GRINDROD GLOBAL EQUITY INCOME GROWTH FUND

Transcription

1 GRINDROD GLOBAL EQUITY INCOME GROWTH FUND Supplement to the Prospectus dated 1 September 2014 for Sanlam Universal Funds plc This Supplement contains specific information in relation to Grindrod Global Equity Income Growth Fund (the "Fund"), a Fund of Sanlam Universal Funds plc (the "Company"), an open-ended umbrella type investment company with segregated liability between its Funds authorised by the Central Bank of Ireland (the "Central Bank") as an undertaking for collective investment in transferable securities pursuant to the Regulations. There are forty other Funds of the Company in existence, namely: Sanlam World Equity Tracker Fund Sanlam World Equity Fund Sanlam Global Financial Fund Sanlam Global Best Ideas Fund Sanlam Global Bond Fund Sanlam Strategic Cash Fund Sanlam Global Select Equity Fund P-Solve Inflation Plus Fund Sanlam African Frontier Markets Fund SIIP India Opportunities Fund 8IP Asia Equity Opportunities Fund 8IP Asia Pacific Equity Fund Grindrod International Property Fund Sanlam Global Property Fund SIM Global Equity Income Fund Sanlam Private Wealth Strategic Investment Grade Bond Fund Sanlam Fund of Alternative UCITS Fund Sanlam Accel Income Fund Sanlam Private Wealth Global High Quality Fund Sanlam Equity Allocation Fund Sanlam Europe excluding UK Equity Tracker Fund Sanlam Emerging Markets Equity Tracker Fund Sanlam North America Equity Tracker Fund Sanlam UK Equity Tracker Fund Sanlam P2strategies Global Fund Sanlam P2strategies UK Fund Sanlam P2strategies North America Fund Sanlam P2strategies Emerging Market Fund Sanlam P2strategies Europe excluding UK Fund Sanlam S&P Africa Tracker Fund FOUR European L/S Fund Sanlam FOUR US Dividend Income Fund Anchor Global Capital Plus Fund Anchor Global Equity Fund Sanlam FOUR Active European Ex-UK Equity Fund Sanlam FOUR Global Equity Fund Sanlam FOUR Active UK Equity Fund Sanlam FOUR Stable Global Equity Fund Sanlam FOUR Multi-Strategy Fund High Street Global Balanced Fund

2 This Supplement forms part of and should be read in conjunction with the Prospectus dated 1 September 2014 (the "Prospectus"). Investment in the Fund should be viewed as medium to long term. The Directors of the Company, whose names appear in the Directors of the Company section of the Prospectus, accept responsibility for the information contained in the Prospectus and this Supplement. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. Words and expressions defined in the Prospectus, unless the context otherwise requires, shall have the same meaning when used in this Supplement. Save as disclosed herein there has been no significant change and no significant new matter has arisen since the Prospectus. Date: 9 March

3 DIRECTORY Investment Objective and Policies... 4 Investment Strategy... 4 Investment Restrictions... 5 Profile of a Typical Investor... 6 Efficient Portfolio Management... 6 Listing... 6 Investment Manager and Distributor... 6 Risk Factors... 7 Dividend Policy... 8 Key Information for Buying and Selling... 8 Charges and Expenses Material Contracts

4 Investment Objective and Policies Investment Objective The investment objective of the Fund is to provide income to investors and capital growth over the long term. Policy and Guidelines The Fund aims to achieve a return in excess of 5% of the US Consumer Price Index (Bloomberg Code: CPI INDX) (the Index ), over rolling three years period. Investors should note that the Fund does not track the Index. The equity securities held by the Fund may include common stocks and other securities with equity characteristics, including but not limited to, depositary receipts, or conferring the right to acquire equity securities. The Fund will invest primarily in dividend yielding securities and the securities will not be selected on the basis of a particular industry/sector, regional or capitalisation bias. The Fund may invest up to 15% of its Net Asset Value in real estate investment trusts ( REITS ) and any investment in REITS will not impact on the Fund's ability to provide redemptions. The ability to trade REITS in the secondary market may be more limited than other stocks. For the avoidance of doubt, investment in REITS will be classified as investment in transferable securities. At least 90% of the market value of the securities in which the Fund invests will be listed on exchanges which have obtained full membership of the World Federation of Stock Exchanges, whilst up to 10% of the market value of the securities in which the Fund invests may be traded on markets or exchanges not having obtained full membership of the World Federation of Stock Exchanges, provided those markets and exchanges are listed in Appendix I of the Prospectus and a comprehensive due diligence, as required by the South African Financial Services Board, has been carried out by the Manager. The Fund may also invest indirectly in such securities through holdings in UCITS funds domiciled in a Member State and other open-ended collective investment schemes, including exchange trade funds ( ETFs ), that satisfy the requirements of the Central Bank such as Guernsey Class A Schemes, Jersey Recognised Funds, Isle of Man Authorised Schemes and/or the United States, including other schemes managed by the Manager or its affiliates. Investment in units of UCITS or non-ucits will be limited to collective investment schemes which adhere to similar restrictions as those applying to the Company and its Funds and will comply with the South African requirements that would allow it to be solicited directly in South Africa. Investment in such collective investment schemes may not exceed 20% of the Net Asset Value of the Fund, subject to a maximum of 20% in any one collective investment scheme. The Fund may pending reinvestment and when market conditions dictate a more defensive investment strategy and the Investment Manager considers it in the best interests of the Fund, also invest up to 15% of its Net Asset Value in bonds (fixed and/or floating, government and/or corporate) and up to 25% in cash, cash deposits and money market instruments (including, but not limited to commercial paper, certificates of deposit, banker s acceptance, notice deposits, debentures and treasury bills all of which have a maturity of less than one year). These cash and money market instruments may be held in currencies other than the base currency of the Fund. Investment Strategy Payers and Growers is a brand that the Investment Manager has developed referring to its proprietary active investment management philosophy and process and this will be applied to the Fund. The Payers and Growers philosophy and process culminates in the selection of securities that demonstrate particular recognisable and useful characteristics. Payers are securities that pay regular income by way of interest or dividends. Payer securities have a clear and unambiguous dividend policy i.e. they pay regular and consistent dividends. Payers are usually stable companies that possess acceptable dividend cover ratios and are cash generative. Growers are securities that have historically demonstrated growth in their interest or dividend payments by inflation or more. Grower securities usually have some competitive edge in the industry they operate in, enjoy good margins and are forecast to continue their dividend payment trend over the next three to five years. 4

5 Payers and Growers portfolios will include securities that demonstrate both of these characteristics to a greater or lesser extent. It has been shown in several academic studies that securities that pay regular and consistent dividends, with inflation-linked growth, deliver excellent long-term real returns. The investment universe is screened to identify those companies that have a track record of growing dividends throughout economic cycles. The screening process helps identify opportunities and narrows the investable universe to companies with a track record of paying and growing dividends. In addition to assessing each company s forward yield, other financial metrics (including, but not limited to positive cashflows, low gearing levels, strong interest and dividend cover ratios), its product offering and the industry in which it operates are also of interest to the Investment Manager. The Investment Manager favours companies with high operating margins, low leverage and dominant products or services in established, but growing markets where pricing power has not been eroded through commoditisation. The Investment Manager will ensure that the Fund has a diversified, well-constructed, inflation-beating portfolio. The Fund has no benchmark constraints and the equity securities will be equally weighted (i.e. an equal amount of capital is applied to each security and the Investment Manager tries to maintain this position as closely as possible). Positions are actively managed to ensure that the current income yield and future income growth prospects are maximised within the risk parameters established by the investment team. These risk parameters are driven primarily by the ability of the portfolio to beat inflation over the long term. Investment Restrictions The general investment restrictions contained in the Investment Restrictions section of the Prospectus shall apply. In addition, the following investment restrictions shall apply to the Fund: 1. Short selling of securities is not permitted. 2. The Fund may not be geared or leveraged through investment in any security. 3. The Fund may not invest in financial derivative instruments ("FDIs"). 4. At least 90% of the debt securities will have a minimum credit rating of BBB- or Baa3 (as rated by Standard & Poor s, Moody s or Fitch). 5. At least 90% of the money market instruments will have a minimum credit rating of A2 or P2 or F2 (as rated by Standard & Poor s, Moody s or Fitch). 6. The Fund may not invest more than 15% of its Net Asset Value in securities of companies listed or traded in countries considered to be emerging markets by the Manager (including but not limited to countries included in the Morgan Stanley Capital International Emerging Markets Index which currently includes twenty-three emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates). 7. The Fund will not invest in securities that compel the Fund to accept physical delivery of a commodity. 8. Where the Fund invests in shares of another collective investment scheme managed by the same management company or by an associated or related company, the manager of the scheme in which the investment is being made must waive the preliminary/initial/redemption charge and any management fee which it would normally charge. 5

6 Profile of a Typical Investor The Fund is suitable for retail and institutional investors who are looking to achieve long-term capital growth. Investment in the Fund should be viewed as a medium to long term investment and therefore investors would be expected to have a reasonable tolerance for medium volatility of the net asset value from time to time. Efficient Portfolio Management The Fund may enter into securities lending arrangements subject to the conditions and within the limits laid down by the Central Bank. Securities lending is used to generate additional income for the Fund with an acceptable low level of risk. The Fund will not use financial derivative instruments until a risk management process has been submitted and cleared by the Central Bank. Further detail on the requirements relating to such transactions and the Collateral Policy for the Fund is contained in the Prospectus. Listing Application has been made to the Irish Stock Exchange for the Class A (USD) Shares to be admitted to the Official List and to trading on the Main Securities Market of the Irish Stock Exchange. It is expected that the Class A (USD) Shares will be admitted to the Official List and to trading on the Main Securities Market of the Irish Stock Exchange and dealing in these Shares of the Fund will commence immediately following the closing of the Initial Offer Period. The Prospectus for the Company and this Supplement including all information required to be disclosed by the listing requirements of the Irish Stock Exchange shall constitute listing particulars for the purpose of the listing of the Class A (USD) Shares. No application has been made to list the Shares on any other stock exchange. Neither the admission of the Shares to the Official List and to trading on the Main Securities Market of the Irish Stock Exchange nor the approval of this Supplement pursuant to the listing requirements of the Irish Stock Exchange shall constitute a warranty or representation by the Irish Stock Exchange as to the competence of service providers to or any other party connected with the Fund, the adequacy of information contained in this Supplement or this Prospectus or the suitability of the Fund for investment purposes. As at the date of this document the Fund does not have any loan capital (including term loans) outstanding or created but unissued or any outstanding mortgages, charges, debentures or other borrowings or indebtedness in the nature of borrowings, including bank overdrafts, liabilities under acceptance (other than normal trade bills) or acceptance credits, hire purchase or finance lease commitments, guarantees or other contingent liabilities which are material in nature. As at the date of this Supplement, no Director nor their spouses nor their infant children or any connected persons have any interest in the Shares of the Fund or any options in respect of such capital. Investment Manager and Distributor The Manager has appointed the following entity as investment manager and distributor to the Fund: Grindrod Asset Management (Pty) Limited Grindrod Asset Management (Pty) Limited (the Investment Manager ) is a company incorporated in South Africa and having its registered office and place of business at 5 Arundel Close, Kingsmead Office Park, PO Box 3211, Durban, KwaZulu Natal, 4001, South Africa. The Investment Manager provides, inter alia, discretionary portfolio management services and investment advisory services for private as well as for institutional clients in all areas of international securities business. The Investment Manager is authorised and regulated in South Africa by the FSB and has a Financial Service Provider Number As at 31 October 2014, the Investment Manager had approximately 1 billion of assets under management. 6

7 Borrowings In accordance with the general provisions contained in the Borrowing and Lending Powers section of the Prospectus, the Fund may borrow up to 10% of its net assets on a temporary basis. Such borrowings are permitted only to meet the Fund s obligations in relation to (i) the administration of the Fund relating to purchase or sale transactions; and/or (ii) the redemption or cancellation of Shares in the Fund. Borrowings in relation to (i) above are only permitted for a period of up to 8 calendar days, and 61 calendar days in respect of (ii) in order to comply with the South African Financial Services Board and to allow for the Fund to be distributed to South African retail investors. However, at all times borrowings on behalf of the Fund will be in accordance with the Regulations and the requirements of the Central Bank. Risk Factors The risk factors set out in the Risk Factors section of the Prospectus apply to the Fund. In addition, the following risk factors apply to the Fund: Political and/or Regulatory Risks The value of the Fund s assets may be affected by uncertainties such as international political developments, changes in government policies, changes in taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which investment may be made. Furthermore, the legal infrastructure and accounting, auditing and reporting standards in certain countries in which investment may be made may not provide the same degree of investor protection or information to investors as would generally apply in major securities markets. Settlement and Clearing Risk The trading and settlement practices on some of the exchanges or markets on which the Fund may invest may not be the same as those in more developed markets of Western Europe and the United States. In particular, some or all of the following additional risks may be associated with settlement and clearing of securities transactions in emerging market countries. These additional risks include delays experienced in repatriation of sales proceeds due to local exchange controls, an uncertain legal and regulatory environment and the possibility that bargains may be settled by a free delivery of stock with payment of cash in an uncollateralised manner. That may increase settlement and clearing risk and/or result in delays in realising investments made by the Fund. Custody Risk Local custody services in some of the emerging market countries in which the Fund may invest may not be the same as those in more developed market countries and there is a transaction and custody risk involved in dealing in such markets. Emerging Markets Investing in emerging markets involve additional risks and special considerations not typically associated with investing in other more established economies or securities markets. Such risks may include (i) increased risk of nationalisation or expropriation of assets or confiscatory taxation; (ii) greater social, economic and political uncertainty, including war; (iii) higher dependence on exports and the corresponding importance of international trade; (iv) greater volatility, less liquidity and smaller capitalisation of securities markets; (v) greater volatility in currency exchange rates; (vi) greater risk of inflation; (vii) greater controls on foreign investment and limitations on repatriation of invested capital and on the ability to exchange local currencies for US dollars; (viii) increased likelihood of governmental decisions to cease support of economic reform programmes or to impose centrally planned economies; (ix) differences in auditing and financial reporting standards which may result in the unavailability of material information about issuers; (x) less extensive regulation of the securities markets; (xi) longer settlement periods for securities transactions and less reliable clearance and custody arrangements; (xii) less protection through registration of assets and (xiii) less developed corporate laws regarding fiduciary duties of officers and directors and protection of shareholders. 7

8 Legal Risk Legal risk is the risk of loss due to unexpected application of a law or regulation, or because contracts are not legally enforceable or documented correctly in the context of financial derivative instruments. Investments in Collective Investment Schemes The Fund may invest a portion of its assets in CIS and investors should be aware of the potential exposure to the asset classes of those underlying collective investment schemes in the context of all of their investments. The investments of the Company are subject to normal market fluctuations and other risks inherent in investing in securities or other instruments and there can be no assurance that the investment objectives will actually be achieved. In particular the value of investments may be affected by uncertainties such as international, political and economic developments or changes in government policies. REITS Risk REITS may be affected by changes in the value of the underlying property owned by the trusts. Equity REITS are dependent upon management skills, may not be diversified and are subject to the risks of financing projects. Such trusts are also subject to heavy cash flow dependency and self-liquidation. The ability to trade REITS in the secondary market can be more limited than other stocks. Efficient Portfolio Management Risk The Company on behalf of the Fund may enter securities lending arrangements for efficient portfolio management purposes. Investors should be aware that from time to time, the Fund may engage with securities lending agents that are related parties to the Custodian or other service providers of the Company. Such engagement may on occasion cause a conflict of interest with the role of the Custodian or other service provider in respect of the Company. Please refer to the section entitled "Portfolio Transactions and Conflicts of Interest" in the Prospectus for further details on the conditions applicable to any such related party transactions. The identity of any such related parties will be specifically identified in the Company s semi-annual and annual reports. As with any extensions of credit, there are risks of delay and recovery. Should the borrower of securities fail financially or default in any of its obligations under any securities lending transaction, the collateral provided in connection with such transaction will be called upon. A securities lending transaction will involve the receipt of collateral. However there is a risk that the value of the collateral may fall and the Fund suffer loss as a result. Please also refer to section entitled "Portfolio Transactions and Conflicts of Interest" in the Prospectus. Reinvestment of Cash Collateral Risk As the Fund may reinvest cash collateral received, subject to the conditions and within the limits laid down by the Central Bank, the Fund will be exposed to the risk associated with such investments, such as failure or default of the issuer of the relevant security. Dividend Policy It is the Directors current intention not to distribute the profits of the Fund derived from its investments. All such profits shall be reinvested in the Fund. Key Information for Buying and Selling It is intended that Class A (USD) Shares in the Fund will be made available for subscription to investors in South Africa and in certain of the Member States. 8

9 Initial Offer Period The Initial Offer Period for the Class A (USD) Shares begins at 9.00 a.m. on 10 March 2015 to 5.00 p.m. on 10 September 2015 (as may be shortened or extended by the Directors in accordance with the Central Bank s requirements). Initial Issue Price Class A (USD) Shares US$1 Base Currency US Dollars Business Day Any day (except Saturday or Sunday) on which the banks in Dublin are open for business and such other days as the Directors may, with the consent of the Custodian, determine and notify in advance to Shareholders. Dealing Day Any Business Day. Valuation Point Midnight (South African time) on each Dealing Day. Dealing Deadline In respect of a Dealing Day, 4.00 p.m. (Irish time) on the Business Day immediately preceding a Dealing Day. Minimum Shareholding Class A (USD) Shares US$1,000 Minimum Initial Investment Amount Class A (USD) Shares US$1,000 Minimum Additional Investment Amount None The Directors may, in their absolute discretion permit a higher or lower Minimum Shareholding, Minimum Initial Investment Amount and Minimum Additional Investment Amount. Preliminary Charge Up to 3% of the Net Asset Value per Share (plus VAT, if any) in respect of the Class A (USD) Shares. The Company may waive in whole or in part the Preliminary Charge. Repurchase Fee None. Settlement Date In the case of applications, close of business on the Business Day preceding the relevant Dealing Day (or up to four Business Days after the relevant Dealing Day as may be permitted by the Manager at its absolute discretion). In the case of repurchases, four Business Days after the relevant Dealing Day or, if later, four Business Days after the receipt of the relevant duly signed repurchase documentation. 9

10 Charges and Expenses Fees of the Manager, the Custodian, the Registrar and Transfer Agent, the Administrator, the Investment Manager and the Distributor. The Manager will be entitled to receive from the Company an annual fee up to0.20% of the net assets of the Class A (USD) Shares These fees will accrue and be calculated on each Dealing Day and be payable monthly in arrears. The Manager will be responsible for all its own out of pocket costs and expenses. The Company will pay an annual investment management fee of 1.00% of the net assets of the Class A (USD) Shares. This investment management fee is payable to the Investment Manager and the Distributor (the Parties ) in such proportions as agreed between the Parties from time to time. The Investment Management fee will accrue and be calculated on each Dealing Day and be payable monthly in arrears. Parties will be responsible for all their own out of pocket costs and expenses. The Administrator will be entitled to receive out of the assets of the Fund an annual fee which will not exceed 0.03% of the Net Asset Value of the Fund (plus VAT, if any) in the performance of its duties as Administrator of the Fund. These fees shall accrue and be calculated on each Dealing Day and shall be payable monthly in arrears. The Registrar and Transfer Agent will be entitled to receive from the Company out of the assets of the Fund an annual fee which will not exceed US$2,500 plus $1,000 for each additional share class greater than four, together with reasonable costs and expenses incurred by the Registrar and Transfer Agent in the performance of its duties as Registrar and Transfer Agent of the Fund. These fees shall accrue and be calculated on each Dealing Day and shall be payable monthly in arrears. The Registrar and Transfer Agent shall also be entitled to be reimbursed out of the assets of the Fund all agreed transaction charges (which will be charged at normal commercial rates). The Custodian will be entitled to receive from the Company out of the assets of the Fund an annual trustee fee which will not exceed 0.015% of the net assets of the Fund (plus VAT, if any) together with reasonable costs and expenses incurred by the Custodian in the performance of its duties as Custodian of the Fund. These fees shall accrue and be calculated on each Dealing Day and shall be payable monthly in arrears. The Custodian shall also be entitled to be reimbursed out of the assets of the Fund all agreed safekeeping fees, expenses and transaction charges (which will be charged at normal commercial rates). The cost of establishing the Fund, obtaining authorisation from any authority, regulatory or other body, listing the Shares on the Irish Stock Exchange, filing fees and the preparation and printing of this Supplement, marketing costs and the fees of all professionals relating to it, did not exceed 25,000 and are being borne by the Fund and amortised over the five years following the first issue of Shares in the Fund. This section should read in conjunction with the section entitled Charges and Expenses in the Prospectus. Material Contracts Investment Management and Distribution Agreement The Investment Management and Distribution Agreement dated 22 October 2010 as novated by way of a novation agreement dated 1 September 2014 between the Manager and the Investment Manager (the Agreement ) provides that the appointment of the Investment Manager will continue in force unless and until terminated by either the Manager giving not less than 30 days' written notice to the Investment Manager or the Investment Manager giving not less than 90 days' notice to the Manager. However, in certain instances the Agreement may be terminated without a minimum period of notice by either party. The Agreement limits the liability of the Investment Manager and Manager to losses arising by reasons of fraud, bad faith, negligence, wilful default or wilful misfeasance of either party in the performance or nonperformance of their duties. The Agreement also provides that each party will indemnify the other party (the non-defaulting party) to the extent that any claims, costs, direct damages, direct losses or expenses 10

11 are attributable to the fraud, bad faith, negligence, wilful default or wilful misfeasance by the other party (the defaulting party) in the performance or non-performance of its duties and are not attributable to the fraud, bad faith, negligence, wilful default or wilful misfeasance of the non-defaulting party. 11