European Alpha Plus Fund

Transcription

1 Schroder European Alpha Plus Fund Final Report and Accounts March 2017

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

3 Fund Information Investment objective and policy The fund s investment objective is to provide capital growth through investment in equity and equity related securities of European companies. At least 80% of the fund will be invested in a concentrated portfolio (typically between 35 and 60 holdings) of large or mid-sized companies listed, incorporated or headquartered in European countries or companies that derive a significant proportion of their revenues from their European business. The fund may also invest in collective investment schemes, fixed interest securities, warrants, cash, deposits and money market instruments. Financial highlights Selling price % change A Income units p p A Accumulation units p p GBP Hedged A Income units 68.19p 56.86p GBP Hedged A Accumulation units 67.95p 56.64p GBP Hedged Z Income units 72.77p 61.36p GBP Hedged Z Accumulation units 68.45p 56.65p L Income units 69.18p 52.40p L Accumulation units 71.26p 53.06p S Income units 68.10p 51.60p Z Income units 86.68p 65.67p Z Accumulation units 91.34p 68.06p Final distribution per Z Income unit p p The performance of hedged unit classes may differ from other unit classes of the fund because the return on unhedged unit classes is based on both the performance of the fund s investments and the performance of the portfolio currencies relative to sterling whereas the return on hedged unit class is based only on the performance of the fund s investments. 3

4 Fund Information (continued) Fund information Launch date 3 October 2003 Launch price 50.00p per A Income unit 50.00p per A Accumulation unit Launch date 10 February 2012 Launch price Launch date 1 July p per Z Income unit 50.00p per Z Accumulation unit Launch price 50.00p per GBP Hedged A Income unit 50.00p per GBP Hedged A Accumulation unit 50.00p per GBP Hedged Z Income unit 50.00p per GBP Hedged Z Accumulation unit 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 Interim Final Accounting dates 15 September 15 March Revenue allocation date 15 May Ongoing charges figure For the period For the year For the year from to to A Income units 1.68% 1.81% 1.68% A Accumulation units 1.68% 1.70% 1.68% GBP Hedged A Income units 1.68% 1.69% 1.68% GBP Hedged A Accumulation units 1.68% 1.68% 1.68% GBP Hedged Z Income units 0.93% 0.94% 0.93% GBP Hedged Z Accumulation units 0.93% 0.93% 0.93% L Income units 0.86% 0.86% 0.86% L Accumulation units 0.86% 0.86% 0.86% S Income units 0.56% 0.57% 0.56% Z Income units 0.93% 0.94% 0.93% Z Accumulation units 0.93% 0.93% 0.93% 1 The Ongoing charges figure is a projected figure based on the latest expenses of that unit class. 4

5 Review of Investment Activities From 15 March 2016 to 15 March 2017, the price of Z Accumulation units on a selling price to selling price basis rose 34.21%. In comparison, the FTSE 1 World Europe ex UK Index generated a total return of 27.47% 2 in sterling terms. European equities made strong gains over the twelve month period. Shares were supported by encouraging economic data and accommodative monetary policy from the European Central Bank. The fund outperformed the index, helped by positioning within the financials, technology and consumer services sectors. The largest individual contributor to relative returns was semiconductor maker STMicroelectronics. The company delivered strong results over the year, resulting in upgrades to future earnings expectations, and is also increasing its penetration at Apple. Maisons du Monde was another leading contributor; we participated in the stock s initial public offering in May and it has since executed its strategy well. Medical devices maker Ambu (sold out in the period) performed well as it rolled out its new ascope product. A number of financial sector holdings also supported relative returns. We saw a buying opportunity in European financials around the time of the UK s referendum on EU membership. Sentiment towards the whole sector slumped and valuations reached very cheap levels, yet banks such as ING Groep and Swedbank have almost zero UK exposure. Banks subsequently rallied strongly in the summer and autumn. The main individual detractor from relative performance was telecoms firm Orange. The telecoms sector lagged the wider market over the twelve month period but we see significant potential for the sector to perform well in Looking ahead, the absolute and relative performance upside within the European market has been diminished following the rally since last summer. The more positive news is that valuations are not excessive and earnings should show solid growth. Fund Manager: James Sym James Sym joined Schroders in July 2013 following the acquisition of Cazenove Capital James is a member of the Pan-European Equity team at Schroders He manages the Schroder European Alpha Income Fund and the Schroder European Alpha Plus Fund James graduated from St John s College, Cambridge with a degree in Natural Sciences and is a Chartered Financial Analyst James has nine years investment experience 1 FTSE International Limited ( FTSE ) FTSE. FTSE is a trade mark of London Stock Exchange plc and The Financial Times Limited and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE s express written consent. 2 Source: Thomson Reuters Datastream. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 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. For non-hedged unit classes exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. There is no guarantee that the hedging strategy applied in hedged unit classes will entirely eliminate the adverse effects of changes in exchange rates between the base currency and the portfolio currencies. In addition, it should be noted that hedging transactions will be entered into whether or not the currency of a hedged unit class is declining or increasing in value in relation to the base currency or portfolio currencies. Hedged unit classes aim to provide investors with a return correlated to the portfolio currencies performance of the fund by reducing the effect of exchange rate fluctuations between the base currency and the portfolio currencies. As it is not possible to legally segregate unit classes liabilities from those of other unit classes in the fund, there is a risk that, in certain limited circumstances, the hedging transactions undertaken in relation to a hedged unit class could result in liabilities which might affect the net asset value of the other unit classes in the fund. The fund invests in a smaller number of stocks. This carries more risk than funds spread across a larger number of companies. 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 15 March 2017 were signed on 8 May 2017 on behalf of the Manager by: J.A. Walker-Hazell Directors J.M. Cardew 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 16 March 2016 to 15 March 2017 Schroder European Alpha Plus Fund ( the Scheme ) Having carried out such procedures as we consider necessary to discharge our responsibilities as Trustee of the Scheme, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Authorised Fund Manager: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme s units and the application of the Scheme s revenue in accordance with the COLL as appropriate, and, where applicable, the Scheme s Trust Deed and Prospectus; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Scheme. J.P. Morgan Europe Limited Trustee Bournemouth 5 April

9 Independent Auditors Report to the Unitholders of Schroder European Alpha Plus Fund Report on the financial statements Our opinion In our opinion, Schroder European Alpha Plus Fund s financial statements, (the financial statements ): give a true and fair view of the financial position of the fund as at 15 March 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, the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. What we have audited The financial statements, included within the Final Report and Accounts, which are prepared by Schroder Unit Trusts Limited (the Authorised Fund Manager ), comprise: the balance sheet as at 15 March 2017; the statement of total return for the year then ended; the statement of change in net assets attributable to unitholders for the year then ended; the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information; and the distribution table. The financial reporting framework that has been applied in their preparation is 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 Financial Statements of UK Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for UK Authorised Funds ), the Collective Investment Schemes sourcebook and the Trust Deed. In applying the financial reporting framework, the Authorised Fund Manager has made judgements where appropriate, for example in respect of substantive accounting estimates. In preparing such estimates, they have considered future events and related assumptions. 9

10 Independent Auditors Report to the Unitholders of Schroder European Alpha Plus Fund (continued) Opinions on matters prescribed by the Collective Investment Schemes sourcebook 10 In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Fund Manager s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received 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. Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Authorised Fund Manager s Responsibilities Statement set out on page 7, the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. 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 Independent Auditors Report to the Unitholders of Schroder European Alpha Plus Fund (continued) What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the fund s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the Authorised Fund Manager s judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Final Report and Accounts (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 8 May 2017 (a) The maintenance and integrity of the Schroders website is the responsibility of the Authorised Fund Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 11

12 Comparative Tables A Income units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (2.65) (2.29) (2.16) Return after operating charges* (1.30) 2.88 Distributions 1 (1.64) (1.16) (0.48) Closing net asset value *after direct transaction costs of (0.19) (0.33) (0.47) Performance Return after charges (%) (0.97) 2.19 Other information Closing net asset value ( 000 s) 7,129 9, ,882 Closing number of units 4,122,063 6,892,948 84,913,103 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

13 Comparative Tables (continued) A Accumulation units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (2.74) (2.41) (2.33) Return after operating charges* (1.38) 3.09 Distributions 1 (1.94) (1.28) (0.51) Retained distributions Closing net asset value *after direct transaction costs of (0.21) (0.34) (0.51) Performance Return after charges (%) (0.95) 2.18 Other information Closing net asset value ( 000 s) 106, , ,935 Closing number of units 55,737,061 75,154, ,912,362 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

14 Comparative Tables (continued) GBP Hedged A Income units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (5.22) Operating charges (1.01) (1.03) (0.92) Return after operating charges* (6.25) 9.38 Distributions 1 (1.53) Nil 2 Nil 2 Closing net asset value *after direct transaction costs of (0.08) (0.15) (0.20) Performance Return after charges (%) (9.90) Other information Closing net asset value ( 000 s) Closing number of units 20,000 20,000 20,000 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p) There was no distribution as the total amount distributable was below de minimis. 14

15 Comparative Tables (continued) GBP Hedged A Accumulation units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (5.46) Operating charges (0.99) (1.00) (0.92) Return after operating charges* (6.46) 9.37 Distributions 1 (0.80) (0.72) Nil 2 Retained distributions Nil 2 Closing net asset value *after direct transaction costs of (0.08) (0.14) (0.20) Performance Return after charges (%) (10.24) Other information Closing net asset value ( 000 s) Closing number of units 34,258 67,438 20,090 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p) There was no distribution as the total amount distributable was below de minimis. 15

16 Comparative Tables (continued) GBP Hedged Z Income units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (6.26) Operating charges (0.59) (0.63) (0.50) Return after operating charges* (6.89) Distributions 1 (1.34) (1.09) (0.57) Closing net asset value *after direct transaction costs of (0.08) (0.16) (0.20) Performance Return after charges (%) (10.10) Other information Closing net asset value ( 000 s) 732 1, Closing number of units 1,028,412 1,721, ,090 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

17 Comparative Tables (continued) GBP Hedged Z Accumulation units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (5.27) 8.95 Operating charges (0.56) (0.56) (0.51) Return after operating charges* (5.83) 8.44 Distributions 1 (1.26) (1.00) (0.59) Retained distributions Closing net asset value *after direct transaction costs of (0.08) (0.14) (0.20) Performance Return after charges (%) (9.33) Other information Closing net asset value ( 000 s) 1,563 1,488 1,039 Closing number of units 2,291,161 2,626,370 1,662,970 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

18 Comparative Tables (continued) L Income units Financial year to 15 March 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) (0.45) (0.41) Return after operating charges* (0.06) 1.55 Distributions 1 (1.19) (0.90) (0.59) Closing net asset value *after direct transaction costs of (0.07) (0.12) (0.18) Performance Return after charges (%) (0.11) 3.01 Other information Closing net asset value ( 000 s) 32,090 40,661 31,803 Closing number of units 47,361,579 78,952,338 60,623,617 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

19 Comparative Tables (continued) L Accumulation units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.51) (0.45) (0.42) Return after operating charges* (0.06) 1.56 Distributions 1 (1.23) (0.91) (0.59) Retained distributions Closing net asset value *after direct transaction costs of (0.08) (0.13) (0.18) Performance Return after charges (%) (0.11) 3.03 Other information Closing net asset value ( 000 s) 23,533 34,472 27,845 Closing number of units 33,137,054 64,979,676 52,428,153 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

20 Comparative Tables (continued) S Income units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.33) (0.29) (0.29) Return after operating charges* Distributions 1 (1.33) (1.04) (0.72) Closing net asset value *after direct transaction costs of (0.07) (0.12) (0.19) Performance Return after charges (%) Other information Closing net asset value ( 000 s) 4,410 3,530 3,675 Closing number of units 6,627,448 6,981,716 7,136,554 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

21 Comparative Tables (continued) Z Income units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.69) (0.61) (0.59) Return after operating charges* (0.13) 1.91 Distributions 1 (1.43) (1.08) (0.70) Closing net asset value *after direct transaction costs of (0.10) (0.16) (0.23) Performance Return after charges (%) (0.20) 2.96 Other information Closing net asset value ( 000 s) 57,378 46,790 43,671 Closing number of units 67,539,127 72,447,560 66,383,413 Operating charges (%) Direct transaction costs (%)** Prices Highest buying price (p) Lowest selling price (p)

22 Comparative Tables (continued) Z Accumulation units Financial year to 15 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges Operating charges (0.72) (0.63) (0.60) Return after operating charges* (0.13) 1.96 Distributions 1 (1.51) (1.12) (0.72) Retained distributions Closing net asset value *after direct transaction costs of (0.10) (0.16) (0.24) Performance Return after charges (%) (0.19) 2.96 Other information Closing net asset value ( 000 s) 118, ,142 98,608 Closing number of units 130,640, ,610, ,630,202 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. 22

23 Portfolio Statement Holding at Market Value % of net s assets Austria 7.20% ( %) Lenzing 72,849 9, Porr 108,978 3, UBM Development 233,921 6, Wienerberger 332,865 5, , Belgium 5.83% ( %) bpost 404,672 8, KBC Group 225,631 12, , Denmark 1.97% ( %) Pandora 71,441 6, , Finland 2.32% ( %) Nokian Renkaat 249,291 8, , France 24.52% ( %) AXA 617,892 12, Carrefour 322,384 6, Engie 454,088 4, Lagardere 404,694 9, Maisons du Monde 293,422 6, Orange 1,442,792 18, Sopra Steria Group 83,959 9, Teleperformance 130,597 11, TOTAL 188,316 7, , Germany 18.49% ( %) Allianz 43,990 6,

24 Portfolio Statement (continued) Holding at Market Value % of net s assets Germany (continued) AURELIUS Equity Opportunities 224,105 12, Continental 73,182 12, Deutsche Telekom 1,039,612 14, Drillisch 291,139 11, SAP 97,341 7, , Italy 2.04% ( %) Eni 282,936 3, Intesa Sanpaolo 1,673,637 3, , Luxembourg 2.37% ( %) Grand City Properties 571,502 8, , Netherlands 10.85% ( %) ABN AMRO Group 320,247 6, ING Groep 768,084 9, Koninklijke KPN 1,915,000 4, STMicroelectronics 614,939 7, TKH Group 277,773 9, , Norway 1.41% ( %) Statoil 351,430 4, , Spain 7.05% ( %) Banco Bilbao Vizcaya Argentaria 83, Bankinter 1,195,163 7, Cellnex Telecom 42, Grupo Catalana Occidente 339,892 9,

25 Portfolio Statement (continued) Holding at Market Value % of net s assets Spain (continued) Telefonica 748,787 6, , Sweden 5.33% ( %) Ahlsell 1,400,948 7, Swedbank 561,085 11, , Switzerland 5.27% ( %) Novartis 131,143 8, OC Oerlikon 617,014 5, Zurich Insurance Group 21,949 5, , United Kingdom 2.15% ( %) Dialog Semiconductor 177,554 7, , Danish Krone Denominated Derivatives 0.00% ( %) Forward to buy DKK27,405 for 3,152 1 DKK27, Forward to sell DKK19,778 for 2,320 1 DKK(19,778) Forward to sell DKK415,178 for 47,215 1 DKK(415,178) (2) 0.00 (2) 0.00 Euro Denominated Derivatives (0.02)% (2016 (0.02)%) Forward to buy 4,841 for 4, , Forward to sell 2,173 for 1,904 1 (2,173) Forward to sell 2,324,975 for 1,966,738 1 (2,324,975) (60) (0.02) (60) (0.02) 25

26 Portfolio Statement (continued) Holding at Market Value % of net s assets Norwegian Krone Denominated Derivatives 0.00% ( %) Forward to buy NOK392,953 for 37,792 1 NOK392, Forward to sell NOK392,953 for 37,579 1 NOK(392,953) Swedish Krona Denominated Derivatives 0.00% ( %) Forward to buy SEK2,928 for SEK2, Forward to sell SEK1,377 for SEK(1,377) Forward to sell SEK1,420,275 for 126,120 1 SEK(1,420,275) (3) 0.00 (3) 0.00 Swiss Franc Denominated Derivatives 0.00% ( %) Forward to buy CHF361 for CHF Forward to sell CHF14 for 11 1 CHF(14) Forward to sell CHF175,816 for 139,707 1 CHF(175,816) (3) 0.00 (3) 0.00 Portfolio of investments 2 340, Net other assets 11, Net assets attributable to unitholders 351, Unless otherwise stated the above securities are ordinary shares or common stock and admitted to official stock exchange listings. 1 The forward foreign exchange contracts are only entered into by the GBP hedged unit classes. 2 Including derivative liabilities. 26

27 Summary of Portfolio Transactions Largest purchases Largest sales Cost For the year ended 15 March s Novartis 19,841 ING Groep 12,956 Continental 12,192 Teleperformance 11,108 Pandora 10,496 Drillisch 9,957 Nokian Renkaat 8,842 STMicroelectronics 8,515 Lenzing 8,339 Orange 7,521 Proceeds For the year ended 15 March s Eni 17,274 Roche Holding 15,648 Novartis 13,911 Valeo 13,440 Ambu 12,131 Wolters Kluwer 11,164 Sika 10,782 A2A 10,723 Fresenius Medical Care 10,672 Airbus 10,256 27

28 Statement of Total Return For the year ended 15 March 2017 Income Notes 000 s 000 s 000 s 000 s Net capital gains/(losses) 2 83,517 (8,572) Revenue 3 11,418 13,909 Expenses 4 (3,875) (5,163) Net revenue before taxation 7,543 8,746 Taxation 5 (340) (721) Net revenue after taxation 7,203 8,025 Total return before distributions 90,720 (547) Distributions 6 (6,556) (6,654) Change in net assets attributable to unitholders from investment activities 84,164 (7,201) Statement of Change in Net Assets Attributable to Unitholders For the year ended 15 March s 000 s 000 s 000 s Opening net assets attributable to unitholders 363, ,783 Amounts receivable on issue of units 38,901 63,024 Amounts payable on cancellation of units (138,034) (185,458) (99,133) (122,434) Dilution adjustment Change in net assets attributable to unitholders from investment activities 84,164 (7,201) Retained distribution on Accumulation units 3,497 3,515 Unclaimed distributions 0 1 Closing net assets attributable to unitholders 351, ,094 28

29 Balance Sheet As at 15 March Notes 000 s 000 s Assets Investments 340, ,171 Current assets Debtors 8 8,458 1,839 Cash and bank balances 9 6,226 16,834 Total assets 355, ,844 Liabilities Investment liabilities (68) (84) Creditors Bank overdrafts 10 (2) 0 Distributions payable (1,702) (1,660) Other creditors 11 (1,659) (2,006) Total liabilities (3,431) (3,750) Net assets attributable to unitholders 351, ,094 29

30 Notes to the Accounts 1 Accounting policies Basis of preparation The accounts have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the SORP for UK Authorised Funds issued by the IMA in May 2014 and in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)). Revenue Dividends receivable from equity investments are credited to revenue when they are first quoted ex-dividend. The ordinary element of stocks received in lieu of cash dividends is recognised as revenue of the fund. Any enhancement above the cash dividend is treated as capital. Interest receivable from bank balances and futures clearing houses and brokers are accounted for on an accruals basis. Special dividends Special dividends are treated as revenue or capital depending on the facts of each particular case. Expenses Expenses of the fund are charged against revenue except for costs associated with the purchase and sale of investments which are allocated to the capital of the fund. The costs of establishing and maintaining the hedging programme for the hedged unit classes, the liabilities, expenses and charges directly attributable to a hedged unit class will be allocated to the capital of that specific hedged unit class. Taxation Corporation tax is provided for on the revenue liable to corporation tax less deductible expenses. The tax effect of different items of revenue or expenses is allocated between revenue and capital using the marginal basis. This includes any gains made on non-reporting offshore funds. Deferred taxation is provided for on all timing differences that have originated but not reversed by the balance sheet date, other than those differences regarded as permanent. Any liability to deferred taxation is provided for at the average rate of taxation expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money. 30

31 Notes to the Accounts (continued) Distributions The revenue available for distribution is the total revenue earned by the fund, less deductible expenses and taxation charged to revenue. The revenue is distributed annually on 15 May to Income unitholders. For Accumulation units this revenue is not distributed but automatically reinvested in the fund and is reflected in the value of these units. The ordinary element of scrip dividends is treated as revenue but does not form part of the distribution. The distribution is in accordance with the COLL. Distributions which have remained unclaimed by unitholders for more than six years are credited to the capital property of the fund. Dilution adjustment In certain circumstances the Manager may apply a dilution adjustment on subscriptions and redemptions of units. If applied, the dilution adjustment is paid to the fund. See Prospectus for further details. Dilution adjustments include an estimate of dealing costs and the spread on underlying investments. From 1 January 2017 the transactional revenue earned from the spread (the difference between the creation price and the cancellation price), to the extent that in respect of any dealing day subscriptions are netted off against redemptions has been paid by the Manager into the fund and is included within the dilution adjustment in the Statement of Change in Net Assets Attributable to Unitholders. Amounts receivable from the Manager are included under Debtors in the balance sheet and in the Notes to the Accounts. Valuation Listed investments of the fund have been valued at market value at 18:00 on the balance sheet date. Market value is defined by the SORP as fair value which generally is the bid value of each security. Forward foreign exchange contracts Open forward foreign exchange contracts are shown in the Portfolio Statement at market value and the net realised losses are reflected under Net capital gains/(losses) in the Notes to the Accounts. Futures contracts The net gains are reflected within Derivative contracts under Net capital gains/(losses) in the Notes to the Accounts. Foreign currencies Transactions in foreign currencies are translated into sterling at the exchange rate prevailing on the date of the transaction. Assets and liabilities valued in foreign currencies have been translated into sterling at the exchange rates prevailing at the balance sheet date and the net gains are reflected under Net capital gains/(losses) in the Notes to the Accounts. 31

32 Notes to the Accounts (continued) GBP hedged unit classes Hedged unit classes allow the Manager to use currency hedging transactions to seek to minimise the effect of exchange rate fluctuations between the base currency and the portfolio currencies of the fund. Currency hedging transactions include entering into over the counter currency forward contracts and foreign exchange agreements. Where undertaken, the effect of hedging will be reflected in the net asset value and therefore, in the performance of the relevant hedged unit class. Any benefits or losses of the hedging transactions will accrue to unitholders in that hedged unit class only. The Manager will aim to hedge the capital currency exposure of the net asset value attributable to a hedged unit class, however, the hedge may not always be at 100%. This is to avoid the transaction costs of making small and frequent adjusting transactions. The Manager will review the relevant hedging positions daily and, if appropriate, adjust the hedge to reflect any change in currency exposure and the flow of unitholder issue and cancellation of units. 2 Net capital gains/(losses) The net capital gains/(losses) during the year comprise: s 000 s Non-derivative securities 81,551 (9,612) Derivative contracts Forward foreign exchange contracts (289) (392) Foreign currency gains 1, Transaction costs (20) (13) Net capital gains/(losses) 83,517 (8,572) 3 Revenue s 000 s UK dividends Overseas dividends 10,580 11,952 Scrip dividends 652 1,631 Bank interest Total revenue 11,418 13,909 32

33 Notes to the Accounts (continued) 4 Expenses Payable to the Manager, associates of the Manager and agents of either of them: s 000 s Annual management charge 3,202 4,370 Administration charge Payable to the Trustee, associates of the Trustee and agents of either of them: 3,691 4,981 Trustee s fees Safe custody fees Interest payable Other expenses: Audit fee Professional fee Total expenses 3,875 5,163 5 Taxation Corporation tax has not been provided for as expenses payable by the fund exceed the revenue liable to corporation tax. (a) Analysis of the tax charge for the year s 000 s Overseas withholding tax Total current tax (Note 5(b))

34 Notes to the Accounts (continued) (b) Factors affecting the current tax charge for the year The tax assessed for the year is different from that calculated when the standard rate of corporation tax for authorised unit trusts of 20% ( %) is applied to the net revenue before taxation. The differences are explained below s 000 s Net revenue before taxation 7,543 8,746 Net revenue for the year before taxation multiplied by the standard rate of corporation tax 1,509 1,749 Effects of: Revenue not subject to corporation tax (2,247) (2,754) Expenses not deductible for tax purposes 0 3 Movement in excess management expenses 738 1,002 Irrecoverable overseas withholding tax Current tax charge for the year (Note 5(a)) (c) Factors that may affect future tax charges At the balance sheet date, there is a potential deferred tax asset of 12,989,365 ( ,250,961) in respect of unutilised management expenses. It is unlikely the fund will generate sufficient taxable profits in the future to utilise this amount and therefore no deferred tax asset has been recognised in the year or prior year. 6 Distributions Distributions The distribution takes account of revenue received on the issue of units and revenue deducted on the cancellation of units, and comprises: s 000 s Final Dividend distribution 5,199 5,175 Add: Revenue deducted on cancellation of units 1,965 2,118 Deduct: Revenue received on issue of units (608) (639) Distributions 6,556 6,654 Net revenue after taxation 7,203 8,025 Scrip dividends not distributed (651) (1,631) Expenses taken to capital 0 14 Equalisation on conversions Distributions 6,556 6,654 Details of the distribution per unit are set out in the Distribution Table on page

35 Notes to the Accounts (continued) 7 Fair value hierarchy Assets Liabilities Assets Liabilities Valuation technique 000 s 000 s 000 s 000 s Quoted prices for identical instruments in active markets 340, ,149 (81) Valuation techniques using observable market data 0 (68) 22 (3) Total 340,711 (68) 348,171 (84) 8 Debtors s 000 s Amounts receivable for issue of units Sales awaiting settlement 6,780 0 Accrued overseas dividends 52 0 Transactional revenue receivable from the Manager 15 0 Overseas withholding tax recoverable 700 1,153 Total debtors 8,458 1,839 9 Cash and bank balances s 000 s Cash and bank balances 6,224 15,817 Amounts held at futures clearing houses and brokers 2 1,017 Total cash and bank balances 6,226 16, Bank overdrafts s 000 s Amounts overdrawn at futures clearing houses and brokers 2 0 Total bank overdrafts

36 Notes to the Accounts (continued) 11 Other creditors s 000 s 000 s 000 s Amounts payable for cancellation of units 617 1,077 Purchases awaiting settlement Accrued expenses Manager and Agents Annual management charge Administration charge Trustee and Agents Trustee s fees 7 4 Safe custody fees 6 7 Transaction costs 4 3 Interest payable Other accrued expenses Total other creditors 1,659 2, Contingent liabilities There were no contingent liabilities at the balance sheet date (2016 Nil). 13 Related party transactions The Manager exercises control over the fund and is therefore a related party by virtue of its controlling influence. Amounts paid during the year or due to the Manager at the balance sheet date are disclosed under Expenses and Other creditors in the Notes to the Accounts. The Manager acts as principal on all transactions of units in the fund. The aggregate monies received through the issue and cancellation of units are disclosed in the Statement of Change in Net Assets Attributable to Unitholders and Distributions in the Notes to the Accounts. Amounts due from or to the Manager in respect of unit transactions at the balance sheet date are disclosed under Debtors and Other creditors in the Notes to the Accounts. Units held or managed by the Manager or associates of the Manager as a percentage of the fund s net asset value at the balance sheet date were 2.65% ( %). 36

37 Notes to the Accounts (continued) 14 Unit classes The fund currently has eleven unit classes: A Income units, A Accumulation units, GBP Hedged A Income units, GBP Hedged A Accumulation units, GBP Hedged Z Income units, GBP Hedged Z Accumulation units, L Income units, L Accumulation units, S Income units, Z Income units and Z Accumulation units. The Annual management charge is based on the average value of the fund, calculated on a daily basis, and covers the remuneration of the Manager, the Investment Adviser and their overhead expenses and for each unit class is as follows: A Income units 1.50% A Accumulation units 1.50% GBP Hedged A Income units 1.50% GBP Hedged A Accumulation units 1.50% GBP Hedged Z Income units 0.75% GBP Hedged Z Accumulation units 0.75% L Income units 0.675% L Accumulation units 0.675% S Income units 0.375% Z Income units 0.75% Z Accumulation units 0.75% The closing net asset value of each unit class, the closing net asset value per unit and the closing number of units in issue are given in the Comparative Tables on pages 12 to 22. The distribution per unit class is given in the Distribution Table on page 44. All classes have the same rights on winding up except for any realised gains or losses on forward foreign exchange contracts which would remain in the GBP hedged unit classes. 15 Derivative and other financial instruments In accordance with the investment objective, the fund may hold certain financial instruments. These comprise: securities held in accordance with the investment objective and policy; cash and short term debtors and creditors arising directly from operations. Under normal circumstances, the Manager would expect substantially all of the assets of the fund to be invested in securities appropriate to the fund s investment objective. Cash and near cash may only be held in order to assist in the redemption of units, the efficient management of the fund or purposes regarded as ancillary to the fund. The fund has little exposure to credit risk. The main risks arising from the fund s financial instruments are market price, derivative, foreign currency, liquidity and interest rate risks. The Manager s policies for managing these risks are summarised below and have been applied throughout the year and the prior year. 37