Schroder International Selection Fund Semi-Annual Report

Transcription

1 International Selection Fund Semi-Annual Report 30 June 2016 Luxembourg R.C.S. Luxembourg B 8.202

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3 International Selection Fund Société d Investissement à Capital Variable (SICAV) Semi-Annual Report 30 June 2016 No subscriptions can be received on the basis of periodical reports. Subscriptions are valid only if made on the basis of the current prospectus accompanied by the last available annual report or semi-annual report if published thereafter. Audited annual and unaudited semi-annual reports, the current prospectus, KIID and the Articles of Incorporation of International Selection Fund (the 'Company') are available, free of charge, at the Company s registered office, 5, rue Höhenhof, L-1736 Senningerberg, Grand Duchy of Luxembourg.

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5 International Selection Fund Semi-Annual Report 30 June 2016 Page 5 Table of contents International Selection Fund Board of Directors Administration Directors Report Investment Managers Report Notes to the Financial Statements Statement of Distribution of Investments by Industry Portfolio of Investments Mainstream Equity Funds Asian Opportunities EURO Equity European Large Cap Global Equity Italian Equity Japanese Equity Swiss Equity UK Equity US Large Cap Specialist Equity Funds Asia Pacific Property Securities Asian Dividend Maximiser Asian Equity Yield Asian Smaller Companies Asian Total Return BRIC (Brazil, Russia, India, China) China Opportunities Emerging Asia Emerging Europe Emerging s European Dividend Maximiser European Equity (Ex UK) European Equity Focus European Equity Yield European Opportunities European Smaller Companies European Special Situations European Total Return Frontier s Equity Global Climate Change Equity Global Demographic Opportunities Global Dividend Maximiser

6 Page 6 International Selection Fund Semi-Annual Report 30 June 2016 Table of contents Specialist Equity Funds (cont) Global Emerging Opportunities Global Emerging s Smaller Companies Global Energy Global Equity Yield Global Gold * Global Property Securities Global Recovery Global Smaller Companies Greater China Hong Kong Equity Indian Equity Indian Opportunities Japanese Opportunities Japanese Smaller Companies Korean Equity Latin American Middle East Swiss Equity Opportunities Swiss Small & Mid Cap Equity Taiwanese Equity UK Opportunities US Small & Mid Cap Equity US Smaller Companies Alpha Equity Funds European Equity Alpha Global Equity Alpha Japanese Equity Alpha Quantitative Equity Funds QEP Global Active QEP Global Blend QEP Global Core QEP Global Emerging s QEP Global ESG QEP Global Quality QEP Global Plus Asset Allocation Funds Global Tactical Asset Allocation Multi-Asset Funds Emerging Multi-Asset Income Global Diversified Growth Global Multi-Asset Balanced * * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

7 International Selection Fund Semi-Annual Report 30 June 2016 Page 7 Table of contents Multi-Asset Funds (cont) Global Multi-Asset Conservative * Global Multi-Asset Flexible * Global Multi-Asset Income Japan DGF Strategic Beta Wealth Preservation Multi-Manager Funds Multi-Manager Diversity Absolute Return Funds Asian Bond Absolute Return Emerging s Debt Absolute Return EURO Credit Absolute Return European Alpha Absolute Return European Equity Absolute Return QEP Global Absolute Mainstream Bond Funds EURO Bond EURO Government Bond EURO Short Term Bond Global Bond Global Inflation Linked Bond Hong Kong Dollar Bond US Dollar Bond Specialist Bond Funds Asian Convertible Bond Asian Local Currency Bond Emerging Bond Emerging Corporate Bond Emerging Local Currency Bond EURO Corporate Bond EURO Credit Conviction EURO High Yield Global Conservative Convertible Bond Global Convertible Bond Global Corporate Bond Global Credit Duration Hedged Global High Income Bond Global High Yield Global Multi Credit * Global Unconstrained Bond RMB Fixed Income * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

8 Page 8 International Selection Fund Semi-Annual Report 30 June 2016 Table of contents Specialist Bond Funds (cont) Strategic Bond Strategic Credit Liquidity Funds EURO Liquidity US Dollar Liquidity Appendix I - TER

9 International Selection Fund Semi-Annual Report 30 June 2016 International Selection Fund Page 9 The Company International Selection Fund (the Company ) is an open-ended umbrella company incorporated under Luxembourg law, which enables investors to choose from Funds (specific portfolios of assets and liabilities within the Company having their own net asset value and represented by a separate class or classes of shares) offering different investment objectives. The shares of each Fund are listed on the Luxembourg Stock Exchange. Prices are also available on Bloomberg and Reuters. This report covers the period from 1 January 2016 to 30 June The financial statements are prepared in accordance with Luxembourg regulations relating to undertakings for collective investment. The last day on which prices were calculated was 30 June 2016, the last working day of the period. At the date of this report, 109 Funds were available for investment. Please refer to the current prospectus for the investment objectives of the Funds as well as details of investment restrictions. The monthly factsheets for each Fund can be obtained from the Company s registered office and are also available on the website of Investment Management (Luxembourg) S.A. ( Hereafter, names of the Funds will be preceded by, e.g. Global Equity Alpha. Corporate Governance s is a FATCA compliant organisation. The FATCA classification of this entity and its GIIN is as follows: FATCA entity classification: FFI; Sponsoring entity: Investment Management (Luxembourg) S.A.; Sponsoring entity GIIN: 4RIMT SP.442 The Company is subject to corporate governance based on: 1. Its obligations as defined by the UCITS Directive 2009/65/EC dated 13 July 2009, as implemented in Luxembourg law which is available for inspection at the registered office of the Company at 5, rue Höhenhof, 1736 Senningerberg, Grand Duchy of Luxembourg. 2. Its articles of incorporation which are available for inspection at the registered office of the Company and at the Luxembourg corporate and trade register, Registre de Commerce et des Sociétés ( RCSL ). 3. Its obligations in respect of the management of the Company, for which the Company has appointed Investment Management (Luxembourg) S.A., which is subject to the requirements of the Management Company Directive 2010/43/EC, as implemented in Luxembourg law. 4. The Association of the Luxembourg Fund Industry ( ALFI ) code of conduct, which the Company has voluntarily adopted. Internal Control and Risk Management Systems The Board of Directors is responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of error or fraud in achieving the Company's financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board of Directors has contracted with the Management Company to put procedures in place to ensure all relevant accounting records are properly maintained and are readily available, including the production of annual and semi-annual reports. The annual and semiannual reports of the Company are required to be approved by the Board of Directors of the Company and filed with the Commission de Surveillance du Secteur Financier ( CSSF ) and, in the case of annual reports, with the RCSL. The annual statutory financial statements are required to be audited by independent auditors who report to the Board of Directors on their findings. The Board meets at least four times a year and ensures that the Company maintains high standards of integrity and control in its operations and that it possesses adequate governance and means of control as law and regulation demand.

10 Page 10 International Selection Fund Semi-Annual Report 30 June 2016 Board of Directors Chairman Directors Massimo Tosato Vice Chairman PLC 31 Gresham Street London EC2V 7QA United Kingdom Mike Champion Head of Product Development Investment Management Limited 31 Gresham Street London EC2V 7QA United Kingdom Marie-Jeanne Chevremont-Lorenzini Independent Director 19, rue de Bitbourg 1273 Luxembourg Grand Duchy of Luxembourg Jacques Elvinger Avocat Elvinger Hoss Prussen 2, place Winston Churchill 1340 Luxembourg Grand Duchy of Luxembourg Daniel De Fernando Garcia Independent Director Serrano Madrid Spain Achim Kuessner Country Head Germany, Austria & CEE Investment Management GmbH TaunusTurm Frankfurt Germany Ketil Petersen Country Head Nordic Region s Denmark Filial af Investment Management (Luxembourg) S.A. Store Strandstraede Copenhagen K Denmark Carlo Trabattoni * Head of Pan European Intermediary Distribution and GFIG Investment Management Limited 31 Gresham Street London EC2V 7QA United Kingdom * Carlo Trabattoni resigned from the Board of Directors on 29 July 2016.

11 Administration International Selection Fund Semi-Annual Report 30 June 2016 Page 11 Registered Office Management Company, Domiciliary Agent, Principal Paying Agent, Registrar and Transfer Agent 5, rue Höhenhof, 1736 Senningerberg, Grand Duchy of Luxembourg Investment Management (Luxembourg) S.A. 5, rue Höhenhof, 1736 Senningerberg, Grand Duchy of Luxembourg Custodian and Fund Administrator Principal Legal Adviser Auditor Investment Managers J.P. Morgan Bank Luxembourg S.A. European Bank & Business Centre, 6, route de Trèves, 2633 Senningerberg, Grand Duchy of Luxembourg Elvinger Hoss Prussen 2, place Winston Churchill, 1340 Luxembourg, Grand Duchy of Luxembourg PricewaterhouseCoopers, Société coopérative 2 rue Gerhard Mercator, 2182 Luxembourg, Grand Duchy of Luxembourg Investment Management Limited 31, Gresham Street, London EC2V 7QA, United Kingdom Asia Pacific Property Securities Asian Dividend Maximiser BRIC (Brazil, Russia, India, China) Emerging Europe Emerging s Emerging s Debt Absolute Return Emerging Multi-Asset Income EURO Bond EURO Corporate Bond EURO Credit Absolute Return EURO Credit Conviction EURO Equity EURO Government Bond EURO High Yield EURO Liquidity EURO Short Term Bond European Alpha Absolute Return European Dividend Maximiser European Equity (Ex UK) European Equity Absolute Return European Equity Alpha European Equity Focus European Equity Yield European Large Cap European Opportunities European Smaller Companies European Special Situations European Total Return Frontier s Equity Global Bond Global Climate Change Equity Global Demographic Opportunities Global Diversified Growth Global Dividend Maximiser Global Emerging Opportunities Global Emerging s Smaller Companies Global Energy Global Equity Global Equity Alpha Global Equity Yield Global Gold* Global Inflation Linked Bond Global Multi Credit* Global Multi-Asset Flexible* Global Multi-Asset Income Global Property Securities Global Recovery Global Smaller Companies Global Tactical Asset Allocation Global Unconstrained Bond Italian Equity Latin American Middle East Multi-Manager Diversity * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

12 Page 12 International Selection Fund Semi-Annual Report 30 June 2016 Administration (cont) Investment Managers (cont) Investment Management Limited (cont) 31, Gresham Street, London EC2V 7QA, United Kingdom QEP Global Absolute QEP Global Active QEP Global Blend QEP Global Core QEP Global Emerging s QEP Global ESG QEP Global Quality QEP Global Plus Strategic Beta 10 Strategic Bond Strategic Credit UK Equity UK Opportunities Wealth Preservation Investment Management (Hong Kong) Limited Level 33, Two Pacific Place, 88 Queensway, Hong Kong China Opportunities Emerging Asia Greater China Hong Kong Dollar Bond Hong Kong Equity Japan DGF RMB Fixed Income Taiwanese Equity Investment Management (Japan) Limited 21st Floor Marunouchi Trust Tower Main, Marunouchi, Chiyoda-Ku, Tokyo , Japan Japanese Equity Japanese Equity Alpha Japanese Opportunities Japanese Smaller Companies Investment Management North America Inc. 875 Third Avenue, 22nd Floor, New York, NY , United States of America Emerging Bond Emerging Local Currency Bond Global Corporate Bond Global Credit Duration Hedged Global High Income Bond Global High Yield US Dollar Bond US Dollar Liquidity US Large Cap US Small & Mid-Cap Equity US Smaller Companies Investment Management (Singapore) Limited 138 Street #23-01, CapitaGreen, Singapore , Singapore Asian Bond Absolute Return Asian Equity Yield Asian Local Currency Bond Asian Opportunities Asian Smaller Companies Asian Total Return Emerging Corporate Bond Indian Equity Indian Opportunities Korean Equity * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

13 Administration (cont) International Selection Fund Semi-Annual Report 30 June 2016 Page 13 Investment Managers (cont) Investment Management (Switzerland) AG Central 2, 8001 Zurich, Switzerland Asian Convertible Bond Global Conservative Convertible Bond Global Convertible Bond Global Multi-Asset Balanced* Global Multi-Asset Conservative* Swiss Equity Swiss Equity Opportunities Swiss Small & Mid Cap Equity * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

14 Page 14 International Selection Fund Semi-Annual Report 30 June 2016 Directors Report Introduction The directors of the Company submit their report and the unaudited financial statements for the period ended 30 June Activities during the period On 30 June 2016, the total net assets of the Company were EUR 83,435,248,382 compared to EUR 85,880,145,553 on 31 December 2015, representing a decrease of New Funds During the period under review, 2 new Funds were made available for investment within the Company: 8 June 2016 Global Multi Credit 29 June 2016 Global Gold 2. New share classes In addition to the 29 share classes launched in new Funds, the following share classes were also made available during the period under review: 3 February 2016 EURO Equity C Acc CHF Hedged 24 February 2016 Global High Yield A Acc EUR Global Multi-Asset Income I Acc GBP Hedged Strategic Credit A Dis Hedged 2 March 2016 Global High Yield A Dis HKD & A Dis AUD Hedged 9 March 2016 European Equity (Ex UK) S Dis GBP Strategic Credit S Acc & S Dis EUR Hedged 13 April 2016 Asian Opportunities X1 Acc Emerging s I Acc GBP European Alpha Absolute Return I Acc Global Multi-Asset Conservative A Acc SEK Hedged Strategic Credit C Acc SEK Hedged 27 April 2016 Global High Yield C Acc SEK Hedged US Dollar Bond C Acc SEK Hedged 18 May 2016 EURO High Yield A Dis Hedged Global Property Securities X Dis Global Smaller Companies Z Acc Strategic Credit I Acc EUR Hedged 25 May 2016 EURO Equity C Acc SEK Hedged European Opportunities C Acc SEK Hedged 8 June 2016 Strategic Credit C Dis SEK Hedged US Large Cap C Acc SEK Hedged 15 June June 2016 QEP Global Core X1 Dis Global Multi-Asset Balanced I Dis 3. Classes liquidations During the period under review, 3 share classes were liquidated: 2 March 2016 Global Recovery I Acc GBP Hedged 31 March 2016 Asian Dividend Maximiser A Dis RMB Hedged 6 June 2016 European Alpha Absolute Return R Acc 4. Hard Closure During the period under review, following share classes were hard closed: 12 January 2016 Global Multi-Asset Conservative A1 Acc and A1 Dis 29 February 2016 European Alpha Absolute Return A Acc, B Acc, C Acc, E Acc, R Acc, C Acc GBP Hedged, R Acc GBP Hedged, A Acc Hedged, C Acc Hedged, R Acc Hedged, A1 Acc Hedged and B Acc Hedged 5. Fund mergers During the period under review, 2 Funds were merged: 1 June 2016 Global Dynamic Balanced was merged into Global Multi-Asset Balanced 29 June 2016 AS Gold and Previous Metals Fund was merged into Global Gold

15 International Selection Fund Semi-Annual Report 30 June 2016 Directors Report (cont) Page 15 Activities during the period (cont) 6. Fund Name change During the period under review, 3 Funds changed names: 1 June 2016 Global Conservative changed its name to Global Multi-Asset Conservative 1 June 2016 Global Dynamic Balanced changed its name to Global Multi-Asset Balanced 1 June 2016 Global Multi-Asset Allocation changed its name to Global Multi-Asset Flexible Furthermore, the following changes took effect during the period: 1 January 2016 Transfer agent fees reduction for Global Multi-Asset Conservative A & A1 classes from 0.20 to Transfer agent fees reduction for Global Multi-Asset Conservative C classes from 0.10 to Asian Bond Absolute Return A Dis, A1 Dis, Z Dis, A1 Dis EUR, Z Dis EUR, A1 Dis EUR Hedged, Z Dis EUR Hedged, A Dis HKD and Z Dis HKD classes changed the distribution policies from monthly 5 fixed to monthly 4 fixed. Emerging s Debt Absolute Return A1 Dis AUD Hedged, A1 Dis EUR Hedged and A1 Dis classes changed the distribution policies from monthly 5 fixed to monthly 4 fixed. Emerging s Debt Absolute Return A Dis, B Dis, A Dis EUR Hedged, Z Dis EUR Hedged and A Dis SGD Hedged classes changed the distribution policies from quarterly 5 fixed to quarterly 4 fixed. EURO Bond A Dis, A1 Dis and B Dis classes changed the distribution policies from quarterly 3 fixed to quarterly 2.5 fixed. Global Bond A Dis EUR Hedged, A1 Dis EUR Hedged and B Bis EUR Hedged classes, changed the distribution policies from quarterly 3 fixed to quarterly 2.5 fixed. 6 January 2016 EURO Credit Conviction A Dis EUR classes changed the distribution policies from semi-annual variable to semi-annual 3 fixed. 28 April 2016 Global High Yield A Dis classes changed the distribution policy from quarterly variable to monthly variable. 2 May 2016 Disclosure of NAV decimal places on all classes changed from 2 to 4 decimal places. 1 June 2016 Management fees reduction for Asian Opportunities X1 Acc classes from 0.55 to Transfer agent fees reduction for Global Recovery X Dis classes from 0.20 to Transfer agent fees reduction for QEP Global Core X Dis classes from 0.12 to Management fees reduction for QEP Global Core X Dis classes from 0.24 to Change of investment policies for Asian Dividend Maximiser, European Dividend Maximiser, Global Dividend Maximiser, Global Equity Yield, Global Recovery, Global Multi-Asset Conservative, Global Multi-Asset Flexible and Global Multi-Asset Balanced. Global Multi-Asset Balanced changed its Dealing cut-off from T-1 to T and its settlement from T+4 to T+3. The Board of Directors International Selection Fund 30 June 2016 The information contained in this report is historical and not necessarily indicative of future performance.

16 Page 16 International Selection Fund Semi-Annual Report 30 June 2016 Investment Managers Report Economic and market background Central bank activity and currency moves were firmly in the spotlight in the first half of Although the Federal Reserve (Fed) lifted interest rates in December 2015, expectations for further hikes were soon pushed out given volatile financial markets and some weak economic data early in the period. This deferral of expectations for the next US rate rise was a theme throughout the six months. Meanwhile, the European Central Bank (ECB) announced fresh monetary policy easing in early March amid slow growth and still below-target inflation. The measures included expanding asset purchases to 80 billion a month (from 60 billion) and now including non-bank investment grade corporate bonds. In the UK, the focus during the period was on the referendum on EU membership which took place at the end of June. Sterling declined in February after the referendum date was announced and fell further once the vote to leave the EU was confirmed. In Japan, the central bank surprised investors by moving to a negative interest rate policy in January. However, the yen rose and continued to make gains later in the period as investors sought perceived safe havens amid the uncertainty caused by the UK s Brexit vote. In emerging economies, the Chinese authorities took steps to loosen monetary policy in an effort to boost growth, making cuts to the reserve requirement ratio and weakening the yuan. Newsflow from Brazil continued to be dominated by the Lava Jato corruption scandal and Prime Minister Dilma Rousseff was formally suspended on impeachment charges. Another feature of the six months was rebounding commodity prices. The risk aversion prevalent for much of the period saw investors turn to perceived safe havens which led to a rally in the price of gold. Meanwhile, oil prices started 2016 on a weak footing as the declines seen in 2015 continued, but then recovered later in the period. Equities overview The MSCI World index returned over the six months. A falling oil price, taken by some as evidence of weak global demand, in combination with growing US recession fears, weighed on investor sentiment initially in As both factors faded, together with emerging economies showing some signs of stabilisation, global stockmarkets gradually recouped most of their early losses by April. However, equities were unable to rally further, with the UK s Brexit vote in June negatively influencing many developed stockmarkets. US equities made gains as macroeconomic news generally improved over the period. An initially disappointing first quarter GDP reading was later revised higher and employment data generally looked resilient. In the eurozone, returns were negative (in euro terms) amid worries over the impact of the UK s Brexit vote and concern over the health of the region s banks, particularly the Italian lenders. UK stockmarket returns were positive, benefiting from the decline in sterling over the period. Investors anticipated the beneficial impact of a weakened currency on the UK stockmarket s predominately overseas earnings base. Currency moves also had a significant impact on Japanese equities, which were sharply lower in yen terms over the period. The MSCI Emerging s index returned A weaker US dollar, as rate hike expectations were deferred, proved supportive for emerging market currencies and also lifted commodity prices. The Brazilian market performed particularly strongly as investors welcomed the change of government and a new head of the central bank. Chinese equities experienced a volatile start to the period and underperformed the emerging markets index. Fixed income overview Bond markets outperformed equities over the period. A combination of a dovish Fed, mixed US economic data and heightened global risk aversion in the lead up to the UK's referendum on EU membership underpinned the performance of US Treasuries. The 10-year Treasury yield fell from 2.27 at the end of December 2015 to 1.47 at the end of June German 10-year Bunds fell to even lower yields, yielding just 0.15 by the end of the period. In corporate bond markets, the investment grade BofA Merrill Lynch Global Corporate Bond index rose but the high yield equivalent outperformed, rising Global corporate high yield debt sold off in January and February amid fears that the falling oil price would lead to a rise in defaults in the high yield sector. However, the stabilisation in oil prices later in the period supported the performance of the high yield sector. Outlook s economists have kept their 2016 global growth forecast unchanged at 2.5 with the principal impact of Brexit being felt in the UK where the growth forecast has been cut in half for Eurozone forecasts have also been reduced as a result of weaker demand from one of its biggest trading partners and the increase in uncertainty brought about by the referendum result. These effects will feed a broader slowdown in trade and activity in 2017, but the overall global effects are not great given the size of the UK in the world economy. Global inflation is forecast to rise to 2.2 this year and to 2.5 in Datastream, MSCI World, total return, US$. 2 Datastream, MSCI Emerging s, total return, US$. 3 Datastream, BofA Merrill Lynch Global Corporate Bond, US$ 4 Datastream, BofA Merrill Lynch Global High Yield, US$

17 International Selection Fund Semi-Annual Report 30 June 2016 Investment Managers Report (cont) Page 17 Outlook (cont.) The Fed looks likely to hike interest rates in December 2016 to The ECB is expected to reduce the deposit rate to The Bank of Japan (BoJ) is no longer expected to take rates lower following the adverse reaction to their move into negative territory in January. Fiscal support and the further delay in the consumption tax relieve some of the pressure on the BoJ. The Investment Managers International Selection Fund 30 June 2016 Source: Datastream MSCI Emerging s in US$ The information contained in this report is historical and not necessarily indicative of future performance.

18 Page 18 International Selection Fund Semi-Annual Report 30 June 2016 Notes to the Financial Statements as at 30 June 2016 The Company The Company was incorporated in Luxembourg on 5 December 1968 as a société anonyme. Pursuant to an Extraordinary General Meeting of Shareholders held on 31 January 1989, the form and name of the Company, as well as its establishment period, was changed to a société d investissement à capital variable ( SICAV ) established for an unlimited period under the name of International Selection Fund. The company qualifies as an undertaking for collective investment (UCI) regulated by the provisions of Part I of the Luxembourg Law of 17 December 2010, as amended, regarding undertaking for collective investment (the 2010 law ). Classes of Shares At the date of this report, seventeen classes of shares are available within the Funds: A, B, C, D, E, F, I, IZ, J, R, S, X, X1, A1, AX, Y and Z shares. All Funds offer A, B and C shares, apart from the following Funds: Emerging Multi-Asset Income (offers only A, A1, C & I); EURO Credit Absolute Return (offers only A, C, I & IZ); EURO High Yield (offers only A, C & I); European Equity (ex UK) (offers only A, C & S); European Equity Focus (offers only A, C, I & Z); Global Conservative Convertible Bond (offers only A, C, E & I); Global Demographic Opportunities (offers only A, C, & Z); Global Gold* (offers only A, A1, C & I); Global Multi Credit* (offers only A, C & I); Global Multi-Asset Conservative* (offers only A, A1,C & I); Global Tactical Asset Allocation (offers only C & I shares); Hong Kong Dollar Bond (offers only A, A1, C & I shares); Indian Opportunities (offers only A, A1,C, E & I); Japan DGF (offers only C, I & X shares); Japanese Equity Alpha (offers only A, C & I shares); Japanese Opportunities (offers only A, A1, C & I); Multi-Manager Diversity (offers only A, C & S); QEP Global Absolute (offers only A, C & I); QEP Global Blend (offers only A, C, I & S); QEP Global Core (offers only C, I, X & X1 shares); QEP Global Emerging s (offers only A, A1, C, I, IZ & Z); QEP Global Plus (offers only A, C & I); RMB Fixed Income (offers only A, C, E & I); Strategic Beta (offers only C & I) UK Opportunities (offers only A, C & S); Shares are generally issued as Accumulation shares. Distribution shares may be issued within any Fund at the Directors discretion. A list of available Distribution shares may be obtained upon request at the Management Company. In accordance with the provisions of the current prospectus, the Directors may also offer classes in multiple currency denominations. The respective Investment Managers have the ability to hedge the shares of such classes in relation to the Fund currency or in relation to currencies in which the relevant Fund's underlying assets are denominated. Where hedging of this kind is undertaken, the respective Investment Managers may engage, for the exclusive account of such share class, in currency forwards, currency futures, currency option transactions and swaps in order to preserve the value of the reference currency against the Fund currency. Where undertaken, the effects of this hedging will be reflected in the Asset and, therefore, in the performance of such additional share class. Similarly, any expenses arising from such hedging transactions will be borne by the class in relation to which they have been incurred. The classes of share available for each Fund are set out in detail in the current prospectus. The Directors may decide from time to time for some or all of the Bond Funds to issue duration hedged share classes. Duration hedged share classes utilise hedging strategies that seek to reduce the share class' sensitivity to changes in interest rate movements. There is no assurance that these hedging strategies will be successful. Where undertaken, the effects of this hedging will be reflected in the Asset and, therefore, in the performance of the share class. Similarly, any expenses arising from such hedging transactions will be borne by the duration hedged share class. The performance of the duration hedged share classes may underperform other share classes in the Bond Funds depending on interest rate movements. Duration hedged share classes can be issued in relation to any type of available share classes of Bond Funds. The naming convention used for the share classes is as follows: A Acc for base currency share class; A Acc CCY for a multicurrency share class; A Acc CCY Hedged for a hedged share class. Initial Charge The Management Company and Distributors are entitled to the following initial charges, which can be partly or fully waived at the Directors discretion. * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

19 International Selection Fund Semi-Annual Report 30 June 2016 Notes to the Financial Statements Page 19 Initial Charge (cont) A and AX Shares Equity Funds Multi-Asset Funds Multi-Manager Funds Absolute Return Funds and Bond Funds Liquidity Funds Initial charge of up to of the Asset per Share Initial charge of up to of the Asset per Share with the exception of: up to of the Asset per Share of Global Multi-Asset Balanced*, Global Multi-Asset Flexible* and Wealth Preservation up to of the Asset per Share of Global Multi-Asset Conservative* Initial charge of up to of the Asset per Share Initial charge of up to of the Asset per Share No initial charge F Shares Equity Funds Initial charge of up to of the Asset per Share A1 Shares Equity Funds Multi-Asset Funds Absolute Return Funds and Bond Funds Liquidity Funds C and E Shares Liquidity Funds Initial charge of up to of the Asset per Share Initial charge of up to of the Asset per Share with the exception of: up to of the Asset per Share of Global Multi-Asset Balanced*, Global Multi-Asset Flexible* and Wealth Preservation up to of the Asset per Share of Global Multi-Asset Conservative* Initial charge of up to of the Asset per Share No initial charge Initial charge of up to of the Asset per Share No initial charge B, D, I, IZ, J, R, S, X, X1, Y and Z Shares No initial charge Distribution Charge A, AX, C, E, F, I, IZ, J, R, S, X, X1, Y and Z Shares No distribution charge B Shares * Equity Funds Absolute Return Funds Bond Funds Liquidity Funds Multi-Asset Funds D Shares ** A1 Shares ** Distribution charge of 0.60 per annum of the net assets of Funds Distribution charge of 0.50 per annum of the net assets of Funds Distribution charge of 0.50 per annum of the net assets of Funds with the exception of: 0.10 per annum of the net assets of EURO Short Term Bond Distribution charge of 0.10 per annum of the net assets of Funds with the exception of: No distribution charge for US Dollar Liquidity Distribution charge of 0.60 per annum of the net assets of Funds with the exception of: 0.50 per annum of the net assets of Fund Wealth Preservation Distribution charge of 1.00 per annum of the net assets of Funds Distribution charge of 0.50 per annum of the net assets of Funds with the exception of: 0.10 per annum of the net assets of EURO Liquidity No distribution charge for of US Dollar Liquidity * Distribution charges in respect of B shares are payable quarterly. ** Distribution charges in respect of A1 and D shares are paid at such intervals, as may be agreed upon from time to time between the Company and those Distributors that are appointed specifically for the purpose of distributing such shares.

20 Page 20 International Selection Fund Semi-Annual Report 30 June 2016 Notes to the Financial Statements Minimum Subscription, Minimum Additional Subscription and Minimum Holding In accordance with the provisions of the current prospectus, minimum amounts for subscription, additional subscription and holding are as follows: A, AX, A1, B, D, F and Y Shares The minimum initial subscription, additional subscription and holding amount is EUR 1,000 or 1,000 or their near equivalent in any other freely convertible currency. ** C and E Shares I and J Shares IZ & Z Shares X Shares X1 Shares R and S Shares The minimum initial subscription and holding amount is EUR 500,000 or 500,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 250,000 or 250,000 or their near equivalent in any other freely convertible currency. ** E Shares will only be available, with prior agreement of the Management Company. The minimum initial subscription and holding amount is EUR 5,000,000 or 5,000,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 2,500,000 or 2,500,000 or their near equivalent in any other freely convertible currency. ** I shares will only be offered to investors who, at the time the relevant subscription order is received, are clients of s with an agreement covering the charging structure relevant to the clients investments in such shares and who are Institutional Investors. J Shares will only be offered to and can only be acquired by Japanese Fund of Funds, which are Institutional Investors. The minimum initial subscription and holding amount is EUR 100,000,000 or 100,000,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 20,000,000 or 20,000,000 or their near equivalent in any other freely convertible currency. ** IZ Shares will only be offered to and can only be acquired by Institutional Investors, with prior agreement of the Management Company. Z Shares will be offered in limited circumstances to professional investors for distribution in certain countries and through certain Distributors, with the prior agreement of the Management Company. The minimum initial subscription and holding amount is EUR 25,000,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 12,500,000 or their near equivalent in any other freely convertible currency. ** X shares will only be available, with prior agreement of the Management Company, to institutional investors, as may be defined from time to time by the guidelines or recommendations issued by the Luxembourg supervisory authority. The minimum initial subscription and holding amount is EUR 22,500,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 12,500,000 or their near equivalent in any other freely convertible currency. ** X1 shares will only be available, with prior agreement of the Management Company, to institutional investors, as may be defined from time to time by the guidelines or recommendations issued by the Luxembourg supervisory authority. There are no minimum subscription or holding amounts. Further details on specific features of the different classes of shares and the conditions under which initial and distribution fees are calculated can be found in the current prospectus. Asset Calculation of Asset per Share The Asset per share of each class is calculated on each Dealing Day in the currency of the relevant class. It is calculated by dividing the Asset attributable to each class, being the proportionate value of its assets less its liabilities, by the number of shares of such class then in issue. The resulting sum is rounded to the nearest four decimal places *. Further details on rules that apply in valuing total assets can be found in the current prospectus. Valuation of the of the Company The value of securities, financial derivative instruments and assets is determined on the basis of the last available price on the stock exchange or any other regulated market on which those securities or assets are traded or admitted for trading. Where such securities or other assets are quoted or dealt in on more than one stock exchange or any other regulated market, the Directors shall make regulations for the order of priority in which stock exchanges or other regulated markets shall be used for the provision of prices of securities or other assets. If a security is not traded on or admitted to any official stock exchange or any other regulated market or, in the case of securities so traded or admitted, the last available price does not reflect their true value, the Directors are required to proceed on the basis of their expected sales price, which shall be valued with prudence and in good faith. Liquid assets and money market instruments are usually valued on an amortised cost basis. Financial derivative instruments, which are not listed on any official stock exchange or any other regulated market, are valued in accordance with market practice. The swaps are valued at their fair value based on the underlying securities (at close of business or intraday) as well as on the characteristics of the underlying commitments. Units or shares in undertakings for collective investments are valued on the basis of their last available net asset value. The value of any cash in hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, cash dividends and interest declared or accrued as aforesaid and not yet received shall be deemed to be the full amount thereof, unless in any case the same is unlikely to be paid or received in full, in which case the value thereof shall be arrived at after making such discount as the Company may consider appropriate in such case to reflect the true value thereof. ** These minima may be waived from time to time at the discretion of the Directors. * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

21 International Selection Fund Semi-Annual Report 30 June 2016 Notes to the Financial Statements Page 21 Asset (cont) Valuation of the of the Company (cont) Any assets or liabilities in currencies other than the base currencies of the Funds will be converted using the relevant spot rate quoted by a bank or other responsible financial institution. If any of the aforesaid valuation principles do not reflect the valuation method commonly used in specific markets or if any such valuation principles do not seem accurate for the purpose of determining the value of the Company s assets, the Directors may fix different valuation principles in good faith and in accordance with generally accepted valuation principles and procedures. The Directors are authorised to apply other appropriate valuation principles for the assets of the Funds and/or the assets of a given class if the aforesaid valuation methods appear impossible or inappropriate due to extraordinary circumstances or events. As of 30 June 2016, fair valuation was applied to the following securities: Security Name Antares Energy Anxin-China Banca Popolare dell'etruria e del Lazio Caja de Ahorros del Mediterraneo China Animal Healthcare China Lumena New Materials China Lumena New Materials China Lumena New Materials China Lumena New Materials China Lumena New Materials China Lumena New Materials China Metal Recycling China Taifeng Beddings China Taifeng Beddings China Taifeng Beddings Irish Bank Resolution Kuwait Foods Americana Jurong Technologies Industrial Longtop Financial Technologies ADR Neo OW Bunker OW Bunker Peace Mark Safeway Safeway (New York) SNS Bank SNS Bank RegS variable perpetual SNS Bank EMTN /10/2020 SNS REAAL SNS REAAL SNS REAAL Urbi Desarrollos Urbanos Urbi Desarrollos Urbanos Urbi Desarrollos Urbanos Ya Hsin Industrial Fund Global Energy QEP Global Emerging s QEP Global Blend QEP Global Core QEP Global Emerging s QEP Global Active QEP Global Quality QEP Global Emerging s QEP Global Blend Global Multi-Asset Income QEP Global Plus Global Multi-Asset Income QEP Global Emerging s QEP Global Active QEP Global Plus QEP Global Core Middle East QEP Global Active Hong Kong Equity QEP Global Emerging s Global Smaller Companies European Smaller Companies European Equity Alpha Global Recovery Global Recovery Global High Yield EURO High Yield Global Bond QEP Global Blend QEP Global Active QEP Global Plus QEP Global Active QEP Global Emerging s QEP Global Plus QEP Global Active Fair Pricing In accordance with the provisions of the current prospectus, fair value pricing may be implemented to protect the interests of the Company s shareholders against market timing practices. Accordingly, if a Fund is primarily invested in markets that are closed for business at the time the Fund is valued, the Directors may, during periods of market volatility and by derogation from the provisions above under Calculation of Asset per share, cause the Fund Administrator to allow for the Asset per share to be adjusted to reflect more accurately the fair value of the Fund s investments at the point of valuation. The level of adjustment is based upon the movement in a chosen surrogate up until the point of valuation, provided that such movement exceeds the threshold as determined by the Directors for the relevant Fund. The surrogate will usually be in the form of a futures index but might also be a basket of securities, which the Directors believe is strongly correlated to and representative of the performance of the Fund. Where an adjustment is made as per the foregoing, it is applied consistently to all classes of shares in the same Fund. During the period under review, fair value pricing was applied to 19 Funds. The Directors, however, reserve the right to extend the implementation of fair value pricing in respect of other Funds whenever they deem it appropriate. The Funds in relation to which fair value pricing was applied during the period under review as well as details of the relevant reference indices, thresholds and surrogates are shown in the following table:

22 Page 22 International Selection Fund Semi-Annual Report 30 June 2016 Notes to the Financial Statements Fair Pricing (cont) Fund Threshold Surrogate Global Climate Change Equity 0.50 CME S&P 500 Index Futures Global Demographic Opportunities 0.50 CME S&P 500 Index Futures Global Dividend Maximiser 0.50 CME S&P 500 Index Futures Global Equity 0.50 CME S&P 500 Index Futures Global Equity Alpha 0.50 CME S&P 500 Index Futures Global Equity Yield 0.50 CME S&P 500 Index Futures Global Smaller Companies 0.50 CME S&P 500 Index Futures Japanese Equity 0.50 CME Yen Denominated Nikkei 225 Index Future Japanese Equity Alpha 0.50 CME Yen Denominated Nikkei 225 Index Future Japanese Opportunities 0.50 CME Yen Denominated Nikkei 225 Index Future Japanese Smaller Companies 0.50 CME Yen Denominated Nikkei 225 Index Future QEP Global Active 0.50 CME S&P 500 Index Futures QEP Global Blend 0.50 CME S&P 500 Index Futures QEP Global Core 0.50 CME S&P 500 Index Futures QEP Global ESG 0.50 CME S&P 500 Index Futures QEP Global Quality 0.50 CME S&P 500 Index Futures US Large Cap 0.50 CME S&P 500 Index Futures US Small & Mid-Cap Equity 0.50 CME S&P 500 Index Futures US Smaller Companies 0.50 CME S&P 500 Index Futures On 30 June 2016, the last working date of the period under review, no Funds were adjusted. Exchange Rates The exchange rates used for the calculation of the combined total in Eur of the financial Statement as at 30 June 2016 are: 1 EUR = ; 1 EUR = GBP; 1 EUR = CHF; 1 EUR = JPY; 1 EUR = HKD; 1 EUR = CNH. Swing Pricing Adjustment A Fund may suffer dilution of the Asset per Share due to investors buying or selling Shares in a Fund at a price that does not reflect the dealing and other costs that arise when security trades are undertaken by the Investment Manager to accommodate cash inflows or outflows. In order to counter this impact, a Swing Pricing mechanism may be adopted to protect the interests of Shareholders of the Fund. If on any Valuation Date, the aggregate net transactions in Shares of a Fund exceed a pre-determined threshold, as determined and reviewed for each Fund on a quarterly basis by the Management Company, the Asset per Share may be adjusted upwards or downwards to reflect net inflows and net outflows respectively. The net inflows and net outflows is determined by the Management Company based on the latest available information at the time of calculation of the Asset per Share. The Swing Pricing mechanism may be applied across all Funds. The extent of the price adjustment will be set by the Management Company to reflect dealing and other costs. Such adjustment may vary from Fund to Fund and will not exceed 2 of the original Asset per Share. The swing pricing mechanism has been applied to the Company s Funds since 12 January On 30 June 2016, the last working day of the period under review, swing pricing adjustment was applied to Emerging Corporate Bond, European Smaller Companies, Global Energy, Latin American and Swiss Equity Opportunities. The official Asset s per share of these Funds following the application of the swing pricing adjustment are shown in the following table. All other financial information stated in this report is shown before any adjustments for swing pricing. Emerging Corporate Bond European Smaller Companies Global Energy Latin American Swiss Equity Opportunities EUR CHF Asset per Share (including swing pricing adjustment) as at 30 June 2016 A Acc A Dis A1 Acc A1 Dis B Acc B Dis

23 International Selection Fund Semi-Annual Report 30 June 2016 Notes to the Financial Statements Page 23 Swing Pricing Adjustment (cont) Emerging Corporate Bond European Smaller Companies Global Energy Latin American Swiss Equity Opportunities EUR CHF C Acc C Dis E Acc I Acc I Dis S Acc Z Acc Z Dis A Acc (CHF) A Acc (EUR) A Acc (GBP) A Acc (SGD) A Dis (EUR) A Dis (GBP) A1 Acc (EUR) A1 Acc () B Acc (EUR) C Acc (CHF) C Acc (EUR) C Dis (GBP) S Dis (GBP) Z Acc (EUR) Z Dis (GBP) A Acc EUR Hedged A Acc Hedged A1 Acc EUR Hedged B Acc EUR Hedged C Acc EUR Hedged E Acc EUR Hedged I Acc EUR Hedged Taxation The Company is not subject to any taxes in Luxembourg on income or capital gains. The only tax to which the Company in Luxembourg is subject is the taxe d abonnement to a rate of 0.05 per annum based on the net asset value of each Fund at the end of the relevant quarter, calculated and paid quarterly. In respect of any Share Class or Fund which comprises only institutional Investors (within the meaning of Article 174 of the Law), the tax levied will be at the rate of 0.01 per annum. Changes in the Funds A list specifying the total purchases and sales for each Fund, which took place during the period under review, may be obtained free of charge upon request at the Company s registered office. Transactions made for a Purpose other than Hedging In accordance with the provisions of the current prospectus, the Company may, for a purpose other than hedging, purchase and sell futures contracts, options on any kind of financial instruments and equity swaps provided that the Company will only enter into equity swap transactions with highly rated financial institutions specialised in this type of transactions. Securities Lending There has been no securities lending activity on the Company s Funds since December Disclosure of Transaction Costs The transaction costs are broker commission fees and taxes related to the purchase and sale of transferable securities. The transaction costs are shown net of the corresponding elements of the swing pricing factors that were applied when net flows in a Fund exceeded 1 on any business day during the period under review. Bond funds will generally show the figure of zero as the broker commission fees are included in the spread, which is excluded from the calculation pursuant to Annex I, Schedule B, Chapter V of Directive 2009/65/EC of the European Parliament.