PowerShares Global Funds Ireland plc (an umbrella investment company with variable capital and segregated liability between funds)

Transcription

1 Global Funds Ireland plc (an umbrella investment company with variable capital and segregated liability between funds) AUDITED ANNUAL REPORT AND FINANCIAL STATEMENTS For the year ended 2010

2 Global Funds Ireland plc Table of Contents Pages General Information. 3 Investment Manager s Report Directors Report Report of the Custodian to the Shareholders 34 Independent Auditors Report to the Shareholders Balance Sheet as at Balance Sheet as at Profit and Loss Account for year ended Profit and Loss Account for year ended Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares for year ended Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares for year ended Notes to the Financial Statements Schedule of Investments Statement of Changes in Composition of Portfolio

3 Global Funds Ireland plc General Information Global Funds Ireland plc (the Company ) was incorporated on 5 February 2002 and is established as an open-ended investment company under registration number with variable capital having segregated liability between its funds, under the laws of Ireland as a public limited company pursuant to the Companies Acts, 1963 to 2009 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended. As at 2010, nineteen funds of the Company had been established namely, EQQQ Fund, FTSE RAFI US 1000 Fund, Global Clean Energy Fund, Dynamic US Market Fund, FTSE RAFI Europe Fund, Global Listed Private Equity Fund, Palisades Global Water Fund, FTSE RAFI Asia Pacific Ex-Japan Fund*, FTSE RAFI Emerging Markets Fund*, FTSE RAFI UK 100 Fund, FTSE RAFI All-World 3000 Fund*, FTSE RAFI Developed Europe Mid-Small Fund, FTSE RAFI Developed 1000 Fund, FTSE RAFI Italy 30 Fund, FTSE RAFI Switzerland Fund*, FTSE RAFI Hong Kong China Fund*, Global Agriculture NASDAQ OMX Fund, Middle East North Africa NASDAQ OMX Fund and EuroMTS Cash 3 Months Fund. Board of Directors: Registered Office: Harold Bruce Bond (American) (resigned on 8 March 2010) Fitzwilton House Eimear Cowhey (Irish)* Wilton Place Benjamin Thomas Fulton (American) Dublin 2 Eugene Regan (Irish)* Ireland Adrian Waters (Irish)* *Independent non-executive directors Investment Manager: Manager: Invesco Capital Management LLC Invesco Capital Management 301 West Roosevelt Road Ireland Limited Wheaton Fitzwilton House Illinois Wilton Place United States Dublin 2 Ireland Independent Auditors: Administrator, Registrar and Transfer Agent: PricewaterhouseCoopers BNY Mellon Fund Services (Ireland) Limited One Spencer Dock Guild House North Wall Quay Guild Street Dublin 1 International Financial Services Centre Ireland Dublin 1 Ireland Legal Advisers in U.K.: Custodian: Clifford Chance Limited Liability Partnership BNY Mellon Trust Company (Ireland) Limited 10 Upper Bank Street Guild House London Guild Street E14 5JJ International Financial Services Centre England Dublin 1 Ireland Secretary: Legal Advisers in Ireland: Wilton Secretarial Limited William Fry Fitzwilton House Fitzwilton House Wilton Place Wilton Place Dublin 2 Dublin 2 Ireland Ireland * See page 6 for details of fund name and currency changes. 3

4 Global Funds Ireland plc Investment Manager s Report EQQQ Fund FTSE RAFI US 1000 Fund Global Clean Energy Fund Dynamic US Market Fund FTSE RAFI Europe Fund Global Listed Private Equity Fund Palisades Global Water Fund FTSE RAFI Asia Pacific Ex-Japan Fund (formerly Dynamic Global Developed Markets Fund) FTSE RAFI Emerging Markets Fund (formerly Dynamic Europe Fund) FTSE RAFI UK 100 Fund FTSE RAFI All-World 3000 Fund (formerly Dynamic UK Fund) FTSE RAFI Developed Europe Mid-Small Fund FTSE RAFI Developed 1000 Fund FTSE RAFI Italy 30 Fund FTSE RAFI Switzerland Fund (formerly Dynamic Italy Fund) FTSE RAFI Hong Kong China Fund (formerly Dynamic Japan Fund) Global Agriculture NASDAQ OMX Fund Middle East North Africa NASDAQ OMX Fund EuroMTS Cash 3 Months Fund For the year ended

5 Investment Strategy for the Year List of Current Funds US Equity ETFs EQQQ Fund FTSE RAFI US 1000 Fund Dynamic US Market Fund Global Funds Ireland plc Investment Manager s Report (continued) Intelligent Access ETFs Global Clean Energy Fund Global Listed Private Equity Fund Palisades Global Water Fund Global Agriculture NASDAQ OMX Fund Middle East North Africa NASDAQ OMX Fund Global ETFs FTSE RAFI Asia Pacific Ex-Japan Fund as of 1 February 2010 (formerly Dynamic Global Developed Markets Fund) FTSE RAFI Developed 1000 Fund European ETFs FTSE RAFI Europe Fund FTSE RAFI Emerging Markets Fund as of 1 February 2010 (formerly Dynamic Europe Fund) FTSE RAFI Developed Europe Mid-Small Fund Country Specific ETFs FTSE RAFI UK 100 Fund FTSE RAFI All-World 3000 Fund as of 1 February 2010 (formerly Dynamic UK Fund) FTSE RAFI Italy 30 Fund FTSE RAFI Switzerland Fund as of 1 February 2010 (formerly Dynamic Italy Fund) FTSE RAFI Hong Kong China Fund as of 1 February 2010 (formerly Dynamic Japan Fund) Fixed Income ETFs EuroMTS Cash 3 Months Fund Please note that five (5) Funds transitioned 1st February 2010 from legacy Dynamic Indices to new FTSE RAFI Indices. See page 6. 5

6 Investment Strategy for the Year (continued) Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report Global Funds Ireland - Index Transition The Board of Directors approved the transitioning of the underlying indices for five of the UCITS funds from the legacy Dynamic Indices (sponsored by Quantative Services Group L.L.C. ( QSG )) to new FTSE RAFI Indices (sponsored by ). The transition for the existing Dynamic funds to the new funds tracking the FTSE RAFI Indices was effective 1 February The following chart outlines each of the legacy funds and the corresponding new funds: Old Fund Old Fund Currency New Fund Dynamic Italy Fund EUR FTSE RAFI Switzerland Fund Dynamic Europe Fund EUR FTSE RAFI Emerging Markets Fund Dynamic Global USD Power Shares FTSE RAFI Asia Pacific Developed Markets Fund Ex-Japan Fund Dynamic Japan Fund GBP FTSE RAFI Hong Kong China Fund Dynamic UK Fund GBP Power Shares FTSE RAFI All-World 3000 Fund New Fund Currency CHF New FTSE RAFI Index FTSE RAFI Switzerland Index USD FTSE RAFI Emerging Markets Index USD FTSE RAFI Asia Pacific Ex- Japan Index USD FTSE RAFI Hong Kong China Index USD FTSE RAFI All-World 3000 Index The following pages will have both the legacy and new funds noted since this annual report covers the time period during which the transition occurred. Performance for the new FTSE RAFI Index funds above will be based only on 1 February 2010, transition date, and forward. EQQQ Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the Nasdaq-100 Index ( the Index ) in U.S. Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI US 1000 Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI US 1000 Index ( the Index ) in U.S. Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. Global Clean Energy Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the WilderHill New Energy Global Innovation Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. Dynamic US Market Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the Dynamic Market Intellidex ( the Index ) in U.S. Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 6

7 Investment Strategy for the Year (continued) Global Funds Ireland plc Investment Manager s Report (continued) FTSE RAFI Europe Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Europe Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. Global Listed Private Equity Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the Global Listed Private Equity Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. Palisades Global Water Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the Palisades Global Water Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI Asia Pacific Ex-Japan Fund 1 (On 1 February 2010 the name and index provider and investment strategy changed. Please refer to Dynamic Global Developed Markets Fund) The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Asia Pacific Ex-Japan Index ( the Index ) in U.S. Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI Emerging Markets Fund 2 (On 1 February 2010 the name and index provider and investment strategy changed. Please refer to Dynamic Europe Fund) The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Emerging Markets Index ( the Index ) in US Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI UK 100 Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI UK 100 Index ( the Index ) in GBP terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI All-World 3000 Fund 3 (On 1 February 2010 the name and index provider and investment strategy changed. Please refer to Dynamic UK Fund) The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI All-World 3000 Index ( the Index ) in US Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 7

8 Investment Strategy for the Year (continued) Global Funds Ireland plc Investment Manager s Report (continued) FTSE RAFI Developed Europe Mid-Small Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Developed Europe Mid-Small Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI Developed 1000 Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Developed 1000 Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI Italy 30 Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Italy 30 Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI Switzerland Fund 4 (On 1 February 2010 the name and index provider and investment strategy changed. Please refer to Dynamic Italy Fund) The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Switzerland Index ( the Index ) in Swiss Franc terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. FTSE RAFI Hong Kong China Fund 5 (On 1 February 2010 the name and index provider and investment strategy changed. Please refer to Dynamic Japan Fund) The investment objective of the Fund is to provide investors with investment results which, before expenses, generally correspond to the price and yield performance of the FTSE RAFI Hong Kong China Index ( the Index ) in US Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. Global Agriculture NASDAQ OMX Fund The investment objective of the Fund is to provide investors with investment results which, before expenses, correspond to the price and yield performance of the NASDAQ OMX Global Agriculture Index ( the Index ) in US Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. Middle East North Africa NASDAQ OMX Fund The investment objective of the Middle East North Africa Fund is to provide investors with investment results which, before expenses, correspond to the price and yield performance of the NASDAQ OMX Middle East North Africa Index ( the Index ) in US Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. EuroMTS Cash 3 Months Fund The investment objective of the EuroMTS Cash 3 Months Fund is to provide investors with investment results which, before expenses, correspond to the price and yield performance of the EuroMTS Government Bill Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 8

9 Investment Strategy for the Year (continued) Global Funds Ireland plc Investment Manager s Report (continued) Investment Strategy from 1 October 2009 to 1 February Dynamic Global Developed Markets Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the QSG Global Index ( the Index ) in U.S. Dollar terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 2 Dynamic Europe Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the QSG Europe Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 3 Dynamic UK Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the QSG United Kingdom Index ( the Index ) in GBP terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 4 Dynamic Italy Fund The investment objective of the Fund is to provide investment results which, before expenses, generally correspond to the price and yield performance of the QSG Italy Index ( the Index ) in Euro terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 5 Dynamic Japan The investment objective of the Fund is to provide investors with investment results which, before expenses, generally correspond to the price and yield performance of the QSG Active Japan Index ( the Index ) in GBP terms, by holding all of the shares in the Index in their respective weightings in the Index, subject to the investment restrictions as disclosed in the Fund s prospectus. 9

10 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report 4 th Quarter 2009 Dividends The Invesco portfolio management team proposed and the board approved the following dividends payable in October 2009 for the Irish Domiciled Funds, zero (0) which exceeded the 1% yield test and eight (8) where dividend amounts were adequate to distribute back to shareholders, for a total of eight (8) Funds with dividends: X-Date Record Date - 2 October 2009 Payment Date - 30 October 2009 Fund Name Currency ISIN Dividend EQQQ Fund USD IE FTSE RAFI US 1000 Fund USD IE00B23D8S Dynamic US Market Fund USD IE00B23D FTSE RAFI UK 100 Fund GBP IE00B23LNN Dynamic UK Fund* GBP IE00B23LNQ FTSE RAFI Developed Europe Mid-Small EUR IE00B23D8Y Fund FTSE RAFI Italy 30 Fund EUR IE00B23LNP Middle East North Africa NASDAQ OMX Fund USD IE00B3BPCJ Investment Manager s Report 1 st Quarter 2010 Dividends The Invesco portfolio management team proposed and the board approved the following dividends payable in January 2010 for the Irish Domiciled Funds, zero (0) which exceeded the 1% yield test and ten (10) where dividend amounts were adequate to distribute back to shareholders, for a total of ten (10) Funds with dividends: X-Date - 30 December 2009 Record Date - 4 January 2010 Payment Date - 29 January 2010 Fund Name Currency ISIN Dividend EQQQ Fund USD IE FTSE RAFI US 1000 Fund USD IE00B23D8S Dynamic US Market Fund USD IE00B23D Global Listed Private Equity Fund EUR IE00B23D8Z FTSE RAFI UK 100 Fund GBP IE00B23LNN Dynamic UK Fund* GBP IE00B23LNQ FTSE RAFI Italy 30 Fund EUR IE00B23LNP FTSE RAFI Developed Europe Mid-Small EUR IE00B23D8Y Fund Dynamic Italy Fund* EUR IE00B23LNR Dynamic Japan Fund* GBP IE00B3BPCG *See page 6 for details of Fund name changes. 10

11 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report 2 nd Quarter 2010 Dividends The Invesco portfolio management team proposed and the board approved the following dividends payable in April 2010 for the Irish Domiciled Funds, zero (0) which exceeded the 1% yield test and three (3) where dividend amounts were adequate to distribute back to shareholders, for a total of three (3) Funds with dividends: X-Date - 31 March 2010 Record Date - 6 April 2010 Payment Date - 30 April 2010 Fund Name Currency ISIN Dividend EQQQ Fund USD IE FTSE RAFI US 1000 Fund USD IE00B23D8S FTSE RAFI UK 100 Fund GBP IE00B23LNN Investment Manager s Report 3 rd Quarter 2010 Dividends The Invesco portfolio management team proposed and the board approved the following dividends payable in July 2010 for the Irish Domiciled Funds, eight (8) which exceeded the 1% yield test and four (4) where dividend amounts were adequate to distribute back to shareholders, for a total of twelve (12) Funds with dividends: X-Date - 30 June 2010 Record Date - 2 July 2010 Payment Date - 30 July 2010 Fund Name Currency ISIN Dividend EQQQ Fund USD IE FTSE RAFI US 1000 Fund USD IE00B23D8S FTSE RAFI Europe Fund EUR IE00B23D8X Global Listed Private Equity Fund EUR IE00B23D8Z FTSE RAFI UK 100 Fund GBP IE00B23LNN FTSE RAFI All-World 3000 Fund* USD IE00B23LNQ FTSE RAFI Developed Europe Mid-Small EUR IE00B23D8Y Fund FTSE RAFI Developed 1000 Fund EUR IE00B23D8W FTSE RAFI Italy 30 Fund EUR IE00B23LNP FTSE RAFI Switzerland Fund* CHF IE00B23LNR FTSE RAFI Hong Kong China Fund* USD IE00B3BPCG Middle East North Africa NASDAQ OMX Fund USD IE00B3BPCJ *See page 6 for details of Fund name changes. 11

12 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report 4 th Quarter 2010 Dividends The Invesco portfolio management team proposed and the board approved the following dividends payable in October 2010 for the Irish Domiciled Funds, zero (0) which exceeded the 1% yield test and thirteen (13) where dividend amounts were adequate to distribute back to shareholders, for a total of thirteen (13) Funds with dividends: X-Date - 29 September 2010 Record Date - 1 October 2010 Payment Date - 29 October 2010 Fund Name Currency ISIN Dividend EQQQ Fund USD IE FTSE RAFI US 1000 Fund USD IE00B23D8S Dynamic US Market Fund USD IE00B23D FTSE RAFI Europe Fund EUR IE00B23D8X Global Listed Private Equity Fund EUR IE00B23D8Z FTSE RAFI UK 100 Fund GBP IE00B23LNN FTSE RAFI All-World 3000 Fund * USD IE00B23LNQ FTSE RAFI Developed Europe Mid-Small EUR IE00B23D8Y Fund FTSE RAFI Developed 1000 Fund EUR IE00B23D8W FTSE RAFI Italy 30 Fund EUR IE00B23LNP FTSE RAFI Hong Kong China Fund * USD IE00B3BPCG Global Agriculture NASDAQ OMX Fund USD IE00B3BQ Middle East North Africa NASDAQ OMX Fund USD IE00B3BPCJ *See page 6 for details of Fund name changes. 12

13 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report Correlation Analysis Correlation represents the relationship between two or more variables with a value assigned between 1 and -1. Correlation is the degree to which these variables are observed to move together: if they move in the same direction, there is positive correlation; if they move in opposite directions, there is negative correlation. A value of 1 indicates they are perfectly correlated and a value of 1 means they are exact opposites. The calculated value usually falls somewhere in between indicating the degree of linear dependence between the variables. The closer the coefficient is to either 1 or -1, the stronger or weaker the correlation between the variables (in this case the Fund and index). The table below outlines the correlation of each of the Irish Domiciled Funds compared to their respective underlying indices. At least 1 year of data is beneficial when doing correlation analysis for the Funds. To get the 1 year and since inception figures, monthly data was used for the analysis. Additional Information: EQQQ monthly data from December 2002 to September 2010 Other Funds monthly data from inception of Fund to September 2010 Please see table below for detailed correlation analysis by Fund for time periods of 1 year and since inception. Correlation Correlation Since Ticker Fund Name Shares in Issue Currency Net Asset Value 1-Year * Inception EQQQ EQQQ Fund 16,000,000 USD 786,413, PSWC Dynamic US Market Fund 3,300,001 USD 24,936, PSRF FTSE RAFI US 1000 Fund 4,900,001 USD 40,977, PSBW Global Clean Energy Fund 1,600,001 EUR 7,709, PSRE FTSE RAFI Europe Fund 1,700,001 EUR 12,235, PSRM FTSE RAFI Emerging Markets Fund 1,300,001 USD 12,596, PSHO Palisades Global Water Fund 800,001 EUR 5,847, PSRA FTSE RAFI Asia Pacific Ex-Japan Fund 600,001 USD 4,108, PSSP Global Listed Private Equity Fund 500,001 EUR 2,703, PSRD FTSE RAFI Developed 1000 Fund 800,001 EUR 6,818, PSES FTSE RAFI Developed Europe Mid-Small Fund 700,001 EUR 5,940, PSRU FTSE RAFI UK 100 Fund 450,001 GBP 3,872, PSRW FTSE RAFI All-World 3000 Fund 1,250,001 USD 16,302, PTI FTSE RAFI Italy 30 Fund 1,000,001 EUR 5,541, PDI FTSE RAFI Switzerland Fund 200,001 CHF 1,848, PSGA Global Agriculture NASDAQ OMX Fund 1,400,001 USD 15,462, PSRH FTSE RAFI Hong Kong China Fund 100,001 USD 2,030, PSMN Middle East North Africa NASDAQ OMX Fund 200,001 USD 2,526, PEU EuroMTS Cash 3 Months Fund 600,001 EUR 60,756,

14 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report Tracking Error Analysis Recommended Ranges for Irish Domiciled Funds The chart below lists appropriate levels of tracking error ranges for the current products listed in Europe using a US study conducted by Ibbotson, as a guideline. The recommended tracking level ranges were the product of an Ibbotson report generated for the US Board of Trustees in 2007.* In that report, Ibbotson researched the ETF marketplace and proposed certain ranges as appropriate based on the nature of the underlying security, asset class, trading restrictions, etc. These ranges were updated in April 2010 with a new Ibbotson report which was authorized and analyzed by the Management team including the Irish Board of Directors. The Irish Board of Directors will direct the Investment Manager to periodically revisit the minimum and maximum of each fund to make sure it is still appropriate as well as alternative measurements to gauge tracking accuracy. The ranges are identical to those used for US-listed funds. Furthermore, several of the funds listed in Europe seek to track the same index as funds listed in the US. When comparing these funds tracking error levels, the European-listed funds results are very close to their US-listed counterparts. Tracking Error Range (%) - Previous Ranges Strategy Minimum Maximum Core US Equity International Tracking Error Range (%) - New Ranges Strategy Minimum Maximum Broad Market Thematic Global Developed Equity Emerging Markets Equity Fixed Income Source: Ibbotson Fund Breakdown by Strategy: Broad Market EQQQ, FTSE RAFI US 1000, Dynamic US Markets Thematic Global Clean Energy, Global Listed Private Equity, Global Water, Global Agriculture Global Developed Equity FTSE RAFI Europe, FTSE RAFI Asia Pacific Ex-Japan, FTSE RAFI UK 100, FTSE RAFI All-World 3000, FTSE RAFI Developed Europe Mid-Small, FTSE RAFI Developed 1000, FTSE RAFI Italy 30, FTSE RAFI Switzerland, FTSE RAFI Hong Kong China Emerging Markets Equity FTSE RAFI Emerging Markets, NASDAQ Middle East North Africa Fixed Income EuroMTS Cash 3 Months * Please note, the Irish and US boards are independent of one another and the Board of Directors is simply using this report as a guideline for their tracking error analysis. 14

15 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report Tracking Error Analysis (Continued) Ticker Fund Name Strategy Since 1 Year 2 Year 3 Year Inception EQQQ EQQQ Fund Broad Market 0.05% 0.10% 0.10% 0.10% PSRF FTSE RAFI US 1000 Fund Broad Market 0.22% 0.58% N/A 0.54% PSBW Global Clean Energy Fund Thematic 0.84% 1.66% N/A 1.79% PSWC Dynamic US Market Fund Broad Market 0.33% 0.34% N/A 0.33% PSRE FTSE RAFI Europe Fund Global Developed Equity 0.38% 0.51% N/A 0.82% PSSP Global Listed Private Equity Fund Thematic 0.22% 1.54% N/A 2.46% PSHO Palisades Global Water Fund Thematic 0.87% 1.97% N/A 2.42% PSRA Dynamic Asia Pacific Ex- Japan Fund Global Developed Equity 0.54% 1.36% N/A 1.20% PSRM FTSE RAFI Emerging Markets Fund Emerging Markets Equity 2.62% 2.15% N/A 2.47% PSRU FTSE RAFI UK 100 Fund Global Developed Equity 0.23% 0.47% N/A 0.67% PSRW FTSE RAFI All-World 3000 Global Developed Equity 1.27% 1.80% Fund N/A 2.16% PSES FTSE RAFI Developed Europe Mid-Small Fund Global Developed Equity 0.48% 1.17% N/A 1.80% PSRD FTSE RAFI Developed 1000 Global Developed Equity 0.32% 0.71% Fund N/A 1.56% PTI FTSE RAFI Italy 30 Fund Global Developed Equity 0.56% 0.73% N/A 0.66% PDI FTSE RAFI Switzerland Fund Global Developed Equity 0.86% 2.79% N/A 2.65% PSRH FTSE RAFI Hong Kong China Fund Global Developed Equity 1.77% 4.80% N/A 4.80% PSGA Global Agriculture Fund Thematic 0.28% 0.97% N/A 0.97% PSMN Middle East North Africa Fund Emerging Markets Equity 1.64% N/A N/A 1.67% PEU EuroMTS Cash 3 Months Fund Fixed Income 0.05% N/A N/A 0.08% 15

16 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report Performance Analysis Ticker Fund Name Inception Date Currency AUM 3 Mo YTD 1 Yr Since Incept EQQQ EQQQ 2-Dec-2002 USD 786,413, % 7.66% 16.59% 7.85% NASDAQ 100 Index 15.07% 7.97% 17.02% 8.17% Excess Return -0.11% -0.31% -0.43% -0.32% PSRF FTSE RAFI US Nov-2007 USD 40,977, % 6.53% 7.87% -3.32% FTSE RAFI US 1000 Index 11.15% 7.24% 8.56% -2.69% Excess Return -0.25% -0.71% -0.69% -0.63% PSWC Dynamic US Market 12-Nov-2007 USD 24,936, % 3.62% 9.88% -7.69% Dynamic Market Intellidex Index 12.94% 4.46% 11.11% -6.66% Excess Return -0.39% -0.84% -1.23% -1.03% PSBW Global Clean Energy 12-Nov-2007 EUR 7,709, % % % % WilderHill New Energy Global Innovation Index 3.31% % -9.21% % Excess Return -0.54% -1.19% -2.18% -1.44% PSSP Global Listed Private Equity 19-Nov-2007 EUR 2,703, % 17.64% 19.96% % Global Listed Private Equity Index 7.26% 18.91% 21.64% % Excess Return -0.43% -1.28% -1.68% -3.13% PSHO Palisades Global Water 19-Nov-2007 EUR 5,847, % 4.43% 11.94% -5.72% Palisades Global Water Index 0.05% 4.93% 13.10% -5.30% Excess Return -0.46% -0.50% -1.16% -0.42% PSGA Global Agriculture NASDAQ OMX 15-Sept-2008 USD 15,462, % 2.76% 17.25% 5.06% NASDAQ OMX Global Agriculture Index 28.46% 3.91% 19.16% 6.10% Excess Return -0.63% -1.15% -1.91% -1.04% PSMN Middle East North Africa NASDAQ OMX 29-Jan-2009 USD 2,526, % 4.87% -7.59% 17.96% NASDAQ OMX MENA Index 13.17% 6.47% -5.92% 21.24% Excess Return -0.06% -1.60% -1.67% -3.28% PSRD FTSE RAFI Developed Dec-2007 EUR 6,818, % 6.84% 7.37% -5.35% FTSE RAFI Developed 1000 Index 3.08% 8.10% 8.85% -4.16% Excess Return -0.57% -1.26% -1.48% -1.19% PSRA FTSE RAFI Asia Pacific ex Japan 01-Feb-2010* USD 4,108, % N/A N/A 15.71% Blended - FTSE RAFI Asia Pacific ex Japan Index 22.03% N/A N/A 16.98% Excess Return -0.15% N/A N/A -1.27% PSRE FTSE RAFI Europe 19-Nov-2007 EUR 12,235, % 2.84% 0.59% -7.71% FTSE RAFI Europe Index 8.26% 3.83% 1.79% -6.29% Excess Return -0.05% -0.99% -1.20% -1.42% PSRM FTSE RAFI Emerging Market 01-Feb-2010* USD 12,596, % N/A N/A 11.89% Blended - FTSE RAFI Emerging Market 15.63% N/A N/A 15.37% Excess Return -0.41% N/A N/A -3.47% 16

17 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report Performance Analysis (Continued) Ticker PSES Inception Date Currency AUM 3 Mo YTD 1 Yr Since Incept Fund Name FTSE RAFI Developed Europe Mid-Small 3-Dec-2007 EUR 5,940, % 11.96% 13.61% -4.43% FTSE RAFI Developed Europe Mid-Small Index 9.38% 13.12% 15.42% -3.92% Excess Return -0.20% -1.16% -1.81% -0.51% PSRU FTSE RAFI UK Dec-2007 GBP 3,872, % 4.61% 4.09% -2.70% FTSE RAFI UK 100 Index 14.65% 5.01% 4.59% -2.05% Excess Return -0.04% -0.40% -0.50% -0.65% PSRW FTSE RAFI All-World Feb-2010* USD 16,302, % N/A N/A 8.41% Blended - FTSE RAFI All-World 3000 Index 15.02% N/A N/A 9.00% Excess Return 0.44% N/A N/A -0.59% PTI FTSE RAFI Italy Dec-2007 EUR 5,541, % % % % FTSE RAFI Italy 30 Index 7.84% -9.53% % % Excess Return -0.28% -0.52% -1.01% -0.77% PDI FTSE RAFI Switzerland 01-Feb-2010* CHF 1,848, % N/A N/A 0.92% Blended - FTSE RAFI Switzerland Index 2.62% N/A N/A 1.84% Excess Return -0.18% N/A N/A -0.93% PSRH FTSE RAFI Hong Kong China 01-Feb-2010* USD 2,030, % N/A N/A 27.26% Blended - FTSE RAFI Hong Kong China 23.79% N/A N/A 27.53% Excess Return -1.20% N/A N/A -0.27% PEU EuroMTS Cash 3 Month 10-Oct-2008 EUR 60,756, % 0.24% 0.29% 0.64% EuroMTS Government Bills Index 0.15% 0.35% 0.47% 1.08% Excess Return -0.05% -0.11% -0.19% -0.45% * Changed Mandate to underlying indices for these 5 funds on 1st February 2010 Due to this change, all performance numbers for our internal reporting have been reset and are calculated from 1st February 2010 and forward for those 5 funds. 17

18 Global Funds Ireland plc Investment Manager s Report (continued) Investment Manager s Report PEA Eligibility PEA Eligibility (Plan d'eparnge en Actions) This PEA Eligibility test is to ensure that the French Pension Funds and investors are eligible to invest in the Funds noted below. The requirement is that 75% of their net assets in equity securities be issued by companies which have their head office in the European Union, Norway or Iceland. This is an annual check for the regulators, however, we are including on an ongoing basis to keep track of PEA Eligibility status for the three Funds noted below. During the period under review, financial period ended 2010, the FTSE RAFI Europe Fund has invested on average 93.5% of its net assets in equity securities, as listed in article L , I, 1, a, b, and c of the Code Monétaire et Financier, issued by companies which have their head office in the European Union, Norway or Iceland. During the period under review, financial period ended 2010, the FTSE RAFI Developed Europe Mid-Small Fund has invested on average 90.6% of its net assets in equity securities, as listed in article L , I,1, a, b, and c of the Code Monétaire et Financier, issued by companies which have their head office in the European Union, Norway or Iceland. During the period under review, financial period ended 31 January 2010, the Dynamic Europe Fund (see below as no longer eligible after 31 January 2010) has invested on average 93.0% of its net assets in equity securities, as listed in article L , I, 1, a, b, and c of the Code Monétaire et Financier, issued by companies which have their head office in the European Union, Norway or Iceland. Update due to Dynamic to FTSE RAFI Index Transition: Through 31 January 2010, the following Funds are those which are applicable to the PEA eligibility requirements - the FTSE RAFI Europe Fund, FTSE RAFI Developed Europe Mid-Small Fund and Dynamic Europe. As of 1 February 2010, only two of the Funds are eligible - the FTSE RAFI Europe Fund and FTSE RAFI Developed Europe Mid-Small Fund. Investment Manager s Report Outlook and Updates Outlook The Funds continue to be managed closely against their underlying indices. Minimal to moderate levels of tracking error have the potential to persist in Funds with extremely small assets sizes as well as the Funds in which account openings are problematic in countries (such as China, India and Russia). As asset sizes grow, correlation and tracking error continue to be minimized when compared to underlying indices for the Funds. Invesco Capital Management, LLC Investment Manager 26 October

19 Global Funds Ireland plc Directors Report The Directors submit their annual report together with the audited financial statements for the year ended 30 September Directors Responsibilities Irish company law requires the Directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements are prepared in accordance with accounting standards generally accepted in Ireland and comply with the Companies Acts, 1963 to 2009 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Company has appointed Invesco Capital Management Ireland Limited ( the Manager ) as manager of the Company who has, in turn delegated certain duties to the Investment Manager, Invesco Capital Management LLC (the Investment Manager ) and the Administrator, BNY Mellon Fund Services (Ireland) Limited (the Administrator ). The Company has appointed BNY Mellon Trust Company (Ireland) Limited (the Custodian ) to act as custodian of the Company s assets. The measures taken by the Directors to secure compliance with the Company s obligations to keep proper books of account include the use of appropriate systems and procedures and the employment of competent persons. The books of account are retained at the office of the Administrator at Guild House, Guild Street, International Financial Services Centre, Dublin 1. Corporate Governance Statement General Principles The Company is subject to compliance with the requirements of the Irish Companies Acts 1963 to 2009 (the Irish Companies Acts ), the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended (the UCITS Regulations ) and the Central Bank of Ireland (the Central Bank ) UCITS notices and guidance notes, as applicable to the Company. The requirements stemming from these are set out in the Corporate Governance Code published by the the Irish Funds Industry Association for Irish Domiciled Collective Investment Schemes (the IFIA Code ). The IFIA Code is publically available at While the IFIA Code sets out the minimum standards that the Company must adhere to, the Company adheres to corporate governance practices that are significantly in excess of these minimum standards and therefore operates on the basis of its own corporate governance policy. The Company, however, complies with all of the provisions of the IFIA Code and also adheres to additional corporate governance practices are set out below. 19

20 Global Funds Ireland plc Directors Report (continued) Corporate Governance Statement (continued) General Principles (continued) As the Company is not incorporated within the United Kingdom, it is not required to comply with the Combined Code on Corporate Governance published by the Financial Reporting Council (the Combined Code ). However, the Directors place a significant emphasis on strong corporate governance practices. Accordingly, in addition to complying with the IFIA Code, a number of the principles of the Combined Code have also been incorporated into the Company s corporate governance practices to the extent that they are relevant and appropriate given the Company s activities as an open-ended investment company and its compliance with the laws and regulations outlined above. The Combined Code is publicly available at The UK Listing Rules in the FSA Handbook require the Company to disclose the significant ways in which the corporate governance practices of the Company differ from those set out in the Combined Code. The Company generally complied with the provisions of the Combined Code with the following exceptions. There is no senior independent director. The Directors as a whole determine the appropriate composition and proper functioning of the Board. Accordingly, the Company does not currently have a nominations committee and there is no formal review process to assess the performance of the Board, its committees and the individual Directors. The Directors do not have formal service contracts or letters of appointment and are not appointed for specified time periods subject to re-election by shareholders. The Board does not currently have a remuneration committee as the majority of Directors are non-executive and such a committee was not considered appropriate or necessary in the circumstances. Direct contact with shareholders is usually through the Investment Manager who then reports back to the Directors. However, the Directors are always available to discuss any concerns or views of shareholders. All shareholders are encouraged to attend the Annual General Meeting to discuss the business tabled and to exercise their voting rights. The Company announces the result of resolutions proposed at general meetings but does not make the full details of voting available on its website. The external auditor of the Company (the Auditor ) has full access to the Board should they deem it necessary, and they are invited to meet with the Board at least bi-annually. Internal Control and Risk Management Systems in Relation to Financial Reporting During the period of these accounts, the Board was responsible for the review and approval of the annual financial statements as set out in the Statement of Directors Responsibilities. It is a statutory requirement that the annual financial statements are audited by one or more persons empowered to audit accounts in accordance with the Irish Companies Acts and in this regard the Board, on the Company s behalf, engages the Auditor. As part of its review procedures the Board receives presentations from relevant parties including consideration of Irish accounting standards and their impact on the annual financial statements, and presentations and reports on the audit process. The Board, on the Company s behalf, has appointed an Audit Committee, which comprises of the three independent non-executive directors who are responsible for conducting certain tasks in relation to financial reporting. The Audit Committee possess the relevant expertise to ensure the management and functions of the Company are properly carried out. The Audit Committee proposes recommendations to the Board regarding the approval of the interim financial accounts and annual financial accounts for the Company. The Audit Committee reviews and monitors the external auditors independence and objectivity and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements. 20

21 Global Funds Ireland plc Directors Report (continued) Corporate Governance Statement (continued) Internal Control and Risk Management Systems in Relation to Financial Reporting (continued) The annual financial accounts of the Company are produced by the Administrator, reviewed by the Investment Manager, then presented to the Audit Committee for consideration prior to the Audit Committee's recommendation to the Board. The Audit Committee is also tasked with, amongst other matters, compliance reporting and internal audit matters. Reviews are carried out on a quarterly basis and reports of these reviews are presented to the Board on a quarterly basis. The Audit Committee supports the work of the Board in ensuring that records are correctly maintained to support the production of the annual financial accounts. The Chairman of the Audit Committee reports directly to the Board and presents the findings of the Audit Committee at the board meeting where the Board is asked to approve the annual financial accounts. Once the annual financial accounts are approved by the Board of Directors, the annual financial accounts are filed with the Central Bank, the Irish Stock Exchange and the UK Listing Authority. Dealings with Shareholders The convening and conduct of shareholders meetings are governed by the Articles of Association of the Company (the Articles ) and the Irish Companies Acts. Although the Directors may convene an extraordinary general meeting of the Company at any time, the Directors were required to convene the first annual general meeting of the Company within eighteen months of incorporation and each subsequent annual general meeting thereafter must be within fifteen months of the date of the previous annual general meeting provided that an annual general meeting is held once in each year within six months of the financial year end of the Company. Shareholders representing not less than one-tenth of the paid up share capital of the Company may also request the Directors to convene a shareholders meeting. At least twenty one clear days notice of every annual general meeting and any meeting convened for the passing of a special resolution must be given to shareholders and fourteen days notice must be given in the case of any other general meeting, unless the Auditor and all the shareholders of the Company entitled to attend and vote thereat, agree to shorter notice. Two shareholders present either in person or by proxy constitutes a quorum at a general meeting. The share capital of the Company is divided into different classes of shares and the Irish Companies Acts and the Articles of Association provide that the quorum for a general meeting convened to consider any alteration to the rights attached to any class of shares, is two or more shareholders present in person or by proxy, holding or representing by proxy at least one third of the issued shares of the relevant class. Every holder of participating shares or non-participating shares present, in person or by proxy, who votes on a show of hands is entitled to one vote. On a poll, every holder of participating shares present, in person or by proxy, is entitled to one vote in respect of each share held by him and every holder of non-participating shares is entitled to one vote in respect of all non-participating shares held by him. At any general meeting, a resolution put to the vote of the meeting is decided on a show of hands unless, before or upon the declaration of the result of the show of hands, a poll is demanded by the chairman of the general meeting, or by at least five shareholders present having the right to vote at such meeting, or any holder or holders of participating shares present, in person or by proxy, representing at least one tenth of the shares in issue having the right to vote at such meeting. Shareholders may resolve to sanction an ordinary resolution or special resolution at a shareholders meeting. Alternatively, a resolution in writing signed by all of the shareholders for the time being entitled to attend and vote on such resolution at a general meeting, will be valid and effective for all purposes as if the resolution had been passed at a general meeting of the Company duly convened and held and may consist of several documents in like form, each signed by one or more shareholders. An ordinary resolution of the Company (or of the shareholders of a particular class of shares) requires a simple majority of the votes cast by the shareholders voting, in person or by proxy, at the meeting at which the resolution is proposed. A special resolution of the Company (or of the shareholders of a particular class of shares) requires a majority of not less than three quarters of the votes cast by the shareholders present, in person or by proxy, and voting in general meeting in order to pass a special resolution including a resolution to amend the Articles. 21

22 Global Funds Ireland plc Directors Report (continued) Corporate Governance Statement (continued) Board composition and activities In accordance with the Irish Companies Acts and the Articles of Association, unless otherwise determined by an ordinary resolution of the Company in general meeting, the number of Directors may not be less than two provided however that a majority of the Directors are at all times resident outside of the United Kingdom. The Board comprises 4 non-executive Directors, three of whom are independent. Details of the current Directors are set out below, under the heading Directors Biographies. The Board is responsible for the Company s overall direction and strategy and to this end it reserves the decision making power on issues such as the determination of medium and long term goals, review managerial performance, organisational structure and capital needs and commitments to achieve the Company s strategic goals. To achieve these responsibilities, the Board meets on a quarterly basis to review the operations of the Company, address matters of strategic importance and to receive reports from the Administrator, Custodian and the Investment Manager. However, a Director may, and the Company Secretary on the requisition of a Director will, at any time summon a meeting of the Directors and ad hoc meetings in addition to the quarterly meetings are convened as required. Questions arising at any meeting of the Directors are determined by a majority of votes. In the case of an equality of votes, the chairman has a second or casting vote. The quorum necessary for the transaction of business at a meeting of the Directors is two, provided that if a majority of the Directors present are resident in the UK, the Directors present, irrespective of their number, shall not constitute a quorum, other than for the purposes of filling vacancies in their number or for summoning general meetings of the Company, but not for any other purpose. Each of the Directors attended at least four Board meetings held during the financial year ended Directors Biographies Eimear Cowhey (Irish Resident) has over 20 years' experience in the offshore funds industry and acts as an independent director in relation to a number of Irish companies and investment funds. From 1999 to 2006 she held various executive positions within The Pioneer Group, including Head of Legal and Compliance and Head of Product Development. From 1992 to 1999 she was Global Fund Director and Head Legal Counsel of INVESCO Asset Management. She qualified in 1990 as an Irish solicitor with the Irish law firm William Fry and she holds a Bachelor of Civil Law received from University College Dublin in She also holds a C. Dip. A F (Certified Diploma in Accounting and Finance) which was received from the Chartered Association of Certified Accountants in Mrs Cowhey acts as a non-executive director to a number of Irish companies. She is a former Council member and past Chairman of IFIA. She was also a member of the IFSC Funds Group which is run under the auspices of the Department of An Taoiseach and is a joint government/industry group to advise the government of investment fund related matters. Mrs Cowhey is a regular speaker at conferences and lectures at the Law Society on financial services law. 22