GIM Specialist Investment Funds

Transcription

1 Audited Annual Report GIM Specialist Investment Funds Société d Investissement à Capital Variable, Luxembourg Specialised Investment Fund (R.C.S. No B ) 31 December 2016

2 GIM Specialist Investment Funds Audited Annual Report Contents Board Directors 1 Management and Administration 2 Board Directors Report 3 Investment Managers Report 6 Audit Report 9 Financial Statements and Statistical Information Combined Statement 10 Combined Statement Operations and Changes in 12 Statement Changes in the Number Shares 14 Statistical Information 15 Notes to the Financial Statements 16 Schedules Investments GIM Specialist Investment Funds - GIM Brazil Government Bond Portfolio Fund II 20 GIM Specialist Investment Funds - GIM Commodities Fund 21 GIM Specialist Investment Funds - GIM Euro Investment Grade Aggregate Bond Fund 24 GIM Specialist Investment Funds - GIM Global Research Enhanced Index Minimum Volatility Equity Fund 28 GIM Specialist Investment Funds - GIM Multi Sector Credit Fund 33 GIM Specialist Investment Funds - ISIF Global Macro Opportunities Fund 44 Appendix - Unaudited Additional Disclosures 1. Fund Total Expense Ratios Summary Investment Objectives the Sub-Funds Performance and Volatility Interest Rate Received/(Charged) on Bank Accounts AIFMD Remuneration Disclosure Calculation Method the Risk Exposure Historical Statement Changes in the Number Shares 52 For additional information please consult No subscriptions can be received solely on the basis this report. Subscriptions are only valid if made on the basis the current prospectus, supplemented by the latest audited annual report. The current prospectus as well as the audited annual report can be obtained free charge from the registered fice the Fund and from local paying agents.

3 GIM Specialist Investment Funds Board Directors Chairman Iain Saunders Duine, Ardfern Argyll PA31 8QN United Kingdom Directors Jacques Elvinger Elvinger Hoss Prussen 2, Place Winston Churchill B.P. 425 L-2014 Luxembourg Grand Duchy Luxembourg Daniel Watkins JP Morgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y 0SP United Kingdom Jean Frijns Antigonelaan 2 NL-5631 LR Eindhoven The herlands Peter Thomas Schwicht Birkenweg 7 D Bad Vilbel Germany Registered Office 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg 1

4 GIM Specialist Investment Funds Management and Administration Alternative Investment Fund Manager, Management Company, Registrar and Transfer Agent, Global Distributor and Domiciliary Agent JPMorgan Asset Management (Europe) S.à r.l. 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg Investment Managers J.P. Morgan Investment Management Inc. 270 Park Avenue New York, NY United States America JPMorgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y 0JP United Kingdom Depositary and Administrative Agent Brown Brothers Harriman (Luxembourg) S.C.A. 80, route d Esch L-1470 Luxembourg Grand Duchy Luxembourg Independent Auditor PricewaterhouseCoopers, Société coopérative 2, rue Gerhard Mercator B.P L-1014 Luxembourg Grand Duchy Luxembourg Legal Adviser Elvinger Hoss Prussen 2, place Winston Churchill B.P. 425 L-2014 Luxembourg Grand Duchy Luxembourg 2

5 GIM Specialist Investment Funds Board Directors Report The Board Directors (the "Board") is pleased to present the Audited Annual Report GIM Specialist Investment Funds (the "Fund") for the year ended 31 December Structure the Fund The Fund is a variable capital investment company, organised as a "Société Anonyme", under the laws the Grand Duchy Luxembourg. The Board has appointed JPMorgan Asset Management (Europe) S.à r.l. ("JPMAME") as Management Company the Fund. The Fund is organised as an "umbrella" with a number Sub-Funds each which has its own investment objective, policies and restrictions. The objective the Fund is to place the money available to it in transferable securities and other permitted assets any kind, in accordance with the Fund's Prospectus, with the purpose spreading investment risks and affording shareholders the results the management their portfolios. The Fund qualifies as a Société d'investissement à Capital Variable - Fonds d'investissement Spécialisé and is subject to the Luxembourg law 13 February 2007 relating to specialised investment funds, as amended (the "2007 Law"). The Fund may therefore be fered for sale to investors who qualify as eligible investors within the meaning the 2007 Law. As at the year end the Fund had six Sub-Funds. All the Sub-Funds and Share Classes are registered for fer and distribution in the Grand Duchy Luxembourg and a number the Sub-Funds and Share Classes are registered for distribution in the following jurisdictions: Belgium, Denmark, Finland, France, Ireland, Italy, Norway, Sweden and the United Kingdom. Role and Responsibility the Board The responsibility the Board is governed exclusively by Luxembourg law. With respect to the annual accounts the Fund, the duties the Directors are governed by the law 10 December 2010 on, inter alia, the accounting and annual accounts undertakings for collective investment and by the law 13 February 2007 relating to specialised investment funds, as amended. A management agreement between the Fund and JPMorgan Asset Management (Europe) S.à r.l sets out the matters over which the Management Company has authority under Chapter 15 the Law 17 December 2010, as amended. This includes management the Fund's assets and the provision administration, registration, domiciliation agent and marketing services. All other matters are reservedfor approval by the Board and a schedule setting out such matters for clarity is in place between the Board and the Management Company. The matters reserved for the Board include determination each Sub-Fund's investment objective and policies, investment restrictions and powers, amendments to the Prospectus, reviewing and approving key investment and financial data, including the annual accounts, as well as the appointment, and review the services provided by, the Management Company, Auditor and Depositary. Prior to each Board meeting the Directors receive detailed and timely information allowing them to be prepared for the items under discussion during the meeting. For each quarterly meeting the Board requests, and receives, reports from, amongst others, the Management Company, the investment managers, risk management as well as proposals for changes to existing Sub-Funds or proposals to launch new ones as appropriate. Senior representatives each these functions attend Board meetings by invitation to enable the Directors to question the reports presented to them. The Directors take decisions in the interests the Fund and its shareholders as a whole and refrain from taking part in any deliberation or decision which creates a conflict interest between their personal interests and those the Fund and its shareholders. The subject conflicts interest is documented in the Prospectus and the Management Company's policy on conflicts interest is available for inspection on the website: The Board can take independent pressional advice if necessary and at the Fund's expense. Board Composition The Board is chaired by Mr. Saunders and consists four Independent Directors and one Connected Director. The Board defines a Connected Director as someone who is employed by JPMorgan Chase & Co or any its affiliates. All Board meetings require a majority Independent Directors to be in attendance and as such the Board acts independently from the Management Company. Change to the Composition the Board Messrs Trevor Ash and Christoph Bergweiler resigned from the Board with effect from the close business on 14 December The Board would like to take this opportunity to record its thanks for their service. At the Board meeting held on 14 December the Board appointed Messrs Iain Saunders and Daniel Watkins to fill the vacancies created by Messrs Ash and Bergweiler's resignations, subject to approval by the CSSF. With effect from 15 March 2017 Mr Elvinger stepped down as Chairman and Mr Saunders took up this role. At the annual General Meeting ( AGM ) to be held on 30 June 2017 the Board Directors would like to recommend that shareholders consider the appointment Messrs Massimo Greco and John Li as additional Directors with effect from the date the AGM. Mr Greco will bring his knowledge and experience in the asset management business, and Mr Li will bring his experience working in the financial sector in an audit and advisory capacity; the Board recommends that shareholders vote in favour these appointments. Summaries their experience are given below: Massimo Greco: managing director, is responsible for JPMorgan Asset Management's Global Funds business in Europe, based in London. He took on his current responsibilities in Mr Greco has been a JPMorgan employee since 1992, initially with the Investment Banking unit, moving to Asset Management in Before that, he worked for Goldman Sachs International in London. Mr Greco holds a degree in Economics from the University Turin and an MBA (Major in Finance) from the Anderson Graduate School Management at UCLA. Mr Greco is a Member the Board JPMorgan Asset Management (Europe) S.à r.l. as well as other Luxembourg domiciled SICAVs and is on the Board European Fund Asset Management Association ( EFAMA ). John Li How Cheong: During the last 29 years Mr Li worked essentially in the financial sector auditing and advising clients including banks, investment funds and insurance companies. Clients were from Europe, US, Japan and Asia fering Mr Li an extensive experience in dealing with international companies. Mr Li was a Partner at KPMG Luxembourg for more than 20 years during which he was Managing Partner for 8 years before taking on the role Chairman the Supervisory Board for 3 years. Mr Li was also a member the Investment Management Practice. 3

6 GIM Specialist Investment Funds Board Directors Report (continued) Mr Li is a board member the Institut Luxembourgeois des Administrateurs. Mr Li currently holds a number board mandates with financial institutions including several JPMorgan managed Luxembourg-domiciled investment funds. Induction and Training All new Directors will receive an induction incorporating relevant information regarding the Fund and their duties and responsibilities as a Director. In addition, the Board takes active steps to keep up to date with developments relevant to the Fund and have ensured that a formal training programme is in place. Board Evaluation The Board carries out a biennial review its performance. Board Remuneration The Board believes that the remuneration its members should reflect the responsibilities and experience the Board as a whole and be fair and appropriate given the size, complexity and investment objectives the Fund. The remuneration is reviewed on an annual basis. The Chairman is currently paid 17,500 per annum and the other Directors 16,000 per annum apart from the Connected Directors who have agreed to waive their remuneration. No element the remuneration paid by the Fund to the Directors is performance related. Board Meetings and Committees The Board meets quarterly but if necessary additional meetings will be arranged. Given the scope and nature the business the Fund, the Board does not currently consider it necessary to have a formal Audit or Remuneration Committee or indeed any other standing committees. However, this is kept under review. All Board related matters are therefore currently approved by the Board or, where there are specific matters that need further consideration, a Sub-Committee the Board could be formed for this specific purpose. Such circumstances could be where the Board requests some amendments to the Prospectus and where it is not appropriate to wait till the next quarterly Board meeting for this to be approved. These Sub-Committee meetings are usually formed a minimum two Directors. There were six Board meetings held during the year. Four these were quarterly Board meetings where, amongst other matters, the agenda included those items highlighted under the section above called 'Role and Responsibility the Board' and two were ad hoc Board meetings. In addition to the Board meeting where the Auditors present the report on the audit the Fund accounts, the Independent Directors also meet with them annually without the Connected Directors being in attendance. Internal Control Investment management and all administrative services are provided by the Management Company and custody assets is provided by J.P. Morgan Bank Luxembourg S.A. The Board's system internal control therefore mainly comprises monitoring the services provided by the Management Company and the Depositary, including the operational and compliance controls established by them to meet the Fund's obligations to shareholders as set out in the Prospectus, Articles Incorporation as well as all relevant regulations. The Management Company formally reports to the Board on a quarterly basis on the various activities it is responsible for and in addition shall inform the Board without delay any material administrative or accounting matters. Corporate Governance and ALFI Code Conduct The Board is responsible for ensuring that a high level corporate governance is met and considers that the Fund has complied with the best practices in the Luxembourg funds industry. In particular the Board has adopted the ALFICode Conduct (the "Code") which sets out principles good governance. These principles are set out below: 1. The Board should ensure that high standards corporate governance are applied at all times; 2. The Board should have good pressional standing and appropriate experience and to ensure that it is collectively competent to fulfil its responsibilities; 3. The Board should act fairly and independently in the best interests the investors; 4. The Board should act with due care and diligence in the performance their duties; 5. The Board should ensure compliance with all applicable laws and regulations and with the Fund's constitutional documents; 6. The Board should ensure that investors are properly informed, are fairly and equitably treated, and receive the benefits and services to which they are entitled; 7. The Board should ensure that an effective risk management process and appropriate internal controls are in place; 8. The Board should identifyand manage fairly and effectively, to the best its ability, any actual, potential or apparent conflict interest and ensure appropriate disclosure; 9. The Board should ensure that shareholder rights are exercised in a considered way and in the best interests the Fund; 10. The Board should ensure that the remuneration the Board members is reasonable and fair and adequately disclosed. The Board considers that the Fund has been in compliance with the principles the Code in all material aspects throughout the financial year ended 31 December The Board undertakes an annual review ongoing compliance with the principles the Code. 4

7 GIM Specialist Investment Funds Board Directors Report (continued) Proxy Voting Policy The Board delegates responsibility for proxy voting to the Management Company. The Management Company manages the voting rights the shares entrusted in a prudent and diligent manner, based exclusivelyon the reasonable judgement what willbest servethe financial interests clients. Sar as ispracticable, the Management Company willvoteat allthe meetingscalledbycompanies inwhichtheyareinvested. A copy the proxy voting policy is available from the Fund's registered fice upon request or on the website: Directors and Officers Indemnity Insurance The Fund's Articles Incorporation indemnify the Directors against expenses reasonably incurred in connection with any claim against them arising in the course their duties or responsibilities as long as they have not acted fraudulently or dishonestly. To protect shareholders against any such claim, the Board has taken out Directors and Officers Indemnity Insurance which indemnifies the Directors against certain liabilitiesarising inthe course their dutiesand responsibilitiesbut doesnot coveragainst anyfraudulentor dishonestactions on their part. Independent Auditor PricewaterhouseCoopers, Société coopérative, has been the Fund s Auditor since January The provision audit services was last put to competitive tender in The Board reviewed the services PwC in 2016 and decided that, subject to any other influencing factor, they should continue to be proposed to Shareholders as Auditor. Annual General Meeting The next Annual General Meeting the Company will be held on 30 June 2017 at the Registered Office the Company to consider matters relating to the year ending on 31 December At this meeting shareholders will, amongst other matters, be requested to consider the usual matters at such meetings including: 1. the adoption the financial statements and approval the allocation the results; 2. the approval Directors' fees; 3. the election the Directors, all whom wish to stand for election; 4. the confirmation the co-option Iain Saunders and Daniel Watkins and their elections to serve as a Directors; 5. the appointment John Li-How-Cheong and Massimo Greco as Directors; 6. the election the Auditor; 7. the discharge Directors duties. No special business is being proposed by the Board. Discharge Directors One the resolutions in the AGM is to discharge the directors their duties for the fiscal year in question. This discharge is only valid where the annual accounts contain no omission or false information concealing the real financial situation the Company. Events during the Year The Board agreed the following corporate actions and other significant amendments relating to Sub-Funds during the year: a) Sub-Fund launch GIM Specialist Investment Funds - ISIF Global Macro Opportunities Fund was launched on 20 July b) Sub-Fund liquidation and closures GIM Specialist Investment Funds - GIM Brazil Government Bond Portfolio Fund I was liquidated on 31 March GIM Specialist Investment Funds - GIM Senior Loan Fund received a full redemption order on 11 April The Management Company resolved to gate the redemptions based on cash availability for each dealing day tranche. With effect from 8 June 2016, the last NAV was calculated and the last redemption tranche was paid out. c) Changes to Management and Advisory Fees With effect from 7 March 2016, the Management Company decided to waive the management fees GIM Senior Loan Fund and GIM Brazil Government Bond Portfolio Fund I until the respective closure and liquidation dates. d) Other matter With effect from August 2016, the Prospectus was updated to incorporate the amendment for GIM Specialist Investment Funds - GIM Multi Sector Credit Fund from a dealing day last business day each month into twice monthly on the fifteenth calendar day each month and the last business day each month. With effect from 23 November 2016, the Prospectus was updated to incorporate amendments in relation to China Hong Kong Stock Connect programme with the added ability to invest in the Shenzhen-Hong Kong Stock Connect programme. Board Directors Luxembourg, 18 May

8 GIM Specialist Investment Funds Investment Managers Report GIM Specialist Investment Funds - GIM Brazil Government Bond Portfolio Fund II The JPMorgan Brazil Government Bond Portfolio Fund II delivered a return over was a volatile year for Brazil, with president Dilma Rousseff being impeached by the senate in Brazil over charges related to the Lava Jato investigation. After the impeachment, we saw the government being headed by vice president Michel Temer, which proceeded with some much-needed fiscal and structural reforms in the Brazilian economy. Looking ahead, the fundamental and political narrative remains positive. Inflation is likely to continue its descent towards the target, while growth has bottomed out, with only a modest recovery expected in This combination weak growth and declining inflation, together with some positive momentum on the fiscal front, should provide the central bank with scope to ease with several hundred basis points cuts in the coming year. In terms growth, private consumption may see a pickup on the back improving confidence and looser monetary policy. However, the magnitude the rebound will depend on developments in the labour market, which still look less promising. Credit conditions also remain tight, while households continue to delever, using a considerable amount their disposable income to pay back debt. On the government side, fiscal constraints will limit the amount heavy lifting that government spending can do. Inflation continues to decline and should approach 5 this year, down from current levels closer to 7. Below-par economic growth should keep service price inflation decelerating at the same time it constrains the pass-through the expected Brazilian real weakening. The outlook for the process relating to administered reforms also seems favourable, with energy prices likely to remain low, and contractionary shocks from the past 18 months unlikely to be repeated. Against this backdrop benign inflation and still-sluggish growth, the central bank will continue to cut the Selic rate. GIM Specialist Investment Funds - GIM Commodities Fund In 2016, the GIM Commodities Fund returned (gross fees), outperforming its Bloomberg Commodities Index benchmark, which returned Positioning in the energy sector was the largest positive contributor to performance in the year. In the first quarter, cautious positioning vs. the index in gasoline and natural gas protected returns, as oversupply paired with muted demand from warmer weather weighed on prices. In the third quarter, underweight positioning in crude oil bolstered performance as we exercised caution following the second-quarter's strong rebound and saw a slowdown in crude oil purchases for China's strategic petroleum reserves. In the fourth quarter, positioning in crude oil also aided results and was informed by the investment team's forecast for higher oil demand in early 2017 and an out--consensus call that the Organisation the Petroleum Exporting Countries would follow through with the November production cut (which they did). Livestock also contributed positively to performance, driven by the fourth-quarter's front month curve positioning in lean hogs as colder-than-expected weather reduced current supply. Precious metals had an immaterial impact on performance. Our positioning in industrial metals detracted from performance, driven primarily by an underweight position in the second half the year as global industrial production surprised to the upside. Our outlook has changed following the US presidential election, which saw Republican candidate Donald Trump elected as US president and the Republicans winning majorities in both the House Representatives and the Senate. In terms growth, approximately two-thirds the world's economies-including Europe, China, Japan and the US-were already growing above trend before the US election. Inflation was also ticking up, as the base effects lower oil prices rolled f. However, the sustainability that growth was in question, given poor demographics and declining productivity in much the developed world. Now, with the lack a strong opposition party in the US government, the way has been paved for meaningful fiscal stimulus, tax reform and regulatory reform. The resulting change in sentiment portends a new trajectory for corporate investment and sustainable growth. GIM Specialist Investment Funds - GIM Euro Investment Grade Aggregate Bond Fund Review The first half 2016 was good for developed market government bonds as yields grinded lower amid political events, and uncertainty around the outlook for global economic growth and central bank policies. A dovish stance from central banks also provided support to bonds. The UK's decision to leave the European Union (EU) took the market by surprise. There was a sharp rally in US 10-year Treasuries after the vote, with the Treasury yield falling from 1.85 to 1.47 in the month. The German 10-year government bond fell into negative territory and ended the month at UK 10-year Gilts also rallied sharply in the month and ended at 0.87, 0.56 lower than at the start the month. The reverse occurredin the second half the year, when economic data improved and markets became less concerned about global growth. Furthermore, the immediate impact Brexit appeared to be not as detrimental as originally expected, although it remains too early to assess the full implications the vote to leave the EU. In addition, the victory Donald Trump in the US presidential election, together with the Republicans winning majorities in both the House Representatives and the Senate, led to a pround change in market sentiment. Markets started to price in stronger growth and higher inflation, which was reflected in the move to higher rates. This should provide support for the Federal Reserve (Fed) to dial down its accommodative stance, as was evidenced at its December 2016 meeting, when it increased interest rates by 25 basis points (bps) was also a year dominated by the quest for yield, with both domestic and foreign investors flocking to global credit bond markets. As a result, significant yield compression occurred in both quality and maturity curves. Investment grade credit tightened 43bps to 130bps in 2016 and high yield was the best-performing major asset class for the year after a volatile start to The GIM Specialist Investment Funds - GIM Euro Investment Grade Aggregate Bond Fund generated a positive return 4.03 (on an end--day basis), while the benchmark produced a positive return The fund therefore outperformed its benchmark over the period (gross fees). In terms performance, the fund's overweight to investment grade credit contributed to excess returns over the period as European investment grade spreads tightened. Exposure to 10-year Italian government bonds detracted over the period as volatility picked up prior to the Italian referendum. The position was originally held vs. Germany and is now held vs. France as we expect volatility to pick up as the French presidential elections approach. The fund is now slightly long headline duration at 6.61 years vs years for the benchmark. The fund's overweight to investment grade corporate credit in terms weighted spread duration was decreased slightly over the quarter from years to years. 6

9 GIM Specialist Investment Funds Investment Managers Report (continued) Outlook Expectations for stronger growth and higher inflation are reflected in the recent move to higher rates. This should provide support for the Fed to dial down its accommodative stance, as it began to do at its December meeting. Replacing monetary policy, there is a new "backstop" in town: any hint a slowdown will be met with more stimulative fiscal policies. We expect the Fed to raise rates another three to four times in 2017, and while a near-term rally is a possibility, we anticipate a continued move to higher rates in Political uncertainty is set to continue in 2017, with the start Brexit negotiations, elections in France, Germany and the herlands, and the potential for early elections in Italy. Investors will also be waiting to see how US economic and foreign policy changes under President Trump. Despite the risks, we view the probability above-trend growth as much higher than we did last quarter, supported by meaningful US fiscal stimulus and tax and regulatory reform, strong growth in two-thirds the world's economies, and an end to the deflationary effects lower oil prices. As it relates to credit, continued positive technical and sector-specific fundamentals should dominate spread markets in As referenced earlier, there is uncertainty surrounding US fiscal, tax and trade policy, so we anticipate periods volatility throughout 2017 as spreads react accordingly. With solid GDP growth out the US, as well as higher US Treasury yields, ongoing quantitative easing, lower net bond supply and high energy prices, the environment lends itself to be supportive spread tightening. GIM Specialist Investment Funds - GIM Global Research Enhanced Index Minimum Volatility Equity Fund Review Our Global Research Enhanced Index (REI) Minimum Volatility strategy seeks to fer investors global equity exposure with lower expected volatility than the broader market. We seek to achieve lower volatility by managing the strategy with a risk prile similar to that the MSCI World Minimum Volatility Index. We seek to enhance returns through our proven Global REI investment process. Global REI Minimum Volatility targets an excess return 0.75 to 1.0, with a tracking error around 1.0. Overall risk for Global REI is similar to the index reference. Minimum volatility is a risk-based approach, which has been an active research area since the 1970s, when it was first documented that low risk stocks tend to outperform high risk stocks over time and across markets. The MSCI World Minimum Volatility Index targets around 30 less volatility than the MSCIWorld Index. Our fundamental research platform is key to the Global REIprocess. Our global network 56 in-house fundamental developed markets research analysts, based in New York, London and Tokyo, and with an average 19 years' industry experience, systematically capture alpha using our uniform valuation model. The portfolio management team captures our information advantage by exposing the portfolio to our analysts' insights, while controlling active risk against the MSCI World Minimum Volatility Index. Global REI Minimum Volatility has marginally outperformed its benchmark since inception to the end December On a performance time-adjusted basis, the fund outperformed its benchmark, the MSCI World Minimum Volatility Hedged, by The strategy seeks to refine the specific risk, while keeping intact the systematic exposure the benchmark. Relative exposure to regions, sectors and styles is minimised and the active risk budget is focused on our proprietary stock-specific research. Outperformance is attributed to a large number small active positions. Each these is capped to embed diversification to deliver benchmark-like characteristics and control the contribution to relative performance from each stock. Outlook The political surprises this year in the US and Europe have given governments a clear mandate to reflate their economies and address inequality. Investors are now expecting significant fiscal stimulus and a continued move away from the reliance on monetary policy to reinvigorate economic growth and inflation. Renewed fiscal stimulus should benefit equity markets globally, with a direct effect on some cyclical sectors, and a more general effect through higher economic growth and improved business and consumer confidence. Expectations for the number interest rate rises by the Federal Reserve in 2017 have increased. However, this need not be a headwind for equity markets if it is accompanied by continued economic growth and a strong labour market. This comes at a time when global economic growth is running at stronger rates than any time since 2010 and analysts' expectations for company earnings are improving. The current backdrop has provided a powerful catalyst for investors to refocus on the historically high levels dispersion in company valuations across sectors and regions globally. We believe this is very positive for active management and we continue to focus on identifying attractively-valued companies with the right business model and management quality to outperform their peers. This positive backdrop is not without its risks, however. Political uncertainty is set to continue in 2017, with a number important elections in Europe, the start Brexit negotiations and uncertainty over the impact Trump's policies on US economic and foreign policy. Investors will therefore be following events closely. The strategy will remain focused on delivering risk-adjusted returns over its index, fering index-like characteristics and exploiting stock-specific ideas from our in-house fundamental research analysts. GIM Specialist Investment Funds - GIM Multi Sector Credit Fund Review The GIM SIF Multi Sector Credit Fund returned 7.27 in 2016 (gross fees, hedged). The year got f to a volatile start, with two consecutive negative months for the fund brought about by slowing global growth emanating from China, recessionary fears within the US and a rout in the price commodities such as oil. The investment grade corporate bond allocation was the only source positive returns for the fund, as the asset class benefited from lower government bond yields amid the flight to quality. The negative returns weremore than fset by a strong rebound in March as commodity prices bottomed and economic data prints conveyed a firmer tone. Furthermore, central banks provided support by keeping interest rates on hold in the US and announcing a corporate bond purchasing scheme in the UK. Our loan allocation produced the strongest returns, followed by the high yield allocations in both the US and Europe. The second quarter saw a continuation the risk-on environment experiencedthroughout the second half the first quarter. The allocation to US assets generated the best returns for the fund, while the euro and sterling started to exhibit bouts volatility in response to growing uncertainty around the UK's referendum regarding its membership the European Union. April's returns were strong, while May and June saw small positive returns for the fund. July saw credit markets stage another sharp rally following the initial sell-f caused by the referendum result. The Bank England helped the rally in spreads by announcing its own corporate bond purchasing scheme, similar to that implemented by the European Central Bank. The quieter months saw a steady grind tighter across asset classes, with no obvious catalyst to stop the positive moves. The fund started to rotate out European investment grade bonds around this time and into US corporates given the rich valuations in the region caused by 7

10 GIM Specialist Investment Funds Investment Managers Report (continued) central bank policies. US valuations were relatively more attractive and the region was supported by strong demand dynamics from both domestic and foreigninvestors. Septemberwas a small negativeforthe fund, drivenby European high yieldand investment gradeholdings. After a relatively quiet October, November brought volatility to credit markets as Donald Trump was announced as the winner the presidential election and the Italian government lost the referendum vote to bring about constitutional reform. Both events sent spreads wider. However, once the uncertainty the referendum passed and markets digested the expansionary policies that the Trump administration had promised, credit markets posted a strong month performance in December, led by the US high yield asset class. Outlook The outlook for credit markets is positive as we head into the new year. We have a preference for US securities, with the view that they will benefit from policies promised by the incoming Trump administration. We will specifically look to add cyclical sectors such as energy, where we have seen a bottoming commodity prices and a significant improvement in balance sheet strength across a number credits. We take a more cautious outlook on the European market. There are a number political events that may send spreads wider, including the French election and the ongoing negotiations pertaining to the UK's exit from the European Union. Despite these uncertainties, we will tactically add exposure to European corporates if we believe any spread widening has gone too far. GIM Specialist Investment Funds - ISIF Global Macro Opportunities Fund Review The second half 2016 was eventful, marked by an improving global growth and inflation backdrop, shifting dynamics between monetary and fiscal policy, and a surprising political outcome in the US. Against this backdrop, global equities rose and fixed income pulled back, while the fund delivered a negative return. Our weak performance was driven by strategies held to reflect our view that global growth was priced too optimistically in markets and a lower-for-longer environment would persist. Equity futures, where we were short growth-oriented equity, was the biggest negative asset class contributor. Physical equity also ended the period down as gains in December failed to fully fset losses from August, October and November. Furthermore, our advanced derivatives, which we predominantly used on a tactical basis to provide short exposure to the US market and long exposure to volatility, contributed negatively. Our fixed income returns were negative, as the pricing global reflation following Trump's US election victory particularly hurt. Currency was the bright spot for performance at an asset class level, with notable gains coming from our fairly persistent long US dollar vs. short emerging market currency exposure. Our belief that global growth was too optimistically priced in markets was the amalgamation a number regional views. We were positive on the outlook for US and European growth, but high levels leverage and a lack structural reform made it difficult to see a sustainable path for emerging market growth, particularly in China, and the outlook for Japan was uncertain. However, global growth surprised to the upside, particularly in emerging markets, where China and its neighbours benefited from stimulus measures, while global monetary and fiscal policy was more supportive than expected. Our more pessimistic view was further challenged by the limited impact from Brexit on the UK and Europe. We reflected our view on global growth predominantly through our sector and regional positioning in equity. By sector, we held significant long exposure in higherquality and defensive sectors, such as healthcare, utilities and telecommunications, and were predominantly short in growth-oriented sectors such as energy, industrials and materials. This equity composition was the key driver our negative performance for the period. Better global growth was accompanied by higherinflation, with headline inflation pickingup amid rising commodity prices, and coreinflation also increasing. From November, this heightened our conviction in the durability the pick-up. We took the decision to remove our low inflation theme as we acknowledged the trend rising inflation, led by the US, where improving inflation is likely to be further supported by more accommodative fiscal policy. We reflected the removal our low inflation theme in part by moving to be modestly short duration. The Federal Reserve (Fed) turned more dovish in the first quarter 2016 and Europe and Japan introduced negative rates. However, as monetary easing appeared to run out room, the focus shifted towards more supportive fiscal policy, particularly in Japan and the US. In the US, the move towards fiscal stimulus comes at a point in the cycle when monetary policy is becoming less accommodative and the Fed has turned more hawkish. As a result this shift towards fiscal policy, as well as a renewed divergence in policy globally, we increased our long US dollar vs. short emerging market currencies strategy. Trump's victory and the Republican clean sweep marked a significant shift, with a new policy direction that we believe may lead to disparate growth and inflation paths for the US vs. the rest the developed and emerging world. Given the expectation for pro-us policy, as well as improving growth data, we transitioned the portfolio to benefit from stronger US growth. We added cyclicals by increasing long exposure to information technology, and moving from short to long global financials and industrials. We funded some these changes through a reduction in our long utilities, telecommunications and healthcare exposures, though we maintained a stable return element within our equity composition, which fers diversification properties. Outlook We expect improving global growth and a gradual pickup in inflation, led by the US, to continue in 2017, with potential challenges to this dynamic presented by possible US protectionist policy and Chinese financial instability. US interest rate increases are likely to accelerate from the pace seen so far in this hiking cycle, while continued easing in Europe and Japan gives even greater prominence to our global policy divergence theme. In the short term, we will seek to take advantage improving US growth, but we are conscious that the economy is moving towards late cycle and supply side weakness should gain more prominence into year end and early The Investment Managers 18 May 2017 The information stated in this report is historical and not necessarily indicative future performance. 8

11 Audit Report To the Shareholders GIM Specialist Investment Funds We have audited the accompanying financial statements GIM Specialist Investment Funds (the Fund ) and each its Sub-Funds, which comprise the Combined Statement and the Schedule Investments as at 31 December 2016 and the Combined Statement Operations and Changes in for the year then ended, and a summary significant accounting policies and other explanatory notes to the financial statements. Responsibility the Board Directors the Fund for the financial statements The Board Directors the Fund is responsible for the preparation and fair presentation these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation the financial statements and for such internal control as the Board Directors the Fund determines is necessary to enable the preparation financial statements that are free from material misstatement, whether due to fraud or error. Responsibility the Réviseur d entreprises agréé Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the judgment the Réviseur d entreprises agréé, including the assessment the risks material misstatement the financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d entreprises agréé considers internal control relevant to the entity s preparation and fair presentation the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose expressing an opinion on the effectiveness the entity s internal control. An audit also includes evaluating the appropriateness accounting policies used and the reasonableness accountingestimates made by the Board Directors the Fund, as wellas evaluating the overall presentation the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view the financial position GIM Specialist Investment Funds and each its Sub-Funds as 31 December 2016, and the results their operations and changes in their net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation the financial statements. Other information TheBoard Directors the Fund is responsible forthe other information. Theother information comprises the information includedin the annual report but does not include the financial statements and our audit report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form assurance conclusion thereon. In connection with our audit 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, based on the work we have performed, we conclude that there is a material misstatement this other information, we are required to report this fact. We have nothing to report in this regard. PricewaterhouseCoopers, Sociétécoopérative Luxembourg, 18 May 2017 Represented by Régis Malcourant PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg T: , F: , Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n ) R.C.S. Luxembourg B TVA LU

12 GIM Specialist Investment Funds Combined Statement GIM Specialist Investment Funds Combined GIM Brazil Government Bond Portfolio Fund II GIM Commodities Fund Investments in Securities at Market 1,310,951,823 7,602,580 5,523,744 Acquisition Cost: 1,302,524,773 8,359,037 5,523,744 Interest and Dividends Receivable, 7,937, Cash at Bank and at Brokers 78,508, , ,405 Amounts Receivable on Sale Investments 8,298,495-1,083,000 Tax Reclaims Receivable 118, Other Receivables 46, Fee Waiver * 643, , ,708 Unrealised Gain on Financial Futures Contracts 291, ,137 Derivatives Instruments at Market 4,017, Total 1,410,813,072 7,949,150 7,498,994 Liabilities Amounts Payable on Purchase Investments 12,857, Unrealised Loss on Forward Foreign Exchange Contracts 10,400,585-77,195 Other Payables 486,438 71,103 29,913 Unrealised Loss on Financial Futures Contracts 3,832, Interest and Dividends Payable, Management and Advisory Fees Payable 101,881 11,867 16,645 Total Liabilities 27,679,232 82, ,753 Total 1,383,133,840 7,866,180 7,375,241 Historical Total 31 December ,106,796 8,096,248 6,683, December ,126,843 14,737,890 9,595,704 * Please refer to Note 3a). The accompanying notes form an integral part these financial statements. 10

13 GIM Specialist Investment Funds Combined Statement (continued) GIM Euro Investment Grade Aggregate Bond Fund GIM Global Research Enhanced Index Minimum Volatility Equity Fund GIM Multi Sector Credit Fund ISIF Global Macro Opportunities Fund(1) 156,343,637 38,777, ,351, ,517, ,686,136 33,655, ,192, ,419,731 1,848,418 60,220 5,577, , ,580 36,027 7,093,749 70,290, ,201 6,529,333-59,749-58, , ,714 95, , ,715 4,009, ,030,635 39,090, ,030, ,192, ,482-10,887,383 2,085, ,670 3,115,715 7,184,029 91,895 20,588 21, , , ,695, ,808 4,893 65, , ,151 14,090,561 13,219, ,344,395 38,874, ,939, ,972, ,399,478 34,912,570 43,220, ,733,925 83,503,770 32,332,225 - (1) The financial information for the Sub-Fund is for the period starting on 20 July

14 GIM Specialist Investment Funds Combined Statement Operations and Changes in For the Year Ended 31 December 2016 GIM Specialist Investment Funds Combined GIM Brazil Government Bond Portfolio Fund I (1) GIM Brazil Government Bond Portfolio Fund II at the Beginning the Year* 291,895,322 17,630,382 8,096,248 Income Interest Income, 18,363, , ,224 Dividend Income, 4,700, Bank Interest 288, Interest on Swap Transactions 81, Other Income Total Income 23,434, , ,224 Expenses Management and Advisory Fees 553,020 32,171 51,082 Custodian, Corporate, Administrative and Domiciliary Agency Fees 516,277 16,116 63,937 Registrar and Transfer Agency Fees 269,761 10,707 42,479 Taxe d abonnement 92, Overdraft Interest 203, Interest on Swap Transactions 283, Sundry Fees** 419,689 8,814 32,019 Less: Fee Waiver *** (471,555) (25,499) (127,201) Total Expenses 1,866,768 43,214 63,812 Investment Income/(Loss) 21,567, , ,412 Realised Gain/(Loss) on Sale Investments (26,554,595) (6,080,407) (2,498,193) Realised Gain/(Loss) on Forward Foreign Exchange Contracts (44,723,808) (1,274,588) (741,939) Realised Gain/(Loss) on Financial Futures Contracts (21,095,110) - - Realised Gain/(Loss) on Foreign Exchange 7,211,924 (240,851) (6,308) Realised Gain/(Loss) on Derivatives Instruments (14,564,040) - - Realised Gain/(Loss) for the Year (99,725,629) (7,595,846) (3,246,440) Change in Unrealised Gain/(Loss) on Investments 18,749,014 7,615,839 4,858,361 Change in Unrealised Gain/(Loss) on Forward Foreign Exchange Contracts (10,264,571) (430,733) (8,026) Change in Unrealised Gain/(Loss) on Financial Futures Contracts (3,445,279) - - Change in Unrealised Gain/(Loss) on Foreign Exchange (130,495) 4,888 - Change in Unrealised Gain/(Loss) on Derivatives Instruments 1,802, Change in Unrealised Gain/(Loss) for the Year 6,710,912 7,189,994 4,850,335 Increase/(Decrease) in as a Result Operations (71,446,761) (129,300) 2,268,307 Movements in Share Capital Subscriptions 1,245,074, Redemptions (81,258,723) (17,501,082) (1,368,305) Increase/(Decrease) in as a Result Movements in Share Capital 1,163,815,349 (17,501,082) (1,368,305) Dividend Distribution (1,130,070) - (1,130,070) Total at the End the Year 1,383,133,840-7,866,180 (1) This Sub-Fund was liquidated on 31 March 2016 * The opening balance was combined using the foreign exchange rates as at 31 December The same net assets when combined using the foreign exchange rate ruling as at 31 December 2015 reflected a figure 289,106,796 ** Sundry Fees are principally comprised Directors fees, audit and tax related fees, registration, publication, mailing, printing fees, broker collateral charges as well as legal and marketing expenses. *** Please refer to Note 3 a). The accompanying notes form an integral part these Financial Statements. 12