Schroder International Selection Fund Semi-Annual Report

Transcription

1 International Selection Fund Semi-Annual Report 30 June 2015 Luxembourg R.C.S. Luxembourg B 8.202

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3 International Selection Fund Société d Investissement à Capital Variable (SICAV) Semi-Annual Report 30 June 2015 No subscriptions can be received on the basis of periodical reports. Subscriptions are valid only if made on the basis of the current prospectus accompanied by the last available annual report or semi-annual report if published thereafter. Audited annual and unaudited semi-annual reports, the current prospectus, KIID and the Articles of Incorporation of International Selection Fund (the 'Company') are available, free of charge, at the Company s registered office, 5, rue Höhenhof, L-1736 Senningerberg, Grand Duchy of Luxembourg.

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5 International Selection Fund Semi-Annual Report 30 June 2015 Page 5 Table of contents International Selection Fund Board of Directors Administration Directors Report Investment Managers Report Notes to the Financial Statements Statement of Distribution of Investments by Industry Portfolio of Investments Mainstream Equity Funds Asian Opportunities EURO Equity European Large Cap Global Equity Italian Equity Japanese Equity Swiss Equity UK Equity US Large Cap Specialist Equity Funds Asia Pacific Property Securities Asian Dividend Maximiser Asian Equity Yield Asian Smaller Companies Asian Total Return BRIC (Brazil, Russia, India, China) China Opportunities Emerging Asia Emerging Europe Emerging s European Dividend Maximiser European Equity (Ex UK) European Equity Focus European Equity Yield European Opportunities European Smaller Companies European Special Situations European Total Return Frontier s Equity Global Climate Change Equity Global Demographic Opportunities Global Dividend Maximiser

6 Page 6 International Selection Fund Semi-Annual Report 30 June 2015 Table of contents Specialist Equity Funds (cont) Global Emerging Opportunities Global Emerging s Smaller Companies Global Energy Global Equity Yield Global Property Securities Global Recovery Global Small Cap Energy Global Smaller Companies Greater China Hong Kong Equity Indian Equity Indian Opportunities Japanese Opportunities Japanese Smaller Companies Korean Equity Latin American Middle East Swiss Equity Opportunities Swiss Small & Mid Cap Equity Taiwanese Equity UK Opportunities US Small & Mid Cap Equity US Smaller Companies Style Equity European Small & Mid-Cap Alpha Equity Funds European Equity Alpha Global Equity Alpha Japanese Equity Alpha Quantitative Equity Funds QEP Global Active QEP Global Blend QEP Global Core QEP Global Emerging s QEP Global Quality QEP Global Plus Asset Allocation Funds Global Tactical Asset Allocation Multi-Asset Funds Asian Diversified Growth Emerging Multi-Asset Income * * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

7 International Selection Fund Semi-Annual Report 30 June 2015 Page 7 Table of contents Multi-Asset Funds (cont) Global Conservative Global Diversified Growth Global Dynamic Balanced Global Multi-Asset Allocation Global Multi-Asset Income Japan DGF Strategic Beta Wealth Preservation EUR Wealth Preservation Multi-Manager Funds Multi-Manager Global Diversity Absolute Return Funds Asian Bond Absolute Return Emerging s Debt Absolute Return European Alpha Absolute Return European Equity Absolute Return QEP Global Absolute * Mainstream Bond Funds EURO Bond EURO Government Bond EURO Short Term Bond Global Bond Global Inflation Linked Bond Hong Kong Dollar Bond US Dollar Bond Specialist Bond Funds Asian Local Currency Bond EURO Corporate Bond EURO Credit Conviction EURO High Yield Global Corporate Bond Global High Income Bond Global High Yield Global Unconstrained Bond Strategic Bond Strategic Credit Specialist Bond Funds (Medium-higher Risk) Asian Convertible Bond Emerging Bond Emerging Corporate Bond Emerging Local Currency Bond * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

8 Page 8 International Selection Fund Semi-Annual Report 30 June 2015 Table of contents Specialist Bond Funds (Medium-higher Risk) (cont) Global Conservative Convertible Bond Global Convertible Bond Global Credit Duration Hedged RMB Fixed Income Liquidity Funds EURO Liquidity US Dollar Liquidity Currency Fund Global Managed Currency Appendix I - Unaudited TER

9 International Selection Fund Semi-Annual Report 30 June 2015 International Selection Fund Page 9 The Company International Selection Fund (the Company ) is an open-ended umbrella company incorporated under Luxembourg law, which enables investors to choose from Funds (specific portfolios of assets and liabilities within the Company having their own net asset value and represented by a separate class or classes of shares) offering different investment objectives. The shares of each Fund are listed on the Luxembourg Stock Exchange. Prices are also available on Bloomberg and Reuters. This report covers the period from 1 January 2015 to 30 June The financial statements are prepared in accordance with Luxembourg regulations relating to undertakings for collective investment. The last day on which prices were calculated was 30 June 2015, the last working day of the period. At the date of this report, 110 Funds were available for investment. Please refer to the current prospectus for the investment objectives of the Funds as well as details of investment restrictions. The monthly factsheets for each Fund can be obtained from the Company s registered office and are also available on the website of Investment Management (Luxembourg) S.A. ( Hereafter, International Selection Fund will be referred to as the Company and all names of the Funds will be preceded by, e.g. Global Equity Alpha. Corporate Governance s is a FATCA compliant organisation. The FATCA classification of this entity and its GIIN is as follows: FATCA entity classification: FFI; Sponsoring entity: Investment Management (Luxembourg) S.A.; Sponsoring entity GIIN: 4RIMT SP.442 The Company is subject to corporate governance based on: 1. Its obligations as defined by the UCITS Directive 2009/65/EC dated 13 July 2009, as implemented in Luxembourg law which is available for inspection at the registered office of the Company at 5, rue Höhenhof, 1736 Senningerberg, Grand Duchy of Luxembourg. 2. Its articles of incorporation which are available for inspection at the registered office of the Company and at the Luxembourg corporate and trade register, Registre de Commerce et des Sociétés ( RCSL ). 3. The obligations in respect of the management of the Company, for which the Company has appointed Investment Management (Luxembourg) S.A., which is subject to the requirements of the Management Company Directive 2010/43/EC, as implemented in Luxembourg law. 4. The Association of the Luxembourg Fund Industry ( ALFI ) code of conduct, which the Company has voluntarily adopted. Internal Control and Risk Management Systems The Board of Directors is responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of error or fraud in achieving the Company's financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board of Directors has contracted with the Management Company to put procedures in place to ensure all relevant accounting records are properly maintained and are readily available, including the production of annual and semi-annual reports. The annual and semiannual reports of the Company are required to be approved by the Board of Directors of the Company and filed with the Commission de Surveillance du Secteur Financier ( CSSF ) and, in the case of annual reports, with the RCSL. The annual statutory financial statements are required to be audited by independent auditors who report to the Board of Directors on their findings. The Board meets at least four times a year and ensures that the Company maintains high standards of integrity and control in its operations and that it possesses adequate governance and means of control as law and regulation demand.

10 Page 10 International Selection Fund Semi-Annual Report 30 June 2015 Board of Directors Chairman Directors Massimo Tosato Executive Vice Chairman Investment Management Limited 31 Gresham Street London EC2V 7QA United Kingdom Mike Champion Head of Product Development Investment Management Limited 31 Gresham Street London EC2V 7QA United Kingdom Marie-Jeanne Chevremont-Lorenzini Independent Director 37C Avenue J.F. Kennedy 1855 Luxembourg Grand Duchy of Luxembourg Jacques Elvinger Avocat Elvinger, Hoss & Prussen 2, place Winston Churchill 2014 Luxembourg Grand Duchy of Luxembourg Daniel De Fernando Garcia Independent Director Serrano Madrid Spain Achim Kuessner Country Head Germany, Austria & CEE Investment Management GmbH Taunustor Frankfurt Germany Ketil Petersen Country Head Nordic Region s Denmark Filial af Investment Management (Luxembourg) S.A. Store Strandstraede Copenhagen K Denmark Georges-Arnaud Saier Independent Director 6, rue Paul Baudry F Paris France Carlo Trabattoni Head of Pan European Intermediary Distribution and GFIG Investment Management Limited 31 Gresham Street London EC2V 7QA United Kingdom

11 Administration International Selection Fund Semi-Annual Report 30 June 2015 Page 11 Registered Office Management Company, Domiciliary Agent, Principal Paying Agent, Registrar and Transfer Agent 5, rue Höhenhof, L-1736 Senningerberg, Grand Duchy of Luxembourg Investment Management (Luxembourg) S.A. 5, rue Höhenhof, L-1736 Senningerberg, Grand Duchy of Luxembourg Custodian and Fund Administrator Principal Legal Adviser Auditor Investment Managers J.P. Morgan Bank Luxembourg S.A. European Bank & Business Centre, 6, route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg Elvinger, Hoss & Prussen 2, place Winston Churchill, L-2014 Luxembourg, Grand Duchy of Luxembourg PricewaterhouseCoopers, Société coopérative 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg, Grand Duchy of Luxembourg Investment Management Limited 31, Gresham Street, London EC2V 7QA, United Kingdom Asian Dividend Maximiser BRIC (Brazil, Russia, India, China) Emerging Europe Emerging s Emerging s Debt Absolute Return Emerging Multi-Asset Income * EURO Bond EURO Corporate Bond EURO Credit Conviction EURO Equity EURO Government Bond EURO High Yield EURO Liquidity EURO Short Term Bond European Alpha Absolute Return European Dividend Maximiser European Equity (Ex UK) European Equity Absolute Return European Equity Alpha European Equity Focus European Equity Yield European Large Cap European Opportunities European Smaller Companies European Special Situations European Total Return Frontier s Equity Global Bond Global Climate Change Equity Global Demographic Opportunities Global Diversified Growth Global Dividend Maximiser Global Emerging Opportunities Global Emerging s Smaller Companies Global Energy Global Equity Global Equity Alpha Global Equity Yield Global Inflation Linked Bond Global Managed Currency Global Multi-Asset Allocation Global Multi-Asset Income Global Property Securities Global Recovery Global Small Cap Energy Global Smaller Companies Global Tactical Asset Allocation Global Unconstrained Bond Italian Equity Latin American Middle East Multi-Manager Global Diversity * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

12 Page 12 International Selection Fund Semi-Annual Report 30 June 2015 Administration (cont) Investment Managers (cont) Investment Management Limited (cont) 31, Gresham Street, London EC2V 7QA, United Kingdom QEP Global Absolute * QEP Global Active QEP Global Blend QEP Global Core QEP Global Emerging s QEP Global Quality QEP Global Plus Strategic Beta 10 Strategic Bond Strategic Credit UK Equity UK Opportunities Wealth Preservation EUR Wealth Preservation Investment Management (Hong Kong) Limited Suites 3301, Level 33, Two Pacific Place, 88 Queensway, Hong Kong SAR Asia Pacific Property Securities Asian Diversified Growth China Opportunities Emerging Asia Greater China Hong Kong Dollar Bond Hong Kong Equity Japan DGF RMB Fixed Income Taiwanese Equity Investment Management (Japan) Limited 21st Floor Marunouchi Trust Tower Main, Marunouchi, Chiyoda-Ku, Tokyo , Japan Japanese Equity Japanese Equity Alpha Japanese Opportunities Japanese Smaller Companies Investment Management North America Inc. 875 Third Avenue, 22nd Floor, New York, New York , United States of America Emerging Bond Emerging Local Currency Bond Global Corporate Bond Global Credit Duration Hedged Global High Income Bond Global High Yield US Dollar Bond US Dollar Liquidity US Large Cap US Small & Mid-Cap Equity US Smaller Companies Investment Management (Singapore) Limited 138 Street #23-01, CapitaGreen, Singapore , Singapore Asian Bond Absolute Return Asian Equity Yield Asian Local Currency Bond Asian Opportunities Asian Smaller Companies Asian Total Return Emerging Corporate Bond * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

13 Administration (cont) International Selection Fund Semi-Annual Report 30 June 2015 Page 13 Investment Managers (cont) Investment Management (Singapore) Limited (cont) 138 Street #23-01, CapitaGreen, Singapore , Singapore Indian Equity Indian Opportunities Korean Equity Investment Management (Switzerland) AG Central 2, CH-8021 Zurich, Switzerland Asian Convertible Bond European Small & Mid-Cap Global Conservative Global Conservative Convertible Bond Global Convertible Bond Global Dynamic Balanced Swiss Equity Swiss Equity Opportunities Swiss Small & Mid Cap Equity * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

14 Page 14 International Selection Fund Semi-Annual Report 30 June 2015 Directors Report Introduction The directors of the Company submit their report for the period ended 30 June Activities during the period On 30 June 2015, the total net assets of the Company were EUR 89,822,134,278 compared to EUR 78,174,779,760 on 31 December 2014, representing an increase of New Funds During the period under review, 2 new Funds were made available for investment within the Company: 8 April 2015 Emerging Multi-Asset Income; 27 May 2015 QEP Global Absolute; 2. New share classes In addition to the 18 share classes launched in new Funds, the following share classes were also made available during the period: 25 February 2015 Asian Dividend Maximiser A Dis RMB Hedged; China Opportunities A Dis HKD; Emerging Asia IZ Acc; EURO Bond IZ Dis; European Dividend Maximiser AX Dis; Global High Yield I Dis GBP Hedged; Global Multi-Asset Income A Dis SGD; Japan DGF X Dis; Strategic Bond I Dis GBP Hedged; 11 March 2015 Global Conservative C Acc & I Acc; Global Multi-Asset Allocation A Acc & I Acc EUR Hedged; 29 April 2015 Global Recovery X Dis; QEP Global Emerging s IZ Dis EUR; 20 May 2015 EURO Equity I Acc Hedged; QEP Global Emerging s I Dis GBP; 3 June 2015 Global Multi-Asset Allocation B Acc & B Dis; QEP Global Core X Dis. 3. Share class liquidations The following share classes were liquidated during the period: 16 February 2015 Global Corporate Bond C Acc EUR Duration Hedged; 10 April 2015 Asian Opportunities I Acc EUR; 22 April 2015 Global Small Cap Energy I Acc CHF & I Acc EUR; 6 May 2015 Asian Bond Absolute Return B Dis, I Acc EUR Hedged, A Acc HKD, I Acc SGD Hedged; Asian Convertible Bond C Dis GBP Hedged; Asian Local Currency Bond A1 Dis & B Dis; Asian Opportunities B Dis; Asian Smaller Companies C Dis; Asian Total Return A1 Acc EUR Hedged, B Acc EUR Hedged, C Dis JPY Hedged; BRIC (Brazil, Russia, India, China) I Acc EUR; China Opportunities A1 Acc SGD Hedged; Emerging s B Dis; EURO Corporate Bond A Dis EUR Duration Hedged; EURO Liquidity I Acc JPY; European Equity Alpha I Dis; European Equity Yield A1 Acc ; European Large Cap B Dis; European Smaller Companies I Acc; European Total Return I Acc, C Dis, I Dis, A Acc GBP Hedged & C Acc GBP Hedged; Global Bond B Dis & I Acc EUR Hedged; Global Climate Change Equity A1 Acc EUR, I Acc EUR, A Dis EUR Hedged & C Dis GBP;

15 International Selection Fund Semi-Annual Report 30 June 2015 Directors Report (cont) Page 15 Activities during the period (cont) 6 May 2015 (cont) Global Emerging Opportunities I Acc EUR & A Dis GBP; Global Energy A Dis EUR Hedged; Global Equity A Dis; Global Equity Alpha A Dis & B Dis; Global Equity Yield I Dis; Global High Income Bond B Acc, A1 Acc, A1 Dis & A Dis SGD Hedged; Global Multi-Asset Income I Acc EUR Hedged & I Acc GBP Hedged; Hong Kong Dollar Bond B Acc; Italian Equity C Dis; Korean Equity A Dis; Latin American I Acc EUR; Middle East I Acc EUR; Swiss Equity I Acc; Taiwanese Equity C Dis & I Dis; US Large Cap B Dis & I Acc EUR; US Small & Mid-Cap Equity I Acc EUR; 7 May 2015 Japanese Equity B Dis; Japanese Equity Alpha A1 Acc & B Acc; Japanese Smaller Companies A Dis & B Dis. Furthermore, the following changes took effect during the period: 1 January 2015 EURO Corporate Bond Z Dis class changed the distribution policy from annual variable to semi-annual 3; Global Property Securities Z Dis EUR class changed the distribution frequency from annual to semi-annual; 12 February 2015 Change in the investment policy to allow investment in Chinese Interbank Bond for Asian Bond Absolute Return, Asian Local Currency Bond and Hong Kong Dollar Bond; 1 April 2015 Minimum subscription changed for all I classes from EUR/ 20,000,000 to EUR/ 5,000,000; Minimum additional subscription changed for all I classes from EUR/ 10,000,000 EUR/ 2,500,00; Minimum holding changed for all I classes from EUR/ 20,000,000 to EUR/ 5,000,000; Management fee reduction for European Equity Absolute Return A, A1, B shares from 2 to 1.5 and C shares from 1 to 0.75; Distribution fee reduction for Global Diversified Growth B Acc class from 0.80 to 0.60; Change of investment policies for European Opportunities, European Equity (Ex UK), RMB Fixed Income, Strategic Credit and UK Opportunities; 28 May 2015 Change in distribution policy for European Equity Yield A Dis RMB Hedged from 4 to 4 + premium and Global Corporate Bond A Dis RMB Hedged from 3 to 3 + currency premium. The Board of Directors International Selection Fund 30 June 2015 The information contained in this report is historical and not necessarily indicative of future performance.

16 Page 16 International Selection Fund Semi-Annual Report 30 June 2015 Investment Managers Report The six-month period was marked by divergence in monetary policy. Several major central banks eased financial conditions, while in the US the focus was on when the Federal Reserve (Fed) would raise interest rates. In total, 21 central banks cut policy rates over the first three months of the period. In the eurozone, ongoing weak growth figures and inflation dipping into negative territory saw the European Central Bank (ECB) announce a much-anticipated quantitative easing programme. The programme envisages asset purchases totalling 60 billion per month from March 2015 to September Meanwhile, in the US focus was on the likely timing of the first interest rate hike from the current ultra-low level. However, although labour market data continued to be robust, other economic indicators showed a slowdown over the winter. This was largely attributed to poor weather conditions but the weaker data meant the market pushed out expectations for a rate rise until the latter part of Nevertheless, the expectation that the US would tighten monetary policy while other economies are still easing policy led to a rise in the US dollar versus other major currencies. The Chinese authorities took steps on several occasions to loosen monetary policy as growth slowed, making cuts to interest rates and the reserve requirement ratio. The Reserve Bank of India was another to lower interest rates over the period. Elsewhere in emerging markets, economic fundamentals deteriorated in Brazil and a corruption scandal at state controlled oil major Petrobras hit the investment outlook for the entire country. On the political front, elections in Greece saw victory for left-wing party Syriza, which formed an anti-austerity coalition government. The period saw multiple sets of negotiations between Athens and its creditors aimed at agreeing reforms needed to release further bailout funds. However, these talks broke down and the Greek government called a referendum on the bailout. Scheduled for 5 July, the vote has been widely regarded as an inout decision on Greece s ongoing membership of the eurozone. Elsewhere, the UK held a general election in May. A coalition government had been widely expected but the Conservative Party won a surprise outright majority in a result largely perceived as positive for business. The global growth picture remained somewhat subdued. The eurozone saw a small acceleration in growth to 0.4 quarter on quarter (q/q) for the first quarter (Q1) of 2015, from 0.3 in the fourth quarter (Q4) of Japanese growth expanded to 1.0 q/q in Q1 (3.9 annualised), supported by business spending. However, the US experienced a contraction of 0.2 (q/q, annualised) in Q1 from a 2.2 growth rate in Q4, as poor weather dragged on activity. Chinese growth slowed to 7.0 year on year in Q1 from 7.3 the previous quarter. Oil prices largely stabilised during the period after the sharp drop seen at the end of Equities overview The MSCI World index returned over the six months. US equities made gains although the optimistic mood at the start of the period gave way to greater uncertainty, as economic indicators weakened and the stronger dollar weighed on exporters. In the eurozone, returns were stronger, supported by the ECB s announcement of quantitative easing along with the weaker euro and signs of the economy picking up. Japanese equities experienced strong gains in local currency terms but the yen s weakness meant these gains were more muted for overseas investors. Globally, merger & acquisition activity picked up in several sectors including food producers (Kraft merging with Heinz), pharmaceuticals (Pfizer buying Hospira) and oil (Royal Dutch Shell bidding for BG Group). The MSCI Emerging s index returned Chinese equities registered strong returns, albeit with profit-taking setting in towards the end of the period. The rally was primarily due to local investors expectations for further monetary policy easing and a shift in investment preferences, away from the slowing Chinese property market into local equities. Russian equities were also strong as oil prices recovered and geopolitical worries eased. Fixed income overview Bond markets largely underperformed equities over the period. Q was, broadly speaking, another period of yield compression in global bond markets. However, there was a reversal in the second half of the period, with bond yields climbing sharply across most major bond markets. In spite of ongoing fragility in macroeconomic data from the US, the Fed warned that investors should expect rate hikes to begin in The comments pushed Treasury yields higher. In the eurozone, inflation expectations were revised upwards and Bund yields rose aggressively in April, May and the start of June. The end of June saw Bund yields fall back slightly due to uncertainty stemming from a potential Greek default. In corporate bond markets, investment grade bonds were outperformed by high yield. The investment grade BofA Merrill Lynch Global Corporate Bond index fell by but the high yield equivalent rose by Corporate bonds struggled through the second part of the period given softer returns in sovereign bonds and a continued high level of supply coming from the US. 1 Datastream, MSCI World, US$. 2 Datastream, MSCI Emerging s, US$. 3 Datastream, BofA Merrill Lynch Global Corporate Bond, US$ 4 Datastream, BofA Merrill Lynch Global High Yield, US$

17 International Selection Fund Semi-Annual Report 30 June 2015 Investment Managers Report (cont) Page 17 Outlook The world economy is likely to enjoy better growth in the second half of this year as the benefits of lower energy prices flow through and growth revives further in the US, Europe and Japan. As this benefits trade, emerging markets should also improve as we head into We are seeing a pick-up in activity. In the US, retail and auto sales have strengthened after a soft Q1 and employment growth remains robust. We think the Fed will raise interest rates in September and into next year. Europe continues to expand, with little evidence that the Greek crisis has significantly damaged business or consumer confidence so far. Bank lending and credit growth are reviving after the contraction experienced in 2013 and Meanwhile, the latest figures show that economic performance in Japan was better than expected in Q1 on the back of stronger investment. Leading indicators suggest growth remained robust in Q2 and we are looking for Japanese consumer spending to improve as real incomes strengthen in the coming months. Emerging economies remain the laggards with China continuing to decelerate in Q2 and as a group they continue to lag the recovery seen in purchasing managers indices in the developed world. Overall, these trends bode well for the second half of the year and into next and our forecast assumes that global growth can pick up to 2.9 in This is based on continued recovery in Europe and Japan and steady growth in the US, which feeds through to better exports from the emerging economies. The ongoing benefits from lower energy costs, loose monetary policy and a less restrictive fiscal stance support demand in the developed world and underpin the forecast. The Investment Managers International Selection Fund 30 June 2015 The information contained in this report is historical and not necessarily indicative of future performance.

18 Page 18 International Selection Fund Semi-Annual Report 30 June 2015 Notes to the Financial Statements as at 30 June 2015 The Company The Company was incorporated in Luxembourg on 5 December 1968 as a société anonyme. Pursuant to an Extraordinary General Meeting of Shareholders held on 31 January 1989, the form and name of the Company, as well as its establishment period, was changed to a société d investissement à capital variable ( SICAV ) established for an unlimited period under the name of International Selection Fund. The company qualifies as an undertaking for collective investment (UCI) regulated by the provisions of Part I of the Luxembourg Law of 17 December 2010, as amended, regarding undertaking for collective investment (the 2010 law ). Classes of Shares At the date of this report, fifteen classes of shares are available within the Funds: A, B, C, D, E, I, IZ, J, R, S, X, Z, A1, B1 and AX shares. All Funds offer A, B and C shares, apart from the following Funds: Asian Diversified Growth (offers only A, C, I & A1 shares); Emerging Multi-Asset Income* (offers only A, C, I & A1 shares); EURO High Yield (offers only A, C & I shares); European Equity (Ex UK) (offers only A, C & S shares); European Equity Focus (offers only A, C, I & Z shares); European Small & Mid-Cap (offers only A, C, I & Z shares); Global Conservative (offers only A, C, I & A1 shares); Global Conservative Convertible Bond (offers only A, C, E & I shares); Global Demographic Opportunities (offers only A, C & Z shares); Global Small Cap Energy (offers only A, C & I shares); Global Tactical Asset Allocation (offers only C & I shares); Indian Opportunities (offers only A, C, E & I shares); Japan DGF (offers only C, I & X shares); Japanese Opportunities (offers only A, C, I & A1 shares); Multi-Manager Global Diversity (offers only A & C shares); QEP Global Absolute* (offers only A, C & I shares); QEP Global Blend (offers only A, C, I, S & Z shares); QEP Global Core (offers only C, I & X shares); QEP Global Emerging s (offers only A, C, I, Z, A1 & IZ shares); QEP Global Plus (offers only A, C & I shares); RMB Fixed Income (offers only A, C, E & I shares); Strategic Beta 10 (offers only I shares); UK Opportunities (offers only A, C & S shares); Wealth Preservation (offers only A, C, E & I shares). Shares are generally issued as Accumulation shares. Distribution shares may be issued within any Fund at the Directors discretion. A list of available Distribution shares may be obtained upon request at the Management Company. In accordance with the provisions of the current prospectus, the Directors may also offer classes in multiple currency denominations. The respective Investment Managers have the ability to hedge the shares of such classes in relation to the Fund currency or in relation to currencies in which the relevant Fund's underlying assets are denominated. Where hedging of this kind is undertaken, the respective Investment Managers may engage, for the exclusive account of such share class, in currency forwards, currency futures, currency option transactions and swaps in order to preserve the value of the reference currency against the Fund currency. Where undertaken, the effects of this hedging will be reflected in the Asset and, therefore, in the performance of such additional share class. Similarly, any expenses arising from such hedging transactions will be borne by the class in relation to which they have been incurred. The classes of share available for each Fund are set out in detail in the current prospectus. The Directors may decide from time to time for some or all of the Bond Funds to issue duration hedged share classes. Duration hedged share classes utilise hedging strategies that seek to reduce the share class' sensitivity to changes in interest rate movements. There is no assurance that these hedging strategies will be successful. Where undertaken, the effects of this hedging will be reflected in the Asset and, therefore, in the performance of the share class. Similarly, any expenses arising from such hedging transactions will be borne by the duration hedged share class. The performance of the duration hedged share classes may underperform other share classes in the Bond Funds depending on interest rate movements. Duration hedged share classes can be issued in relation to any type of available share classes of Bond Funds. The naming convention used for the share classes is as follows: A Acc for base currency share class; A Acc CCY for a multicurrency share class; A Acc CCY Hedged for a hedged share class. Initial Charge The Management Company and Distributors are entitled to the following initial charges, which can be partly or fully waived at the Directors discretion.

19 International Selection Fund Semi-Annual Report 30 June 2015 Notes to the Financial Statements Page 19 Initial Charge (cont) A and AX Shares Equity Funds and Asset Allocation Funds Multi-Asset Funds Multi-Manager Funds Absolute Return Funds, Bond Funds and Currency Funds Liquidity Funds Initial charge of up to of the Asset per Share Initial charge of up to of the Asset per Share with the exception of: up to of the Asset per Share of Global Dynamic Balanced, Global Multi-Asset Allocation, Wealth Preservation EUR and Wealth Preservation up to of the Asset per Share of Global Conservative Initial charge of up to of the Asset per Share Initial charge of up to of the Asset per Share No initial charge A1 Shares Equity Funds and Asset Allocation Funds Multi-Asset Funds Absolute Return Funds, Bond Funds and Currency Funds Liquidity Funds C and E Shares Liquidity Funds Initial charge of up to of the Asset per Share Initial charge of up to of the Asset per Share with the exception of: up to of the Asset per Share of Global Dynamic Balanced, Global Multi-Asset Allocation, Wealth Preservation EUR and Wealth Preservation up to of the Asset per Share of Global Conservative Initial charge of up to of the Asset per Share No initial charge Initial charge of up to of the Asset per Share with the exception of Liquidity Funds No initial charge B, B1, D, I, IZ, J, R, S, X and Z Shares No initial charge Distribution Charge A, AX, C, E, I, IZ, J, R, S, X and Z Shares No distribution charge B Shares * Equity Funds Absolute Return Funds Bond Funds Liquidity Funds Currency Funds Asset Allocation Funds Multi-Asset Funds D Shares ** A1 Shares ** B1 Shares ** Distribution charge of 0.60 per annum of the net assets of Funds Distribution charge of 0.50 per annum of the net assets of Funds Distribution charge of 0.50 per annum of the net assets of Funds with the exception of: 0.10 per annum of the net assets of EURO Short Term Bond Distribution charge of 0.10 per annum of the net assets of Funds with the exception of: No distribution charge for US Dollar Liquidity Distribution charge of 0.50 per annum of the net assets of Funds Distribution charge of 0.60 per annum of the net assets of Funds Distribution charge of 0.60 per annum of the net assets of Funds with the exception of: 0.50 per annum of the net assets of Funds Wealth Preservation EUR and Wealth Preservation Distribution charge of 1.00 per annum of the net assets of Funds Distribution charge of 0.50 per annum of the net assets of Funds with the exception of: 0.10 per annum of the net assets of EURO Liquidity No distribution charge for US Dollar Liquidity Distribution charge of 1.25 per annum of the net assets of Funds (including a shareholder servicing fee of 0.25 p.a.) with the exception of: 0.60 per annum of the net assets of Global Conservative * Distribution charges in respect of B shares are payable quarterly. ** Distribution charges in respect of A1, B1 and D shares are paid at such intervals, as may be agreed upon from time to time between the Company and those Distributors that are appointed specifically for the purpose of distributing such shares.

20 Page 20 International Selection Fund Semi-Annual Report 30 June 2015 Notes to the Financial Statements Minimum Subscription, Minimum Additional Subscription and Minimum Holding In accordance with the provisions of the current prospectus, minimum amounts for subscription, additional subscription and holding are as follows: * A, AX, A1, B, B1 and D Shares The minimum initial subscription, additional subscription and holding amount is EUR 1,000 or 1,000 or their near equivalent in any other freely convertible currency. ** C and E Shares The minimum initial subscription and holding amount is EUR 500,000 or 500,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 250,000 or 250,000 or their near equivalent in any other freely convertible currency. ** E Shares will only be available, with prior agreement of the Management Company. I & J Shares The minimum initial subscription and holding amount is EUR 5,000,000 or 5,000,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 2,500,000 or 2,500,000 or their near equivalent in any other freely convertible currency. ** I shares will only be offered to investors who, at the time the relevant subscription order is received, are clients of s with an agreement covering the charging structure relevant to the clients investments in such shares and who are Institutional Investors. J Shares will only be offered to and can only be acquired by Japanese Fund of Funds, which are Institutional Investors. IZ & Z Shares The minimum initial subscription and holding amount is EUR 100,000,000 or 100,000,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 20,000,000 or 20,000,000 or their near equivalent in any other freely convertible currency. ** IZ Shares will only be offered to and can only be acquired by Institutional Investors, with prior agreement of the Management Company. Z Shares will be offered in limited circumstances to professional investors for distribution in certain countries and through certain Distributors, with the prior agreement of the Management Company. X Shares The minimum initial subscription and holding amount is EUR 25,000,000 or 25,000,000 or their near equivalent in any other freely convertible currency. The minimum additional subscription amount is EUR 12,500,000 or 12,500,000 or their near equivalent in any other freely convertible currency. ** X shares will only be available, with prior agreement of the Management Company, to institutional investors, as may be defined from time to time by the guidelines or recommendations issued by the Luxembourg supervisory authority. R & S Shares There are no minimum subscription or holding amounts. Further details on specific features of the different classes of shares and the conditions under which initial and distribution fees are calculated can be found in the current prospectus. Asset Calculation of Asset per Share The Asset per share of each class is calculated on each Dealing Day in the currency of the relevant class. It is calculated by dividing the Asset attributable to each class, being the proportionate value of its assets less its liabilities, by the number of shares of such class then in issue. The resulting sum is rounded to the nearest two decimal places. Further details on rules that apply in valuing total assets can be found in the current prospectus. Valuation of the of the Company The value of securities, financial derivative instruments and assets is determined on the basis of the last available price on the stock exchange or any other regulated market on which those securities or assets are traded or admitted for trading. Where such securities or other assets are quoted or dealt in on more than one stock exchange or any other regulated market, the Directors shall make regulations for the order of priority in which stock exchanges or other regulated markets shall be used for the provision of prices of securities or other assets. If a security is not traded on or admitted to any official stock exchange or any other regulated market or, in the case of securities so traded or admitted, the last available price does not reflect their true value, the Directors are required to proceed on the basis of their expected sales price, which shall be valued with prudence and in good faith. Liquid assets and money market instruments are usually valued on an amortised cost basis. Financial derivative instruments, which are not listed on any official stock exchange or any other regulated market, are valued in accordance with market practice. The swaps are valued at their fair value based on the underlying securities (at close of business or intraday) as well as on the characteristics of the underlying commitments. ** These minima may be waived from time to time at the discretion of the Directors.

21 International Selection Fund Semi-Annual Report 30 June 2015 Notes to the Financial Statements Page 21 Asset (cont) Valuation of the of the Company (cont) Units or shares in undertakings for collective investments are valued on the basis of their last available net asset value. Liquid assets and money market instruments held within the liquidity Funds are usually valued on an amortised cost basis. The value of any cash in hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, cash dividends and interest declared or accrued as aforesaid and not yet received shall be deemed to be the full amount thereof, unless in any case the same is unlikely to be paid or received in full, in which case the value thereof shall be arrived at after making such discount as the Company may consider appropriate in such case to reflect the true value thereof. Any assets or liabilities in currencies other than the base currencies of the Funds will be converted using the relevant spot rate quoted by a bank or other responsible financial institution. If any of the aforesaid valuation principles do not reflect the valuation method commonly used in specific markets or if any such valuation principles do not seem accurate for the purpose of determining the value of the Company s assets, the Directors may fix different valuation principles in good faith and in accordance with generally accepted valuation principles and procedures. The Directors are authorised to apply other appropriate valuation principles for the assets of the Funds and/or the assets of a given class if the aforesaid valuation methods appear impossible or inappropriate due to extraordinary circumstances or events. As of 30 June 2015, fair valuation was applied to the following securities: Security Name Fund Anxin-China QEP Global Emerging s Banca Popolare dell'etruria e del Lazio QEP Global Blend Caja De Ahorros Del Mediterraneo QEP Global Core China Animal Healthcare QEP Global Emerging s China Lumena New Materials QEP Global Active China Lumena New Materials QEP Global Quality China Lumena New Materials QEP Global Emerging s China Lumena New Materials QEP Global Blend China Lumena New Materials Global Multi-Asset Income China Lumena New Materials Global Plus China Lumena New Materials QEP Global Absolute * China Taifeng Beddings QEP Global Active China Taifeng Beddings QEP Global Emerging s China Taifeng Beddings QEP Global Plus Corp GEO QEP Global Active Corp GEO QEP Global Emerging s Corp GEO QEP Global Plus Irish Bank Resolution Corporation QEP Global Core Jurong Technologies Industrial QEP Global Active Longtop Financial Technologies ADR Hong Kong Equity Neo QEP Global Emerging s Ow Bunker European Smaller Companies Ow Bunker Global Smaller Companies Parmalat Finanziaria EURO Equity Parmalat Finanziaria Italian Equity Parmalat Finanziaria European Equity Alpha Peace Mark European Equity Alpha Safeway Global Recovery Safeway (New York) Global Recovery SNS Bank RegS 11,25 perpetual Global High Yield SNS Bank RegS 11,25 perpetual EURO High Yield SNS Bank NV /10/2020 Global Bond SNS REAAL QEP Global Active SNS REAAL QEP Global Blend SNS REAAL QEP Global Absolute * Sound Global Emerging Asia Sound Global Greater China Sound Global China Opportunities Urbi Desarrollos Urbanos QEP Global Active Urbi Desarrollos Urbanos QEP Global Emerging s Urbi Desarrollos Urbanos QEP Global Plus Ya Hsin Industrial QEP Global Active * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

22 Page 22 International Selection Fund Semi-Annual Report 30 June 2015 Notes to the Financial Statements Asset (cont) Valuation of the of the Company (cont) Additionally, Greek securities were fair valued as at 30 June The list of securities together with the haircut amounts are disclosed in the following table: Fund Security Description Currency Haircut Emerging Europe Emerging s European Equity Yield Global Recovery European Equity Alpha QEP Global Active QEP Global Blend QEP Global Emerging s QEP Global Plus Hellenic Telecommunications Organization (895,045) JUMBO (551,026) National Bank of Greece (1,354,120) Piraeus Bank (843,997) EUR (3,644,188) Hellenic Telecommunications Organization (829,801) National Bank of Greece (1,790,926) (2,620,727) Athens Water Supply & Sewage (1,205,951) EUR (1,205,951) Hellenic Exchanges - Athens Stock Exchange (920,651) Hellenic Telecommunications Organization (240,597) OPAP (251,108) (1,412,356) Mytilineos (1,871,262) EUR (1,871,262) JUMBO (59,195) (59,195) JUMBO (7,529) Metka (11,301) (18,830) Athens Water Supply & Sewage (20,480) JUMBO (61,179) Metka (46,577) OPAP (269,825) (398,061) JUMBO (24,420) (24,420) JUMBO (2,166) Metka (1,707) (3,873) Fair Pricing In accordance with the provisions of the current prospectus, fair value pricing may be implemented to protect the interests of the Company s shareholders against market timing practices. Accordingly, if a Fund is primarily invested in markets that are closed for business at the time the Fund is valued, the Directors may, during periods of market volatility and by derogation from the provisions above under Calculation of Asset per share, cause the Fund Administrator to allow for the Asset per share to be adjusted to reflect more accurately the fair value of the Fund s investments at the point of valuation. The level of adjustment is based upon the movement in a chosen surrogate up until the point of valuation, provided that such movement exceeds the threshold as determined by the Directors for the relevant Fund. The surrogate will usually be in the form of a futures index but might also be a basket of securities, which the Directors believe is strongly correlated to and representative of the performance of the Fund. Where an adjustment is made as per the foregoing, it is applied consistently to all classes of shares in the same Fund. During the period under review, fair value pricing was applied to 21 Funds. The Directors, however, reserve the right to extend the implementation of fair value pricing in respect of other Funds whenever they deem it appropriate. * Please refer to the Directors Report for the details of all corporate actions that occurred during the period under review.

23 International Selection Fund Semi-Annual Report 30 June 2015 Notes to the Financial Statements Page 23 Fair Pricing (cont) The Funds in relation to which fair value pricing was applied during the period under review as well as details of the relevant reference indices, thresholds and surrogates are shown below: Fund Threshold Surrogate Global Climate Change Equity 0.50 CME S&P 500 Index Futures Global Demographic Opportunities 0.50 CME S&P 500 Index Futures Global Dividend Maximiser 0.50 CME S&P 500 Index Futures Global Energy * 0.50 CME S&P 500 Index Futures Global Equity 0.50 CME S&P 500 Index Futures Global Equity Alpha 0.50 CME S&P 500 Index Futures Global Equity Yield 0.50 CME S&P 500 Index Futures Global Property Securities * 0.50 CME S&P 500 Index Futures Global Smaller Companies 0.50 CME S&P 500 Index Futures Japanese Equity 0.50 CME Yen Denominated Nikkei 225 Index Future Japanese Equity Alpha 0.50 CME Yen Denominated Nikkei 225 Index Future Japanese Opportunities 0.50 CME Yen Denominated Nikkei 225 Index Future Japanese Smaller Companies 0.50 CME Yen Denominated Nikkei 225 Index Future Latin American * 0.50 CME S&P 500 Index Futures QEP Global Active 0.50 CME S&P 500 Index Futures QEP Global Blend ** 0.50 CME S&P 500 Index Futures QEP Global Core 0.50 CME S&P 500 Index Futures QEP Global Quality 0.50 CME S&P 500 Index Futures US Large Cap 0.50 CME S&P 500 Index Futures US Small & Mid-Cap Equity 0.50 CME S&P 500 Index Futures US Smaller Companies 0.50 CME S&P 500 Index Futures On 30 June 2015, the last working date of the period under review, the following Funds were adjusted: Fund Currency Total Adjustment Global Climate Change Equity 694,431 Global Demographic Opportunities 129,244 Global Dividend Maximiser 12,704,372 Global Equity 252,897 Global Equity Alpha 4,071,246 Global Equity Yield 1,418,605 Global Smaller Companies 1,162,544 Japanese Equity JPY 2,740,570,315 Japanese Equity Alpha JPY 49,476,607 Japanese Opportunities JPY 789,823,704 Japanese Smaller Companies JPY 251,005,755 QEP Global Active 5,852,998 QEP Global Blend 1,447,318 QEP Global Core 5,359,738 QEP Global Quality 7,055,585 US Large Cap 8,478,133 US Small & Mid-Cap Equity 8,646,227 US Smaller Companies 2,919,789 Exchange Rates The exchange rates used for the calculation of the combined total in Eur of the financial Statement as at 30 June 2015 are: 1 EUR = ; 1 EUR = GBP; 1 EUR = CHF; 1 EUR = JPY; 1 EUR = HKD; 1 EUR = RMB. Swing Pricing Adjustment A Fund may suffer dilution of the Asset per Share due to investors buying or selling Shares in a Fund at a price that does not reflect the dealing and other costs that arise when security trades are undertaken by the Investment Manager to accommodate cash inflows or outflows. * Fund was removed from the program on 4 May ** Fund was added to the program on 19 January 2015.