Schroder. Income Maximiser. Final Report and Accounts August 2017

Transcription

1 Schroder Income Maximiser Final Report and Accounts August 2017

2 Contents Schroder Income Maximiser 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 Income Maximiser 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/(losses) Revenue Expenses Taxation Distributions Fair value hierarchy Debtors Other creditors Contingent liabilities Related party transactions Unit classes Derivative and other financial instruments Direct transaction costs Units in issue reconciliation Counterparty exposure Remuneration Distribution Table Quarterly distribution for the three months ended 30 November Corporate unitholders (unaudited) Interim distribution for the three months ended 28 February Corporate unitholders (unaudited) Quarterly distribution for the three months ended 31 May Corporate unitholders (unaudited) Final distribution for the three months ended 31 August 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 Income Maximiser s (the fund ) investment objective is to provide income with potential for capital growth primarily through investment in equity and equity related securities of UK companies. The fund will also use derivative instruments to generate additional income. The Manager may selectively sell short dated call options over securities or portfolios of securities held by the fund or indices, in order to generate additional income by setting target strike prices at which those securities may be sold in the future. The Manager is also permitted to sell put options on securities or portfolios of securities which are not held by the fund, or indices, at target prices that are pre-set below the current market level. The Manager may also, for the purpose of efficient management, use derivative instruments which replicate the performance of a basket of short dated call options or a combination of equity securities and short dated call options. Investment will be in directly held transferable securities. The fund may also invest in collective investment schemes, derivatives, cash, deposits, warrants and money market instruments. Financial highlights Selling price % change A Income units 45.32p 43.70p 3.71 A Accumulation units p 95.56p L Income units 49.21p 47.14p 4.39 L Accumulation units 64.31p 57.37p S Income units 48.42p 46.27p 4.65 Z Income units 53.34p 51.13p 4.32 Z Accumulation units 82.34p 73.50p to to Distributions per Z Income unit p p 3

4 Fund Information (continued) Fund information Launch date 4 November 2005 Launch price 50.00p per A Income unit Launch date 11 May 2011 Launch price 50.00p per A Accumulation unit 50.00p per Z Income unit 50.00p per Z Accumulation unit Launch date 1 October 2013 Launch price 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 Quarterly Interim Quarterly Final Accounting dates 30 November 28 February 31 May 31 August Revenue allocation dates 31 January 30 April 31 July 31 October Ongoing charges figure For the year For the year to to A Income units 1.66% 1.66% A Accumulation units 1.66% 1.66% L Income units 0.84% 0.84% L Accumulation units 0.84% 0.84% S Income units 0.54% 0.54% Z Income units 0.91% 0.91% Z Accumulation units 0.91% 0.91% 4

5 Review of Investment Activities From 31 August 2016 to 31 August 2017, the price of Z Accumulation units on a selling price to selling price basis, which reflects the reinvestment of the distributions paid to unitholders, rose 12.03%. The fund does not measure its performance against a benchmark because the options overlay strategy is expected to result in diverging performance according to market conditions. However, for comparison purposes, the FTSE 1 All Share Index generated a total return of 14.33% 2 and The Investment Association UK Equity Income Sector Average generated a total return of 10.79% 3. Miners Anglo American, South32 and BHP Billiton rebounded strongly to better reflect fundamentals rather than short term sentiment. Our holdings in the banking sector, Royal Bank of Scotland Group and Barclays also performed well. Some might suggest this or that is the reason why these businesses have rallied so strongly. The reality is far more pedestrian. Low valuation creates its own catalysts, and the low valuations of these banks have allowed them to jump in response to unforeseen events. The shares were simply cheap enough to respond positively. Meanwhile, Wm Morrison Supermarkets and Tesco performed well on the back of strong results, which underlined how these management led turnarounds are gaining traction. On the negative side, education business Pearson performed poorly after downgrading 2017 profit guidance. As long term investors, we are encouraged by Pearson s meaningful progress in shifting sales towards digital and services as well as strengthening its balance sheet significantly via the sale of non-core assets. Integrated energy business and British Gas owner Centrica also detracted as it struggled to make headway amid political uncertainty. The company is cutting costs in order to protect its profit margins and the chief executive and finance director have worked hard to address the capital allocation concerns that mar its past. Structurally, we believe that historic under investment in the domestic power supply makes Centrica s assets more valuable. The fund s yield strategy continues to perform as we would expect, and the fund remains on track to deliver its 7% annual target yield in We continue to apply the strategy in an active manner, looking at each individual holding and its potential within the portfolio as a whole. Our aim is to sell just enough potential capital growth across our range of holdings to meet the income target, while still benefiting from the first phase of any share price growth. Co-Fund Manager: Mike Hodgson Head of Risk Managed Investments and Structuring, based in London, having re-joined Schroders in years of experience in financial markets. Mike started his career in 1987 at J Henry Schroder & Co. Limited as Principal Interest Rate Derivatives Trader and then was promoted to Global Head of Structured Products and Equity Derivatives In 2000, he moved to Citigroup as a result of its acquisition of J Henry Schroder where he was European Head of New Product Development In 2004, Mike joined ABN AMRO Bank NV (which then became Royal Bank of Scotland NV in 2007) as Global Head of Equity Derivatives Structuring moving on to become Head of Fund Derivatives Trading and Structuring PhD in Physics, Cambridge University and BSc (Hons) in Physics, Imperial College, London Co-Fund Manager: Nick Kirrage Specialist Value UK equities fund manager with sixteen years investment experience Previously a sector analyst responsible for a number of UK sectors including Transport and Metals & Mining Investment career commenced in 2001 at Schroders Chartered Financial Analyst Degree in Aeronautical Engineering, Bristol University 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 3 Source: Lipper for Investment Management. 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. Co-Fund Manager: Kevin Murphy Specialist Value UK equities fund manager with seventeen years investment experience Previously a sector analyst for Pan European Construction and Building Materials Investment career commenced in 2000 at Schroders Chartered Financial Analyst Degree in Economics, Manchester University 5

6 Risk Profile 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. Exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. The fund is index unconstrained and has the potential for greater volatility. The fund invests in a smaller number of stocks. This carries more risk than funds spread across a larger number of companies. 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. The fund uses derivatives for specific investment purposes. The way in which derivatives are used will increase the revenue paid to investors and reduce volatility, but there is the potential that performance or capital value may be eroded. As a result of the expenses being charged wholly to capital, the distributable revenue of the fund may be higher, but the capital value of the fund may be eroded which may affect future performance. The target yield quoted is an estimate and is not guaranteed. It is quoted net of basic rate tax, however, higher rate tax payers should note that they may be liable for further deductions. For these reasons, the purchase of units should not normally be regarded as a short term investment. 6

7 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 31 August 2017 were signed on 28 November 2017 on behalf of the Manager by: J.A. Walker-Hazell Directors P. Chislett 7

8 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 1 September 2016 to 31 August 2017 Schroder Income Maximiser ( 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 21 September

9 Independent Auditors Report to the Unitholders of Schroder Income Maximiser Report on the audit of the financial statements Opinion In our opinion, Schroder Income Maximiser s financial statements (the financial statements ): give a true and fair view of the financial position of the fund as at 31 August 2017 and of the net revenue and the net capital gains of 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: balance sheet as at 31 August 2017; 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. 9

10 Independent Auditors Report to the Unitholders of Schroder Income Maximiser (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. 10

11 Independent Auditors Report to the Unitholders of Schroder Income Maximiser (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 7, 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 liquidate the fund or to cease operations, 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. 11

12 Independent Auditors Report to the Unitholders of Schroder Income Maximiser (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 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 28 November

13 Comparative Tables A Income units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.76) (0.69) (0.79) Return after operating charges* (0.64) Distributions 1 (3.31) (2.97) (3.52) Closing net asset value *after direct transaction costs of 0.00 (0.04) (0.01) Performance Return after charges (%) (1.35) Other information Closing net asset value ( 000 s) 205, , ,531 Closing number of units 460,883, ,840, ,800,862 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

14 Comparative Tables (continued) A Accumulation units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.05) Operating charges (1.72) (1.46) (1.55) Return after operating charges* (1.60) Distributions 1 (7.56) (6.31) (6.94) Retained distributions Closing net asset value *after direct transaction costs of 0.00 (0.09) (0.03) Performance Return after charges (%) (1.76) Other information Closing net asset value ( 000 s) 106, , ,701 Closing number of units 99,845, ,719, ,741,181 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

15 Comparative Tables (continued) L Income units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.41) (0.37) (0.43) Return after operating charges* (0.35) Distributions 1 (3.59) (3.19) (3.76) Closing net asset value *after direct transaction costs of 0.00 (0.04) (0.02) Performance Return after charges (%) (0.69) Other information Closing net asset value ( 000 s) 94,920 62,358 47,167 Closing number of units 195,657, ,984, ,928,543 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

16 Comparative Tables (continued) L Accumulation units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.12) Operating charges (0.52) (0.44) (0.47) Return after operating charges* (0.59) Distributions 1 (4.56) (3.77) (4.13) Retained distributions Closing net asset value *after direct transaction costs of 0.00 (0.05) (0.02) Performance Return after charges (%) (1.09) Other information Closing net asset value ( 000 s) 46,956 43,688 33,371 Closing number of units 72,728,366 76,405,597 62,553,989 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

17 Comparative Tables (continued) S Income units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.26) (0.24) (0.27) Return after operating charges* (0.24) Distributions 1 (3.53) (3.13) (3.67) Closing net asset value *after direct transaction costs of 0.00 (0.04) (0.01) Performance Return after charges (%) (0.49) Other information Closing net asset value ( 000 s) 22,440 21,719 23,714 Closing number of units 47,005,217 47,891,885 52,330,309 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

18 Comparative Tables (continued) Z Income units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.49) (0.44) (0.50) Return after operating charges* (0.42) Distributions 1 (3.89) (3.46) (4.08) Closing net asset value *after direct transaction costs of 0.00 (0.05) (0.02) Performance Return after charges (%) (0.77) Other information Closing net asset value ( 000 s) 508, , ,905 Closing number of units 967,614, ,813, ,402,081 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

19 Comparative Tables (continued) Z Accumulation units Financial year to 31 August p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.15) Operating charges (0.73) (0.62) (0.65) Return after operating charges* (0.80) Distributions 1 (5.84) (4.84) (5.29) Retained distributions Closing net asset value *after direct transaction costs of 0.00 (0.07) (0.02) Performance Return after charges (%) (1.16) Other information Closing net asset value ( 000 s) 112,516 98,174 87,322 Closing number of units 136,105, ,012, ,681,337 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling 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. For Accumulation unit classes, prior years figures have been updated in line with the Investment Association circular, issued on 6 October 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. 19

20 Portfolio Statement Holding at Market Value % of net s assets United Kingdom Oil & Gas 9.24% ( %) BP 12,410,041 55, Royal Dutch Shell B 2,140,192 46, , Basic Materials 6.27% ( %) Anglo American 3,006,650 42, BHP Billiton 1,812,871 26, , Industrials 1.05% ( %) BAE Systems 1,899,103 11, , Health Care 8.30% ( %) AstraZeneca 803,194 36, GlaxoSmithKline 3,563,989 54, , Consumer Services 17.92% ( %) Debenhams 18,920,341 7, J Sainsbury 5,372,896 12, Marks & Spencer Group 6,416,334 20, Next 506,740 20, Pearson 8,128,957 49, Tesco 12,910,246 23, Trinity Mirror 5,422,588 5, William Hill 8,473,438 20, Wm Morrison Supermarkets 14,765,673 36, ,

21 Portfolio Statement (continued) Holding at Market Value % of net s assets Telecommunications 2.99% ( %) Vodafone Group 14,846,772 32, , Utilities 5.88% ( %) Centrica 20,471,521 40, Drax Group 7,664,454 23, , Financials 31.99% ( %) Aviva 10,452,151 54, Barclays 20,883,379 39, HSBC Holdings 9,417,381 70, Legal & General Group 8,668,256 22, Lloyds Banking Group 48,047,644 30, NEX Group 2,651,843 17, Old Mutual 7,595,754 15, Provident Financial 846,054 7, Royal Bank of Scotland Group 18,037,202 45, Standard Chartered 3,399,093 26, TP ICAP 4,190,910 20, , Australia Basic Materials 4.03% ( %) South32 24,337,541 44, , United States Health Care 2.64% ( %) Merck 348,995 17, Pfizer 446,600 11, ,

22 Portfolio Statement (continued) Holding at Market Value % of net s assets Consumer Services 1.97% ( %) Staples 2,724,486 21, , Technology 8.12% ( %) Cisco Systems 1,455,514 36, HP 1,139,142 16, Intel 1,314,519 35, , Sterling Denominated Derivatives (0.62)% (2016 (1.16)%) Anglo American Written Call Option (206,307) (340) (0.03) AstraZeneca Written Call Option (98,863) Aviva Written Call Option (999,085) BAE Systems Written Call Option (275,045) Barclays Written Call Option (1,305,211) BHP Billiton Written Call Option (169,956) (225) (0.02) BP Written Call Option (1,517,043) Drax Group Written Call Option (186,686) GlaxoSmithKline Written Call Option (426,342) HSBC Holdings Written Call Option (1,053,286) (488) (0.04) J Sainsbury Written Call Option (671,612) Legal & General Group Written Call Option (688,178) (10) 0.00 Lloyds Banking Group Written Call Option (3,002,977) Marks & Spencer Group Written Call Option (601,531) Old Mutual Written Call Option (835,532)

23 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets Royal Bank of Scotland Group Written Call Option (1,154,625) Standard Chartered Written Call Option (318,664) Tesco Written Call Option (1,210,335) TP ICAP Call Option (209,818) (46) (0.01) Vodafone Group Written Call Option (1,633,144) William Hill Written Call Option (488,664) Wm Morrison Supermarkets Written Call Option (1,417,504) (1) 0.00 Anglo American Written Call Option (206,307) (413) (0.04) AstraZeneca Written Call Option (78,813) Aviva Written Call Option (979,889) Barclays Written Call Option (1,305,211) BHP Billiton Written Call Option (169,956) (240) (0.02) BP Written Call Option (1,292,012) Centrica Written Call Option (1,919,205) Debenhams Written Call Option (591,260) Drax Group Written Call Option (347,759) GlaxoSmithKline Written Call Option (336,629) HSBC Holdings Written Call Option (900,074) (442) (0.04) J Sainsbury Written Call Option (591,021) Legal & General Group Written Call Option (577,671) (5) 0.00 Lloyds Banking Group Written Call Option (3,002,977) Marks & Spencer Group Written Call Option (601,531) NEX Group Written Call Option (171,527) (11)

24 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets Next Written Call Option (32,050) (5) 0.00 Old Mutual Written Call Option (835,532) (6) 0.00 Pearson Written Call Option (343,345) Royal Bank of Scotland Group Written Call Option (1,127,325) (2) 0.00 Royal Dutch Shell B Written Call Option (267,524) (29) 0.00 South32 Written Call Option (324,639) (7) 0.00 Standard Chartered Written Call Option (318,664) (17) 0.00 Tesco Written Call Option (1,210,335) (8) 0.00 TP ICAP Call Option (288,125) (17) 0.00 Vodafone Group Written Call Option (1,633,144) (2) 0.00 William Hill Written Call Option (795,882) Wm Morrison Supermarkets Written Call Option (1,476,567) (3) 0.00 Anglo American Written Call Option (281,873) (18) 0.00 AstraZeneca Written Call Option (50,199) (12) 0.00 Aviva Written Call Option (979,889) (28) 0.00 BAE Systems Written Call Option (237,387) (3) 0.00 Barclays Written Call Option (1,305,211) (10) 0.00 BHP Billiton Written Call Option (169,956) (12) 0.00 BP Written Call Option (1,538,510) (17) 0.00 Centrica Written Call Option (1,919,205) (35) (0.01) Drax Group Written Call Option (157,463) (1) 0.00 GlaxoSmithKline Written Call Option (440,786) (28) 0.00 HSBC Holdings Written Call Option (812,482) (30)

25 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets J Sainsbury Written Call Option (671,612) (2) 0.00 Legal & General Group Written Call Option (1,083,532) (13) 0.00 Lloyds Banking Group Written Call Option (3,002,977) (3) 0.00 Marks & Spencer Group Written Call Option (601,531) (7) 0.00 Next Written Call Option (31,671) (6) 0.00 Old Mutual Written Call Option (494,952) (1) 0.00 Pearson Written Call Option (316,711) (10) 0.00 Royal Bank of Scotland Group Written Call Option (1,010,359) (6) 0.00 Royal Dutch Shell B Written Call Option (256,823) (10) 0.00 South32 Written Call Option (224,613) (1) 0.00 Standard Chartered Written Call Option (318,664) (6) 0.00 Tesco Written Call Option (1,210,335) (4) 0.00 TP ICAP Call Option (172,155) (28) 0.00 Vodafone Group Written Call Option (1,707,378) (17) 0.00 William Hill Written Call Option (794,384) (1) 0.00 Wm Morrison Supermarkets Written Call Option (1,438,533) (13) 0.00 Anglo American Written Call Option (206,307) (335) (0.03) Aviva Written Call Option (1,306,518) (4) 0.00 Barclays Written Call Option (1,305,211) BHP Billiton Written Call Option (169,956) (160) (0.02) BP Written Call Option (1,517,043) (8) 0.00 Drax Group Written Call Option (152,496) GlaxoSmithKline Written Call Option (299,344)

26 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets HSBC Holdings Written Call Option (1,149,039) (134) (0.01) J Sainsbury Written Call Option (644,747) Legal & General Group Written Call Option (1,083,532) (19) 0.00 Lloyds Banking Group Written Call Option (3,002,977) Marks & Spencer Group Written Call Option (601,531) NEX Group Written Call Option (211,478) (6) 0.00 Next Written Call Option (32,050) (25) 0.00 Old Mutual Written Call Option (835,532) (11) 0.00 Pearson Written Call Option (457,191) Royal Bank of Scotland Group Written Call Option (1,127,325) (1) 0.00 Royal Dutch Shell B Written Call Option (267,524) (64) (0.01) Standard Chartered Written Call Option (318,664) (1) 0.00 Tesco Written Call Option (1,210,335) (18) 0.00 TP ICAP Call Option (217,435) (22) 0.00 Vodafone Group Written Call Option (1,633,144) (12) 0.00 William Hill Written Call Option (885,432) (1) 0.00 Wm Morrison Supermarkets Written Call Option (1,339,542) (15) 0.00 Anglo American Written Call Option (206,307) (251) (0.03) AstraZeneca Written Call Option (100,399) Aviva Written Call Option (979,889) (9) 0.00 Barclays Written Call Option (1,305,211) BHP Billiton Written Call Option (169,956) (78) (0.01) BP Written Call Option (493,217) (3)

27 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets Drax Group Written Call Option (124,594) GlaxoSmithKline Written Call Option (326,557) (1) 0.00 HSBC Holdings Written Call Option (1,149,039) (37) (0.01) J Sainsbury Written Call Option (644,747) (1) 0.00 Legal & General Group Written Call Option (1,083,532) (37) (0.01) Lloyds Banking Group Written Call Option (3,002,977) (1) 0.00 Marks & Spencer Group Written Call Option (601,531) (6) 0.00 NEX Group Written Call Option (161,114) (6) 0.00 Old Mutual Written Call Option (911,490) (23) 0.00 Pearson Written Call Option (261,064) (1) 0.00 Royal Bank of Scotland Group Written Call Option (1,127,325) (3) 0.00 Royal Dutch Shell B Written Call Option (267,524) (70) (0.02) Standard Chartered Written Call Option (318,664) Tesco Written Call Option (1,210,335) (23) 0.00 TP ICAP Call Option (128,709) (27) 0.00 Vodafone Group Written Call Option (1,781,612) (11) 0.00 William Hill Written Call Option (824,085) (5) 0.00 Wm Morrison Supermarkets Written Call Option (1,661,138) (26) 0.00 Anglo American Written Call Option (198,054) (197) (0.02) AstraZeneca Written Call Option (96,383) Aviva Written Call Option (940,693) (9) 0.00 BAE Systems Written Call Option (182,313) (4) 0.00 Barclays Written Call Option (1,253,002)

28 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets BHP Billiton Written Call Option (163,158) (67) (0.01) BP Written Call Option (1,150,252) (14) 0.00 Centrica Written Call Option (1,842,436) (3) 0.00 Drax Group Written Call Option (139,184) GlaxoSmithKline Written Call Option (326,557) (3) 0.00 HSBC Holdings Written Call Option (1,130,085) (46) (0.01) J Sainsbury Written Call Option (644,747) (1) 0.00 Legal & General Group Written Call Option (1,040,190) (34) (0.01) Lloyds Banking Group Written Call Option (2,882,858) Marks & Spencer Group Written Call Option (577,470) (2) 0.00 NEX Group Written Call Option (184,906) (2) 0.00 Next Written Call Option (30,404) (40) (0.01) Old Mutual Written Call Option (852,684) (10) 0.00 Pearson Written Call Option (487,737) (2) 0.00 Royal Bank of Scotland Group Written Call Option (1,082,232) (4) 0.00 Royal Dutch Shell B Written Call Option (256,823) (105) (0.01) Standard Chartered Written Call Option (305,918) (1) 0.00 Tesco Written Call Option (1,161,922) (21) 0.00 TP ICAP Call Option (169,891) (18) 0.00 Vodafone Group Written Call Option (1,781,612) (15) 0.00 William Hill Written Call Option (762,609) (7) 0.00 Wm Morrison Supermarkets Written Call Option (1,417,504) (15) 0.00 Anglo American Written Call Option (198,054) (150) (0.02) 28

29 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets AstraZeneca Written Call Option (96,383) Aviva Written Call Option (945,461) (12) 0.00 BAE Systems Written Call Option (227,892) (11) 0.00 Barclays Written Call Option (1,253,002) BHP Billiton Written Call Option (163,158) (72) (0.01) BP Written Call Option (1,489,204) (37) 0.00 Centrica Written Call Option (1,842,436) (15) 0.00 Drax Group Written Call Option (453,911) (3) 0.00 GlaxoSmithKline Written Call Option (427,678) (37) 0.00 HSBC Holdings Written Call Option (1,130,085) (38) 0.00 J Sainsbury Written Call Option (644,747) (1) 0.00 Legal & General Group Written Call Option (1,040,190) (30) 0.00 Lloyds Banking Group Written Call Option (2,882,858) Marks & Spencer Group Written Call Option (577,470) (7) 0.00 NEX Group Written Call Option (201,715) (2) 0.00 Next Written Call Option (30,404) (33) 0.00 Old Mutual Written Call Option (911,490) (18) 0.00 Pearson Written Call Option (361,524) (4) 0.00 Royal Bank of Scotland Group Written Call Option (1,082,232) (6) 0.00 Royal Dutch Shell B Written Call Option (256,823) (97) (0.01) Standard Chartered Written Call Option (305,918) (1) 0.00 Tesco Written Call Option (1,161,922) (25) 0.00 TP ICAP Call Option (230,554) (19)

30 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets Vodafone Group Written Call Option (1,781,612) (31) 0.00 Wm Morrison Supermarkets Written Call Option (1,594,692) (36) 0.00 Anglo American Written Call Option (198,054) (75) (0.01) AstraZeneca Written Call Option (96,383) (26) 0.00 Aviva Written Call Option (1,003,406) (28) 0.00 BAE Systems Written Call Option (227,892) (16) 0.00 Barclays Written Call Option (1,253,002) (2) 0.00 BHP Billiton Written Call Option (163,158) (63) (0.01) BP Written Call Option (1,489,204) (19) 0.00 Centrica Written Call Option (1,842,436) (44) (0.01) Drax Group Written Call Option (136,047) (2) 0.00 GlaxoSmithKline Written Call Option (427,678) (116) (0.01) HSBC Holdings Written Call Option (1,097,318) (52) (0.01) Legal & General Group Written Call Option (1,040,190) (12) 0.00 Lloyds Banking Group Written Call Option (2,882,858) (4) 0.00 Marks & Spencer Group Written Call Option (577,470) (7) 0.00 Next Written Call Option (30,404) (3) 0.00 Old Mutual Written Call Option (911,490) (5) 0.00 Pearson Written Call Option (487,737) (17) 0.00 Royal Bank of Scotland Group Written Call Option (1,082,232) (10) 0.00 Royal Dutch Shell B Written Call Option (256,823) (16) 0.00 South32 Written Call Option (197,652)

31 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets Standard Chartered Written Call Option (305,918) (12) 0.00 Tesco Written Call Option (1,161,922) (20) 0.00 Vodafone Group Written Call Option (1,781,612) (14) 0.00 William Hill Written Call Option (762,609) (6) 0.00 Wm Morrison Supermarkets Written Call Option (1,771,880) (23) 0.00 Anglo American Written Call Option (261,293) (67) (0.01) AstraZeneca Written Call Option (96,383) (48) (0.01) Aviva Written Call Option (1,003,406) (72) (0.01) BAE Systems Written Call Option (227,892) (19) 0.00 Barclays Written Call Option (1,253,002) (25) 0.00 BHP Billiton Written Call Option (163,158) (48) (0.01) BP Written Call Option (1,489,204) (47) (0.01) Drax Group Written Call Option (168,204) (3) 0.00 GlaxoSmithKline Written Call Option (427,678) (84) (0.01) HSBC Holdings Written Call Option (666,364) (77) (0.01) J Sainsbury Written Call Option (644,747) (13) 0.00 Legal & General Group Written Call Option (643,407) (12) 0.00 Lloyds Banking Group Written Call Option (2,882,858) (11) 0.00 Marks & Spencer Group Written Call Option (577,470) (22) 0.00 NEX Group Written Call Option (106,278) (4) 0.00 Next Written Call Option (30,404) (7) 0.00 Old Mutual Written Call Option (741,200) (9)

32 Portfolio Statement (continued) Sterling Denominated Derivatives (continued) Holding at Market Value % of net s assets Pearson Written Call Option (272,291) (18) 0.00 Royal Bank of Scotland Group Written Call Option (1,082,232) (15) 0.00 Royal Dutch Shell B Written Call Option (235,421) (36) (0.01) South32 Written Call Option (148,514) (1) 0.00 Standard Chartered Written Call Option (305,918) (35) (0.01) Tesco Written Call Option (1,161,922) (9) 0.00 TP ICAP Call Option (184,486) (35) (0.01) Vodafone Group Written Call Option (593,876) (14) 0.00 William Hill Written Call Option (762,609) (8) 0.00 Wm Morrison Supermarkets Written Call Option (1,771,880) (34) 0.00 (6,764) (0.62) US Dollar Denominated Derivatives (0.25)% (2016 (0.21)%) Forward to sell US$177,584,000 for 135,550,165 US$(177,584,000) (2,066) (0.19) HP Written Call Option US$ (125,300) (1) 0.00 Intel Written Call Option US$ (144,500) Merck Written Call Option US$ (43,600) Staples Written Call Option US$ (170,200) Cisco Systems Written Call Option US$ (181,900) (2) 0.00 HP Written Call Option US$ (125,300) (10) 0.00 Intel Written Call Option US$ (144,500) (1) 0.00 Merck Written Call Option US$ (38,800) Pfizer Written Call Option US$ (55,800)