First State Investments ICVC

Transcription

1 First State Investments ICVC Annual Report 31 July 2015

2 Contents Page No. 1 Authorised Corporate Director's report* 1 Information about the Company* 1 Changes to the prospectus and instrument of incorporation * 3 The Investment Manager 4 Statement of the Authorised Corporate Director's responsibilities in respect of the financial statements of the Company* 4 Report of the Authorised Corporate Director* 5 Statement of Depositary's responsibilities and report of the Depositary to the shareholders of First State Investments ICVC for the year ended 31 July Independent auditor's report 8 Financial Statements 10 Notes to the Financial Statements Investment review* and financial statements for: Asia Pacific equity funds 17 First State Asia Pacific Fund 32 First State Asia Pacific Leaders Fund 49 First State Asia Pacific Sustainability Fund 64 First State Greater China Growth Fund 79 First State Indian Subcontinent Fund Emerging market bond funds 91 First State Emerging Markets Bond Fund 114 First State Emerging Markets Local Currency Bond Fund Emerging market equity funds 133 First State Global Emerging Markets Fund 148 First State Global Emerging Markets Leaders Fund 164 First State Global Emerging Markets Sustainability Fund Global equity funds 181 First State Global Agribusiness Fund 196 First State Global Resources Fund 211 First State Worldwide Equity Fund 227 First State Worldwide Leaders Fund 240 First State Worldwide Sustainability Fund Global Interest rates & Currency Funds 255 First State Global Interest Rates and Currency Fund Infrastructure funds 271 First State Global Listed Infrastructure Fund Latin America funds 288 First State Latin America Fund Multi-assets funds 302 First State Diversified Growth Fund

3 Contents Property securities funds 331 First State Asian Property Securities Fund 345 First State Global Property Securities Fund About First State Investments Corporate directory* * Collectively, these items, along with the investment reviews disclosed within the individual sub-fund reports, comprise the Authorised Corporate Director's report for the purposes of the rules contained in the Financial Services Authority s Collective Investment Schemes Sourcebook.

4 Authorised Corporate Director's report We are pleased to present the Annual Report and Financial Statements for First State Investments ICVC (the "Company"), which provides information on each of the 21 sub-funds of the Company (each a "Fund") for the year ended 31 July The report of the Company's Auditors which is unqualified is set out on page 6. In this document we provide a review of selected financial markets followed by detailed information on each of the Funds within the Company. This information includes an investment report, performance summary, top 10 holdings, country breakdowns, and financial statements of each sub- Fund. Information about the Company The Company is an open-ended investment company ("OEIC") with variable capital. The Company is structured as an umbrella company authorised as a UCITS scheme and operates under chapter 5 of the Collective Investment Schemes Sourcebook (the Sourcebook ). Different Funds may be established from time to time by First State Investments (UK) Limited, the authorised corporate director of the Company (the Authorised Corporate Director or the ACD ) with the approval of the Financial Conduct Authority (the FCA ) and the agreement of the Company s depositary, National Westminster Bank plc. Each Fund may issue different classes of share and within each class there may be different types of share. Further classes and types of share may be established from time to time by the ACD with the approval of the FCA and the agreement of the Depositary. On the introduction of any new Fund or class or type of share, a revised prospectus will be prepared setting out the relevant details of each Fund or class. Each Fund is invested as if it were individually authorised as the type of scheme known as a UCITS scheme, as specified in the Sourcebook. For investment purposes, the assets of each Fund will be treated as separate from those of every other Fund and will be invested in accordance with the investment objective and investment policy applicable to that Fund. The shareholders are not liable for the debts of the Company. A shareholder is not liable to make any further payment to the Company after paying the purchase price of Shares. Whilst the provisions of the OEIC Regulations provide for segregated liability between Funds, these provisions are subject to the scrutiny of the courts and it is not free from doubt, in the context of claims brought by local creditors in foreign courts or under foreign law contracts, that the assets of the Fund will always be ring fenced from the liabilities of other Funds of the Company. Changes to the prospectus and instrument of incorporation of First State Investments ICVC since 31 July 2014 During the year and up to the date of this report, the following changes were made to the Company which were reflected in the Prospectus and/or Instrument of Incorporation: The FCA approved an update to the Prospectus on the 3 September The main updates to the Prospectus were: o the launch of a new fund, the First State Global Interest Rates and Currency Fund the base currency of which is US Dollars; o the inclusion of Gross Share Classes, these are not eligible for United Kingdom investors. o the change of address of the Company; o confirmation that subscriptions and redemptions should be sent to the Registrar and not the ACD; o amendments to the Fees and Expenses section making it more transparent to the investor what the fees and expenses are for; o the inclusion of a new generic risk, the Fixed Income Transferable Securities risk that is applicable to all funds; o minor amendments to the Derivatives Risk that is applicable to all funds; o the inclusion of a new risk, the Additional Derivatives Risk. This is applicable to the First State Global Interest Rates and Currency Fund; o new inclusions and amendments to the various sections within Taxation ; o inclusion of a new section in Appendix I on leverage; and o amendments in Appendix III covering the First State Global Interest Rates and Currency Fund. The FCA approved an update to the Instrument of Incorporation on the 3 September The main update was the inclusion of the First State Global Interest Rates and Currency Fund. The First State Global Interest Rates and Currency Fund launched on 15 September

5 Authorised Corporate Director's report The FCA approved an update to the Prospectus on the 28 October The main updates to the Prospectus were: o the inclusion of new Class Z Shares, this class is reserved for and is only available for subscription by institutional investors or clients of the Investment Manager or of the Sub-Investment Managers; o the amendment of the Gross classes definition; o minor amendments to the Fees and Expenses section; o minor amendments to the Taxation section; and o minor amendments to Appendix III with regard to investment in collective investment schemes. The FCA approved an update to the Prospectus on the 10 December The main update to the Prospectus was a minor correction to the First State Global Interest Rates and Currency Fund. The FCA approved an update to the Prospectus on the 2 March The main update to the Prospectus was a minor amendment made to the Prospectus to reflect the sub-delegation arrangement between the Investment Manager and First State Investments (Singapore) in regards to the First State Global Interest Rates and Currency Fund. The FCA approved an update to the Prospectus and the Instrument of Incorporation on the 20 April The main updates to the Prospectus were: o clarification on the concept of Currency Hedged Share Class used by the Company, and consequent update of risk factor R ( Currency Hedged Share Classes Risk ); o update of sections Material Contracts (in General Information ) and The Investment Manager (in Management and Administration ) in order to better reflect the ACD s approach; o insertion of new language in relation to the, Protection of Client Money ; o update of the Risk Factor A13 entitled Derivatives Risk ; o update of risk factors D ( China Market Risk ) and E ( Investment in China A Shares Risk ) in relation to the implementation of the investment in China A Shares via the QFII regime for certain sub-funds of the Company; o addition of certain risk factors for certain sub-funds of the Company, omitted previously in error; o amendments to Appendix I ( Investment Objectives, Policies and Other Details of the Funds ) in order to (i) reflect the clarifications relating to the Currency Hedged Share Classes, (ii) clarify the wording on global exposure and leverage, (iii) update the performance figures, (iv) the references to global exposure and leverage in certain sub-funds appendices; o amendments to Appendix II ( Eligible Securities and Derivatives Markets ) to (i) reorder the eligible markets list alphabetically, (ii) reflect the renaming of the International Capital Market Association to Xtrakter, (iii) add the Nigerian Stock Exchange for several sub-funds (First State Global Emerging Markets Fund, First State Global Emerging Markets Leaders Fund, First State Global Emerging Markets Sustainability Fund) and (iv) add the Ghana Stock Exchange for the First State Global Emerging Markets Sustainability Fund; o amendments to Appendix III ( Investment Management and Borrowing Powers of the Company ) to allow investment in collective investment schemes to a level above 10% and minor other updates in line with COLL; o minor other updates (e.g. new definition of Second Scheme, updates of the Registrar s principal place of business, the Auditor s principal place of business, performance figures and the update of the biography of one of the ACD s directors; and o the Instrument was amended to reflect the clarification of the concept of Currency Hedged Share Class that was inserted in the The FCA approved an update to the Prospectus and the Instrument of Incorporation on the 5 May The main updates to the Prospectus were: o addition of four new sub-funds, the First State Diversified Growth Fund, the First State Asia All-Cap Fund, the First State Asia Focus o related amendments in relation to the four new sub-funds; o addition of the First State Asia All-Cap Fund and the First State Asia Focus Fund to the list of funds subject to the initial charge and switching fee and related amendments; o update of risk factor A13 entitled Derivatives Risk ; o minor amendments to the taxation wording in the section headed Risks Specific to Direct Investment in China A Shares via a QFII License ; 2

6 Authorised Corporate Director's report o update of the address of the registrar in the section headed Register of Shareholders ; o correction of a typographical error which stated the minimum initial subscription of the First State Indian Subcontinent Fund Class B GBP shares as 000k rather than the correct 500k; o Minor typographical updates for clarification; and o The Instrument was amended to reflect the addition of the new sub-funds. The FCA approved an update to the Prospectus on the 17 June The main update to the Prospectus was an amendment of the leverage in the First State Diversified Growth Fund, increasing it from 105% to 500%. We hope that you find this report informative and that it answers any questions you may have about your investment with First State Investments. If you have any additional queries in relation to your investment, or one of our Funds, please contact our Client Services team on ( if calling from outside the UK). Also, a copy of the long form Annual Report and Accounts may be obtained by calling our Client Services team or by writing to them at Client Services, First State Investments (UK) Limited, 23 St Andrew Square, Edinburgh EH2 1BB. A copy of the Prospectus is available on request. All of the sub-funds have been prepared on a going concern basis with the exception of the First State Global Interest Rates and Currency Fund which the Authorised Corporate Director intends to terminate within one year of the date of approval of the financial statements and therefore the financial statements of this Fund have been prepared on a basis other than going concern. In applying this basis of preparation, the assets and liabilities of this Fund continue to be stated at their fair values which materially equate to their residual values. No adjustments were necessary in the Fund's financial statements to reduce assets to their realisable values, to provide for liabilities arising from the termination and to reclassify fixed assets and long-term liabilities as current assets and liabilities. The Investment Manager First State Investment Management (UK) Limited, the investment manager of the Company (the Investment Manager ) has delegated the investment management of (a) the First State Global Resources Fund, the First State Asian Property Securities Fund, the First State Global Property Securities Fund, the First State Global Listed Infrastructure Fund and the First State Global Agribusiness Fund to Colonial First State Asset Management (Australia) Limited, a company registered in Australia, by agreement dated 8 September 2006 as amended (b) the First State Greater China Growth Fund to the First State Investments (Hong Kong) Limited, a company registered in Hong Kong, by agreement dated 24 October 2003 and (c) the First State Global Emerging Markets Fund, the First State Global Emerging Markets Leaders Fund, the First State Indian Subcontinent Fund, the First State Latin America Fund and the First State Worldwide Equity Fund to First State Investments (Singapore), a company registered in Singapore, by agreement dated 7 January 2013 (as amended). 3

7 Statement of the Authorised Corporate Director's responsibilities in respect of the financial statements of the Company The Open-Ended Investment Companies Regulations 2001 (SI 2001/1228, as amended) (the OEIC Regulations ) and the Sourcebook require the ACD to prepare financial statements for each annual and semi-annual accounting period which give a true and fair view of the financial position of the Company and of its net revenue and the net capital gains on the property of the Company for the year. In preparing the Financial Statements the ACD is required to: select suitable accounting policies and then apply them consistently; comply with the disclosure requirements of the Statement of Recommended Practice relating to Financial Statements of Authorised Funds issued by the Investment Association (IA) formerly know as the Investment Management Association (IMA) in October 2010 ("the IMA SORP 2010"); comply with the prospectus, the Instrument of Incorporation and applicable accounting standards; keep proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements; make judgements and estimates which are reasonable and prudent; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in operation; and keep proper accounting records and to manage the Company in accordance with the Sourcebook, the Instrument of Incorporation and the prospectus. The ACD is responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities. Report of the Authorised Corporate Director This report has been approved by the Authorised Corporate Director, First State Investments (UK) Limited, and signed on its behalf in accordance with the requirements of the OEIC Regulations and the Sourcebook. G Ferguson Director First State Investments (UK) Limited 15 October 2015 J Breyley Director First State Investments (UK) Limited 15 October

8 Statement of Depositary's responsibilities and report of the Depositary to the shareholders of First State Investments ICVC ('the Company') for the year ended 31 July 2015 The Depositary is responsible for the safekeeping of all custodial assets of the Company which is entrusted to it, for verifying ownership and maintaining a record of all other assets of the Company, and for the collection of income that arises from those assets. It is the duty of the Depositary to take reasonable care to ensure that the Company is managed in accordance with the Financial Conduct Authority's ('FCA') Collective Investments Schemes Sourcebook ('COLL') the Open-Ended Investment Companies Regulations 2001 (S1 2001/2008) ('OEIC Regulations'), the Company s Instrument of Incorporation and Prospectus, and where applicable, the FCA's Investment Funds Sourcebook (FUND'), in relation to the pricing of, and dealings in shares in the Company; the application of revenue of the Company; and the investment and borrowing powers applicable to the Company. Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through the Authorised Corporate Director: (I) (II) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Company s shares and the application of the Company s revenue in accordance with the COLL, the OEIC Regulations, the Instrument of Incorporation and Prospectus of the Company and, where applicable, has observed the investment and borrowing powers and restrictions applicable to the Company. National Westminster Bank plc Edinburgh 15 October

9 Independent Auditor's report to the Shareholders of First State Investments ICVC Report on the financial statements Our opinion In our opinion the financial statements, defined below: give a true and fair view of the financial position of the Company and each of the Funds and of the net revenue/(expenses) and the net capital gains/(losses) of the scheme property of the Company and each of the Funds for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for Authorised Funds, the Collective Investment Schemes sourcebook and the Instrument of Incorporation. This opinion is to be read in the context of what we say in the remainder of this report. Emphasis of Matter - Basis of preparation In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the basis of accounting for First State Global Interest Rates and Currency Fund, for which the Authorised Corporate Director has confirmed their intention to terminate within one year of the date of approval of the financial statements. Accordingly, the going concern basis of accounting is no longer appropriate and the financial statements for this Fund have been prepared on a basis other than going concern as described in note 1 to the financial statements. No adjustments were necessary in the Fund's financial statements to reduce assets to their realisable values, to provide for liabilities arising from the termination and to reclassify fixed assets and long-term liabilities as current assets and liabilities. What we have audited The financial statements of First State Investments ICVC (the 'Company'), which are prepared by First State Investments (UK) Limited (the Authorised Corporate Director ), comprise: the aggregated balance sheet of the Company ; the aggregated statement of total return of the Company for the year then ended; the aggregated statement of change in net assets attributable to shareholders of the Company for the year then ended; the balance sheets together with the statements of total return and statements of changes in net assets attributable to shareholders of each of the Company s Funds; the notes to the Company s financial statements and each of the Company s Funds, which include a summary of significant accounting policies and other explanatory information; and the distribution tables. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), the Statement of Recommended Practice Financial Statements of Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for Authorised Funds ), the Collective Investment Schemes sourcebook and the Instrument of Incorporation. In applying the financial reporting framework, the Authorised Corporate Director has made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company s and each of the Company s Fund's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Corporate Director; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 6

10 Independent Auditor's report to the Shareholders of First State Investments ICVC Opinions on matters prescribed by the Collective Investment Schemes sourcebook In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Corporate Director s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Corporate Director As explained more fully in the Authorised Corporate Director s Responsibilities Statement set out on page 4, the Authorised Corporate Director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Company s members as a body in accordance with paragraph of the Collective Investment Schemes sourcebook as required by paragraph 67(2) of the Open-Ended Investment Companies Regulations 2001 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. PricewaterhouseCoopers LLP Chartered Accountants & Statutory Auditors Edinburgh 15 October 2015 Notes: (a) (b) The maintenance and integrity of the Company website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 7

11 Aggregated Statement of total return for the year ended 31 July 2015 Notes '000 '000 '000 '000 Income: Net capital gains 2 710, ,138 Revenue 3 354, ,246 Expenses 4 (183,576) (176,312) Finance costs: interest 6 (41) (39) Net revenue before taxation 171, ,895 Taxation 5 (19,744) (28,002) Net revenue after taxation 151, ,893 Total return before distributions and equalisation 862, ,031 Finance costs: s and equalisation 6 (175,145) (135,219) Change in net assets attributable to shareholders from investment activities 687, ,812 Aggregated Statement of change in net assets attributable to shareholders for the year ended 31 July 2015 Opening net assets attributable to shareholders Assets transferred from OEICs* Amounts receivable on issue of shares Less: Amounts payable on cancellation of shares Dilution adjustment Stamp duty reserve tax Change in net assets attributable to shareholders from investment activities Retained distribution on accumulation shares Unclaimed distributions Movement in currency adjustment on consolidation Closing net assets attributable to shareholders *Relating to the transfer of assets from an external party. 31 July July 2014 '000 '000 '000 '000 15,144,878 16,121,770-16,858 2,249,128 1,565,661 (2,492,459) (3,129,205) (243,331) (1,563,544) 2,028 1,945 - (558) 687, , , , ,089 (194) 15,745,238 15,144,878 Notes to the Aggregated financial statements are on pages 10 to 16. 8

12 Aggregated Balance sheet Notes '000 '000 Assets Portfolio of investments 14,613,630 14,242,225 Debtors 8 159, ,602 Cash and bank balances 9 1,135, ,006 Total other assets 1,294,541 1,030,608 Total assets 15,908,171 15,272,833 Liabilities Derivative liabilities (919) (687) Creditors Bank overdrafts payable on income shares Total other liabilities Total liabilities Net assets attributable to shareholders 10 (147,770) (115,866) (301) (875) (13,943) (10,527) (162,014) (127,268) (162,933) (127,955) 15,745,238 15,144,878 Notes to the Aggregated financial statements are on pages 10 to 16. 9

13 Notes to the Aggregated Financial Statements 1. Accounting and distribution policies (a) Basis of accounting The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments. The financial statements have adopted the principles of the Statement of Recommended Practice for the Financial Statements of UK Authorised Funds issued by the Investment Association (IA), formerly known as the Investment Management Association (IMA) in October 2010, (the "IMA SORP 2010"). (b) (c) (d) (e) All of the sub-funds have been prepared on a going concern basis with the exception of the First State Global Interest Rates and Currency Fund which the Authorised Corporate Director intends to terminate within one year of the date of approval of the financial statements and therefore the financial statements of this Fund have been prepared on a basis other than going concern. In applying this basis of preparation, the assets and liabilities of this Fund continue to be stated at their fair values which materially equate to their residual values. No adjustments were necessary in the Fund s financial statements to reduce assets to their realisable values, to provide for liabilities arising from the termination and to reclassify fixed assets and long-term liabilities as current assets and liabilities. Basis of valuation of investments The value of the Funds was calculated using the bid market value of investments as at 12:00 midday on 31 July 2015, net of any accrued interest. Investments for which published market values are not available are included at the Authorised Corporate Director s valuation. Open forward currency contracts are shown in the portfolio statement and are valued using quoted forward rate. Over the Counter (OTC) derivatives (including cross currency swaps) are held at fair value. Gains and losses, including exchange differences in the valuation of investments held at the balance sheet date, including unrealised exchange differences, are treated as capital. Exchange rates Amounts in overseas currencies are translated at the exchange rates ruling at the close of business on 31 July Transactions denominated in foreign currencies are converted to sterling at the exchange rate ruling at the date of the transaction. policy The whole of the Fund s revenue after expenses must be distributed at the end of its financial year. Interim distributions will usually be for the whole of the revenue, after charging expenses determined at the end of the interim accounting period. The Authorised Corporate Director may, however, in exceptional circumstances distribute a lesser amount, for the interim period. Emerging Markets Bond Fund, Emerging Markets Local Currency Bond Fund and Global Interest Rates and Currency Fund satisfied the qualifying investments test of Section 19 The Authorised Investment Funds (Tax) Regulations 2006 (S2006/964) throughout the period. All distributions made are therefore made as interest distributions. All the other Funds make dividend distributions. Recognition of revenue Dividends on equities are recognised when the security is quoted ex-dividend. Other revenue is accounted for on an accruals basis. UK dividends are shown net of tax credits. Dividends from US Real Estate Investment Trusts ("REITs") are recognised as distributable revenue when the securities are quoted ex-dividend. On receipt of the capital/revenue split in the following calendar year, the allocation of the dividend is adjusted within the financial statements. Dividends from the UK Real Estate Investment Trusts ("UK REITs") are recognised as distributable revenue when the securities are quoted exdividend. Dividends received from UK REITs are split into PID (Property Income s) and Non-PID components for tax purposes. Revenue arising from UK REITs tax-exempt rental business is colloquially known as PID revenue and is taxable in the hands of each Fund. A UK REIT may also carry out activities that give rise to taxable profits and gains. It is from these that the REIT will make a Non-PID distribution. These are treated for tax purposes in the same way as dividends from UK companies. Dividends received as shares (scrip/stock dividends), to the extent that the value of such dividends is equal to the cash dividends, are treated as revenue. This revenue forms part of any distribution. In the case of enhanced scrip dividends, the amount by which such dividends exceed the cash dividends is treated as capital and does not form part of the distribution. The treatment of special dividends and share buy backs is determined on a case by case basis, taking into account whether the event is income or capital by nature. The tax treatment will follow the treatment of the principal amounts. Interest on deposits and fixed interest securities are recognised as earned. Revenue from debt securities is accounted for on an effective yield basis. 10

14 Notes to the Aggregated Financial Statements (j) Stamp duty reserve tax (SDRT) Applying effective yield to the revenue calculation may result in either higher or lower revenue depending whether funds hold more bonds purchased at a discount or purchased at a premium. Where the funds hold more bonds purchased at a discount than at a premium, income will be higher. Where the full initial charge is levied on investment into any fund that is soft closed (soft closed meaning that the fund can still be accessed by investors, however, a charge is levied in an attempt to control the size of a fund by discouraging inflows) in the interests of protecting existing investors returns, the Investment Manager has paid this in to the relevant fund. This is recognised on a cash basis for the individual share classes of the soft closed funds. Prior to it being paid into the fund, the Investment Manager will exercise discretion on whether to donate some or all of this revenue to charity or reimburse back to the funds for the benefit of the existing shareholders. (f) Treatment of expenses All expenses, other than those relating to transaction fees and stamp duty reserve tax, are charged against the revenue property of the Fund. In the case of First State Asian Property Securities Fund, Global Property Securities Fund, Global Listed Infrastructure Fund, Emerging Markets Bond Fund and Emerging Markets Local Currency Bond Fund, all expenses are borne by the capital property of the Fund for distribution purposes. Management, registrar and dealing fees are charged directly to the share classes to which they relate. Other expenses are charged on a proportional basis. (g) Taxation Provision is made for corporation tax at the current rate on the excess of taxable revenue over allowable expenses. UK dividend revenue is disclosed net of any related tax credits. Overseas dividends are disclosed gross of any foreign tax suffered, the tax element being separately disclosed in the taxation note. Tax is calculated using the marginal basis i.e. the taxeffect of revenue and expenditure is allocated between capital and income on the same basis as the particular item to which it relates. Deferred taxation is provided for on all timing differences that have originated but not reversed at the balance sheet date. Deferred taxation is not recognised on permanent differences. Any liability to deferred tax is provided at the average rate of tax enacted, or substantively enacted. Deferred tax assets are only recognised where it is more likely than not that there will be suitable taxable profits against which the future reversal of underlying timing differences can be deducted. Deferred tax assets and liabilities are not discounted to reflect the time value of money. Withholding tax on accrued overseas dividends is netted off against accrued revenue in the debtors note. (h) Equalisation Equalisation applies only to shares purchased during the distribution period (group 2 shares). It is the average amount of revenue included in the purchase price of all group 2 shares and is refunded to holders of these shares as a return of capital. Being capital repayment, it is not liable to income tax but must be deducted from the cost of the shares for capital gains tax purposes. (i) Dilution adjustment On 1st February 2005 single swinging pricing was adopted for the Funds of the Company. The ACD reserves the right at its sole discretion to impose a dilution adjustment. For example: (a) on a Fund experiencing net purchases (ie purchases less redemptions) as this could lead to trading which results in a dilutive effect; (b) on a Fund experiencing net redemptions (ie redemptions less purchases) as this could lead to trading which results in a dilutive effect; and (c) where there may be a dilutive effect which, in the opinion of the ACD requires the application of a dilution adjustment in the interests of existing/continuing shareholders and potential shareholders. See the prospectus for full details. SDRT is charged at a maximum of 0.5% of the value of shares redeemed. Although the Authorised Corporate Director has the powerto impose SDRT at the time of the share transaction it is not the Authorised Corporate Director s policy to impose the charge to shareholders at that point. Instead, the SDRT will be charged by the Depositary to the Fund. However, in certain circumstances the Authorised Corporate Director does reserve the right at the time of dealing to charge shareholders. The SDRT is either reduced or does not apply if the Fund holds overseas investments or certain other classes of securities. Prior to 30 March 2014 SDRT was charged at a maximum of 0.5% of the value of the shares redeemed. From 30 March 2014, no SDRT is charged on the surrender of shares in each Fund, with the exception of surrenders in respect of which a shareholder receives a non-pro rata in specie redemption resulting in a transfer of underlying assets. In this instance, the SDRT will be a liability of the recipient of the underlying assets. 11

15 Notes to the Aggregated Financial Statements (k) Derivative financial instruments The treatment of the returns on forward currency contracts depend upon the nature of the transaction. Where these transactions are used to protect or enhance revenue, the revenue and expenses are included within net revenue in the Statement of total return. Where the transactions are used to protect or enhance investments, the gains/losses are treated as capital and included within gains/losses on investments in the Statement of total return. Any open positions in these types of transactions at the year end are included in the Balance sheet at their mark to market value. (l) Foreign currency translation Items included in the Company s financial statements are measured using the primary economic environment in which it operates (the functional currency ). The functional currencies of each Fund are GBP with the exception of First State Emerging Markets Local Currency Bond Fund and First State Global Interest Rates and Currency Fund which have adopted USD as their functional currencies. The Company has adopted GBP as the presentation currency for the Company as a whole. The Company s results and financial position are translated from the respective Fund's functional currency to the Company s presentation currency, as follows: (a) assets and liabilities, including net assets attributable to shareholders, are translated at the closing rate at the balance sheet date; (b) proceeds from subscriptions and amounts paid on redemption of shares are translated at average rates, which approximate the rates prevailing at the dates of the transactions; and (c) income and expenses are translated at average exchange rates. Other matters Retail distribution review Following the Financial Conduct Authority's recent Retail Review a total of 5,082 conversions were made from A to B share classes for an aggregate amount of approximately 1,634.2 million across all Funds of First State Investments ICVC during the period 1 August 2014 to 31 July 2015 (1 August 2013 to 31 July ,940 conversions and million). High Court claim In December 2006, the European Court of Justice found that the taxation by HMRCof portfolio dividends received from entities situated in EU/EEA countries prior to 1 July 2009 was discriminatory. In addition the same court found in November 2012 that the differing taxation of UK and foreign dividends (both from EU member states and third countries) is contrary to EU law. Judgement, however, is still to be given in the UK courts in respect of the test case, the Franked Income Investment Group Litigation order. The Company has made claims against HMRC to recover tax paid in the circumstances outlined above, however it should be noted that the interest which each sub fund has in these claims has not been recognised in the financial statements as the timing and amount of any benefit is uncertain. In the event claims are successful, any monies awarded by the court will be paid to the relevant sub-funds as a windfall to those shareholders who remain in the subfund at the date of payment of the claims. Foreign retrospective tax claims A number of the ICVC Funds are in the process of reclaiming tax, retrospectively for the last 5 years, with the local tax authorities in France, Taiwan and Belgium. On receipt, these amounts will be treated as windfall amounts in to the Funds and will form part of any distributable income. During the financial period, four sub-funds (Indian Subcontinent/ Asia Pacific Sustainability/ Asia Pacific and GEM Sustainability) in the Company received assessments from the Indian tax authorities regarding Minimum Alternative Tax ( MAT ). These assessments were appealed, as the Company believes MAT should not apply to foreign portfolio investors/ foreign institutional investors with no permanent establishment in India. In September 2015, the Indian Government released a statement agreeing that Indian MAT should not apply to investors such as the Company and that the Government will amend legislation or issue a circular to reflect this. No provision for MAT has been recognised in the NAV of any of the four sub-funds. 12

16 Notes to the Aggregated Financial Statements for the year ended 31 July Net capital gains The net capital gains during the year comprise: Non-derivative securities Derivative contracts Forward foreign exchange currency contracts Currency gains/(losses) Net capital gains Revenue Dividends from UK companies Overseas taxable revenue* Overseas non-taxable revenue Property revenue from UK REITs - PID Property revenue from UK REITs - Non PID Property revenue from overseas REITs* UK scrip dividends Overseas scrip dividends s from Regulated Collective Investment Schemes: Offshore distribution non taxable Interest from bank deposits* Interest from government and fixed interest securities Interest on capital revenue from Brazilian companies Currency hedge gains/(losses) Front end load income Swap Income Class action Total revenue *Prior year figures have been reanalysed to reclass revenue from overseas REITs and bank deposits. Expenses '000 ' , ,129 (424) (2) (9,127) 1,804 28,657 (62,793) 710, ,138 '000 '000 20,214 19,744 (156) 1, , , ,471 5,387-2,565 17,724 10, , ,661 2,861 5,251 5,411 (81) (2) 3,470 4, , ,246 Payable to the ACD, associates of the ACD, and agents of either of them: ACD's periodic charge ACD's periodic charge rebate Payable to the Depositary, associates of the Depositary, and agents of either of them: Depositary's fees Other expenses: Audit fee Registrar fees Safe custody charges Other expenses Total expenses Other expenses includes 200,373 (31/07/14: 145,540) paid to PwC for Non-audit services rendered in relation to tax. '000 ' , ,252 (4) (22) 171, ,230 1,860 2, ,131 2,850 4,894 3,777 1,762 2,204 9,965 9, , ,312 13

17 Notes to the Aggregated Financial Statements for the year ended 31 July (a) (b) Taxation '000 '000 Analysis of charge in year: Corporation tax Double tax relief (225) (129) Irrecoverable overseas tax 13,517 15,643 Indian capital gains tax 6,234 12,334 Brazilian IOF tax 3 10 Taiwan capital gains tax 3 6 Adjustments in respect of prior years - 2 Total current tax (note 5b) 19,757 27,995 Deferred taxation (13) 7 Total deferred tax (note 5c) (13) 7 Total taxation 19,744 28,002 Factors affecting current tax charge for the year: The tax assessed for the year is lower than (2014: higher than) the standard rate of corporation tax in the UK for an OEIC of 20% (2014: 20%). The differences are explained below: Net revenue before taxation 171, ,895 Corporation tax of 20% (2014: 20%) 34,268 26,978 Effects of: UK dividends* Non taxable scrip dividends* Overseas non-taxable revenue* Double tax relief Revenue taxable in different periods Movement in excess management expenses Irrecoverable overseas tax Tax deductible interest distributions Expenses not deductible for tax purposes Adjustments in respect of prior years Overseas tax expensed Taiwan capital gains tax Property revenue from UK REITs - Non PID Indian capital gains tax Brazilian IOF tax Current tax charge for year (note 5a) (4,042) (3,948) (3,543) (2,690) (58,595) (51,507) (225) (129) 71 (61) 33,275 32,011 13,517 15,643 (876) (404) (314) (237) 3 6 (20) (13) 6,234 12, ,757 27,995 (c) (d) OEICs are exempt from tax on capital gains. Therefore, any capital return is not included in the above reconciliation. *As an authorised OEIC these items are not subject to corporation tax. Deferred taxation: Details of the provision for deferred taxation are disclosed within the individual sub-funds' financial statements. Factors that may affect future tax charges: Details of factors that may affect future tax charges are disclosed within the individual sub-funds' financial statements. 14

18 Notes to the Aggregated Financial Statements for the year ended 31 July Finance costs s and equalisation and interest The distributions take account of revenue received on the issue of shares and revenue deducted on the cancellation of shares, and comprises: Interim distributions Final distributions Income tax withheld Add: revenue deducted on cancellation of shares Deduct: revenue received on issue of shares Net distributions for the year Interest from bank deposits Total finance costs Details of the distribution per share are set out in the distribution tables in the individual sub-funds' financial statements. Movement between net revenue and net distributions '000 '000 47,362 35, ,222 98,760 1, , ,817 7,782 6,105 (7,278) (5,703) 175, , , ,258 '000 '000 Net revenue after taxation 151, ,893 Revenue deficit 2,010 1,353 Movement in net income as a result of conversions 782 1,510 Expenses charged to capital* 15,243 13,751 Tax relief on expenses charged to capital (739) (639) Taiwan capital gains tax* 3 7 Indian capital gains tax 6,234 12,334 Brazilian IOF tax 3 10 Net distributions for the year 175, ,219 * Prior year figures have been reanalysed to disclose Taiwan capital gains tax. Debtors Sales awaiting settlement Amounts receivable for issue of shares Accrued revenue ACD expenses recoverable Overseas tax recoverable Accrued ACD's periodic charge rebate Total debtors Cash and bank balances Cash and bank balances Amounts held at futures clearing houses and brokers Total cash and bank balances '000 '000 96,061 34,391 27,996 61,567 33,747 33,194 (1) (1) 1,654 1,440 (1) , ,602 '000 '000 1,134, , ,135, ,006 15

19 Notes to the Aggregated Financial Statements for the year ended 31 July Creditors Purchases awaiting settlement Amounts payable for cancellation of shares Accrued expenses Deferred taxation Income tax payable Total creditors Portfolio transaction costs Analysis of total trade costs: Non-derivative securities Derivative contracts* Trades in the year before transaction costs Commissions Taxes Total costs Total net trades in the year after transaction costs *Purchases and/or sales of derivatives contracts do not incur transaction costs. Contingent liabilities and commitments Contingent liabilities and commitments are disclosed within the individual sub-funds' Financial Statements. Derivatives and other financial instruments Derivatives and other financial instruments are disclosed within the individual sub-funds' Financial Statements. Related parties Related parties are disclosed within the individual sub-funds' Financial Statements. Share classes Annual ACD charges are disclosed within the individual sub-funds' Financial Statements. '000 '000 92,426 84,880 36,334 14,101 18,455 16, , ,866 Purchases Sales '000 '000 '000 '000 5,656,989 5,197,477 5,998,335 6,783, ,652 2, ,411 2,784 5,907,641 5,200,261 6,249,746 6,785,795 8,214 7,963 (8,455) (10,365) 2,695 3,288 (5,640) (6,696) 10,909 11,251 (14,095) (17,061) 6,102,553 5,211,512 6,235,651 6,768,734 16

20 First State Asia Pacific Fund Authorised Fund Manager's Report for the year ended 31 July 2015 Investment objective and policy The Fund aims to achieve long-term capital growth. The Fund invests in equities in the Asia Pacific region (excluding Japan, including Australasia). Risks and reward profile Share class A Accumulation Share class A Income Share class B Accumulation Share class B Income Lower risk Higher risk Potentially lower rewards Potentially higher rewards * * * * 6 7 The synthetic risk reward indicator (the SRRI) rating is not a measure of the risk of you losing your investment but describes how much the value of the Fund went up and down in the past; The SRRI rating is based on historical data which may not be a reliable indication of the future risks and rewards of the Fund; We cannot guarantee that the rating of the Fund will remain the same, it may change over time; Even the lowest rating 1 does not mean a risk free investment; On a scale of 1 (less risky) to 7 (more risky), this Fund has a rating of 5 due to its past performance and the nature of its investments. Shares with a rating of 5 might have higher risks, but also higher returns; Risk is taken in order to make a higher potential return, the more risk a fund takes, the higher the potential return but the greater the risk of loss; and The value of the Fund and its return is not guaranteed and may fall as well as rise. You may get back less than you originally invested. *The SRRI changed from 6 to 5 on 21 July The Fund might also experience the following risks: Emerging market risk: emerging markets may not provide the same level of investor protection as a developed market; they may involve a higher risk than investing in developed markets. Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund. For further information on risks, please refer to the risk factors section in the Company's prospectus. Performance The fund rose by 9.1% in sterling terms over the year and has provided returns of 36.7% and 66.7% over three and five years to 31 July Performance was helped by Pigeon Corp (Japan: Consumer Staples) which rose on the back of rapid sales growth in China and CSL (Australia: Health Care) which gained as its key business areas performed. First State China A Shares (China: Multiple Sectors) made a positive contribution as the China A-share market rallied strongly over the year. On the negative side, Asustek Computer (Taiwan: Information Technology) fell because of weak operations and XL Axiata (Indonesia: Telecom Services) was impacted by a deteriorating competitive environment. Petra Foods (Singapore: Consumer Staples) was hit by profit taking as it reached a high valuation. Portfolio changes Significant purchases over the period included Li & Fung (Hong Kong: Consumer Discretionary), backing the owner to rejuvenate the franchise, and Raffles Medical (Singapore: Health Care), a favoured medical franchise in Singapore with expansion plans overseas. We also bought Asustek Computer (Taiwan: Information Technology), which we believe is a good quality technology franchise with long-term potential, as it was trading on an attractive valuation. We sold Samsung Fire & Marine (South Korea: Financials) due to concerns over corporate governance and Axiata Group (Malaysia: Telecom Services) as we were increasingly concerned about the outlook in the core Malaysian market and weak growth. We also sold China Telecom as we would like to see more dividends paid to shareholders by such a cash generative franchise. 17