Henderson - Fundsquare

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@
Henderson
Global Investors
Henderson Horizon Fund
Annual Report & Accounts
For the year from 1 July 2005 to 30 June 2006 (Audited)
Incorporated in Luxembourg as an open-ended
investment company qualifying as a UCITS
(Undertaking for Collective Investment in
Transferable Securities)
O9 OCT, 2M16
Henderson
Horizon Fund
Contents
Reserve Fund & Bonds
Core Equity
Specialist
Smaller Companies
Page 2
General Information on the Fund
Page 3
Investing in the Fund
Page 4
Directors' Report
Page 5
Ten Year Highest and Lowest Net Asset Value per share
Page 8
Net Asset Value Summary
Page 10
Performance History
Page 11
Combined Statements
Page 13
Global Bond Fund
Page 17
Pan European Bond Fund
Page 21
Global High Yield Bond Fund
Page 25
US Dollar Reserve Fund
Page 29
American Equity Fund
Page 33
Continental European Equity Fund
Page 37
Global Opportunities Fund
Page 41
Japanese Equity Fund
Page 45
Pacific Equity Fund
Page 49
Pan European Equity Fund
Page 53
Pan European Equity Dividend Fund
Page 57
Asia-Pacific Property Equities Fund
Page 61
Global Property Equities Fund
Page 65
Global Technology Fund
Page 69
Pan European Property Equities Fund
Page 73
Japanese Smaller Companies Fund
Page 77
Pan European Smaller Companies Fund
Page 81
India Fund
Page 82
Notes to the Financial Statements
Page 90
Auditor's Report to the Shareholders
Page 91
General Information
Page 92
Henderson Global Investors
1
General Information on the Fund
Chairman:
Robin Baillie
4 Broadgate,
London, EC2M 2DA
United Kingdom
Directors:
Giorg io Giovannin i
Via Agnello 8
20122 Milano
Italy
Country Head Italy
Kate O'Neill
4 Broadgate,
London, EC2M 2DA
United Kingdom
Director of European
Distribution and Hedge Funds
Jeremy Vickerstaff
Rue Henri Schnadt 4a
L-2530 Gasperich
Grand Duchy of Luxembourg
General Manager, Henderson
Fund Management
(Luxembourg) S.A.
lean-Claude Wolter
Avocat Honoraire,
Director of Companies
232 rue Edith Cavell
B-1180 Brussells
Belgium
Investment Adviser:
Henderson Management S.A.
23, Avenue de la Porte Neuve
L-2085 Luxembourg
Management Company:
Henderson Fund Management
(Luxembourg) S.A.
Rue Henri Schnadt 4a
L-2530 Gasperich
Investment Manager
& Distributor:
Limited
4 Broadgate,
London, EC2M 2DA
United Kingdom
2
Sub-Investment Manager of
the North American Portfolio
of the Global Property
Equities Fund:
K G Redding & Associates, LLC
One North Wacker Drive,
Suite 4343
Chicago, Illinois 60606-2841
United States of America
Registered Office:
23, Avenue de la Porte Neuve
L-2085 Luxembourg
Administrator:
BNP Paribas Fund Services
33 Rue de Gasperich
L-5826 Hesperange
Postal Address: B.P. 2463
L-1024 Luxembourg
Registrar and Transfer Agent:
BNP Paribas Securities Services
Luxembourg Branch
33 Rue de Gasperich
L-5826 Hesperange
Postal Address:
L-I 024 Luxembourg
Custodian:
Citibank International plc
(Luxembourg Branch)
Atrium Business Park
31 Z.A. Bourmicht
L-8070 Luxembourg
Auditor:
KPMG Audit S.à 1.1
3 1 Allée Scheffer
L-2520 Luxembourg
Legal Adviser t o the Fund
as t o English Law:
Lovells
Atlantic House
50 Holborn Viaduct
London EC2A 2FG
United Kingdom
as to Hong Kong Law:
Johnson, Stokes and Master
16th-19th Floors
Prince's Building
1 O Chater Road
Central
Hong Kong
as t o Dutch Law:
Lovells
Frederiksplein 42
1 O1 7 XN Amsterdam
PO Box 545 1OOAM,
Amsterdam
The Netherlands
as t o Swiss Law:
Naegeli & Partners
Klausstrasse 33
CH8008 Zurich
Switzerland
as t o German Law:
Lovells
Schlüterstrasse 37
10629 Berlin
Germany
as t o Italian Law:
Lovells
Via dei Due Macelli 66
00187 Rome
Italy
Legal Adviser t o the Fund as
t o Spanish Law:
Uria & Menendez
Calle Principe de Vergara
187 Madrid,
28002 Spain
legal Adviser t o the Fund as
t o Belgian Law:
DLA Piper
Coppenc Van Ommeslagne
& Faurès
Avenue Louise 81
B-1050 Brussels
Belgium
t o French Law:
Lovells
6, Avenue Kléber
751 16 Paris
France
t o Taiwanese Law:
Russin & Vecchi
205 Tun Hwa N. Road
9th Floor, Bank Tower
Taipei
Taiwan
as t o Norwegian Law:
Thommessen Krefting Greve Lund
Haakon Vll's Gate 1O
PO Box 1484 Vika
N-0116 OSIO
Norway
as t o Swedish Law:
AdvokatPirman Vinge KB
Smalandsgatan 20
Box 1703
SE-1 11 87 Stockholm
Sweden
Hong Kong Representative:
Dexia Trust Services
Hong Kong Limited
Central Plaza, 51st Flooi
18 Harbour Road
Wanchai
Hong Kong
as t o Austrian Law:
DLA Weiss-Tessbach
Rotenturmstrasse 13
A-1010 Vienna
Austria
as t o Luxembourg Law:
Linklaters Loesch
35 avenue John F. Kennedy
L-1855 Luxembourg
t o Singapore Law:
Allen & Gledhill
One Marine Boulevard
# 28-00 Singapore
O1 8989
as t o Liechtenstein Law:
Sele Frommelt & Partner
Advokaturburo
Postfach 1617
Meierhofstrasse 5
FL-9490 Vaduz
Fürstentum, Liechtenstein
as t o Irish Law:
Matheson Ormsby Prentice
30 Herbert Street
Dublin 2
Ireland
Investing in the Fund
The Henderson Horizon Fund provides a simple and cost effective way of investing in world equity and bond markets The Fund,
through its seventeen funds, provides the investor with access to thirteen equity funds, three bond funds and one reserve fund
Applications for shares may be made on any business day in Luxembourg to the Registrar and Transfer Agent between 9.00am and
6.00pm (local time), or t o the Distributor in London between 9.00am and 5.00pm (local time). Applications should be made on the
application form circulated with the Prospectus or by fax, telephone or in writing and may be made in any major currency. Applications
are accepted by telephone only from existing investors who have previously been issued with a personal service number.
For full information, including a copy of the Prospectus, please write to the Registrar and Transfer Agent or Distributor at the addresses
shown on page 2.
For further information on latest performance numbers or other information on the Henderson Horizon Fund please refer to the
monthly Fact Sheets, which are also available from the Registrar and Transfer Agent, the Distributor or on the Fund’s
website: www. henderson.comlhoriron.
Alternatively. contact the main dealing desk on Luxembourg +352 2696 2050.
For jurisdictions in which the Fund is authoriçed please refer to the Prospectus.
3
Directors' Report
For the year from 1 July 2005 to 30 June 2006
The Directors are pleased to present the Report and Financial Statements for the Henderson Horizon Fund for the twelve-month period
to 30 June 2006.
Assets under management at 30 June 2006 rose to USD 5.3 billion (EUR 4.2 billion), from a figure of USD 3 billion (EUR 2.5 billion) at
30 June 2005.
Over the period, the US S&P 500 Index rose by 8.63%". the FTSE All Share Index by 19.6%*, and the MSCl Japan Index closed
35.96%* higher. The Asia-Pacific region also produced a positive return, with the MSCl AC Pacific Free ex Japan Index rising by
22.87%* over the year.
Despite higher US interest rates and a steep rise in energy prices, overall it was an encouraging year for world equity markets. Strong
growth in earnings and dividends plus burgeoning merger and acquisition activity, assisted by the rapid growth of private equity
investment, were critical factors behind the rise in share prices. Equity markets became more volatile, however, in the second quarter
of 2006, as the release of adverse US inflation data triggered a sell-off in May and early June on concerns that, in response t o the
figures, the Federal Reserve would raise US interest rates to levels higher than previously anticipated. Investors became more risk averse
and emerging markets and smaller company indices fell sharply in the correction.
Over the year as a whole, Japan was comfortably the top-performing major market, largely on convincing evidence of a long-awaited
recovery in the domestic economy, raising expectations that the Bank of Japan would soon be able t o abandon its zero interest rate
policy. The Topix index rose by 34.8%*. A broadly positive economic outlook also boosted the smaller Pacific markets. European equity
markets performed well, buoyed by improving corporate earnings prospects and evidence of a revival in the major domestic
economies. By the end of the review period, the FTSE World ex Europe UK Index had risen by 26.04%*. Continuing merger and
acquisition activity fuelled the FTSE All Share's 19.6%* advance. Mid cap stocks outperformed and the second line FTSE Mid250 Index
recorded an all-time high in May. In contrast, US equities lagged other major markets, as concerns over the impact of higher interest
rates on corporate profits capped gains.
The yield on 10-year US Treasuries trended higher over the review period as the Federal Reserve sought to head off inflation with a
total of eight rate increases during the period to 5.25%. The US yield curve inverted on several occasions, but thus far this seems t o
have been a premature signal of economic weakness. In Europe, the initial outlook for stagnant economies gradually gave way, as
economic data (particularly survey data) went from strength to strength. The European Central Bank raised rates three times over the
year to 2.75%.
Looking to the second half of 2006, equity markets may struggle if global economies weaken as some respected financial
commentators are forecasting. However, as long as any economic downturn is moderate, equity markets should not fall too far or for
long. The possibility of easier monetary policies might offer some support in 2007. Conversely, bond yields may rise in the short-term if
central banks tighten policy.
Robin Baillie
Chairman
31 August 2006
Notes: *US dollar terms. The base source for performance and indices statistics is Micropal
(Year ended 30 June 2006)
Prices are shown in USD terms (unless otherwise stated)
Fund
1997
2001
1998
2002
2003
2004
2005
2006
2.05
2.05
2.09
2.09
1.83
1.83
1.84
1.84
2.42
2.42
2.52
2.52
2.00
2.00
2.04
2.04
2.48
2.32
2.63
2.56
2.48
10.84
10.94
11.11
11.11
9.96
9.94
9.96
9.94
Global Bond Fund
High
A1
B1
A2
B2
A1
LOW
B1
A2
B2
High (EUR)
Low
-
A1
B1
A2
B2
A1
B1
A2
B2
(EUR)
Global High Yield Bond Fund*
High
Low
A1
A2
A1
A2
-
-
-
-
-
-
-
10.01
10.00
10.01
10.00
9.76
9.76
9.76
9.76
-
-
-
-
-
10.00
10.00
10.03
10.03
10.00
10.00
9.98
9.97
10.00
10.00
10.08
10.08
10.00
10.00
10.03
10.03
-
-
-
2.76
2.70
-
-
-
2.19
2.29
2.26
-
-
-
2.29
2.45
2.49
-
-
-
10.76
11 09
11.08
11.28
-
-
12.12
12.19
-
-
-
10.32
10.43
10.37
-
-
-
10.69
11.12
11.72
-
-
-
10.68
12.35
10.41
11.18
11.14
13.65
10.22
12.17
10.74
14.38
10.24
13.24
10.00
10.00
10.00
-
-
-
10.10
10.20
-
-
10.46
10.00
10.00
10.00
High
A1
B1
A2
B2
A1
B1
A2
82
Low
-
-
-
-
10.08
10.09
10.20
-
-
-
-
10.59
10.59
11.73
11.73
-
-
-
9.81
8.52
10.30
10.30
-
-
23.74
23.74
30.57
30.73
High
A1
A2
B2
A1
A2
E2
Low
-
-
-
-
-
-
-
10.22
10.22
8.65
8.65
-
9.48
8.10
8.60
8.60
6.78
6.78
7.93
8.10
-
-
26.24
24.05
20.98
20.87
20.65
-
-
18.01
19.47
13.02
12.87
High
LOW
(EUR)**
(EUR)*'
--
A1
A2
B2
A1
A2
B2
-
-
-
11.98
16 55
18.56
33.59
34.32
-
-
-
-
-
-
9.27
11.61
11.85
17.55
24.45
-
-
-
-
-
-
-
-
-
-
-
-
16.21
20.92
18.76
23.35
23.35
-
-
-
13.87
13.87
-
Global Opportunities Fund***
High
A1
A2
B2
A1
A2
B2
LOW
__
-
-
-
-
-
-
-
10.40
10.40
9.33
9.33
10.71
-
11.63
11.31
-
-
-
-
-
-
9.02
9.02
6.89
6.89
8.30
11.00
10.78
11.04
11.04
-
-
-
I
.
I
5
(Year ended 30 June 2006) (continued)
Fund
1997
High
1998
2000
AI
A2
B2
12
A1
A2
B2
[.ow
2001
Low
High
(EUR)
A2
82
A2
B2
Pan European Equity Dividend Fund****
A1
High
(EUR)
LOW
A2
I2
A1
A2
I2
(EUR)
-
-
8.20
8.20
10.95
10.59
10.59
-
-
-
-
29.55
42.21
37.49
-
-
-
-
28.03
16.44
15 37
26.14
26.05
-
-
-
-
-
Asia-Pacific Property Equities Fund*
High
-
-
-
-
-
-
-
-
14.62
14.62
-
9.54
36.01
-
2006
-
-
-
6.02
6.02
5.69
5.69
-
-
2005
14.16
A1
A2
B2
12
XZ
A1
A2
82
I2
x2
LOW
2004
-
9.54
34.53
2003
14.16
I2
Pacific Equity Fund
High
2002
30.35
30.35
21.84
21.84
6.91
9.11
9.11
14713
10.95
9.55
40.73
43.92
60.03
-
-
-
27.85
34.10
42.50
-
-
-
16.07
16.07
-
29.39
29.39
22.33
22.33
-
-
-
-
-
-
10.96
10.96
9.83
9.83
10.95
8.71
12.51
-
-
-
-
-
-
-
9.37
9.37
6.86
6.86
8.57
10.01
16.13
16.07
12.22
12.22
-
-
-
-
-
12.22
13.64
-
-
-
12.68
12.68
12.55
11.11
10.00
10.00
15.24
15.39
15.29
12.41
12.41
12.27
-
-
-
**
13.52
7.26
13.52
7.26
10.60
13.58
13.58
13.52
9.72
6.13
6.13
9.72
8.97
9.73
9.73
1 13 4
AI
A1 (GBP)
A2
A2 (GBP)
A2 (EUR)
I1
Low
I?
X?
A1
A1 (GEP)
A2 (GBP)
A2
A2 (LUR)
I1
IZ
x2
-..__..._-_I
.. ... .
Global Property Equities Fund****
High
AI
A2
A2 (GBP)
I1
LOW
-
I2
AI
A2
A2 (GBP)
I1
I2
-
-
-
-
-
-
-
-
-
10.61
10.61
-
10.68
9.66
9.66
-
9.69
14.22
14.24
7.87
14.42
14.42
10.12
10.13
6.90
10.62
10.62
(Year ended 30 June 2006) (continued)
1998
1997
Fund
1999
2000
2004
2005
2006
-
-
22.80
22.07
25.84
25.84
2001
2002
-
-
32.23
32.23
17.57
17.33
-
-
-
-
-
-
16.28
16.21
10.98
10.91
17.05
17.49
20.92
20.92
-
-
-
-
13.90
13.03
17.08
-
-
-
-
13.90
13.03
-
-
-
35.01
31.97
34.62
24.14
19.40
24.14
19.48
2003
High
A1
A2
62
A1
A2
82
Low
I--.I
-
-
-
-
-
13.08
19 8 0
27.99
101 54
84.90
-
-
-
-
-
-
13.15
13.52
28.04
26.02
-
-
-
9.28
.
.
..-_--I_-.
High
(ElJR)
Low
(EUR)
-
-
-
A1
A1 (GBP)
A2
A2 (GBP)
B2
I1
12
x2
A1
A1 (GBP)
A2
A2 (GBP)
B2
I1
I2
x2
34.48
23.53
34.62
23.63
-
20.20
-
17.06
-
-
28.99
25.13
29.41
High
Low
A2
40.55
29.31
26.92
36.36
76.28
82
-
-
-
-
-
A2
82
22.18
14.82
13.51
22.77
14.66
-
-
-
-
-
16.37
15.74
11.69
1 1 69
15.70
15-70
10.32
10.32
22.92
-
23.42
31.27
-
-
12.08
19.77
22.06
-
-
-
16.02
16.02
23.71
23.74
..
High
Low
(EUR)**
(EUR)**
A1
A2
82
A1
A2
B2
..
-
-
-
-
19 60
26.43
27.16
28.37
23.24
-
-
-
-
-
12.66
18.05
9.13
10.83
13.93
-
-
-
-
-
I
~....I-._
-
-
-
14.08
11 96
9.95
12.44
9.95
-
-
-
872
9.61
6.33
6.33
-
-
7.72
13.76
10.94
15.38
15.38
-
-
-
~
* On 9 February 20C4 the name of this fund was chanyed from Pan European High Yield Bond Fund to Glohal High Yield Bond Fund, it was re-denominatedfrom euro to
US dollars, the investment policy and benchmark were changed, and therefore performance has been calculated from that date.
* * The historical Highest and Lowest Net Asset Value figures for the Continental European Equity Fund and the Pan European Smaller Companies Fund
have been converted from the legacy base currencies of US dollars and Dutch guilders t o euro using the appropriate euro exchange rate.
* * * The name of this fund was changed from Global Equity Fund to Global Opportunities Fund on 1 April 2005.
* * * * The Pan European Equity Dividend Fund and the Global Property Equities Fund were launched respectively on 1 September 2004 and 1 January 2005.
***** The Asia-Pacific Property Equities Fund was launched on 3 October 2005.
Net Asset Value Summary
Numbers are shown in USD terms (unless otherwise stated)
Net Asset Value
Asat
Fund
30 Jun 04
Global Bond Fund
8.687.22 1
124,009,734
EUR 102,005,447
Global High Yield Bond Fund**
2 1,608,2 18
Continental European
Equity Fund
13,255,676
2,641,904
592.1 22,430
EUR 487,056,226
Global Opportunities Fund***
9,532,381
As at
30 Jun 05
6,277,896
134,020,023
EUH 11 1.1 68,269
15,581,435
11,130,320
7,418.21 S
455,737,752
EUR 378,029,908
13,124.31 5
As at
I
I
Net Asset Value Per Share
Asat
kat
30 Jun 04
30 Jun 05
30Jun06
2 32
da
2 49
2 41
n/a
2 63
232
n/a
nla
nla
da
n/a
n/a
EUR 10 41
EUR 1 0 9 7
EUR 1 0 3 9
30 Jun 06
5,367,784
143,357,320
EUR 1 12,777,770
14,828,077
5,979,113
16,811,997
483,186,081
EUR 380,117,658
1 1,941.07 1
A1
I1
A2
12
x2
A1
I1
A2
12
x2
A1
I1
A2
I2
x2
AI
I1
A2
I2
A2
I1
I2
x2
A1
Pacific Equity Fund
554,654.808
104,445,517
755,943,214
EUR 621,808,650
87.81 6,651
817,072,519
-
569,441,698
65.457.784
1,344,562,959
EUR 677,753,484 EUR 1,057,754,234
278,957,460
EUR 231,392,424
Pan European Equity
Dividend Fund****
Asia-Pacific Property
Equities Fund*****
405,405,065
-
356,006,273
EUR 280,066,575
409,524,711
da
nla
nla
EUR 12 07
nla
nla
1045
nla
13 26
EUR 1 1 74
n/a
nla
n/a
nla
10.00
n/a
10 09
n/a
9.24
n/a
nla
10.00
nla
1020
n/a
10.00
nla
10 46
nta
nla
1042
nla
1 1 04
n/a
nla
nla
nta
A2
I2
n/a
n/a
nla
EUR 20.16
n/a
nla
EUR 21.92
nla
EUR 28 06
x2
n/a
A1
I1
A2
n/d
nla
EUR 23 73
n/a
EUR 23 73
n/a
nla
1 1 15
12
12 82
nla
nta
11.15
n/a
nla
nla
12.82
n/a
nla
12 84
n/a
n/a
nla
9 65
nla
n/a
n/a
35 14
n/a
43 22
n/a
nla
12 84
12 94
n/a
52 79
n/a
nla
nla
n/a
n/a
n/a
nla
EUR 10.73
EUR 12 48
n/a
nla
n/a
nla
n/a
n/a
EUR 12 69
nla
EUR 12 6 9
EUR 12 55
EUR 14 79
nla
EUR 14 79
EUR 14 85
€UR 14.79
EUR 14 09
nla
IZ
nla
x2
n/a
nla
n/a
da
A1
A I (GBP)
A2
A2 (EUR)
A2 (GBP)
I2
x2
da
n/a
10 50
I1
A2
I1
da
1c 49
n/a
14 09
nla
n/a
nla
n/a
n/a
nla
da
n/a
nla
n/a
n/a
12 05
GBP 6 57
12 12
12 05
EUR 9 48
GBP 6 57
12 12
12 05
nla
n/a
nla
n/a
n/a
A 183%
I
n/a
X
n/a
A 120%
I
n/a
X
nla
A 159%
I
da
X
da
A 1.19%
I
n/a
A 223%
I
n/a
X
n/a
A 199%
I
n/a
X
n/a
A 251%
I
nla
X
n/a
A 196%
I
100%
X
n/a
A 222%
I
n/a
X
n/a
A 202%
I 100%
X
da
A 186%
I 100%
EUR 14 23
E M 14 15
nla
n/a
n/a
30Jun06
da
10.38
da
nla
I
2 56
n/a
x2
A1
I1
A2
I2
x2
A2
I2
x2
A1
I1
A2
I2
x2
A1
k a t
~
EUR 11 10
n/a
n/a
10 23
nla
12.18
I1
TER*
,
kat
Ma
X
A 2 16%
I
X
100%
n/a
Numbers are shown in USD terms (unless otherwise stated)
Fund
Global Property
Equities Fund****
Pan European Property
Equities Fund
Japanese Smaller
Companies Fund
Pan European Smaller
Companies Fund
Net Asset Value
As at
As at
TEA'
Net Asset Value Per Share
Asat
As at
kat
As at
As at
30 Jun 04
30 Jun 05
30 Jun 06
30 Jun 04
30 Jun 05
30 Jun 06
30 Jun 06
-
38,475,388
230,040,917
AI
Ma
da
I1
da
A2
da
A2 (GBP)
Ma
I2
da
x2
da
A1
da
I1
21 13
A2
da
12
da
x2
nla
A1
nla
A1 (GBP)
nla
I1
A2
EUR 17 04
A2 (GBP)
n/a
I2
n/a
x2
nla
A2
22 78
12
nla
n/a
x2
A1
nla
I1
n/a
A2
EUR 12.26
12
n/a
x2
n/a
10 58
n/a
10 58
13 41
13.60
13 42
GBP 7 30
13.60
A 2.17%
I 100%
nla
X nla
A 2 00%
I nla
255,545,447
70,950,848
EUR 58,361,329
32,707,415
lO9.121.347
EUR 89,758,855
186.762.134
430.985.959
EUR 357,498,543
42,897,964
149,759,126
EUR 124.223.698
172,780,508
1,201,761,657
EUR 945.41 3,878
36,446,210
228.359.797
EUR 179,648,369
nla
10 65
n/a
nla
nla
21 16
nla
nla
EUR 24.80
n/a
n/a
EUR 24 80
nla
nla
nla
22 77
nla
23 15
nla
23 15
nla
n/a
EUR 31 37
GBP 21 74
EUR 31 85
EUR 31 50
GBP 21 83
EUR 31 85
EUR31 18
25 95
n/a
nla
nla
EUR 15 52
EUR 20 12
nla
da
EUR 15 52
nla
nla
EUR 20 14
da
da
X n/a
A 2 10%
I
1.00%
X n/a
A 206%
I nla
X n/a
A 202%
I n/a
X nla
TOTAL in USD
* Source: Lipper Fitzrovia Interndtional, Independent Total Expense Ratio calculation. In Accordance with standard industry practice, the stated TER"s do not include
performance fees earned in the period. The amounts earned in relation to performance fees for the period are shown in note 5 t o the financial statements on page 84.
** The name of this Fund was changed from Pan European High Yield Bond to Global High Yield Bond Fund and it was re-denominated from Euro to US Dollars
on 9 February 2004
* + * The name of this Fund was changed from Global Equity Fund to Global Opportunities Fund on 1 April 2005.
'+*+ The Pan European Equity Dividend Fund and the Global Property Equity Fund were launched respectively on 1 September 2004 and 1 January 2005.
*+*** The Asia-Pac,fic Property Equities Fund was launched on 3 October 2005.
tThis figure excludes the assets of the Global Sustainable Investments Fund and the American Smaller Companies Fund. Consequently, the total assets shown are
USD 42,360,182 lesi than reported in previous versions of the Annual Report and Accounts The Global Sustainable Investment Funds and the American Smaller
Companies Fund were closed respectively on 31 March 2005 and 31January 2005.
9
Performance History
(Annualised to 30 June 2006)
Performance numbers are shown in USD terms (unless otherwise stated) for share classes authorised for distribution in Switzerland
1
Fund & Benchmark
2002
2003
2004
2005
2006
A1
1220
15 70
3 10
6 30
A2
895
13 73
16 40
3 30
5 60
-2 1 1
-2 66
-010
16 56
9 70
5 35
AI
A2
-0.10
9 30
1 60
7 90
8 90
8 70
1 .oo
10 24
226
1080
-2 73
-2 10
A1
-
-
-0 40
9 00
10 35
A2
-
-
-0 40
8 30
6 34
-
-
-0.40
7.90
5 92
A1
-
-
-
-
-
A2
030
0 50
0 00
110
2 55
A1
-
-
-
-
A2
-13 50
15 20
2 80
6 05
6 05
I
Global Bond Fund
IP Morgan Government Bond Traded Index
Pan European Bond tund (EUR)
Merrill Lynch Pan European Broad Market Index
Global High Yield Bond Fund'
Merrill Lynch Global High Yield Index
-1 2.40
19 11
5.60
8 63
-
-
-
-
A2
-21 00
-19 20
22 20
-20 17
-18 74
23 19
7 80
4.60
18 37
18 20
21 17
A1
-
-
-
-
15 15
A2
-700
-10.50
24 80
7.40
15 08
-a 00
-1 .a9
24.57
8.70
17 50
A1
-
-
-
-
32 92
A2
-1670
-14 20
54 20
-8.10
32 92
-16 60
-14 40
46 30
2 40
A1
-
-
28 73
22 14
A2
2.40
-1 70
27 I O
2300
22 14
7.71
2 80
2834
2600
22 87
A1
-
-
-
-
A2
-320
-9.90
23 10
1630
19 59
18 51
MSCl World Index
MSCl Japan Index
Pacific Fquity Fund
MSCl AC Pacific ex Japan Free Index
Pan Europeai tquity Fund (LUR)
-1020
-17.90
21.90
14.30
26 04
AI
-
-
-
26.90
12 27
A2
-
-
-
2690
12 22
-
-
-
2030
18 67
A1
-
-
-
-
20 50
A2
-
-
-
-
A1
-
-
-
5 80
A2
-
-
-
-
-
-
5 80
4 90
20 50
25 34
27 00
27 41
26 07
FTSE World Europe Index
Pan European Equity Dlvidend Fund (EUR)**MSCI Europe Index
Asia-Pacific Property Equities***FTSE EPRA / NAREIT Pure Asd totdl return net dividend index (Capital constrained)
Globdl Property Equities F u n d x * * - *
tTSE EPRA / NAREIT Global Index
A1
-
-
-
A2
-46.40
1.20
23 90
0.10
-1 4.40
-1.60
24.80
-2.70
7 93
A1
-
-
-
-
27 11
A2
-1 60
3 50
-1 10
-0 40
37.10
45.50
27 02
3500
3760
28 13
-6.40
-21 10
88 60
0 00
-1 1.01
0 48
98 96
4 50
MSCl All CountrieS World IT Index
Pan European Property Equities Fund (EUR)
EPRA Index (UK Restricted)
A2
Tokyo SE Second Section Index
A2
t ISBC James Capell Smaller Companies Pan Europe Index
9 40
13 97
16 42
30 08
AI
Pan European Smaller Companies Fund (EUR)
9 40
13 97
A1
-0 18
AI
FT5E World Europe ex IJK Index
Global Opportunities Fund"*
-0 58
-7 30
0 25
S&P 500 Index
Continental European tquity Fund (EUR)
1 60
-2980
-21 50
5860
2660
29 77
-16 80
-12 40
3850
2530
36 51
The basis of the performance ralrulation is detprmined by the Swiss Funds Association The source of the indices statistics is Micropal
* On 9 February 2004 the name of this fund was changed from
Pan European High Yield Bond Fund t o Global High Yield Bond Fund,
it
euro t o US dollars, the investment policy and benchmark were changed, and therefore performance has been calculated from that date
*+ The name of this fund was changed from
*xx
Global Equity Fund t o Global Opportunities Fund on 1 April 2005
The Pan European Equity Dividend Fund was launched on 1 September 2004
**** The Asia-Pacific Property Equities Fund was launched on 3 October 2005
* * * * * The Global Property Equities Fund was launched o n 1 January 2005
10
was redenominated from
Henderson Horizon Fund - Combined Statements
Combined Statement of Net Assets
Combined Statement of Net Assets
At 30 June 2006 (JSD)
At 30 June 2005 (USD)
Assets
Investment in securities a t market value (note 3)
Cash at bank
Interest and dividends receivable
Subscriptions receivable
Reorganisation and formation expenses,
net of amortisation (note 3)
Receivable for investments sold
Net unrealised gain on forward foreign exchange
contracts (note 13)
Other assets
Total assets
Liabilities
Bank overdrafts
Payable for investments purchased
Taxes and expenses payable
Redemptions payable
Net unrealised loss on forward foreign exckiange
contracts (note 13)
Other liabilities
Total liabilities
Net assets at the end of the year
5,147,360,331
I 53,426,827
29,592,448
29,314,587
159.785
27,994,106
88,861
21 6,134
5,388,153.081
__-__
22,383,242
24,323,434
45,367,776
185,370
39,282
92,299,104
5,295,853,977
Assets
Investment in securities at market value (note 3)
Cash a t bank
Receivablefor investments Sold
contracts (note 13)
Other assets
Total assets
Liabilities
Bank overdrafts
Redemptions payable
Net unrealised loss on forward foreign exchange
contracts (note 13)
Other liabilities
Total liabilities
3,027.710,941
90,458,238
21,803,205
31,126,358
283,634
36,668,713
29,193
2,236,559
3.2 10,316,841
4,850,023
57,286,876
14,662.718
48,384,691
70.587
3,639,721
128,894,616
3,081,422,225
Combined Statement of Operations
Combined Statement of Operations
For the year from 1 July 2005 to 30 June 2006 (USD)
Income
Income from investments
Bank interest
Other income
Total income
Expenses
Custodian fee
Management fee (note 5)
Shareholder Servicing fees and Distribution fees
(note 6 and note 7)
Administration fee
Operations expenses
Annual tax (note e)
Amortisation of reorganisation and formation expenses
Total expenses
96,901,049
2,912,509
5,212
99,818,770
681,412
63,400,727
21,362,428
6,561,101
4,755,383
2,999,431
153,508
99,913,990
Net loss from investment
Net realised gain on investment
Net realised currency exchange loss
(95,220)
538,350,053
(4,370,726)
Net realised gain
533,884,107
Increase in unrealised appreciation on investments
147,552,806
Net increase in assets as a result of operations
681.436.913
Income
Income from investments
Bank interest
Total income
60,858,193
1,323,028
62,181,221
Expenses
Custodian fee
Shareholder Servicing fees (note 6)
Administration fee
Operations expenses
Annual tax (note 8)
Total expenses
1,238,579
36,535,224
13,479,926
4,615,120
1,710,594
1,423,891
188,907
59,192,241
Net income from investment
2,988,980
234,273,393
(2,577,628)
Net realised gain
234,684,745
Net increase in assets as a result of operations
88,327,183
323,011,928
11
Henderson Horizon Fund - Combined Statements (continued)
Combined Statement of Changes in
Net Assets
Combined Statement of Changes in
Net Assets
Net assets a t the beginning of the year
Exchange rate effect on opening net assets
Proceeds from shares issued
Payments for shares redeemed
Net equalisation received (note 12)
Increase in unrealised
appreciation on investments
Dividends paid (note 14)
3,081,422,225
123,311,097
(95,220)
538,350,053
(4,370,726)
4,921,168,143
(3,511,610,274)
934,576
147,552,806
(808,703)
5,295,853,977
Net assets at the beginning of the year
Exchange rate effect on opening net assets
2,697,586,342
(13,802,920)
2,988,980
234,273,393
(2,577,628)
2,327,576,064
(2,253,002,648)
130,736
88,327,183
Dividends paid (note 14)
(77,2 77)
3,oa1,422,225
The accompanying notes form an integral part of these financial
statements
12
Global Bond Fund
Manager's Report - Annual Review to 30 lune 2006
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was -2.66%* in US
dollar terms The JP Morgan Global Bond Index fell by -0 58% in US dollar terms over the same period.
The yield on the IO-year US Treasury trended higher over the review period, moving up from 4.04% to, briefly, over 5.20% at the end
of the period. Helping this movement along was the steady drive upwards in interest rates, as the federal Reserve sought to head off
inflation with a total of eight rate increases during the period to 5.25%. Bond yields fell briefly in August as rising oil prices and the
after effects of Hurricane Katrina raised doubts about the US recovery. Confidence improved again in September, but yields took
another breather in November as the Fed hinted at an end t o the monetary tightening cycle (at the time seen peaking at 4.5%).
However, that proved premature given continued strong economic data, and the period closed with the Fed having raised rates yet
again as inflation concerns mounted. The US yield curve inverted on several occasions during the period under review, but seems to
have been a premature signal on economic weakness.
Gilt yields followed a somewhat different path over the year, heading broadly lower in the first half from 4.20%-4.40% to a shortlived record low below 4 % as markets anticipated further rate reductions from the Bank of England. That proved a bridge too far,
however, as consumption and housing failed to weaken as expected, with the latter in particular recovering on the back of the central
bank's August reduction. In Europe, the initial outlook for stagnant economies gradually gave way as economic data (particularly
survey data) went from strength to strength. The ECB raised rates three times over the year, to 2.75%, and towards the end of the
period sounded increasingly hawkish on inflation and the potential for further monetary tightening. The Bank of Japan ended its
quantitative easing policy in March, but left rates at zero while awaiting a stable development in inflation.
We began the period with an overall short duration (interest rate sensitivity) stance, which was lengthened early in 2006 as we
anticipated a slowdown across key markets. This did not materialise, and at the end of the period we were underweight interest rate
sensitivity again. We also started out underweight the US in favour of Europe, feeling that the absence of strong economic data in
the latter left the rate reduction case intact. That said, improving European data soon took the prospect of a rate cut off the table.
We were also urderweight long-dated gilts on valuation grounds but were otherwise long duration in line with our view that the
Bank of England could trim rates once again. We were short duration in Japan, where the steadily improving economic outlook and
impending lifting of quantitative easing and the zero interest rate policy argued for less rate exposure. We also held a position in
inflation-linked US TIPS, in anticipation of the negative effects from higher oil and commodity prices, which was removed in November.
In the autumn, we reduced our US short duration stance and European long duration stance to neutral, and brought in a short 10year, long-30-year trade in Europe, anticipating a flattening of the yield curve. This trade went in our favour. In Japan, we brought in a
position in inflation-linked JGBs, balanced by an equivalent underweight position in conventional bonds, in the expectation of a rise in
inflation. Our short duration position in that country was eliminated in the spring as yields had over-reached themselves. In currencies,
we were mainly bearish on the dollar for fundamental reasons, but briefly held a long position as markets reversed course.
Chris Wozniak, Fund Manager**
*Relates to Class A Accumulation Shares.
** Chris Wozniak took over management of the Fund from Katia Velasco-Anton in February 2006.
The base source for performance and indices statistics is Micropal.
13
Global Bond Fund
Statement of Net Assets
Statement of Operations
For the year from 1 July 2005 to 30 lune 2006 (USD)
Assets
Investment in securities
at market value (note 3)
Cash at bank
contracts (note 13)
Other assets
Total assets
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
Number of shares outstanding:
Equivalent to a net asset value per share of:
4,880,85 1
474,886
50,433
151
Income
Income from investment
Bank interest
Total income
148,255
5,392
153,647
Expenses
Custodian fee
1,508
--___
Shareholder Servicing fees and Distribution fees (notes 6 and 7)
Administration fee
.
.
.
.
.
Operations expenses
___".
Annual tax (note 8)
5,407,829
Total expenses
..._.
.
.
.
.
.
8,365
12,555
7,085
12,040
40,045
5,367,784
A2
1,492,404.64
2.56
Net realised loss
(26,811)
Decrease in unrealised
appreciation on investment
(1 19,420)
Net decrease in assets
as a result of operations
(146,231)
A1
669,334.05
2.32
Dividend paid (note 14)
14
6,277,896
56,152
1,540
(84,503)
1,414,821
(2,156,576)
9,234
(1 19,420)
(3 1,360)
5,367,784
16,676
13,862
3,302
356
97,495
56,152
1,540
(84,503)
5 ha re Tra nsa c t i o ns
13,333
Net realised gain on investments
Statement of Changes in Net Assets
16,633
33,333
A2
A1
1,569,707.89
889,894.81
Shares issued during the year 485,728.31
77,609.90
Shares outstanding at the
beginning of the year
Shares redeemed during
the year
end of the year
(563,031.56)
(298,170.66)
1,492,404.64
669,334.05
The accompanying notes form an integral part of these financial statements.
Global Bond Fund
Portfolio as at 30 June 2006
Market
Value
USD
Nominal
Value
%of
Net
Market
Value
USD
Nominal
Value
Assets
%of
Net
Assets
Bonds
Bonds
Transferable secuT:!ies and money Tarket instruments admitted tc an official
exchange listing
Transferdole securities and money market instruments admitted to an official
exchange I!sting
Australia
Netherlands
29,000 AUD Australia Gowrnment Bond 6.25%
1 YW2015
22,196
0 41
238,873
4 45
289,863
5 40
240,926
4.49
320,000 SEK Sweden GovernmentBond 5.25% 15/03/2011 46,761
0.87
Spain
Finland
190,000 EdR Fidand GovernmentBond 3% 04/07/2008
190,000 EUR Spain GovernmentBond 3.6% 31/01/2009
Sweden
France
250,000 EUR France Gowrnmem Bond 3.25% 25/W016 296,225
70,000 EUR France Gowrnment Sond 4.25% 2M4/2015 S9.518
240,000 EUP France GovernmentBond4.75% 25/04/2035 323,171
709,214
5 52
1 67
6 02
13?1
United Kingdom
10.000 GBP United Kingdom Gilt 4.75% 07/03/2020
60,000 GBP United Kingdom Gilt 4 75% 07/12/2038
Germany
370,000 FUR Bundesobligation3% 11/04/2008
10,000 EUR Deutwhland Government Bond 4 75%
04/07/2034
103.000 EUR DeutrchlandGovernment Bond 5%
w/07/2011
465,785
6 68
13.507
025
133.445
612.737
2 49
;1 42
Japan
13,000,000
44,800,000
29,450,000
3,150,000
23,950,000
234,COG FUR Netherlands GovernmentBond 3%
15/01/2010
JPY
JPY
!PY
JPY
JPY
Japan Government Bond 12% 20106/2015 167,173
Japan GovernmentBond 1 I % 22/03/2010 398,413
Japan GovernmentBond I 9% 20/03/2009 263.316
Japan GovernmentBond 2 3% 20/03/2035 26,298
Japan GovernmentBond Ten Year Bond ii 8%
2o/G3/2013
197,529
21,400,000 JPY Japan GovernmentBond Ten YQar Bond 08%
1O’OWO15
’E3.881
20.100.000 IPY Japan GovernmentBond Twenty Year
Bond 1 9% 20/12/2023
167,039
1,342,649
18,465
117,888
136,353
0 34
2.20
2 54
259,285
263,304
392,925
161,168
163,597
1,240,279
4.83
4 91
7 32
United States
270,000 USD US Treasury 4% lYCU2010
271,000 USD US Treasury 4 75% !MY1014
390,000 USD US lreasury 5 625% 15/05/2008
15O.000 USD US Treasury 6% 1 YOU2026
13G.000 USD USTreasury8125% !5/08’2019
2 00
3 00
3 05
23 11
7 42
4 90
0 49
Investment in Securities
Other Net Assets
Total Net Assets
4,880,851
486,933
5,367,784
90.93
9.07
100.00
3 68
Any differenm in the percentage of Net Asset figuresare the rerult of mundings
3 43
3 11
25 03
15
Global Bond Fund
Top ten changes in the securities portfolio from 1 July 2005 to 30 June 2006
Description of Securities
BondslNotes
Purchases
Sales
USD
USD
861,990
398,967
154,447
863,658
182.858
,059,385
384,526
439,490
,450,468
805,127
491,661
498,144
1,213,034
369,553
1,182,131
694,205
.2 19.162
,138,578
903,212
294.254
Germany
Bundesobligation 3 % 1 1/04/2008
DeutSchland Government Bond 4.75%
04/07/2034
Japan
Japan Government Ten Year Bond 1.7%
22/03/2010
Netherlands
Netherlands Government Bond 3% 15/07/2006
Netherldnds Government Bond 3% 15/01/2010
United Kingdom
United Kngdom Gilt 4 75% 07/09/2015
United States
c;S Treasury 0% 16/02/2006
1 5 Treasury 0% 35/c)8/2005
UT Treasury 4 75% 15/05/2014
US Treasury 5 625% 15/05/2008
Portfolio by Country
Country
Market Value USD
% of Net Assets
1,343,649
1,240,279
709,2 14
612,737
289,863
240,926
238,873
136,353
46,761
22,196
25.03
23.1 1
13.21
11.42
5 40
4.49
4.45
2 54
0.87
0.41
4,880,851
486,933
5.367.784
90.93
9.07
100.00
Japan
United States
France
Germany
Netherlands
Spain
Finland
United Kingdorn
Sweden
Australia
Other Net Assets
Total Net Assets
Any differences in the percentage of Ne: A w t figures are the result of rounding5
16
Manager’s Report - Annual Review to 30 June 2006
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was -2 73%* in euro
terms. The Merr II Lynch Pan European Broad Market Index fell by -2.10% in euro terms over the same period.
The period began with a narrowing in credit spreads after a first-half panic-widening in the wake of the GM and Ford downgrades
Investors recovered their optimism and resumed the hunt for yield, which helped high-yield debt outperform investment grade The
latter credit class was hampered by record-low yields which made them a very expensive proposition Yields were held down by the
fear that high oil prices would hamper the global economy The European Central Bank raised rates in December and again in early
June, while the Bank of England moved t o trim rates in August and left them on hold thereafter January saw credit spreads spike
higher again, mainly as a result of a new high in oil prices that in turn was caused by supply and terrorism fears In the spring of 2006,
credit spreads slowly moved wider again as it became evident that inflation would cause yet tighter monetary policy from world
central banks, and that this would eventually guarantee an economic slowdown On the supportive side, however, default rates remain
low, and are expected to rise only slowly into 2007, hence credit fundamentals remain relatively benign
The Fund began the period with a neutral sensitivity to interest rates (duration), with a long duration stance in the UK and a short
stance in Europe This was reduced to a small short given the extent of the move down in bond yields already seen. Duration was
moved t o long in December in line with our house view that a global economic slowdown was due This view proved to be premature,
and we shifted our duration to short towards the end of the period
In the summer months, the Fund took profits in upper Tier 1 and 2 financial paper as targets were reached Throughout the period we
were alert for relative value trades, such as an early trade out of Endesa 2013 bonds into Veolia 2016 bonds based on fundamentals
and potential hostile bid activity Another example is a late December trade in which we sold holdings in Glaxo-SmithKline and Tesco
in favour of short-dated Rhiag and Allied Domecq
In the autumn, the Fund’s key strategy was t o remain underweight supranational bonds while overweighting financials and securitized
bonds Most recently, we have cut positions in Tui (a high-beta travel-services company) and Rhiag in favour of Hammerson pic, in line
with our present strategy of cutting risk Throughout the period, we actively managed our weighting in government and credit bond
classes, taking advantage of fundamental events that shifted market sentiment towards credit We used our government bond
holdings to manipulate the Fund‘s interest rate sensitivity, a cost-effective strategy
We remain optimistic about the credit market. We are making cautious and selective additions and are conscious that spreads remain
tight, although they have moved out somewhat in the wake of recent market volatility Risks have increased, and hence a careful
stance on stock-picking remains key.
Chriz Wozniak, Fund Manager**
* * Chris Wozniak took over management of the fund from Katia Velasco-Anton in February 2006
17
Pan E uropean Bond Fund
At 30 June 2006 (EUR)
For the year from 1 July 2005 to 30 June 2006 (EUR)
Assets
a t market value (note 3)
Cash at bank
Receivablefor investments sold
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Other Income
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
107,116,346
4,965,547
1,953,669
158,084
.
.
.
.
.
956,656
69,906
.
.
.
.
.
115,220,208
4,578,268
79.472
4,100
4,661,840
Expenses
Custodian fee
6,636
679,704
Shareholder Servicing fees and Distribution fees (notes 6 and 7) 271,882
124,949
Administration fee
131,524
Operations expenses
68,65 1
Annual tax (note 8)
19,435
1,302,781
Total expenses
.
.
.
.
.
.
.
.
.
.
173,958
2,266,610
.
.
.
.
.
1,870
2,442,43 8
112.777.770
A2
9,594,574 48
11.74
3,359,059
(1,441,067)
(36,534)
Net realised loss on investment
1,881,458
Net realised gain
(5,965,948)
Net decrease in assets as a result of operations
(4,084,490)
A1
12,679 98
10 39
Share Transactions
For the period from 1 July 2005 to 30 June 2006 (EUR)
For the year from 1 July 2005 to 30 lune 2006
A2
A1
9,195,749.88
12,379.98
111,168,269
3,359,059
(1,441,067)
(36,534)
125,480,584
(120,144,673)
Shares issued during
the year
10,547,583.20
305.00
(1 0,148,758.60)
the year
(5.00)
365,009
end of the year
9,594,574.48
12,679 98
(5,965,948)
18
(6,929)
112.777.770
Nominal
Value
Market
Value
EUR
%of
Net
Market
Value
EUR
Nominal
Value
Assets
%of
Net
krsetI
Bonds
Bonds
Transferable Securiti?\ and money market instruments admtted to an official
exchange listing
Transferable securities and money market instrdrnents admitted to an official
exchange listiriq
Croatia
Spain
1,500,000 EUR Agrokor D 0 11% C3/04/2007
1,573,350
1.40
5,700,000 FUR Spain iKiflgdom OD 3 6% 31/01/20C9
5,686,035
504
1.1 12,782
0.99
485,967
1,152,975
142,688
1.1 17,559
0.43
1.02
0.66
0 99
408.1 12
1,468,404
787,141
334,591
168,791
6,666,228
0.36
130
0 70
0 30
0 15
5 91
Sweden
European Composite
420,000 EUR Abiva 4.7291% 284 1/2014 perpetual
450,000 EUR Chester Asset ReceivablesDealingsNo 1 1
6125% lYlb'2010
1,220,000 EUR EurohypoCapital FundingTrust 6 445%
23/05/2013 perpetual
380,000 EUR MSNA Credit Card Master Note Trust 4.5%
17/06/2016
1,150,000 EUR Mxgan Stanley Dean Wi;ter 5.75%
Ol/W2009
1,250,000 EUR Wssdield Financial3 625% 27/0W012
9,680,333 SEK Sweden GovernmentBond 5 25%
1 5/03/20I 1
406,308
0.36
486,563
0.43
1,306,201
1.16
386,153
0.34
1,261,691
1,193,250
4,980,166
1 .G7
1.06
4.42
United Kingdom
332,300
800,000
750,300
775.300
250.00G
GBP
GBP
EUR
GBF
GBP
950.900 GBP
540,000 GBP
22G.000 GBF
117.000 GBP
BrixtonEstater 6% 30/1U2010
Broadgate Financing 4.821 % 05/07/2036
HammersonPIc4875% 19/06/20!5
Royal & Sun Alliance 6 701% perpetuity
Royal & Sun Alliance Insurance8.5%
GS/lU2214 perpetual
UK Treasury4.75% 07/12/2038
UK Treasury 5% 07/03/2012
UK Treasury 5% 07/03/2025
United Kingdom Gilt4.75% 07/09/2015
Finland
5,830,000 EUR Finland(Rep of ) 3% 04/07/2008
5,766,162
5.1 1
Notes
France
1,200,000 EUR Banque Federativedu Credit Mutuel5%
3C/09/2015
1,24,603
500.000 EUR Belvedere 15/05/2013
504.625
800,000 EUR Bcuygues4.5% 24/05/2013
752,280
1,500,000 EUR Compagniede Saint-Gobain 4.25%
31/05/2011
1,483,875
400,000 EUR Credit Agricole4.13% OW 112015 perpetual 372,800
1,000,000 EUR CMit Logement4.604% 16/03/11 perpetual 962,239
1,820,000 EUR Gowrnment of France 3.25% 25/04/2016 1,696513
4.30C.000 EUR Governmentof France4 25% 25/04/2019 4,326,315
6,520,000 EUR Gowrnment of France4 75% 2YMIz035 6,913,156
18.316,106
Transferable securities ana money market instrJments admitted to an official
exchange listing
1.10
0.45
0.70
1 32
0.33
0.87
1.50
384
6.13
16.24
Germany
1,300,000
5,610,000
1,000,000
1,420,000
2,200.000
5,850,000
2,150,000
EUR
EUR
EUR
EUR
EUR
EUR
EUR
Bayerisihe Landesbank 5.75% 02/06/2310 i.386.617
BLndesobligation3% 11/04/2008
5,555,863
BLndesrepublik Deutsche4 5% 04/01/2013 1,029.900
BLndesrepublik Deutsche 5% 04/01/2012 !,494.550
BmdesrepublikDeutsche 5% 04/07/2011 2,309.560
BLndesschatzanweisungen2% 1 Y06'2007 5,716,583
DeutschlandGovernment Bond 4.75%
1.23
4.93
3 91
1 33
2.05
5 12
04/07/2034
2.03
17.6
2,284,590
19837.863
Luxembourg
1,330,000 EUR HouseholdFinance 4 5% 12/11/2010
950,000 EUR Olivetti Finance 6 875% 24/01/2013
550,000 EUR Reridential Capital 5 125% 17/05/2012
'34,249
1,052,543
543.070
2,939,862
119
0 93
0.48
2.60
European Composite
1,000,003 EUR BAT InternationalFinance 5.125%
09/07/2013
1.900.000 EUR BES Finance4 5% 16/03/2015 perpetual
1,120,000 EUR Goldman Sachs Group 5 125%
24/04/2013
950.000 E M HE05 Treasury Servics 3 75% 26/07/2010
700.000 EUR Old Mutm 5% 041 1/2015 perpetual
420.000 EUR Royal Bankof Scotland 5.125%
03/07/2014 perpetual
1,200,000 EUR Zurich Finance4.5% 17/09/2014
1,000,000 FUR Al2dis Finance 5 125% 02/10/2013 EUR 1,010,600
11,244,000 EUR Netherlands GovernmentBond 3%
15/01/2010
10,957,278
1 1,967,878
0.90
9 72
10 62
0.90
1 60
1,158,092
942,149
670,495
1.03
0.84
428,968
1,183,228
7,205,394
0.38
479,294
855,416
1.334.710
0.42
0.76
1.18
608,560
0.54
1,014,353
486.225
2.1 09.1 38
0.90
0.43
1.87
1,572,755
1.39
383 087
0.34
1,162,440
1.03
0.59
1.e5
6.39
France
420,300 EUR FranceTelecom 7.25% 28/01/2013
920.000 EUR Veolia Environnement 4% 12/0U2016
Germany
390,000 GBP Commerzbank 6 625% 30/0&'2019
1,050,000 EUR tommerzbank Cap Fund 5 012%
12/04/2016 perpetua!
500.300 EUR lery Hersen & Ish NWJ 15/04/2013
Ireland
1,700.000 FUR Bank of Ireland Mortgdge Bank 3 25%
22/06/2015
Netherlands
1,013,377
1,809,085
Netherlands
380,000 EUR BHP Billiton Finance 4.375% 10/10/2007
Spain
Singapore
850,000 EUR Shinsei Bank 3 75% 23/02/2016
81 1.615
0 72
1.200.003 EUR Telefonica EmisionesSAU 3 75%
02/02/2011
19
Portfolio as a t 30 June 2006
(cont i nued)
Nominal
Value
Market
Value
EUR
Top ten changes in the securities portfolio
from 1 July 2005 to 30 June 2006
%of
Purchases
Sales
EUR
EUR
Bundesobligation 3 % 11/04/08
Bundesrepublik Deutsche 3 25% 04/07/2015
Bundesrepublik Deutsche 5% 04/01/2012
Deutschland Government Bond 4.75%
22,186,403
26,533,972
7,435.063
16,425,706
26,964,808
15,739,956
0.41
04/07/20!4
12,320,536
17,630,815
1 00
Netherlands
1.16
Netherlands Government Bond 3% 15/07/2006 8,206,500
Netherlands Government Bond 3% 15/01/2010 9,070,242
11,798,618
5,347,128
Net
Assets
Bonds
Notes
Transferable securmes 2nd money market instruments admitted to an official
fxchange listing
United Kingdom
330,000 GBP Allied Irish Bank, 5 25% 10103/2025
464,483
79C,OOG GBP Anglian Water Services Financing 5 25%
3WlW2015
:,123.270
1.500.1)OO EUR Barclap Bank4 75% 15/03/2020perpetual 1,305,132
640,000 EUR BAT Holdings 4 375% 1YOW014
613,152
24C.OOG GBP Bradford & Bingley 6 462%
02/06/2032perpetual
373,753
773,782
530,000 GBP Constellation Brands 8 5% 15/11/2009
200,000 GBP Dwr Cymru Financing6.907% 31/03/2021 332,059
1,250,000 GBP Egg Banking 7.3% 09/12/2013 perpetual 1,949.634
1,654.829
l.ljC.000 GBP lnvestec Finance 5.25% 25fOU2008
730,000 GBP Old Mutual 5% 21/0i/2016
i.028.547
1,099,352
1,12G,000 EUR Rexam 4.375% 15/03/20i3
ESC,C)00 GBP Tornkins 8% 20112/2C11
1,339,486
630,000 GBP Tyco Inwnational Group 6.5% 21/11/2011 938,386
12,995,905
0.54
0.33
0.69
0.29
1.73
1.47
0.91
0.97
1.19
0.83
11.52
Other Net Assets
Total Net Assets
Spain
Spain Government Bond 3 20% 31/10/2006
Spain Government Bond 4 95% 30/07/2005
16,058,192
16,034,891
18,241,382
7,563,094
2,314,479
7,499,831
9,721,614
United Kingdom
United Kingdom Gilt 4 75% 07/29/2015
United Kingdom Gilt 4 75% 07/03/2020
United States
705,000 EUR blanpower Inc 4.3% 0110W012
Germany
688,870
0.61
107.116,346
5,661,424
112.777.770
94.38
5.02
100.00
Any differences in the percentageof Net Aset fqurer arf the result of roundmgs
Country
Market Value EUR
% of Net Assets
21,947,001
19,662,133
19,650,816
12,350,965
12,185,560
6,848,475
5,766,162
2,939,862
1,573,350
1,572,755
1.1 12,782
817,615
688.870
1947
17.43
1742
10.96
10 81
6 07
5.1 1
2 60
1 40
139
0 99
0 72
0 61
107,116,346
5,661,624
112,777,770
94.98
5.02
100.00
Germany
United Kingdom
France
Letherlands
European Composite
Spain
Finland
Luxembourg
Croatia
Ireland
Sweden
Singapore
United States
Other Net Assets
Total Net Assets
Any differences in the percentage of Net Asset figures are the result of roundings.
20
Global High Yie d Bond Fund
Managers' Report - Annua Review to 30 June 2006
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was 6 34%* in US
dollar terms. Over the same period the Merrill Lynch Global High Yield Index returned 5.92% in US dollar terms.
The start of the review period was characterized by low risk aversion with investors eager to embrace yield in a low interest rate
environment. As a result, lower-rated credits found favour, supported by low and stable default rates. Spreads tightened to around
350 bps over US Treasuries at the start of the period, helped by strong performance in equity markets, with the t w o asset classes
normally well correlated. The New Year saw a renewed move to still tighter levels (near the 10-year low point of 299 bps) in spite of
an already expensive high yield market. However, late in the period as equity markets suffered the first fairly extensive bouts of
weakness, high yield markets at first continued to fare well. The asset class then weakened towards the end of the period as risk
aversion rose along with expectations for global interest rate increases.
At the start of the period, we increased the Fund's weighting in BB and CCC areas, topping up the latter on bouts of market
weakness, and held emerging market debt at just under 10% of the portfolio. These positions included holdings in Turkey and in
Brazilian company Petrobras, as well as holdings in Venezuela, Panama and Colombia. Our weightings in each sub-class of high yield
were actively managed throughout the period to take advantage of price and demand fluctuations in the market. Cash levels were
kept low throughout the period. Early in the New Year, activity on the primary market picked up, and the Fund participated in several
new issues. Towards the end of the period, we shifted our focus to European debt, particularly to relatively safer cash proxies such as
short-dated paper and floating rate bonds from companies such as EMI, Warner Music, Constellation Brands, Hellas Telecom and
Belvedere.
Looking forward, the high-yield market should continue to derive some support from low default rates, although the latter are likely to
rise from the current very low levels to around 3%-4% by the end of 2007 That said, the best performance is now behind us. as
investors become increasingly jittery about the prospects for a less than benign slowdown in the US Rising interest rates are likely to
continue to undermine demand for riskier assets to some extent Once interest rates peak, we feel the next trend in markets will
become clearer
John Pattullo & Jenna Barnard, Fund Managers
The base source for performance and indices statistics is Micropal
21
Global Hiah Yield Bond kund
I
.
I
Statement of 0 perat ions
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
12,338,579
2,315,639
266,919
703
14,92 1,840
_____
53,398
11,001
1,350,431
31,451
1,381,882
Expenses
Custodian fee
Shareholder Servicing fees and Distributionfees (notes 6 and 7)
Administration fee
Operations expenses
Annual tax (note 8)
Total expenses
Net income from investments
Net realised 1055 on investments
1,070,593
(126,456)
(69,442)
Net realised gain
874,695
(42,586)
14,828,077
Net increase in assets
832,109
A2
1,034,620.55
14.09
A1
24,014.71
1049
22,757
6,607
93,763
Share Transactions
Net income from investments
Net realised loss on investments
6,205
155151
46,294
60,87 1
21,364
10,473
10.93 1
31 1,289
15,581,435
1,070,593
(126,456)
(69,442)
14,416,112
(16,045,134)
A2
A1
1,135,384.57
49,903.47
the year
1,062,821.76
555.00
the year
(1,163,585.78)
(26,443.76)
end of the year
1,034,620.55
24,014.71
75,506
(42,586)
(31,951)
The accompanying notes form an integralpart of these financial statemem
22
14.828.077
Nominal
Value
Market
Value
USD
%of
Net
Market
Nominal
Value
Value
USD
Assets
%of
Net
Assets
Bonds
Bonds
Transferable securitiss and money m x k e t inwument5 admitted to an official
exchange listing
Transferable securities and money market instruments admitted to an official
exchange lirtirrg
Brazil
United Kingdom
100.000 USD Brazilian Government InternationalBond
8,87S% 14/10/2019
110,750
0 75
343.001
2 31
100,000 EUR Agrokor Government Bond !1% 03/04/2007 133,$30
0.90
Chile
350,000 USD Chile Government Internationa!Bond
55% 15/01/2513
Croatia
100,000 GBP Allied DomeCc Findntial Sewer 6 625%
12/56/2014
100.000 GBP Constellation Brands 8 5% 15/11/2009
200,000 GBP Corur Group 6 75% 20/05/2008
100.000 GBP EM1Group 8 25% 20/05/2008
200.000 tUR l n m Group Holdings 7875% 15/02/2016
250.000 EU9 invensys 9 875% 1 YO3201 1
100,550 GBP NTL Cable 9 754 1YO4RO14
200.000 GBP Pipe Holdings 7 75% 01/1 lROl1
350,000 GBP UK Treasury 5 75% 07/12/2009
Denmark
100,000 EUR Ncrdic Telephone Co Holdings 8 25%
0 1'OY2016
EUR
EUR
US0
EUR
366,169
2 00
2 41
764,043
927.445
1.78
6.25
297,233
Buldffscnatzanweizungen3% 14/03/2008 755.594
Estada 75% 01/04/2012
136,093
Kabel Deutschland 10.625%01/07/2014
158,625
MTU Aero Engines Investment8.25%
01/04/L014
64,208
1,114.520
5.10
0.92
EUR
EUR
EUR
EUR
Eircom Funding6.25% 15/08/2013
h a d SK PIC 5% 20/12/201C
MDPAcquisitions10 125% 01/10/2C12
Riwrdeep Group 9 25% 1Y04/2011
0 43
7.52
105,061
627,628
139,191
253.348
1,131.228
0.72
4.23
0 94
1 74
7 63
107,252
0.72
261,857
267,894
153,893
118,506
914,802
1 77
Luxembourg
75,000 EUR Cadecom Luxembourq9 375% 1S/W2014
200,000 EUR C i a Finance Luxembourg8 15%
1505/20!4
200,000 EUR Ligithouse Internationa! 8% 30/04/2014
125,000 EUR Nell Af Sarl6.3?5% 15/08/2015
125.000 USD Nell Af Sarl8.3759'0 15/0&2'0!5
181
1.07
0.80
6.17
211,969
1 43
201.399
312.145
725,513
1.36
2.10
4.89
15/08/2015
250,000 USD TronoxWo:ldwide9 5% 01/1uZ012
100,000 SBP Warner MUSKGroup 8 125% 15/04/2014
257,188
258.751
188,923
2,056,200
1 73
1.75
127
1367
Uruguay
100.000 US0 Uruguay Government lnternatlonalBond 7 5%
15/03/2015
96,000
100.00C USD Uruguay Government Internationa'Bond 8%
18/11/20?;
95,750
191,750
Floating Rate Notes
0.64
0.65
129
Transferabre securities and money market instruments admitted t o an official
exchanqe listing
100,OCO EVR Nordic Tel Co Holdings01/05/2016
131,843
0.89
64.145
65,146
129,291
0 43
France
50,000 EUR Belvedere 15Kl5/2013
5C.300 EUR Europcar Groupe 1YOY2013
150,000 FVR ley Hesw & Irish NIW 15/04/2013
200,000 EUR TPleColumbus&Co lYO4RO10
200,000 EUR IUI 10/12/2010
044
0 87
125
185,419
257.877
248.103
691.399
1 67
4 66
260,332
1 76
281,320
1 90
12.338.579
2,489,498
14.a2a.077
83.21
16.79
100.00
1 74
Greece
200,OOC EUR Hellas Telecom lVlOnO12
United Kingdom
180,250
122
131,564
0.89
150.000 GBP WRG Acqu sitions 1Y1 U2011
Spain
100,000 EUR Codere Finance 8 25% WTS 15/06/2015
1.34
0.72
1.04
2.22
0.87
1.05
Germany
Philippines
175,000 US0 Phi lipin6 Gowrnment Intena!ional Bond
8% 15/01/2016
1 a7
EUR FreSeniuS Med Cap Trust 7 375% 1Y06'201 1
GBP HCA Inc 8.75% MTN 01/11/2010
us9 hertz CorpDration 10.5% 01/01/2016
USD Hertz Cormration 8 875% 01/01/2014
EUR Kronos InternationalInc 6.50% 15/04/2013
EUR RockwoodSpxialitia 7.625% 15/11/2014
USE Samsonite3.875% 01/06'2011
USD Sungard Data Systems Inc 10 25%
Denmark
Netherlands
150,000 EUR C o q s Gmbh 9 5% 1YOy1014
150,000 FUR Cullgan Finance Corporation 8%
01/10/2014
250,000 EUR FraeniusFinance 5.5% 31/01/2016
200,000
100,000
100,000
150.000
270,000
J05.000
150,000
255,000
1.07
Ireland
75,000
500,000
100,000
185.000
277.1 I O
159.011
106,250
154,313
328.623
129,656
156,375
0 87
Germany
600,000
100,000
150,000
75,000
1.27
133
2.49
1.32
1.59
2 39
1 24
2 50
4.45
18.58
United States
129,479
France
225.000 EUR Crown European Holdings 6.259'0
0'/09/2011
275,000 EUR Ra{ Acquisition f) 375% 1 Y03/2015
200,000 EUR Rh3dia 8% C!/06R010
188,885
196,718
369,595
195,617
235,645
354,331
183.190
370,508
660,073
2,754,562
Other Net Assets
Total Net Assets
Any di'ference in the percentageof Net Asset figum are the result of rounding8
23
Purchases
Sales
USD
USD
BondslNotes
United States
Choctaw Resort Gevelopment Enterprise
505,625
7.25% 15111/2019
Crystal US Holdings 10% 01/10/2014
552,713
Diglcel 9.25% 01/09/2012
51 1.500
General Motors Acceptance 6.75%
552,000
01/12/201 A
Mirant Americas 8.3% 01/05/2011
5.30,000
Neirran-Marcbs Group 10.375%
15/10/2015
500,750
Prestige Brands 9.25% 15/04/2012
5: 3,125
Semgroup 8.75% 15/1 1/2015
500,873
Tesoro 6.625% 01/11/2015
500.003
Trains 7 651 % 15/06/2015
1,582,500
502,188
571,500
523.750
904,496
525.938
517,813
498,?25
508,375
499,375
1,528,537
Countty
Market Value US0
% of Net Assets
3,035,882
2,056.200
1,805.9 19
1,131.228
1,056,736
9'14,802
725,513
343,001
26: ,322
260,332
191.750
180,250
133,330
131,564
'10,750
20.47
13.87
12.18
7.63
7 13
6.17
4.89
2.31
1 76
1.76
1.29
1.22
12,338,579
2,489,498
83.21
16.79
100.00
United Kingdorn
United States
Germarjy
Irdanu
France
Luxembourg
Netherlands
Chile
Denmark
Greece
L'ruguay
Philippines
Crcatia
Spain
Brazil
Other Net Assets
Total Net Assets
14,828,077
0.90
0 89
0.75
Any differences in the percentage of Net Asset figures are the result of rounding5
24
Manager's Report - Annual Review to 30 June 2006
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was 2.55%* in US
dollar terms.
The Federal Reserve's monetary policy moves have been the determining factor over the fund in the period under review The central
bank has pushed interest rates steadily higher in an effort t o head off inflation, with a total of eight rate increases during the period to
5 25% Bond yields fell briefly in August as rising oil prices and the after effects of Hurricane Katrina raised doubts about the US
recovery Confidence improved again in September, but yields took another breather in November as the Fed hinted at an end to the
monetary tightening cycle (at the time seen peaking at 4.5%) However, that proved premature given continued strong economic
data, and the period closed with the Fed having raised rates yet again as inflation concerns mounted The US yield curve inverted on
several occasions during the period under review, but seems to have been a premature signal on economic weakness
The Fund's strategy over the period under review has been on earning an attractive return by investing in very short-dated corporate
bonds. At the start of the period, the Fed's monetary tightening cycle had only just begun, and interest rate risk was high. However,
despite a false start at the end of 2005, we now feel confident that the prospects of future rate increases are quite limited. That fact
lends itself t o a more diversified group of holdings. In the first half of the period, we added short-dated bonds of Telenor Ah,
Kommunalbanken AS, Rabobank, Bank Austria, Prudential, Credit Suisse, Signet Bank (Wachovia Corp), and Wells Fargo Bank. In the
second half of the period, we purchased bonds of British Transco, the Province of Ontario, Bank of America and Credit Suisse, in
addition to holding substantial amounts of US Treasury bills.
Global GDP growth is likely to fade into the second half of 2006 and into next year This is likely to be led by weakness in the US
housing market, which would lead t o a slowdown in consumer spending Markets are split on the level of the eventual peak in US
policy rates, but this is seen generally at around 5 5% Oil prices should remain at current levels, so the boost to headline inflation
could begin to fade. We continue to add selective corporate holdings which add t o the Fund's income potential The Fund remains
well-diversified, and its investment in Treasury bills and very short-term securities lowers the risk of default
Steve Skinner, fund Manager**
* * Steve Skinner took over Management of the Fund from Michael Kerley in February 2006.
25
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
5,77931 8
176,178
40,491
402,777
27,904
430,681
Expenses
Custodian fee
Shareholder Servicing fees and Distribution fees (notes 6 and 7)
Administration fee
Operations expenses
Annual tax (note 8)
Total expenses
332,269
(347,386)
_____
10,129
18,593
5,979.1 13
A2
571,588.27
10.46
(1 1)
Net realised loss
(15,128)
213,013
197.885
A1
1.oo
10.00
S ha re Tr a nsact ions
26
11,130,320
332,269
(347,386)
(11)
5,020,923
(10,370,245)
1,240
41,290
20,645
12,110
14,873
2,018
6,236
98,412
the year
the year
A2
A1
1,091,058.91
1.oo
486,845.85
0.00
( 1,006,3 16.49)
0.00
230
end of the year
571,588.27
1.oo
213,013
_____
5,979,113
The accompanying notes form an integral part of these financial statements
Nominal
Value
Market
Value
USD
%of
Net
Assets
Nominal
Value
Market
Value
USD
%of
Net
&sets
Bonds
Bonds
Transferable secilrities and money market instruments abmitted to an official
exchange tisting
Transferable securities acd money market instruments admitted t o an official
exchange listing
Australia
United States
200,000 US0 Ria Tinto Finance 5 75% 03/07/2006
200.074
3.35
197,777
3.31
198,729
3.32
199,568
398,317
3.34
6.66
200.E24
3 36
Canada
200,000 USD Ontario (Provof)2.65% BDS 15/12/2036
Germany
200,000 USD KFW 2.375% 25/09/2006
200,000 USD I.aidvJiachafr Rentenbank 4.5%
2YlW2006
250,000 USD Bank of America 7.125% 15/09/2006
250,000 USD Credit Suisse Fmt Boston USA 5.875%
01/08/2006
250,000 U5D Signet BankingCorp 7.8% 1YOWOO6
122,000 U G US Treasury 0% 27/07/2006
760.000 USD US Treasury 0% 03/0&2006
900.000 USD US Treasury 0% 24/W2006
8GO.000 USD US Treasury 0% 17/0PJ2006
840.000 US0 US Tredrur/ 0% 1W0&'2006
360,300 250 US TRasury 0% 31/08/2006
230,003 ilSD Wells Fargo & Co 5.125% 15/02/2007
250,931
4 20
250,: 1 1
251,499
121.58a
756,697
893.441
a34,7ca
835,475
357,040
231.386
4,782,876
4.18
421
2 03
12 66
14.94
13.96
13.97
5 97
3.87
79 99
Netherlands
200,000 UED Brttsh Tranrco tntl Finance 7% tMlN
OY1W2006
Other Net Assets
Total Net Assets
5,779,818
199,295
5,979,113
96.67
3.33
100.00
Any differencesin the percentageof Net Asset figures af? the result of roundtngs
27
BondsINotes
Purchases
Sales
USD
USD
797,22 1
790,000
2,160,221
836,626
836,225
755,769
746,023
577,599
552.205
2,173,457
840,000
840,000
76G,000
750,000
58G,000
546,727
648,672
41 1,927
480,898
480,000
United Kingdom
Britl5h Telecom 7.625-7.875% Step Cpn
1 5/12/05 L'SD
United States
US Treasury 3% 11/05/2r306
US Treasury 3% 08/06/2006
US Trearury 0% 22/06/2006
JS Treasury 0% 18/05/2006
D a d e r Chcisler Nd Hldg 6.4% 15/05/06 ciSD
Wells Fargo & Cc Globdl 5 125%
15/02/07 USD
Toyota Motor C r w t Carp 7% Emrn
11/13/35 US0
Country
Market Value USD
% of Net Assets
m t e d States
Germmy
Netherlancs
Australia
Canaaa
4,782,876
398.3 17
2OG,S24
200,024
197.777
79.99
6.66
3 36
3 35
3 31
Other Net Assets
Total Net Assets
5,779,818
199,295
5,979,113
96.67
3.33
100.00
Any differences in the percentage of Net Aset figurer are the result of roundings
Managers’ Report - Annual Review to 30 June 2006
dollar terms. The S&P 500 Index rose 8.63% in US dollar terms over the same period.
Interest rates were raised throughout a period which also saw Ben Bernanke take over from Alan Greenspan as Chairman of the
Federal Reserve Worries about this change in leadership at a time of rising inflation sparked a significant move by investors t o reduce
risk in May and June The oil price remained at high levels throughout the period, but it was metals prices that grabbed the headlines
as they hit multi-year highs Despite these cost headwinds, corporate earnings continued t o rise in the double digits
Within the energy portion of the portfolio, we switched from EOG Resources into Ultra Petroleum, and from Chevron into Hess. EOG
and Ultra are both highly leveraged to natural gas prices and both are posting impressive production growth. However, whilst EOG’s
attractive production profile is well-known, the market is only just beginning to realise the potential of Ultra’s asset base and the
potential for a multi-year period of rising production growth. The protracted battle to acquire Unocal highlighted to us the difficulty
that Chevron will have in maintaining, let alone growing, its oil production. In contrast, Hess has a number of interesting drilling
prospects and is the cheapest of the integrated players in the group.
In the consumer staples sector, we bought Kellogg, Colgate-Palmolive and Supervalu. Kellogg is a standout in the food space, with
solid volume growth, pricing power and margin expansion scope. They continue t o innovate in the cereals market and are also gaining
share in the attractive ”on the go” snack market. Colgate has been quietly restructuring in the last year, whilst Procter & Gamble has
stolen the limelight with its acquisition of Gillette. The savings from Colgate’s restructuring are going partly towards increased
marketing, particularly in the emerging markets, spurring renewed growth. Supervalu, a food retailer and distributor, has recently
completed the acquisition of 1,100 supermarkets from Albertson’s, making it one of the largest players in the food retail market. The
Albertson’s stores have been underperforming and Supervalu management faces a tough task in turning them around. However, this is
reflected in the valuation which is at a steep and compelling discount to other food retailers.
Within the industrials sector, we added Textron, United Technologies and General Cable, whilst selling our position in General Electric
Textron produces Cessna business jets and Bell helicopters, both of which are seeing record high orders United Technologies is also in
an excellent position, benefiting from strength in the commercial construction and aerospace markets Finally, General Cable IS a
beneficiary of increased spending on electrical transmission and distribution infrastructure, a renewed area of focus by the major utility
companies after decades of underinvestment
Interest rate increases may finally come t o an end in the second half of 2006, but the direction of the market is dependent on the
extent to which the economy slows moving into 2007. Earnings growth will inevitably decelerate as revenue growth comes up against
tough year-over-year comparisons, and as rising costs put pressure on current record high margins. Whilst we harbour some concerns
about the macroeconomic backdrop, the valuation of the market is compelling and leaves room for continued modest equity market
gains.
Anthony Gifford & Nicholas Cowley, Fund Managers
29
St atern ent of 0 perat ions
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
16,459,249
119,679
14,931
13,728
1,457
406,602
_____
_____
17,015,646
.
.
.
.
.
136,338
32,935
34,376
_____
_____
203,649
120,568
9,854
130,422
Expenses
4,526
Custodian fee
169,543
Administration fee
37,965
15,256
Operations expenses
9,946
Annual tax (note 8)
6,773
314,652
Total expenses
(184,230)
126,287
(2,772)
Net realised loss
(60,715)
2 33,804
16,811,997
A2
1,523,150 48
11.04
S hare Tr a nsact ions
30
173,089
A2
7,418,218
(184,230)
126,287
(2,772)
19.210,330
(9,989,640)
.
.
.
.
.
Shares issued during the year
Shares redeemed during the year
end of the year
711,614.62
1,724,978.23
(913,442.37)
1,523,150.48
233,804
_--__
16,811,997
Number
Market
Value
USD
of Securities
%of
Net
Number
of Securities
Assets
Shares
Market
%of
Value
USD
Net
Assetr
exchange listing
Shares
Tcdnsferable Seruritles and money market instruments admitted to an official
exchange listing
Canada
United States (continued)
10,700
9.040
11.206
4,559
1 79
301,063
398.167
410,505
267,636
1,377371
2 37
2.44
1.59
8.19
UTI WorldvJide
125,233
0.74
Ak,bott Ldboratories
Acobe Sptems
Alltel
Anerican InternationalGroup
Anerican Express
Anerican Tower
Angen
Apple Computer
ALtodesk
Boston Scientific
CF Richard Ellis Group
Cltlgroup
Cdgate-Palmoliw
Ecolab
EMC
Emerson Electric
Exelon
Exxon MoSiI
General Cable
General Dynamic
Halliburton
443,367
327,302
405.536
314,828
473,806
298.316
352,314
316.327
187,127
270,000
374,145
558.285
422,822
364,572
258,606
351,519
367.185
346.68 1
322,943
298.086
284,956
264
'I .95
2.41
1 87
2.82
1.77
2.10
1.88
1.12
1.61
Ace Aviation Holdings
Cznadiar. National Railway
Sh3ppers Drdg Mart
Ultra Petroleum
British Virgin Islands
4,914
United States
10,345
10,570
6.400
5,332
8,797
9.648
5,404
5.553
5.428
16,000
15,237
1 1,472
7,wc
8,517
24,962
4,200
6,500
5.6?8
9,300
4,544
3,8G
2.23
4.32
2.52
2.17
1.54
2.09
2.18
2.07
1.92
1.77
1.69
8,161
7,200
Hers
9,600
LWVJS
10,000
6,171
6,608
7,400
13,220
13,900
4.810
15,901
6,000
4,100
8.092
6,721
4,478
8,151
5.485
1.100
5,834
12,410
8,701
Kellogg
Marriott 1n:ernational
Medtronic
Metlife
Micros Sptems
Microsoft
Motorola
National-OilwellVarco
NM Corp
NII Holdings
Northern Trust
PfpslCo
Praxair
Supervalu
Target
Textron
UnitFd Technologies
Wachovia
Walt Disney
Wyeth
Other Net Assets
Total Net Assets
430,534
348.948
339,888
380.250
289.327
335,786
3 18,200
311,133
277,236
300,577
304.186
333,240
228.104
485.560
364,009
138,549
403.719
503,221
447.513
3 18.04
372,610
384,671
14,956,645
16,459,249
352.748
16,811,997
2.56
2.08
2.02
2.26
1.72
2.00
1.89
1.85
1.65
1.79
1.81
1 96
1.36
2.89
2.17
0.82
2.40
2.99
2.66
1.a9
2.22
2.29
88.97
97.90
2.10
100.00
Any differencs in the percentage of Net Asset figuresare the result of rounding:
31
Shares
Purchases
Sales
USD
US0
460.966
48 1.51 9
452,547
381,202
353,046
339,524
287,982
450,771
408,433
524.527
166,713
114,646
335,756
220,456
208,340
316,949
370,074
123,955
285,498
87,900
United States
Ckigroup
Colgate-Palmolive
Ebay
Exxon Mobil
General Dynamics
International Buiness Machines
Johnson & Jchnsori
Micros Systems
Microsoft
Textron
Portfolio by Sector
Sector
Market Value USD
General Industries
Non-Cyciicai Consumer Goods
Finanaals
Cydcal Swces
Canada Cyclical Services
Resources
Other Services
iltilities
InformationTechnology
Other Eauities
Other Net Assets
Total Net Assets
% of Net Assets
3,44O,C37
2,997,030
2,933.308
2,651,051
1 .i09.735
1,046,851
701,447
657,141
629,333
298.3 7 6
20 46
17.83
17.45
15.77
6.60
6.23
4.17
3.88
3 74
1.77
16,459,249
352,748
16.81 1,997
97.90
2.10
100.00
Any differences in the percentage of Net Asset figures are the result of roundings
32
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was 18.20%* in euro
terms. The FTSE World Europe ex UK Index rose 21.1 7% in euro terms over the same period.
European equity markets posted strong gains over the twelve month review period, benefiting from a combination of better than
expected economic and corporate news and high levels of merger and acquisition activity. After reaching five-year highs in early May,
sentiment shifted and markets fell sharply as investors worried that rising inflation would inexorably lead to higher US interest rates
which would choke off economic growth. In the last t w o weeks of June, markets found a firmer footing when, despite sanctioning a
seventeenth successive 2 5 basis point rise in US interest rates to 5 . 2 5 % , the Federal Reserve made no reference t o any immediate
need for further interest rate hikes.
Throughout the review period we focused investment on high-quality companies with a reasonable degree of earnings predictability.
We trimmed holdings in the oil sector, taking profits in ENI, Statoil and Total. Another theme was targeting stocks which had missed
out during the market rally. In this category, we added a position in Dutch support services company TNT. Prior to purchase, TNT shares
had struggled as investors focused on investigations into tax issues at various subsidiaries. Our analysls suggested that the shares were
looking distinctly undervalued.
In early 2006, we initiated a position in power plant company Alstom. The company is seeing excellent demand growth and we expect
this to continue for several years. On the sell side, we disposed of luxury goods manufacturers LVMH and Richemont. Shares in both
companies had done well and looked fully valued. Later on, we added a new position in Spanish retailer Inditex, owner of the Zara
fashion chain. We decided t o purchase this stock after an encouraging meeting with the management team. To finance this, we
trimmed Deutsche Bank and UBS, locking in some profits after a period of outperformance. At the same time, we sold Swiss food
manufacturer Nestle, which appeared to have limited upside potential.
Later in the review period, we reintroduced German chemicaVpharrnaceutical giant Bayer to the Fund. Once Bayer has completed its
merger with Schering it will have a much enlarged healthcare division. We believe that this deal offers significant synergy opportunities
and that this is being overlooked by the market. German retailer Karstadt Quelle was another purchase. The company has a new,
dynamic management team, a clean balance sheet and a strategy for revitalising its retail offering. Our analysis suggested that the
shares could be significantly undervalued. To finance these transactions, we disposed of Ericsson as we were concerned that it was
trading at a high multiple which did not sit well with its negative earnings momentum.
Finally, we topped up a number of stocks which had been unfairly hit during the market weakness in May and June and which looked
undervalued. Examples include OTE. Fresenius AG, Hypo Real Estate and S t Gobain. We also added a position in Telecom Austria; our
analysis suggest: that the shares are undervalued and have some defensive attractions.
In recent weeks the Federal Reserve has provided some reassurance to financial markets that the peak of the US interest rate cycle is in
sight. Despite t h s, we remain cautious about the outlook for US economic growth on a six to twelve-month view. This caution
explains why we have been reducing your Fund's exposure t o selected economically-sensitive cyclicals, increasing the emphasis on
defensive stocks and avoiding companies with significant exposure t o the US.
John Botham, Fund Manager
33
5tatem ent of 0 perat ions
Assets
Investment in securltles
Cash at bank
interest and dividends receivable
Reorganisation and formatlon expenses,
Net unrealised gain on forward forelgn exchange
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
361,688,485
14,457,755
2,649,346
2,221,978
55,183
3,781,794
44,103
384,898,644
2,372,073
1,684,471
706,937
7,305,385
198,518
7,503,903
Expenses
Custodian fee
47,825
5,646,301
Shareholder Servicing fees and Distributionfees (notes 6 and 7) 1,997,975
Administration fee
548,382
Operations expenses
297,268
Annual tax (note 8)
249,562
14,293
Total expenses
8,801,606
Net realised currency exchange gain
(1,297,703)
91,101,545
546,530
Net realised gain
90,350,372
(24,377,468)
17,505
4,780,986
Net increase In assets
Net assets a t the end of the year
380,117,658
A2
13,539,693.55
28.06
A1
6,922.96
27.92
65,972,904
S ha re Tr a nsact ions
378,029,908
(1,297,703)
91,101,545
546,530
120,621,945
(184,501,561)
Net equalisation paid (note 12)
(4,614)
A2
A1
15,921,621.78
5,500.00
the year
4,444,176.16
1,422.96
the year
(6,826,104.39)
0.00
end of the year
13,539,693.55
6,922.96
(24,377,468)
34
(924)
380,117,658
Number
of Securities
Market
%of
Value
Net
EUR
Assets
Market
Value
Number
of Securities
EUR
%of
Net
Assets
Shares
Transferable securities and voney marke: Instruments admitted to an official
exchange listing
Shares
Twsfe*ahlP iecufities and money market instruments admitted to an official
exchange listing
Austria
Netherlands
241,300
Telekom Austria
4,187,762
110
Seadrill
7.li2.Gl5
1 a7
Bermuda
680,OCO
128,377
450,000
165,GOO
1,000,000
246.808
2,859,597
13,695,750
4,010,325
11,655,000
6,839,050
39,059,722
10.28
2,146,966
9,826,554
11,973,522
0.57
2.59
3.16
Aciiona
ACS Actividades
AMs
lnditex
Telefonica
4,842,009
6,534,000
4,949,100
6,763,975
12,569,600
35,658,675
1.27
1.72
1.30
1.78
3.31
9.38
Credit Suisse Group
Julius h e r Holding
Lonza Group
NovdrtlS
DanalpinaWelt Transport Holding
Roche Holdings
SGS Holding
Schmdler Holding
Sika
Swiss ReinsuranceCompany
Syrigentd
LlBS
Zurich Firiancidl Services
5.2 12.69 1
3,928,630
10,589,376
12,180,974
3,120.022
13,437,084
4,062,345
4,141,193
4,897,745
5,419.119
8,120,351
9.ao0.19a
10.310.124
55,219,852
EADS
ING Groep
Philipr Eletlfonics
Reed Elsevier
TNT
Finland
450,000
350.000
Nokia
Sampo
7.1 57,250
1.88
141
3.29
Norway
5,357,600
12,524,850
Alrtom
BNP Paribdi
Compagnie de Saint Gobain
France Teletom
Sdnofi-Aven!is
To:al
4,279,500
13,486,500
6,579,000
1,039,063
12,068,000
11,161,500
48,624,563
112
Spain
3 55
1 73
0 21
3 18
2.94
12 79
Allianr
Bapr
8,870,760
13,628,700
4,251,500
4,680.225
8,336,725
7,234,450
11,465,080
8,070,750
4.8.53.300
71,421,490
7,450,000
440,m
Pan Fish
statoll
France
60,000
ia0,oc~
120.000
62.500
160,000
22G.000
Germany
72,000
380,000
110,001)
165.000
95,000
82,000
88,000
170,000
235,000
Bayensche Motoren Wrke
Commerzbank
Deutsche Bank
E ON
Fresenius
H)po Real Estate Holdngr
Karstadt Ouelle
Alpha Baqk
8,’39,600
(-mCola Hellpnic Bottling
A,?13,000
HellenicTelecommunicationsOrganisation 6,566.400
19.019,000
3.59
1 12
1.23
2 19
1.90
3 02
2.12
1.28
18.78
2 14
l.i3
1.73
5.00
Sanpaolo Imi
UniCredito ltaliano
5,936.150
6,723,750
12,659,900
12G.000
58.000
200.00G
290.000
42,834
1C5.000
5,500
151,443
5.675
100,000
76.000
1 15.300
61.000
137
1 03
2.79
3 20
0 82
3 54
1 07
1 09
129
1.43
2 14
2 58
2.71
25 06
Contracts for Difference
1.56
3.33
4,172,333
1.10
1.77
Luxembourg
371.700
1 .ao
Transferable securities dnd money mafket instrdments dealt in on anothei
regulated market
1%
430.000
1,100,000
3.07
Switzerland
2 33
Greece
420.000
150,000
380.000
40.009
200.000
135.000
205.000
973.256
0.75
3.60
1.06
Italy
320,000
SES Global
EN1 Spa CFD
Other Net Assets
Total Net Assets
44,600
0.01
361.688.485
95.15
18,429,173
4.85
380.1 17,658
1oo.00
Any differencesin tne percentageof Net Asset figures are the result of roundings
35
Top ten changes in the securities portfolio from 1 July 2005 t o 30 June 2006
Purchases
Sales
EUR
EUR
13,851,877
10,838,241
9,389,142
12,781,440
7,431,029
10,393,401
18,839,554
7,343,326
14,567,032
12,020,271
10,873,515
17,331,939
13.339.764
9,625,007
11,468,382
10.82 1,063
x.797354
13,158,740
? 3,726,639
Shares
Finland
Nokia
France
BNP Paribas
Germany
Bayerische Motoren Werke
DaimlerChrysler
Deutsche Bank
Deutsche Post
Italy
UniCredito lialiano
Netherlands
Philips Electronics
Switzerland
Credit Suisse Group
Roche Holdings
14,567.142
Country
Market Value EUR
Switzerland
Germany
France
Netherlands
Spain
Greece
Italy
Finldrid
Norway
Bermuda
Austria
Luxembourg
Other Net Assets
Total Net Assets
% of Net Assets
95,219.S52
7 1.421,490
48,624,563
39,059,722
35,658,676
19,019,000
12,704,700
12,524,850
11,973,522
7,122.015
4,187,762
4,172,333
25 06
1878
12.79
1028
9 38
5.00
3 34
3.29
3 16
1 87
1.10
1.10
361,688,485
18,429,173
95.15
4.85
100.00
380.1 17,658
Any differences in the percentage of Net Asset figures are the result of romdtngs
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was 15.08%' in US
dollar terms. The MSCl World Index rose 17.50% in US dollar terms over the same period
Overall, world stock markets have performed very well during the year to the end of June 2006. The US stock market has been the
laggard but has still performed quite well, rising by 10%. However, the best performing areas have been Japan and Europe (excluding
the UK) where returns have been extremely good. Within the markets there have also been significant differences. In particular,
smaller companies oil-related and mining-related stocks have generally outperformed. The economic background has been positive.
Worldwide growth continues at a good pace and inflation is under control. Even the laggard countries with slower economic growth
such as Japan and Europe are seeing better growth and, as a result, the world economy is bowling along. High oil prices have just
started t o show :hrough in terms of inflation numbers and central banks need to be vigilant in ensuring these do not worsen
significantly from here. Expectations for US rate rises are now therefore higher than a little time ago. The ECB has also increased rates
and further rises can be expected. Finally, Japan has started to reduce its ultra easy monetary policy, and a small interest rate increase IS
expected in the second half of the year.
There has not been much change in terms of regional allocation during the course of the year and approximately 40% of the assets
remain invested in the United States Principal purchases in the United States have been Federated Department Store, Wyeth, the
pharmaceutical company, Williams, an oil sewice stock, and NII Holdings The latter has mobile networks in Brazil and Mexico which
we believe are very attractive Principal sales have been Encana, Schlumberger, CVS Corporation and PepsiCo More recently, we have
also sold EMC Corp, ahead of a profit warning, and Sprint Nextel, the wireless operator
Activity in Europe has been relatively quiet following the heavier period of turnover the year before. The main sales have been France
Telecom and Deutsche Telekom. Amongst the principal purchases was Alstom, the French power plant company. The company is
expecting demand growth to continue for several years as countries catch up on their under-spending. More recently, we have bought
Agfa Geveart. The shares have been quite weak over the past year, but we feel there is significant valuation support with the
possibility of some restructuring. We also bought Debenhams on the recent re-listing. Because of the weakness in the retail sector the
shares were priced at an attractive level.
In Japan we purchased TDK at the beginning of the year The shares had been weak over the previous six months, giving us a buying
opportunity We sold our holding in Toshiba as we felt there would be pricing pressure in their main semiconductor business We also
bought Takeda Chemical, the pharmaceutical company, which has a good pipeline of drugs coming up over the next few years
In Asia we have bought small holdings in t w o real estate companies, Shanghai Real Estate and Neo China We also bought a holding
in Lotte Shopping in Korea The company is one of the best quality retailers and we expect consumer spending t o improve On the
sales side we sold Samsung Electonics following strong performance In Hong Kong we sold Esprit, the international retailer, while we
also completed the sale of China Life This was a relative recently purchase, but the shares have performed well and had reached our
price target
The key question for the global economy is whether the improving picture in Japan and Europe can offset the decline in the US As
interest rates are rising around the world, fears that the authorities will raise rates too far are the main concerns of the markets At the
moment it is not clear how things will pan out and some concern will remain On balance we believe that the global economy will
slow, but not by so much as to cause a major negative impact on earnings That notwithstanding, corporate profits are high and we
expect earnings to increase only slightly over the course of the next year Valuations of most equity markets seem quite reasonable
based on relatively recent history, although if we go back over many years they are probably slightly expensive On balance therefore
we expect stock markets t o improve slightly, in line with earnings Following a strong period of good returns, some consolidation IS
expected and stock markets could prove t o be a little volatile over the next few months With this background, a focus on good stock
selection should enable some returns to be made
lain Clark, Fund Manager
"Relates to Class A Accumulation Shares.
37
Assets
Income
Bank interest
Total income
Cash a t bank
contracts (note 13)
Other assets
Total assets
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
11,131,719
1,058,647
24,554
.
.
.
.
.
3,901
.
.
.
.
.
_____
1,316
12,220,137
_____
15,364
43,702
220,000
_____
_____
279,066
177,413
16,922
194,335
Expenses
Custodian fee
15,484
184,872
Administration fee
60,049
Operations expenses
13,690
Annual tax (note 8)
7,935
6,257
Total expenses
352,312
(1 57,977)
1,302,619
(30,289)
Net realised gain
1,114,353
684,135
11,941,071
A2
923,172 60
12.82
1,798,488
A1
8,040.53
12 82
Share Transactions
Net realised gain on Investment
Net realsied currency exchange loss
13,124,315
(1 57,977)
1,302,619
(30,289)
4,576,843
(7,558,514)
_____
A2
A1
1 , I 68,616.81
8,040.53
the year
363,281.83
0.00
the year
(608,726.04)
0.00
end of the year
923,172.60
8,040.53
684,135
38
(61)
11,941.07 1
Market
Value
USD
Number
of Securities
%of
Net
Assets
Market
Value
USD
Number
of Securities
%of
Net
Assets
Shares
Shares
Traxfeable securities and money market instruments admitted to an official
exchange listing
Transferable securities and money market inst'uments admitted t o an official
exchange listing
Australia
Japan
3.100
6,224
005
Acfa Gevaert
111,633
0 94
Sh3pperj Drug Mart
197,781
1.66
China Cox0 Holding
:trip.com International
Pirg An Insurance
Tencent Holdings
51,337
52,303
61,891
25,182
190,713
0.43
Aaityd Birla Minerai
Belgium
4,600
Canada
5,400
China
100,000
1 ,C3C
20,500
12,000
13,000
28,000
2.800
2,700
1c9
20.000
17
2,"O
2.000
9,000
154.995
163,363
44,291
93,950
159,822
172,712
179,321
124.304
152,404
159,538
1,404,700
130
1.37
0.37
0 79
1.34
1.45
1 50
104
128
1 34
11.76
TornTorn
36,266
0.30
Statoil
99,436
0 83
DBS Grouo
102.724
0.86
Hyundai MotoE
Lone Shopping GDR (in KRW)
Lotte Shopping GDR (in USD)
Samsung Electronics
Shinhan FinancialGroup
55,961
33,450
19,180
41,224
149,979
299.794
0.47
0.28
0.16
0.35
1.26
2.52
hditex
Telefonica
158,857
115,620
274,477
1.33
0.97
2.30
Kuehne & Vagel International
SGS
137,947
112,839
250,781
116
094
2 10
AU Optfonics
Talwan Seniconductor ADS
United Micro Elmronics ADS
58,179
82,901
50,640
191,720
0 49
0 69
0.42
160
156,463
80,210
88,387
122.355
14,985
97,891
76,367
636,658
1.31
0.67
0.74
1.02
0.13
0.82
Daiwd Serums Group
Hino Motors Ltd
Kapp Create
Nippon Sytem Development
NTT DoCoMo
Sekisui Chemical
Sumitomo Mitsui Financial Group
Takda Pharmaceutical
TDK
Yamato Holdings
0.44
0 52
0 21
I 60
Netherlands
935
Noway
Finland
2.250
3,510
Nckia
45,783
0 38
Singapore
France
1,805
51,000
1,05G
130
1,635
9,0or,
Alstom
Rhgdia
Total
Va iouw
Vinci
163,588
101,267
68,279
155,747
169,371
659,252
1.37
0.85
0.57
1.3'
1 42
5 52
Bapr
Ccinmefzbdnk
Dfutsche Bank
Dcutrche Post
Fwsenius
Merck
156B2
9 1.3CIo
146,388
155,309
148,402
135,601
835,882
133
0 76
I23
13c
1 24
1.14
7.0C
63,307
15,773
73,655
122.735
0.70
0.13
0.20
1 03
Greece
2,800
400
3,000
Ccm-ColaHellenic BottlingCompany
Nmional Bank of Greece
National Bank of Greece U R !
Hong Kong
400.000
321,000
Neo-China Group
Shmgha, Real Estate
37,336
58,478
95,814
0.31
0.8G
Tekkomunikasi indonma
68,101
0.57
Enl: Spa
56,172
0.55
Italy
7,700
Spain
3,775
7.000
Switzerland
1,905
119
Taiwan
4,100
9,115
16.000
0.49
Indonesia
85,000
660
86
1,000
65
3.200
Germany
3,440
2,500
1,300
5,800
891
1,500
South Korea
United Kingdom
18,331
23,345
16,000
12,500
16,441
15,800
2.017
Capita Group
Debenhams
tidlfords Gmup
Lloyds TSB Group
Regal Petroleum
Texo
Xstrdld
0.64
5.33
39
(cont i nued)
Number
Market
Value
USD
of Securities
from 1 July 2005 to 30 June 2006
%of
Net
Assets
Shares
Transferaole Secur:ties and money market instruments admitted to an cfficial
exchange listing
4,130
6,OE
6,564
4,522
8,016
1.4%
2,200
2,800
2,850
4,500
3,500
3,300
1,250
2,200
lG,4OC
5.002
Aobotl Laboratories
Adobe Systems
American InternationalGroup
American Express
American Tower
Apple Computer
Adtodesk
Capital One Financial
CB Kichard Ellis Group
i i w o Sfitems
Uigital Rive:
EMC
Exelon
Federated Department Stores
General Electric
Medtronic
Microsoft
National Semitoiductor
National-OilwellVarco
NII Holdings
Nike
PepsiCo
Praxair
Procter & Gamble
Texas Instruments
Textron
Williams Companies
Wveth
209,457
217,793
141,708
204,668
218,635
182,744
17,293
173,640
243,095
34,641
25.203
26,936
233,304
219,540
222.21 1
211,076
188,704
34.517
137,478
155,512
232,289
270,022
189,560
170,955
37,437
201,839
241,488
221.05G
4,662,795
1 75
182
1.19
71
183
1 53
0.14
1.45
2.04
0.29
021
0 23
1 95
184
1 .86
1.77
1.58
0.29
1.15
1.30
1.95
2.26
1 59
143
0.31
1 69
2.02
1 .a5
39.03
Investment Funds
Transferable securities and m o v y market tnstrurnents admitted to an offic,al
exchange listing
United Kingdom
88,000
Purchases
Sales
USD
USD
Sharesllnvestment Funds
China
SunTech Power
196,875
273,914
177,595
184,423
166,466
204,733
234,337
89,770
192,667
188,675
France
United States
4,887
7,100
2,400
3,800
7,071
3,208
500
2,000
5,900
1.750
633
2,600
HendersonGlobal Funds Nortb American EnhancedEquity Fund
Other Net Assets
Total Net Assets
772,278
11,131,719
809,352
11,941,071
Any differences in t k percentageof hlet Asset figures are the result of roundings.
6.47
93.22
6.78
100.00
Alcatel
Germany
Deutsche Post
Japan
TDK
Sweden
Ericsson
United States
Citigroup
EMC
Exxon Mobil
National-Oilwell Vaeco
News Corooration
89,826
241,696
192.680
375,236
347,461
420,930
106,434
184.765
Country
Market Value USD
United States
United Kingdom
Japan
Germany
France
South Korea
Spaip
Switzerland
Canada
Taiwan
China
Greece
Belgium
Singapore
Norway
Hong Kong
Indonesia
Italy
Finland
Netherlands
Australia
Other Net Assets
Total Net Assets
4,662,795
1,4oa,936
1,404,700
835.8~2
659,252
299,794
274,477
250,781
197,781
191,720
190,713
122,735
1 1 1,633
102,724
99,436
95,814
68,101
66,172
45,783
36,266
6,224
11,131,719
809,352
11,941,071
% of Net Assets
39 03
1 1 a0
1 1 78
7 00
5 52
2 52
2 30
2 10
1 66
1 60
1 60
1 03
094
0 86
0 83
C 80
0 57
0 55
0 38
0 30
0 05
93.22
6.78
100.00
Any differences in the percentage of Net Aset figures are the result of roundings
40
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was a rise of 32.92%”
in US dollar terms. The MSCI Japan index rose by 28.73% in US dollar terms over the same period. While the Fund’s performance was
behind the index for 2005, the second half of the period reflected an improvement in performance relative to the index. The fund’s
aversion to chasing gains in what turned out to be overvalued areas of the market, such as smaller companies, helped Performance.
In addition, the negative impact from sector positioning in the first half had diminished by year end. Going forward we expect the
improving trend in performance t o continue.
While equities rose sharply during the first six months of the year, the second half proved to be less rewarding with the benchmark
index only inching ahead in US dollar terms. This was a more volatile period and, whilst the overall return was positive, there was
pronounced weakness in certain areas of the market. Smaller companies, which had enjoyed near stellar performance over the past
several years, fell sharply. The arrest of the charismatic president of a now defunct internet company brought about a swift
reassessment of the more highly rated areas of the market. The Mothers index, home to many of Japan‘s new and more racier
companies, fell by over 50% from its high. Later in the period the prospect of slower growth yet higher inflation in the US sent a
shudder througb Asian stock markets. Japanese equities suffered a renewed bout of selling pressure which brought indices lower.
The confession and subsequent arrest of a senior fund manager on insider trading charges did little to help matters, although equity
markets managed to recover some composure by period-end, After a difficult second half, investors still registered an impressive gain
for the year.
Persistently high commodity prices and the prospect of slower growth in the US have taken some of the shine off the outlook for
equities. However, as we believe that growth in the US will slow, but not extinguish, then our view on Japan - one of broadening
recovery - remains intact. Confidence is percolating through the corporate sector as reflected in revised spending plans to levels not
seen in over a decade, while consumers’ rising expectations for higher prices reaffirms the move towards a more inflationary
environment. A r official rise in interest rates, from zero, is anticipated. While the economy is set for further expansion, companies will
have t o hurdle successfully a rising cost base t o prolong what 15 already a well-established profits cycle. The focus for investment must
be on companies which can either pass on price increases or are positioned t o benefit from a strengthening domestic economy.
From a stockpicker’s perspective the good news t o emerge from the correction in equities has been a renewed focus on valuation. This
suits our fundamentally-driven process and valuations are considerably more attractive now than earlier in the year We find valuations
most compelling in the large cap area of the market and will maintain our focus on later-cycle, more domestically-oriented sectors of
the economy.
Michael Wood-Martin, Fund Manager
*Relates t o Class A Accumulation Shares.
41
Assets
Cash at bank
Net unreallsed gain on forward foreign exchange
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
565,281,934
6,809,435
1,513,537
2,963,490
4,434
8,702,031
.
.
.
.
.
.
.
.
.
.
585,274,861
.
.
.
.
.
3,869,635
1,169,220
10,669,641
5.&52,287
337,239
6,189,526
Expenses
Custodian fee
37,693
6,034,018
Shareholder Sewicing fees and Dsitributionfees (notes 6 and 7) 2,489,376
Administration fee
591,840
Operations expenses
329,046
Annual tax (note 8)
330,800
4,02 1
Total expenses
9,816,794
Net loss from investments
(3,627,268)
42,246,795
454.61 5
Net realised gain
39,074,142
85,525,381
124,667
.
.
.
.
.
15,833,163
569,441,698
A2
41,773,736.16
12.84
A1
430,299.43
12.84
124,599,523
I2
2,114,198.53
12.94
Share Transact ions
Net loss from investments
405,405,065
(3,627,268)
42,246,795
454,615
526,390,149
(486,888,668)
(64,37 1)
A2
A1
Shares outstanding a t the beginning of the year
.
.
.
.
_
41,994,475.94
I2
x2
.---_
-_---
41,099,915.18 430,299.43 2,839,261.53
(41,320,654.96)
.
.
.
.
.
1,130.41
(725,063.00) (1,130.41)
Shares outstanding at the end of the year
41,773,736.16 430,299.43 2,114,198.53
_____
85,525,381
42
.
.
.
.
.
569,441,698
Number
Market
Value
USD
of Securities
%of
Net
Asreis
Shares
Transferable securities and money market instruments adrwted to an of'&
exchange lirting
Japan
3,517.000
311,900
869,000
471,000
1,142,000
1,971,000
424,400
559.200
184,080
2,328
825,000
531,000
874,000
287,300
3,135,000
99,100
265,500
3,572
63,560
552,900
535.653
14,047
804,000
500,600
775,000
354,000
2,109,000
3,166
345,500
113,200
577,100
545,900
323,500
3,975
Y77.000
Auhi Kasei
Beiase
Bridgestone
Canon
Daiwa House Industry
Daiwa Securities Group
Edon
Family Mdn
Hakuhodo
MitsubushiUF Financial Group
Mitsui
Mi6ui Fudosdn
Mitsui Sumitomc Insurance
Murafd Manufacturing
NK
Nintendo
Nippon System Development
Nippon Telegraph 8 Telephone
Nippon TV Network
Nirsen
NS Solutions
NTT DoCoMc
Onward Kashiyama
Picneer
Riroh
Secom
Sekisui Chemical
Sunitorno Mitsui FinancialGroup
Tdkeda Pharmaceutical
TDK
THK
Tovota Motor
Tsubaki Nakashima
West Japdn Railway
Ydnato Holdings
Other Net Assets
Total Net Assets
22,904,081
l0,707,G74
16,697.305
22,989,614
18,206,823
23,4>9,327
8,395,245
16,625,560
13,497,552
32,393,237
11,619,908
11,511,492
10,922,367
18,597,314
16,669,476
16,581,648
9,295,876
17,481,754
8,644,516
6,890,290
12,944,164
20,526,225
12,334,146
8,066,190
15,144.691
16,692,049
18.150,323
33,281,941
2 1.4CO.163
8,596,583
17.117,513
28,479,015
5,490.554
16,437.136
17,259,582
565,281,934
565,281,934
4,159,764
569,441,698
4 02
1
,a
2 93
404
3.2C
4,:i
1.47
2.81
2.37
5.69
2
.w
2 02
1 97
3.27
2.93
2.9:
1.62
3 07
1.52
1.21
2.27
3.60
2.17
1.42
2.66
2.93
3.15
5.M
3.76
1.51
3.01
5.0G
0 96
2.89
3.03
99.27
99.27
0.73
100.00
Any differences in the percentage cf Net Asset figures are the result of roundings
43
ShareslBonds
Purchases
Sales
USD
USD
Japan
Daiw,! House Iidustry
Mitsubushi LF Financial Group
Nippo? Telegraph &Telephone
NTr DoCoMo
Sekisui Cnemital
SMTG Finante Ltd CNV 2 25% 11/07/2005
Sumitomo N i t w Flndncial Group
Tokyo Eroadcast
Toshiba
Yarnato Holdings
5,937,783
15,668.964
~ m . 6 a1
12,860,436
16,184,075
30,885,235
1,093,662
17,082,046
11,416,606
8,238,447
11,950,420
4,365,784
16,192,629
5,531,767
18,663,025
20,003,583
Portfolio by Sector
Market Value USD
% of Net Assets
General Industries
Cycllcal Services
Fiaaricials
Non-CyclicalCoisurner Goods
O:her Services 8 Businesses
Informationk h n o l o g y
228,725,389
150,946,585
11 1,528,363
33,734,310
27,399,123
12,944,164
40 18
26 51
15.59
5.92
4.81
2.27
Other Net Assets
Total Net Assets
565,281,934
Sector
4,159,764
569,441,698
99.27
0.73
100.00
Any differences in the percmage of Net Asset figurer are the result of roundings.
Pacific Equity Fund
dollar terms. The MSCI AC Pacific Free ex Japan Index rose 22.87% in US dollar terms over the same period.
Asian markets posted strong gains in the second half of 2005 and remained buoyant in the early part of 2006. Towards the end of the
financial year in May and June, there was a sharp correction which reversed most of the gains made during the January to April 2006
period. The strong global markets seen in late 2005, as investors shrugged off concerns about higher US interest rates and higher oil
prices, reversed in early May 2006 when concerns re-emerged as US inflation data started to pick up and GDP data started to soften.
Over the course 3f the year, Korea, China and India were the standout performers with US dollar returns in excess of 35%. Hong
Kong, Malaysia and Taiwan were the biggest disappointments, with US dollar returns below 10%. The Australian market performed in
line with regional indices,
At the sector level, Energy and Materials performed very well as underlying commodity prices remained very strong. Ut
Telecoms were the worst performing sectors. Technology was mixed, with strong performance from Indian software stocks but very
poor performance from technology hardware, particularly in Taiwan. Financials were also very mixed. Insurance stocks generally did
well across the region, but banks and real estate were more subdued.
Korean performance was heavily skewed towards the latter part of 2005. Earlier concerns about a potential slowdown in global
growth and Korean export earnings were brushed aside, as clear signs of acceleration in the US and Chinese economies emerged.
Korean bank earnings were also revised upwards as the full impact of normalising provisions for earlier bad debts and faster loan
growth became apparent. Korean returns were further boosted by strength in the Korean Won versus the US dollar. We have a broad
spread of investments in Korea and remain comfortable that the banks have further upside.
India lagged Korea significantly in the late 2005 rally, but more than made up for this in early 2006 as foreign portfolio flows were channelled
into the market. Higher GDP growth led to significant earnings upgrades just as earnings elsewhere in the region appeared to be peaking.
Strong domestic loan growth driven by rising industrial and agricultural wages, together with increasing optimism about public infrastructure
spending, were the main drivers of sharply higher estimates of domestic economic growth. By the end of the 1st quarter of 2006 it became
clear that stock market valuations were becoming stretched. India was hit hard in May and early June by a more general sell-off in emerging
markets, driven by falling investor risk appetite caused by concerns over higher global interest rates. We remain concerned about the general
level of valuations in India and expect further underperformance from the broad market in the second half of 2006.
The performance of the Chinese indices was, in large part, the result of very strong rises in the Energy sector. This was the
consequence of strong oil prices resulting from tight global supply. Chinese demand has been a significant contributor to this supply
tightness, as demand for oil-based products has risen in line with accelerating GDP growth. China Life Insurance and Bank of
Communications were also very stronger performers over the period as surging money supply growth led to a big rise in premiums
written and loans. Our focus remains on the Energy and Telecoms sectors.
Conversely, in Hong Kong where the major indices are dominated by property stocks and the currency is pegged t o the US dollar,
rising US interest rates were a major drag. Transaction volumes in the primary and secondary property markets were down sharply as
households digested higher financing costs and the impact of large rises in property prices in the previous year. We are confident that
a peaking in US interest rates should drive better performance from property stocks in the second half of 2006.
Taiwan also remained depressed throughout the year as the outlook for technology sector earnings remained fairly subdued. The
banking sector also saw very large earnings downgrades as the result of a sharp rise in delinquencies in unsecured loans t o the
household sector. We have recently added t o positions in the banks as we see a near-term peak in problem loans. We are selectively
exposed to secular growth stories within the technology sector.
Malaysia underperformed the wider region during the rising markets in late 2005 and early 2006, but the market performed well
during the May/June sell-off. The portfolio is exposed to the palm oil and finance sectors.
Our long-term outlook for Asia remains positive. Valuations are fair given a structural increase in return on equity driven by Asian
companies' increasing focus on capital efficiency. Earnings growth expectations for 2006 have been slightly downgraded but should
still be at least 5%-10%. Economies remain sound, and in the absence of a sharper than expected slowdown in the US we remain
comfortable with Asia's prospects over the next 12 months,
Andrew Beal, Fund Manager**
*Relates t o Class A Accumulation Shares.
**Andrew Beal took over management of the Fund from Michael Kerley in September 2005.
45
Pacific Equity Fund
for the year from 1 July 2005 to 30 June 2006 (USD)
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
63,821,779
2,826,562
2 19,690
175,584
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
67,043,615
_____
702,928
434,052
446,065
2,034,557
19,339
2,053,896
Expenses
Custodian fee
26,379
1,164,014
Management fee (note 5 )
Shareholder Servicing fees and Distributionfees (notes 6 and 7) 365,899
Administration fee
98,524
Operations expenses
205,534
44,512
Annual tax (note 8)
6,869
Total expenses
1,911,731
142,165
21,769,556
(342,035)
Net realised gain
2 1,569,686
(6,904,490)
.
.
.
.
.
2,786
1,585,831
65,457,784
14,665,196
A2
1,239,875.76
52.79
Share Transactions
87,816,651
Shares outstanding at the beginning of the year
142,165
2 1,769,556
(342,035)
24,558,500
(61,512,335)
(70,228)
A2
2,031,703.10
488,609.58
(1,280,436.92)
1,239,875.76
46
(6,904,490)
.
.
.
.
.
65,457,784
Pacific Equity Fund
Number
of Securities
Market
Value
USD
%of
Net
Assets
an official
BHP Billiton
Macquarie Bank
Puslishing & Broadcasting
PEE Insurance Group
2,752,205
1,384,075
1,507,097
1.257.:74
6,900,546
4.20
2.1 1
2.30
? .92
i o 53
778.640
119
China Petroleum &Chemical
joiu.com
Yanzhou Coal Mining
1,698.976
944.239
1,167,687
3,510,902
2 60
144
1.94
5.98
Ckebng Kong Holdings
Chna Mobile
Esprit Holdings
Henderson Land Development
Henderson I.and Development
Sui Hung Kai Propertis
Wharf Holdings
1,516,216
2,762,122
1,870,575
1,344,737
2.32
4.22
2.86
2.05
Cayman Islands
Hong Kong
140,000
483.500
229,000
260,000
20,000
188,000
466.000
.....
.....
1.915,653
1,657,281
I 1,066,584
2.93
2 53
16 91
ICI3 Bank
Taxa Motors
960.000
1,348,760
2.3C8.760
1 47
2.06
3.53
Awa International
1,183,149
1,697,550
2,880.699
1.81
2.59
4.40
1,342,920
1,524,772
2,867,692
2 33
Indonesia
1,130,000
9,: 70,000
Balk Mandin
Malaysia
826,000
390,500
Ass&
Net
Transferable recc;ritles and money market instruments admitted t o an official
exchange listing
1.860.00C
169,118
180.000
.75,000
1,090,384
1,524,202
1,662,240
1,406,474
6,083,300
1 67
2.94
2 54
2.15
9.30
1,457,646
163,825
1,135,677
1,343,050
2,607,765
1,081,183
1,474,200
2,422,374
1,950,648
13,656.368
2.23
0.28
1.73
2.05
3.98
1.65
2 25
3.70
2 98
20.85
Advanced Semiconductor Engineelng
Cathay Financial Holding
ChinatrustFinancial Holding
Quanta Computer
Tawan SemiconductorADS
United Microelectronits
1,404,675
1,888,799
1,589,768
1,401,852
1,531,758
1,839,645
9,656,497
2.15
2.89
2.43
2.14
2.34
2 81
1476
Bangkok Bank
Land and House
True Corpcration
1,404,709
891,982
1.41 5.100
3.71 1,791
2.15
1.36
2.16
5.67
63.a21.779
1,636,005
65.457.7a4
97.50
2.50
100.00
BanyanTree Holdings
DB5 Group Holdings
Keppel
S!ngapop AirlineS
45,000
5.700
14,700
60,000
31,825
11,680
81,000
34,460
41,623
Hynix SemiconductorInc
Hynix Semicondudor Inc GDR
Hyundai Department Store
Industm Bank of Korea
Kockmin eank
LG Electrorics
LG Philips LCD
Samsung Electronic
Shinhan Financial Group
Taiwan
1,414,000
864.000
1,918,000
675,000
169,255
3.064.979
India
40,000
78,189
USD
South Korea
Poytec Asset Holdings
China
2,974,000
37,000
1,720,000
%of
Singapore
Australia
3,046,970
Market
Value
Shares
Shares
Transferable securities and rnonev market instruments adrnltted to
exchange listing
142,700
27.000
11 1,300
82,379
Number
of Securities
Bumiputra Commerce
I01
2.05
Thailand
513.860
4,555,147
5,450,000
Other Net Assets
Total Net Assets
Any differences in the percentage of Net Asset figurer are the result of roundings.
4 38
47
Pacific Equity Fund
Shares
Purchases
Sales
USD
USD
295,288
2,393,484
2,033528
4,090,044
2,628,484
2,313,988
1,61!,722
3,461,122
1.747.130
3,056,336
1,495,151
2,522,352
1,642,651
2,868,691
3.G33.641
1.640.420
2,838,629
3,025.482
2,075,3 12
2,931 ,2 17
Australia
BHP 8i:itor
National Australia Bank
Westpac Banking
Hong Kong
Chemg Kong Holdings
Sun Huriy Kai Properties
Wharf lloldisgs
Malaysia
Malayan Banking
South Korea
Pynix Semiconductor Inc
Samsung Electronics
United Kingdom
Rio Tinto
Country
Market Value USD
% of Net &wets
13,656,368
11,066,584
5,656,497
6,900,546
6,083,300
3,910,902
3,711,791
2,880,699
2,867,692
2.308.760
778.640
20.85
16.91
14.76
10 53
9 30
5.98
5.67
4.40
4.38
3.53
1.19
63.821.779
1,636,005
65.457.784
97.50
2.50
100.00
South Korea
Hong Kong
Taiwan
Australid
Singapore
China
Thailand
Indonesia
Malaysia
India
Cayman Islands
Other Net Assets
Total Net Assets
48
It has been an intriguing year for the equity markets and another good one too, with the total return for the period, excluding any
initial charges paid on investment, with gross income reinvested, being a rise of 18 51 %* in euro terms The FTSE World Europe Index
rose by 26.04% in euro terms over the same period. My warnings that returns were likely to be lower are looking way too cautious
when viewed over the year, but somewhat more prescient when viewed over the last few months.
A year ago I referred to the "wall of worry" and concerns over possible slowdown in the US economy. A year on those fears are as
real as ever, if not more so. The oil price is over USD75, US interest rates have just been increased for the 17th consecutive time (from
1 % to 5.25% over the course of this tightening cycle), and the Middle East is once again a far from harmonious region. As an
optimist, I am sure that each of these events can be coped with eventually, but as a realist I do worry that they will have a negative
effect on sentiment and even profits in many cases. It is in some ways a remarkably similar position in economies today as it was a
year ago, even though European economies are clearly faring a lot better than previously expected.
During the year I have continued to emphasise the commitment to good quality, reliable growth companies, mindful of the growing
likelihood of weaker economic growth worldwide in 2007. This latter point is an issue which I have repeatedly raised over the last 12
months, but it really does now look inevitable, and as a result I have sold out of Maersk (Danish shipping and oil conglomerate) and
Atlas Copco (Swedish-listed global construction and mining equipment). Both are great companies, but the headwinds will intensify
over the next twelve months. As a result, our exposure to what are sometimes referred to as "cyclicals", is minimal.
Generalisations over sector performance seem even more dangerous today than ever before Many cyclicals have continued to do well
look at the battle for Arcelor, which may yet become an even more profitable global company - and performance across markets and
sectors has been very diverse I have also been making the point that today's basket of growth stocks is different from that of a few
years ago, and it will no doubt be different again in a few years' time Telecoms can hardly be construed as growth stocks, and I have
no exposure t o any of either the fixed or mobile stocks. Semiconductor stocks are in the same category The risk to watch carefully is
when and if other "classic" growth sectors - such as even pharmaceuticals - go the same way
-
Many of my old favourites remain in the portfolio - Capita, Fresenius, Inditex, all of which have continued on their respectable growth
paths. Some names have reappeared - Sodexho, the French-listed global catering group and Sanofi, the pharmaceutical group, which
now trades on just about 14 times earnings estimates, which just seems too low for a growth company. We have also built up big
positions in ABB and Alstom, both of which are seeing huge order intake in power generation related equipment. In terms of strategy
I remain as committed as ever to seeking out good quality, reliable growth companies at reasonable valuation levels -while well aware
that what drives growth is constantly changing.
So where to from here, in the light of recent market turbulence? I am concerned that the falls in May were an early warning sign that
the next few months are riddled with uncertainty. The difference this time is that I suspect that by October or November it will be
much clearer whether we should be worrying about inflation or low growth. Either way, I suspect that the waiting period will be used
as an excuse to let markets drift t o a lower level, Right at the end of June I have therefore bought a small amount (0.5% of the Fund
spent) of index put options (proportional t o the geographical exposure of the Fund) some 5 % below the prevailing level of indices,
with a December expiry. This, combined with a 3 % cash position, reflects my short term caution. I will be using declines of about 10%
to add to holdings where I am confident that the growth prospects are intact. With growing interest in equity investment and a huge
amount of Private Equity money sitting on the sidelines, I do not anticipate a huge fall in markets, just that well known and much
loved "healthy correction"
On the stock selection front I feel that greater economic uncertainty strengthens the case for good quality reliable growth companies.
With almost five years of track record now for this Fund, this is a strategy that has been working well. We shall keep at it!
Tim Stevenson, Fund Manager
49
Sta tern ent of Operations
Assets
Income
Bank interest
Total income
Cash a t bank
contracts (note 13)
Other assets
Total assets
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
1,009,546,348
46,ai 5,224
6,099,752
6,689,264
.
.
.
.
.
.
.
.
.
.
_____
81,899
1,069,232,487
_____
.
.
.
.
r
6,452,941
5,023,682
20,478,701
459,017
20,937,718
Expenses
Custodian fee
126,485
15,193,249
Administration fee
1,407,818
Operations expenses
788,952
Annual tax (note 8)
619,020
21,718
Total expenses
22,727,699
(1,789,981)
127,801,738
1,433,031
Net realised gain
127,444,788
1,630
.
.
.
.
.
1 1,478,253
666,822
1,057,754,234
Number of shares outstanding
Equivalent to a net asset value per share of
A2
68,110,687 70
14 79
A1
146,294.08
14.79
128,111,610
12
3,240,761.56
14.85
S ha re Tra nsact io ns
677,753.484
(1,789,981)
127,801,738
1,433,031
50
946,536,326
(694,647,186)
x2
434.3 1
14.79
A2
A1
54,317,712.59
_____
62,011,047.55
146,294.08
(48,218,072.44)
.
.
.
.
.
3,318,980.56 434.31
(78,219.00)
-----
.
.
.
.
.
68,110,687.70
146,294.08
3,240,761.56
434.31
666,822
_____
l,O57,7S4,234
Number
of Securities
Market
Value
%of
Net
EUR
Assets
Market
Value
EUR
Number
of Securities
K of
Net
Assetr
Shares
Shares
Transferable securities and money rrarket instruments admi.ted to an official
exchange listing
Transferable securities and money market instruments admitted t o an official
exchdnge lismg
Austria
Netherlands
424,290
534,668
OEstereichElektrizitan
OMV
15,866,324
24,661,562
40,577,886
50
2 33
3 83
Seadrill
16.192,: :2
1 S3
1
458,491
687.354
915,000
EADS
ING Groep
Philips Electronics
10.2 12.887
20,919,619
22,239,075
53,371,581
0.97
1.98
2.10
5.05
ACS Activldades
lndltex
Red Electricade Espana
15,231,897
34,468,953
15,538,918
65,239,768
3.26
1.47
6.17
Assa Abloy
13,920,071
132
17,504,056
20,339,934
12,480,826
13.236.720
16,660,327
22,859,989
18,236,044
15,859,394
15,735,543
152,916.833
1.65
1 92
1.18
1.25
Bermuda
1.546.000
Czech Republic
397,492
Zentiva
14,491,594
1.37
Nckia
20,511,450
1.94
Alrtorn
17,864,925
15,130.225
491.843
14,913,900
ia.122.865
19,579,986
24,663,975
20,079,950
31,939,447
19,020,126
18: K7.192
169
1 43
0 05
141
171
1 .s5
2.?3
1.90
3.02
1.80
17.19
Finland
1,290,000
1.A4
1 ,G40.000
Switzerland
MA
M A iRightr)
EDF
L'Oreal
LVMH M W Heniessy Louis Vuitton
Saiofi-Awntis
Sodexno Alliance
Total
Vinci
1,750,000
361.195
412,423
250,000
69.003
544242
142,500
21,472
1M,695
AB6
Kufhne & Nagel International
Logitech
Lonza
Nestle
lvovartis
Roche Holdings
SGS
UBS
1.58
2.16
1.12
1.50
1.49
14.45
United Kingdom
Germany
125,000
375,000
285.000
1,506,620
173.900
256,066
530.420
58,500
119,000
466,235
1,044,672
579,37a
Sweden
France
251,300
590,909
83,434
365.000
248,855
254.203
327,000
540,000
628,420
235,034
Spain
Allianz
Bapr
DEutsihp Bank
Deutsche Post
F ON
Fresenius
Karstadt Quelle
Pma
SPP
15.4C0.625
13,449.37s
25,010.175
3 1,397,969
15,342,328
33,361,559
i1.022.12a
17,803,890
19,600,490
lS2.3S8.530
145
3.15
104
168
1.85
17.23
Alpha Bank
National Bank of Greece
National Bank of Greece(REGD',
14,379,960
!,495,930
'2.1 C4.298
27.1)80,188
1.36
0.14
1 14
2.64
Rank of Ireland
IAWS tiroup 'A(Dublin Listing!
12,925,725
15.624.634
28,560,359
122
1 48
2.70
3,152,436
19,763,375
15,039.SO6
37,955,617
0.30
1 87
I .4?
3.59
1 46
! 27
2.36
2 97
2,923,037
2,250,000
4,913,874
982,999
2.020.000
5.700.000
1,445,870
1,620,002
3.1 93,860
609,183
BP
Bradford & Binglq
Capita Grwp
GUS
ICAP
Old Mutual
Pmch Taverns
Reed EIseviPr
Serco Group
Xstrdta
26,709,194
14,857.425
26,830,604
13,804,757
14,675.812
13,488,697
18,057,083
12,722,274
14,672,568
17,734.153
173,552.567
2.52
1.40
2.54
1.31
1.39
1.28
171
120
139
1 .a
16.42
Greece
742.000
242,256
405,640
Italy
Ireland
935.000
1.1 31,400
lbrY
137,691
1,115,000
2,460,500
Transferable securities and money market instrument dealt in on another
regulated market.
EN1
Saipem Spa
UniCredito ltaliano
890,000
E t i Spa CFD
Other Net Assets
Total Net Assets
124,600
1,009,546,348
48,207,886
1,057,754,234
0 01
95.44
4.56
100.00
Any differencesin the percentageof Net Asset figum ar? the mult of roundings
51
Shares
Purchases
Sales
EUR
EUR
20,378,286
29,711,525
30,470,126
27,746,020
52,455,105
30,686,662
33,285,216
29,641,977
26,144.967
13,444,563
31,314,650
18,550,034
18,927,500
33,730,295
40,422,976
27,928,770
19,j1 1,185
27,253,212
29,266,376
35,489,309
France
Carrefour
ST Microelectronics
Germany
Deitsche Bank
Deutsche Post
SAP
Sweden
A m Abloy
Ericrron
Switzerland
ABB
United Kingdom
Tesco
Voddfone Group
Country
Market Value EUR
% of Net Assets
182,388,530
181,807,192
73,552,567
!51.9 15,833
65,239,768
53,37i,581
43,527.886
38.080.2 17
28,560,359
27,980,788
20,517,450
16,192.il2
14,491,594
13,920,071
1723
11 19
1642
1445
6 17
5 05
3 83
3 60
2 70
2 64
1 94
153
1 37
1 32
Germany
France
United Kmgdom
Switzerland
Spain
Netheriznds
Austria
I?aly
Ikeiand
Greece
Finland
Bermuda
Czech Repdblic
Swede9
Other Net Assets
Total Net Assets
1,009,546,348
48,207,886
1,057,754,234
95.44
4.56
100.00
Any differences in the perrectaye of Net Asset figures are the result of roundings
52
The total return for the period, excluding any initial charges paid on investment and with dividends reinvested, was 12.22%* in euro
terms. The MSCl Europe Index (with reinvested income) rose 18.67% in euro terms over the same period.
Having enjoyed a period of relative strength during 2003 and 2004, higher yielding stocks generally lagged a strong market in 2005
and the first half of calendar 2006. Higher risk stocks performed better in a market that rose very strongly and fairly steadily from July
2005 to the middle of May 2006. Corporate earnings growth has remained very robust, with most companies being able to cope well
with rising pressures such as the high oil price and other commodity price increases. This has led to continued earnings upgrades,
which has clearly been a positive for the market. Part of the reason for the underperformance of high-yield stocks has been that
expectations for growth have increased, leading to speculation about rising inflation and therefore of rising interest rates t o combat
this. However, 10-year European bond yields are still at only 4%, which although low compared t o history is considerably higher than
the 3.25% a t the time of writing last year. However, considering that the dividend yield on the equity market is at 3% for 2006, and
dividend growth is still expected to be at IO%, the equity market is still reasonably attractive in relation t o this.
Equity markets globally sold off heavily from mid-May to mid-June, led by emerging markets and higher risk assets that had done
particularly well. This reflected escalating concerns about higher inflation and the prospect of higher interest rates
The strategy of the Fund has remained consistent during the year. I continue to seek out opportunities in stocks that combine a
healthy dividend yield with some growth prospects The portfolio is still forecast to have a gross dividend yield of 4 1 % for 2006
against the market yield of 3%.
Stocks in the portfolio that performed particularly well over the year were mainly smaller companies. The Fund has enjoyed success in
the financials sector, particularly through stocks such as Admiral, the UK online motor insurance company, Trygvesta, the Danish
insurer, and Investec, the South African and UK financial services company. Oriflame also performed strongly as the cosmetics company
recovered from a setback in Russia. Since the beginning of 2006, I have been reducing my weighting in small and mid cap stocks,
selling, for example, both Admiral and Trygvesta after their strong performances and also selling Wienerberger, the Austrian brick
manufacturer, after good performance.
Looking forward, we are clearly at a crossroads in terms of the markets. Having had a period of high returns from the market lows of
March 2003, concerns over the strength of the corporate profit cycle, some signs of higher inflation creeping into the system and
global interest rates rising are taking their toll. Increasing tension in the Middle East and the oil price rising to new highs has caused
more concerns. Although valuations are currently at attractive levels at only 1 2 . 2 ~next years estimated earnings, there are increasing
concerns that the predicted earnings number to calculate that ratio may prove to be too optimistic as global growth slows into 2007.
This is likely to lead t o a continuation of the recent trend of fairly weak but choppy markets, at least until we get some more visibility
in the autumn over the strength of the global economy. However, any correction is unlikely to be too severe, given that there is a
growing amount of private equity money looking to be invested and corporate earnings have, so far, been robust. In this sort of
environment, focusing on good companies with good cash flow generation and valuation support should serve the Fund well.
Samantha Monk, Fund Manager
53
5tate ment of 0 perat io ns
Assets
Cash a t bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
265,077,628
14,407,827
2,000,09 1
1,526,281
_____
10,548
283.033.31 5
_____
_____
Redemptions payable
contracts (note 13)
Other liabilities
902,713
2,064,027
Total liabilities
2,966.740
_____
_____
280,066,575
A2
15,288,058.27
14.23
11,271,096
86,782
11,357,878
Expenses
Custodian fee
60,503
3,101,431
Administration fee
467,030
Operations expenses
Annual tax (note 8)
Total expenses
5,612,522
31,088,977
(376,320)
Net realised gain
36,325,179
(3,418,521)
32,906,658
A1
4,070,857.42
14.09
12
369,192.00
14.15
S ha re Transact ions
231,392,424
5612,522
31,088,976
(376,320)
333,342,836
(316,794,432)
(290.366)
385,416
194,486
2,735
5,745,356
A2
AI
beginning of the year 14,651,667.80 3,547,602.36
the year
19,943,967.76 3,371,179.59
I2
41,113.96
883,157.00
the year
(19,307,577.29) (2,847,924.53) (555,078.96)
end of the year
15,288,058.27 4,070,857.42
369,192.00
(3,418,521)
54
(490,544)
280,066,575
Market
Value
EUR
Number of
Securities
%of
Net
Assets
Market
Value
EUR
Number of
Securities
%of
Net
Assets
Shares
Shares
Transfe:able securities and money market instruwnts admitted to ar: of'icial
exchange listing
exchange listing
Denmark
Norway
59.050
TmVesta
2.851,ai7
1 07
9.501.015
2.fi26.750
5.511.836
7,743.960
6,904.830
2,857.388
35,301,781
3.39
1.01
1.97
2.77
2.45
BNP Paribas
EuAsat Communications
Frznce Telecorn
Sanofi-Awntis
Total SA
Vivendi Universal
1
.oo
12.60
Germany
85,300
47,600
46,500
105.900
76,800
76,476
171,911
40,203
206,217
Acidas
All anz
BASF
Bdpr
DaimlerChryslei
Dfubche Bank
Dfutxhe Post
E ON
HCI Capital
3.175.719
5,864,558
2,913,690
3,796,154
2,957,568
6,886.661
3,582,625
3,546,915
2,852,193
35,618,028
113
2 09
1.04
1.36
1.06
2.46
128
127
1 03
12 77
Coca-Cola Hellenic Bottling Company
EFG Eurobank Ergasia8
G w k Organirationof FootballPrognostia
HellenicTelecommunicationOrganisation
Motor Oil HellasCorinth Refineries
2,923,556
4,387,158
3,360,784
4,944,154
3,306,495
18.922.147
1.04
1.57
1.20
1 77
I18
6 76
Greece
128,791
203.486
120,028
286,120
158,661
kly
319,700
1,157,500
Sanpaolo IMI
UniCredito ltaliano
4.413,459
7,075,216
1 1 ,%8.677
1 57
2.53
4.10
Luxembourg
9,967
149,509
430,678
3,241,909
1.16
5,034.811
4,082,363
4,540,966
13,658,140
1.80
1.46
1.62
4.88
3,024,374
2,892,346
5,916,720
1 08
2 11
4.477.718
3,331,893
1
7,809.61
1.60
1.19
2.79
12,157,199
3,564.873
2,996,626
3,264,541
3.193,049
11,215,603
4,330,682
3,475,935
9,360,071
5,689,045
4,182.153
5,570,418
6,973,557
4,221,103
2,801,661
7,294,328
3,618,892
4,686,322
98,596,264
4.34
1.27
1.07
1.17
114
4.00
1 55
1.24
3 34
2.03
1.49
1.99
2.49
I .51
Spain
France
126,607
231,966
331,900
102,671
135,855
102,929
21 1,987 Ekornes
Oriflame Cosmetics iin EUR)
Oriflame Cosmetics (in StKl
SES Global FDR
125.357
3,836.511
4,834,361
6,796,229
004
137
1 73
3.14
3,305,348
2,965,883
10,164,07?
3,i54.m
3,182,632
22,772,205
1.16
1.06
3.63
113
114
8.14
314.97:
219.659
35: .6G4
Banco Bilbao Vizcdya Argentaria
GestevisionTelecinto
Telefonica
Sweden
376,503
235,091
Castellum
SKF
1.03
Switzerland
M.570
65,721
tom
PacnersGroup Holding
United Kingdom
1,330,476
489,&89
1.1 09,612
248,139
266,851
5: 1,025
308.376
807,681
678,354
235,593
1 1 0.70s
3,016,915
908.657
1,783.737
641.640
285.521
215.555
2,803,990
BP
CdliberGlcbai Investment
Debenhams
Diageo
b d X Group
CilaxoSrnithKline
GUS
Halfords Group
HSBC Holdings
ImperialTobacco Grodp
InvestEt
legal &General Group
Lloyds TSB Group
Old Mutual
Dremier Foods
Royal Bank of Scotland
Sewn Trent
Voddfone Group
1 .oo
2 60
129
1.67
35.19
Transferdblf securities and money market instruments dealt in on another
reguldted market
Netherlands
101,703
76,936
333,960
270,666
154.160
Ballast Nfdam
tieijmans
IN5 Grwp
R e d Elsevier
SBM Offshore
lW
750,000
350,OCn
ENEL CFD
EN1Spa CFD
Other Net Assets
Total Net Assets
52,500
49,000
101 500
265,077,628
14,988,947
280,066,575
0.02
0.02
0.04
94.65
5.35
100.00
55
Top ten changes in the securities portfolio from I July 2005 to 30 June 2006
Shares
Purchases
Sales
EUR
EUR
10,757,646
11,461,761
14.977.328
4,393,058
9,529,977
6,873,551
3,335,558
7,502,964
11,791,527
3.626.190
6,993,388
4,229,365
3,2i4,237
9,050,638
6,354.C89
6,556,342
15,637,713
7,555,256
2,622,264
3,968,727
France
BNP Pariuas
Germany
Deutsche Bank
Deutsche Pcst
Italy
EN1
Sancaolo IMI
Luxembourg
SES Global FDR
Netherlands
ABN AMRO kloldings
Spain
Banco Sdntdnder Central Hispano
United Kingdom
BF
Lloyus TSa Group
Country
Market Value EUR
United Kingdom
Germany
France
Netherlands
Greece
Spain
Italy
Luxembourg
Switzerland
Sweden
Noway
Denmark
Other Net Assets
Total Net Assets
K of Net Assets
98,598,264
35,618,028
3 5.30 1.78 1
22,772,805
18,972,147
13,658,140
11,590,177
8,796,229
7.809.61 1
5,916,720
3,241,399
2,851 ,E17
35 19
1272
1260
8 14
6 76
4 88
4 14
3 14
2 79
2 11
116
1 02
265,077.628
14.988.947
280,066,575
94.65
5.35
100.00
56
Asia-Pacific Property Equities Fund*
Manager's Report - Review of the period from 3 October 2005 to 30 June 2006
The first half of 2006 was an eventful one for property stocks in the Asia Pacific region The Asia-Pacific Property Equities Fund
recorded net asset value growth of 7 4%** in US dollar terms over the period, bringing the total return since launch in October 2005
to 20 5%* The EPRNNAREIT Asia capped index rose 25 34% in US dollar terms over the same period.
Property stocks in the region had a strong start t o 2006 rising by around 20% by early May as investors factored improving asset
values and earnings into expectations The appetite for risk was relatively high at the start of the year, but by the middle of May a
combination of inflation and interest rate fears curbed investors' risk tolerance and precipitated an indiscriminate sell-off in global
equities Property stocks in Asia were not immune and corrected some 16% through May and early June before rallying into the close
A number of specific themes stand out as having played a key role over the first half of the year. In Japan, a series of equity market
scandals created a good deal of volatility and, combined with concerns of BO1 tightening, made investors increasingly nervous.
Economic indicators nevertheless remain healthy in Japan. In Australia, listed property trusts gained on the back of a solid reporting
season which delivered few surprises. As risk tolerance for equities deteriorated, the low-risk, high-yielding Australian RElT market
performed comparatively well. In Hong Kong, the spectre of rising US interest rates caused home sales t o slump, although office
market conditions continued to tighten. The Hong Kong RElT market looked set to deepen with the launch of Champion RElT and a
slew of subsequent issues, but in the end the market struggled to accept the heavy financial structuring involved. The China residential
market continued to show terrific growth, as evidenced by the impressive earnings figures announced by mainland developers during
March. The response from Beijing was to raise the one year lending rate by 27 basis points in April, and thereafter t o impose a string
of policy tightening measures to cool the market. Singapore property counters also performed strongly until May, partly supported by
hopes that local developers would be involved in the government-led Marina Bay Integrated Resort project. The tender was awarded
to Las Vegas Sands Corp. in late May putting downward pressure on local developers' stock prices.
There was significant broad-based investment activity over the first half of 2006 as new subscriptions added over USD350m to the
Fund value. Consequently, we bought a broad basket of stocks t o maintain a consistent exposure to Australia, Japan, Hong Kong and
Singapore. Through most of the first half the Fund bias was towards higher beta stocks, with overweight bets on China residential
developers, major Japanese office and housing developers, Hong Kong office landlords and selected Singaporean developers. Longterm strategic bets were also made in Macau residential property, as well as in the Indian property market. The higher beta holdings
and exposure to China residential generated some underperformance as equity market turbulence rose and risk appetite diminished.
To moderate risk the Fund rotated into better quality names as the sector sold-off, the bet in China was reduced and the Fund
increased its exposure t o Australia.
Looking ahead, we expect US growth to slacken in the second half of this year as consumer spending slows and US housing
moderates, which means that interest rates are likely t o see limited further upward pressure in the short-term For property stocks in
the region in which the Fund invests it means there is likely to be some short-term support for stocks on interest rate optimism,
particularly given the recent weakness Over the medium-term the focus will return to earnings and whether earnings growth supports
prices Commercial property markets around the region remain in fairly good shape, with offices in most cities experiencing better
rents and reduced vacancy rates Retail also continues to be healthy A halt in interest rate hikes will tend to support asset prices of
both commercial and residential property On our forecasts, earnings growth for property stocks will continue to be strong in 2007,
particularly in China and Singapore
Chris Reilly, Fund Manager
*The Asia-Pacific Property Equities Fund was launched on 3 October 2005.
**Relates to Class A Accumulation Shares.
57
Statem ent of 0 perat ions
For the period from 3 October 2005 to 30 June 20C6 (USD)
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
407,016,510
3,970,234
1,945,441
2,832,523
Expenses
Custodian fee
49,727
1,658,515
Administration fee
159,874
Operations expenses
171,813
Annual tax (note 8)
234,736
.
.
.
.
.
Total expenses
2,846,345
20,000
7,097,744
_____
_____
422,882,452
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
_____
8,518,544
1,122,666
3,716,440
_____
91
13,357,741
Net assets at the end of the period
4,339,885
108,762
4,448,647
1,602,302
(1.993.936)
(842,97 1)
Net realised loss
(1,234,605)
1,886,949
409,524,711
A2
18,174,685.30
12.05
Al(GBP)
8,858.88
6.57
652,344
AZ(GBP)
9,179.70
6.57
12
1,982,934.03
12.12
A2(EUR)
50,424.90
9 4a
I1
1,159,843.67
12.12
A1
12,576,768.30
12.05
x2
9,749.79
12.05
For the period from 3 October 2005 to 30 June 2006 (USD)
Net assets at the beginning of the period
.
.
.
.
.
1,602,302
(1,993,936)
(842,971)
509,129,888
Net assets at the end of the period
(101,105,296)
847,77 5
1,886,949
_____
409,524,711
S ha re Tra nsact ions
For the period from 3 October 2005 to 30 June 2006
A2
Shares outstanding at the beginning of the period
Shares issued during the period
Shares redeemedduring the period
Shares outrtanding at the end of the period
23,773,010.08
(5,598,324.78)
18,174,685.30
A2(GBP)
9,179.70
52,128.65
A1 AI(GBP)
__
14,341,170.44
9,179.70
50,424.90
--
8,858.88
0.00
12,576,768.30 8,858.88
0.00 (1,703.75) (1,764,402.14)
58
A2(EUR)
I
-
12
I1
_____
x2
2,265,839.03 2,098,412.67 9,749.79
(282,905.00) (938,569.00)
0.00
1,982,934.03 1,159,843.67 9,749.79
Market
Value
USD
Number
of Securities
%of
Net
Assets
Market
Value
USD
Number
of Securities
%of
Net
Assets
Shares
Shares
Transferable securities and money market iriitrunients domtted to an official
exchange listing
Transferable securities dnd Toney market instruments admitted to an official
exchange listing
Australia
Malaysia
5,000,000
1,710.OOC
1,988,561
3.300.000
828,198
180,000
7,000,000
6,800,000
500,000
3,682.5:3
2,162,341
5,000,000
3.714.006
2,757,000
All anz Global Inwstors Furopean
Property Trust
3,714,910
All:o lommerciai Real Estate InvBtment Trust 867.11 1
ALstraland Property Group
3,036,193
4,915,941
BurlningsWarehouse Prcperty Trust
4,098,!39
Centro Properties Group
249,756
C F j Retail Property Trust
7,606,279
De Rreef Trust
2 1.977.41 1
GFT Group
Lend Leap Corp
5.1 95,302
Macquarie Goodman Grodp
16,361.527
8,906,698
Miwac Stapled Group
Rubicon America Trust
3,612,090
Stockland Trust Management
19,343,615
4.72
99,887,332
24 40
10,0C2.057
2.M
S:arhill Real Estate InvestmentTrust
0.11
0.74
1.20
1 00
0 06
186
5 37
127
4.00
2.18
0 88
Poytec Asset Holdings
2,475,300
5,000,000
4,800,500
2.L59.000
4.585.000
604,000
8.500.000
Ascendas Kea1 Estate lnwsrntent Trust
Capitaland
CapitaMall Trust
K-Reit Asia
Mapletree Logistics
UOL Gnup Ltd
Wing Tal Hddings
GLangzhou R&F Properties Co Ltd
3,947,837
0.96
10,lC3.571
2.47
Hong Kon$
16,566,000
173,076
1,75G,000
6,450,000
2,800,000
1,00G,000
38,000,000
1,800,000
10,000,000
9,045,000
850,000
2,950,000
0.73
3.45
1.57
0.44
0.55
0.27
1
.a
8.95
United Kingdom
14.000.00G
3.300.000
Eredeie Capital
Tmty Capita
7.254261
5,371.917
12,626,178
1 77
1.30
3 07
Investment Funds
Australia
CCind Oveseas land & InveStment
Henderson Land Dwelooment
Hcngkong Land Holdings
Hyian Development
Kerry Properties
Neo-ChinaGroup
N@N World Development
Pacific Century Premium Developments
Prosperity Real Estate InvestmentTrust
Siro Land
Sui Hung Kai Properties
.....
.
.
.
.
.
9,251,112
23.671.503
7,867,202
3,405,130
3.546.745
2.954.545
1,848,336
1,938,790
1,354,169
30,059,445
96,800,548
2.21
5.78
1.92
083
0 87
0 72
2.70
0.47
0.33
7 34
23.64
Japan
210,000
500,000
600
300
1,470,000
1,500,000
800
207
1,200,000
340,000
1,150,000
2,973,814
14.1 19,898
6,430,266
1,801,317
2,680,629
1,090,799
1,554,775
36,651,498
Transferable wcdrities And money market instruments admitted to an official
exchdnge listing
China
853,000
0.17
Singapore
Cayman Islands
39,140,000
690,170
1351
Daibiru
Daiwa House Industry
Japan Real Estate Investment
Japan Retail Fund Investment
Mitsubijhi Estate
Mitsui Fudosan
Nippon Building Fund
Orix 1 Rea: Estate InveStmentTrust
Sumitorno Realty & Development
Tokyo Tatemono
Totyl: Ldnd
2,323,916
7,971,463
5,312,855
2,347,601
3: .0?8.525
32,518,337
7,711,927
1,224,364
29.52 1,678
3,629,058
8,933,928
132,593,652
3.57
1 95
1.3G
0.57
7.59
7.94
1.88
5,933,333
4,43!,944
CommonwealthProperty Office Fund
IN5 Industrial Fund
6,149,662
7,310,138
13,459,800
1.50
1.79
3.29
Warrants
Transferable securities and money market instruments dealt
regulated market
in
on another
Hong Kong
i.070.750
China Overseas WTS
Other Net Assets
Total Net Assets
356.968
0 09
407,016,510
2,508,201
409,524,711
99.39
0.61
100.00
Any diffemces in the percentageof Net Asset figures are the result of rounding5
0.30
7.21
0.89
2.18
32 38
59
Top ten changes in the securities portfolio from 3 October 2005 to 30 June 2006
Shares
Purchases
Sales
USD
USD
Australia
GPT Group
Stockland Trust Management
20,954,667
19,080,597
737,861
Hong Kong
China Overseas Land & lnvestrnpnt
hongkong Land Holdings
Sun Hung Kat Prooenies
19,417,880
13,797,!98
23,578,893
30,921,500
9,337,850
3,683,332
31,355,538
35,251,098
29,636,884
1,034,325
3,991,085
1,226,146
15,931,615
1,653,542
Japan
Mitsubishi Estate
Mitsui Fudosan
Singapore
Capitatand
Country
Market Value USD
% of Net Assets
132,593,652
113,347,632
97,157,516
36,651,496
i2.62b.178
1O,OO2,057
3,947,807
690,170
32.38
27.69
23.73
8 95
3.07
2.44
0.96
0 17
407,016,510
2,508,201
409,524.71 1
99.39
0.61
100.00
Japan
Australia
Hong Kong
Singapore
United Kingdom
Cayman Islands
Ch:W
Malaysia
Other Net Assets
Total Net Assets
Any differences in the percentage of Net Asse! figures are the result of roundings.
60
The total return over the full year, excluding any initial charges paid on investment, with gross income reinvested, was 27.41 % * in US
dollar terms. The FTSE EPRA NAREIT Global Index rose 26.1 % in US dollar terms over the period.
The rise of global property stocks was not uninterrupted. In October and again in April and May equity markets were unsettled by
fears of rising inflation and interest rates.
The Japanese property market was the top performer, returning 65.6%.Resurgent investor confidence, property values rising for the first
time in 15 years and the announcement of a major property transaction (Maranouchi Trust Tower) at a relatively low yield, all contributed to
performance. The Hong Kong property market returned 24.1 %. China delivered impressive returns, as companies exposed to the growing
housing sector demonstrated strong earnings growth; however, it corrected significantly at end of the period on the back of government
tightening measures in the real estate sector. Australia’s performance was less dramatic but also less volatile, returning 15.6%.**
In Australia, we moved t o an overweight stance towards the end of the period. We added to Bunnings Warehouse, Westfield and the
developer Australand amongst others. In Asia, we moved to an underweight position. During recent market turbulence we rotated
back into better quality names, for example selling Shanghai Forte and China Resources Land to invest in China Overseas Land &
Investment. We also reduced exposure to China mainland developers after headlines of stricter regulations. In Japan, we reduced our
J-REIT exposure, disposing of Japan Retail Fund Investment and Japan Prime Realty Investment following strong performance. Finally,
we participated in the IPO of Eredene Capital, which is listed on AIM and specialises in Indian commercial and residential development.
The US property market returned 20.3% over the period, while Canada was up 26.7%.** The US retail sector underperformed with a
5.1 % return. Whilst consumer spending was strong initially, spending growth began t o slow in the second quarter of 2006 in response
to rising interest rates, increasing oil prices and a weakening housing market. The office sector returned 19.9%, benefiting from
strong tenant demand in most major markets. A return of 24.0% in the apartment sector was largely attributed to the weak housing
market, as rising interest rates deterred tenants from buying their own homes. A number of takeovers were announced over the year.
Shurgard Storage Centres and CarrAmerica Realty were both acquired for significant premiums t o their NAV in March, and in June
Trizec Properties was acquired by Brookfield Properties and the unlisted-Blackstone Group.***
We maintained an underweight position in North America. In the US, we strengthened our office exposure by adding to Brookfield
Properties and initiating positions in Equity Office Properties and SL Green Realty Corp. In the hotel sector, we switched from an
overweight position to a neutral position, disposing of Hilton Hotels and Starwood Hotels. We also substantially reduced FelCor
Lodging Trust, tke owner of a number of Embassy Suites, Crowne Plaza, Holiday Inn, and Doubletree branded hotels. We remain
selectively overweight in the apartment sector. In the retail sector, we reduced our weighting further through the sale of Regency
Centres and the Taubman Centres. We opened a position in American Tower, a cellular telecoms tower leasing company.
In Europe, Danish property stocks returned 60.0% over the year. Spanish property stocks also had a good year, returning 45%,
boosted by takeovers. German and Greek property stocks also performed strongly, generating returns of 40% and 39% respectively.
UK property stocks gained 27% boosted by news that the government is t o water down several restrictions which had been seen as
stumbling blocks to the success of the UK REIT, now to be introduced in January 2007. The French property market returned 23.8%
over the year, the strength of the market based largely on strong full year results released in 41. Sweden was the laggard, returning
4 % in euro terms after severe pullbacks in August, April and May.***
We remained overweight in Europe, with a particular emphasis on UK property stocks. We maintained our focus on smaller companies where
we see the best growth prospects. We continued to favour Sjaelss, the Danish developer, Fonciere des Regions, Tour Eiffel and, more recently,
Unibail in France; and Technopolis in Finland. During the period we shifted the portfolio aggressively towards UK large caps (Land Securities,
British Land and Slough), in expectation of the REIT announcement and of good results. We continue to see good rental growth prospects in
the London office market and we retain positions in Great Portland and Derwent Valley. Elsewhere, we participated in a number of new issues
of smaller compaiies including Equest Balkan Properties, which focuses on Bulgaria and Romania; Engel East Europe, a housebuilder active in
Poland and Hungary; Develica Deutschland, which invests in German commercial property; and Dolphin Capital, which develops resorts in
Greece and Cyprus. At the end of the period, holdings in Central and Eastern Europe represented 3% of the Fund.
Our strategy is to focus on high-quality companies with able management, good long-term growth prospects and a stable dividend yield.
Outlook
We expect US growth t o slacken in the second half of 2006 as consumer spending slows and the housing market softens, which may
mean that interest rates see little further upward pressure in the short-term.
The fundamentals of commercial property remain compelling in terms of supply and demand. Office markets, in particular, are improving
in all major financial centres. In Europe, there remains further scope for yield compression. Our analysis suggests that the office market
offers strong medium-term growth prospects and that good rental growth should continue to drive valuations higher from current
levels. In all the major markets we still see opportunities to buy above-average earnings and asset growth at a reasonable price.
Patrick Sumner & Sara Bellenda, Fund Managers
* Relates to Class A Accumulation Shares.
* * Relates to the regional benchmarks of the EPRA / NAREIT Global Index. All in USD.
* * * Relates to the regional benchmarks of the EPRA / NAREIT Global Index. All in Euros
Both fund and benchmark figures are expressed in USD terms. The base source for performance and indices statistics is Micropal.
61
5t aternent of Operations
Assets
Cash a t bank
contracts (note 13)
Other assets
Total assets
Income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
227,290,725
4,020,607
847,401
845.631
14,000
188,343
_____
150
233,206,857
.
.
.
.
.
1,238,656
1,003,885
914,479
3,668
5,252
3,165,940
Bank interest
Total income
3,369,778
175,532
3,545,310
Expenses
51,181
Custodian fee
1,972,411
Administration fee
293,584
Operations expenses
165,210
Annual tax (note 8)
95,907
4,000
Total expenses
3,214,834
330,476
7,521,704
(202,497)
Net realised gain
7,649,683
19,951,030
230.040.91 7
4,968,776.30
13.42
A2
A2 (GBP)
A1
820 62 11,238,247.09
7.30
13 41
27,600,713
I2
450,000.00
13.60
Share Transactions
38,475,388
330,476
7,521,704
(202,497)
215,303,160
(51,277,108)
A2 A2(GBP)
AI
12
191, I 53.02
2,991,014.04 450,000.00
I1
478,500.00
13.60
I1
_____
6,024,086.71
820.62 11,104,729.12
(1,246,463.43)
(2,857,496.07)
478,500.00
_
I
_
-
48,362
4,968,776.30
820.62 1 1,238,247.09 450,000.00 478,500.00
19,951,030
62
(1 09,598)
230,040,917
Number
Market
Value
US0
of Securities
%of
Net
Assets
Transferable wurities a
exchange listing
m monev market instruments admi!ted
to an official
Allianz Global Investors EuropeanPropertyTrust 747.762
Australand Property Group
1,004,908
8dinings Warehouse Property Trdst
764,624
Centro Propenies Group
713,135
CF5 Retail Droperty Trust
188,520
CommonwealthProperty Inwstment Trust 1,460,379
FK? Property Group
215.711
GPT Group
3,715,829
lnwsta Property Group
159,453
Lend tea9 Corp
1,568.618
Macquarie Goodman Group
2,632,861
Macuuarie Protogis Trust
62,425
MIYX Group
'.738.727
Ruacon America Trust
;,C90,552
Stockland Trust Mdnagement
3.147.053
Valad Property Group
508,478
Wesifield Group
6,967,627
26,701.702
033
044
033
0.31
0.08
0.63
0.09
1.62
007
068
1.14
0 04
076
9.47
137
022
3.03
i1.61
1,9;0,6;0
0.83
Dolphin Capital
15,000
125,800
106,500
31,128
45,999
71.700
34,700
48,900
7,700
Bodrdwalk Real Estdte InvestmentTrust
tin USDj
2.7:7.121
Boardwalk Real Estate InvestmentTrust
(in CAD)
330.i20
Brookfield Properties
4,004,214
Reyirernent Residences Real Estate
580,361
RicCan Real Estate InvestmentTrust !in CAD) 589.844
RicCan Real Estate lnveqment Truq (in USD) 907,291
Summit Real Estate Inwtment Trust (in CAD) !,6t5,930
Summit Heal Estate InveStventTrust (in USD) 759,930
T m c Canaoa (in CADi
1.493,6'4
Trizec Canada (in USD)
235.735
118
0 14
1 74
0.30
026
13,333,660
070
033
0.65
0 IO
5.79
Orchid DevelopmentsGroup
P O ~ KAsset Holdings
187,920
792,580
1,199,842
2,180,342
0.08
0 34
0 52
0.94
831,253
0.36
2.163.309
095
833,072
036
Altarea
Foncieredes Regions
lade
Societe de la b u r Eiffel
ilnibail Holding
1,764,280
966,799
3.167.882
944,676
2,414,300
9,257,937
0.77
042
1.38
0.41
1.05
4.03
Dic kset
Patrizia lmrnobilien
Vib Vermoegen
310,742
860,960
607,981
1,779,683
0.14
0.37
0.26
0.77
Guangzhou R&F Properties Co
Tethnooolis
France
11,111
7,500
74,000
8,000
14.000
0.29
1,454,000
18.307
238,000
530,000
400,000
8,000,000
510,000
2,000,009
1,000,000
512,009
Cnina Overseas Land & lnvwtment
HongKong Land Holdings
Hym Development
Neo-ChinaGroup
New World Development
Pacific Cen:ury Prpmium Development!
Prosperity Real Estate Investment Trust
Sun Hung Kai Propertis
866,832
0.39
0.00
1,231,008
1,945,100
1,123,938
746.71 7
837,160
569,693
214,359
5,217,337
12,772.144
0.54
2,501,809
1.09
521.416
555,209
533,136
5,094,708
5,111,997
725,471
296,754
3,332,569
1,403,145
17,580,375
0.23
0.24
0.23
2.21
2.22
0.32
0.13
1.45
0.61
7.64
1,349,068
0.59
Starhill Real Estate InvestmentTrus:
534,078
0.23
Engel East Europe
628,701
0.27
Globe Trade Centre
689,743
0.30
&lendas Real Estate InvestmentTrust
CapitaMall Trust
K-Reit Asia
Mapletree Logistics Trust
Wing Tal Holding
611,475
1,343,730
44.795
586,498
891,604
3.484.102
0.27
0.58
002
0.25
0.39
1.51
JM
1,052,515
1,410,496
2,463.011
046
0 61
1 07
794.886
0 35
0.85
0.49
0.32
0.36
0.25
c.09
2.27
5.55
Italy
37,047
P i r d & C Real Estate
12,500
50,000
60
240,000
235,000
75
50
135.000
l80.990
Aeon Mall
Daibiru
Japan Real Estate Investment
MitrubishiEstate
Mitrui Fudosan
Nippon Building Fund
Onx J Real Estate InvestmentTrust
Tokyu Ldnd
Luxembourg
12,581
Orco Property Group
Malaysia
Netherlands
285,000
8.250
Singapore
Sjaho Gruppen
Finland
112,000
660,377
Poland
Denmark
6,500
Babis Vows
Hong Kong
2,133,000
Kipgdom Hotel Ikstments
China
179,600
26,731
039
Cayman Islands
27,000
310,000
4,695,000
Trdrisferdble secufities and money market instruments admitted to an official
exchange listing
Japan
Canada
120,200
Net
AssetI
Greece
Australia
1,150,000
%of
Shares
Shares
1,000.00G
653,960
510,000
143,197
135,000
1,400,000
55.000
1,143,590
51,665
150,000
588,79d
98,200
535,770
1,500.OOC
600,375
500,000
537,834
Market
Value
USD
Number
of Securities
51 1,250
:,030.i)oo
56,000
1,000,000
:,000,000
Sweden
66.00C
123.000
Kungsleden
Germany
12,4CO
35.07'1
65.000
Turkey
490,000
Yapi Kredi Koray
(continued)
Number
of Securities
from I July 2005 to 30 June 2006
Market
%of
Value
USD
Net
Asreis
Sharesllnvestment Funds
Purchases
Sales
USD
USD
7,754,446
1,941,026
6,081,714
3,014,517
7,808,203
8,092,379
7,144,660
2,325,135
8,351,783
7,972,329
4.21 1,028
9,778,363
6,179,805
2.785.628
180,874
5,324,765
4,774,664
4,364,567
Shares
Transferable securities and money market intrments admitted t o an official
exchange listing
Australia
United Kingdom
Japan
7c.035
250.000
322,000
45,000
1,550,000
544.444
17,500,000
185,003
260,000
253,000
300,000
30C.000
96249
1,200,300
48.882
Atlas Estates
Big Mllow Groua
RritishLano
D e r r m Valley Holdirys
Develica Deutxhland
Equest Balkan Propems
EredeneCapital
Great Portland Estates
!idmmenon
Land Securities Group
Leo Capital
London Merchant Tecurities
St Modwen Properties
Trinity Capital
Warner Estate Holding
332,560
1,925,032
7.552.GO4
1,306,276
1,992,113
1,065,346
9.126.163
1,726,760
5,704,325
8,397,343
348,202
1,099,985
202,671
1,965,990
605,710
43,950,500
0.35
0 85
0.26
19 IO
Acadia Realty Trust
American Tovm Corporat,orl
%ston Properties
BRE Properties
Camden Property Trust
Crown Castle International
Digitdl Redlty Trust
Equity Office Prcperties Trust
Equiiy Residental
Fssex Prmrty Trust
F&or Loaging Trust
Maguire Propems
p.ologls
Public Storage
RecksonAssociates Realty
SBA Communicdtion
Shdrgard Storage Centers
Simon PropertyGroup
SI Lreen Realty
Starwood Hotels & K ~ o r t Worldwide
s
Strategic Hgtels & Reso*
Taubman Cente-r Inc
Ventas
Vornado Kealty Trust
817,478
2,365,320
3,796,310
3,280,800
3,595,942
1,448,994
1,804,206
5,793,118
8,440,528
2,840,594
8,508
3,386,663
6.016,890
522.917
4,818,802
1,278.400
2,716,476
6,797,630
5,940,146
3,621,993
1,710,117
47,052
4,062,729
4,570,279
79,682.2 12
0.36
1.03
1.65
1.43
1.56
0.63
0.78
2 52
3 67
1.23
0.00
1 47
2 62
0.23
2.10
0.56
1.12
2.96
2 58
1 57
0.74
0.02
1 77
1.99
34.65
0.14
0.84
3 28
0 57
0 87
0.46
3 97
0 75
2.48
3.65
9.15
0.48
United States
34,500
76,500
42,446
60,000
49.300
42,600
73,551
1
woo
189,547
26,100
400
97,500
115.629
6,900
118,500
54.400
43,800
81,946
54.790
60,;91
83,400
1,200
120,057
47,000
Warrants
Transferablc securities and money market instrument dealt in on another
regulated rrarke:
Chiia Overseaswarrants
31,333
Mitsui Fudosan
United Kingdom
British Land
Eredene Capital
Land Securities Groua
786,627
United States
Equity Office Propenies Trust
Equity Residerrtial
General Growth Propenies
Simon Property Group
Starwood 3orels & Resorts Worldwide
Country
Market Value USD
% of Net Assets
79,682,2 12
43,950,500
27,852,520
17,580,375
13,333,660
12,803,477
9,257,937
3,484,102
2,501,809
2,463.01 1
2.1 83.309
2,180,342
1,910,610
1.779.683
1,349,068
833,072
831,253
794,886
689,743
660.377
628,701
534.078
34.65
19.10
12.11
7.64
5.79
5 56
4 03
151
1.09
1.07
0.95
0.94
0.83
0 77
0.59
0 36
0 36
0.35
0.30
0.29
0.27
023
227,290,725
2,750,192
230,040,917
98.80
United States
United Kingdom
Australia
Japan
Canada
Hong Kong
France
Singapore
Italy
Sweden
Denmark
Cayman Islands
BritishVirgin Islands
Germany
Luxembourg
Finland
China
Turkey
Poland
Greece
Netherlands
Malaysia
Other Net Assets
Total Net Assets
Hong Kong
121.750
Westfield Group
1.20
100.00
0 01
Investment Funds
Transferablf securities and money market ;nstrumeits admitted to an official
exchange listing
Australia
560,130
166,558
ING IndustrialFmd
Macquarie CountryVdideTrust
Other Net Assets
Total Net Assets
929,833
226,985
1,156,818
227,290,725
2,750,192
230,040,917
Any differences in the pertentdge of Ket &ret fiqurer dre the r6ult of rounding5
64
0 40
0 10
0 50
98.80
1.20
100.00
Managers' Report - Annual Review to 30 June 2006
dollar terms. The MSCl All Countries World IT Index rose 7.93% in US dollar terms over the same period.
Global Technology markets made strong progress for much of the reporting period, driven by a benign macroeconomic environment,
strong emerging market demand and compelling new product cycles Towards the end of the period, markets corrected sharply on
concerns over inflation and interest rates Technology markets were worst hit as investors rotated into lower risk areas of the market,
and stock option timing issues weighed on investor sentiment Disappointing desktop PC demand and conflicting datapoints from the
mobile handset foodchain also held back markets, but positive newsflow from the DRAM segment and positive internet advertising
trends proved a welcome relief
Over the period, the Fund significantly outperformed the benchmark thanks largely to strong stock selection. Our choice of holdings
within Commun cations Equipment and the Internet sector proved particularly beneficial.
We have increased our position in the internet sector. Internet stocks have continued their disruptive disintermediation of old economy
business models at a rapid pace, particularly within advertising Our overweight position in the sector has had a strong positive impact
on the portfolio's performance, with a number of holdings producing exceptional returns. We have recently been concentrating on
smaller capitalisation names where we see good value and strong growth prospects.
Having been structurally underweight the Communications Equipment sector for some time, we have increased our exposure during
2006. While our concerns over competition in the sector and falling corporate capital expenditure on legacy products remain, we have
a positive view on those companies exposed to spending on broadband (especially wireline) and have significant exposure to this
theme in the roLting and optical spaces
We are now Underweight the software sector, primarily as a function of a lack of compelling bottom-up stock ideas. Within the sector,
our exposure is mostly limited t o enterprise software names, as we feel that while corporate capital expenditure trends are strong, the
consumer, particularly in the US, remains vulnerable.
We have built up a position in the hard disk drive segment, a decision that was predicated on a growing demand for data storage
driven by the digitisation of media and increasingly onerous compliance regulations Consolidation in the industry, and tight supply
dynamics, have made this area a particularly attractive investment opportunity
We believe that the broad backdrop for technology remains constructive over the intermediate term, as relative valuation is favourable.
corporate capital expenditure trends seem supportive and several new product cycles are emerging Our view is dependent on an
assumption of continuing moderate economic growth on a global basis, and the obvious main risk to technology would be any kind of
rapid global economic slowdown This is something we are not anticipating, but must remain alert for
Stuart O'Gorman and Geoff Paton, Fund Managers
65
St aternent of 0perat ions
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other llabllltles
Total liabilities
165,111,385
8,478,832
231,332
251,140
18,862
372,515
_____
_____
174,464,066
.
.
.
.
.
.
.
.
.
.
402,433
1,281,125
_____
_____
1,683,558
1,095,308
204,147
1,299,455
Expenses
Custodian fee
20,302
2,463,407
253,982
Administration fee
212,412
Operations expenses
123,429
Annual tax (note 8)
12,206
Total exoenses
4,112,158
(2,812,703)
18,574,936
Net realised gain
15,755,025
(7,208)
3,612,451
172.780.508
A2
7,461,879.42
23.15
19,367,476
A1
500.00
23 15
S ha re Tra nsact ions
(2,812,703)
18,574,936
(7.208)
74,016,101
(107,364,584)
(6 19)
66
A2
186,762,134
AI
8,824,715.47
the year
3,227,119.79
600.00
the year
(4,589,955.84)
(100 00)
end of the year
7,461,879.42
500 00
.
.
.
.
.
3,612,451
_____
i72,7ao,soa
Global Technoloav Fund
Number
Market
Value
USD
of Securities
%of
Net
Market
Value
USD
Number
of Securities
Assets
%of
Net
Assets
Shares
Shares
Transferable securities d i d money market instrbments ddmitted to an of'scial
exchange listing
exchdnge listing
Bermuda
United States
30,747
i7.300
Vistaurint
Xy-atex
623.405
455,249
1,278,554
3.48
3 26
0 74
3,054,4'7
1.77
China
60,150
Ct.io.Com International
Finland
Nckia
7.S33.960
4 53
ADVA AG Optimal Networking
Infineon Technologies
SAP
2,226,271
1,544.177
5,228,479
9,300,927
1 29
0.89
3 03
5 21
Andacs
3.061.380
1 77
Canon
3,851,676
1,316,614
1.009369
1,078.222
1,994,049
9,260,532
2.24
0.76
0.59
0.62
1.15
5.36
2,606.013
855,897
1,733,773
5,195.683
1.51
0.50
NHN
Samsung Electronics
3,368,963
4,702.671
8,071,634
1.95
2.72
4.67
Enisson
2,009,275
1.16
LogitKh Internationdl
Ro:he Holding
909,237
1,580,373
2,489,6:3
0 53
9 92
145
Hcn Hai Prwision
T a i m Semiconductor
2,332,976
2,016,908
4,349,884
1.35
1.17
2 52
385.000
Germany
225,600
138,6OC
24,900
Guernsey
s4.000
Japan
78,846
37,000
13,000
16,600
28,036
Hcya
Kpcerd
Murata Manufacturing
Nino Denko
Netherlands
128,800
40,500
44,700
ASML dolding
Tele Atias
TomTom
1 .00
3.01
South Korea
9,700
7,415
Sweden
613,995
160.250
60,360
31,700
23,000
190,000
32,000
117,999
7 1,950
18.900
250,000
485.019
70,600
45.084
88,112
61,764
46,073
283,985
52,000
15,369
172,068
168,300
69,639
71,250
21.750
4o,m(ro
108,259
347.000
41.000
58,0G0
56,900
303,300
157,600
53,000
131,263
2 1,800
43.400
33,400
121,776
51,300
184,361
43,950
70,000
3Com
Adobe Systems
Amphenol
Anixter International
Antec
Apple Computer
Applied Materials
Autodek
Checkfree
Ciena Corp
Ciwc Systems
Citrix Systens
Cognmzant Terhnology Solutions
Commscope
Dell Computer
Oigita; River Corn
EMC Corp
Freescale Semiconductor
Google
Hwlett Dackard
Intel
InternationalBusiness Machines
Intevar
Komag Corn
Marvel1Technology Group
Microchip Technology
Microsoft
Monster Worldwide
Nationdl Semiconductor
Network Appliance
Oracle
PMC-Sierra
Qualcomm
Quest Software
Rackable Systems
Red Hat
Sandisk Corp
Tellabs Inc
Tessera Tecinologies
Texas lnstrurnenn
Varian Serriconductor Equipment
ksocidt ior
Xilinx Corn
819.679
1,852,157
1,777,419
1,080,195
2,463,350
1,822,880
1,940,494
2,488,391
935,172
1.1 26,259
9,600,951
2,819,411
3,051,961
2,704.157
1,526,806
1,834,397
2,942,085
1,539,980
6,345,476
5,517,360
3,206,957
5,408,861
444,763
990.82 1
1,822,740
3,690,549
8,166,645
1,779,605
1,380,690
2,933,606
4,466,092
1,402,053
2,142,790
1,859340
865,896
1,512,305
1,717,094
1,628,754
1,388,691
5.522.2 1 I
1,455,184
1,590,050
108,164,268
0.47
1 .07
1.03
0.63
1.43
1.G6
1.12
1.a
0.54
0.65
5.56
1.63
1.77
1.57
0.88
1.06
170
0.89
3 67
3.19
186
3 13
0.26
0.57
1.05
2 14
4.73
1 03
0.80
1.18
2 58
0.81
1 24
108
0.50
0.59
0 98
0.94
0 80
3.20
0.84
0.92
62.59
Switzerland
23,500
9,650
Shares
Transferablp securities and money market instrument dealt in on another
regulated market
Taiwan
377,957
1.1 18,573
United Kingdom
638,000
Arm Holdings
1.341, I 61
o 78
United Kingdom
400,000
U4tA
investment in Securities
Other Net Assets
Total Net Assets
165,111,385
7,669,123
172,780,508
95.56
4.44
100.00
Any differencesin the percentage of Net Asset figures dw the result of rounding8
67
Shares
Purchases
Sales
USD
USD
12,680,199
1 1,639,537
4,196.51 7
10,420,662
4,158,550
4,164,195
6,237,219
2,669,006
2,610,430
4,160,061
5,190,193
3,843,342
6,577,356
6,998,897
5.1 51,909
4,759,165
8,266,842
7,320,407
5,248,081
6,510,968
Finland
Nnkia
United States
Analog Devizes
Cisco Systems
Dell Computer
EMC Corp
Google
Intel
Micrgsoft
5eaga:e Technology
Yahoo!
Country
Market Value USD
% of Net Assets
106,164,268
9,260,532
3,000,927
8,071.634
7,833,960
5,195,683
4,349,884
3,061,380
3.C54.417
2,489,610
2,005,275
1341,161
1,278,654
62 59
5.36
5 21
4.67
4 53
3 01
2 52
1 77
1 77
145
116
0 78
0 74
165,111,385
95.56
4.44
100.00
Urli:eo States
Idpan
tiermany
South Korea
Finland
Netherlands
TaiwaGuernsey
China
Switzerland
Sweden
b w a Kmgdom
Bermuda
Other Net Assets
Total Net Assets
7,669,123
172,780,508
Any differences in the pfrcfntagc of Net Asset figures are the result of romdings.
68
The total return for the full-year, excluding any initial charges paid on investment, with gross income reinvested, was 27.02%* in euro
terms. The EPRA Europe (UK Restricted) Index rose 28.13% in euro terms over the period. The Fund saw substantial investor inflows
over the period, growing from EUR355m to EUR951m.
In euro terms Denmark was the strongest performer, with property stocks returning 59.9%. Spanish property stocks did well, returning
44.6% over the oeriod. German and Greek property stocks generated returns of 39.6% and 38.5% respectively. UK property stocks
gained 26.5%. Sweden was the laggard, returning 4% in euro terms.
In the UK, we increased our overweight position in anticipation of a re-rating of the UK majors. We added to Big Yellow, British Land,
Development Securities, Derwent Valley, Great Portland, Helical Bar, Hammerson, Land Securities, Slough, S t Modwen and Warner
Estate and started new holdings in LMS, Minerva, Teesland and Unite. We sold Capital & Regional and Shaftesbury. As a result, we
increased exposure to central London offices t o 22% of the portfolio, we reduced exposure to UK retail and established an exposure
to the fast-growing property fund management sector.
In France, we added to Societe de la Tour Eiffel, Fonciere des Regions, Affine, Klepierre and Unibail and participated in the lPOs of lcade
and CeGeREAL (subsequently sold). We also started a holding in Kaufman & Broad. As a result, we moved from an underweight
position at the start of January to a 3.6% overweight by the end of June. The French market rose 23.8% over the period.
In Spain, we sold Metrovacesa on valuation grounds and consequently missed out on the subsequent stake-building activity. More
recently, we sold lnmobiliara Colonial in the wake of the lnmocaral bid, as there seemed to be little scope for further upside.
In Italy we increased exposure to Pirelli Real Estate, started a new holding in IGD and reduced our holding in Beni Stabili. The Italian
market returned 19.6% over the period
In the Nordic region we added to Citycon and Technopolis and started a holding in Hufvudstaden. We reduced Fabege and sold out of
Wihlborgs in the wake of the demerger. We also topped up Sjaelso and JM, although we have subsequently taken profits in the latter.
We broadened exposure to central Europe with the purchase of GTC, Engel, Equest, Atlas Estates, Bulgarian Land, Bulgarian Property
Development and Nanette.
We remain underweight in Holland, but are slowly building an exposure to Germany through IVG, Patrizia, DIC (subsequently sold) and
UK listed companies Dawnay Day Treveria (subsequently sold), Develica Deutschland and Deutsche Land. The Dutch property sector
market delivered 12% over the year whereas German property stocks returned 39.6%.
Over the period, strongly performing holdings included Big Yellow Group, the operator of self-storage centres in Southern England,
and Orco Property Group, which develops and manages real estate in Hungary and the Czech Republic, returning 131 % and 79%
respectively (both in local currency).
The most significant news was the introduction of RElT legislation in the UK. The government watered down several restrictions which
had been seen as stumbling blocks t o the success of the new regime. As a result, shares in the UK majors reached new highs, with the
EPRA Europe (UK Restricted) index posting its largest ever one-day gain of 4.3% on 22 March. The majority of the UK listed sector is
on track to convert as soon as the legislation goes live in January 2007. Progress in Germany is less certain and the launch of the
G-REIT is likely to be delayed into 2007.
Property shares performed strongly for most of the year, but were hard hit by the sudden fall in equity markets in the last six weeks. The
sector's recent performance contrasts markedly with US RElTs which have tended to track interest rates rather than the wider stock market
during recent turbulence. This suggests that investors are concerned that rising short-term interest rates will end the property bull market.
While the UK seems to be near to the top of the interest rate cycle, the ECB has signalled that further interest rate increases may be
needed. The Swedish and Danish central banks will probably follow suit. While this may have an impact on residential markets, significant
further monetary tightening is already reflected in swap rates and the impact on commercial markets should be limited.
Our research suggests that the UK yield structure is stable so long as institutional cash flows remain strong and that there is scope for
further yield compression in continental Europe. Furthermore, there is increasing evidence of rental growth in the key office markets.
In the West End of London prime rents have risen by around 5% in the last 12 months, but secondary rents, which are more
representational sf the Fund's exposure, have grown by 20% or more. Rents are also rising in the City of London, Paris, Madrid and
Barcelona, and other cities such as Stockholm are on the turn.
In our view, the re-pricing of property shares, which has been a malor contributor to returns over the last three years, has largely run
its course and the majority of our forecast return over the next twelve months is expected to come from capital growth - itself largely
driven by rental growth - and dividend income.
Patrick Sumner &Adrian Elwood, Fund Managers
69
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
941,759,222
1,508,657
6,411,043
5,604,623
Expenses
Custodian fee
74,852
11,815,763
Administration fee
1,064,878
Operations expenses
1,050,262
Annual tax (note 8)
427,418
6,056
Total expenses
17,805,903
7,888
2,707,035
_____
23,302
958,021,770
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
15,112,957
559,199
15,672,156
.
.
.
.
.
696,783
5,798,688
6,111,895
(2,133,747)
47,377,473
(4,159,776)
Net realised gain
41,083,950
87,834,497
526
_____
12,607,892
945.413.878
A2
25,837,061 84
31 50
I2
3,713,81091
31 85
128,918,447
A2(GBP)
16,785 89
21 83
I1
321,10000
31 85
A1
76,829 94
31 37
x2
3,739 76
31 16
A1 (GBP)
1,203 65
21 74
357,498,543
(2,133,747)
47,377,473
(4,159,776)
995,951,055
(536,952,645)
87,834,497
(1,522)
945,413,878
Share Transactions
Shares redeemedduring the year
A2
14,405,558.08
29,045,772.86
(17,614,269.1 0)
25,837,061 84
A2(GBP)
17,088.03
(302.14)
16,785.89
70
A1
9,900.00
76,004.18
(9,074.24)
76,829.94
A1 (GBP)
I2
I1
x2
1,203.65
4,028,916.70
(315,105.79)
3,713,810.91
321,100.00
3,739.76
321,100.00
3,739.76
1,203.65
_____
Market
Value
EUR
Number
of Securities
%of
Net
Assets
Shares
Transferable securities and money market instrlrments admixed t o an otficial
exchange listing
Shares
Austria
Sweden
600,00G
Ccnviert lmmobilien invest
6.907.000
0 94
8,180,000
Dclphin Capital
10,622,998
;,I2
3,246,200
1.300.000
Orchid Developments
4,601,492
0 49
2,143,745
35,000
CaPellum
Fabege
Hutvudstaoen
IM
Ljungerg Grupper!
Cayman Islands
2,302,444
145,415
Slaelso Gruppen
37,926,102
4 01
1,398,823
2,192,400
Citycon
Technopolis
5,077,717
12,770,730
17,848,457
0.54
135
1.89
2,308.736
16,277,840
72,678,000
6.319,614
25,445,000
18,776.140
61.916,000
157,721,330
0 24
1.72
2 40
France
2 1,760
157.884
680,000
148,400
325,000
200,707
460,000
Affine
Foncieredes RQons
lcale
KaAfman & Broad
Klepierre
%rib!@ de la Tour Eiffel
llnibail R
G.67
3 11
1 99
6 55
16.68
Germany
400,000
58,334
9,348,000
1.1 13,213
10,461,013
0.99
0.12
B a x Vovor
7,889.580
0.83
Beii Stabili
9,339,000
7,250,369
:7,163.416
33,152,785
0.99
0.77
1.82
3.58
Orio Property Group
:4,222.606
1 50
Engel East Europe
Nanette Real Esta!e
Rdamco Europe
7,725,758
4,216,378
7 1,364.000
33.366.136
0 82
Globe Trade Centre
9,010,624
0 95
IVG Immobalien
Patrizia
Ill
Greece
438.3 10
Italy
1i.000.000
3,068,939
330,447
lmllobiliare Grande Distribuzione
Pirelli & C Real Estates
Luxembourg
171,202
2 75
25,937,951
18,876,460
5.975.788
26.838.425
688,973
78.3 17,597
2.00
0.63
2.84
0 07
8.29
Yap1 Kredi Kordy
2,169.170
0 23
7,264.893
15,973,641
91,432,887
1,522,612
5,950,325
5,639,596
35,986,386
4,271,132
12,405.830
21,438,450
7,605,148
4,025,831
28,836,743
37,538,344
4,025,831
6,429,766
90,741,354
4,324,342
13,560,389
25,967,112
31,206,680
5,624,436
9,892,780
12,646,375
19,395,557
12,135,722
514,942,422
0.77
? .69
9.67
0.16
0.53
0.60
3.81
0.45
1.31
2.27
0.80
0.43
3.05
3 97
0.43
0.68
9 60
0.46
1.43
2 75
3 30
0.59
1.05
1.34
2.05
1.28
54.47
United Kingdom
'.960.000
Finland
Net
Assets
Turkey
1,633,?02
Denmark
%of
exchange lirting
1 .J00.000
Marlret
Value
EUR
Number
of Securities
7.665.928
5.025.COO
1,049,999
6.250.00G
775,000
1,596,636
4.000.00G
1,596,800
2 I ,300.00G
4,972,221
4,000,000
3,980,000
2,200,000
2,400,000
1 ,I96,238
3,525,000
4,7;9,490
4,7:9,490
7,220.000
3,600,000
868,607
7,660,269
2,200,000
1,564,000
2,327,321
Atlds EstateS
Big Yellow &roup
Bri:isC Land
BuigananLand Developmen!
BulgananProperty DevelODments
Caliber Global Investment
Decwent Valley Holdings
Deutsche m d
Deveiooment Securbies
Develica Deutschland
Equest Balkan Properties
European Equity Tranche
Great Ponland Estates
Hammerson
Hansteen holdings
Helical Bar
Land Swntier Group
Leo Capital
London Merchant Securitier
Minefva
5lougn Estates
St Modwen Propertlei
Tmland
Unite Group
Warner Estate Holdings
Workpace Group
Other Net Assets
Total Net Assets
941,759,222
3,654,656
945.41 3.878
99.62
0.38
100.00
Any differences in the percentageof Net Asset figures are the mult of rounding8
Netherlands
4,480,453
3,636,363
280.000
0 45
2 26
3 53
Poland
137,750
71
Destrlption of Securities
Shares
Purchases
Sales
EUR
EUR
France
Kibpierre
Unabail R
3,275,207
11,263,984
Netherlands
Rodanico ELrcpe
24,239,226
12,362,753
4,358,937
27,198,535
26,512,062
32,828,263
76,970.129
24,009,195
85,2 16,888
32,934,127
23,657,243
20,757,369
7,374,505
32,929,507
Spain
Inmobiliaria Coloniai
Metrovacerd
United Kingdom
British Land
Hammerson
Land Secur,;,es Group
Mmrva
5ough Estates
12,158,860
Market Value EUR
K of Net Assets
Cayman Islands
Turkey
514,942,422
157,721,330
78,317,597
37,926,102
33,752,785
33,366, i36
17,848,457
14,222,606
10,622,998
10,461.01 3
9,010,624
8,907,900
7,889,530
4,601,402
2,169.1 70
54 47
16 68
8 29
4 01
3 58
3 53
1 89
150
112
111
0 95
0 94
0 83
0 49
0 23
Other Net Assets
Total Net Assets
941,759,222
3,654,656
945,413,878
99.62
0.38
100.00
Country
United Kingdom
France
Sweden
Denmark
Italy
NetnerlandS
Finland
Luxembourg
Bristish Vigin Islands
Germany
Poland
Aus:ria
Greece
Any differences in the pcxentage sf Net Asset figures are the result of roundings.
72
dollar terms. The Tokyo SE Second Section Index rose 16.42% in US dollar terms over the same period.
The Japanese market performed strongly during the first half of the reporting period on the back of strong earnings momentum and
growing expectations of the domestic economy emerging from deflation. Foreign investors continued to buy Japanese equities in large
quantities and retail investors' margin buying also increased. The landslide victory of the Liberal Democratic Party (LDP) in the Lower
House election on 1 1 September also helped market sentiment as expectations for structural reform acceleration increased. However,
market sentiment deteriorated rapidly in January with the arrest of former Livedoor president Takafumi Horie. This so-called "Livedoor
shock" hit newer markets hard. The TSE Mothers market dropped by about 50% between 16 January and 20 February. Concerns
emerged over the shrinkage of excess liquidity, in tandem with simultaneous global tightening after the January nationwide core CPI
showing a 0.5% year-on-year increase; and Tokyo official land prices rising 0.8% year-on-year for residential land and 3.0% for
commercial land provided evidence of an end to deflation. Companies' conservative earnings outlooks announced in May disappointed
the stock market. Mistrust in corporate accounting prevailed after a major financial statement fraud and a string of accounting
revisions by newly established firms. The government took a more stringent stance against bid-rigging by construction companies and
consumer finance companies' lending rates, making investors more aware of regulatory risks.
The smaller companies sector underperformed larger companies modestly over the period after strong out-performance in the previous
5 years. After this underperformance, the valuation premium of smaller companies has more or less disappeared and they look more
attractive now considering higher growth perspectives.
Major positive contributors to the Fund during the period were Leopalace 21 (monthly-leasing apartment operator), Aplix (mobile
software developer), Goodwill (provider of short-term labour) and Hitachi System (software service provider). We sold Leopalace 2 1
and trimmed both Aplix and Goodwill, although we still expect upside potential from these two stocks. Major negative contributors
were Ninety-Nine Plus (foods store operator), For-side.com (mobile contents provider), Enplas (electronic components maker) and ESystem (system integrator). All the positions for these stocks were sold, except for a small weighting of Ninety-Nine Plus which recently
began to rebound.
We believe that Japanese equities offer superior investment opportunity compared t o other major markets over the next several years.
Corporate Japan has the strongest profitability and lowest leverage, with record free cash flow generation. Free cash flow yield
exceeds 6 % compared to just over 1 % for dividend yield, highlighting the significant room for dividend increases. We have also
witnessed a meaningful change in management attitudes toward shareholder returns, with declining cross share holdings among
corporate Japan. There is a reasonable probability that the current cyclical recovery - the third since the 1980s asset bubble burst - will
result in the economy emerging from deflation and resuming sustainable growth. The next key catalysts for the Japanese market will
be any evidence of bank loan growth after a decade-long credit contraction, and any signs that households are more willing t o take
risks by investing some of their large savings in the equity market. A risk factor is the slow down of global economies, including the
US housing market. We have therefore positioned the Fund toward more stable growth stocks with higher exposure t o the domestic
economy, from cyclical stocks with higher exposure to overseas economies.
The Japanese smaller companies sector should perform largely in line with the broad market over the next 12 months, but with the
possibility of out-performance given their superior growth perspective, greater participation of retail investors via online trading, style
drift into small cap and M&A activity from private equity funds acquiring small companies
Yun Young Lee & Michael Wood-Martin, Fund Managers
"Relates to Class A Accumulation Shares.
73
Assets
Cash at bank
contracts (note 13)
Other assets
Total assets
Income
Bank interest
Total income
390,832
36,676
427,508
Expenses
Custodian fee
Shareholder Servicing & fees and Distributionfees (notes 6 and 7)
Administration fee
Operations expenses
Annual tax (note 8)
Total expenses
7,786
562,056
234,19 1
77,088
5 1,499
28,126
3,028
963,774
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
36,17?,121
617,582
1 19,748
654,193
.
.
.
.
_
_____
_____
.
.
.
.
.
37,568,644
_____
437,398
87,682
597.334
.
.
.
.
.
1,122,414
(536,266)
9.1 36.168
131, I 83
Net realised gain
8,731,085
(2,300,065)
36,446,230
6,431,020
A2
1,404,651.92
25.95
Share Transactions
A2
42,897,964
(536,266)
9,136,168
131,183
1,884,325.61
1,497,663.28
38,174,488
(51,056,912)
end of the year
(1,977,336.97)
1,404,651.92
(330)
74
(2,300,065)
.
.
.
.
.
36,446,230
Market
Value
USD
Number
of Securities
%of
Net
Assetr
Shares
exchange listing
290
63,603
340.000
75,000
788,000
60,000
104,500
44,200
44,900
1,030
127,600
340,000
34,000
90,700
90,000
417
670,000
230,000
114,200
156,000
82,000
25,500
100,OOG
870
264,000
231,000
1 10,000
198,100
9,000
Aplix
Ar: Land Sakamoto
BMB Corporation
Century Leasing Syitem
Cnugoku Marine Paints
Cmte 50
Doshisha
Ebara Foods Industry
Cizo Nanao
Goodwill Group
Hitachi Systems & Sewces
ltoham Foods
Japan Asia InveStment
KudmOtO Seirakusho
Nichiha Corporation
Ninety-Nine Plus
Nippon Chemical Industrial
Nippon ihemiphar
Nissen
Okamura
Sdison Information Systems
Sanei-International
Sh rnadzu
Tact Home
Tasaki Shinlu
Th? Japan Wool Textile
Tohokushinsha tilm
Towa
Tsutsumi Jwelry
Other Net Asses
Total Net Assets
2,280,733
940.73 1
1,334,757
1,179.362
1,616,833
841.158
1,982.833
516.699
1,404,256
758,835
2,835,800
1,342,177
242,777
437,566
1,725,741
643.902
1,978,537
1.;40,015
1,423,171
:.612,ioo
1.14rJ.641
1.125.6a5
707,508
593,522
1,307,015
1,956,780
1.1 64.030
1,534.402
349,000
36.177.121
269,109
36,446,230
6.26
2 58
3 66
3.24
4.46
2.31
5.44
1.42
3 85
2 08
7.78
3 68
0 67
i20
4.68
1.77
5.43
3.40
3.90
4 42
3.13
3 09
1.94
1 63
3 59
5.37
3 19
4 13
0.96
99.26
0.74
100.00
Any ditterences in the percentage of Net Aswt figum are ;he result of rouqdings
75
Dexriptlon of Securities
Shares
Aplix
For side.cor
Goodwiil Group
Leopalace 21
hjinety-Nine Plus
Nippon Chemical Industrial
Nissen
0kamura
Paramount Bed
TIS
Purchases
Sales
USD
USD
3.482.577
1,752,865
2,121,724
.
.
.
.
.
2,381,540
3,345,839
2.152,166
3,196,413
1,639,509
1,545,955
2,443,687
1,695,351
2,316,613
4,l17,623
687,554
.
.
.
.
.
1,190,779
2,256,657
1,607,442
2,007,l15
Portfolio by Sector
Sector
Market Value USD
General Retailer5
Textles & Apparel
Chemicals
Telecommunicattons
Non-Cyclical r o r w f i e r Goods
Software & Computers
Enpeering & Machinery
OtDer Equities
Food Producers
General Industrials
Speciality & Other Fsnance
Electronic & Electrical
Media IL ?notography
hpport Services
Real Estate
Other Net Assets
Total Net Assets
5.183.720
5,065,258
3,605,370
3,421,374
2,852,714
2,835,800
1.111,910
2,093,580
i,asa,a7i
1,705,741
1,422,
i40
1 .A04.256
1,l h4.030
758,835
593,522
36.177.121
% of Net Assets
142%
1390
9 89
9 39
7 83
7 78
6 07
5 75
5 10
468
3 90
3 85
3 19
2 08
1 63
99.26
269,109
0.74
36,446,230
100.00
Any oiffecences in the percentage of Net Asset figures are the result of roundings.
76
Managers’ Report - Annual Review to 30 June 2006
The total return for the period, excluding any initial charges paid on investment, with gross income reinvested, was 29.77%* in euro
terms. The HSBC Smaller European Companies Index rose 36.51 O h in euro terms over the same period
Whilst we have recently seen a lot of volatility, it has been a good year for the Fund which has returned 30%* over the period. AS the
year has progressed, the macro economic picture in Europe has broadly continued to improve and this has provided a supportive
backdrop for our companies.
Since May we have seen a sharp correction in equity markets generally, and more markedly in smaller companies, as investors have
become concerned about inflation and the risk of rate rises throttling economic growth. The correction was not a huge surprise as the
market had moved very hard, very quickly and, psychologically, we probably needed reminding of the risk element of the riskheturn
equation. We were not fully prepared for the ferocity of the correction. We believe that the volatility is likely to continue for the next
month or two, especially if the fighting in the Middle East escalates further. We will also keep a watchful eye on the US economy and
on the housing market in particular. That said, continuing European economic strength, buying by directors, and the large pool of
private equity money provide a positive outlook for smaller companies on a nine to twelve-month view.
Through the yea* we have continued to adhere to our ”bottom up” stock-picking approach that has kept us in good stead over recent
years. We have added a number of new holdings where we believe the market has yet to recognise their full potential. These have
included La Seda de Barcelona, the Spanish plastic (PET) bottle manufacturer that is leading consolidation across the sector. Other new
holdings include Acta Holdings, the Norwegian financial services group which is successfully expanding into Sweden, and Compagnie
FinanciPre Tradition (CFT), the Swiss Inter Dealer Broker. The Fund has also continued t o seek out restructuring stories. This has proved
beneficial of late, with our holding in the unloved Agfa-Gevaert which has performed strongly.
The Fund continues to be predominantly focused on the established markets of Western Europe However, over the last year we have
given more attention to countries further east including Russia and Turkey The weightings in these countries are likely t o remain small
and we are conscious of the risks, but we believe it would be short-sighted to ignore the ever changing dynamics in these regions and
the interesting companies that are emerging This has led us to take small positions in companies such as Cat Oil, the German-listed
Russian oil services company, and CTC Media, the NASDAQ-listed Russian TV company, and Aksigorta, the Turkish insurer
The strength of the markets has led to a flurry of lPOs of variable quality. We have participated in a number of these issues and it has
been broadly beneficial t o the Fund. In several cases we received a smaller allocation than we would have liked, so we sold the
position and realised the profit. For example, we sold Scandinavian clothing company Gant, soon after its market debut. In others such
as Bauer, the German foundation construction company, and Tallink, the Estonian ferry operator, we have been able t o establish a
meaningful position. The one positive of the recent market turbulence is that the investment bankers have taken a break from wealth
redistribution and been forced t o reconsider the quality and valuations of their IPO pipeline. Hopefully, this will give a market suffering
from indigestion time to settle.
In summary, for :he year ahead we remain cautiously optimistic and hope that central bankers are not too aggressive in attempting t o
prove their credibility. We will continue to focus our attention on seeking niche leaders in smaller companies and opportunities in
under and poorly-researched equities where we see long-term potential and value.
Stephen Peak & Ollie Beckett, Fund Managers
77
Assets
investment in securities
Cash at bank
contracts (note 13)
Other assets
Income
Bank interest
Total income
Total assets
Liabilities
Bank overdrafts
Redemptions payable
contracts (note 13)
Other liabilities
Total liabilities
172,125,640
14,260,573
16,803
774,530
256
1,386,584
_____
9,025
188,573,411
_____
2,803,296
686,914
5,433,100
2.31 5,651
142,632
2,458,283
Expenses
Custodian fee
33,191
2,081,561
Administration fee
240,573
Operations expenses
132,110
99,400
Annual tax (note 8)
8,792
Total expenses
3,306,126
(847,843)
50,323,675
(61,849)
Net realised gain
49,413,983
(19,485,755)
1,732
.
.
.
.
.
8,925,042
179,648,369
A2
8,9 16,17 1.96
20.14
A1
3,351.38
20.12
29,928,228
Share Transactions
124,223,698
(847,843)
50,323,675
(6 1,849)
222,794,702
(197,298,056)
the year
the year
A2
A1
8,000,666.93
1,939.00
11,158,604.13
3,353.1 3
(10,243,099.10)
(1,940.75)
8,916,171.96
3,351.38
.
.
.
.
.
end of the year
(19,485,755)
(203)
179,648,369
Number
of Securities
Market
Value
EUR
%of
Net
Number
of Securities
Market
Value
EUR
Assets
Shares
%of
Net
AsSBtf
Transferable securities and money market instruments d(lmittPd to an officlal
exchange listing
Shares
exchange h n g
Austria
Netherlands
26,593
93,s85
150,000
64,225
547,500
Aqana Beteiligunys
ALstria Micmrystems
(at Oil
Century Casino
Skdurope Holdings
2,272,143
3,751,777
2,445.750
557,769
1,902,563
10,9$0,002
1.26
2.09
1.36
0.31
1.06
5 08
3,804,000
2 12
Belgium
200,000
Agfa Gwaert
&an Citrus Holdings
1,753.184
3,665,743
5,418,927
0.98
Luidin Mining
Urdguay Mineral Exploratlon
3,704,989
I ,654.C2Y
5,359,018
2.06
0 92
2 98
Kingdom Hotel Investment
1,463,165
0.81
Vmls Energy Public Company
1,897,624
161
Seadrill
7.04
3 02
Canada
170,000
55o.000
Cyprus
525,000
Tallink Grupp
2.8ro.000
1.56
GL Trade
Hi-Media
Iliad
lngenico
Rkodia
Soitec
1,515,389
3,367,200
1,995.463
3.074.400
2,916,500
2,757,999
15,626.951
0.84
1.87
1.11
171
1 62
1 54
8.69
h e a l Bank
Cash life
Duerr
Flexis
Ffkiderer
SGL Carbon
Tbielert
Vi*vacoT;
3,096,975
2.389.500
3,542,750
2,237,900
4,385,000
2,504,199
3,:39,500
1,818,500
23.1 15,424
1.72
1.33
1 97
125
2.44
139
1.75
1.01
12.66
1,684.36 I
1,482,NO
3,126,000
1,578,000
1,819,361
0 94
0 82
1.74
Greece
510,855
60,000
150,000
100,000
0.88
4.36
Ora Interactive
7”2,457
0.40
Astaldi
kimut Holding
EEMS ltalia
2,261,509
4,748,750
713,918
7,524,177
115
2.64
0 40
4.19
Italy
442.384
580,000
102,670
Acta Holding
Blotk Watne Gruppen
Odf!ell invest
3,751.485
2,637,886
1,821,675
8,211,246
2.09
1.47
1.01
4.57
GestevisionTelecinco
Grifols
La Seda De Barcelona
i?lvent Gt
1,952,391
1,915,500
4,024,125
2,213,591
10,105,607
1 09
1.07
2.24
123
5.63
2.944.630
1.042.895
3,669,837
7,657,362
0 58
2.04
4.26
3,393,284
2,210,241
3,709,632
2,664,094
3,548,829
15,526,060
1.89
1.23
2.07
1.4
1 98
8.65
1,654,148
0.92
1,667,960
2,277,155
1,725.588
2,114,788
1.61 7,832
1,587,606
2,106.188
977,601
4,315,546
18,390,264
0.93
127
0 96
118
0.90
1.17
0.54
2.41
10 24
2,674,752
603.153
3,277,905
1.49
0.34
1.83
Sweden
!64,100
Enim
Kdppahl Holdings
Tradedoubler
1
.a
Switzerland
37,200
5.000
55300
50,090
70,000
CompaqnieFinanciereTradition
Gurit Holding
Konax Holding
bledisire Holding
Partners Group Holding
Turkey
740,000
Aksigona
450,000
500,000
900,000
60,000
45.000
900.000
364,000
1,333,319
200.000
k l a s Estate
Gondola Holdings
lP2lPO Group
McCarthy & Stone
NDS Group ADR ‘ A
RAB Special Situations
Raymarine
Regal Petroleum
Unibet Group
0.88
United States
taldenpon Holdings
Marfin Financial Group
M3or Oil Hellas Corinth Refinpries
Piraeus Port Authortry
Israel
1,250,000
1 05
0 63
126
t .63
1.62
0.93
1.56
2.28
10.96
United Kingdom
Germany
105,000
100,000
175,000
140.00G
200,000
161,405
130,000
105,wO
:05,052
300,300
i.825.000
220,000
250,000
France
44,834
460,000
39,500
180,000
1.YGO.000
llY.Yl3
1,485,000
523,400
977,000
360.000
Estonia
800,000
1,893,375
1,126,267
2,266,250
2,925,000
2,902,200
1,679,200
2,802,810
4,087,068
19,@2,170
Spain
Cayman Islands
266,270
ndlbens Industries
Amtel Vredestein
ASIA International
Ballast Nedam
Ewct Holdings
Gemalto
Trader Media
Univar
Noway
Bermuda
600,000
350,000
33,000
760,300
ia5.000
9o.ooL1
120,000
80,099
386,900
110,926
200,000
400,000
CTC Media
Frontera Resources
Warrants
Transferable securities and rnoney market instruments dealt in on another
regulated market
United Kingdom
375,000
RAE Special Situations Class B Warranb
Other Net Assets
Total Net Assets
98,752
0 05
172,125,640
95.81
4.19
7.522.729
179,648,369
100.00
Any differences in the percentage of Ne1Asset figuresare the result of rounding8
79
Descriptlon of Securities
Shares
Purchases
Sales
EUR
EUR
3,498,983
3.678,ago
4.989.844
3,995,256
5,075,057
4,630,603
956,315
1,793.556
1,642,693
6,526,234
8,527,329
3,: 16,000
3,077,783
Czech Republic
Zentiva
France
Hi-Media
Germany
AdrFal Bank
Cash Liie
Mobilcom
Pfleiderer
Italy
Emms ltalia
ha
Luxembourg
TVS! (formerly SBS Broadcasting)
6,137,488
Netherlands
Nutreco holding
1,197,307
5,400,520
United Kingdom
Travis Perkins
Country
Market Value EUR
Germany
Netherlands
Unitea Kingdon:
France
Switrerland
Austria
Spain
Norway
Greece
Sweden
Italy
Berrnuda
Canada
Belgium
United States
Cyprus
Estonia
Turkey
Cayman Islands
Israel
Other Net Assets
Total Net Assets
23,115,424
19,682,170
1 8,489,016
15.616.951
15,526,080
10,930,002
10,105,607
8.2 1 1,246
7.S70.361
7,657,362
7,524,177
5,418.927
5,359,018
3,a04.000
3,277,905
2,897,624
2.a00.000
1,654,148
1,463,165
712 457
172,125,640
7,522,129
179,648,369
% of Net Assets
12 86
1096
10 29
8 69
a 65
6 om
5 63
4 57
4 38
4 26
4 19
3 02
2 98
2 12
1 83
161
156
0 92
o ai
0 40
95.81
4.19
100.00
Any differeices in the percentage of Net A w t figurer are the result of roundings.
80
India Fund
As advised in the Annual Report for the year to 30 June 2005, the Directors anticipated that final distributions would be made to the
remaining shareholders of the India Fund and that the process would be complete by 30 September 2005.
Final distributions amounting to USD 0.982797 per share and totalling USD 1,673,994 were, in fact, made on 26 October 2005
ai
As at 30 June 2006
1. General
Henderson Horizon Fund (the "Fund") was incorporated in Luxembourg on 30 May 1985 and is qualified, under Part I of the law of
20 December 2002, as a "Societe d'lnvestissement A Capital Variable" (SICAV).
On 3 October 2005 a new fund, the Asia-Pacific Property Equities Fund, was launched. The fund is denominated in United States
dollars and it is benchmarked against the FTSE EPRNNAREIT Pure Asia total return net dividend index (Capital constrained).
On 3 October 2005 the investment policies of the Global Property Equities Fund and the Pan European Property Equities Fund were
clarified to provide that these t w o sub-funds may invest in real estate investment trusts.
On 3 October 2005 class A shares of the Global Technology Fund, Japanese Smaller Companies Fund, Pacific Equity Fund and Pan
European Smaller Companies Fund were delisted from the Euronext Amsterdam N.V. stock exchange.
On 27 February 2006 class X shares of all sub funds (except the US Dollar Reserve Fund) were launched These will be distributed only
in Italy and only to retail investors in that country.
2. Presentation of Financial Statements
Shares of the Fund may be issued in seventeen funds:
Specialist Funds
Regional Funds
Pacific Equity Fund
Bond Funds
Global Bond Fund
Reserve Fund
Specialist and Regional funds are sometimes referred to as equity funds in the following nates to the financial statements.
A separate pool of assets (a "Portfolio") is maintained for each fund and is invested in accordance with the investment objective
applicable to the fund to which the Portfolio relates. Accordingly, separate financial statements have been prepared for each Portfolio.
The liabilities are segregated on a fund-by-fund basis with third party creditors having recourse only to the assets of the fund concerned.
To comply with Luxembourg regulations, combined statements of Net Assets and Operations have been presented in United States dollars.
82
As at 30 June 2006
3. Significant Accounting Policies
The following is a summary of the significant accounting policies followed by the Fund:
Valuation of Investment Securities
The investments of each fund will normally be valued on the basis of either the last available mid-market price (the mid point between
the quoted bid and offer prices) or, for certain markets, the last traded price on the principal stock exchange or market on which the
investments are quoted, listed or normally dealt in as at 1 .OOpm Luxembourg time on the relevant Dealing Day with the exception of
the Global Opportunities Fund, the Global Technology Fund, the Global Property Equities Fund and the American Equity Fund which
are valued as at 4pm Luxembourg time. All other assets, including restricted and not readily marketable securities, WIIIbe valued in
such manner as the Directors consider appropriate to reflect their fair value.
In the event that net subscriptions or redemptions on any Dealing Day represent a material proportion of the Shares in issue, or in such
other circumstarces as the Directors consider appropriate, the investments may be valued on an offer or bid basis, as appropriate.
taking into account the applicable dealing costs, or in such a manner as the Directors deem appropriate, to reflect more fairly the
value of the investments in the circumstances.
The last Dealing Day of the current year was 30 June 2006 and the investments have been valued based on the relevant market or
traded price attributable to that Dealing Day.
As a result of time variations in certain markets the prices applied to certain funds do not necessarily reflect the closing market prices
for the same calendar day as the relevant Dealing Day.
Realised Gains & Losses on Sales of Investments
The computation of realised gains and losses on sales of investments is made on the basis of average cost.
Income
Dividends are recognised as income on the dates that securities are first quoted as "ex-dividend'' t o the extent information thereon
reasonably available to the Fund. Interest is accrued on a daily basis.
is
Dividend and interest income is disclosed net of irrecoverable withholding tax where applicable.
Designated Currencies
As permitted by Luxembourg law, the books of the Fund are kept in United States dollars ("USD") with the exception of the
Continental European Equity Fund, the Pan European Smaller Companies Fund, the Pan European Property Equities Fund, the Pan
European Equity Fund, the Pan European Equity Dividend Fund and the Pan European Bond Fund, which are kept in euro (''EUR").
Foreign currency items are translated into these currencies at the rates of exchange ruling at the balance sheet date for assets and
liabilities, and for transactions at the rates ruling when they arose
The EUR figures have been converted into USD in order t o produce combined financial statements to comply with Luxembourg
regulations.
Reorganisation and Formation Expenses
The costs incurred in obtaining authorisation for distribution in Chile, Germany, Italy, Ireland and Lichtenstein, and the cost of
obtaining a stock exchange listing in Amsterdam, are being amortised over 5 years
Expenses relating to the reorganisation of the Henderson Horizon Fund have been allocated t o all funds and are being amortised over
5 years.
83
As a t 30 June 2006
4. Rates of Exchange
The rates of exchange used for the conversion into USD of assets and liabilities of the Fund denominated in other currencies as at
3 0 June 2006 are as follows:
USDl
USDl
USDl
USDI
USDl
USDI
USD1
USDl
AUD
E RL
= CAD
= CHF
= CZK
= DKK
= EUR
= GBP
=
=
1.34592
2.17817
1.11176
1.23285
22.41983
5.86822
0.78669
0.54519
USDl
USD1
USDI
US01
USDl
USDl
USDl
US01
=
=
=
=
=
=
=
=
HKD
IDR
INR
J PY
KRW
MXN
MYR
NOK
7,76769
9264.26234
46.05250
114.62763
950.07632
11.30386
3.67508
6.24370
US01
USDl
USDl
USDl
USDl
USDl
USDI
=
NZD
=
SEK
SGD
THB
TRY
TWD
ZAR
=
=
=
=
=
1.64191
7.27347
1.58641
38.17309
1.56962
32.36342
7.15360
5. Management Fee
On 31 March 2005, the Fund signed a Fund Management and Advisory Agreement appointing Henderson Management S.A. as
Investment Adviser and Henderson Fund Management (Luxembourg) S.A., a company incorporated under the laws of Luxembourg on
18 February 2005, as the Management Company.
For the year ended 30 June 2006 the management fee rates, as a percent per annum on the total net assets of the relevant fund, were as
follows:
Class A Shares
Class X Shares*
Class I Shares
Specialist Funds
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
1Q%
1%
Regional Funds
Pacific Equity Fund
1 .2%
1.2%
1.2%
1.2%
1.2%
1Yo
1.2%
1.2%
1.2%
1.2%
1.2%
1
1%
1%
1%
1%
1%
1%
0.625%
0.75%
0.62 5
0.625%
0.75%
0.62 5 Q/o
0.625%
0.75%
0.6 2 5 Yo
0.5%
NIA
0.5%
Bond Funds
Global Bond Fund
Reserve Fund
1%
1%
1%
1%
1%
Additional fees and expenses will be charged to Shareholders of Class I Shares as part of the management fee subject to the limit on the
relevant management fee set out above. All additional fees and expenses that the Company cannot recover from the Shareholders of the
Class I Shares through the management fee shall be borne by the Investment Manager (note 16).
The Investment Adviser is also entitled to performance fees on all funds, other than the US Dollar Reserve Fund, as detailed in the
Prospectus. At 30 June 2006 the following provision was made for performance fees: the Pan European Equity Fund: EUR 4,053,371,
the Pan European Property Equities Fund EUR 3,735,746 the Pan European Smaller Companies Fund: EUR 374,338, the Continental
European Equity Fund: EUR 851,161, the Pacific Equity Fund: USD 285,856. the Global Property Equities Fund: USD 420,628 and the
Asia-Pacific Property Equities Fund: USD 84,090.
* Class X shares will be distributed only in Italy and only to retail investors in that country
84
As at 30 June 2006
6. Shareholder Servicing Fee
A shareholder servicing fee with respect t o each sub-class of Class A Shares and Class X Shares (note 9) is payable out of the assets of
each fund to the Distributor at the annual rate of 0 5% per annum for the Specialist and Regional Funds (note 2) and 0 25% per
annum for the Bond and Reserve Funds of the relevant fund's average daily net assets, accrued daily and payable monthly in arrears
This fee IS payable to the Distributor for services provided and expenses incurred by it in respect of the ongoing liaison with, and the
ongoing costs of the remuneration of, those distributors appointed by the Distributor to procure sale of the Shares of the Fund
7. Distribution Fee
A distribution fee is payable to the Distributor in respect of Class X Shares out of the assets of each fund at the rate of 0.6% per
annum for the Regional and Specialist funds and 0 35% per annum for the Bond funds of the relevant fund's average daily net assets,
accrued daily and payable monthly in arrears The fee is payable to the Distributor as remuneration for providing distribution-related
services to the f m d s with respect t o Class X Shares
8. Taxation
Under Luxembourg law, there are no Luxembourg income, withholding or capital gains taxes payable by the Company. The Company
will, however, be subject to an annual tax, calculated and payable quarterly, on the aggregate net asset value of each fund at the end
of each quarter being 0.05% per annum on the Regional, Specialist and Bond Funds and 0.01 % per annum on the Reserve Fund and
on Class I Shares. No such tax is due on the portion of the Company's assets invested in other Luxembourg undertakings for collective
investment. Capital gains, dividends and interest on securities issued in other countries and held by the Fund may be subject t o
withholding and capital gains taxes imposed by such countries.
In accordance with the provisions of the European Union Savings Directive ("EUSD") which came into force on 1 July 2005,
withholding tax will apply when a Luxembourg paying agent makes distributions from and redemptions of Shares in certain funds and
where the beneficiary of these proceeds is an individual residing in another Member State. Such distributions and redemptions will be
subject to withholding tax at the rate of 15% until 31 December 2007, 20% until 31 December 2010 and 35% thereafter.
9. Share Capital
The Company offers Class A Shares, Class I Shares and Class X Shares for each of its Funds (except for the Reserve Fund for which no
Class X Shares are available). The fee structure for each of these share classes is described in notes 5 to 7.
There are t w o sub-classes of Shares, "sub-class 1 Shares" or "Distribution Shares" and "sub-class 2 Shares" or "Accumulation
Shares". These sub-classes of Shares are abbreviated in the financial statements as "A1 " and "AZ", "11" and "12". Class X Shares
offer only Accumulation Shares.
Sub-class 1 Shares or Distribution Shares entitle the shareholder to the periodical distribution of net income and/or realised capital
gains. Sub-class 2 Shares or Accumulation Shares do not entitle the shareholder to the distribution of net income or realised capital
gains, which instead are accumulated.
All Shares of the Fund are of no par value and, subject to the restrictions of Luxembourg law, are each entitled to one vote at all
meetings of the Shareholders.
Shareholders may switch all or part of their shareholdings from one or more of the funds into the same Class of one or more of the
other funds on any Business Day. Switches into Class I Shares are not permitted, unless the investor switching into Class I is an
institutional investor within the meaning of Article 129 of the law of 20 December 2002.
Switches into Class X Shares are only permitted if the investor is a retail investor and an Italian resident.
10. Charges and Expenses
In addition to the charges described in notes 5, 6, 7 and 8 above, global operating and other expenses of the Fund are charged to the funds
on a pro-rata basis calculated on the net asset value of each fund. This includes audit and legal fees. Custodian fees are charged to each fund
on an actual basis. Administration fees are charged to each fund up to a maximum rate. Additional fees and expenses will be charged to
Shareholders of Class I Shares as part of the management fee subject to the limit on the relevant management fee set out above (note 5).
11. Net Asset Value
The net asset value is calculated on each business day in Luxembourg.
12. Equalisation
An equalisation account I S operated in connection with the issue and redemption of shares The income element of the issue and
redemption prices of the Portfolio is taken t o the statement of changes in net assets.
85
As at 30 June 2006
13. Forward Foreign Exchange Contracts
At 30 June 2006, the following contracts were open:
Fund
Global Bond Fund
BUY
Sell
U nrealised
Gain/(Loss)
EUR 53,000
GBP 36,515
USD 394
USD (515)
USD (18)
US0 (178)
USD (1,046)
USD 945
USD 568
USD (1,090)
USD (1,040)
USD 988
USD 81 1
USD (1,264)
USD (2,683)
USD 2,439
USD (305)
USD 160
USD (1,924)
USD 1,570
USD 2,093
USD (1,650)
USD 6,351
USD (5,818)
USD (70)
USD (21 1)
USD 1,456
USD (1,381)
USD 1,939
USD (2,027)
USD 575
USD (700)
USD 72
USD (535)
USD 492
USD (1,278)
USD (208)
USD 788
USD 3,330
USD (1,481)
USD 468
USD (797)
USD 2,215
USD (1,002)
USD (1,526)
USD (6,429)
USD (1,433)
USD (7,853)
GBP 36.449
CHF 98,606
USD 80,000
GBP 53,000
AUD 132.1 12
CAD 11 1,808
USD 100,000
CAD 148,644
EUR 106,000
JPY 18,433,344
USD 160,000
USD 200,701
EUR 160,000
EUR 53,000
JPY 7,739,060
USD 132,847
EUR 106,000
JPY 15.476.127
USD 133,000
EUR 491,000
USD 61 9,765
EUR 53,000
CAD 74,681
EUR 80,000
USD 100,347
JPY 15,456,262
USD 133,000
JPY 6,133,849
USD 53,000
JPY 2.525.160
EUR 36,768
CAD 58,682
NZD 86,000
GBP 29,000
SEK 392,138
CAD 136,067
CAD 240,204
EUR 171,000
CAD 236,000
EUR 171,000
JPY 25,397,630
GBP 161,834
GBP 192,177
USD 428,000
USD 429,295
86
EUR 53,000
USD 80,000
CHF 98,847
AUD 132,248
GBP 53,000
USD 100,000
CAD 112,388
EUR 106,000
CAD 148,703
USD 160,000
J PY 18.48 5,344
EUR 160,000
USD 200,945
JPY 7,755,755
EUR 53,000
EUR 106,000
USD 133,201
USD 133,000
JPY 15,425.473
USD 61 7,960
EUR 492,000
CAD 74,994
EUR 53,000
USD 100,272
EUR 80,000
USD 133,000
JPY 15,466,282
USD 53,000
JPY 6,148.2 12
GBP 12,000
SEK 343,721
NZD 86,000
CAD 59,555
JPY 6,106,356
GBP 29,000
USD 119,128
EUR 171,000
CAD 241,329
JPY 24,368,770
GBP 1 17,410
CAD 248,000
EUR 234,500
USD 359,070
SEK 3.1 18,299
GBP 238,230
As at 30 June 2006
13. Forward Foreign Exchange Contracts (continued)
At 30 June 2006, the following contracts were open:
BUY
Sell
Unrealised
Gain/(Loss)
CAD 481,488
GBP 234,000
EUR 444,000
SEK 4,310,558
JPY 74,398,428
USD 1,202,553
JPY 150,444,714
EUR 1,972,333
USD 2,518,951
GBP 234,000
CAD 484,141
JPY 64,097,986
USD 581,691
EUR 51 6,000
JPY 135,413,464
USD 1,330,178
USD 2,473,629
EUR 2,009,642
USD 3,946
USD (6,334)
USD 4,385
USD 11,932
US0 (5,917)
USD 17,871
USD (13,993)
USD 36,895
USD (39,062)
USD (7,085)
EUR 5,413,366
SEK 629,127
GBP 342,337
GBP 3,710,782
EUR 67,888
EUR 500,000
EUR 77,392
EUR 246
EUR (7,732)
EUR 69,906
EUR 1,368,420
USD 189,726
USD 8,630,603
GBP 938,052
GBP 103,754
EUR 6,789,603
USD 25,065
USD (1,382)
USD (46,440)
USD (22,757)
CHF 8,390,743
EUR 59,415
EUR 5,371,795
CHF 92,950
EUR (17,608)
EUR 103
EUR (17,505)
USD 462.274
USD 7.1 35,653
JPY 53,776,290
JPY 831,446,327
USD (6,865)
USD (1 17,802)
USD (124,667)
CHF 782,644
EUR 7,412
EUR 501,053
CHF 11,595
EUR (1,643)
EUR 13
EUR (1,630)
USD 44,792
USD 275,843
JPY 5,22 1,446
SGD 440,576
USD( 9 15)
USD (2,753)
USD (3,668)
SEK 1,343,650
EUR 145,854
EUR (526)
CHF 518,972
CHF 597,826
EUR 332,248
EUR 382,120
EUR (1,089)
EUR (643)
EUR (1,732)
Fund
Global Bond Fund (continued)
a7
As at 30 June 2006
14. Dividends
During the year dividends were declared and were m d on the following funds:
No of shares
783,534.92
701,378.79
673,402.58
673,440.71
669,334.05
Rate per share in USD
0.007 588
0.00481 1
0.01485
0.01 1635
0.006283
9,392
10,951
5,000
3,839
2,769
31,951
49,738.47
43,424.82
23,984.7 1
23,996.71
24,014.7 1
0.188829
0.252204
0.208466
0.1 59973
0.1 15289
31 January 2006
61
8,040.53
0.007587
20 October 2005
109,598
5,16592 1.52
0.021216
20 October 2005
20 January 2006
31 January 2006
20 April 2006
20 July 2006
Amount paid in EUR
860
1,027
2,500
1,720
822
6,929
No of shares
12,379.98
12,679.98
12,681.98
12,679.98
12,679.98
Rate per share in EUR
0.069534
0.080998
0.19713
0.135646
0.064792
20 October 2005
31 January 2006
567
357
924
5,500.00
5,500.00
0.103 108
0.064909
20 October 2005
490,544
3,669,517.43
0.133681
20 October 2005
31 January 2006
1,208
314
1,522
11,220.07
18,149.55
0.107690
0.017301
20 October 2005
31 January 2006
26
177
203
3,743.13
3,019.69
0.006921
0.058615
Fund
Global Bond Fund
Pay Date
20 October 2005
20 January 2006
31 January 2006
20 April 2006
20 July 2006
Amount paid in US0
20 October 2005
20 January 2006
31 January 2006
20 April 2006
20 July 2006
5,945
3,374
10,000
7,835
4,206
31,360
15. Securities lending
The aggregate value of securities o n loan as at 30 June 2006 was USD 142,059,210 (30 June 2005: USD 189,914,783).
As at 30 June 2006
16. Transactions with Connected Persons
During the year Lnder review, the following transactions were entered into by the Fund with the following connected persons of the Fund:
(1) The Management Company and the Investment Adviser - Note 5 documents the percentages of management fees relevant to each
fund The total amount paid by the Fund t o the Management Company, Henderson Fund Management (Luxembourg) 5 A and the
Investment Adviser, Henderson Management S.A. during the year in respect of these fees was USD 63,146,175 (June 2005, USD
36,535,224). This amount includes performance fees payable to the Investment Adviser
Out of the fees to the Investment Adviser and the Management Company, the Investment Manager was entitled t o fees at the rate of
25% of the Investment Adviser's and Management Company's management fee for the Equity funds (except for the Pan European
Property Equities Fund) and 12.5% of the Investment Adviser's and Management Company's management fee for the Bond funds and
the Pan Europeai Property Equities Fund. The total amount paid by the Investment Adviser and Management Company to the
Investment Manager during the year in respect of fees was USD 10,985,607 (June 2005. USD 7,929,267).
(2) The Distributor - as from 19 November 2001 fees paid to the Distributor were up to 0.5% per annum of the average total net
assets (excluding those assets attributable to shareholders of the I shares) of the Equity funds and 0 25% per annum for the Bond and
Reserve funds T i e total amount paid by the Fund to the Distributor during the year in respect of these fees was USD 22,055,614
(June 2005: USD 13,479,926).
(3) The Directors - fees payable to the Directors in the year were USD 59,410 (June 2005: USD 84,386).
(4) The Directors- the transactions into the Fund during the year were USD 61,446 (June 2005: nil)
17. Soft Commission
No cash rebates were retained by the Manager or any of its connected persons. All transactions carried out on behalf of the Fund
were conducted on an arm's length basis and were executed on the best available terms.
The Manager and any of its connected persons may effect transactions by or through the agency of another person with whom the
Manager and any of its connected persons have an arrangement under which that party will from time to time provide to or procure for the
Manager and any of its connected persons goods, services or other benefits, such as research and advisory services, computer hardware
associated with soecialised software or research services and performance measures etc., the nature of which is such that their provision can
reasonably be expected to benefit the Fund as a whole and may contribute to an improvement in the Fund's performance and that of the
Manager or any of its connected persons in providing services to the Fund and for which no direct payment is made. Instead, the Manager
and any of its connected persons undertake to place business with the party. For the avoidance of doubt, such goods and services do not
include travel, accommodation, entertainment, general administrative goods or services, general office equipment or premises, membership
fees, employee salaries or direct money payments. Soft dollar commissions may be retained by the Manager or any connected persons of
the Manager provided that the brokerage rates are not in excess of customary institutional full-service brokerage rates.
18. Purchases and Sales of Securities
A listing of purchases and sales of securities during the year is available upon request at the registered office of the Fund.
19. Contracts for Difference
As at 30 June 2006, the fund holds the following contracts for difference:
Fund
Description
EN1 Spa CFD
Quantity
890,000
Price EUR
23.18
Commitment
20,630,200
Unrealised Appreciation
124,600
EN1 Spa CFD
ENEL CFD
350,000
750.000
23.18
7.12
8.1 13,000
5,340,000
49,000
52,500
EN1 Spa CFD
320,000
23.18
7.41 7,600
44,800
As at 30 June 2005, the Fund did not hold any contracts for difference The unrealised appreciation on contracts for difference
included in the iivestment in securities at market value in the statement of net assets.
IS
89
Auditor's Report to the Shareholders
Henderson Horizon Fund
23, Avenue de la Porte-Neuve
L-2085 Luxembourg
We have audited the financial statements, which consist of the statement of net assets, the statement of operations, the statement of
changes in net assets, the portfolio of investments and the notes t o the financial statements of Henderson Horizon Fund and of each
of its sub-funds (the "SICAV") for the year ended 30 June 2006. These financial statements are the responsibility of the Board of
Directors of the SICAV. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the Board of Directors of the SICAV in preparing the
financial statements, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the attached financial statements give, in conformity with Luxembourg legal and regulatory requirements, a true and
fair view of the financial position of Henderson Horizon Fund and of each of its sub-funds as at 30 June 2006 and the results of their
operations and changes in their net assets for the year then ended.
Supplementary informatton included in the annual report has been reviewed in the context of our mandate but has not been subject
to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on
such information. We have no observation to make concerning such information in the context of the financial statements taken as a
whole.
Luxembourg, 22 September 2006
KPMG Audit S.a
f i n
1.1
Macleod
Note:
Only the English version has been audited. Consequently, the audit opinion is expressed uniquely on the English version.
90
General Information
Henderson Horizon Fund (the "Fund") is an open-ended investment company incorporated in Luxembourg as a societe
d'investissernent a capital variable (SICAV) on 30 May 1985 and is a recognised collective investment scheme for the purposes of
Section 76 of the United Kingdom Financial Services Act 1986 Potential investors in the United Kingdom are advised that all, or most,
of the protectiors afforded by the United Kingdom regulatory system will not apply to an investment in the Fund and that
compensation will not be available under the Financial Services Compensation Scheme
This Report is issued by Henderson Global Investors Limited (regulated by the FSA), the Investment Manager. Henderson Global
Investors Limited has its registered office at 4 Broadgate, London ECZM 2DA. Tel +44 207 818 1818.
The Fund provides a simple and cost effective way of investing in world equity and bond markets The Fund, through its seventeen
funds, provides investors with access to thirteen equity funds, three bond funds and one reserve fund.
Applications for shares may be made on any business day in Luxembourg to the Registrar and Transfer Agent between 9.00am and
6.00pm (local time), or t o the Distributor in London between 9.00am and 5.00pm (local time). Applications should be made on the
application form circulated with the Prospectus or by fax, telephone or in writing and may be made in any major currency. If you are
sending applications by fax or telex, you should also subsequently send the original form by post. Applications are accepted by
telephone only from existing investors who have previously been issued with a Personal Service Number.
For full information, including a copy of the Prospectus, please write t o the Registrar and Transfer Agent or Distributor at the addresses
shown on page 1. Alternatively, contact the main dealing desk on Luxembourg +352 2696 2050 or visit the Fund's website:
www. henderson.com/horizon.
Please remember that past performance is not a guide to future performance. The value of an investment and the
income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the
amount originally invested. Tax assumptions may change if the law changes and the value of tax relief will depend
upon individual circumstances. Please refer to the Prospectus for information on the Henderson Horizon Fund.
91
Founded in 1934, Henderson is a leading investment manager, providing a wide range of investment products and services to
institutions and individuals in Asia, Europe and North America. Henderson manages over USD 116.6 billion (as at 30 J m e 2006) in
assets and employs more than 900 people around the world.
Henderson has a clear focus on investment management and manufactures a broad range of actively-managed investment products
for institutional and retail investors across multiple asset classes including equities, fixed income, private equity and property.
Henderson has offices in Amsterdam, Frankfurt, Paris, Milan, Vienna and Zurich and in London where our headquarters are based.
Henderson has had a presence in North America since 1999 when it acquired US real estate investment manager Phoenix Realty
Advisers, and has offices in Chicago and Hartford. In Asia, Henderson has offices in Hong Kong, Singapore and Tokyo.
With investment expertise across every asset class, Henderson’s skilful investment managers invest in every major market around the
globe. They are supported by a global team of researchers and economists who have a keen understanding of the economic forces
driving the security markets and who undertake rigorous sector and theme analysis. Underpinning this process is a comprehensive risk
control framework to ensure that investment views are translated into portfolios managed in line with investors’ risk and return
requirements.
Listed below is an overview of the key components of our business:
Leading investment trust manager with USD 5.7 billion managed in 1 1 different trusts
USD 24.3 billion managed in 39 OElC sub funds
Based in London, Henderson Global Investors has a growing network of international operations, with offices in Australia, France,
Germany, Hong Kong, Italy, Japan, The Netherlands, New Zealand, Singapore, Switzerland, and the USA
In Canada, Henderson Global Investors has a successful distribution partnership with Mackenzie Financial Corporation, one of
Canada’s leading mutual fund providers
In the UK, Henderson Global Investors manages over USD 92.1 * billion in institutional funds and USD 24.5 billion in retail funds
Successfully selling our range of fund management skills t o an increasingly broad range of UK and European institutions
Clients in Canada, Japan, the Netherlands, Australia, Singapore and the US, and increasingly in other European countries. In total,
over USD 24.2 billion is managed for non-UK clients.
*Includes Pearl Group funds
92
e
Henderson
G loba I Investors
Issued by Henderson Global Investors limited (regulated by the FSA) Henderson Global 1nvestor5Limited has its regi~teredoffice at 4 Broadgate. London EC2M 2DA. UK
Tel +44 20 7818 1818
Please remember that past performance is not a guide to future performance The value of an investment and the income from It can fall as well a5 w e as a result of market and
currency fluctuations and you may not get back the amount originally invested Tax assumptions may change if the law changes and the value of tax relief will depend upon individual
Circumstances. Please refer to the Prospectus for further information on the Henderson Horizon Fund
Special Information for Swiss Investors
Vontobel Fonds Services AG, Dianastrasse 9. 8022 Zurich (the "Swiss Representative") acts as Representative and Bank Vontobel AG. Bahnhofstrasse 3, 8001 Zurich as Paying Agent
of the Henderson Horizon Fund in Switzerland The Prospectus, a copy of the articles of Incorporation. annual and semi-annual reports of the Henderson Horizon Fund as well as a list
of all purchases and sales for the account of the Henderson Horizon Fund during the reporting perlod can be obtained free of charge from the Swiss Representative
HG15420/2006
I

Henderson - Fundsquare

Transcription

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