Smaller Companies and Markets Investment Series Annual Report Authorised Corporate Director s Short Report

Transcription

1 Smaller Companies and Markets Investment Series Annual Report Authorised Corporate Director s Short Report Issued September 2015 For the year 1 August 2014 to 31 July 2015

2 Contents 01 Invesco Perpetual Emerging European Fund 10 Invesco Perpetual European Smaller Companies Fund 17 Invesco Perpetual Global Emerging Markets Fund 26 Invesco Perpetual Global Smaller Companies Fund 36 Invesco Perpetual Japanese Smaller Companies Fund 44 Invesco Perpetual UK Smaller Companies Equity Fund Further information This Short Report, which is unaudited, has been prepared by the Authorised Corporate Director (the Manager ) in respect of the Invesco Perpetual Smaller Companies and Markets Investment Series (the Company ) in accordance with the Open-Ended Investment Companies Regulations The Manager s Long Form Financial Statements, and the Prospectus which contains a written statement of the Terms and Conditions of the Company, can be obtained using the contact details shown on the back cover. Invesco Perpetual Emerging Countries Fund Name Change Effective 22 June 2015, the Invesco Perpetual Emerging Countries Fund changed its name to Invesco Perpetual Global Emerging Markets Fund. We believe the new fund name better articulates the fund s exposure to emerging markets globally. There is no change to the investment objective, philosophy or investment process of the Fund. Terms used in this report shall have the same meaning as defined in the Prospectus.

3 Emerging European Fund Investment objective The fund aims to achieve long-term capital growth from investment primarily in shares of companies in Emerging European Countries, and also in Russia. 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. Risk profile 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. As this is an emerging market fund, investors should be prepared to accept a higher degree of risk than for a fund 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. The fund may invest directly in Russia, which can involve significant risks to capital. As the fund has a concentrated number of holdings, investors should be prepared to accept higher risks. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/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 fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. The fund's performance may be adversely affected by variations in relative strength of world currencies or if Sterling strengthens against those currencies. Strategy, review and outlook The fund fell by 10.1% over the twelve months to the end of July 2015, compared to a 14.5% loss in the benchmark MSCI Emerging Markets Eastern Europe Index. Fund performance data source: Lipper, mid-to-mid (excluding the entry charge), in Sterling, with net income reinvested. MSCI EM Eastern Europe Index data source: Thomson Reuters Datastream, total return, in Sterling. Past performance is not a guide to future returns. There was a clear distinction between how our holdings in Russia performed versus those held elsewhere in the region. Russian stocks generally endured a challenging trading environment that was accentuated by the continuation of Western sanctions imposed against the country and a sharp collapse in the price of oil. The main drag on performance came from our holdings in Russian financials and energy companies. By comparison, there was positive input from our positions held in Poland, Hungary, Czech Republic and Turkey with the healthcare and consumer discretionary sectors doing reasonably well. At a stock level, Sberbank and Gazprom were the main detractors. Relative performance versus the benchmark was enhanced by favourable stock selection. We are not surprised that sentiment towards emerging European equity markets has improved since the start of this year. We believe the region offers long-term opportunities. Equity valuations still remain attractive, in our view, especially in Russia. In central European countries, economic growth momentum is building, consumer confidence levels are rising and leading indicators are becoming more bullish, drawing support from historical low interest rates and some 01 Smaller Companies and Markets Investment Series

4 Emerging European Fund upbeat economic news from Western Europe, the key trading partner for the region. Encouragingly, the latest manufacturing survey data for central Europe suggests that the Greek crisis is having less of an adverse impact than originally feared. Nicholas Mason, Fund Manager Where Nicholas Mason 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 diversified approach is reflected in sector positioning, which is spread across a broad range. In particular, we favour the materials, industrials, consumer discretionary and healthcare sectors. Our largest country holding is in Russia, where we have an underweight position versus the benchmark. However, during the review period we continued our strategy of increasing the fund s exposure to healthy Russian exporting companies who, in our view, can take advantage of a weaker rouble exchange rate to boost earnings. For example, we took a position in Novolipetsk Steel, a successful exporter that also has the flexibility to shift sales between domestic and overseas markets if needed. Other notable fund activity included the introduction of new positions in Polish companies, Polenergia and Work Service. The former is an independent electricity producer and the latter is a human resources company with strong market leadership in the region. Work Service generates healthy cash flow and, in our view, is well positioned to expand its services in new markets such as Germany and Switzerland. 02 Smaller Companies and Markets Investment Series

5 Emerging European Fund Fund facts Launch date 12 December 2007 Fund size at million Accounting date 31 July Ex-dividend date 1 August Distribution payable 30 September Fund Management Fee - Trail classes 1.92% per annum - No Trail classes 1.42% per annum - Z classes 1.17% per annum - Y classes 1.12% per annum Entry charge 5% Ongoing charges figure (OCF) for the year ended Trail classes 1.92% - No Trail classes 1.42% - Z classes 1.17% - Y classes % Ongoing charges figure (OCF) for the year ended Trail classes 1.98% - No Trail classes 1.48% - Z classes 1.23% - Y classes % 1 Share classes launched 31 March 2014 The OCF is expressed as a percentage of average net assets for the year. It is the annual fee that the Manager charges for its services in managing the sub fund and is inclusive of the fees and expenses which are paid by the Manager in relation to its operation and administration. It excludes portfolio transaction costs as well as the entry charge. The OCF is equivalent to the FMF, which we also refer to as the ongoing charge in our Key Investor Information Documents (KIIDs) and our literature. 03 Smaller Companies and Markets Investment Series

6 Emerging European Fund Risk and Reward Profiles for the year 1 August 2014 to 31 July 2015 Lower Risk Higher Risk Typically lower rewards Typically higher rewards The risk category shown is not a measure of capital losses or gains, but of how significant the rises and falls in the share class prices have been historically. For example a share class whose price has experienced significant rises and falls will be in a higher risk category, whereas a share class whose price has experienced less significant rises and falls will be in a lower risk category. As the Share Class risk category has been calculated using historical data, it may not be a reliable indication of the Share Class future risk profile. Please note that the Share Class risk category may change in the future and is not guaranteed. The lowest risk category does not mean a risk free investment. A share class in risk category 6 indicates its price has experienced very significant rises and falls historically. The risk category for the Y Accumulation and Y Income share classes for this fund changed from 7 to 6 on 1 November 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 Smaller Companies and Markets Investment Series

7 Emerging European Fund Distributions to to p p Accumulation shares Payable 30 September Accumulation shares (No Trail) Payable 30 September Z Accumulation shares Payable 30 September Y Accumulation shares Payable 30 September Income shares Payable 30 September Income shares (No Trail) Payable 30 September Z Income shares Payable 30 September Y Income shares Payable 30 September Smaller Companies and Markets Investment Series

8 Emerging European Fund 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 Y Accumulation shares to 31 July 2 from 12 November 3 from 31 March Z Accumulation shares were issued at 200p on 12 November Y Accumulation shares were issued at 200p on 31 March Smaller Companies and Markets Investment Series

9 Emerging European Fund Price and revenue record by share class continued Highest Lowest Net share share revenue price price per share Calendar year p p p Income shares Income shares (No Trail) Z Income shares Y Income shares to 31 July 2 from 12 November 3 from 31 March Z Income shares were issued at 200p on 12 November Y Income shares were issued at 200p on 31 March Smaller Companies and Markets Investment Series

10 Emerging European Fund Net asset value Net asset Net asset value value per share per share Percentage growth p p % Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Y Accumulation shares Income shares Income shares (No Trail) Z Income shares Y Income shares Net asset value per share calculated on the last business day of the period at bid market value at 4.30pm. Performance Percentage growth to 31 July 2015 Since Since Since Since Since launch % % % % % Emerging European Fund (accumulation shares) MSCI Emerging Markets Eastern Europe Index No suitable IA peer group exists for this fund. Standardised rolling 12 month performance Percentage growth % % % % % Emerging European 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 Emerging Markets Eastern European 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. 08 Smaller Companies and Markets Investment Series

11 Emerging European Fund Portfolio classification As at As at Investment % % Austria Greece Hungary Israel 2.16 Kazakhstan Netherlands Poland Russia Turkey United Arab Emirates 1.74 United Kingdom United States 1.08 Total investments Net other assets Net assets largest investments As at 31 July 2015: % As at 31 July 2014: % LUKOIL 8.67 LUKOIL 9.87 Novatek 7.05 Sberbank of Russia 8.32 MMC Norilsk Nickel 5.61 Gazprom 6.52 Gazprom 5.14 Powszechny Zaklad Ubezpieczeń 5.17 Sberbank of Russia 4.90 Mobile Telesystems 4.85 Powszechny Zaklad Ubezpieczeń 4.55 Novatek 4.77 KRUK 4.32 Tatneft 4.30 Phosagro 4.28 Surgutneftegaz 3.96 Magnit 4.08 Hikma Pharmaceuticals 3.35 Hikma Pharmaceuticals 3.52 Phosagro Smaller Companies and Markets Investment Series

12 European Smaller Companies Fund Investment objective The fund aims to achieve capital growth through a portfolio of investments primarily in smaller European companies, excluding the United Kingdom. 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. Risk profile 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. Smaller company funds are higher risk than funds that can invest in larger company sizes. Market conditions, such as a decrease in market liquidity, may mean that it is not easy to buy or sell securities. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/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 fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. The fund s performance may be adversely affected by variations in the relative strength of world currencies or if Sterling strengthens against those currencies. Strategy, review and outlook The fund returned 11.2% over the twelve months ending 31 July 2015, outperforming its benchmark, the Euromoney Smaller Europe (ex UK) Index, which returned 8.8%. The IA European Smaller Companies Sector averaged a return of 14.2% during the same period, placing the fund in the third quartile of its peer group. Fund and sector average performance data source: Lipper, mid-to-mid (excluding the entry charge), in Sterling, with net income reinvested. Euromoney Smaller Europe (ex UK) Index source: Thomson Reuters Datastream, total return, in Sterling. Past performance is not a guide to future returns. Small and mid-cap European equity markets rose over the last twelve months. Performance was particularly strong at the beginning of 2015, amid a pick-up in European economic momentum and as the European Central Bank (ECB) started implementing its quantitative easing programme to tackle low inflation and spur economic growth. Elsewhere, the euro weakened against the US dollar, and oil prices dropped significantly, reaching levels not seen since During the period under review, the fund s outperformance was largely driven by the financials sector, thanks to an overweight position relative to the benchmark and good stock picking. Swiss-based financial company Leonteq was the portfolio s standout performer, as it continued to 10 Smaller Companies and Markets Investment Series

13 European Smaller Companies Fund achieve strong earnings growth year on year. The consumer goods sector was also among the top contributors to relative performance. Danish jewellery designer Pandora led the sector, as the company improved its revenues and expanded into new geographies. Other notable contributors to relative returns were German semiconductor manufacturers Dialog, and Norwegian oil shipping company Ocean Yield. In terms of portfolio activity, we raised the fund s exposure to the financials sector. We believe this area is well positioned to benefit from the upswing in the European economy. For example, we introduced a new position in Italian lender Banca Sistema, encouraged by what we believe to be attractive valuations and good prospects for earnings growth. We also recently took part in the initial public offering of Flow Traders, a Dutch-based electronic trading company. Moreover, we increased the fund s exposure to the technology sector. We introduced a new position in Swiss telecom company Sunrise Telecommunications, encouraged by the company s future earnings and dividend prospects. Meanwhile, we reduced exposure to the natural resources sector, but remained overweight relative to the benchmark. Despite lower energy prices, we still find some companies with robust fundamentals, good cash generation capabilities and potential for dividend payments. As at period end, technology stood as the largest overweight sector relative to the benchmark, while retail providers the biggest underweight sector. After years of slow economic activity, there is good ground to believe in a domestic European recovery. Economic momentum in Europe has been accelerating since the beginning of 2015, and has remained resilient in spite of the Greek debt issue. In fact, latest macro data seems to suggest that corporate Europe was relatively relaxed about any contagion risk from the Greek crisis; we believe this is due to the much stronger governance architecture in the Eurozone since 2012, and a much lower exposure to Greece by European companies compared to previous years. Elsewhere, leading economic indicators are strengthening, financial conditions remain much easier than a year ago thanks to various ECB programmes in place, and Eurozone inflation, which caused some concern at the end of 2014, is now gradually returning towards healthier levels. Structural reforms in peripheral countries are also playing a very positive role and should stimulate further growth in our view. Accordingly, we remain constructive on the outlook for the European economy and positive on the prospects for smaller companies in Europe. Our strategy remains primarily focused on fundamental analysis and valuation, seeking what we view as attractive investment opportunities within the smaller companies universe. We favour stocks which, in our view, are in a healthy financial position, have sound management and are capable of delivering high returns on capital, while being undervalued by the market. Adrian Bignell, Fund Manager Where Adrian Bignell 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. 11 Smaller Companies and Markets Investment Series

14 European Smaller Companies Fund Fund facts Launch date 31 December 1984 Fund size at million Accounting date 31 July Ex-dividend date 1 August Distribution payable 30 September Fund Management Fee - Trail class 1.70% per annum - No Trail class 1.20% per annum - Z class 0.95% per annum - Y class 0.90% per annum Entry charge 5% Ongoing charges figure (OCF) for the year ended Trail class 1.70% - No Trail class 1.20% - Z class 0.95% - Y class % Ongoing charges figure (OCF) for the year ended Trail class 1.73% - No Trail class 1.23% - Z class 0.98% - Y class % 1 Share class launched 31 March 2014 The OCF is expressed as a percentage of average net assets for the year. It is the annual fee that the Manager charges for its services in managing the sub fund and is inclusive of the fees and expenses which are paid by the Manager in relation to its operation and administration. It excludes portfolio transaction costs as well as the entry charge. The OCF is equivalent to the FMF, which we also refer to as the ongoing charge in our Key Investor Information Documents (KIIDs) and our literature. 12 Smaller Companies and Markets Investment Series

15 European Smaller Companies Fund Risk and Reward Profiles for the year 1 August 2014 to 31 July 2015 Lower Risk Higher Risk Typically lower rewards Typically higher rewards The risk category shown is not a measure of capital losses or gains, but of how significant the rises and falls in the share class prices have been historically. For example a share class whose price has experienced significant rises and falls will be in a higher risk category, whereas a share class whose price has experienced less significant rises and falls will be in a lower risk category. As the Share Class risk category has been calculated using historical data, it may not be a reliable indication of the Share Class future risk profile. Please note that the Share Class risk category may change in the future and is not guaranteed. The lowest risk category does not mean a risk free investment. A share class in risk category 6 indicates its price has experienced very significant rises and falls historically. 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. 13 Smaller Companies and Markets Investment Series

16 European Smaller Companies Fund Distributions to to p p Accumulation shares Payable 30 September Accumulation shares (No Trail) Payable 30 September Z Accumulation shares Payable 30 September Y Accumulation shares Payable 30 September 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 Y Accumulation shares to 31 July 2 from 12 November 3 from 31 March Z Accumulation shares were issued at 200p on 12 November Y Accumulation shares were issued at 200p on 31 March Smaller Companies and Markets Investment Series

17 European Smaller Companies Fund Net asset value Net asset Net asset value value per share per share Percentage growth p p % Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Y Accumulation shares Net asset value per share calculated on the last business day of the period at bid market value at 4.30pm. Performance Percentage growth to 31 July 2015 Since Since Since Since Since % % % % % European Smaller Companies Fund (accumulation shares) Euromoney Smaller Europe (ex UK) Index IA European Smaller Companies Sector Fund Ranking 1/12 9/12 5/12 6/12 8/8 Standardised rolling 12 month performance Percentage growth % % % % % European Smaller Companies 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. Euromoney Smaller Europe (ex UK) 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 Smaller Companies and Markets Investment Series

18 European Smaller Companies Fund Portfolio classification As at As at Investment % % Equities Austria Belgium Canada Denmark Finland France Germany Italy Luxembourg 0.87 Netherlands Norway Portugal Republic of Ireland Spain 5.22 Sweden Switzerland United Arab Emirates 0.71 United Kingdom United States Futures and Derivatives Options Total investments Net other assets Net assets For the year ended 31 July 2015, unquoted securities amounted to 0.00% (31 July %) of the Net Asset Value of the fund. 10 largest investments As at 31 July 2015: % As at 31 July 2014: % Leonteq 9.04 Leonteq 5.24 Ocean Yield 3.63 Mota-Engil 3.15 Pandora 3.42 Marine Harvest 3.06 DHT 3.16 Africa Oil 2.66 NOS SGPS 3.12 MTU Aero Engines 2.45 Navios Maritime Acquisition 2.84 Bufab 2.18 Avanza Bank 2.51 RIB Software 2.17 Mota-Engil 2.29 Ontex 2.16 Banca Sistema 2.29 AMS 2.08 Sunrise Communications 2.23 Aareal Bank Smaller Companies and Markets Investment Series

19 Global Emerging Markets Fund Investment objective The fund aims to achieve capital growth primarily through a portfolio of shares in companies established and/or operating in countries where, in the opinion of the Manager, there is an emerging market. Exposure to such markets will partially be obtained through indirect investment in securities traded on other markets. 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. Risk profile 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. As this is an emerging market fund, investors should be prepared to accept a higher degree of risk than for a fund 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. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/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 fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. The fund s performance may be adversely affected by variations in the relative strength of world currencies or if Sterling strengthens against those currencies. Strategy, review and outlook The fund fell by 4.0% over the twelve months to the end of July 2015, compared to a 6.0% loss in the benchmark MSCI Emerging Markets Index. This placed the fund in the second quartile of its peer group, the IA Global Emerging Markets Sector, which declined by an average of 6.5%. Fund and sector average performance data source: Lipper, mid-to-mid (excluding the entry charge), in Sterling, with net income reinvested. MSCI Emerging Markets Index data source: Thomson Reuters Datastream, total return, in Sterling. Past performance is not a guide to future returns. Fund performance varied at both a country and sector level. The biggest drag on performance came from our holdings in South Korea and Brazil. By contrast, having exposure to companies based in South Africa and Taiwan proved beneficial. Lower oil prices had an adverse impact on our holdings in energy firms. Banking stocks also generated disappointing returns. The technology and healthcare sectors contributed the most towards performance. Chinese technology company NetEase was our strongest stock contributor with Hyundai Motor being the biggest individual detractor. Relative performance versus the benchmark was enhanced by favourable stock selection, particularly in the materials and technology sectors. One area that particularly interests us is the Chinese internet sector. Supported by favourable demographics, such as a young and increasingly educated population, rising income levels and rapid changes in technology, companies that can successfully tap into this vast market are likely to be highly rewarded over the long term in our opinion. During the review period we took 17 Smaller Companies and Markets Investment Series

20 Global Emerging Markets Fund a position in US-listed Alibaba Group. We believe that Alibaba enjoys e-commerce leadership thanks to its multiple online platforms and strengths in logistics/ e-payments. The company is a key beneficiary of business to consumer e-commerce, with great potential from mobile developments and rural expansion. Dean Newman, Fund Manager Where Dean Newman 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. Other Chinese stocks introduced to the portfolio during the review period were Minth Group and China Hongqiao Group. Minth supplies body parts for car manufacturers in China and China Hongqiao is a low cost integrated aluminium producer. The net impact of these transactions increased the fund s exposure to China. Currently, about a quarter of the fund s assets are represented here (including Hong Kong). Although China s economy is likely to slow further from the double-digit growth rates of the past decade, we believe, with the aid of policymakers, the slowdown will be gradual as the economy slowly transforms itself into a more consumer-led powerhouse with a greater emphasis on services. Encouragingly, China s economic growth held steady at 7% in the threemonth period to the end of June Outside of China and Asia, the fund continues to invest in a wide range of countries in Latin America, emerging Europe, the Middle East and Africa. The fund s diversified approach is reflected in sector positioning, which is spread across a broad spectrum of industries. Our most favoured sectors are software and services, media and materials. 18 Smaller Companies and Markets Investment Series

21 Global Emerging Markets Fund Fund facts Launch date 29 June 1987 Fund size at million Accounting date 31 July Ex-dividend date 1 August Distribution payable 30 September Fund Management Fee - Trail classes 1.75% per annum - No Trail classes 1.25% per annum - Z classes 1.00% per annum - Y classes 0.95% per annum Entry charge 5% Ongoing charges figure (OCF) for the year ended Trail classes 1.75% - No Trail classes 1.25% - Z classes 1.00% - Y classes % Ongoing charges figure (OCF) for the year ended Trail classes 1.76% - No Trail classes 1.26% - Z classes 1.01% - Y classes % 1 Share classes launched 31 March 2014 The OCF is expressed as a percentage of average net assets for the year. It is the annual fee that the Manager charges for its services in managing the sub fund and is inclusive of the fees and expenses which are paid by the Manager in relation to its operation and administration. It excludes portfolio transaction costs as well as the entry charge. The OCF is equivalent to the FMF, which we also refer to as the ongoing charge in our Key Investor Information Documents (KIIDs) and our literature. 19 Smaller Companies and Markets Investment Series

22 Global Emerging Markets Fund Risk and Reward Profiles for the year 1 August 2014 to 31 July 2015 Lower Risk Higher Risk Typically lower rewards Typically higher rewards The risk category shown is not a measure of capital losses or gains, but of how significant the rises and falls in the share class prices have been historically. For example a share class whose price has experienced significant rises and falls will be in a higher risk category, whereas a share class whose price has experienced less significant rises and falls will be in a lower risk category. As the Share Class risk category has been calculated using historical data, it may not be a reliable indication of the Share Class future risk profile. Please note that the Share Class risk category may change in the future and is not guaranteed. The lowest risk category does not mean a risk free investment. A share class in risk category 6 indicates its price has experienced very significant rises and falls historically. 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. 20 Smaller Companies and Markets Investment Series

23 Global Emerging Markets Fund Distributions to to p p Accumulation shares Payable 30 September Accumulation shares (No Trail) Payable 30 September Z Accumulation shares Payable 30 September Y Accumulation shares Payable 30 September Income shares Payable 30 September Income shares (No Trail) Payable 30 September Z Income shares Payable 30 September Y Income shares Payable 30 September Smaller Companies and Markets Investment Series

24 Global Emerging Markets Fund 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 Y Accumulation shares to 31 July 2 from 12 November 3 from 31 March Z Accumulation shares were issued at 200p on 12 November Y Accumulation shares were issued at 200p on 31 March Smaller Companies and Markets Investment Series

25 Global Emerging Markets Fund Price and revenue record by share class continued Highest Lowest Net share share revenue price price per share Calendar year p p p Income shares Income shares (No Trail) Z Income shares Y Income shares to 31 July 2 from 12 November 3 from 31 March Z Income shares were issued at 200p on 12 November Y Income shares were issued at 200p on 31 March Smaller Companies and Markets Investment Series

26 Global Emerging Markets Fund Net asset value Net asset Net asset value value per share per share Percentage growth p p % Accumulation shares Accumulation shares (No Trail) Z Accumulation shares Y Accumulation shares Income shares Income shares (No Trail) Z Income shares Y Income shares Net asset value per share calculated on the last business day of the period at bid market value at 4.30pm. Performance Percentage growth to 31 July 2015 Since Since Since Since Since % % % % % Global Emerging Markets Fund (accumulation shares) MSCI Emerging Markets Index IA Global Emerging Markets Sector Fund Ranking 10/51 15/50 2/43 4/33 7/21 Standardised rolling 12 month performance Percentage growth % % % % % Global Emerging Markets 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 Emerging Markets 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. 24 Smaller Companies and Markets Investment Series

27 Global Emerging Markets Fund Portfolio classification As at As at Investment % % Austria 1.37 Brazil Canada China Colombia 0.94 Greece 1.55 Hong Kong India Indonesia Israel Kazakhstan Mexico Panama 0.79 Peru Philippines Poland Russia South Africa South Korea Taiwan Thailand Turkey United Arab Emirates United Kingdom Total investments Net other assets Net assets largest investments As at 31 July 2015: % As at 31 July 2014: % Naspers 4.07 Samsung Electronics 4.50 Samsung Electronics 3.81 Taiwan Semiconductor Manufacturing 3.49 Taiwan Semiconductor Manufacturing 3.75 Hyundai Motor 2.96 NetEase 3.54 Naspers 2.93 CK Hutchison 2.68 NetEase 2.22 China Mobile 2.55 Hikma Pharmaceuticals 2.11 Frutarom 2.12 Kasikornbank 2.06 Housing Development Finance (Goldman Hon Hai Precision Industry 1.93 Sachs certs 14/9/2015) 2.07 ITC 1.82 Turkiye Sinai Kalkinma Bankasi 2.00 POSCO 1.82 Infosys Smaller Companies and Markets Investment Series

28 Global Smaller Companies Fund Investment objective The fund aims to achieve capital growth through a portfolio of investments in international securities. The fund intends to invest mainly in shares of smaller companies, which are quoted on the world s stock markets. 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. Risk profile 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. Smaller company funds are higher risk than funds that can invest in larger company sizes. Market conditions, such as a decrease in market liquidity, may mean that it is not easy to buy or sell securities. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/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 fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. The fund s performance may be adversely affected by variations in the relative strength of world currencies or if Sterling strengthens against those currencies. Strategy, review and outlook The fund returned 11.5% over the twelve months to the end of July 2015, compared to a return of 12.9% for the benchmark MSCI AC World Small Cap Index. This placed the fund in the second quartile of its peer group, the IA Global Sector, which returned an average of 10.8%. Fund and sector average performance data source: Lipper, mid-to-mid (excluding the entry charge), in Sterling, with net income reinvested. MSCI AC World Small Cap Index source: Thomson Reuters Datastream, total return, in Sterling. Past performance is not a guide to future returns. Global smaller company equity markets remained unsettled during the twelve months to the end of July with uncertainty over the timing and frequency of a US interest-rate rise against a backdrop of ongoing concerns over Greece and volatility in Chinese equity markets. Nonetheless, the prospects for continuing US consumption, amidst a further rise in the employment rate, as well as burgeoning economic strength in the Eurozone, sent a positive signal to global equity markets, which rose during the twelve months. It was a challenging time for emerging smaller company equity markets with many registering losses. Undermining support was a sharp fall in commodity prices, which generated significant stress in energy-related assets and economies, dragged lower by concerns over the growth outlook for China. 26 Smaller Companies and Markets Investment Series

29 Global Smaller Companies Fund The relative underperformance of the fund versus the benchmark MSCI AC World Small Cap Index over the twelve months was driven by its exposure to Europe where stock picking lagged due to a preference for southern Europe (Spain and Italy). In terms of economic outlook, we still see better recovery opportunities in parts of peripheral Europe. Additionally, we believe that companies with defensive earnings profiles look overvalued. In contrast, stocks more sensitive to the economic recovery, in our view, offer more attractive valuations. We believe that this has been overlooked by the market and through the second half of 2014 in particular this approach underperformed. Stock selection in Japan also struggled. Stock selection in the US, however, was strong. Some of the strongest individual performers included: UPL Ultra Petroleum. The company s share price rose on strong results as well costs continued to decline due to faster drilling times and well results came in better than expected; Dycom Industries, which provides engineering, construction, maintenance and installation services to major telecoms providers in the US and Canada. A number of major clients have stated long-term plans to deploy significant wireline networks across the US, designed to provide 1 gigabit of broadband to individual consumers. This is creating great opportunities with existing clients that are unprecedented in the industry, according to the company; and Amag Pharmaceuticals, which late in the second quarter of 2015 announced an acquisition of Cord Blood registry business which can offer cross selling opportunities in the women s health care segment. We believe that the acquisition could be accretive in At the sector level, performance was led by consumer-related areas as well as financials, health care and IT. The fund had an overweight exposure to consumer discretionary and financials stocks which helped performance, as did strong stock selection within energy, materials and industrials. The fund s underweight exposure to health care, the best performing sector over the twelve months, detracted from returns. Nick Mustoe (lead) and the Invesco Perpetual Global Smaller Companies Group, Fund Managers Where Nick Mustoe and the Invesco Perpetual Global Smaller Companies Group have 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. Effective 31 July 2015, Nick Mustoe was appointed Lead Fund Manager. The UK smaller companies market was strong over the twelve months and the fund s overweight exposure versus the benchmark index was positive for performance, as was good stock selection. 27 Smaller Companies and Markets Investment Series

30 Global Smaller Companies Fund Fund facts Launch date 22 September 1984 Fund size at million Accounting date 31 July Ex-dividend date 1 August Distribution payable 30 September Fund Management Fee - Trail classes 1.70% per annum - No Trail classes 1.20% per annum - Z classes 0.95% per annum - Y classes 0.90% per annum Entry charge 5% Ongoing charges figure (OCF) for the year ended Trail classes 1.70% - No Trail classes 1.20% - Z classes 0.95% - Y classes % Ongoing charges figure (OCF) for the year ended Trail classes 1.72% - No Trail classes 1.22% - Z classes 0.97% - Y classes % 1 Share classes launched 31 March 2014 The OCF is expressed as a percentage of average net assets for the year. It is the annual fee that the Manager charges for its services in managing the sub fund and is inclusive of the fees and expenses which are paid by the Manager in relation to its operation and administration. It excludes portfolio transaction costs as well as the entry charge. The OCF is equivalent to the FMF, which we also refer to as the ongoing charge in our Key Investor Information Documents (KIIDs) and our literature. 28 Smaller Companies and Markets Investment Series

31 Global Smaller Companies Fund Risk and Reward Profiles for the year 1 August 2014 to 31 July 2015 Lower Risk Higher Risk Typically lower rewards Typically higher rewards The risk category shown is not a measure of capital losses or gains, but of how significant the rises and falls in the share class prices have been historically. For example a share class whose price has experienced significant rises and falls will be in a higher risk category, whereas a share class whose price has experienced less significant rises and falls will be in a lower risk category. As the Share Class risk category has been calculated using historical data, it may not be a reliable indication of the Share Class future risk profile. Please note that the Share Class risk category may change in the future and is not guaranteed. The lowest risk category does not mean a risk free investment. A share class in risk category 6 indicates its price has experienced very significant rises and falls historically. 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. 29 Smaller Companies and Markets Investment Series

32 Global Smaller Companies Fund Distributions to to p p Accumulation shares Payable 30 September Accumulation shares (No Trail) Payable 30 September Z Accumulation shares Payable 30 September Y Accumulation shares Payable 30 September Income shares Payable 30 September Income shares (No Trail) Payable 30 September Z Income shares Payable 30 September Y Income shares Payable 30 September Smaller Companies and Markets Investment Series