SKANDIA GLOBAL FUNDS PLC - Fidelity Investments

Skandia Global Funds plc
Interim Report and Unaudited Financial Statements for the period ended 30 June 2012
SKANDIA US CAPITAL GROWTH FUND
INVESTMENT ADVISER’S REPORT FOR THE PERIOD ENDED 30 June 2012
Skandia US Capital Growth Fund – 300 North Capital, LLC
Below is a report from the Investment Adviser of the Skandia U.S. Capital Growth Fund for the first six months of 2012.
The Skandia US Capital Growth Fund was launched on 17 April 2002 with a starting Net Asset Value per share of USD 10.00.
Investment Adviser’s Commentary
The Skandia US Capital Growth Fund underperformed its benchmark, the Russell 3000 Growth Index, for the first half 2012.
The Fund returned +7.39%, while the benchmark index returned +8.33% over the period.* The Fund significantly outperformed
the benchmark in the first quarter. Both stock selection and sector allocation benefited relative performance overall. In terms of
individual sectors, the Fund greatly benefited from being overweight in outperforming consumer discretionary shares; stock
picking in this area also boosted relative performance. Being underweight in the lagging, defensive consumer staples sector was
another helpful position, enhanced by beneficial stock selection among these shares. Meanwhile, having no holding in badly
underperforming utilities was another contributor to the portfolio’s relative performance. Less helpful was being underweight in
the financial sector, which outperformed over much of the quarter due to improved investor sentiment. Stock selection in
industrials was another negative for returns.
Among shares held in the Fund, technology-related companies led the way. An overweight position in the online travel group
priceline.com was the single largest relative contributor to returns, benefiting from investor optimism on earnings and more
generally strong investor demand for internet stocks. Similarly, a surge in shares of computer giant Apple was a principal driver
behind the strong gains in IT stocks. Apple benefited from strong earnings and sales. Shares also soared after Apple initiated its
first dividend and share repurchase programme during the period. Apple has been the beneficiary of incremental sales
opportunities over the past few years from new regions (China), phone service carriers and products (iPad). Among detractors,
earnings fears weighed on oil services group Halliburton. And a holding in railway freight group CSX in the underperforming
transport sector also
detracted from relative returns.
During the second quarter, the Fund underperformed the benchmark, hurt by poor relative performance from stocks in both the
consumer discretionary and energy sectors. Within consumer discretionary, Coach detracted from relative performance, as its
shares suffered on fears of the impact of a potential slowdown in demand from Asia, particularly China, where Coach has
benefited from strong growth trends. Despite the benefit of a sector underweight position, stock picking in energy was a net
detractor - an example being Pioneer Natural Resources, one of the weaker holdings in the portfolio. This was largely due to
investor concerns that a deteriorating economic backdrop would result in reduced global demand for oil. On the other hand, the
portfolio’s overweight position in the defensive healthcare industry and successful stock selection within it gave a boost to the
Fund’s relative return.
Within the sector, Perrigo, a provider of over-the-counter store brand products, was a significant contributor as it continued to
gain market share. And C.R. Bard, a diversified medical products company, benefited from a positive ruling on patent litigation.
Both stock picking and an underweight position in IT were beneficial overall for the portfolio. A notable contributor was
NetSuite, a provider of subscription-based enterprise resource planning (ERP) software. It outperformed following a user
conference in May which highlighted continued strong demand for its products, as well as its unique competitive positioning.
Nevertheless, the two largest individual stock detractors over the second quarter were also IT companies - Rackspace Hosting
and F5 networks. Conversely, the strongest individual relative contributor to the Fund’s quarterly performance came from a
constituent of the consumer staples sector, i.e., retailer Whole Foods Market, which was a significant factor behind the
successful stock picking result in the sector. Unfortunately, this was more than outweighed by the portfolio’s underweight
position in this outperforming sector.
Source: 300 North Capital, LLC as at 29th June 2012
Prior to 20 April 2012 the fund was sub advised by Marsico Capital Management, LLC.
* Performance figures refer to Class A shares and are sourced from Morningstar. Calculation basis: bid to bid, net of fees, gross
income reinvested in fund base currency (US Dollars).
References to benchmarks are for illustrative purposes only and are not intended to imply a performance objective. There is no
guarantee that the Skandia US Capital Growth Fund will outperform this benchmark.
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