M&S UNIT TRUST FUNDS. The Marks and Spencer Worldwide Managed Fund

Transcription

1 M&S UNIT TRUST FUNDS The Marks and Spencer Worldwide Managed Fund Manager s annual report December 2014

2 Contents Page(s) Manager s investment report 2 to 5 Portfolio statement 6 to 21 Net asset value per unit and comparative table 22 Ongoing charges 23 Risk and reward profile 23 Authorised status 23 Trustee report 23 to 24 Statement of the Manager s responsibilities 24 Certification of financial statements by Directors of the Manager 24 Independent auditor s report 25 Statement of total return 26 Statement of change in net assets attributable to Unitholders 26 Balance sheet 27 Notes to the financial statements 28 to 36 Distribution tables 37

3 The Marks and Spencer Worldwide Managed Fund THE MARKS AND SPENCER WORLDWIDE MANAGED FUND Manager, Registrar, dealing, administration and marketing Marks and Spencer Unit Trust Management Limited Authorised and regulated by the Financial Conduct Authority. Investor helpline: or if calling from abroad. Lines are open 8am-8pm Monday to Friday, 9am- 5pm on Saturday and 10am-4pm bank holidays (closed on Sunday, Christmas Day, Boxing Day and New Year s Day). Please be aware that opening hours may be restricted over the Christmas period, please contact us for details. Calls may be recorded. Head office and registered office Kings Meadow Chester CH99 9FB Registered in England No Directors of the Manager Sue Fox (Executive) - appointed May 2014 Crawford Prentice - resigned December 2014 Dame Denise Holt Peter Shawyer Phillip Scott Justin Turner Keith Woollard Investment advisers HSBC Global Asset Management (UK) Limited 78 St James s Street London SW1A 1EJ HSBC Global Asset Management (UK) Limited directly manage a proportion of the fund and sub-delegate the remaining fund management to the following specialist advisers: GMO UK Limited One Angel Court Throgmorton Street London EC2R 7HJ Insight Investment Management (Global) Limited 33 Old Broad Street London EC2N 1HE Wellington Management International Limited Cardinal Place 80 Victoria Street London SW13 5JL The above listed investment advisers are authorised and regulated by the Financial Conduct Authority. Axiom International Investors LLC 33 Benedict Place Greenwich CT USA Sanders Capital LLC 390 Park Avenue New York NY USA Axiom International Investors LLC and Sanders Capital LLC are not authorised by the Financial Conduct Authority but are registered with the Securities and Exchange Commission in the USA. Trustee State Street Trustees Limited 525 Ferry Road Edinburgh EH5 2AW Authorised and regulated by the Financial Conduct Authority. Independent auditor KPMG Audit Plc 15 Canada Square London E14 5GL PAGE 1

4 Manager s investment report This section gives you an opportunity to see whether we have made any changes to the objectives we give our investment advisers. If no change has occurred it reiterates the objectives laid down for the Manager. Our objectives and methods The Marks and Spencer Worldwide Managed Fund offers access to the share and bond markets, using a mix of different investment styles with the aim of achieving long term capital growth and a reasonable yield. The fund may use derivative instruments (options, futures and contracts for difference) and forward transactions in a currency for the purposes of efficient portfolio management. These instruments can therefore be used to reduce risk, reduce costs, or generate additional capital or income with no, or low levels of, risk. Details of the value of derivative contracts held are confirmed in the Notes to the financial statements section. We used the skills of six investment management companies during the period of the report to select the investments. Each company has been chosen for their specific approach to investment and for skills which will be complementary when matched together. HSBC Global Asset Management (UK) Limited aims to track the performance of the FTSE All-Share Index. GMO UK Limited (removed as an investment adviser on 31 July 2014) aims to use complementary investment techniques to select a balanced portfolio of UK shares. Insight Investment Management (Global) Limited invests in UK and overseas fixed interest securities. Sanders has a value investment strategy where they use fundamental research to identify shares that are undervalued by the markets. Wellington selects shares through fundamental research based on the size of the value gap between the current price and what they think the long term value of the company should be. Axiom invest in companies that they believe will report better results than expected by consensus market forecasts. These positive surprises compared to expectations should mean that the shares will outperform. We develop a working partnership with our investment advisers. We provide each adviser with a benchmark against which to measure performance. Their results and the processes they use to make decisions are regularly monitored by the HSBC Group Investment Committee. The percentages below reflect the actual allocation for each investment sector and adviser, including uninvested cash at 31 December UK shares HSBC Global Asset Management (UK) Limited 23.6% International shares Wellington Management International Limited 27.3% Axiom International Investors LLC 16.4% Sanders Capital LLC 10.7% UK and overseas bonds Insight Investment Management (Global) Limited 21.6% Cash 0.4% Important information With effect from 19 February 2014 we removed the initial charge for the Marks and Spencer Worldwide Managed Fund. This applies to any lump sum or monthly investments from this date. Review of the twelve months to 31 December 2014 During the review period, global equity markets rose 9.9% (in sterling terms). With the gradual winding down of the US Federal Reserve s (the Fed) monthly asset purchases in the first quarter of 2014, investors focused keenly on the outlook for US interest rates. Confusion arose as new Fed chair Janet Yellen implied that rates could rise as early as the first quarter of 2015, seemingly contradicting the earlier message of a very gradual removal of policy accommodation. However, on the last day of March, she announced that considerable slack in the PAGE 2

5 Percentage growth 31/12/09 to 31/12/10 to 31/12/11 to 31/12/12 to 31/12/13 to 31/12/10 31/12/11 31/12/12 31/12/13 31/12/ % -2.6% 8.5% 15.1% 7.3% This information relates to the past, and past performance is no guarantee of future performance. All the above figures are on a bid to bid basis, net income reinvested. The performance figures exclude the initial charge of the fund. Source: Morningstar. labour market was evidence that the central bank s unprecedented accommodation would still be needed for some time to come. As the year progressed, the US economy remained a bright spot in the global landscape after the economy grew at its fastest pace in more than a decade during the third quarter of In Europe, inflation slumped to a five-year low, increasing pressure on the European Central Bank (ECB) to introduce further stimulatory measures. The annual inflation rate stood at a mere 0.3% in November, down from 0.4% the previous month, as energy prices fell, according to Eurostat. Inflation has been below 1% since October The level of unemployment remains at around 11.5%. ECB head Mario Draghi continued to try to win consensus for more stimulus, with Germany still opposed to full-fledged quantitative easing. So far, Draghi s stimulus measures of buying asset-backed securities and covered bonds, and providing cheap loans to banks, have had little effect on European growth. Towards the end of the review period, global stock markets had a choppy time as equities dived in October on concerns over global growth and geopolitical turmoil, and in December as oil traded at its cheapest level in five years and Russia s financial crisis worsened. As a result there was an end-of-year sell-off in emerging markets as investors grew more risk averse. Despite this, many markets ended the year significantly ahead, lifted by above-trend growth in the US and reassurance the US Federal Reserve would take a patient approach to raising rates, renewed stimulus actions in Europe and Japan, and structural economic reforms in many countries like India and China. Gilt yields fell substantially in January as a combination of weaker-than-expected economic data from several emerging markets including China and soft data from US, drove investors back into government bonds. UK gilt yields followed global bond markets in April and May and fell lower amid continuing geopolitical concerns in Ukraine and dovish messages from central banks. Gilt yields rose in June, resulting in the first negative month of the year, as the Bank of England s governor Mark Carney hinted that interest rate rises could happen much sooner than the market was expecting. However, gilt yields resumed their downward trend over the second half of the year as geopolitical events and mixed economic data prompted investors to grow increasingly nervous about the outlook for global growth. The Monetary Policy Committee maintained the base rate at 0.5% throughout the period. However, there was a change in the balance of views in the committee, with two members voting a number of times in favour of raising interest rates. Portfolio review During the review period, GMO UK Limited was removed as an investment adviser from 31 July 2014, with the assets being distributed among the remaining investment managers. In Wellington s part of the fund, its Global Value strategy outperformed the benchmark. PAGE 3

6 Positive performance was primarily driven by stock selection in the information technology sector. Stock specific contributors include health insurer UnitedHealth Group which posted above consensus results with performance strongest in Optum (their health services platform company). In addition, Optum are now moving into the Affordable Care Act exchanges (new platform enabling US citizens to shop for health insurance through state exchanges). Nordstrom was also a positive contributor, as it reported solid earnings ahead of consensus estimates. The largest negative contribution came from BG Group which saw its results come in below expectations as a result of weak upstream earnings. Spanish bank, Banco Bilbao Vizcaya Argentaria (BBVA), also had a negative effect on performance as its latest results disappointed the market with higher-than-expected provisioning charges, higher costs from upgrading technology and weakness in emerging market currencies. Purchases over the period included Irish-headquartered healthcare products company Covidien, while sales included UK retailing business Kingfisher and selective Asian vehicle companies. In the part of the fund managed by Sanders Capital, the portfolio outpeformed its benchmark, mainly as a result of positive stock selection in the technology and healthcare sectors. Within the technology sector, Intel, Corning and Apple were the main contributors, whilst within the healthcare sector, a positive contribution came from Novartis and UnitedHealth Group. However, this was offset by a negative contribution from the financial and consumer discretionary sectors. Within the financial sector, the exposure to European bank holdings, such as BNP Paribas and Barclays, were the main detractors. In the consumer discretionary sector, carmaker positions, such as Volkswagen preference and Hyundai Motor also detracted from performance. Purchases during the period included Apple, DR Horton and Taiwan Semiconductor Manufacturing sponsored ADR while sales included GlaxoSmithKline, Ensco and Noble Corporation. In the part of the fund managed by Axiom International Investors, the portfolio underperformed its benchmark. Over the review period, a positive contribution came from the exposure in the health care sector but this was offset by a negative contribution from the holdings in the consumer discretionary sector. At stock level, Axiom sold the LyondellBasel position, whose competitive advantages from low cost natural gas feedstock in the USA have been eroded by the general fall in oil and gas prices. The exposure to Airbus, the European competitor to Boeing, also detracted from performance as cost overruns swamped the benefits of stronger than expected orders for the company s more fuel efficient new planes. In contrast, CSR, the Chinese rail maker, contributed positively to performance. CSR s performance was fuelled by continued strong contract wins, an increasingly favourable policy environment, and a surprise merger with its national rival, China CNR. Purchases during the period included Apple and BMW, while sales included Gilead Sciences and Walgreen. As HSBC tracks the FTSE All-Share Index, purchases and sales were carried out to rebalance holdings in line with the changes in the index. During the period additions to the FTSE All-Share Index included Flybe Group, Just-Eat, Pets at Home Group, Saga plc and Poundland, whilst deletions included Headlam Group, Wilmington Group, JKX Oil & Gas and Ruspetro plc. Insight manages the bond part of the fund and over the review period it outperformed its benchmark. Performance was positive over the first half of 2014 but negative over the second half. Yield curve positioning and duration management contributed positively to performance during the first quarter of 2014, while security selection detracted from it. During the second quarter, duration was neutral for performance, but yield curve was strongly positive. The fund was also active PAGE 4

7 in terms of relative value market allocation trades, taking a short position in 10-year US treasuries against a long position in Europe. Insight took profits on the European part of the trade, replacing it with a long in the UK and shifted the short in the US from the 10-year to the 30-year. In terms of yield curve, in the UK, Insight were overweight 5-year to 10-year maturities and underweight 10-year to 15-year maturities and this contributed strongly to performance in the second quarter. Over the second half of the year, the fund managed duration generally on the shorts side in anticipation of yields rising as the market started to price in interest rate hikes. However yields continued to fall and Insight removed shorts and focused on the UK and Europe in October and closed out a US position in early November. In terms of yield curve, in the UK, the fund was initially positioned for yield curve flattening, which was positive for performance, before moving to an overweight in intermediatedated bonds and underweights either side of the curve, but this was slightly negative. Outlook We expect the global economy to continue growing in 2015 and beyond. However, we would not be surprised to see further spikes in volatility over the coming year. It is unusual for equity markets to rally in the relatively uninterrupted way that they have since the summer of Moreover, previous rate tightening cycles suggests that the US Federal Reserve starting to increase interest rates could trigger higher volatility. In addition, equity valuations look attractive and are at levels that have historically been consistent with moderate but positive long-term returns. However, risks remain such as the ECB failing to prevent the Eurozone sliding into outright deflation and a possible acceleration in the pace of the slowdown in the Chinese economy. The investment advisers in the period under review were: HSBC Global Asset Management (UK) Limited The primary objective of HSBC Global Asset Management (UK) Limited is to track the FTSE All-Share Index. They have constructed a portfolio which closely resembles the UK equity market as a whole but has a slightly above average level of dividend income. To do this they must inevitably have a large range of holdings. GMO UK Limited (removed as an investment adviser on 31 July 2014) GMO used three complementary investment techniques to select a balanced portfolio of UK shares. Their processes aimed to identify undervalued shares, shares with price momentum and market signals to buy or sell shares. Insight Investment Management (Global) Limited Insight aims to add stability and income to the fund by investing in government bonds and other fixed interest securities. The portfolio will invest primarily in UK fixed interest securities but is permitted to hold up to 40% in foreign currency denominated fixed income securities. Wellington Management International Limited Wellington selects shares through fundamental research based on the size of the value gap between the current price and what they think the long term value of the company should be. Axiom International Investors LLC Axiom invest in companies that they believe will report better results than expected by consensus market forecasts. These positive surprises compared to expectations should mean that the shares will outperform. Sanders Capital LLC Sanders has a value investment strategy where they use fundamental research to identify shares that are undervalued by the markets. PAGE 5

8 Portfolio statement This section details all the different companies in which the fund invests, by sector and country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). UK EQUITIES AND CONVERTIBLES (25.08%; 31/12/ %) Oil & gas producers 3.70 Afren 73,250 34, BG Group 423,093 3,659, BP 1,630,071 6,693, Cairn Energy 38,843 69, EnQuest 48,450 17,200 - Exillon Energy 7,400 10,934 - Nostrum Oil & Gas 4,000 16,800 - Ophir Energy 34,050 48, Premier Oil 35,024 58, Royal Dutch Shell 'A' 262,776 5,658, Royal Dutch Shell 'B' 231,100 5,159, Salamander Energy 17,341 11,272 - Soco International 14,798 44, Tullow Oil 61, , Vesuvius 19,715 87, Oil equipment & services 0.08 AMEC 26, , Greencoat UK Wind 27,000 29, Hunting 9,987 52, John Wood 24, , Lamprell 17,000 20,570 - Chemicals 0.16 Croda International 9, , Elementis 30,908 80, Johnson Matthey 13, , Synthomer 18,000 42, Victrex 5, , Forestry & paper 0.05 Mondi 24, , Industrial metals 0.01 Evraz Group 35,340 54, Ferrexpo 9,950 5,249 - Mining 1.01 African Barrick Gold 9,450 24,135 - Anglo American 87,508 1,050, Anglo Pacific 6,430 6,430 - Antofagasta 24, , BHP Billiton 141,309 1,962, Fresnillo 11,360 86, Gem Diamonds Mining 4,300 7,514 - Hochschild Mining 11,300 9,859 - Kazakhmys 17,286 44, Lonmin 28,710 50, Rio Tinto 83,565 2,506, Vedanta Resources 6,976 40, Construction & materials 0.07 Balfour Beatty 46,405 98, Boot (Henry) 6,570 12,582 - Costain 4,860 13,401 - Galliford Try 5,494 70, Keller 4,732 41, Kier Group 3,579 53, Low & Bonar 21,994 10,887 - Marshalls 13,449 30, Morgan Sindall 2,560 15,872 - Norcros 37,380 6,635 - Polypipe Group 8,900 22,072 - Rok* 12, Tyman 11,430 35, PAGE 6

9 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Aerospace & defence 0.49 BAE Systems 213,599 1,007, Chemring 13,170 31, Cobham 76, , Meggitt 54, , QinetiQ 44,400 83, Rolls-Royce 126,655 1,099, Rolls-Royce 'C' 16,971,770 16,972 - Rolls-Royce 'C'* 11,398, Senior 27,993 84, Ultra Electronics Holding 4,618 83, General industrials 0.17 Alent 14,840 47, British Polythene Industries 1,658 10,868 - Exova 7,253 11,423 - Melrose 72, , Rexam 47, , RPC Group 15,294 76, RPC Group Rights 3,782 6,619 - Smith (David S) 62, , Smiths Group 26, , Vitec 2,863 16,849 - Electronic & electrical equipment 0.11 Dialight 2,050 16,410 - Domino Printing 7,512 49, Halma 27, , HellermannTyton Group 13,000 40, Morgan Advanced Materials 23,456 74, Oxford Instruments 3,569 45, Renishaw 2,450 48, Spectris 7, , TT Electronics 10,692 10,772 - Xaar 5,120 19,456 - Industrial engineering 0.17 Bodycote International 13,273 85, Fenner 13,693 29, Hill & Smith 6,000 34,800 - IMI 18, , Rotork 5, , Severfield-Rowen 20,960 14,253 - Spirax-Sarco Engineering 4, , Weir Group 14, , Industrial transportation 0.06 BBA Group 32, , Fisher (James) & Sons 2,755 32, Royal Mail 41, , UK Mail Group 1,516 7,231 - Wincanton 8,492 13,481 - Support services 0.79 Aggreko 16, , Ashtead 33, , Atkins (WS) 6,810 92, Babcock International 33, , Berendsen 11, , Brammer 9,312 31, Bunzl 22, , Capita 44, , Carillion 29,049 97, Connect 14,394 22,167 - De La Rue 6,976 36, Diploma 7,600 53, PAGE 7

10 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Electrocomponents 31,621 67, Essentra 17, , G4S 105, , Hays 94, , HomeServe 18,420 61, Howden Joinery 43, , Interserve 9,685 53, Intertek 10, , Mears Group 6,500 24,408 - Menzies (John) 3,867 13,747 - Michael Page International 20,539 84, Mitie 26,552 73, Northgate 9,027 54, Paypoint 4,757 42, Premier Farnell 24,798 43, Rentokil Initial 126, , Robert Walters 4,426 13,555 - RPS Group 17,153 35, Safestore 13,000 30, Serco 35,055 56, Shanks 31,766 31, SIG 40,208 69, Speedy Hire 38,850 30,303 - St.Ives 7,695 14,197 - SThree 7,900 22,930 - Travis Perkins 16, , Xchanging 16,350 25,424 - Automobiles & parts 0.07 GKN 109, , Beverages 1.16 A.G. Barr 5,670 33, Britvic 15, , Diageo 242,949 4,490, SABMiller 63,079 2,120, Stock Spirits 12,678 27, Food producers 0.56 Associated British Foods 23, , Cranswick 3,705 51, Dairy Crest 9,500 47, Devro 13,036 39, Premier Foods 46,641 14,809 - SSP Group 17,880 52, Tate & Lyle 31, , Unilever 80,783 2,122, Household goods 0.91 AGA Foodservice 4,267 5,035 - Barratt Developments 65, , Bellway 8, , Berkeley Group Holdings 8, , Bovis Homes Group 9,111 80, Crest Nicholson Holdings 14,500 56, Persimmon 121,926 1,920, Reckitt Benckiser 43,343 2,258, Redrow 14,871 43, Taylor Wimpey 217, , Leisure goods - Games Workshop 2,100 10,605 - Pets At Home 14,480 29,279 - Photo-Me International 17,000 23,460 - Personal goods 0.11 Burberry 30, , PZ Cussons 20,850 63, Ted Baker 1,800 39, PAGE 8

11 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Tobacco 1.54 British American Tobacco 189,065 6,617, Imperial Tobacco 85,193 2,416, Healthcare equipment & services 0.16 Al Noor Hospitals Group 3,550 35, Consort Medical 3,218 27, NMC Health 4,600 21,091 - Smith & Nephew 60, , Spire Healthcare 11,000 41, Synergy Healthcare 3,800 78, Pharmaceuticals & biotechnology 1.94 AstraZeneca 139,514 6,355, BTG 24, , Dechra Pharmaceuticals 5,987 50, Genus 4,460 55, GlaxoSmithKline 325,783 4,482, Hikma Pharmaceuticals 9, , Indivior 43,343 64, Vectura 27,040 34, Food & drug retailers 0.32 Booker 108, , Greggs 7,110 51, Morrison (Wm) Supermarkets 146, , Ocado Group 29, , Sainsbury (J) 94, , Tesco 543,534 1,025, General retailers 0.62 AO World 11,910 33, Card Factory 11,828 33, Carpetright 3,438 13,752 - Carphone Warehouse Group 63, , Darty 26,789 18,350 - Debenhams 82,871 62, Dignity 3,276 62, Dunelm Group 6,160 56, Game Digital 5,561 19,614 - Halfords 13,526 63, Home Retail 55, , Inchcape 31, , JD Sports Fashion 3,920 19,600 - Kingfisher 160, , Laura Ashley 16,700 4,843 - Lookers 21,177 27, Marks & Spencer** 212,852 1,019, Mothercare 5,121 8,911 - N Brown Group 11,501 43, Next 9, , Pendragon 93,105 29, Poundland 9,930 32, Sports Direct International 17, , SuperGroup 2,180 19,228 - WH Smith 8, , Media 0.56 Bloomsbury Publishing 7,121 11,411 - British Sky Broadcasting 70, , Centaur Media 12,160 7,722 - Chime Communications 5,400 15,336 - Euromoney Institutional Investor 2,576 26,971 - Informa 42, , ITE 19,536 31, ITV 253, , PAGE 9

12 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Merlin Entertainments 37, , Moneysupermarket.com 29,460 68, Pearson 55, , Reed Elsevier 77, , Rightmove 6, , Trinity Mirror 20,806 33, UTV Media 6,979 12,213 - Travel & leisure 1.00 Betfair 6,250 97, Bwin.Party Digital Entertainment 48,900 57, Carnival 12, , Cineworld 13,144 54, Compass 227,700 2,506, Domino's Pizza 9,170 64, easyjet 16, , Enterprise Inns 34,238 39, FirstGroup 81,165 86, Flybe 14,000 15,295 - Go-Ahead 2,804 68, Greene King 14, , InterContinental Hotels 15, , Ladbrokes 62,109 68, Marston's 41,803 59, Millennium & Copthorne Hotels 10,245 59, Mitchells & Butlers 15,864 60, National Express 28,463 70, Punch Taverns 14,354 16,938 - Rank Group 7,400 11,840 - Restaurant Group 14,430 94, Saga 20,900 31, Spirit Pub 44,461 45, Stagecoach 28, , Thomas Cook 99, , Wetherspoon (JD) 5,939 48, Whitbread 12, , William Hill 57, , Fixed line telecommunications 0.43 British Telecom 545,837 2,191, Cable & Wireless Communications 181,949 90, Kcom 39,691 35, TalkTalk Telecom 32,722 99, Telecom Plus 3,908 49, Mobile telecommunications 0.88 Inmarsat 28, , Vodafone 2,211,152 4,923, Electricity 0.20 Drax 27, , Infinis Energy 6,300 13,734 - Scottish & Southern Energy 65,699 1,065, Gas, water & multi-utilities 0.94 Centrica 332, , National Grid 387,409 3,556, Pennon 26, , Severn Trent 16, , United Utilities 46, , Banks 3.45 Bank of Georgia Holdings 1,800 37, Barclays 2,575,670 6,271, HSBC Holdings** 1,513,438 9,210, Lloyds Banking 3,603,870 2,732, Royal Bank of Scotland 143, , PAGE 10

13 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Standard Chartered 136,287 1,312, TSB Banking 16,600 46, Non-life insurance 0.13 Admiral 13, , Amlin 33, , esure 17,060 34, Jardine Lloyd Thompson 8,394 74, Novae 4,342 25,748 - Royal & Sun Alliance Insurance 66, , Life insurance 1.04 Aviva 199, , Chesnara 8,423 28, Legal & General 396, , Old Mutual 330, , Partnership Assurance 9,900 13,811 - Prudential 170,733 2,547, St. James's Place Capital 34, , Standard Life 159, , Real estate investment services 0.56 Big Yellow Group REIT 8,714 52, British Land REIT 67, , Capital & Counties Properties 49, , Capital & Regional 25,506 13,391 - CLS Holdings 2,161 32, Countrywide 10,350 45, Daejan Holdings ,443 - Derwent London REIT 6, , Development Securities 8,416 18,684 - Foxtons 15,000 23,850 - Grainger 30,165 56, Great Portland Estates REIT 24, , Hammerson 52, , Hansteen Holdings REIT 46,200 49, Helical Bar 6,860 25,725 - Intu Properties REIT 59, , Land Securities REIT 53, , LondonMetric Property 48,000 73, LSL Property Services 5,690 16,743 - McKay Securities 14,578 34, Mucklow (A&J) Group REIT 2,000 8,905 - Primary Health Properties REIT 7,000 25,760 - Quintain Estates & Development 32,432 30, Redefine International REIT 50,000 27,200 - Savills 8,300 55, Segro REIT 49, , Shaftesbury 18, , St Modwen Properties 12,889 49, Town Centre Securities 3,564 9,347 - Tritax Big Box REIT 24,000 25,860 - Unite 14,933 69, Workspace Group REIT 7,818 59, Financial services 0.45 Aberdeen Asset Management 66, , Arrow Global 9,000 20,475 - Ashmore 26,800 74, Brewin Dolphin 17,636 52, Charles Taylor 2,600 6,500 - Close Brothers 9, , Hargreaves Lansdown 15, , ICAP 36, , IG Group Holdings 24, , Intermediate Capital 27, , International Personal Finance 15,938 71, PAGE 11

14 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Investec 34, , IP Group 30,821 62, Just Retirement 14,000 20,650 - Liontrust Asset Management 2,350 6,392 - London Stock Exchange 16, , Man Group 106, , Paragon Group of Companies 20,327 84, Provident Financial 9, , Rathbone Brothers 3,135 63, S & U 220 4,303 - Schroders 7, , Tullett Prebon 14,108 40, Equity investment instruments i Bioscience* 3, i Group 65, , Aberforth Smaller Companies 7,118 75, Alliance Trust 42, , Asian Total Return Investment 5,005 9,660 - Bankers Investment Trust 11,506 66, Baring Emerging Europe 9,250 45, Biotech Growth Trust 4,249 28,808 - BlackRock Smaller Companies 3,220 24,649 - BlackRock Throgmorton Trust 6,726 18,497 - BlackRock World Mining Investment Trust 17,337 53, British Assets Investment Trust 34,530 45, British Empire Securities 9,826 50, Caledonia Investments 2,190 50, Candover Investments 1,732 6,807 - City of London Investment Trust 25,340 96, Dunedin Income Growth Investment Trust 12,318 32, Edinburgh Dragon Investment Trust 19,710 53, Edinburgh Investment Trust 13,140 85, Electra Private Equity 3,196 96, European Investment Trust 4,462 33, F&C Capital & Income Investment Trust 6,949 17,859 - F&C Global Smaller Companies 5,842 52, Fidelity Special Values Investment Trust 3,670 31, Finsbury Growth & Income Trust 6,260 33, Foreign & Colonial Investment Trust 37, , Graphite Enterprise Trust 7,000 39, Henderson Smaller Companies Investment Trust 6,179 34, Herald Investment Trust 5,249 34, HgCapital Trust 2,482 26,061 - Impax Environmental Markets 15,090 23,012 - Invesco Perpetual UK Smaller Companies Investment Trust 4,560 14,467 - JPMorgan Asian Investment Trust 12,976 29, JPMorgan Claverhouse Investment Trust 3,703 22,218 - JPMorgan Emerging Markets Investment Trust 11,465 68, PAGE 12

15 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). JPMorgan European Investment Trust 12,895 28, JPMorgan European Smaller Companies Trust 10,800 21,924 - JPMorgan Global Emerging Markets Fund 19,247 22,519 - JPMorgan Indian Investment Trust 7,230 35, JPMorgan Japanese Investment Trust 12,042 28, JPMorgan Mid Cap Investment Trust 1,700 13,396 - JPMorgan Overseas Investment Trust 2,765 28, JPMorgan Overseas Investment Trust (Sub share) JPMorgan Russian Securities 7,850 21,823 - JPMorgan Smaller Companies Investment Trust 3,760 26,997 - Jupiter European Opportunities Trust 5,790 26,764 - Law Debenture 8,990 47, Lowland Investment Company 1,810 23,385 - Martin Currie Global Portfolio Trust 16,753 29, Mercantile Investment Trust 8, , Merchants Trust 7,066 33, Monks Investment Trust 20,172 79, Murray Income Trust 5,478 41, Murray International Trust 9,725 99, North American Income Trust 5,529 48, Pantheon International 3,600 45, Perpetual Income & Growth Investment Trust 21,370 85, Personal Assets Trust , Polar Capital Technology Trust 10,262 59, RIT Capital Partners 8, , Schroder Asia Pacific Fund 10,000 27,300 - Schroder Japan Growth Investment Trust 25,300 32, Schroder UK Growth Investment Trust 10,860 17,186 - Scottish American Investment Trust 10,193 25,304 - Scottish Investment Trust 11,346 69, Scottish Mortgage Investment Trust 82, , Securities Trust of Scotland* 44, SVG Capital 13,900 61, Temple Bar Investment Trust 6,210 73, Templeton Emerging Markets Investment Trust 25, , TR European Growth Trust 3,385 17,280 - TR Property Investment 21,407 60, Witan Investment Trust 12,857 96, Witan Pacific Investment Trust 4,480 10,438 - Worldwide Healthcare Trust 3,728 63, Non-equity investment instruments 0.11 BlackRock Latin American Investment Trust 5,250 20,803 - Direct Line Insurance 101, , Ecofin Water & Power Opportunities 17,000 25,585 - Fidelity China Special Situations Trust 38,558 51, Fidelity European Values 40,920 66, PAGE 13

16 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). JPMorgan American Investment Trust 26,550 76, Jupiter Fund Management 28, , Riverstone Energy 3,039 26, Software & computer services 0.17 Anite 21,940 17,333 - Aveva 4,353 56, Computacenter 5,342 31, Fidessa 2,681 64, Innovation 82,000 24,395 - Just-Eat 18,437 56, Micro Focus International 10, , NCC Group 13,000 26, Playtech 12,900 88, Sage 72, , SDL 6,000 24,900 - Telecity 13, , Zoopla Property Group (WI) 12,000 23,340 - Technology hardware & equipment 0.22 Arm Holdings 94, , CSR 11,194 95, Imagination Technologies 14,550 33,247 - Laird 19,572 60, Pace 21,483 74, Spirent 45,748 34, Total United Kingdom 147,270, OVERSEAS SHARES (52.24%; 31/12/ %) CONTINENTAL EUROPE (12.48%; 31/12/ %) Austria (-; 31/12/ %) Erste Bank 53,524 1,125, Total Austria 1,125, Belgium (0.72%; 31/12/ %) Anheuser-Busch InBev 51,825 3,762, Delhaize 10, , Total Belgium 4,253, Channel Islands (1.75%; 31/12/ %) 3i Infrastructure 39,549 60, Aberdeen Asian Income Fund 12,950 25,706 - Advance Developing Markets Fund 8,850 37, Assura 60,000 30, Bacit 20,000 23,100 - Beazley 35, , BH Global 1,840 22,724 - Bluecrest Allblue Fund 37,000 68, Cape 8,200 19,721 - Centamin 70,750 41, City Merchants High Yield 12,984 24,475 - Delphi Automotive 29,100 1,357, Dexion Absolute 9,140 15,995 - Experian 66, , F&C Commercial Property Trust 34,399 46, PAGE 14

17 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). F&C UK Real Estate Investment 14,760 13,874 - Friends Life 92, , GCP Infrastructure Investments 29,000 35, Genesis Emerging Markets Fund 9,080 47, Glencore Xtrata 712,599 2,128, Hardy Oil & Gas 4,520 2,802 - Henderson Far East Income 7,201 23,475 - Henderson 69, , HICL Infrastructure 87, , International Public Partnership 66,091 89, John Laing Infrastructure Fund 50,000 61, Kennedy Wilson Europe Real Estate 7,406 77, MedicX Fund 23,560 19,555 - NB Global Floating Rate Income Fund 84,000 83, Petrofac 17, , Picton Property 30,000 19,500 - Polymetal International 13,650 78, Randgold Resources 6, , Real Estate Credit Investments 4,910 7,782 - Regus 41,061 85, Schroder Oriental Income Fund 14,000 26, Schroder Real Estate Investment 31,780 18,830 - Shire 39,553 1,792, Standard Life Investments Property 10,450 8,151 - Stobart 24,500 26, UK Commercial Property Trust 27,400 24,167 - United Business Media 29, , Wolseley 17, , WPP 89,532 1,203, Total Channel Islands 10,287, France (1.59%; 31/12/ %) AXA 63, , BNP Paribas 93,570 3,573, Renault 38,200 1,794, Sanofi 30,500 1,787, Schneider Electric 19, , Total 9, , Total France 9,334, Germany (2.07%; 31/12/ %) Allianz (registered) 13,095 1,402, BMW 26,277 1,831, Deutsche Annington Immobilien 42, , Henkel preference 17,377 1,203, Porsche preference 21,348 1,115, ProSiebenSat.1 Media 86,861 2,347, Siemens 31,775 2,316, TUI AG 12, , TUI AG New 13, , Volkswagen preference 4, , Total Germany 12,131, Greece (0.12%; 31/12/13 -) Alpha Bank 1,978, , Total Greece 706, PAGE 15

18 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Ireland (0.86%; 31/12/ %) Bank of Ireland 961, , Bank of Ireland (LSE) 3,057, , Covidien 27,000 1,771, CRH (London listed) 49, , DCC (London listed) 5, , Grafton 15,000 95, Greencore 28,000 80, ishares FTSE , , ishares FTSE , , Kenmare Resources 180,000 5,670 - UDG Healthcare 16,200 62, Total Ireland 5,026, Italy (0.67%; 31/12/ %) Generali 181,056 2,388, Enel 207, , Intesa Sanpaolo SpA 508, , Total Italy 3,938, Luxembourg (0.01%; 31/12/ %) BBGI SICAV 28,630 35, Colt Telecom 23,499 30,713 - Total Luxembourg 66, Netherlands (1.21%; 31/12/ %) Akzo Nobel 36,356 1,623, Delta Lloyd 62, , Heineken 20, , NXP Semiconductors 1,100 53, Sensata Technologies 62,200 2,089, Unilever 59,831 1,515, Total Netherlands 7,093, Portugal (0.11%; 31/12/ %) Energias de Portugal 252, , Total Portugal 631, Norway (0.46%; 31/12/ %) DNB 139,942 1,325, Telenor 105,451 1,366, Total Norway 2,691, Spain (0.39%; 31/12/ %) BBV Argentaria 260,337 1,586, BBV Argentaria Rights 260,337 15,961 - International Consolidated Airlines 137, , Total Spain 2,270, Sweden (0.24%; 31/12/ %) Nordea Bank 193,000 1,437, Total Sweden 1,437, Switzerland (2.28%; 31/12/ %) ACE 24,700 1,819, CIE Financiere Richemont 18,096 1,036, Coca-Cola 13, , Julius Baer 51,791 1,531, PAGE 16

19 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Metropolitan Bank & Trust on UBS Warrant 20/4/ , , Novartis (registered) 44,833 2,670, Roche Holding - participating 13,020 2,267, Zurich Insurance 14,514 2,919, Total Switzerland 13,398, NORTH AMERICA (29.94%; 31/12/ %) Bermuda (0.63%; 31/12/ %) Aquarius Platinum 84,908 12,524 - Catlin 22, , Hiscox 21, , Kofax 4,914 21,978 - Lancashire Holdings 12,800 71, Lazard 30, , Marvell Technology Group 238,600 2,218, Petra Diamonds 25,660 49, Utilico Emerging Markets Utilites 14,360 26, Total Bermuda 3,699, Canada (0.09%; 31/12/ %) Barrick Gold 66, , Entertainment One 13,350 42, Total Canada 500, Cayman Islands (0.36%; 31/12/ %) BH Macro 2,880 58, Alibaba Group Holding ADR 11, , Phoenix Group Holdings 14, , Tencent Holdings 128,700 1,197, Total Cayman Islands 2,116, Mexico (0.36%; 31/12/ %) Cemex ADR 181,528 1,185, Grupo Televisa ADR 41, , Total Mexico 2,086, United States (28.50%; 31/12/ %) Activision 70, , Aetna 19,500 1,110, American Express 22,400 1,336, Amgen 22,500 2,298, Anthem 12, , Apache 12, , Apple 127,630 9,034, Applied Materials 58, , AutoNation 14, , Bank of America 180,000 2,065, Bed Bath & Beyond 10, , Biogen Idec 3, , BlackRock 9,800 2,246, Blackstone 57,500 1,245, Bristol Myers Squibb 114,900 4,348, Cabot Oil & Gas 44, , Carnival 33, , CBRE Group 39, , CBS 76,300 2,707, Cigna 11, , Cisco Systems 182,200 3,249, Citigroup 154,900 5,376, Comcast 26, , Constellation Brands 28,950 1,821, PAGE 17

20 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Corning 135,100 1,986, Delta Air Lines 63,500 2,002, DR Horton 103,500 1,678, Eaton 49,300 2,148, EMC 105,510 2,013, EOG Resources 62,770 3,706, Facebook 60,200 3,012, General Electric 144,500 2,341, Goldman Sachs 15,500 1,926, Google 'C' 2, , Halliburton 60,100 1,514, HCA Holdings 43,200 2,033, Hewlett-Packard 53,600 1,379, Home Depot 36,100 2,429, IAC/InterActive 21, , Intel 227,600 5,297, International Business Machines 6, , International Flavours & Fragrances 10, , International Paper 86,300 2,964, Johnson & Johnson 34,640 2,323, JPMorgan Chase & Co 116,200 4,664, Kraft Foods Group 45,300 1,820, Las Vegas Sands 25, , Lennar 3,200 91, Marathon Oil 76,100 1,380, Marsh & Mclennan 59,400 2,180, Maxim Integrated Products 154,800 3,164, Medtronic 30,700 1,421, Merck & Co 128,400 4,676, Meritage Homes 20, , MetLife 73,200 2,539, Microsoft 181,600 5,409, Mohawk Industries 11,660 1,161, Mondelez International 42, , Monsanto 19,560 1,498, Morgan Stanley 46,800 1,164, Mylan 47,800 1,728, Nordstrom 44,100 2,245, PepsiCo 10, , Pioneer Natural Resources 13,200 1,260, PNC Financial Services 54,400 3,182, Priceline 1,977 1,445, Procter & Gamble 26,400 1,542, Pulte Group 143,500 1,974, PVH 18,900 1,553, Raytheon 6, , Regeneron Pharmaceuticals 5,470 1,438, Rockwell Automation 18,080 1,288, Ryland 18, , Sandisk 9, , Schlumberger 18,800 1,029, Southwestern Energy 36, , Splunk 23, , St. Jude Medical 35,400 1,476, SunTrust Banks 22, , Symantec 96,500 1,587, United Rentals 13, , United Technologies 23,300 1,718, UnitedHealth Group 61,500 3,987, Valero Energy 14, , Verizon Communications (NYSE) 42,352 1,270, Vertex Pharmaceuticals 14,000 1,066, Visa 'A' Shares 10,420 1,752, Wabco Holdings 21,400 1,437, Wal-Mart Stores 18, , Wells Fargo & Co 56,000 1,968, Whirlpool 10,445 1,297, PAGE 18

21 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Xcel Energy 26, , Xerox 217,700 1,935, Total United States 167,347, SOUTH AMERICA (0.35%; 31/12/ %) Brazil (0.35%; 31/12/ %) Embraer S.A. Sponsored ADR 48,500 1,146, Itau Unibanco ADR 131, , Itausa Investimentos 131, , Total Brazil 2,059, FAR EAST (9.03%; 31/12/ %) China (1.23%; 31/12/ %) China Longyuan Power 'H' 2,514,000 1,667, China Petroleum & Chemical 'H' 823, , China Resources Power Holdings 134, , CSR 1,156, , Dongfeng Motor Group 1,380,000 1,253, Industrial & Commercial Bank of China 2,577,000 1,206, PetroChina 2,048,000 1,453, Total China 7,223, Hong Kong (0.56%; 31/12/ %) AIA Group 417,600 1,485, Cathay Pacific Airways 389, , China Mobile Hong Kong 167,000 1,252, Total Hong Kong 3,280, India (0.40%; 31/12/ %) ICICI Bank ADR 226,600 1,678, LIC Housing Finance on UBS Warrants 7/12/ , , Total India 2,374, Indonesia (0.13%; 31/12/ %) Bank Rakyat Indonesia on UBS Warrants 17/2/2017 1,308, , Total Indonesia 787, Israel (-; 31/12/ %) Japan (4.41%; 31/12/ %) Eisai 58,800 1,466, FANUC 12,230 1,304, Fuji Heavy Industries 216,900 4,988, Honda Motor 21, , Japan Tobacco 66,600 1,183, KDDI 20, , Mitsubishi UFJ Financial 1,028,000 3,651, Nidec 33,100 1,389, Nippon Telegraph & Telephone 48,700 1,617, NTT DoCoMo 165,600 1,565, Omron 32, , Orix 114, , Rakuten 125,000 1,124, PAGE 19

22 Portfolio statement This section details all the different companies in which the fund invests, by sector/country. It also shows the number of shares held, the percentage each company represents of the fund as a whole and the value of those shares at the end of the year (shown under bid value). Seven and I Holdings 55,600 1,295, T&D Holdings 179,900 1,402, Toyota Motor 43,500 1,758, Total Japan 25,870, Korea (1.08%; 31/12/ %) BS Financial Group 36, , DGB Financial Group 900 5,908 - DGB Financial Group Rights Hana Financial Holdings 69,032 1,288, Hyundai Heavy Industries 3, , Hyundai Motor 3, , Samsung Electronics 3,303 2,555, Shinhan Financial Group 11, , SK Hynix 46,818 1,304, Total Korea 6,354, Malaysia (0.41%; 31/12/ %) Airasia Berhad 4,830,700 2,410, Total Malaysia 2,410, Panama (-; 31/12/ %) Russia (0.07%; 31/12/ %) Gazprom OAO 38, , Gazprom OAO ADR 10,200 30, Rosneft Oil GDR 119, , Total Russia 408, Singapore (-; 31/12/ %) Taiwan (0.74%; 31/12/ %) Taiwan Semiconductor Manufacturing sponsored ADR 303,500 4,354, Total Taiwan 4,354, Thailand (-; 31/12/ %) AFRICA (0.21%; 31/12/13 -) South Africa (0.21%; 31/12/13 -) Naspers 14,535 1,220, Total South Africa 1,220, PACIFIC BASIN (0.23%; 31/12/ %) Australia (0.23%; 31/12/ %) Fortescue Metals Group 570, , Rio Tinto 16, , Total Australia 1,322, FIXED INTEREST SECURITIES (20.94%; 31/12/ %) UK government bonds Treasury 1.25% 22/7/ ,464,323 19,664, Treasury 1.75% 22/1/ ,910,396 14,262, Treasury 1.75% 7/9/ ,039,784 14,235, Treasury 2.25% 7/9/2023 5,730,605 6,004, PAGE 20