Manager s annual long report

Transcription

1 THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Manager s annual long report For the period 1 January 2017 to 31 December 2017

2 THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Contents Page(s) Manager s investment report 2 to 6 Portfolio statement 7 to 19 Net asset value per unit and comparative table 20 to 21 Ongoing charges 22 Risk and reward profile 22 Authorised status 22 Trustee report 22 to 23 Statement of the Manager s responsibilities 23 Certification of financial statements by Directors of the Manager 24 Independent auditor s report Statement of total return 26 Statement of change in net assets attributable to Unitholders 26 Balance sheet 27 Notes to the financial statements 28 to 38 Distribution tables 39 Important Changes Remuneration 41

3 The Marks and Spencer Worldwide Managed Fund THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Manager, Registrar, dealing, administration and marketing Marks and Spencer Unit Trust Management Limited Authorised and regulated by the Financial Conduct Authority. Investor helpline: or if calling from abroad. Lines are open 8am-8pm Monday to Friday, 9am-5pm on Saturday and 10am-4pm bank holidays (closed on Sunday, Christmas Day, Boxing Day and New Year s Day). Please be aware that opening hours may be restricted over the Christmas period, please contact us for details. Calls may be recorded. Head office and registered office Kings Meadow Chester CH99 9FB Registered in England No Directors of the Manager James Coyle (Chairman and non-executive Director) Sue Fox (Chief Executive Officer and Director) David Stewart (Non-Executive Director) Phillip Scott (Director) Douglas van den Aardweg (Non-Executive Director) Matt Handley (Director) Peter Dew (Non-Executive Director) appointed 07 April 2017 Simon Ellis (Director) - appointed 23 May 2017 Investment advisers HSBC Global Asset Management (UK) Limited 8 Canada Square London E14 5HQ HSBC Global Asset Management (UK) Limited directly manage a proportion of the Fund and sub-delegate the remaining fund management to the following specialist advisers: Insight Investment Management (Global)* Limited 160 Queen Victoria Street London EC4V 4LA The above listed investment advisers are authorised and regulated by the Financial Conduct Authority. Axiom International Investors LLC* 33 Benedict Place Greenwich CT USA Sanders Capital LLC* 390 Park Avenue New York NY USA Axiom International Investors LLC and Sanders Capital LLC are not authorised by the Financial Conduct Authority but are registered with the Securities and Exchange Commission in the USA. Trustee State Street Trustees Limited Quartermile 3 10 Nightingale Way Edinburgh EH3 9EG Authorised and regulated by the Financial Conduct Authority. Independent auditor KPMG LLP 15 Canada Square London E14 5GL * during the period 1 January 2017 to 14 September 2017 PAGE 1

4 Manager s investment report THE MARKS AND SPENCER WORLDWIDE MANAGED FUND This section gives you confirmation of the Fund objective. It also gives you the investment strategy employed by each investment adviser, the percentage of the Fund allocated to each investment adviser as at the report date; and an economic, market and portfolio review for the period of the report. Our objectives and methods The Fund s objective is to achieve long term capital growth, as well as a reasonable yield. A reasonable yield is defined as the quoted average yield of funds in its Investment Association peer group which is the mixed investment (minimum 40% in shares, maximum 85% shares) peer group. For the period 01 January 2017 to 14 September 2017 The Fund invested in United Kingdom fixed interest stocks, United Kingdom (UK) and overseas equities and other securities. Generally the Fund invested in transferable securities listed or traded on an eligible securities market with power to invest in recently issued transferable securities which were to be so listed or traded. However, transferrable securities, that were not approved securities, could have been held within the Fund provided the total of such securities did not exceed 10% value of the property of the Fund. This 10% limit was inclusive of recently issued securities. For the period 15 September 2017 to 31 December 2017 The Fund invests in a broad range of securities including equities, fixed income and money market instruments. The portfolio will be diversified globally by investing both in the UK and overseas. Investments will be held directly in securities or indirectly via collective investment schemes, of which a large proportion are likely to track indices as part of their underlying objective. In addition, the Fund may indirectly hold property by investing in collective investment schemes. The collective investment schemes in which the Fund will invest will include schemes which are managed or operated by the Manager or an associate of the Manager. The Fund may use derivative instruments (options, futures and contracts for differences) and forward transactions for the purposes of efficient portfolio management. These instruments can therefore be used to reduce risk, reduce costs, or generate additional capital or income with no, or low levels of, risk. The Manager s investment policy may mean that at times it is appropriate not to fully invest but to hold cash or near cash. This will only occur when the Manager reasonably regards it as necessary to enable units to be redeemed or for the efficient management of the Fund in accordance with its objectives or purpose that may reasonably be regarded as ancillary to the objectives of the Fund. Strategy For the period 01 January 2017 to 14 September 2017 The Fund was structured to deliver the objective through its broad exposure to UK Government bonds and worldwide equities including the UK. The Fund used a multimanager approach and it invested in a range of UK shares, UK and international bonds and overseas shares. We used the skills of four investment management companies during this period to select the investments. Each company was chosen for their specific approach to investment and for skills which were complementary when matched together. For the period 15 September 2017 to 31 December 2017 We have regularly reviewed the decision to use non-hsbc investment managers. Our most recent review concluded that the use of such investment managers no longer represents the best value for investors and therefore we have taken action to simplify the structure. We have concluded that HSBC Global Asset Management (UK) Limited will be better placed to manage the whole of the Fund. We have appointed HSBC Global Asset Management (UK) Limited as the sole Investment Manager to provide investment management services to the Manager in PAGE 2

5 THE MARKS AND SPENCER WORLDWIDE MANAGED FUND respect of the Fund. The Fund is structured to deliver the Objective through its broad exposure to UK and global equities and fixed income securities. The allocation to these asset classes will vary through time to reflect both the longerterm investment return expectations and shorter-term more tactical market views of the Investment Manager. The longer-term allocations across the various different asset classes are adjusted to meet the Objective and are reviewed at least annually. The short-term tactical asset allocation enables the Investment Manager to invest in asset types, regions and currencies it believes have a more positive outlook or to reduce exposure to those asset classes it considers to have a less favourable outlook. The desired allocation to each asset class will be achieved by investing indirectly in either collective investment schemes (CIS) or directly into securities. This will include investment in CIS, a large proportion of which are likely to have objectives which aim to track various indices, which are sometimes referred to as being passively managed. There is no limit to the percentage which can be invested in CIS and there is no limit to the percentage of the Fund which can be invested in other CIS, managed by the Manager, the Investment Manager or an associate. It is the intention where possible to invest in CIS managed by the Investment Manager. The investment styles the Investment Manager can utilise may include selecting CIS in which to invest which may track indices as part of their objective and policy, tracking market capitalisation indices, and/or the use of suitable alternative weighting schemes that are not market weighted that the Investment Manager considers appropriate. As at the date of this report: - 23% of the value of the Fund is invested directly in UK equities with the aim to match the return of the FTSE All-Share Index, with a further - 50% of the value of the Fund invested in CIS or other instruments which in turn are passively managed and individually track a diverse range of market specific, regional and global indices in order to achieve the Objective of the Fund. It should be noted that this allocation will fluctuate based upon market movement and the Investment Manager s discretion to adjust the asset allocation to enable the Fund to meet its Objective. This is sometimes referred to as Tactical Asset Allocation (TAA). The Investment Manager may use a combination of investment styles and allocation techniques to actively manage the Fund and these will vary from time to time. Investors should be aware that the asset allocation will fluctuate based upon market movements and the Investment Manager has full discretion to adjust the asset allocation to enable the Fund to meet its Objective. The Manager has determined that the Fund will not invest in securities issued by companies that are considered, after reasonable enquiries, to be involved in the use, development, manufacturing, stockpiling, transfer or trade of cluster munitions and/or anti-personnel mines. The investment advisers in the period under review were: Insight Investment Management (Global) Limited (to 14 September 2017) Insight aimed to add stability and income to the Fund by investing in government bonds and other fixed interest securities. The portfolio invested primarily in UK fixed interest securities but was permitted to hold up to 40% in foreign currency denominated fixed income securities. PAGE 3

6 THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Axiom International Investors LLC (to 14 September 2017) Axiom invested in companies that they believed would report better results than expected by consensus market forecasts. The positive surprises compared to expectations could have meant that the shares may have outperformed. Sanders Capital LLC (to 14 September 2017) Sanders had a value investment strategy where they used fundamental research to identify shares that were undervalued by the markets. HSBC Global Asset Management (UK) Limited For the period 01 January 2017 to 14 September 2017 The primary objective of HSBC Global Asset Management (UK) Limited was to track the FTSE All-Share Index. They constructed a portfolio which closely resembled the UK equity market as a whole but had a slightly above average level of dividend income. To do this they inevitably held a large range of holdings. For the period 15 September 2017 to 31 December 2017 The Fund invests in a broad range of securities including equities, fixed income and money market instruments. The portfolio will be diversified globally by investing both in the UK and overseas. Investments will be held directly in securities or indirectly via collective investment schemes, of which a large proportion are likely to track indices as part of their underlying objective. In addition, the Fund may indirectly hold property by investing in collective investment schemes. The collective investment schemes in which the Fund will invest will include schemes which are managed or operated by the Manager or an associate of the Manager. We developed a working partnership with our investment advisers. We provided each adviser with a benchmark against which to measure performance. Their results and the processes they used to make decisions were regularly monitored by the HSBC Governance Forum. The percentages below reflect the actual allocation for each investment sector and manager, including uninvested cash: 14/9/17 31/12/17 UK shares HSBC Global Asset Management (UK) Limited 24.9% 24.4% UK and overseas shares and bonds through directly held investments and collective investment schemes HSBC Global Asset Management (UK) Limited % International shares Axiom International Investors LLC 30.8% - Sanders Capital LLC 24.4% 24.4% - UK and overseas bonds Insight Investment 19.8% - Management (Global) Limited - Cash 0.1% 2.4% PAGE 4

7 THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Percentage growth 31/12/12 to 31/12/13 to 31/12/14 to 31/12/15 to 31/12/16 to 31/12/13 31/12/14 31/12/15 31/12/16 31/12/ % 7.3% 1.3% 19.2% 10.7% This information relates to the past, and past performance is no guarantee of future performance. All the above figures are on a bid to bid basis, net income reinvested. The performance figures exclude the initial charge of the Fund. Source: Morningstar. Review of the 12 months to 31 December 2017 The majority of equity markets showed a strongly positive return in 2017, adding to gains seen in recent years. The year saw coordinated economic expansion in all the major blocs and this was a positive factor which allowed equity markets to perform well. In the US, market sentiment was positive at the start of the year following Donald Trump s inauguration as US President. Expectations that he would pursue pro-growth policies, such as tax reductions and infrastructure spending, which would benefit company earnings, helped propel equities higher. Although scepticism about Trump s ability to deliver on his promises set in as the year went on, the strength of US economic data, accompanied by better economic data in all of the major blocs, supported an equity rally. Optimism was further bolstered at year end as Trump s proposed tax legislation passed in early December, with the proposed tax cut injecting additional momentum into US equity market prospects. In the UK, negotiations on Brexit continued to dominate the news throughout the year but did not provide any real clarity with regard the post-brexit relationship with the EU. The UK economy continued to grow, but more slowly than in the previous year, held back by Brexit uncertainty and consumers seeing little or no growth in real incomes as a result of higher inflation. In April, Prime Minister Theresa May unexpectedly announced that a snap general election would be held on 8 June, citing a need for a clear mandate ahead of Brexit negotiations. Although the Conservatives won more seats than the other parties in the election, this was not enough to secure the party a parliamentary majority. Lack of a firm political base and uncertainty over Brexit, although factors holding the UK equity market back, did not prevent strong positive gains for UK equities for the year as a whole. Within the eurozone, a range of positive economic indicators bolstered European equities and continued to point towards expansion, leading the European Central Bank to signal that it would scale back its stimulus programme. In Germany, Chancellor Angela Merkel s party secured fewer seats than expected in its federal election, casting some doubt on whether French president Macron would be able to secure enough backing from Germany for his proposals to reform the eurozone. In Spain, although Catalonia called for an independence referendum to be held on 1 October, the country s government refused to recognise the vote and deemed it illegal. In Asia, The People s Bank of China signalled its intention to keep monetary conditions tight and to pre-empt the risk of capital outflows as ratings agency Standard & Poor s downgraded the country s credit rating, citing concerns over debt levels. Nonetheless, Chinese equities made strong gains, as did Asian equities in general. In Japan, although the market experienced turbulence following North Korea s nuclear weapon testing, equities soon reverted to performing well, helped by business investment and economic sentiment which improved. PAGE 5

8 THE MARKS AND SPENCER WORLDWIDE MANAGED FUND The Global and UK government bond markets were relatively stable in 2017, supported by low levels of interest rates and a continued search for yield by investors. Corporate Bond issuance was at record highs in 2017 as issuers took advantage of historically low interest rates. This did not prevent corporate bond markets from continuing to perform well, however. In the US, the central bank continued its policy of gradual normalisation of interest rates, while elsewhere the Bank of England reversed its rate cut made after the Brexit vote and the European Central Bank signalled that monetary policy would be made slightly less expansionary. Portfolio Review During the third quarter, the portfolio manager implemented a variety of changes. This followed the decision to transfer the mandates managed by Sanders, Axiom and Insight to HSBC Global Asset Management. Asset allocation changed from 80% in equities and 20% in bonds to 70% in equities, 23% in bonds, 5% in property and 2% in cash. The reduction in equities came from the global allocation, which declined to 45%. In fixed income, the fund became more diversified by moving away from a reliance on UK government bonds by introducing corporate bonds (both Investment Grade and High Yield), as well as Emerging Market Debt, with allocations to both US dollar denominated and local currency investments. This further added to return potential of the overall fund. A further asset class of Real Estate Investment Trusts, which gives the fund exposure to the property market via a collection of listed investments, was added. It should be noted that all percentages shown above are indicative, as the portfolio will be managed actively and therefore these numbers can be expected to change. Outlook We enter 2018 with coordinated economic growth from the main economic blocs. Such coordination is a positive sign that economic growth can be sustained over the course of the year. President Trump passed his tax reform bill at the end of 2017, which should boost US economic growth via increased consumer spending and business investment (though the magnitude of the stimulus is unclear). Continental Europe, for so long the weak man of the major economic blocs with stuttering, inconsistent economic growth, is producing robust economic data again. In the UK, Brexit introduces an element of uncertainty which could hold the economy back somewhat. Nonetheless weak sterling and global economic growth are positives. Japan is also benefitting from the global economic upturn, while emerging economies appear to be through their weakness of recent years, helped by a recovery in commodity prices and more competitive exchange rates. Such a scenario paints a positive backdrop for riskier assets, such as equities. Although these markets have performed well, the environment for equities is positive as long as economic growth is sustained, bond markets do not decline materially and central banks continue with their gradual approach to normalizing monetary policy. It would not be surprising to see greater volatility in the asset class than has been the case recently, however. Fixed income markets continue to be characterized by historically low levels of yield. At this point in the economic cycle this makes them vulnerable to set-back. However, their performance in 2017, when a similar environment ensued, demonstrates that it is perfectly possible for fixed income to also deliver positive returns in the year ahead, particularly if inflation remains well behaved. PAGE 6

9 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND UK EQUITIES AND CONVERTIBLES (20.81%; 31/12/ %) Alternative energy 0.00 Volution Group 6,815 13,766 - Oil & gas producers 3.08 BP 1,256,279 6,559, Cairn Energy 37,846 80, EnQuest 69,983 19,945 - Nostrum Oil & Gas 4,459 14,503 - Ophir Energy 41,338 27, Premier Oil 32,930 25, Royal Dutch Shell A 295,921 7,332, Royal Dutch Shell B 244,145 6,113, Soco International 14,798 16,315 - Tullow Oil 91, , Vesuvius 15,175 88, Oil equipment & services 0.05 Hunting 9,093 55, John Wood 44, , Lamprell 17,000 12,963 - Chemicals 0.16 Croda International 8, , Elementis 30,115 86, Johnson Matthey 12, , Synthomer 17,538 85, Victrex 5, , Forestry & paper 0.07 Mondi 24, , Industrial metals 0.02 Evraz Group 33, , Ferrexpo 14,230 41,680 - Mining 1.03 Acacia Mining 9,450 18,758 - Anglo American 64, , Antofagasta 23, , BHP Billiton 135,379 2,060, Fresnillo 11, , Gem Diamonds Mining 4,300 3,053 - Hochschild Mining 14,608 38, Kaz Minerals 14, , Petropavlovsk 194,000 14,938 - Rio Tinto 77,411 3,049, Sirius Minerals 286,724 67, Vedanta Resources 6,559 52, Construction & materials 0.09 Balfour Beatty 45, , Boot (Henry) 6,570 20,367 - Costain 6,516 30,446 - Forterra 12,288 36, Ibstock 24,009 63, Keller 4,449 43, Kier Group 5,978 65, Low & Bonar 21,994 11,712 - Marshalls 12,645 57, Morgan Sindall 2,407 34,348 - Norcros 4,470 7,957 - Polypipe Group 12,077 47, Tyman 10,747 38, Aerospace & defence 0.42 BAE Systems 207,287 1,186, Chemring 17,886 32,821 - Cobham 163, , Meggitt 52, , QinetiQ 37,149 85, Rolls-Royce 107, , Rolls-Royce (C Share Ent)*** 4,954, Senior 26,319 68, Ultra Electronics Holding 5,001 67, General industrials 0.16 Coats Group 75,051 66, RPC Group 27, , PAGE 7

10 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Smith (David S) 64, , Smiths Group 25, , Electronic & electrical equipment 0.14 Dialight 2,050 11,275 - Halma 25, , Morgan Advanced Materials 17,700 59, Oxford Instruments 3,356 28, Renishaw 2, , Rotork 57, , Spectris 7, , TT Electronics 10,053 22,267 - Xaar 4,814 17,691 - Industrial engineering 0.16 Bodycote 12, , Fenner 12,874 51, Hill & Smith 4,989 66, IMI 18, , Melrose Industries 123, , Renold 13,119 6,100 - Severfield-Rowen 20,960 16,034 - Trifast 7,676 18,729 - Weir Group 14, , Industrial transportation 0.10 BBA Group 70, , Clarkson 1,505 43, Clipper Logistics 4,104 17,237 - Fisher (James) & Sons 2,591 40, Gulf Marine Services 8,546 3,824 - Royal Mail 61, , Wincanton 8,492 19,786 - Support services 0.73 ACAL 4,166 15,425 - Aggreko 15, , Aldermore 17,339 53, Ashtead 32, , Babcock International 33, , Biffa 12,145 31, Bunzl 22, , Capita 44, , Carillion 30,104 5,193 - CMC Markets 6,444 9,650 - Connect 17,374 18,938 - De La Rue 6,559 42, Diploma 7,405 92, Electrocomponents 30, , Equiniti 19,915 56, Essentra 16,938 89, G4S 103, , Hays 86, , Hogg Robinson Group 16,240 13,033 - HomeServe 16, , Howden Joinery 40, , Interserve 9,685 9,249 - Intertek 10, , Mears Group 6,112 24,631 - Menzies (John) 4,935 33, Mitie 22,660 43, Northgate 8,488 32, Pagegroup 20,012 93, Paypoint 4,473 40, Renewi 41,066 42, Rentokil Initial 122, , Ricardo 3,257 28,336 - Robert Walters 4,162 24,056 - RPS Group 16,127 43, Serco 71,788 70, SIG 37,803 66, Speedy Hire 38,850 23,699 - SThree 7,428 27,335 - Travis Perkins 16, , Automobiles & parts 0.06 GKN 113, , Gocompare.com 19,865 20,908 - TI Fluid Systems 10,769 26,836 - PAGE 8

11 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Beverages 0.69 A.G. Barr 5,331 35, Britvic 17, , Diageo 161,155 4,384, Stock Spirits 11,920 31,797 - Food producers 0.17 Associated British Foods 23, , Cranswick 3, , Dairy Crest 8,932 51, Devro 12,257 27,823 - Hilton Food Group 3,817 32, Premier Foods 46,641 19,589 - Tate & Lyle 30, , Household goods 0.81 Barratt Developments 66, , Bellway 8, , Berkeley Group Holdings 8, , Bovis Homes Group 8, , Countryside Properties 17,912 63, Crest Nicholson Holdings 16,065 87, DFS Furniture 9,887 19,230 - Galliford Try 5,246 67, Headlam Group 5,119 29, McBride 11,321 25,246 - Persimmon 20, , Reckitt Benckiser 40,574 2,806, Redrow 13,982 91, Taylor Wimpey 217, , Leisure goods 0.01 Photo-Me International 16,768 30, Personal goods 0.56 Burberry 28, , PZ Cussons 12,770 41, Ted Baker 1,693 45, Unilever 74,966 3,091, Tobacco 1.42 British American Tobacco 149,200 7,471, Imperial Brands 62,229 1,970, Healthcare equipment & services 0.20 Cambian Group 6,413 12,553 - Consort Medical 3,026 35,071 - Convatec Group 92, , Medicline International 26, , NMC Health 5, , Smith & Nephew 57, , Spire Healthcare 18,493 46, Pharmaceuticals & biotechnology 1.38 AstraZeneca 82,553 4,225, BTG 25, , Circassia Holdings 12,049 12,350 - Dechra Pharmaceuticals 5, , Genus 3, , GlaxoSmithKline 315,226 4,154, Hikma Pharmaceuticals 9, , Indivior 47, , Oxford Biomedica 170,000 15,045 - Vectura 45,849 53, Food & drug retailers 0.32 Booker 109, , Greggs 6,928 96, Morrison (Wm) Supermarkets 143, , Ocado Group 28, , Sainsbury (J) 107, , Tesco 533,301 1,115, General retailers 0.37 AO World 17,068 18,732 - Card Factory 20,139 59, Carpetright 3,438 5,845 - Debenhams 67,698 23,356 - Dignity 3,192 58, Dixons Carphone 66, , PAGE 9

12 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Dunelm Group 5,792 40, Findel 5,660 11,320 - Halfords 12,717 44, Inchcape 28, , JD Sports Fashion 24,361 81, Kingfisher 144, , Lookers 19,911 20,409 - Marks & Spencer 107, , Mothercare 9,696 6,302 - Motorpoint Group 3,955 8,503 - N Brown Group 10,814 29, Next 9, , Pendragon 87,536 23, Saga 73,531 92, Sports Direct International 15,112 56, SuperGroup 3,202 63, Pets At Home 23,761 41, Topps Tiles 9,595 7,604 - WH Smith 7, , Media 0.58 Ascential 27, , Bloomsbury Publishing 7,121 13,031 - Euromoney Institutional Investor 2,422 31,413 - Informa 54, , ITE 18,368 33, ITV 245, , Merlin Entertainments 48, , Moneysupermarket.com 34, , Pearson 54, , RELX 69,471 1,207, Rightmove 6, , Sky 67, , STV 2,326 7,327 - Trinity Mirror 20,806 16,125 - Travel & leisure 0.81 Carnival 11, , Cineworld 12,807 76, Compass Group 103,307 1,652, Domino s Pizza 32, , easyjet 16, , El Group 32,191 45, FirstGroup 79,080 87, Go-Ahead 2,637 39,239 - Greene King 20, , GVC Holdings+ 18, , Hollywood Bowl Group 7,988 16,196 - InterContinental Hotels Group 12, , Ladbrokes Coral Group 112, , Marston s 44,004 49, Millennium & Copthorne Hotels 7,629 44, Mitchells & Butlers 14,916 42, National Express 27, , On the Beach 3,691 17,292 - Rank Group 10,879 26,273 - Restaurant Group 13,567 40, SSP Group 30, , Stagecoach 26,974 44, Thomas Cook 87, , Wetherspoon (JD) 5,215 65, Whitbread 12, , William Hill 59, , Fixed line telecommunications 0.24 British Telecom 545,400 1,480, Kcom 32,578 29,565 - TalkTalk Telecom 35,926 54, Telecom Plus 3,675 44, Mobile telecommunications 0.64 Inmarsat 30, , Vodafone 1,736,542 4,078, PAGE 10

13 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Electricity 0.14 Drax 26,378 71, Luceco 5,193 5,764 - Scottish & Southern Energy 67, , Gas, water & multi-utilities 0.50 Centrica 366, , National Grid 220,590 1,929, Pennon 27, , Severn Trent 15, , United Utilities 44, , Banks 2.70 Barclays 1,107,758 2,249, BGEO Group 2,394 84, CYBG 57, , HSBC Holdings** 1,303,204 9,983, Lloyds Banking 4,659,426 3,159, Metro Bank 4, , OneSavings Bank 11,752 48, Royal Bank of Scotland 211, , Standard Chartered 174,962 1,364, TBC Bank Group 2,864 49, Virgin Money 18,479 52, Non-life insurance 0.22 Admiral 13, , Beazley 34, , Direct Line Insurance 91, , esure 18,677 46, Hastings Group 18,180 58, Jardine Lloyd Thompson 8, , Royal & Sun Alliance Insurance 66, , Life insurance 1.14 Aviva 258,514 1,305, Chesnara 7,920 30,829 - Just Group 30,645 52, Legal & General 386,841 1,057, Old Mutual 313, , Prudential 168,434 3,205, St James s Place Capital 34, , Standard Life 182, , Real estate investment services 0.59 Assura 163, , Big Yellow Group REIT 9,465 82, British Land REIT 67, , Capital & Counties Properties 49, , Capital & Regional 35,506 20,593 - Civitas Social Housing 23,082 25,967 - CLS Holdings 14,978 36, Countrywide 10,433 12,546 - Custodian REIT 17,242 20,130 - Daejan Holdings ,175 - Derwent London REIT 6, , Ediston Property Investment Company REIT 8,671 9,495 - Empiric Student Property 31,862 29, Foxtons 15,000 12,188 - GCP Student Living 25,955 37, Grainger 29,391 84, Great Portland Estates 21, , Greencoat UK Wind 47,480 58, Hammerson 53, , Hansteen Holdings REIT 22,102 31, Helical Bar 6,860 23,101 - Intu Properties REIT 57, , Land Securities REIT 46, , LondonMetric Property 43,541 80, Lonmin 17,107 14,199 - LSL Property Services 5,690 15,648 - PAGE 11

14 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND McCarthy & Stone 34,262 54, Newriver REIT 19,819 66, Primary Health Properties REIT 36,405 42, Redefine International REIT 75,213 27, Safestore Holdings REIT 12,223 60, Savills 8,087 80, Schroder European REIT 7,376 7,855 - Segro REIT 67, , Shaftesbury 16, , St Modwen Properties 12,119 49, Town Centre Securities 3,564 10,157 - Tritax Big Box REIT 77, , U and I Group 8,416 16,159 - Unite 15, , Workspace Group REIT 7,655 76, Financial services 0.61 AA 39,014 66, Allied Minds 16,740 27,370 - Arrow Global 13,163 52, Ashmore 26, , Brewin Dolphin 18,932 73, Charles Taylor 4,100 11,070 - Charter Court Financial Services 7,234 20,418 - Close Brothers 10, , Hargreaves Lansdown 17, , Henderson Diversified Income Trust 10,585 10,056 - IG Group Holdings 24, , Intermediate Capital Group 18, , International Personal Finance 14,985 29, Investec 42, , IP Group 62,734 89, John Laing Group 24,291 71, Liontrust Asset Management 2,350 11,045 - London Stock Exchange 20, , Man Group 114, , NEX Group 20, , P2P Global Investments 5,733 46, Paragon Group of Companies 19,425 95, Provident Financial 9,720 87, Rathbone Brothers 3,377 86, S & U 220 4,895 - Schroders 7, , TP ICAP 32, , VPC Specialty Lending Investments 25,866 19,917 - Worldpay Group 114, , Software & computer services 0.38 Alfa Financial Software 6,191 32, Auto Trader 61, , Aveva 4, , Computacenter 4,432 51, FDM Group 5,445 50, Fidessa 2,612 66, Just-Eat 37, , Micro Focus International 28, , NCC Group 16,647 38, Playtech 18, , Sage 71, , SDL 5,642 23,979 - Servelec 4,494 14,066 - Softcat 5,070 26,339 - Sophos Group 16,664 94, Zoopla Property Group (WI) 17,747 58, Technology hardware & equipment 0.06 Laird 48,340 66, PAGE 12

15 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Nanoco Group 14,527 3,777 - Spirax-Sarco Engineering 4, , Spirent 43,012 43, UK COLLECTIVES AND INVESTMENT TRUSTS (42.65%; 31/12/ %) 3i Group 64, , Aberdeen Asian Smaller Companies Investment Trust 2,306 24,328 - Aberdeen Diversified Income and Growth Trust 36,968 45, Aberdeen New Dawn Investment Trust 8,242 19,698 - Aberforth Smaller Companies 6,935 91, Aberforth Split Level Income Trust 18,606 18,234 - Alliance Trust 25, , Asian Total Return Investment 5,005 17,855 - Baillie Gifford Japan Investment Trust 5,005 41, Baillie Gifford Shin Nippon Investment Trust 2,567 22,846 - Bankers Investment Trust 9,135 80, Baring Emerging Europe 2,541 19,693 - BCA Marketplace 48,879 99, Bioscience Investment Trust* 3, Biotech Growth Trust 3,860 29, BlackRock Greater European Investment Trust 6,553 21,887 - BlackRock Latin American Investment Trust 4,936 22,656 - BlackRock Smaller Companies 3,028 39, BlackRock Throgmorton Trust 6,324 29, BlackRock World Mining Investment Trust 11,092 43, British Empire Securities 8,919 64, Caledonia Investments 2,134 60, City of London Investment Trust 22,098 96, Diverse Income Trust 22,120 22,839 - Dunedin Income Growth Investment Trust 11,582 30,113 - Ecofin Global Utilities & Infrastructure 15,984 20,859 - Edinburgh Dragon Investment Trust 12,198 45, Edinburgh Investment Trust 13,267 93, Edinburgh Worldwide Investment Trust 3,115 23,596 - Electra Private Equity 1,950 18,155 - European Investment Trust 4,196 39, F&C Capital & Income Investment Trust 6,534 21,562 - F&C Global Smaller Companies 3,760 52, F&C Private Equity Trust 7,312 24,568 - Fidelity China Special Situations Trust 25,480 59, Fidelity European Values 27,885 63, Fidelity Special Values 17,253 43, Finsbury Growth & Income Trust 10,094 78, Foreign & Colonial Investment Trust 38, , Henderson Euro Trust 1,368 16,252 - Henderson European Focus Trust 2,395 32, PAGE 13

16 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Henderson Smaller Companies Investment Trust 5,810 51, Herald Investment Trust 4,824 56, HgCapital Trust 2,334 41, HSBC American Index Fund** 11,549,428 62,528, HSBC Corporate Bond Fund** 1,399,825 3,237, HSBC European Index Fund** 4,965,483 46,208, HSBC FTSE All-World Index Fund** 58,259,356 88,262, HSBC Gilt & Fixed Interest Fund** 6,584,062 4,857, HSBC Japan Index Fund** 29,246,401 36,821, HSBC Pacific Index Fund** 6,490,066 20,716, HSBC UK Gilt Index Fund** 12,630,956 14,778, ICG Enterprise Trust 6,582 52, Impax Environmental Markets 13,491 34, Independent Investment Trust 2,125 13,855 - Invesco Perpetual UK Smaller Companies Investment Trust 3,151 16,306 - JPMorgan American Investment Trust 16,282 65, JPMorgan Asian Investment Trust 7,356 26, JPMorgan Chinese Investment Trust 5,035 15,306 - JPMorgan Claverhouse Investment Trust 3,482 25,157 - JPMorgan Emerging Markets Investment Trust 9,289 81, JPMorgan European Investment Trust 5,633 18,110 - JPMorgan European Smaller Companies Trust 10,907 45, JPMorgan Global Emerging Markets Income Trust 23,267 31, JPMorgan Indian Investment Trust 6,798 51, JPMorgan Japanese Investment Trust 11,322 49, JPMorgan Mid Cap Investment Trust 1,700 20,196 - JPMorgan Overseas Investment Trust 7,927 26,119 - JPMorgan Russian Securities Investment Trust 7,381 36, JPMorgan Smaller Companies Investment Trust 1,901 20,569 - Jupiter European Opportunities Trust 8,936 64, Jupiter Fund Management 28, , Keystone Investment Trust ,975 - Law Debenture 8,453 52, Lindsell Train Investment Trust 12 9,900 - Lowland Investment Company 1,702 26,279 - Martin Currie Global Portfolio Trust 6,757 16,487 - Mercantile Investment Trust 6, , Merchants Trust 7,584 37, Monks Investment Trust 14, , Murray Income Trust 5,151 40, Murray International Trust 9, , North American Income Trust 1,968 25,840 - PAGE 14

17 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND North Atlantic Smaller Companies Investment Trust ,776 - Pacific Assets Investment Trust 7,999 20,657 - Pantheon International 4,793 89, Perpetual Income & Growth Investment Trust 15,764 59, Personal Assets Trust , Polar Capital Technology Trust 9, , Ranger Direct Lending Fund 1,366 9,494 - RIT Capital Partners 8, , Riverstone Energy 3,544 43, Schroder Asia Pacific Fund 11,283 52, Schroder Japan Growth Investment Trust 11,057 24,491 - Schroder UK Growth Investment Trust 10,860 19,168 - Scottish American Investment Trust 9,584 35, Scottish Investment Trust 5,818 50, Scottish Mortgage Investment Trust 92, , Scottish Oriental Smaller Companies Trust 1,982 20,811 - Securities Trust of Scotland* 44, Standard Life UK Smaller Companies Trust 4,558 22,152 - Temple Bar Investment Trust 4,405 57, Templeton Emerging Markets Investment Trust 20, , TR European Growth Trust 3,183 38, TR Property Investment 21,328 84, Twentyfour Income Fund 26,903 32, Witan Investment Trust 13, , Witan Pacific Investment Trust 4,480 14,874 - Woodford Patient Capital Trust 52,655 44, Worldwide Healthcare Trust 3,632 91, Total United Kingdom 421,830, OVERSEAS SHARES (34.02%; 31/12/ %) CONTINENTAL EUROPE (33.90%; 31/12/ %) Channel Islands (1.72%; 31/12/ %) 3i Infrastructure 44,431 92, Aberdeen Asian Income 12,025 26,124 - Apax Global Alpha 16,866 24,793 - BH Global 1,599 21,507 - BH Macro 1,472 29, Bluefield Solar Income Fund 24,556 28, Centamin 68, , City Merchants High Yield 12,208 24,233 - CVC Credit Partners European Opportunities 21,168 23,814 - Dexion Absolute 9,140 15,698 - Experian 60, , F&C Commercial Property Trust 32,342 43, F&C UK Real Estate Investment 14,760 15,240 - Foresight Solar 22,314 23,932 - PAGE 15

18 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Funding Circle SME Income Fund 10,141 10,369 - GCP Asset Backed Income Fund 17,589 18,205 - GCP Infrastructure Investments 52,122 66, Genesis Emerging Markets Fund 9,036 65, Glencore 760,777 2,958, HarbourVest Global Private Equity 5,310 65, Henderson Far East Income 8,181 30, HICL Infrastructure 117, , Highbridge Multi-Strategy Fund 12,177 26, International Public Partnership 88, , International Workplace 40, , John Laing Infrastructure Fund 56,980 70, MedicX Fund 22,151 18,385 - NB Global Floating Rate Income Fund 77,872 73, NB Private Equity Partners 3,220 33, NextEnergy Solar Fund 37,336 42, Pershing Square Holdings 15, , Petrofac 16,856 85, Picton Property 28,206 23,199 - Polymetal International 16, , Princess Private Equity 4,522 42, Randgold Resources 6, , Real Estate Credit Investments 4,910 8,212 - Regional REIT 19,560 19,853 - Renewables Infrastructure Group 54,689 59, Ruffer 9,905 23,128 - Sanne Group 6,938 56, Schroder Oriental Income Fund 19,974 51, Schroder Real Estate Investment 31,780 19,068 - Sequoia Economic Infrastructure Income Fund 51,807 58, Shire 58,054 2,258, Sirius Real Estate 55,038 35, SQN Asset Finance Income Fund 12,464 11,155 - Standard Life Investments Property 24,197 22,382 - Starwood European Real Estate Finance 24,505 26,649 - Stobart 19,041 53, Syncona 30,927 62, Target Healthcare REIT 21,200 23,850 - Tarsus 6,664 21,125 - UBM 25, , UK Commercial Property Trust 42,122 37, VinaCapital Vietnam Opportunity Fund 13,284 43, Wizz Air Holdings 3, , Wolseley 16, , WPP 80,576 1,080, Total Channel Islands 11,462, PAGE 16

19 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Denmark (0.00%; 31/12/ %) France (0.00%; 31/12/ %) Germany (0.07%; 31/12/ %) TUI AG 29, , Total Germany 446, IRELAND (2.06%; 31/12/ %) CRH (London listed) 54,706 1,453, DCC (London listed) 5, , Grafton 14, , Greencore 46, , HSBC MSCI Russia Capped UCITS ETF** 444,534 3,386, ishares Core FTSE 100 UCITS ETF 41, , ishares FTSE 250 UCITS ETF 3,225 63, Kenmare Resources 5,400 14,580 - Paddy Power 5, , Smurfit Kappa ,398 - Smurfit Kappa 15, , SPDR MSCI World Financials UCITS ETF 215,910 6,820, UDG Healthcare 15, , Total Ireland 13,715, Italy (0.00%; 31/12/ %) Luxembourg (29.87%; 31/12/ %) B&M European Value 52, , BBGI SICAV 26,918 37,820 - HSBC GIF Brazil Bond Fund** 407,445 3,119, HSBC GIF Economic Scale Index Fund** 471,597 16,275, HSBC GIF Economic Scale Index GEM Equity Fund** 2,665,171 22,988, HSBC GIF Economic Scale Index Japan Equity Fund** 382,243 3,479, HSBC GIF Euroland Equity Smaller Companies Fund** 106,730 9,959, HSBC GIF Global Emerging Markets Bond Fund** 4,162,370 32,132, HSBC GIF Global Emerging Markets Local Debt Fund** 5,619,288 41,626, HSBC GIF Global Government Bond Fund** 2,022,482 16,419, HSBC GIF Global High Yield Bond Fund** 1,671,704 12,870, HSBC GIF Global Real Estate Equity Fund** 3,388,105 26,568, HSBC GIF Global Short Duration High Yield Bond Fund** 1,294,530 9,617, HSBC GIF India Fund** 377,974 3,231, Total Luxembourg 198,548, Netherlands (0.01%; 31/12/ %) RHI Magnesita 1,597 62, DP Eurasia 5,145 10,805 - Total Netherlands 73, Portugal (0.00%; 31/12/ %) Spain (0.11%; 31/12/ %) PAGE 17

20 Portfolio statement This section details all the different companies in which the Fund invests, by sector and country of domicile. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). THE MARKS AND SPENCER WORLDWIDE MANAGED FUND International Consolidated Airlines 109, , Total Spain 708, Phoenix Spree Deutschland REIT 8,817 34,078 - Total Cayman Islands 295, Switzerland (0.05%; 31/12/ %) Coca-Cola HBC 13, , Total Switzerland 318, Gibraltar (0.01%; 31/12/ %) 888 Holdings 14,736 41, Total Gibraltar 41, NORTH AMERICA (0.12%; 31/12/ %) Bermuda (0.07%; 31/12/ %) Hiscox 18, , Lancashire Holdings 12,472 84, Petra Diamonds 32,565 25,401 - PureCircle 8,184 37, Utilico Emerging Markets Utilites 13,502 30, Utilico Emerging Markets Utilites (Sub share) 2, Total Bermuda 454, Canada (0.01%; 31/12/ %) Entertainment One 20,441 66, Total Canada 66, Cayman Islands (0.04%; 31/12/ %) Phoenix Group Holdings 26, , Dragon Capital Vietnam 12,827 56, United States (0.00%; 31/12/ %) SOUTH AMERICA (0.00%; 31/12/ %) Brazil (0.00%; 31/12/ %) FAR EAST (0.00%; 31/12/ %) China (0.00%; 31/12/ %) Hong Kong (0.00%; 31/12/ %) India (0.00%; 31/12/ %) Indonesia (0.00%; 31/12/ %) Japan (0.00%; 31/12/ %) South Korea (0.00%; 31/12/ %) Russia (0.00%; 31/12/ %) Singapore (0.00%; 31/12/ %) Taiwan (0.00%; 31/12/ %) AFRICA (0.00%; 31/12/ %) South Africa (0.00%; 31/12/ %) FIXED INTEREST SECURITIES (0.00%; 31/12/ %) INDEX LINKED SECURITIES (0.00%; 31/12/ %) PAGE 18

21 Portfolio statement THE MARKS AND SPENCER WORLDWIDE MANAGED FUND This section details all the different companies in which the Fund invests, by sector and country. It also shows the number of shares held, the percentage each company represents of the Fund as a whole and the value of those shares at the end of the year (shown under bid value). FORWARD FOREIGN EXCHANGE CONTRACT (0.09%; 31/12/16 (0.02%)) Sold US dollars $96,872,753 for UK sterling 72,159, , (expires 31/01/2018) Total forward foreign exchange contracts 623, FUTURES CONTRACTS (0.00%; 31/12/ %) Portfolio of investments 648,585, Net other assets 16,185, Net assets 664,771, Investments Equity 647,962, Forward foreign exchange contracts 623, Portfolio of investments 648,585, * These are delisted securities and have been valued at the Manager s best assessment of their value. **Related parties *** Corporate Action - C shares are noncumulative, unquoted redeemable Preference Shares given in lieu of cash dividend The securities held are approved and are admitted to an official listing unless otherwise stated. PAGE 19

22 Net asset value per unit and comparative table THE MARKS AND SPENCER WORLDWIDE MANAGED FUND This section details in concise figures how the Fund has performed, in terms of the size of the Fund, the price of units and the income distributions made. INCOME Change in net assets per unit Opening net asset value per unit p p p Return before operating charges* 58.57p 80.50p 12.99p Operating charges** (7.44p) (6.61p) (6.27p) Return after operating charges* 51.13p 73.89p 6.72p Distributions on income unit (4.03p) (3.70p) (3.53p) Closing net asset value per unit p p p * after direct transaction costs of:*** 0.42p 0.46p 0.32p Performance Return after charges 10.93% 18.57% 1.70% Other information Closing net asset value 13,483,409 13,182,467 12,201,144 Closing number of units 2,617,784 2,816,961 3,067,280 Operating charges 1.43% 1.56% 1.56% Direct transaction costs 0.08% 0.11% 0.08% Prices Highest unit price p p p Lowest unit price p p p ** The operating charges include all costs borne by the Trust, except for direct transaction costs. It includes the operating charges of any collective investment schemes in which the Trust invests. *** The direct transaction costs are made up of fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. PAGE 20