Investec Global Strategy Fund R.C.S
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GSF Investec Global Strategy Fund R.C.S. Luxembourg B139420 Investment Fund under Luxembourg Law Annual report and accounts | For the year ended 31 December 2012 Investec Global Strategy Fund Registered address 49 Avenue J.F. Kennedy, L-1855 Luxembourg Grand Duchy of Luxembourg Correspondence address – Global Distributor c/o Investec Asset Management Guernsey Limited P.O. Box 250, Glategny Court, Glategny Esplanade St. Peter Port, Guernsey GY1 3QH Channel Islands Investment Fund under Luxembourg Law Annual report and accounts For the year ended 31 December 2012 Contents Market overview 2-3 Material changes to the Fund 4 Annualised performance over 5 years 5-8 Calendar year performance over 5 years 9-10 The Fund 11-13 Directors of the Fund 14 Report of the Directors 15 Statistical Information 16-22 Portfolio details – Schedule of Investments 23-231 Statement of Operations 232-239 Statement of Changes in Shareholders’ Equity 240-247 Statement of Assets and Liabilities 240-247 Notes forming part of the financial statements 248-297 Independent Auditor’s report to the Shareholders 298 Performance Records 300-317 Investment objectives and policy 318-327 Risk considerations 328-334 Risk Management 335-338 Fair Value Hierarchy 339-347 Additional Information for Investors in the Federal Republic of Germany 348 Notice to investors in Switzerland 348 Notice of Meeting 349 Portfolio Turnover 350 European Union Savings Directive 351 Report of the custodian 351 Administration of the Fund 352 How to contact Investec 353 Investec Global Strategy Fund | 1 Market overview All returns and indices are in US dollar terms, 1 January 2012 to 31 December subsequent eleventh hour deal to avoid the fi scal cliff, helped 2012, unless otherwise stated. bolster markets with the MSCI USA NDR Index ending the year up 15.3%. Overview The United Kingdom remained under pressure from government For the most part, 2012 was dominated by uncertainty spending cuts and poor credit availability. The economy surrounding the fate of the euro zone, China’s growth trajectory contracted by 0.3% in the fi rst quarter of 2012, according to and the outcome of the United States fi scal cliff of automatic data from the Offi ce for National Statistics (ONS), supporting the spending cuts and tax increases, leaving markets subject to Bank of England’s decision to approve a further £50 billion of wide fl uctuations. Nonetheless, with a perceived decline in the quantitative easing in February. The economy offi cially emerged risk of a euro-zone break-up, a last minute deal to avoid the from recession in the three months to September, thanks to fi scal cliff (for now) and a strong fourth quarter rebound in China’s the ‘Olympic effect’, with gross domestic product (GDP) data economic data, investor sentiment improved notably into year confi rming growth of 1.0%. While ONS data indicated that end. This drove a broad rally in shares, commodities, corporate household expenditure and net trade showed signs of a strong bonds, and emerging market currencies, with markets overall upturn, economists warned that the improvements might be posting robust positive returns. temporary. Against this backdrop, equities made steady gains through July to December, and fi nished the year up 17.5% as Much like the preceding year, 2012 began optimistically, measured by the FTSE All-Share Index. with companies reporting good earnings, economies slowly recovering and the global fi nancial crisis receding from memories. In Europe, the euro-zone crisis dominated newsfl ow as However, markets failed to carry on the positive momentum and policymakers struggled to restore confi dence in the future of the global equity markets saw their fi rst downturn of 2012 in April, single currency. In July, ECB president Mario Draghi’s promise to as policy paralysis in Europe continued to concern investors. save the euro boosted investor confi dence, sparking a ‘risk-on’1 The MSCI AC World NDR Index fell by 1.1% over the month. rally, with European equities such as Spain, Portugal, Italy and Negative sentiment was driven by problems in the euro zone; Greece particularly benefi ting. European shares also climbed in in particular, Greece’s inability to elect a government clearly in November on news that the International Monetary Fund and favour of implementing the terms of its bailout agreement, and euro-zone fi nance ministers had reached a bailout deal for the d ramatic increasing of provisions at Spanish bank, Bankia. Greece. Although data indicated that unemployment reached new highs and that the euro zone fell back into recession for The sell-off continued into May, though on a smaller scale than the fi rst time in three years during the third quarter of 2012, in 2011. Sentiment improved in June after the Greek election, there was a perceived decline in euro-zone break-up risk. The which was widely viewed as a de facto referendum on the region posted strong returns over the year with the MSCI Europe country’s future in the European Monetary Union and turned ex-UK NDR Index returning 21.3%. out to be positive, calming Greek exit fears. Improved sentiment continued throughout July, underpinned by comments from A strong fourth quarter concluded a good year for Asian equity European Central Bank (ECB) governor Mario Draghi that he markets, ending the period up 22.4% (MSCI AC Asia ex Japan would do “whatever it takes” to save the euro. NDR Index). The region benefi ted from an overall improvement in investor risk sentiment on tentative signs of progress in the In September, policy moves by the so-called ‘big three’ kicked global economy, in particular indications that China’s slowdown off with the ECB announcing unlimited bond buying via its may have bottomed out. There were signs of revival after a Outright Monetary Transactions (OMT) programme, signifi cantly sluggish year, including improvement in the manufacturing bolstering markets. The following week, US Federal Reserve purchasing managers’ index, industrial production data and (the Fed) chairman Ben Bernanke committed to a third round retail sales. The country posted strong returns in the fourth of quantitative easing (QE3), purchasing fi nancial assets with quarter, with the MSCI China NDR Index rising 12.9%, resulting newly created money to stimulate the national economy. The in annual returns of 22.7%. fi nal push for markets came when the Bank of Japan decided to extend its own asset purchasing programme. Japan had mixed fortunes during 2012. After a strong performance in the fi rst quarter (MSCI Japan NDR Index By the end of 2012, the mood was picking up as economic rising 11.3%), the country suffered from a stronger yen and data stabilised, particularly in the United States and China, disappointing earnings news in April. In May, the MSCI Japan while the actions of G3 (Europe, Japan and United States) NDR Index reached the lows seen in 2008. In October, policymakers helped calm investor nerves. However, tensions ongoing tensions with China over the sovereignty of the began to show in the markets after the re-election of President Senkaku/Diaoyu Islands, together with the perception of poor Barack Obama in November and the approach of the fi scal cliff corporate governance and weak growth, weighed on the at the end of December. The United States narrowly avoided market. However, the election of the new Liberal Democratic falling back into recession after a last-minute deal was reached. Party (LDP) government, led by prime minister Shinzo Abe The announcement was welcomed by global markets, with the in December created expectations of additional fi scal and MSCI AC World NDR Index closing the year up 16.1%. monetary stimulus leading to a rally in the Japanese market, with the MSCI Japan NDR Index returning 8.2% over the year. Global Equities Fixed Income While the United States market sold off in April/May, it strengthened in June, returning 9.1% in the fi rst six months of The fi rst quarter of 2012 saw a signifi cant rally in government 2012 (MSCI USA NDR Index). The key driver of the strong equity bond markets, following the ECB’s enormous injection of performance was the strength of corporate earnings, refl ected liquidity (cash) into the banking sector at the tail-end of 2011, in both the fi rst quarter’s results and positive economic trends. and activity from several central banks around the world at the Equities reacted well to the Fed’s announcement in September beginning of the year. Italian bonds, in particular, benefi ted, while of unlimited quantitative easing, which is set to continue until the ‘safe-haven’ markets of Germany and the United Kingdom employment numbers improve. This announcement, and the saw little change. 1 Investors buy perceived riskier assets when they feel more optimistic about the future (risk-on). 2 | Investec Global Strategy Fund In April/May, when the euro-zone crisis overheated once again, 7.1% over the year, while Brent crude ended at $111.11 per barrel, yields of ‘safe-haven’ government bonds collapsed, as nervous a rise of 3.5% during the year. Brent prices were supported by investors sought to preserve capital on the back of global growth the intensifying of the Israel/Palestinian confl ict, which increased and euro-zone crisis fears. The recapitalisation of the Spanish concerns of supply constraints from the Middle East. banking sector led to yields on Spanish two-year bonds also rising, to end June at 4.3%. Coal and gas consumption increased during the summer heat wave in the US, driving a surge in air conditioning use. The United States and United Kingdom continued to hold interest The ensuing drought also led to strong performance by the rates across the year, while the ECB cut its main interest rate agricultural & softs subsector, as crop supply fell.