0 0 Remuneration paid to employees of the AIFM who have a material impact on the risk profile of the AIF 4 371,337 371,337 0 0 Due to the size and structure of Fund Partners, it is determined that employees of the AIFM who have a material impact on the risk profile of the AIF include the Board and the Head of Risk and Compliance. The delegated investment manager is subject to regulatory requirements on remuneration that Fund Partners deem to be equally as effective as those detailed in the AIFMD, which would include the Capital Requirements Directive or Markets in Financial Instruments Directive. The information in this report is designed to enable shareholders to make an informed judgment on the activities of the Fund during the period it covers and the result of those activities at the end of the period. The long Report and Accounts are available free of charge on request. For more information about the activities and performance of the Fund during the period and previous periods, please contact: Authorised Corporate Director Fund Partners Limited Cedar House, 3 Cedar Park, Cobham Road, Wimborne, Dorset, BH21 7SB Customer Service Centre: 01268 448 634 www.fundpartners co.uk Depositary State Street Trustees Limited 20 Churchill Place, London, E14 5HJ Investment Manager Octopus Investments Limited 33 Holborn, London, EC1N 2HT Authorised and regulated by the FCA Authorised regulated by the FCA Authorised and regulated by the FCA Please note that telephone calls may be recorded for monitoring and training purposes, and to confirm investors' instructions Auditor Deloitte LLP Chartered Accountants and Statutory Auditor Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2DB Page 6