Far Eastern Investment Series Annual Report Including Long Form Financial Statements

Transcription

1 Far Eastern Investment Series Annual Report Including Long Form Financial Statements Issued January 2014 For the year 1 December 2012 to 30 November 2013

2 Contents Invesco Perpetual Far Eastern Investment Series 02 Report of the Authorised Corporate Director (ACD) 05 Company s financial statements 15 Invesco Perpetual Asian Fund 16 Strategy, review and outlook 17 Comparative table 24 Financial statements 32 Distribution table 33 Invesco Perpetual Asian Equity Income Fund 34 Strategy, review and outlook 35 Comparative table 41 Financial statements 49 Distribution tables 50 Invesco Perpetual Hong Kong & China Fund 51 Strategy, review and outlook 52 Comparative table 56 Financial statements 63 Distribution table 64 Invesco Perpetual Japan Fund 65 Strategy, review and outlook 66 Comparative table 71 Financial statements 78 Distribution table 79 Invesco Perpetual Pacific Fund 80 Strategy, review and outlook 81 Comparative table 87 Financial statements 95 Distribution table 96 Regulatory Statements 96 Statement of ACD s responsibilities 96 Statement of Depositary s responsibilities 96 Depositary s Report to Shareholders 97 Independent Auditors Report 01 Far Eastern Investment Series

3 Invesco Perpetual Far Eastern Investment Series Report of the Authorised Corporate Director (ACD) The Company The Invesco Perpetual Far Eastern Investment Series is an Investment Company with variable capital, incorporated in England and Wales on 8 May The Company is an Umbrella Company (under the ICVC Regulations) and therefore new sub funds may be formed by the ACD, subject to Regulatory approval. Any changes to sub funds or share classes will be included in an updated Prospectus. Each sub fund of the Company belongs to the type of UCITS Scheme which complies with Chapter 5 of the FCA Collective Investment Schemes sourcebook ( COLL ). At 30 November 2013, the Company consisted of five sub funds: Invesco Perpetual Asian Fund Invesco Perpetual Asian Equity Income Fund Invesco Perpetual Hong Kong & China Fund Invesco Perpetual Japan Fund Invesco Perpetual Pacific Fund Accounting periods Annual accounting date Interim accounting date Distribution payable on 30 November 31 May 31 January The following fund will also pay an interim distribution on 31 July: Invesco Perpetual Asian Equity Income Fund Should expenses and taxation exceed revenue in a distribution period, no distribution will be payable. Share classes available Invesco Perpetual Asian Fund Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Income shares Income shares (No Trail) Z Income shares Invesco Perpetual Asian Equity Income Fund Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Income shares Income shares (No Trail) Z Income shares Invesco Perpetual Hong Kong & China Fund Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Invesco Perpetual Japan Fund Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Invesco Perpetual Pacific Fund Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Income shares Income shares (No Trail) Z Income shares The sub funds are valued at 12 noon on each dealing day. Prices can be found in the Financial Times and on our website ( 02 Far Eastern Investment Series

4 Invesco Perpetual Far Eastern Investment Series Report of the Authorised Corporate Director (ACD) Risk Profile Shareholders should be aware of the risks inherent in investing in securities and other financial instruments. Financial markets can be vulnerable to unpredictable price movements and are affected by a number of factors, both political and economic. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Over time, inflation may erode the value of investments. The sub funds' performance may be adversely affected by variations in the relative strength of world currencies or if Sterling strengthens against those currencies. The sub funds may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing or generate additional capital or income, although this may not be achieved. The use of such complex instruments may result in greater fluctuations of the value of the sub funds. The managers, however, will ensure that the use of derivatives within the sub funds does not materially alter the overall risk profile of the sub funds. As one of the key objectives of the Invesco Perpetual Asian Equity Income Fund is to provide income, the annual management charge is taken from capital rather than income. This can erode capital and reduce the potential for capital growth. As the Invesco Perpetual Asian Fund, Invesco Perpetual Asian Equity Income Fund, Invesco Perpetual Hong Kong & China Fund and Invesco Perpetual Pacific Fund are emerging markets funds, investors should be prepared to accept a higher degree of risk than for funds with a broader investment mandate as there is potential for a decrease in market liquidity, which may mean that it is not easy to buy or sell securities, as well as operational difficulties. As the Invesco Perpetual Japan Fund has a concentrated number of holdings, investors should be prepared to accept higher risk. The main risks from the Company s holding of financial instruments are set out in note 14 of the Notes to the Company s financial statements on pages 12 to 14. Fund Ratings Invesco Perpetual Asian Fund S&P Capital IQ grading 1 Morningstar OBSR analyst rating 2 Invesco Perpetual Asian Equity Income Fund S&P Capital IQ grading 1 Invesco Perpetual Japan Fund S&P Capital IQ grading 1 Morningstar OBSR analyst rating 2 Invesco Perpetual Pacific Fund S&P Capital IQ grading 1 Gold Bronze Silver Gold Bronze Gold 1 As at 30 November An S&P Capital IQ fund grading represents an opinion only and should not be relied on when making an investment decision. Past performance is not indicative of future results. Currency exchange rates may affect the value of investments. Copyright 2013 by McGraw-Hill International (UK) Limited (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. 2 Morningstar OBSR analyst rating as at 30 November Liability The shareholders of the Company have no liability for the debts of the Company. The Company is structured by having segregated liability between its sub funds. As a consequence the assets of one sub fund will not be available to meet the liabilities of another sub fund within the Company, although it is not yet known whether a foreign court would apply segregated liability if a dispute arose under a foreign law contract made with the Manager or on behalf of the Company. ISA Eligibility All the Company s sub funds qualify for stocks and shares ISA investment. None of the sub funds qualify for cash ISA investment. Certification of the Annual Report by the ACD In accordance with the requirements of the Financial Services (Open-Ended Investment Companies) Regulations 2001, We hereby certify these financial statements on behalf of the Directors of Invesco Fund Managers Limited. John Rowland Director 20 January 2014 Graeme Proudfoot Director 20 January Far Eastern Investment Series

5 Invesco Perpetual Far Eastern Investment Series Report of the Authorised Corporate Director (ACD) KIID Risk and Reward Profiles Invesco Perpetual introduced Key Investor Information Documents (KIIDs) for all its funds and share classes on 20 February 2012 which include Risk and Reward numerical indicators. Risk and Reward Numerical Indicator Published in the KIID for the year to to Invesco Perpetual Asian Fund Accumulation shares 6 6 Accumulation shares (No Trail) 6 6 Z Accumulation shares Income shares 6 6 Income shares (No Trail) 6 6 Z Income shares Invesco Perpetual Asian Equity Income Fund Accumulation shares 6 6 Accumulation shares (No Trail) 6 6 Z Accumulation shares Income shares 6 6 Income shares (No Trail) 6 6 Z Income shares Invesco Perpetual Hong Kong & China Fund Accumulation shares 7 6 Accumulation shares (No Trail) 7 6 Z Accumulation shares Invesco Perpetual Japan Fund Accumulation shares 6 6 Accumulation shares (No Trail) 6 6 Z Accumulation shares Invesco Perpetual Pacific Fund Accumulation shares 6 6 Accumulation shares (No Trail) 6 6 Z Accumulation shares Income shares 6 6 Income shares (No Trail) 6 6 Z Income shares Share class launched 12 November 2012 For more information on our funds risk and reward profiles, please refer to the most up to date relevant fund and share class specific Key Investor Information Documents (KIIDs), which are available at or by contacting us. 04 Far Eastern Investment Series

6 Invesco Perpetual Far Eastern Investment Series Company s financial statements Aggregated Statement of Total Return for the year 1 December 2012 to 30 November 2013 to to Notes Income Net capital gains 2 249, ,551 Revenue 3 31,108 30,108 Expenses 4 (21,706) (20,019) Finance costs: Interest 6 (3) (4) Net revenue before taxation 9,399 10,085 Taxation 5 (1,885) (1,776) Net revenue after taxation 7,514 8,309 Total return before distributions 256, ,860 Finance costs: Distributions 6 (8,005) (8,523) Change in net assets attributable to shareholders from investment activities 248, ,337 Aggregated Statement of Change in Net Assets Attributable to Shareholders for the year 1 December 2012 to 30 November 2013 to to Opening net assets attributable to shareholders 1,151,881 1,235,843 Amounts received on issue of shares 231, ,611 Amounts paid on cancellation of shares (263,791) (303,381) In-specie transfer (21,502) (53,812) (200,770) Dilution adjustment 630 1,010 Stamp Duty Reserve Tax (14) (9) Change in net assets attributable to shareholders from investment activities 248, ,337 Retained distribution on accumulation shares 7,354 7,470 Closing net assets attributable to shareholders 1,354,967 1,151, Far Eastern Investment Series

7 Invesco Perpetual Far Eastern Investment Series Company s financial statements Aggregated Balance Sheet as at 30 November 2013 Notes Assets Investment assets 1,342,658 1,118,545 Debtors 7 8,357 19,064 Cash and bank balances 8 15,075 27,311 Total other assets 23,432 46,375 Total assets 1,366,090 1,164,920 Liabilities Investment liabilities Creditors 9 10,340 10,113 Bank overdrafts 37 2,194 Distribution payable on income shares Total other liabilities 11,123 13,039 Total liabilities 11,123 13,039 Net assets attributable to shareholders 1,354,967 1,151, Far Eastern Investment Series

8 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 1 Accounting policies a) Basis of accounting The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the Statement of Recommended Practice for Financial Statements of Authorised Funds issued by the IMA in October 2010 (the SORP ). The financial statements have been prepared on the going concern basis. b) Recognition of revenue i) Dividends on quoted ordinary shares, collective investment schemes and preference shares are recognised when the securities are quoted ex-dividend. Where such securities are not quoted, dividends are recognised when they are declared. ii) iii) iv) Nominal interest on bank balances and deposits is recognised on an accruals basis. Revenue arising on debt securities is accreted or amortised over the life of such securities and recognised at a consistent rate over the life of the instrument (effective yield accounting). Future cash flow on all debt securities are considered when calculating revenue on an effective yield basis and where purchase costs are considered to reflect incurred credit losses, such losses are taken into account so that interest is recognised at a reasonably expected commercial rate. Accrued interest purchased and sold on interest-bearing securities is excluded from the capital cost of these securities and dealt with as part of the revenue of the Company. All revenue is recognised at a gross amount that includes any withholding taxes but excludes any other taxes, such as attributable tax credits. c) Stock dividends Ordinary stock dividends are recognised wholly as revenue and are based on the market value of the shares on the dates they are quoted ex-dividend. Where an enhancement is offered, the amount by which the market value of the shares on the date they are quoted ex-dividend exceeds the cash dividend is taken to capital. The ordinary element of stock dividends is treated as revenue and forms part of the Company s distribution. d) Special dividends and share buy-backs The underlying circumstances behind both special dividends and the proceeds from share buybacks are reviewed on a case by case basis in determining whether the amount is capital or revenue in nature. Amounts recognised as revenue will form part of the Company s distribution. Any tax treatment thereon will follow the accounting treatment of the principal amount. e) Underwriting commission Underwriting commission is wholly recognised as revenue when the issue takes place, except where the Company is required to take up all or some of the shares underwritten, in which case an appropriate proportion of the commission received is deducted from the cost of those shares. f) Expenses All expenses, except for those relating to the purchase and sale of investments and Stamp Duty Reserve Tax, are recognised on an accrual basis and charged initially against revenue. g) Revenue allocation to share classes Revenue is allocated each day pro rata to the capital value of assets attributable to each class and taxation is computed by reference to the net revenue after expenses and tax attributable to each class. h) Distribution The Company will distribute all revenue disclosed in the annual financial statements (less expenses and taxation). Should expenses and taxation exceed revenue, there will be no distribution and the shortfall will be met from capital. All sub fund accumulations and distributions are paid as dividend distributions. In calculating the amount to be distributed, Invesco Perpetual Asian Equity Income Fund allocates the ACD s annual management charge to capital, thereby increasing the amount available for distribution. Distributions which have remained unclaimed by shareholders for more than six years are credited to the capital property of the sub fund. 07 Far Eastern Investment Series

9 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 1 Accounting policies continued i) Basis of valuation of investments All investments have been valued on the last business day of the period at bid market value net of any accrued revenue, at 4.30pm. Where there is no reputable price source for an investment, the ACD will assess any information available from internal and external sources in order to arrive at an estimated fair value. Those particular investments are valued with reference to the International Private Equity and Venture Capital ( IPEVC ) Valuation guidelines. The fair value is established by using measures of value such as the price of recent transactions, earnings multiple and net assets. The ACD of the Company also makes judgements and estimates based on their knowledge of recent investment performance, historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions used are under continuous review by the ACD with particular attention paid to the carrying value of the investments. This approach is consistent with IPEVC valuation guidelines. j) Exchange rates Assets and liabilities in foreign currencies are translated into Sterling at the exchange rates ruling at 4.30pm on the last business day of the period. Revenue items denominated in foreign currencies are translated into Sterling at the exchange rates ruling at the times of the transactions. k) Taxation and deferred taxation Provision is made for corporation tax at the current rate on the excess of taxable revenue over allowable expenses. Provision is made on all material timing differences arising from the different treatment of items for accounting and tax purposes. A deferred tax asset is recognised only to the extent that there will be taxable profits in the future against which the asset can be offset. l) Efficient portfolio management Where appropriate, certain permitted transactions such as derivatives or forward currency transactions are used for efficient portfolio management. Where such transactions are used to protect or enhance revenue, the revenue and expenses derived therefrom are included in Revenue or Expenses in the Statement of Total Return. Where such transactions are used to protect or enhance capital, the gains and losses derived therefrom are included in Net capital gains/losses in the Statement of Total Return. Any positions on such transactions open at the period end are reflected in the Balance Sheet at their marked to market value. m) Dilution adjustment The ACD may apply a dilution adjustment on the issue and redemption of such shares if, in its opinion, the existing shareholders (for sales) or remaining shareholders (for redemptions) might otherwise be adversely affected, and if applying a dilution adjustment, so far as practicable, it is fair to all shareholders and potential shareholders. In particular, the dilution adjustment may be applied in the following circumstances for all sub funds in the Invesco Perpetual Far Eastern Investment Series: where over a dealing period a sub fund has experienced a large level of net issues or redemptions relative to its size. For these purposes a large level of net dealing is defined as 5% or more of the net asset value of the sub fund in question (as calculated at the last valuation point); or where the ACD considers it necessary to protect the interests of the shareholders of that Company. Please refer to Appendix 1 of the Prospectus which shows the size of typical dilution adjustments by sub fund and an indication of the frequency of application of such adjustments. n) Stamp Duty Reserve Tax (SDRT) The sub funds will normally bear the cost of SDRT as it is not the ACD s intention to charge individual buyers or sellers of shares for this on normal transactions. However, the ACD reserves the right to charge a SDRT provision of up to 0.5% of its value, on a deal under certain circumstances. These exceptional circumstances are set out in the Prospectus. 08 Far Eastern Investment Series

10 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 2 Net capital gains to to Non-derivative securities 250, ,054 Foreign currency (losses)/gains (683) 3,593 Transaction expenses (99) (96) Net capital gains 249, ,551 3 Revenue to to UK franked dividends 1, Non-taxable overseas dividends 27,891 27,825 Taxable overseas dividends 1,132 1,247 Stock dividends Bank interest ,108 30,108 4 Expenses to to Payable to the ACD, associates of the ACD and agents of either of them: ACD's annual management charge 19,218 17,767 Registration fees 1,782 Accounts printing and postage ,258 19,587 Payable to the Depositary, associates of the Depositary and agents of either of them: Depositary s fees Other expenses: Audit fee* Dividend collection charges FT listing fees Professional fees 18 7 Registration fees 1,956 Safe custody fees , Total expenses 21,706 20,019 *Audit fees in the current and prior years are disclosed inclusive of VAT, to the extent that it is not recoverable. 09 Far Eastern Investment Series

11 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 5 Taxation to to a) Analysis of charge for the year Overseas tax 1,885 1,776 Current and total tax charge 1,885 1,776 b) Factors affecting the tax charge for the year The tax assessed for the year is higher ( lower) than the standard rate of corporation tax in the UK for an authorised investment company with variable capital. The differences are explained below: to to Net revenue before taxation 9,399 10,085 Corporation tax at 20% ( %) 1,880 2,017 Effects of: Overseas tax 1,885 1,776 Relief for overseas tax treated as an expense (8) (6) Revenue not subject to tax (5,992) (5,768) Movement in excess expenses 4,120 3,757 Current tax charge 1,885 1,776 Authorised investment companies with variable capital are exempt from tax on capital gains. Therefore any capital return is not included in the above reconciliation. 6 Finance costs to to Distributions and interest Accumulations and distributions paid 31 July Accumulations and distributions payable 31 January ,968 8,092 Amounts deducted on cancellation of shares Amounts received on issue of shares (1,061) (410) 8,005 8,523 Interest 3 4 Total finance costs 8,008 8,527 The distributable amount has been calculated as follows: Net revenue after taxation 7,514 8,309 ACD s annual management charge taken to capital Tax relief on ACD s annual management charge taken to capital (7) (6) Equalisation on conversions 231 8,005 8,523 7 Debtors Amounts receivable for issue of shares 2,113 6,120 Sales awaiting settlement 482 5,879 Foreign currency contracts awaiting settlement 2,810 4,006 Accrued revenue 2,628 2,851 Prepaid expenses VAT recoverable ,357 19, Far Eastern Investment Series

12 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 8 Cash and bank balances Cash and bank balances 15,075 27,311 9 Creditors Amounts payable for cancellation of shares 1,523 1,977 Purchases awaiting settlement 4,123 2,511 Foreign currency contracts awaiting settlement 2,826 3,990 Accrued expenses 1,868 1,635 10,340 10, Commitments and contingent liabilities Potential calls on partly paid shares, if exercised 2, Transactions and balances with related parties Invesco Fund Managers Limited (and its associates), as ACD, is a related party and acts as principal in respect of all transactions in the shares of the Company. The aggregate monies received through the issue and paid on cancellation of shares are disclosed in the Aggregated Statement of Change in Net Assets Attributable to Shareholders on page 05. Amounts payable to Invesco Fund Managers Limited in respect of administration services are disclosed in note 4. Amounts due at the end of the accounting year for administration services 1,577,000 (2012-1,378,000) are disclosed in note 9 within accrued expenses. Invesco Fund Managers Limited and its associates (including other authorised investment companies managed by Invesco Fund Managers Limited) held the following shareholdings in the sub funds: Held at Change in Held at year Asian Fund accumulation shares 16,122,603 (909,988) 17,032,591 Asian Fund Z accumulation shares 5,000 5,000 Asian Fund income shares 6,795,425 (1,497,330) 8,292,755 Asian Fund income shares (No Trail) 1,000 1,000 Asian Fund Z income shares 5,000 5,000 Asian Equity Income Fund accumulation shares 83,275 (33,274) 116,549 Asian Equity Income Fund accumulation shares (No Trail) 25,000 25,000 Asian Equity Income Fund Z accumulation shares 5,000 5,000 Asian Equity Income Fund income shares 10,948,821 (523,294) 11,472,115 Asian Equity Income Fund income shares (No Trail) 25,000 25,000 Asian Equity Income Fund Z income shares 5,000 5,000 Hong Kong & China Fund Z accumulation shares 5,000 4,000 1,000 Japan Fund accumulation shares 16,350,352 (406,501) 16,756,853 Japan Fund Z accumulation shares 5,000 5,000 Pacific Fund accumulation shares 30,164 (346) 30,510 Pacific Fund Z accumulation shares 5,000 5,000 Pacific Fund Z income shares 5,000 5, Dealing commission arrangements The level of securities trading on the sub funds is determined by fund management decisions. The ACD s buying and selling values of securities trades meet current best execution regulations. Commissions are paid to brokers for these trades. Under current regulations, the ACD is allowed to ask a number of brokers, with whom it has commission sharing arrangements, to use some of the commissions paid to brokers to pay for permitted execution and research services used by the ACD in the managing of its funds. If trading does not result in sufficient commissions to pay for these services, then the ACD pays for them. 11 Far Eastern Investment Series

13 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 13 Shareholders funds The ACD s entry charge and annual management charge are as follows: Annual Entry Management Charge Charge % % Asian Fund Trail classes No Trail classes Z classes Asian Equity Income Fund Trail classes No Trail classes Z classes Hong Kong & China Fund Trail class No Trail class Z class Japan Fund Trail class No Trail class Z class Pacific Fund Trail classes No Trail classes Z classes The net assets attributable to each share class, the net assets value per share and the number of shares in issue of each share class are shown in the comparative table of each sub fund. These can be found on: Asian Fund page 17 Asian Equity Income Fund page 35 Hong Kong & China Fund page 52 Japan Fund page 66 Pacific Fund page 81 Each share class has the same rights on a winding up of the Company. 14 Derivatives and other financial instruments In pursuing its investment objectives, the Company holds a number of financial instruments that may comprise securities and other investments, cash balances and debtors and creditors that arise directly from its operations. There are certain investment risks which apply in relation to the use of derivatives. Derivatives may be used to provide protection for an investment or as a cheaper or more liquid alternative for an investment. However, should the Manager s expectations in employing such techniques and instruments be incorrect, a sub fund may suffer a substantial loss, having an adverse effect on the net asset value of shares. Such instruments may cause greater fluctuations of the net asset value of the sub fund concerned. However, transactions in derivatives are used in the sub funds solely for the purposes of efficient portfolio management. Derivatives exposure is managed within the investment limits set by the Manager to ensure that the use of derivatives does not materially alter the overall risk profile of the fund. Political and economic events in the major economies of the world, such as the United States, Japan and the Far Eastern Union, will influence stock and securities markets worldwide. The main risks from the Company s holding of financial instruments are set out below together with the ACD s policy for managing these risks. Market price risk The Company is exposed to the risks normally associated with investment in stocks and shares such as general economic conditions, market events or the performance of underlying stocks. As such the prices of and the income generated by the Company s securities may go down as well as up and an investor may not get back the full amount invested. Adhering to investment guidelines and avoiding excessive exposure to one particular issuer can mitigate market risk. Currency exchange risk The Company may invest in securities denominated in currencies other than Pound Sterling. As a result, changes in exchange rates may adversely affect the value of any investment, which will have a related effect on the price of shares. Currency exchange risk may be mitigated by hedging the exposure through the use of forward currency contracts. 12 Far Eastern Investment Series

14 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 14 Derivatives and other financial instruments continued Liquidity risk The Company may be affected by a decrease in market liquidity for the securities in which it invests, which may mean that the Company may not be able to sell some securities at a fair price within a timely manner. In order to mitigate this risk, a substantial proportion of the Company s assets consist of readily realisable assets. Counterparty risk The Company may enter into derivative transactions or place cash in bank deposits with counterparties who may not be able to fulfil their responsibility by completing their side of the transactions. As a result, the Company could experience delays in liquidating positions and significant losses, including declines in the value of the investment during the period in which the Company seeks to enforce its rights or inability to realise any gain on investments. In order to mitigate this risk, the Company conducts trades through reputable counterparties. Investing in Emerging Markets Sub funds that invest mainly in established markets, may also invest in emerging and developing markets, where difficulties in dealing, settlement and custody problems could arise. Investments in emerging markets may be more volatile than investments in more developed markets. Some of these markets may have relatively unstable governments, economies based on only a few industries and securities markets that trade only a limited number of securities. Many emerging markets do not have well developed regulatory systems and disclosure standards may be less stringent than those of developed markets. The risks of expropriation, nationalisation and social, political and economic instability are greater in emerging markets than in more developed markets. The following is a brief summary of some of the more common risks associated with emerging markets investment: Lack of Liquidity The acquisition and disposal of securities may be more expensive, time consuming and generally more difficult than in more developed markets. Many emerging markets are small, have low trading volumes, low liquidity and significant price volatility. Settlement and Custody Risks Settlement and custody systems in emerging markets are not as well developed as those in developed markets. Standards may not be as high and supervisory and regulatory authorities not as sophisticated. As a result there may be a risk that settlement could be delayed and that cash or securities could be disadvantaged. Investment and Remittance Restrictions In some cases, emerging markets may restrict the access of foreign investors to securities. As a result, certain equity securities may not always be available to a sub fund because the maximum permitted number of or investment by foreign shareholders has been reached. In addition, the outward remittance by foreign investors of their share of net profits, capital and dividends may be restricted or require governmental approval and there can be no guarantee that additional restrictions will not be imposed. Accounting Accounting, auditing and financial reporting standards, practices and disclosure requirements applicable to companies in emerging markets differ from those applicable in more developed markets in respect of the nature, quality and timeliness of the information disclosed to investors and, accordingly, investment possibilities may be difficult to properly assess. Taking charges from capital Where the investment objective of a sub fund is to treat the generation of income as a higher priority than capital growth, or the generation of income and capital growth have equal priority, all or part of the Manager s fee as well as other fees and expenses of the Company may be charged against capital instead of income. The Company will charge such fees and expenses to capital in order to manage the level of income paid and/or available to shareholders. This may result in capital erosion or may constrain capital growth. 13 Far Eastern Investment Series

15 Invesco Perpetual Far Eastern Investment Series Notes to the Company s financial statements 14 Derivatives and other financial instruments continued Monitoring of Global Exposure The Manager uses a risk management process (including a risk management policy) to monitor and measure at any time the risks related to the positions entered into on behalf of the sub funds, including the risks attached to financial derivative instruments. The Manager uses a relative VaR (Value-at-Risk) approach to measure the global exposure of each sub fund. VaR is a statistical measurement that intends to measure the maximum potential loss of a portfolio, at a given confidence level (probability), over a specified time period under normal market conditions. In accordance with ESMA s Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS (ref: ), for each of the sub funds, the VaR of the portfolio will not be greater than twice the VaR of its respective reference benchmarks (Relative VaR). However there is no guarantee that the VaR limits set by the Manager will be adhered to in all instances. The Manager calculates the global exposure of each sub fund on a daily basis. Investment objective Each sub fund has been managed throughout the period in accordance with its investment objective. These can be found on: Asian Fund page 15 Asian Equity Income Fund page 33 Hong Kong & China Fund page 50 Japan Fund page 64 Pacific Fund page 79 The sub funds may also hold cash and near cash assets where reasonably necessary to fund cancellations of shares, for the efficient portfolio management of the sub fund or for purposes ancillary to the objectives of the sub fund. They may also borrow, providing such borrowing is on a temporary basis and does not exceed the limits laid down in the regulations. The exercise of these powers and the management of risk during the period is disclosed above. The use of financial instruments by a UCITS scheme is set out in the COLL. Fair value The market value of investments is taken to equal fair value. There is no material difference between the value of the financial assets and liabilities as shown in the Balance Sheet and their fair value. Base currency The base currency of the Company is Sterling and is taken to be the functional currency of the Company. Bank balances and overdrafts Bank balances and overdrafts are held by the Custodian, and are subject to the Custodian s variable credit and debit interest rates respectively. Borrowings The borrowing facilities available to the Company as at 30 November 2013 comprise a bank overdraft facility of up to 10% of the value of the Company. 15 Post balance sheet events There are no post balance sheet events that require disclosure or adjustments to the financial statements. 14 Far Eastern Investment Series

16 Asian Fund Investment report for the year The Investment Objective of the Asian Fund The fund aims to achieve capital growth in Asia and Australasia excluding Japan. The fund intends to invest primarily in shares of companies in Asia and Australasia (excluding Japan), although it may include other Asian and Australasian related investments. In pursuing this objective, the fund managers may include investments that they consider appropriate which include transferable securities, money market instruments, warrants, collective investment schemes, deposits and other permitted investments and transactions as detailed in Appendix 2 of the most recent Prospectus. Share Prices p p Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Income shares (xd) Income shares (No Trail) (xd) Z Income shares (xd) Performance Percentage growth to 30 November 2013 Since Since Since Since Since % % % % % Asian Fund (accumulation shares) MSCI All Countries Asia Pacific (ex Japan) Index IMA Asia Pacific excluding Japan Sector Fund Ranking 29/63 13/63 27/58 15/53 8/34 Standardised rolling 12 month performance Percentage growth % % % % % Asian Fund (accumulation shares) This standardised past performance information is updated on a quarterly basis. Should you require up to date past performance information, this is available on our website or by contacting us. Fund and sector average performance data source: Lipper, mid-to-mid (excluding the entry charge), in Sterling, with net income reinvested. MSCI All Countries Asia Pacific (ex Japan) Index data source: Thomson Reuters Datastream, total return, in Sterling. The value of investments and any income from them will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Past performance is not a guide to future returns. Current tax levels and reliefs may change. Depending on individual circumstances, this may affect investment returns. 15 Far Eastern Investment Series

17 Asian Fund Investment report for the year Strategy, review and outlook The fund returned 8.1% over the twelve months to the end of November 2013, compared to the benchmark MSCI All Countries Asia Pacific (ex Japan) Index, which returned 5.9%. The fund was in the first quartile of its peer group, the IMA Asia Pacific (ex Japan) Sector, which returned an average of 5.7%. Fund and sector average performance data source: Lipper, mid-to-mid (excluding the entry charge), in Sterling, with net income reinvested. MSCI All Countries Asia Pacific (ex Japan) Index data source: Thomson Reuters Datastream, total return, in Sterling. Past performance is not a guide to future returns. Asia Pacific (ex Japan) equity markets registered positive returns over what has proven to be an eventful twelve months. Initial gains were reversed due to concerns over the slowdown in China s economy and uncertainty surrounding US monetary policy. However, markets have since recovered thanks to signs of stabilisation in China s economy and the postponing of QE tapering by the US Federal Reserve. North Asian economies have been less vulnerable to changing expectations of the global liquidity environment, while the gradual improvement in the outlook for global trade has been supportive for exporters generally. Conversely, South Asian markets have proved to be more volatile, particularly those with large current account deficits, such as Indonesia, where inflation has remained elevated and the central bank has raised interest rates to 7.50% from 5.75% over the period. Fund performance benefited from strong stock selection across a number of different sectors, particularly IT, consumer discretionary and industrials. The biggest single contributor to overall performance was our holding in Hyundai Motor preference shares as their discount to the ordinary share class narrowed, while holdings in Chinese internet companies added notable value. On the other hand, our exposure in South Asian banks and real estate companies detracted due to lingering concerns over QE-tapering and specific macroeconomic concerns. Finally, stock selection in Australia disappointed as our limited exposure to its banks counted against us, while our holding in Newcrest Mining detracted notably as the gold price weakened. Our main overweight position relative to the benchmark index continues to be in Hong Kong & China, where we favour consumer-related areas of the market that we believe are undervalued. We remain underweight in Australia, particularly its banks, preferring to hold banks which we believe have the potential to grow their loan books profitably, such as those in India where credit penetration is still growing. Our exposure in the technology sector remains significant and includes industry leaders with significant competitive advantages as well as Chinese internet companies which continue to generate significant free cash flow. Over the period we have moved from having a small underweight position in India to an overweight, reflecting our increased confidence in the mediumterm outlook, with a more progressive reform agenda likely to be the focus of next year s general elections. We have also added exposure in the energy and utility sectors, where valuations appeared attractive to us given the potential for gradually improving earnings growth. In turn, we have continued to take profits from recent outperformers where share prices now reflect a more optimistic view of future growth. Asian economic growth has slowed, but we expect it to be sufficiently high in 2014 to offer attractive investment opportunities. China s ambitious new reform agenda has also given us grounds for optimism. While much depends on successful implementation, there is real potential for meaningful change, particularly in allowing market forces to take a more decisive role in the allocation of resources. The region still faces a number of challenges that require structural reform, in our opinion, but markets have to a large extent discounted this given current low valuation levels relative to history and developed markets. Consensus earnings growth forecasts for Asia Pacific (ex Japan) companies are currently around 12.0% for 2014, bringing valuation levels for the region to 11.7 times 2014 expected earnings. In our opinion, these valuation levels remain supportive. Stuart Parks, Fund Manager Where Stuart Parks has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco Perpetual investment professionals. The fund s ten largest investments were % Samsung Electronics 7.62 Hyundai Motor 3.38 Hutchison Whampoa 3.32 Taiwan Semiconductor Manufacturing 3.15 NetEase 3.02 BHP Billiton 2.84 Baidu 2.39 ICICI Bank 2.38 Industrial & Commercial Bank of China H 2.31 Keppel Far Eastern Investment Series

18 Asian Fund Investment report for the year Comparative table Total net assets of fund Total net assets 548, , , ,310 Net asset value Accumulation shares Assets attributable ( '000) 483, , , ,135 Shares in issue 117,380, ,156, ,268, ,112,966 Net asset value (pence per share) Accumulation shares (No Trail) Assets attributable ( '000) 2,851 4,191 2,348 2,863 Shares in issue 1,668,625 2,670,549 1,716,672 1,889,506 Net asset value (pence per share) Z Accumulation shares Assets attributable ( '000) 10, Shares in issue 4,844,932 5,000 Net asset value (pence per share) Income shares Assets attributable ( '000) 44,514 51,517 48,337 60,272 Shares in issue 11,942,312 14,867,015 15,818,461 17,534,977 Net asset value (pence per share) Income shares (No Trail) Assets attributable ( '000) Shares in issue 526, ,515 27,993 27,993 Net asset value (pence per share) Z Income shares Assets attributable ( '000) 6, Shares in issue 2,802,324 5,000 Net asset value (pence per share) Far Eastern Investment Series

19 Asian Fund Investment report for the year Price and revenue record by share class Highest Lowest Net share share revenue price price per share Calendar year p p p Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Income shares Income shares (No Trail) Z Income shares to 30 November 2 from 12 November Z accumulation shares and Z income shares were issued at 200p on 12 November Far Eastern Investment Series

20 Asian Fund Investment report for the year Ongoing charges figure (OCF) to to Ongoing charges as % of average net assets Accumulation shares and income shares 1.70% 1.70% Accumulation shares (No Trail) and income shares (No Trail) 1.20% 1.20% Z accumulation shares and Z income shares 0.95% 0.95% Total expenses per note 4 ( 000) 9,613 9,400 Transaction expenses per note 2 ( 000) Total expenses ( 000) 9,649 9,434 Average net assets for the year ( 000) 570, ,138 The OCF represents the annual operating expenses of the fund expressed as a percentage of average net assets for the year it does not include entry charges. The OCF includes the annual management charge and also the following charges which are deducted directly from the fund: Registration Fee, Depositary Fee, Custody Fee, Audit Fee, FCA Fee, Price Publication Fee, Report production and transaction expenses, less: VAT recoverable where applicable. 19 Far Eastern Investment Series

21 Asian Fund Investment report for the year Portfolio Statement Holding or Percentage as at 30 November 2013 nominal Market of total value of value net assets Investment positions 000 % Australia 8.87% ( %) Amcor 1,216,404 7, Australia & New Zealand Banking 543,585 9, Dart Energy 5,851, Goodman 1,895,962 5, Orica 194,437 2, Origin Energy 765,455 5, QBE Insurance 483,199 4, Treasury Wine Estates 789,394 2, Westpac Banking 616,991 11, China 13.66% ( %) Baidu ADR 129,132 13, China Shenhua Energy H 2,478,500 5, E-House China ADR 275,644 1, ENN Energy 1,132,000 4, Industrial & Commercial Bank of China H 28,923,840 12, Mindray Medical International ADR 413,294 10, NetEase ADR 378,068 16, PetroChina H 7,514,000 5, Wumart Stores H 2,321,000 2, Zhejiang Expressway H 5,436,000 3, Hong Kong 23.15% ( %) AIA 3,884,000 12, Cathay Pacific Airways 4,928,000 6, Cheung Kong 662,574 6, China Mobile 1,702,500 11, China Resources Enterprise 1,720,000 3, CNOOC 8,870,000 11, Galaxy Entertainment 926,000 4, Hengan International 477,500 3, HKR International 18,996,000 5, HSBC 1,470,242 10, Hutchison Whampoa 2,346,000 18, Jardine Matheson (Singapore quote) 259,513 7, Jardine Strategic (Singapore quote) 349,888 6, Noble 7,269,000 3, Samsonite 2,939,400 5, Tencent 231,500 8, Wharf 389,287 1, India 8.97% ( %) Adani Port and Special Economic Zone 2,493,602 3, Godrej Consumer Products 691,268 6, Housing Development Finance 500,543 4, ICICI Bank 210,825 2, ICICI Bank ADR 496,702 10, Infosys 133,931 4, NTPC 5,817,256 8, UPL 5,829,076 9, Indonesia 1.05% ( %) Bank Negara Indonesia 21,659,500 4, Surya Citra Media 8,532,000 1, New Zealand 0.62% ( Nil) Meridian Energy (partly paid) 6,967,009 3, Philippines 2.73% ( %) Filinvest Land 356,949,000 6, LT 17,971,000 3, Metro Pacific Investments 70,207,600 4, Singapore 4.89% ( %) Keppel 2,299,000 12, Parkway Life Real Estate Investment Trust 8,325,000 9, United Overseas Bank 506,988 5, Far Eastern Investment Series

22 Asian Fund Investment report for the year Portfolio Statement continued Holding or Percentage as at 30 November 2013 nominal Market of total value of value net assets Investment positions 000 % South Korea 17.90% ( %) DGB Financial 756,010 7, Hyundai Mobis 69,544 12, Hyundai Motor pref. 253,788 18, Korea Electric Power 291,020 5, POSCO 23,199 4, Samsung Electronics 40,610 34, Samsung Electronics GDR 15,794 6, Shinhan Financial 327,450 8, Taiwan 11.55% ( %) Airtac International 1,452,820 7, China Life Insurance 15,894,185 9, Delta Electronic 2,090,000 6, E.Sun Financial 19,877,659 8, Far Eastern New Century 13,818,180 9, Hon Hai Precision Industry 3,109,505 4, Taiwan Semiconductor Manufacturing 8,008,613 17, Thailand 2.57% ( %) Advanced Info Service 501,200 2, Bangkok Bank 2,094,000 7, CPN Retail Growth Leasehold Rights 19/12/2013 4,217, CPN Retail Growth Property Fund (Alien market) 12,458,200 3, United Kingdom 3.72% ( %) BHP Billiton (London listing) 837,049 15, M.P. Evans 1,043,780 4, Portfolio of investments ( %) 546, Net other assets ( %) 1, Net assets 548, Holdings are ordinary shares unless otherwise stated. 21 Far Eastern Investment Series