Schroder. European Fund. Final Report and Accounts January 2018

Transcription

1 Schroder European Fund Final Report and Accounts January 2018

2 Contents Schroder European Fund Fund Information Investment objective and policy Financial highlights Fund information Ongoing charges figure Review of Investment Activities Risk Profile Risk and reward indicator Specific risks Statement of the Manager s Responsibilities Report of the Trustee Independent Auditors Report to the Unitholders of Schroder European Fund Comparative Tables Portfolio Statement Summary of Portfolio Transactions Largest purchases Largest sales Statement of Total Return Statement of Change in Net Assets Attributable to Unitholders Balance Sheet Notes to the Accounts Accounting policies Net capital gains Revenue Expenses Taxation Distributions Fair value hierarchy Debtors Other creditors Contingent assets Contingent liabilities Related party transactions Unit classes Derivative and other financial instruments Direct transaction costs Units in issue reconciliation Remuneration Distribution Table Final distribution for the year ended 15 January Corporate unitholders (unaudited) Equalisation General Information Authorisation Other information Collectively these comprise the Manager s report.

3 Fund Information Investment objective and policy The Schroder European Fund (the fund ) aims to provide capital growth by investing in equity and equity related securities of European companies, excluding the UK. The fund invests at least 80% of its assets in equity and equity related securities of large and mid sized European companies, excluding the UK. These are companies that, at the time of purchase, are considered to be in the top 90% by market capitalisation of the European equities market. As the fund is index unconstrained it is managed without reference to an index. The fund may also invest in collective investment schemes, warrants and money market instruments, and hold cash. The fund may use derivatives with the aim of reducing risk or managing the fund more efficiently. With effect from 5 April 2017 the fund s Investment objective and policy changed, previously it was: The fund s investment objective is to achieve capital growth through investment in European stock markets, excluding the UK. The core of investment will be in the larger market capitalisation stocks in the major European markets. The remainder of the portfolio will consist of investments in medium market capitalisation stocks and those drawn from the smaller European markets. The fund may also invest in a wide range of investments including transferable securities, collective investment schemes, warrants and money market instruments. 3

4 Fund Information (continued) Financial highlights Dealing price % change A Income units p 90.78p A Accumulation units p 95.20p GBP Hedged A Income units 82.16p 70.96p GBP Hedged A Accumulation units 84.39p 70.96p GBP Hedged Z Income units 82.87p 70.21p GBP Hedged Z Accumulation units 87.56p 73.06p I Income units 1,483.00p 1,255.00p I Accumulation units 2,242.00p 1,875.00p L Income units 81.22p 68.76p L Accumulation units 85.59p 71.63p Q Euro Accumulation units S Income units 80.15p 67.81p Y Accumulation units 74.98p 62.42p Z Income units p 98.80p Z Accumulation units p p Final distribution per I Income unit p p The performance of a hedged unit class may differ from other unit classes of the fund because the return on unhedged unit classes is based on both the performance of the fund s investments and the performance of the portfolio currencies relative to sterling whereas the return on a hedged unit class is based only on the performance of the fund s investments. 4

5 Fund Information (continued) Fund information Launch date 30 April 1987 Launch price p per I Income unit Launch date 1 October 2010 Launch price p per I Accumulation unit 50.00p per A Income unit 50.00p per A Accumulation unit Launch date 8 November 2011 Launch price Launch date 1 July 2013 Launch price 50.00p per Z Income unit 50.00p per Z Accumulation unit Launch date 1 October 2013 Launch price 50.00p per GBP Hedged A Income unit 50.00p per GBP Hedged A Accumulation unit 50.00p per GBP Hedged Z Income unit 50.00p per GBP Hedged Z Accumulation unit 50.00p per L Income unit 50.00p per L Accumulation unit Launch date 31 January 2014 Launch price 50.00p per S Income unit Launch date 11 March 2016 Launch price 50.00p per Y Accumulation unit Launch date 1 December 2017 Launch price per Q Euro Accumulation unit Interim Final Accounting dates 15 July 15 January Revenue allocation date 15 March 5

6 Fund Information (continued) Ongoing charges figure For the period For the year For the year from to to A Income units 1.67% 1.67% 1.68% A Accumulation units 1.67% 1.67% 1.68% GBP Hedged A Income units 1.67% 1.67% 1.68% GBP Hedged A Accumulation units 1.67% 1.67% 1.68% GBP Hedged Z Income units 0.92% 0.92% 0.93% GBP Hedged Z Accumulation units 0.92% % 0.93% I Income units 0.77% 0.77% 0.78% I Accumulation units 0.77% 0.77% 0.78% L Income units 0.85% 0.85% 0.85% L Accumulation units 0.85% 0.85% 0.85% Q Euro Accumulation units 0.75% % 2 S Income units 0.55% 0.55% 0.55% Y Accumulation units 0.32% 0.32% 0.33% 2 Z Income units 0.92% 0.92% 0.93% Z Accumulation units 0.92% 0.92% 0.93% 1 The Ongoing charges figure is a projected figure based on the latest expenses of the unit classes. 2 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 6

7 Review of Investment Activities From 13 January 2017 to 15 January 2018, the price of l Accumulation units on a dealing price to dealing price basis rose 19.57%. In comparison, the FTSE¹ World European ex UK Index generated a total return of 16.53%² in sterling terms. European equities gained during the period under review. The eurozone s economic recovery picked up momentum while political worries faded after market friendly election results in the Netherlands and France. The European Central Bank maintained an accommodative monetary policy stance. The fund outperformed the benchmark over the period, thanks mainly to positive stock selection. The biggest individual contributor was mining and metallurgy company Eramet. It produces nickel, which had been left behind in the metals rally; however, there are signs that demand is starting to rise. The firm has a well regarded new management team taking charge at this cyclically opportune moment. Another top contributor was STMicroelectronics amid significant order wins; we sold our holding after good share price performance. New holding Novo Nordisk also supported fund returns; it has an exceptionally strong pipeline of novel insulins and obesity treatments which should allow it to grow market share. On the negative side, networks business Nokia was the largest detractor. The share price has been impacted by uncertainty over the migration from 3G to 4G to 5G which is causing weak demand. We expect conditions to remain challenging until 2019, and remain patient. Unfortunately the cash proceeds generated from the settlement of a patent dispute with Apple will not be funding share buybacks. Leading economic indicators remain robust in Europe. The stronger euro was a concern for markets in summer 2017 but corporate earnings have held up. We expect a lively year for shareholder activism as corporates look to deploy excess capital, either through special dividends, share buybacks or merger and acquisition activity. Fund Manager: Martin Skanberg Martin joined Schroders in 2004 as an Industrials analyst, before taking on portfolio management responsibilities in 2006 and is now a fund manager for the Schroder European Fund and Schroder ISF EURO Equity Investment career commenced in 1994 when he joined SEB Asset Management as an investment analyst for Nordic Industrials and Basic Materials. In 1999 he became Head of European Research Also previously worked at American Express Asset Management as a senior investment analyst responsible for Industrials and Telecommunications Masters in Financial Economics 1 FTSE International Limited ( FTSE ) FTSE. FTSE is a trade mark of London Stock Exchange plc and The Financial Times Limited and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE s express written consent. 2 Source: Thomson Reuters Datastream. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 7

8 Risk Profile Risk and reward indicator The risk and reward indicator changed from 6 to 5 with effect from 1 June 2017 for A Income units, A Accumulation units, I Income units, I Accumulation units, L Income units, L Accumulation units, S Income units, Y Accumulation units, Z Income units and Z Accumulation units. GBP Hedged A Income units, GBP Hedged A Accumulation units, GBP Hedged Z Income units and GBP Hedged Z Accumulation units remained at 6. At year end the risk and reward indicator for Q Euro Accumulation units is 5. There is a difference between unit classes caused by the technical nature of the calculation of the risk and reward indicator. The risk category was calculated using historical performance data and may not be a reliable indicator of the fund s future risk profile. The fund is in this category because it can take higher risks in search of higher rewards and its price may rise and fall accordingly. The fund s risk category is not guaranteed to remain fixed and may change over time. A fund in the lowest category does not mean a risk free investment. Specific risks The fund invests in assets which are exposed to currencies other than sterling. For non-hedged unit classes exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. There is no guarantee that the hedging strategy applied in hedged unit classes will entirely eliminate the adverse effects of changes in exchange rates between the base currency and the portfolio currencies. In addition, it should be noted that hedging transactions will be entered into whether or not the currency of a hedged unit class is declining or increasing in value in relation to the base currency or portfolio currencies. Hedged unit classes aim to provide investors with a return correlated to the portfolio currencies performance of the fund by reducing the effect of exchange rate fluctuations between the base currency and the portfolio currencies. As it is not possible to legally segregate unit classes liabilities from those of other unit classes in the fund, there is a risk that, in certain limited circumstances, the hedging transactions undertaken in relation to a hedged unit class could result in liabilities which might affect the net asset value of the other unit classes in the fund. 8

9 Risk Profile (continued) The fund may invest in a wide range of derivatives in order to meet its investment objectives and for leverage. The use of leverage can increase gains as well as losses and expose the fund to increased risk. For these reasons, the purchase of units should not normally be regarded as a short term investment. 9

10 Statement of the Manager s Responsibilities The Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL) requires the Manager to prepare accounts for each annual and half yearly accounting period, in accordance with United Kingdom Generally Accepted Accounting Practice, which give a true and fair view of the financial position of the fund and of its net revenue and the net capital gains on the property of the fund for the year. In preparing the accounts the Manager is required to: select suitable accounting policies and then apply them consistently; comply with the disclosure requirements of the Statement of Recommended Practice (SORP) for UK Authorised Funds issued by the Investment Management Association (IMA (now the Investment Association (IA))) in May 2014; follow generally accepted accounting principles and applicable accounting standards; prepare the accounts on the basis that the fund will continue in operation unless it is inappropriate to do so; keep proper accounting records which enable it to demonstrate that the accounts as prepared comply with the above requirements; make judgements and estimates that are prudent and reasonable. The Manager is responsible for the management of the fund in accordance with its Trust Deed, the Prospectus and the COLL, and for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law or regulations. The Manager s report and accounts for the year ended 15 January 2018 were signed on 23 March 2018 on behalf of the Manager by: J.A. Walker-Hazell Directors P. Chislett 10

11 Report of the Trustee Statement of the Trustee s responsibilities in relation to the accounts of the Scheme The Trustee is responsible for the safekeeping of all of the property of the Scheme (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the Trustee to take reasonable care to ensure that the Scheme is managed by the Authorised Fund Manager in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook (COLL) and the Scheme s Trust Deed and Prospectus, as appropriate, in relation to the pricing of, and dealings in, units in the Scheme; the application of revenue of the Scheme; and the investment and borrowing powers of the Scheme. Report of the Trustee for the accounting period from 16 January 2017 to 15 January 2018 Schroder European Fund ( the Scheme ) Having carried out such procedures as we consider necessary to discharge our responsibilities as Trustee of the Scheme, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Authorised Fund Manager: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme s units and the application of the Scheme s revenue in accordance with the COLL as appropriate, and, where applicable, the Scheme s Trust Deed and Prospectus; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Scheme. J.P. Morgan Europe Limited Trustee Bournemouth 7 February

12 Independent Auditors Report to the Unitholders of Schroder European Fund Report on the audit of the financial statements Opinion In our opinion, Schroder European Fund s financial statements: give a true and fair view of the financial position of the fund as at 15 January 2018 and of the net revenue and the net capital gains on its scheme property for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable law), the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. We have audited the financial statements, included within the Final Report and Accounts (the Annual Report ), which comprise: the balance sheet as at 15 January 2018; the statement of total return and the statement of change in net assets attributable to unitholders for the year then ended; the notes to the financial statements, which include a description of the significant accounting policies, and the distribution tables. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ( ISAs (UK) ) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the Financial Reporting Council s (FRC) Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 12

13 Independent Auditors Report to the Unitholders of Schroder European Fund (continued) Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when: the Manager s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the Manager has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the fund s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the fund s ability to continue as a going concern. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our Auditors Report thereon. The Manager is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Manager s Report In our opinion, the information given in the Manager s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 13

14 Independent Auditors Report to the Unitholders of Schroder European Fund (continued) Responsibilities for the financial statements and the audit Responsibilities of the Manager for the financial statements As explained more fully in the Statement of the Manager s Responsibilities set out on page 10, the Manager is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Manager is also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Manager is responsible for assessing the fund s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intend to wind up or terminate the fund, or have no realistic alternative but to do so. Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC s website at: This description forms part of our Auditors Report. Use of this report This report, including the opinions, has been prepared for and only for the fund s unitholders as a body in accordance with paragraph of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 14

15 Independent Auditors Report to the Unitholders of Schroder European Fund (continued) Other required reporting Opinion on matter required by the Collective Investment Schemes sourcebook In our opinion, we have obtained all the information and explanations we consider necessary for the purposes of the audit. Collective Investment Schemes sourcebook exception reporting Under the Collective Investment Schemes sourcebook we are also required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 23 March

16 Comparative Tables A Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (1.69) (1.32) (1.25) Return after operating charges* Distributions 1 (0.70) (0.10) (1.19) Closing net asset value *after direct transaction costs of (0.16) (0.13) (0.13) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 2,909 2,278 2,679 Closing number of units 2,729,265 2,508,387 3,839,779 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

17 Comparative Tables (continued) A Accumulation units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (1.77) (1.39) (1.29) Return after operating charges* Distributions 1 (0.73) (0.39) (1.23) Retained distributions Closing net asset value *after direct transaction costs of (0.17) (0.13) (0.13) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 37,775 32,212 27,814 Closing number of units 33,534,767 33,786,735 38,120,557 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

18 Comparative Tables (continued) GBP Hedged A Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (1.29) (1.10) (1.15) Return after operating charges* Distributions 1 Nil 2 (1.85) Nil 3 Closing net asset value *after direct transaction costs of (0.12) (0.10) (0.12) Performance Return after charges (%) Other information Closing net asset value ( 000 s) Closing number of units 20,000 20,000 20,000 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p) There will not be a distribution as the total amount distributable is below de minimis. 3 There was no distribution as the total amount distributable was below de minimis. 18

19 Comparative Tables (continued) GBP Hedged A Accumulation units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (1.33) (1.10) (1.15) Return after operating charges* Distributions 1 Nil 2 (1.85) Nil 3 Retained distributions 1 Nil Nil 3 Closing net asset value *after direct transaction costs of (0.13) (0.10) (0.12) Performance Return after charges (%) Other information Closing net asset value ( 000 s) Closing number of units 26,486 20,000 20,000 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p) There will not be a distribution as the total amount distributable is below de minimis. 3 There was no distribution as the total amount distributable was below de minimis. 19

20 Comparative Tables (continued) GBP Hedged Z Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.72) (0.59) (0.65) Return after operating charges* Distributions 1 (1.16) (0.79) (1.58) Closing net asset value *after direct transaction costs of (0.12) (0.10) (0.12) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 7,852 4,169 8,542 Closing number of units 9,623,281 5,995,198 13,894,795 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

21 Comparative Tables (continued) GBP Hedged Z Accumulation units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.77) (0.62) (0.66) Return after operating charges* Distributions 1 (1.23) (0.91) (1.60) Retained distributions Closing net asset value *after direct transaction costs of (0.13) (0.11) (0.12) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 41,670 1,520 1,681 Closing number of units 47,659,512 2,076,733 2,630,472 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

22 Comparative Tables (continued) I Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value 1, Return before operating charges Operating charges (10.69) (8.45) (8.13) Return after operating charges* Distributions 1 (21.96) (15.27) (25.55) Closing net asset value 1, , *after direct transaction costs of (2.20) (1.74) (1.72) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 128, , ,973 Closing number of units 8,792,866 12,248,546 13,537,007 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) 1, , , Lowest dealing price (p) 1,

23 Comparative Tables (continued) I Accumulation units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value 1, , , Return before operating charges Operating charges (16.34) (12.67) (11.67) Return after operating charges* Distributions 1 (33.30) (30.74) (37.17) Retained distributions Closing net asset value 2, , , *after direct transaction costs of (3.36) (2.61) (2.48) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 320, ,658 53,031 Closing number of units 14,302,611 8,342,840 3,723,320 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) 2, , , Lowest dealing price (p) 1, , ,

24 Comparative Tables (continued) L Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.64) (0.51) (0.49) Return after operating charges* Distributions 1 (1.14) (0.79) (1.36) Closing net asset value *after direct transaction costs of (0.12) (0.10) (0.09) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 173, ,937 91,305 Closing number of units 216,874, ,134, ,816,908 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

25 Comparative Tables (continued) L Accumulation units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.69) (0.53) (0.50) Return after operating charges* Distributions 1 (1.22) (0.86) (1.38) Retained distributions Closing net asset value *after direct transaction costs of (0.13) (0.10) (0.10) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 88,238 14,945 7,143 Closing number of units 103,244,570 20,833,714 13,117,911 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

26 Comparative Tables (continued) Q Euro Accumulation units 2018 Financial period to 15 January per unit Change in net asset value Opening net asset value Return before operating charges 3.98 Operating charges (0.04) Return after operating charges* 3.94 Distributions 1 Nil Retained distributions 1 Nil Closing net asset value *after direct transaction costs of (0.16) Performance Return after charges (%) 3.94 Other information Closing net asset value ( 000 s) 1 Closing number of units 1,000 Operating charges (%) 0.06 Direct transaction costs (%)** 0.16 Prices Highest dealing price ( ) Lowest dealing price ( ) The unit class was launched on 1 December The unit class has made no distribution to date. 26

27 Comparative Tables (continued) S Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.42) (0.32) (0.32) Return after operating charges* Distributions 1 (1.36) (0.94) (1.50) Closing net asset value *after direct transaction costs of (0.12) (0.09) (0.09) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 18,718 5,698 5,030 Closing number of units 23,793,164 8,507,861 9,793,699 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

28 Comparative Tables (continued) Y Accumulation units Financial year to 15 January p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.23) (0.15) Return after operating charges* Distributions 1 (1.42) (0.99) Retained distributions Closing net asset value *after direct transaction costs of (0.11) (0.09) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 538, ,465 Closing number of units 718,621, ,539,468 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p) The unit class was launched on 11 March

29 Comparative Tables (continued) Z Income units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (1.01) (0.79) (0.75) Return after operating charges* Distributions 1 (1.56) (1.15) (1.90) Closing net asset value *after direct transaction costs of (0.17) (0.14) (0.13) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 5,632 4,446 14,520 Closing number of units 4,903,254 4,546,133 19,351,965 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

30 Comparative Tables (continued) Z Accumulation units Financial year to 15 January p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (1.09) (0.82) (0.78) Return after operating charges* Distributions 1 (1.67) (0.94) (1.93) Retained distributions Closing net asset value *after direct transaction costs of (0.19) (0.14) (0.14) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 90,186 21,898 37,451 Closing number of units 72,934,258 21,081,110 47,459,608 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p) These figures have been rounded to 2 decimal places. ** Direct transaction costs have been stated after deducting the proportion of the amounts collected from dilution adjustments. The Operating charges are calculated on an ex-post basis and as such may differ from the Ongoing charges figure where the Ongoing charges figure has been annualised for a unit class that has not been in existence for a full year. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 30

31 Portfolio Statement Holding at Market Value % of net s assets Equities 99.27% (99.63%) Austria 1.24% (1.87%) Erste Group Bank 518,826 18, , Belgium 4.96% (3.57%) Ageas 623,534 23, UCB 431,995 26, Umicore 556,421 22, , Denmark 6.32% (6.89%) Novo Nordisk B 956,008 38, TDC 5,671,215 26, Vestas Wind Systems 523,753 27, , Finland 4.92% (3.05%) Fortum 580,693 9, Nokia 8,705,325 31, Sampo A 750,331 31, , France 16.87% (12.62%) Accor 324,862 13, Atos 284,271 32, BNP Paribas 670,213 40, Cie de Saint-Gobain 722,941 30, Danone 454,607 27, Elis 754,110 15, Eramet 377,082 40, Lagardere 897,556 20, Publicis Groupe 465,048 24, , Germany 23.91% (21.32%) Bayer 534,378 49, Beiersdorf 152,487 13, Deutsche Boerse 117,303 10, E.ON 2,640,735 20,

32 Portfolio Statement (continued) Holding at Market Value % of net s assets Germany (continued) GEA Group 750,644 26, Krones 236,022 23, LEG Immobilien 161,297 13, Porsche Automobil Holding Preference 693,645 47, SAP 538,295 43, Siemens 443,660 48, Symrise 329,529 20, thyssenkrupp 1,375,225 31, , Greece 1.95% (1.84%) Hellenic Telecommunications Organization 2,796,031 28, , Ireland 2.06% (1.63%) Ryanair Holdings 2,105,271 29, , Italy 5.91% (8.02%) Intesa Sanpaolo 5,452,901 14, Leonardo 2,554,206 24, UniCredit 2,973,798 46, , Luxembourg 2.07% (1.37%) Tenaris 2,366,176 30, , Netherlands 7.01% (10.26%) Akzo Nobel 344,215 23, ASM International 602,100 30, Koninklijke Ahold Delhaize 1,804,697 29, Koninklijke DSM 248,613 18, , Norway 1.54% (4.78%) DNB 1,547,859 22, ,

33 Portfolio Statement (continued) Spain 0.00% (0.98%) Holding at Market Value % of net s assets Sweden 12.53% (9.40%) Autoliv SDR 383,902 37, BillerudKorsnas 2,145,679 25, Elekta B 3,959,751 25, Essity B 1,123,721 24, Husqvarna B 1,989,776 14, Munters Group 2,650,653 13, Svenska Cellulosa B 3,355,608 26, Trelleborg B 795,873 14, , Switzerland 7.98% (10.09%) Julius Baer Group 860,400 41, Roche Holding 198,283 36, Sika 2,458 15, Swatch Group 73,990 22, , United States of America 0.00% (1.94%) Equities total 1,442, Forward Foreign Currency Contracts (0.01)% ((0.01)%) Buy CHF 658 Sell GBP /01/2018 CHF Buy CHF 45,950 Sell GBP 34,574 31/01/2018 CHF 45, Buy DKK 4,281,156 Sell GBP 509,541 31/01/2018 DKK 4,281, Buy DKK 168 Sell GBP 20 31/01/2018 DKK Buy EUR 345,518 Sell GBP 304,803 31/01/2018 EUR 345, Buy EUR 212 Sell GBP /01/2018 EUR Buy SEK 605,236 Sell GBP 54,391 31/01/2018 SEK 605, Buy SEK 6,080 Sell GBP /01/2018 SEK 6,

34 Portfolio Statement (continued) Forward Foreign Currency Contracts (continued) Holding at Market Value % of net s assets Sell CHF 5,303,487 Buy GBP 4,017,432 31/01/2018 CHF (5,303,487) Sell CHF 7,935 Buy GBP 5,969 31/01/2018 CHF (7,935) Sell DKK 5,971 Buy GBP /01/2018 DKK (5,971) Sell DKK 30,425,311 Buy GBP 3,630,724 31/01/2018 DKK (30,425,311) (5) 0.00 Sell EUR 24 Buy GBP 21 31/01/2018 EUR (24) Sell EUR 38,682,825 Buy GBP 34,366,968 31/01/2018 EUR (38,682,825) (70) 0.00 Sell SEK 172,061 Buy GBP 15,609 31/01/2018 SEK (172,061) Sell SEK 68,128,042 Buy GBP 6,071,000 31/01/2018 SEK (68,128,042) (101) (0.01) Forward Foreign Currency Contracts total (158) (0.01) Portfolio of investments 1,442, Net other assets 10, Net assets attributable to unitholders 1,452, Unless otherwise stated, all securities are admitted to official stock exchange listings. The comparative percentage figures in brackets are as at 15 January

35 Summary of Portfolio Transactions Largest purchases Largest sales Cost For the year ended 15 January s Bayer 57,395 SAP 55,406 Siemens 47,585 Novo Nordisk B 47,356 UniCredit 47,239 Nokia 41,979 Roche Holding 41,071 Julius Baer Group 37,764 Cie de Saint-Gobain 35,935 Danone 33,907 Proceeds For the year ended 15 January s SAP 36,374 BNP Paribas 36,161 Norsk Hydro 35,983 Linde 35,873 STMicroelectronics 35,704 Schindler Holding 34,322 E.ON 32,455 Intesa Sanpaolo 31,860 Industrivarden 28,388 Koninklijke Philips 27,420 35

36 Statement of Total Return For the year ended 15 January 2018 Income Notes 000 s 000 s 000 s 000 s Net capital gains 2 187, ,556 Revenue 3 29,806 18,436 Expenses 4 (7,818) (5,249) Net revenue before taxation 21,988 13,187 Taxation 5 (2,190) (1,551) Net revenue after taxation 19,798 11,636 Total return before distributions 207, ,192 Distributions 6 (19,725) (11,171) Change in net assets attributable to unitholders from investment activities 187, ,021 Statement of Change in Net Assets Attributable to Unitholders For the year ended 15 January s 000 s 000 s 000 s Opening net assets attributable to unitholders 1,060, ,193 Amounts receivable on issue of units 398, ,644 Amounts receivable on in-specie transfers 0 431,967 Amounts payable on cancellation of units (211,617) (127,867) 186, ,744 Dilution adjustment Change in net assets attributable to unitholders from investment activities 187, ,021 Retained distribution on Accumulation units 18,299 11,173 Unclaimed distributions 0 1 Closing net assets attributable to unitholders 1,452,964 1,060,370 36

37 Balance Sheet As at 15 January Notes 000 s 000 s Assets Investments 1,442,448 1,056,595 Current assets Debtors 8 4,277 32,018 Cash and bank balances 16,258 11,904 Total assets 1,462,983 1,100,517 Liabilities Investment liabilities (176) (226) Creditors Distributions payable (4,930) (3,832) Other creditors 9 (4,913) (36,089) Total liabilities (10,019) (40,147) Net assets attributable to unitholders 1,452,964 1,060,370 37

38 Notes to the Accounts 1 Accounting policies Basis of preparation The accounts have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the SORP for UK Authorised Funds issued by the IMA in May 2014 and in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)). Revenue Dividends receivable from equity investments are recognised net of attributable tax credits and are credited to revenue when they are first quoted ex-dividend. The ordinary element of stocks received in lieu of cash dividends is recognised as revenue of the fund. Any enhancement above the cash dividend is treated as capital. Interest receivable from bank balances is accounted for on an accruals basis. Special dividends Special dividends are treated as revenue or capital depending on the facts of each particular case. Expenses Expenses of the fund are charged against revenue except for costs associated with the purchase and sale of investments which are allocated to the capital of the fund. The costs of establishing and maintaining the hedging programme for the hedged unit classes, the liabilities, expenses and charges directly attributable to a hedged unit class will be allocated to the capital of that specific hedged unit class. Taxation Corporation tax is provided for on the revenue liable to corporation tax less deductible expenses. The tax effect of different items of revenue or expenses is allocated between revenue and capital using the marginal basis. Deferred taxation is provided for on all timing differences that have originated but not reversed by the balance sheet date, other than those differences regarded as permanent. Any liability to deferred taxation is provided for at the average rate of taxation expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money. 38

39 Notes to the Accounts (continued) Distributions The revenue available for distribution is the total revenue earned by the fund, less deductible expenses and taxation charged to revenue. The revenue is distributed annually on 15 March to Income unitholders. For Accumulation units this revenue is not distributed but automatically reinvested in the fund and is reflected in the value of these units. The ordinary element of scrip dividends is treated as revenue but does not form part of the distribution. The distribution is in accordance with the COLL. Distributions which have remained unclaimed by unitholders for more than six years are credited to the capital property of the fund. Dilution adjustment In certain circumstances the Manager may apply a dilution adjustment on subscriptions and redemptions of units. If applied, the dilution adjustment is paid to the fund. See Prospectus for further details. Valuation Listed investments of the fund have been valued at market value at 18:00 on the balance sheet date. Market value is defined by the SORP as fair value which generally is the bid value of each security and the offer value for short positions. Forward foreign exchange contracts Open forward foreign exchange contracts are shown in the Portfolio Statement at market value and the net gains/(losses) are reflected under Net capital gains in the Notes to the Accounts and relate to the GBP hedged unit classes only. Foreign currencies Transactions in foreign currencies are translated into sterling at the exchange rate prevailing on the date of the transaction. Assets and liabilities valued in foreign currencies have been translated into sterling at the exchange rates prevailing at the balance sheet date and the net losses are reflected under Net capital gains in the Notes to the Accounts. GBP hedged unit classes Hedged unit classes allow the Manager to use currency hedging transactions to seek to minimise the effect of exchange rate fluctuations between the base currency and the portfolio currencies of the fund. Currency hedging transactions include entering into over the counter currency forward contracts and foreign exchange agreements. Where undertaken, the effect of hedging will be reflected in the net asset value and therefore, in the performance of the relevant hedged unit class. Any benefits or losses of the hedging transactions will accrue to unitholders in that hedged unit class only. 39

40 Notes to the Accounts (continued) The Manager will aim to hedge the capital currency exposure of the net asset value attributable to a hedged unit class, however, the hedge may not always be at 100%. This is to avoid the transaction costs of making small and frequent adjusting transactions. The Manager will review the relevant hedging positions daily and, if appropriate, adjust the hedge to reflect any change in currency exposure and the flow of unitholder issue and cancellation of units. 2 Net capital gains The net capital gains during the year comprise: s 000 s Non-derivative securities 187, ,251 Forward foreign exchange contracts 1 1,776 (405) Foreign currency losses (1,659) (263) Transaction costs (44) (27) Net capital gains 187, ,556 1 The forward foreign exchange contracts are only entered into by the GBP hedged unit classes. 3 Revenue s 000 s Overseas dividends 29,622 17,864 Interest on prior years tax reclaim 7 45 Scrip dividends Bank interest Total revenue 29,806 18,436 40