Investec Funds Series ii Annual Report and Accounts REPORT AND ACCOUNTS Investec Funds Series ii 3...

OEIC | REPORT AND ACCOUNTS INVESTEC FUNDS SERIES II

Investec Funds Series iiAnnual Reportand Accounts For the year ended 31 December 2016

REPORT AND ACCOUNTS

Investec Funds Series ii 1

Investec Funds Series ii Report & Accounts

American Fund* 2- 4

Asia ex Japan Fund* 5- 7

Global Energy Fund* 8- 10

Global Strategic Equity Fund* 11- 14

Monthly High Income Fund * 15- 17

Portfolio Statements per Fund* 18- 30

Authorised Corporate Director’s report* 31

Statement of Authorised Corporate Director’s responsibilities 32

Statement of Depositary’s responsibilities and report to shareholders 33

Independent Auditor’s Report 34-35

Comparative Tables 36-45

Financial Statements 46-100

Securities Financing Transactions 10 1

Other Information 102 -106

Glossary 107-112

Directory 113

* The above information collectively forms the Authorised Corporate Director’s report

REPORT AND ACCOUNTS

Investec Funds Series ii2

American Fund

Summary of the Fund’s investment objective and policy

The Fund aims to grow the value of your investment over the long term.

The Fund invests primarily in the shares of US companies and in related derivatives (fi nancial contracts whose value is linked

to the price of an underlying asset).

The Investment Manager is free to choose how the Fund is invested and does not manage it with reference to an index.

Performance record

Investec American Fund ‘ I’ accumulation shares 44.39%*

Performance comparison index 32.67%**

Peer group 30.09%**

The Fund outperformed both its performance comparison index and peer group during the period under review. Our

holdings in the fi nancials sector led to favourable returns, while selective investments in industrials stocks contributed

strongly. On an individual stock level, holdings in companies such as gold miner Kinross Gold and Bank of America helped

the Fund’s returns. Less favourably, performance was hurt by our exposure to US clothing retailer Abercrombie & Fitch.

Factors helping performance

The year 2016 marked a turn in the tide for value stocks, as they enjoyed a very strong second half of the year. With many of

the major equity indices at, or close to, all-time highs, it is perhaps not surprising that there was a something of a shift into

value stocks, which we believe is long overdue. The Fund’s exposure to US banks was a strong contributor to relative

returns. Two of the three largest positive contributors to performance were US banks, specifi cally Bank of America and

Washington Federal. These companies rallied on increasing hopes of a US Federal Reserve interest-rate hike in the near

future, and have recovered from some of their underperformance from earlier in the year.

Kinross Gold was the single largest contributor to returns over the 12-month period. The miner benefi ted from the recovering

gold price and the company’s shares gained by 140% during the fi rst half of the year, although performance fell in the

second half as gold prices cooled. Kinross had underperformed its peers, so the rebound in the gold price at the start of the

year, saw it close the gap quite considerably and outperform. We closed our position in the stock in April.

Our position in oilfi eld services company Patterson-UTI Energy contributed to return. The sector benefi ted from the increase

in oil prices, which reached their lowest level in January 2016 and have been on an upward path since. Maintenance costs

had been cut to the bone in the lower oil-price environment of 2015, but the higher oil price saw exploration companies

increase activity, to the benefi t of supporting industries and companies like Patterson. We closed our position in October.

Factors hurting performance

Our holdings in the energy sector generated positive returns, but were behind the index in terms of performance. At the start

of the year, our weighting to the sector was higher than the index and many of our positions performed well. As the oil price

ticked higher, we gradually started to reduce our holdings in energy companies after strong performance by a number of our

stocks. The sector continued its strong run into year-end and we missed out on this rally due to our reduced exposure.

REPORT AND ACCOUNTS


Our position in US clothing retailer Abercrombie & Fitch was among the top detractors from performance over the period.

The company’s margins have continued to compress as the retailer’s ‘cool factor’ has waned. Also, the company has

decided not to compromise on the quality of its products, leading to higher costs than its competitors, which in turn leads to

a large compression in margins. Successive improvement efforts have not led to a material improvement in sales, and the

company is being further hit by the decline in mall traffi c. The shares now look cheap and we argue that if things even start

to go mildly right for them (increased mall footfall, slight margin expansion) there is potential for the share price to rally from

its current level.

The cruise ship company Carnival came under pressure during the period and fi nished as one of the main negative

contributors. Having benefi ted from lower oil prices for much of 2015, the gradual strengthening in oil prices over 2016

negatively affected the company. Elsewhere, concerns over the refugee crisis in Europe at the start of year and the outcome

of the Brexit referendum weighed on booking numbers. We remain confi dent in Carnival as we believe it is well positioned to

benefi t from the rapid expansion in Chinese cruise demand that is expected to unfold over the coming years. Only a handful

of yards can build these ships and production is slow, so capacity shouldn’t increase so fast as to put downward pressure

on prices.

Signifi cant purchases during the year:

Deere, Manitowoc Foodservice, American Express, Halliburton, Oracle, Signet Jewellers, Citigroup, Bank of America,

Leucadia National, Manitowoc

Signifi cant sales during the year:

United States Treasury Note 1% 31/10/2016, International Speedway, Halliburton, Carnival,Patterson-UTI Energy, Baker

Hughes, Staples, Zimmer Biomet, Graham, Cable One, Kinross Gold, MDC

Outlook

2016 saw a small reversal in the nine-year underperformance of ‘value’ stocks versus ‘growth’ stocks in global equities.

Value stocks are those considered cheap by a number of different valuation methods, while growth stocks are typically the

more expensive, stable, market-leading companies. It is unlikely to be a coincidence that such a reversal has happened

alongside a sharp rise in global bond yields (meaning a fall in prices). When asset prices are biased towards a specifi c

outcome (that is, a persistent environment of no growth, defl ation and perpetual quantitative easing by central banks), a

small shift in investor sentiment is enough to cause magnifi ed share-price movements. While the moves in both ‘value versus

growth’ and bond yields since the summer might seem large, a glance at any long-term performance chart for these two

measures will show that what we have witnessed so far pales in comparison with the longer-term picture. If the

underperformance of value stocks has lasted nine years, then it is not inconceivable that the reversal could last several years

too.

The US market overall remains expensive, with most sectors offering little in the way of bargains. What’s more, there appears

to be, for the fi rst time, a worryingly relaxed consensus that another year of gains awaits the investor in US equities. We do

not attempt to predict exactly what will happen in a given year, but prefer to position the portfolio defensively in a number of

cheap, stable businesses, which should hopefully insulate us from losses in case the consensus turns out to be wrong.

*Source: Morningstar, total return, income reinvested, no initial charge, accumulation (acc) share class, net of fees in GBP. Past

performance should not be taken as a guide to the future and there is no guarantee that this investment will make profi ts.

**Index (S&P 500 NDR Index) and peer group (Investment Association North America sector) shown for performance comparison purposes

only.

The opinions expressed herein are as at end of December 2016.

REPORT AND ACCOUNTS


Risk and Reward profi le*

Lower risk Higher risk

Potentially lower rewards Potentially higher rewards

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This indicator is based on historical data and may not be a reliable indication of the future risk profi le of the Fund. The risk

and reward category shown is not guaranteed to remain unchanged and may shift over time. The lowest category does not

mean ‘risk free’.

The value of your investment can fall as well as rise and you are not certain of making profi ts; losses may be made.

“The Fund appears towards the higher end of the Risk and Reward Indicator scale. This is because it invests in the shares of

companies, whose values tend to fl uctuate more widely.

The following risks may not be fully captured by the Risk and Reward Indicator:

Concentrat ed portfolio: The Fund invests in a relatively small number of individual holdings. This may mean the value of

the Fund may fl uctuate more widely than more broadly invested funds.

Currency exchange: Changes in the relative values of different currencies may adversely affect the value of the Fund’s

investments and any related income.

Derivatives: The use of derivatives is not intended to increase the overall level of risk in the Fund. However, the use of

derivatives may still lead to large changes in the value of the Fund and includes the potential for large fi nancial loss.

Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company

profi ts and future prospects as well as more general market factors. In the event of a company default (e.g. bankruptcy), the

owners of their equity rank last in terms of any fi nancial payment from that company.

Geographic/Sector: Investments may be primarily concentrated in specifi c countries, geographical regions and/or

industry sectors. This may mean the value of the Fund may decrease whilst more broadly invested funds might grow.

Third party operational: The Fund’s operations depend on third parties. Investors in the Fund may suffer disruption or

fi nancial loss in the event of third-party operational failure.

*The Risk and Reward profi le is taken from the Key Investor Information Document. Please note that, the Risk and Reward profi le section is

based on Sterling “I” Class Accumulation shares.

The full list of the Fund’s risks are contained in Appendix VII of the Investec Funds Series Omnibus prospectus.

REPORT AND ACCOUNTS


Asia ex Japan Fund



The Fund invests primarily in the shares of companies in the Asian region (excluding Japan) and in related derivatives

(fi nancial contracts whose value is linked to the price of an underlying asset). The Fund seeks to invest in companies that are

expected to benefi t from Chinese economic growth and development.

The Investment Manager is free to choose how the Fund is invested. However, the MSCI All Countries Asia ex Japan Index is

currently taken into account when the Fund’s investments are selected.

Performance record

Investec Asia ex Japan Fund ‘ I’ accumulation shares 24.55%*


Peer group 26.00%**

The Fund produced strong positive returns over the year but underperformed both its performance comparison index and

peer group. The Fund’s performance was hurt by our exposure to Hong Kong equities. More positively, our holdings in South

Korean and Chinese equities, and our lack of holdings in Malaysian companies, helped the Fund’s returns.

Factors hindering performance

The Fund’s investments in the materials and fi nancial sectors of the market had the largest negative impact on overall

performance. Our exposure to real estate and our strategy of holding fewer energy investments than the comparative index

also led to disappointment. From a country perspective, our investments in Hong Kong companies hurt performance, with

diversifi ed conglomerate CK Hutchison being the Fund’s biggest detractor in 2016. CK Hutchinson has considerable

holdings in the UK and Europe which were considered under threat by the UK’s exit from the EU. We have since sold the

position.

Meanwhile, Ping An Insurance also negatively impacted performance due to concerns around liquidity-tightening measures

in China. Its banking arm had the added inconvenience of a board shake up with the resignation of its president and

chairman. Nevertheless, the company continues to generate growth and increase profi tability, while divesting itself more

capital-intensive subsidiaries. The valuation also looks attractive compared to both its history and its ongoing strong returns.


A notably positive contribution to the Fund’s performance, relative to its comparison index, came from investments in the

information technology sector. Value also came from our holdings in the telecommunications services sector. From a country

perspective, investments in South Korean and Chinese equities, alongside not holding Malaysian companies, supported

returns over the year.

Within the information technology sector, Chinese internet companies Alibaba and Tencent helped overall returns, as they

benefi ted from the huge growth potential of China’s internet market. The Fund also benefi ted from a strong performance

from Samsung Electronics, which announced a more defi ned shareholder-return plan during the year. Chinese carmaker

Geely did well as new models were well received. This was partly down to a closer collaboration between Geely and Volvo

which is a subsidiary of Geely’s parent holding company.. The Fund benefi ted from an overweight position in the stock.

REPORT AND ACCOUNTS



Alibaba ADR, Ping An Insurance Group of China, DBS, NAVER, Sands China


Samsung Electronics, CK Hutchison,China Mobile, Korea Electric Power, Ping An Insurance, Baidu ADR, United Overseas

Bank

Outlook: Fundamentals are looking brighter

We remain positive on the outlook for Asia, as company fundamentals appear to be brighter. Asian companies are seeing the

strongest upgrades to earnings estimates in six years, with a bias towards cyclical sectors and Greater China.

The erosion in company profi tability that began after the global credit crisis is starting to bottom out. This is because profi t

margins have picked up since 2014, as companies focus on higher margin products. Falling commodity prices have also

helped and a reduction in capacity (the maximum level of output that a company or industry can sustain) has improved

pricing power. Capital expenditure has been slashed in many industries where excess capacity was a problem. This has

been further bolstered by site closures in the oil exploration and production sectors in China, for example. We expect this to

continue under the Chinese government’s state-owned enterprise reform initiatives.

The evidence of the improvement is that the ratio of companies’ free cashfl ows compared to their sales has seen the

sharpest improvement in Asia relative to developed markets since 2011. Valuations look attractive both relative to their own

10-year history and relative to developed markets. Asia now trades at a 25% discount to P/E of the MSCI Asia ex Japan vs

MSCI World index. However, there is also a lack of upward momentum in share prices, as Asian stock markets have lagged.

This refl ects deep scepticism of the improvements we are seeing, as investors are instead focused on wider macro risks

such as the potential for a Trump-led trade war with China, a debt-fuelled collapse in Chinese growth, or headwinds caused

by tighter global liquidity. While it would be foolish to dismiss these risks out of hand, the underweight position of Asia in

investor portfolios presents an opportunity should the improvements in company performance continue.

From a sector perspective, our view points towards a cyclical recovery in energy, materials, fi nancials and technology. This is

where we are focusing our research efforts. We believe this changing dynamic is best captured by a stock-selection process

that focuses on buying good quality companies, with improving fundamentals on reasonable valuations that are receiving

increasing market attention.

*Source: Morningstar, total return, income reinvested net of UK basic rate tax, no initial charge, accumulation (acc) share class, net of fees

in GBP. Past performance should not be taken as a guide to the future and there is no guarantee that this investment will make profi ts.

**Index (MSCI All Countries Asia ex Japan NDR Index) and peer group (Investment Association Asia Pacifi c ex Japan sector) shown for

performance comparison purposes only.


REPORT AND ACCOUNTS





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The Fund appears towards the higher end of the Risk and Reward Indicator scale. This is because it invests in the shares of







Developing market: Some of the countries in which the Fund invests may have less developed legal, political, economic

and/or other systems. These markets carry a higher risk of fi nancial loss than those in countries generally regarded as being

more developed.






Investing in China: Investment in mainland China may involve a higher risk of fi nancial loss when compared with

countries generally regarded as being more developed.

Liquidity: There may be insuffi cient buyers or sellers of particular investments giving rise to delays in trading and being

able to make settlements from the Fund and/or large fl uctuations in the value of the Fund which may lead to larger fi nancial

losses than might be anticipated.






REPORT AND ACCOUNTS


Global Energy Fund



The Fund invests around the world primarily in the shares of companies and in related derivatives (fi nancial contracts whose

value is linked to the price of an underlying asset). The companies are those that are involved in the exploration, production

or distribution of oil, gas and other energy sources or those that service the energy industry.


Performance record

Investec Global Energy Fund ‘I’ accumulation shares 49.90%*


Peer group Not applicable**

While producing a strong positive return, the Fund underperformed its performance comparison index over the period. The

oil price increased over 2016 as global inventories declined and many key oil-producing countries agreed to production cuts.


The Fund’s relative underperformance was largely due to our overweight exposure to renewable energy companies, which

lagged those stocks more closely related to changes in the oil price. The solar sector has been under pressure since the

extension of the solar Investment Tax Credit in the US, which has effectively provided developers with a longer window in

which to install new solar projects. This has delayed the purchase of panels and installation of projects as developers

anticipate further price reductions. In addition, falling confi dence in the sector helped to expedite the bankruptcy of

SunEdison (not held within the strategy), one of the biggest companies in the sector. Despite these headwinds, we still

believe in the longer-term investment thesis for the renewable energy sector. These companies now appear cheap compared

to the rest of the market, and we believe they have a strong growth outlook.

Our selective exposure to oilfi eld services companies also hurt relative returns, in particular our holding in Weatherford

International. Weatherford suffered following the release of poor fi rst and third-quarter results during the period. Signifi cantly,

management downgraded its free cashfl ow (cash available to the company after spending what is required to maintain the

business) forecast for 2016. Weatherford is one of the ‘big four’ US diversifi ed service companies along with Schlumberger,

Halliburton and Baker Hughes. Its valuation remains compelling and we believe it can make up the relative

underperformance to its peers.

Our position in US refi ner Marathon Petroleum was also a negative contributor over the year. The acquisition of MarkWest by

Marathon’s midstream (transportation of crude) unit created balance sheet pressure in an already challenging operating

environment, and the stock fell at the beginning of the year. We have since closed out our position in the stock.


The Fund has an overweight exposure to oil exploration and production (E&P) companies, with a focus on medium-sized and

larger oil-producing companies within this sector. We believe this strategy will allow the Fund to capture the benefi ts of any

recovery in the oil price, while reducing the risk of exposure to companies with weaker balance sheets. In our view, certain

companies with large crude oil reserves and strong growth profi les had been punished heavily during the sell-off from late

2014 to 2015. During the period under review, these companies added the most value to the Fund, as the oil price

recovered, especially in the second-half of the year. Anadarko Petroleum, Range Resources, Marathon Oil, Encana and EOG

Resources were among the top performers.

Some of the larger integrated producers within the Fund also contributed positively to overall returns, but to a lesser degree.

BP, BG Group (before it was purchased by Royal Dutch Shell) and Statoil all boosted returns.

REPORT AND ACCOUNTS



TOTAL, Exxon Mobil, BP, Schlumberger, Chevron, Valero Energy, Royal Dutch Shell ‘B’ Shares, Imperial Oil, CNOOC, Suncor

Energy, Anadarko Petroleum, Devon Energy, ConocoPhillips, Cimarex Energy, EOG Resources, Occidental Petroleum,

Superior Energy Services, Eni, Hess, Weatherford International , Cresent Point Energy.


Royal Dutch Shell ‘B’ Shares, Chevron, Exxon Mobil, Valero Energy, TOTAL, Phillips 66, Anadarko Petroleum, Schlumberger,

Eni, Oil & Natural Gas, TransCanada, Encana, Statoil, Marathon Oil, Suncor Energy, Kinder Morgan, BP, Cenovas Energy,

Superior Energy Services, Range Resources.

Outlook

Given the magnitude of Opec’s decision in November to cut oil production, it is right to dwell for a moment on the

practicalities of the cuts. Saudi Arabia took the ‘biggest hit’ according to Energy Minister Khalid al-Falih, however all Opec

countries are participating, cutting their near-term production levels (even though Iran’s target is above its November 2016

level). The coordination of these cuts, we believe, recovers the credibility of Opec, restoring its infl uence and making the

implementation of a signifi cant proportion of the agreed cuts more likely. Our oil supply/demand models are showing that if

global oil demand growth remains at one million barrels per day (bl/d) – which looks like a low estimate – and the production

cuts are implemented, then OECD oil inventory levels should fall and begin to normalise in the early part of 2017. We believe

this is likely to support oil prices further.

US natural gas prices were strong during the year, up almost 60%, as Henry Hub gas prices moved from US$2.34 per

thousand cubic feet (mcf) to US$3.72 over the period. Demand continues to be strong – primarily from residential and

industrial users – while US natural gas production fell on an annual basis in 2016 (the fi rst time since the shale gas

revolution). The result of these supply and demand trends is that gas inventory levels are modestly below the fi ve-year

average, 10% below the beginning of 2016, and tightening quickly. Gas drilling activity is still relatively low, and we believe

that higher gas prices are required to encourage adequate new supply in 2017. Over the longer term, we see signifi cant

production capacity available from the prolifi c fi elds of the Marcellus and Utica, in the North Eastern US, which would place

downward pressure on the price, potentially capping it between US$3-3.50/mcf.

We believe this is an exciting time for energy investors, as oil prices move towards US$60/bl. This is a critical level for many

of the large integrated oil companies, as it allows them to sustain their free cashfl ow and dividend payments. With

approximately US$1 trillion of lost investment caused by the fall in the oil price between mid-2014 and the end of 2015, and

more constrained access to capital, we expect oil markets to remain structurally tight for several years, suggesting a more

positive period for oil prices. At the stock level, we believe that companies focused on lower costs can deliver stronger

operating margins at US$60/bl than were evident at $100/bl in the last cycle. The ‘value over volume’ ethos should see

greater discipline and focus on profi tability which should lead to improved shareholder returns over time. We, as active

managers in this sector, have a clear responsibility to ensure that our portfolio companies adhere to this ethos.

With a long-term mind-set, we focus on companies with high quality assets and prudent capital management. We believe

these businesses have a competitive advantage over their peers, and a better chance of enhancing free cashfl ow and return

on capital employed (key measures of company profi tability) while delivering competitive earnings growth. The portfolio

performed well during the recent move higher in oil and natural gas prices and we hope that this strong absolute and relative

performance can be maintained in 2017. We have seen a good recovery since January 2016 lows, but our analysis suggests

there is potential for continued strong performance in 2017.



**Index (MSCI All Countries World Energy Index) shown for performance comparison purposes only. For this Fund, there is no relevant peer

group sector against which to measure fund performance.

The opinions expressed herein are as at 31 December 2016.

REPORT AND ACCOUNTS





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REPORT AND ACCOUNTS


Global Strategic Equity Fund



The Fund invests around the world primarily in the shares of companies, believed to offer above average opportunities for

capital gains, and may invest in related derivatives (fi nancial contracts whose value is linked to the price of an underlying

asset).

The shares are those issued by companies that are believed to be of high quality or offer good value (meaning they are

undervalued within the market), those expected to benefi t from increases in profi t expectations or are currently or expected

to receive increased investor demand. Opportunities may also be sought for investments in companies which are expected

to see their profi ts benefi t over time from operational and structural improvements.


Performance record

Investec Global Strategic Equity Fund ‘I’ accumulation shares 24.97%*


Peer group 23.94%**

Over 2016, the Fund underperformed its performance comparison index, but outperformed its peer group. Our positioning

within the energy and healthcare sectors detracted from relative returns, while our exposure to fi nancial companies helped

performance.


The strategy’s performance was markedly different over the two halves of the year. During the fi rst six months, performance

was disappointing, as the rapid changes happening within the market – a rotation from defensive to cyclical and “deep value”

stocks - were not helpful to our investment process. We have seen periods of underperformance in the past and they have

all featured similarly swift changes within the market.

Due to our light exposure to the energy sector and oil and gas companies, we didn’t benefi t from the strong rise in this area.

Oil prices made a signifi cant recovery from the previous year’s collapse, partly due to proposed Organization of the

Petroleum Exporting Countries (Opec) production cuts. This led to many oil and gas companies gaining strongly.

Within the healthcare sector, Canadian drug-maker Valeant Pharmaceuticals detracted signifi cantly from the Fund’s

performance in the fi rst half of the year. The company had revised some of its earnings projections and withdrew its profi ts

guidance, which led to its downgrade by credit-rating agencies. Valeant also announced an undisclosed investigation by the

US regulator and, due to a late fi ling of its annual report, risked breaching its debt covenants (agreements between the fi rm

and its creditors). We have since sold our holding in this stock.

Another poor performer for 2016 was US real estate and brokerage company Jones Lang LaSalle. The company’s share

price fell after the UK’s referendum vote to leave the EU, as this stoked concern over large real estate transactions in the

ensuing market upheaval. We exited our position.

Within telecommunications services, our overexposure compared with the index to the UK’s service provider BT Group also

detracted from returns. Concerns over the UK telecoms regulator trying to force BT to legally separate its Openreach division

(a supplier of broadband to millions of customers) to encourage investment in the country’s aging network, as well as

REPORT AND ACCOUNTS


increasing pension liabilities, have weighed on its share price. However, we continue to hold the stock due to BT’s dominant

position which was materially improved with the acquisition of EE and subsequent strong performance in the consumer

business. Recent accounting irregularities in the company’s Italian corporate division, acquired in 2005, alongside greater

than expected earnings pressure in UK government contracts has led us to revisit the balance of the investment thesis.


Adding to returns was the turnaround in the fi nancials sector, particularly in US banks, which began mid-year with indications

that the US economy was improving. US bank shares were boosted further by Donald Trump’s election win, which generated

hopes of higher interest rates from his stimulus plan, and looser regulation. The biggest contributor to the Fund’s

performance was Popular, which has banking operations in the US and Puerto Rico, as it benefi ted from its growing US loan

business.

Within consumer staples, the food and beverages subsector helped relative performance. For example, both Chinese liquor

company Kweichow Moutai and US meat processor Tyson Foods added value to the portfolio over the year on strong

revenue growth.

Among our best performers was US computer giant Hewlett Packard. Shares were boosted early in the year on its improving

balance sheet and news that it was accelerating its restructuring. Another strong performer was Japanese semiconductor

equipment manufacturer SCREEN Holdings, which saw its share price rise steadily after it increased its earnings guidance.


Amazon.com, Alphabet ‘A’ Shares, Siemens, Alibaba ADR, Broadcom.


AmerisourceBergen, AT&T, Honeywell, Tyson Foods, Japan Airlines.

Outlook

The broad expectation that a Trump victory would result in the Federal Reserve delaying plans to raise interest rates has

been largely discredited. Expectations are moving towards a faster cycle of interest-rate hikes in the face of the new

administration’s planned economic stimulus. Furthermore, recent economic data from China, Japan and Europe has proved

generally stronger than expected. Although the case for a signifi cant short-term link between macroeconomic growth and

stock-market performance is tenuous, we do note that corporate-earnings growth (which is more directly linked to stock-

market performance) is accelerating. Expectations are for US profi ts to grow by 3% in in the fourth quarter, continuing the

upward trend that began in the third quarter.

Forecasters have raised expectations for a rise in infl ation. The recent shift in the bond market shows investors are beginning

to believe a turn in the direction of infl ation is on the way, as longer-term yields have pushed sharply higher. Central bank

policy has pumped cash into the global economy through quantitative easing programmes since the global fi nancial crisis.

This hasn’t impacted infl ation signifi cantly until now, because people were holding on to their money. However, if people think

infl ation is going to rise, they may be less inclined to put off purchases, and money will start changing hands more quickly.

This will automatically lead to an increase in infl ation.

REPORT AND ACCOUNTS


The vast majority of market observers’ expectations for global equity markets predict only a small increase in equity prices

for the next 12 months. Also, many investment strategies out there still seem very focused on avoiding too much risk,

preferring a more defensive approach. While it’s certainly important to consider the risks, at this juncture our analysis

suggests that there is good value to be found in segments of the equity market. This is particularly apparent in those sectors

that, historically, have proven to lead the market when risk appetite increases. These include resources, technology and

fi nancials – all are areas where indicators have been improving of late. Any persistence in the market’s expectations for rising

growth and infl ation could see more money being diverted to these segments, although markets, as always, remain

vulnerable to geopolitical upheaval.



**Index (MSCI All Countries World NDR Index) and peer group (Investment Association Global sector) shown for performance comparison

purposes only.


REPORT AND ACCOUNTS





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Developing market: Some of the countries in which the Fund invests may have less developed legal, political, economic

and/or other systems. These markets carry a higher risk of fi nancial loss than those in countries generally regarded as being

more developed.




Investing in China: Investment in mainland China may involve a higher risk of fi nancial loss when compared with

countries generally regarded as being more developed.






REPORT AND ACCOUNTS


Monthly High Income Fund


The Fund aims to provide a high income, paid on a monthly basis.

The Fund invests around the world primarily in bonds (contracts to repay borrowed money which typically pay interest at

fi xed times) and related derivatives (fi nancial contracts whose value is linked to the price of an underlying asset).

The bonds may be issued by governments, institutions or companies and may be of investment grade (high quality) as rated

by the credit rating agencies (companies that rate the ability of the issuers of bonds to repay borrowed money) or below

investment grade (if providing a high income).

The Fund will use hedging (an investment technique which aims to protect the value of an investment against currency

movements) to minimise any currency risk in sterling.


Performance record

Investec Monthly High Income Fund ‘I’ accumulation shares 12.18%*


Peer group 11.25%**

Total deemed income distributions per ‘I’ accumulation share

12 months to 31 December 2016 7.5 2 pence

12 months to 31 December 2015 5.90 pence

The total income distribution payments from the Fund on ‘I’ accumulation shares during the 12 months to 31 December 2016

were 7.5 2 pence per share, relative to 5.90 pence per share for the same period last year.

Over 2016, the Fund underperformed its performance comparison index, but outperformed its peer group. Our preference

for high-quality assets caused the Fund to fall behind the index. However, we still generated a robust return thanks to

benefi cial positioning during more turbulent periods, and our lower exposure to the commodity sector, when it experienced

weakness.


Over the second half of the year, the Fund’s exposure to oil exploration and production companies, and other commodity-

related businesses, was somewhat low, so we did not feel the full benefi t of the signifi cant rally in that sector. Since then, we

have increased our holdings in the commodity sector as oil prices have moved higher and stabilised the outlook for the

producers during the year.

Corporate bond markets rallied over the year, but suffered bouts of volatility (widely fl uctuating prices). Although we had

positioned the Fund for a rally in this market, we maintained a preference for higher-quality assets. This was a period in

which low-quality assets outperformed, which meant the Fund fell slightly behind its performance comparison index. We

continue to prefer to hold higher-quality assets.

There was some volatility in individual bonds in September that detracted from the overall performance of the Fund. This

included the bonds of state-owned oil and gas company Petroleos de Venezuela, which came back from the brink of default

REPORT AND ACCOUNTS


(no longer able to pay its debts) and rallied strongly given the improvement in energy prices, although we were not invested.

We did own bonds in US-based Sinclair Television. This security lost value because there were concerns that TV

advertisement spending during this year’s presidential campaigns would be lower than had been expected. We believe the

bond remains attractive and still hold the position.


The Fund’s low exposure to oil companies and the wider commodities sector helped in the fi rst half of the year, when

commodity prices fell, leading to a decline in many commodity-related corporate bonds.

During turbulent periods, such as the UK referendum on EU membership, we maintained a portfolio positioned for a positive

move in corporate bond markets. The Fund did initially suffer with the short-term decline in markets, but it went on to benefi t

from the subsequent rally, as the fears on market prices surrounding the Brexit vote appeared to have dissipated.

Our stock selection was particularly good in October, helping to generate strong absolute returns over the period. This

included bonds in US pharmaceutical company Valeant, Brazilian petroleum company Petrobras and US fi nancial-software

company Diebold.


Tesoro 4.75% 15/12/2023, ARD Finance 6.625% 15/09/2023, T-Mobile USA 6.5% 15/01/2026, WMG Acquisition 4.125%

01/11/2024, Sappi Papier 4% 01/04/2023.


Ardagh Packaging Finance 4.25% 15/01/2022, Telecom Italia 3.25% 16/01/2023, Dufry Finance 4.5% 01/08/2023, Owens-

Brockway Glass Container 5% 15/01/2022, Tesco 6.125% 24/02/2022.

Outlook

We believe the fundamental backdrop for corporate bonds remains positive. The level of company debt (known as corporate

leverage) remained largely stable over 2016, although US investment grade credit (higher quality bonds) was the one

exception to this. The affordability of company debt is also still at comfortable levels, in our view. With markets heavily

focused on central bank policy, and several meaningful political events on the horizon, bouts of turbulence and price

fl uctuations are likely to continue.

Changes in the political landscape, such as the policy uncertainty of a Donald Trump presidency and European elections in

2017, may amplify this. With the improvement in energy and metal prices, pressure on the commodity sector has fallen and

so too has the potential for company defaults. The difference between corporate-bond yields and government-bond yields

(known as corporate-bond spreads) is just inside long-term averages, but is still some way above historical lows in the credit

cycle (the ease of access to credit by borrowers over time).

Due to supportive central bank policies, the length of this cycle may be extended beyond historical norms. So we remain

cautiously positive on the prospects of the corporate bond asset class, with a focus on managing risks, but also making use

of interesting opportunities that may arise in the wake of further volatility.

Market liquidity through any period of sustained volatility remains a key consideration in portfolio construction, and we may

need to adjust our strategy accordingly in such market conditions.

*Source: Morningstar, total return, income reinvested, no initial charge, accumulation share class, net of fees in GBP. Past performance

should not be taken as a guide to the future and there is no guarantee that this investment will make profi ts.

**Index (BofA Merrill Lynch Global High Yield Constrained Index GBP Hedged) and peer group (Investment Association £ High Yield sector)

shown for performance comparison purposes only.


REPORT AND ACCOUNTS





1 765432





The Fund appears towards the middle of the Risk and Reward Indicator scale. This is because it invests in bonds whose

returns tend to fl uctuate more than those of cash funds but less than those of funds which invest in the shares of companies.


Default: There is a risk that the issuers of fi xed income investments (e.g. bonds) may not be able to meet interest payments

nor repay the money they have borrowed. The worse the credit quality of the issuer, the greater the risk of default and

therefore investment loss.

Derivative counterparty: A counterparty to a derivative transaction may fail to meet its obligations to the Fund thereby

leading to fi nancial loss.

Derivatives: The use of derivatives may increase the overall risk in the Fund by multiplying the effect of both gains and

losses. This may lead to large changes in the value of the Fund and potentially large fi nancial loss.

Interest rate: The value of fi xed income investments (e.g. bonds) tends to decrease when interest rates and/or infl ation

rises.

Liquidity: There may be insuffi cient buyers or sellers of particular investments giving rise to delays in trading and being

able to make settlements from the Fund and/or large fl uctuations in the value of the Fund which may lead to larger fi nancial

losses than might be anticipated.






REPORT AND ACCOUNTS

18 Investec Funds Series ii

MARKET PERCENTAGE VALUE OF NET ASSETSASSET HOLDING (£’000) (%)

BONDS 0.00% (31.12.15: 4.48%)

BASIC MATERIALS 0.00% (31.12.15: 0.84%)

CONSUMER GOODS 15.43% (31.12.15: 10.18%)

FOOD PRODUCERSLeucadia National 257,954 4,863 3.97 ––––––––––––––––––––––––––––––––––––––––––HOUSEHOLD GOODS & HOME CONSTRUCTIONManitowoc Foodservice 414,830 6,390 5.21

Procter & Gamble 49,921 3,422 2.79

MDC 84,637 1,788 1.46 ––––––––––––––––––––––––––––––––––––––––––– 11,600 9.46 ––––––––––––––––––––––––––––––––––––––––––PERSONAL GOODSCoach 86,162 2,451 2.00 ––––––––––––––––––––––––––––––––––––––––––CONSUMER SERVICES 11.48% (31.12.15: 22.93%)

GENERAL RETAILERSWal-Mart Stores 67,312 3,790 3.09

Signet Jewelers 49,021 3,744 3.06

Best Buy 46,585 1,631 1.33

Abercrombie & Fitch 82,175 803 0.66 ––––––––––––––––––––––––––––––––––––––––––– 9,968 8.14 ––––––––––––––––––––––––––––––––––––––––––

TRAVEL & LEISURESouthwest Airlines 55,548 2,267 1.85

Carnival 43,255 1,828 1.49 ––––––––––––––––––––––––––––––––––––––––––– 4,095 3.34 ––––––––––––––––––––––––––––––––––––––––––FINANCIALS 26.32% (31.12.15: 15.33%)

BANKSBank of America 468,285 8,371 6.83

Citigroup 148,309 7,157 5.84

Washington Federal 215,576 6,081 4.96 ––––––––––––––––––––––––––––––––––––––––––– 21,609 17.63 ––––––––––––––––––––––––––––––––––––––––––

FINANCIAL SERVICESAmerican Express 99,228 5,962 4.87

Northern Trust 64,916 4,676 3.82 ––––––––––––––––––––––––––––––––––––––––––– 10,638 8.69 ––––––––––––––––––––––––––––––––––––––––––HEALTH CARE 10.67% (31.12.15: 16.33%)

HEALTH CARE EQUIPMENT & SERVICESZimmer Biomet 37,127 3,123 2.55

Anthem 16,186 1,905 1.55

Medtronic 23,716 1,379 1.13 ––––––––––––––––––––––––––––––––––––––––––– 6,407 5.23 ––––––––––––––––––––––––––––––––––––––––––

PHARMACEUTICALS & BIOTECHNOLOGYJohnson & Johnson 44,520 4,179 3.41

Merck 29,977 1,439 1.17

Pfi zer 40,044 1,057 0.86 ––––––––––––––––––––––––––––––––––––––––––– 6,675 5.44 ––––––––––––––––––––––––––––––––––––––––––

Portfolio Statement

As at 31 December 2016

American Fund

19Investec Funds Series ii

REPORT AND ACCOUNTS


INDUSTRIALS 10.38% (31.12.15: 3.41%)

GENERAL INDUSTRIALS3M 24,860 3,605 2.94 ––––––––––––––––––––––––––––––––––––––––––INDUSTRIAL ENGINEERINGDeere 81,129 6,803 5.55

Manitowoc 456,253 2,311 1.89 ––––––––––––––––––––––––––––––––––––––––––– 9,114 7.44 ––––––––––––––––––––––––––––––––––––––––––OIL & GAS 2.20% (31.12.15: 7.95%)

OIL & GAS PRODUCERSValero Energy 48,419 2,700 2.20 ––––––––––––––––––––––––––––––––––––––––––TECHNOLOGY 15.23% (31.12.15: 14.28%)

SOFTWARE & COMPUTER SERVICESMicrosoft 114,039 5,830 4.76

Oracle 105,191 3,308 2.70

DST Systems 22,106 1,936 1.58 ––––––––––––––––––––––––––––––––––––––––––– 11,074 9.04 ––––––––––––––––––––––––––––––––––––––––––TECHNOLOGY HARDWARE & EQUIPMENTMotorola Solutions 59,745 4,024 3.28

Cisco Systems 144,251 3,571 2.91 ––––––––––––––––––––––––––––––––––––––––––– 7,595 6.19 ––––––––––––––––––––––––––––––––––––––––––Portfolio of investments 112,394 91.71

Net other assets 10,154 8.29 –––––––––––––––––––––––––––––––––––––––––––Net assets 122,548 100.00 ––––––––––––––––––––––––––––––––––––––––––Unless otherwise stated the above securities are ordinary shares or common stock and admitted to offi cial stock exchange listings.

REPORT AND ACCOUNTS



CHINA 29.72% (31.12.15: 24.31%)Tencent 535,600 10,651 6.33

China Construction Bank 13,956,100 8,719 5.19

Alibaba ADR 94,867 6,734 4.01

Ping An Insurance Group of China 882,000 3,587 2.13

Sands China 764,000 2,699 1.61

Geely Automobile 3,230,000 2,492 1.48

NetEase ADR 13,616 2,468 1.47

Sinopharm 594,000 1,986 1.18

China Galaxy Securities 2,422,500 1,770 1.05

ANTA Sports Products 700,000 1,695 1.01

China Shenhua Energy 975,500 1,493 0.89

New Oriental Education & Technology ADR 37,776 1,306 0.78

AAC Technologies 173,500 1,281 0.76

Anhui Conch Cement 480,500 1,060 0.63

Jiangsu Expressway 1,010,000 1,034 0.61

Sunny Optical Technology 143,000 505 0.30

China Petroleum & Chemical 858,000 494 0.29

Real Gold Mining * 1,507,000 – – ––––––––––––––––––––––––––––––––––––––––––– 49,974 29.72 ––––––––––––––––––––––––––––––––––––––––––HONG KONG 18.19% (31.12.15: 24.99%)AIA 1,195,400 5,482 3.26

CNOOC 4,290,000 4,362 2.59

Sun Hung Kai Properties 346,825 3,563 2.12

BOC Hong Kong 1,061,500 3,082 1.83

Cheung Kong Property 595,000 2,966 1.76

China Overseas Land & Investment 1,114,000 2,394 1.42

Guangdong Investment 1,860,000 1,993 1.19

CSPC Pharmaceutical 2,120,000 1,829 1.09

China Resources Land 762,256 1,392 0.83

WH 1,845,000 1,209 0.72

Techtronic Industries 364,036 1,059 0.63

PCCW 1,488,000 655 0.39

China Everbright 386,598 597 0.36 ––––––––––––––––––––––––––––––––––––––––––– 30,583 18.19 ––––––––––––––––––––––––––––––––––––––––––

INDIA 8.01% (31.12.15: 10.25%)ITC 1,108,786 3,198 1.90

Aurobindo Pharma 233,195 1,866 1.11

Hero MotoCorp 49,714 1,804 1.07

Motherson Sumi Systems 407,571 1,587 0.94

Maruti Suzuki India 22,969 1,462 0.87

Zee Entertainment Enterprises 256,659 1,390 0.83

Bharat Petroleum 148,004 1,121 0.67

Power Grid Corporation of India 441,173 970 0.58

JSW Energy 82,628 60 0.04 ––––––––––––––––––––––––––––––––––––––––––– 13,458 8.01 ––––––––––––––––––––––––––––––––––––––––––INDONESIA 2.28% (31.12.15: 1.45%)Telekomunikasi Indonesia 16,013,100 3,836 2.28 ––––––––––––––––––––––––––––––––––––––––––

LUXEMBOURG 2.29% (31.12.15: 2.03%)Investec GSF All China Equity Fund † 291,763 3,849 2.29 ––––––––––––––––––––––––––––––––––––––––––

Portfolio Statement


Asia ex Japan Fund


REPORT AND ACCOUNTS


PHILIPPINES 0.00% (31.12.15: 0.73%)

SINGAPORE 2.42% (31.12.15: 1.79%)DBS 296,100 2,889 1.72

Broadcom 8,103 1,185 0.70 ––––––––––––––––––––––––––––––––––––––––––– 4,074 2.42 ––––––––––––––––––––––––––––––––––––––––––

SOUTH KOREA 18.70% (31.12.15: 18.53%)Samsung Electronics 9,074 10,993 6.54

KB Financial 145,190 4,177 2.48

NAVER 5,769 3,005 1.79

Samsung Life Insurance 32,072 2,428 1.45

Hana Financial 107,963 2,267 1.35

KT&G 27,549 1,873 1.11

POSCO 10,149 1,755 1.04

Kangwon Land 67,607 1,627 0.97

Korea Zinc 3,719 1,188 0.71

Coway 19,447 1,154 0.69

Hyundai Department Store 13,192 963 0.57 ––––––––––––––––––––––––––––––––––––––––––– 31,430 18.70 ––––––––––––––––––––––––––––––––––––––––––

TAIWAN 14.26% (31.12.15: 11.77%)Taiwan Semiconductor Manufacturing 2,524,357 11,524 6.85

Hon Hai Precision Industry 3,221,319 6,833 4.06

Silicon Motion Technology ADR 50,216 1,778 1.06

E.Sun Financial 3,460,487 1,597 0.95

China Life Insurance 1,719,000 1,387 0.82

Micro-Star International 471,000 874 0.52 ––––––––––––––––––––––––––––––––––––––––––– 23,993 14.26 ––––––––––––––––––––––––––––––––––––––––––THAILAND 2.47% (31.12.15: 1.42%)Bangkok Bank 530,000 1,937 1.15

Siam Cement 142,500 1,611 0.96

Bangkok Bank NVDR 166,700 602 0.36 ––––––––––––––––––––––––––––––––––––––––––– 4,150 2.47 ––––––––––––––––––––––––––––––––––––––––––UNITED KINGDOM 0.63% (31.12.15: 0.00%)HSBC 163,200 1,064 0.63 ––––––––––––––––––––––––––––––––––––––––––Portfolio of investments 166,411 98.97

Net other assets 1,728 1.03 –––––––––––––––––––––––––––––––––––––––––––Net assets 168,139 100.00 ––––––––––––––––––––––––––––––––––––––––––† A related party to the Fund.

* Suspended securit y.

Unless otherwise stated the above securities are ordinary shares or common stock and admitted to offi cial stock exchange listings.

Stocks shown as NVDRs represent Non Voting Depositary Receipts.

Stocks shown as ADR s represent American Depositary Receipts.

REPORT AND ACCOUNTS



CANADA 7.65% (31.12.15: 13.28%)Suncor Energy 117,118 3,128 3.38

Imperial Oil 63,693 1,812 1.96

Encana 126,800 1,223 1.32

Precision Drilling 206,224 918 0.99 ––––––––––––––––––––––––––––––––––––––––––– 7,081 7.65 ––––––––––––––––––––––––––––––––––––––––––CHINA 0.46% (31.12.15: 0.63%)‡Xinjiang Goldwind Science & Technology 81,000 111 0.12

Huaneng Renewables 342,000 90 0.10

BYD 19,500 84 0.09

Tianneng Power International 96,000 71 0.08

Xinyi Solar 240,000 63 0.07 ––––––––––––––––––––––––––––––––––––––––––– 419 0.46 ––––––––––––––––––––––––––––––––––––––––––

DENMARK 0.11% (31.12.15: 0.00%)Vestas Wind Systems 1,970 103 0.11 ––––––––––––––––––––––––––––––––––––––––––FRANCE 6.50% (31.12.15: 4.18%)TOTAL 141,710 5,882 6.35

Schneider Electric 2,428 136 0.15 ––––––––––––––––––––––––––––––––––––––––––– 6,018 6.50 ––––––––––––––––––––––––––––––––––––––––––

GERMANY 0.09% (31.12.15: 0.00%)Nordex 5,036 88 0.09 ––––––––––––––––––––––––––––––––––––––––––HONG KONG 3.43% (31.12.15: 3.64%)‡ CNOOC 2,901,000 2,950 3.19

China Everbright International 155,000 143 0.15

Wasion 184,000 80 0.09 ––––––––––––––––––––––––––––––––––––––––––– 3,173 3.43 ––––––––––––––––––––––––––––––––––––––––––INDIA 0.11% (31.12.15: 1.34%)Amara Raja Batteries 9,963 104 0.11 ––––––––––––––––––––––––––––––––––––––––––IRELAND 1.10% (31.12.15: 1.62%)Weatherford International 260,045 1,017 1.10 ––––––––––––––––––––––––––––––––––––––––––ITALY 1.51% (31.12.15: 2.53%)Eni 105,959 1,400 1.51 ––––––––––––––––––––––––––––––––––––––––––NORWAY 1.55% (31.12.15: 2.82%)Statoil 95,548 1,434 1.55 ––––––––––––––––––––––––––––––––––––––––––PORTUGAL 1.21% (31.12.15: 0.00%)Galp Energia 93,013 1,125 1.21 ––––––––––––––––––––––––––––––––––––––––––RUSSIA 2.09% (31.12.15: 2.24%)Gazprom ADR 247,346 1,005 1.09

Lukoil ADR 20,560 931 1.00 ––––––––––––––––––––––––––––––––––––––––––– 1,936 2.09 ––––––––––––––––––––––––––––––––––––––––––SPAIN 0.12% (31.12.15: 0.00%)Gamesa Corporacion Tecnologica 6,566 108 0.12 ––––––––––––––––––––––––––––––––––––––––––SWEDEN 1.12% (31.12.15: 0.00%)Lundin Petroleum 59,030 1,040 1.12 ––––––––––––––––––––––––––––––––––––––––––

Portfolio Statement


Global Energy Fund


REPORT AND ACCOUNTS

UNITED KINGDOM 14.18% (31.12.15: 14.39%)Royal Dutch Shell ‘B’ Shares 267,911 6,275 6.78

BP 1,165,895 5,898 6.37

Tullow Oil 307,921 955 1.03 ––––––––––––––––––––––––––––––––––––––––––– 13,128 14.18 ––––––––––––––––––––––––––––––––––––––––––UNITED STATES 56.28% (31.12.15: 51.50%)Schlumberger 66,891 4,578 4.94

Exxon Mobil 57,709 4,237 4.58

Chevron 42,504 4,071 4.40

EOG Resources 47,232 3,888 4.20

ConocoPhillips 91,404 3,756 4.06

Occidental Petroleum 63,924 3,720 4.02

Hess 65,098 3,328 3.58

Anadarko Petroleum 57,102 3,254 3.51

Noble Energy 85,002 2,644 2.86

Pioneer Natural Resources 17,467 2,579 2.79

Marathon Oil 145,637 2,080 2.25

Halliburton 45,103 1,981 2.14

Cimarex Energy 17,360 1,924 2.08

Devon Energy 45,790 1,710 1.85

Valero Energy 27,345 1,525 1.65

Cabot Oil & Gas 58,127 1,074 1.16

Whiting Petroleum 109,276 1,082 1.17

Oasis Petroleum 77,197 947 1.02

QEP Resources 60,176 915 0.99

Range Resources 31,596 880 0.95

SM Energy 29,517 833 0.90

Ormat Technologies 3,892 170 0.18

Acuity Brands 646 122 0.13

Green Plains 4,590 103 0.11

Itron 1,992 103 0.11

AO Smith 2,531 98 0.11

Silver Spring Networks 8,307 90 0.10

Pattern Energy 5,736 89 0.10

Hannon Armstrong Sustainable* 5,231 81 0.09

Renewable Energy 8,082 65 0.07

First Solar 2,251 60 0.06

Solaredge Technologies 5,514 55 0.06

SunPower 9,846 54 0.06 ––––––––––––––––––––––––––––––––––––––––––– 52,096 56.28 ––––––––––––––––––––––––––––––––––––––––––Portfolio of investments 90,270 97.51

Net other assets 2,304 2.49 –––––––––––––––––––––––––––––––––––––––––––Net assets 92,574 100.00 ––––––––––––––––––––––––––––––––––––––––––* Real Estate Investment Trust (REIT).

‡ Prior year comparatives restated.


Stocks shown as ADR s represent American Depositary Receipts.


REPORT AND ACCOUNTS



AUSTRALIA 0.77% (31.12.15: 0.00%)South32 3,123,495 5,045 0.77 ––––––––––––––––––––––––––––––––––––––––––BELGIUM 0.91% (31.12.15: 3.32%)bpost 308,450 5,948 0.91 ––––––––––––––––––––––––––––––––––––––––––BRAZIL 0.59% (31.12.15: 0.70%)Itau Unibanco ADR 460,203 3,872 0.59 ––––––––––––––––––––––––––––––––––––––––––CANADA 0.00% (31.12.15: 0.86%)

CHINA 7.07% (31.12.15: 6.78%)Shanghai International Air 3,558,432 11,009 1.68

China Construction Bank 14,357,000 8,970 1.37

Alibaba ADR 114,643 8,137 1.24

New China Life Insurance 1,954,200 7,282 1.11

Kweichow Moutai 164,750 6,419 0.98

Anhui Conch Cement 2,042,000 4,506 0.69 ––––––––––––––––––––––––––––––––––––––––––– 46,323 7.07 ––––––––––––––––––––––––––––––––––––––––––DENMARK 0.80% (31.12.15: 1.27%)Novo Nordisk 179,210 5,247 0.80 ––––––––––––––––––––––––––––––––––––––––––FINLAND 1.34% (31.12.15: 0.00%)UPM-Kymmene 437,742 8,748 1.34 ––––––––––––––––––––––––––––––––––––––––––FRANCE 3.37% (31.12.15: 2.77%)Teleperformance 94,435 7,729 1.18

BNP Paribas 149,354 7,688 1.17

Arkema 84,324 6,708 1.02 ––––––––––––––––––––––––––––––––––––––––––– 22,125 3.37 ––––––––––––––––––––––––––––––––––––––––––GERMANY 2.65% (31.12.15: 2.05%)Siemens 101,767 10,107 1.54

HeidelbergCement 96,194 7,294 1.11 ––––––––––––––––––––––––––––––––––––––––––– 17,401 2.65 ––––––––––––––––––––––––––––––––––––––––––HONG KONG 0.51% (31.12.15: 1.72%)CNOOC 3,309,000 3,365 0.51 ––––––––––––––––––––––––––––––––––––––––––ISRAEL 1.55% (31.12.15: 0.76%)Mellanox Technologies 193,855 6,421 0.98

Nice ADR 66,790 3,720 0.57 ––––––––––––––––––––––––––––––––––––––––––– 10,141 1.55 ––––––––––––––––––––––––––––––––––––––––––ITALY 1.66% (31.12.15: 1.06%)Poste Italiane 2,007,598 10,883 1.66 ––––––––––––––––––––––––––––––––––––––––––JAPAN 10.00% (31.12.15: 16.21%)Nippon Telegraph & Telephone 252,300 8,609 1.31

Sekisui House 631,600 8,535 1.30

Fuji Heavy Industries 236,800 7,837 1.20

Japan Tobacco 290,700 7,759 1.18

Fuji Electric 1,811,000 7,603 1.16

Sompo 263,600 7,254 1.11

Komatsu 349,500 6,418 0.98

SCREEN 126,400 6,352 0.97

KDDI 251,900 5,181 0.79 ––––––––––––––––––––––––––––––––––––––––––– 65,548 10.00 ––––––––––––––––––––––––––––––––––––––––––MALAYSIA 0.91% (31.12.15: 0.88%)Tenaga Nasional 2,362,900 5,951 0.91 ––––––––––––––––––––––––––––––––––––––––––

Portfolio Statement




REPORT AND ACCOUNTS

MEXICO 0.80% (31.12.15: 0.00%)Grupo Mexico 2,317,119 5,246 0.80 ––––––––––––––––––––––––––––––––––––––––––MONACO 0.45% (31.12.15: 0.77%)Scorpio Tankers 801,101 2,963 0.45 ––––––––––––––––––––––––––––––––––––––––––NETHERLANDS 5.24% (31.12.15: 5.86%)ING Groep 1,000,236 11,381 1.74

Koninklijke Ahold Delhaize 496,710 8,451 1.29

NN 276,434 7,622 1.16

NXP Semiconductors 85,996 6,858 1.05 ––––––––––––––––––––––––––––––––––––––––––– 34,312 5.24 ––––––––––––––––––––––––––––––––––––––––––PANAMA 1.50% (31.12.15: 0.00%)Carnival 232,132 9,810 1.50 ––––––––––––––––––––––––––––––––––––––––––PUERTO RICO 2.47% (31.12.15: 1.79%)Popular 457,546 16,205 2.47 ––––––––––––––––––––––––––––––––––––––––––RUSSIA 0.95% (31.12.15: 0.70%)MMC Norilsk Nickel ADR (US listing) 449,982 6,076 0.93

MMC Norilsk Nickel ADR (London listing) 8,659 118 0.02 ––––––––––––––––––––––––––––––––––––––––––– 6,194 0.95 ––––––––––––––––––––––––––––––––––––––––––SINGAPORE 1.63% (31.12.15: 0.00%)Broadcom 73,170 10,698 1.63 ––––––––––––––––––––––––––––––––––––––––––SOUTH KOREA 1.57% (31.12.15: 0.00%)Samsung Electronics 8,485 10,279 1.57 ––––––––––––––––––––––––––––––––––––––––––SPAIN 1.66% (31.12.15: 0.00%)Repsol 921,999 10,621 1.62

Repsol Rights Issue 06/01/2017 921,999 279 0.04 ––––––––––––––––––––––––––––––––––––––––––– 10,900 1.66 ––––––––––––––––––––––––––––––––––––––––––SWITZERLAND 1.38% (31.12.15: 0.00%)ABB 525,266 9,027 1.38 ––––––––––––––––––––––––––––––––––––––––––TAIWAN 0.00% (31.12.15: 1.42%)

TURKEY 0.80% (31.12.15: 0.83%)Emlak Konut Gayrimenkul Yatirim * 7,677,995 5,252 0.80 ––––––––––––––––––––––––––––––––––––––––––UNITED KINGDOM 1.84% (31.12.15: 2.07%)BT 1,909,838 6,982 1.07

Just Eat 861,449 5,022 0.77 ––––––––––––––––––––––––––––––––––––––––––– 12,004 1.84 ––––––––––––––––––––––––––––––––––––––––––UNITED STATES 44.90% (31.12.15: 45.68%)Citigroup 382,361 18,453 2.82

Priceline 15,122 18,185 2.78

Activision Blizzard 464,393 13,767 2.10

Hewlett Packard Enterprise 724,154 13,745 2.10

Alphabet ‘A’ Shares 20,442 13,338 2.04

Quest Diagnostics 167,442 12,504 1.91

CBS 231,780 12,154 1.86

Amazon.com 19,212 11,942 1.82

UnitedHealth 86,359 11,303 1.72

Chemed 82,171 10,715 1.64

Zimmer Biomet 118,069 9,932 1.52

Johnson & Johnson 95,898 9,003 1.37

Lam Research 100,529 8,755 1.34

Lincoln National 150,737 8,102 1.24

Valero Energy 142,418 7,941 1.21

CME 80,823 7,593 1.16

ON Semiconductor 699,274 7,372 1.12

PayPal 224,773 7,301 1.11

eBay 291,733 7,107 1.08

VMware 110,480 7,105 1.08

Morgan Stanley 205,676 7,047 1.08

Vantiv 141,098 6,813 1.04


REPORT AND ACCOUNTS


Portfolio Statement continued


UNITED STATES 44.90% (31.12.15: 45.68%) (continued)QUALCOMM 125,199 6,721 1.03

Tyson Foods 132,029 6,670 1.02

Ally Financial 416,762 6,504 0.99

Voya Financial 199,075 6,374 0.97

Thermo Fisher Scientifi c 55,162 6,344 0.97

Macy’s 210,439 6,208 0.95

Hess 115,675 5,914 0.90

Shire 120,854 5,620 0.86

Johnson Controls International 154,935 5,249 0.80

Visteon 78,127 5,087 0.78

Manitowoc Foodservice 130,089 2,004 0.31

Radian 80,532 1,182 0.18 ––––––––––––––––––––––––––––––––––––––––––– 294,054 44.90 ––––––––––––––––––––––––––––––––––––––––––Portfolio of investments 637,541 97.32

Net other assets 17,536 2.68 –––––––––––––––––––––––––––––––––––––––––––Net assets 655,077 100.00 ––––––––––––––––––––––––––––––––––––––––––* Real Estate Investment Trust (REIT).


Stocks shown as ADR’s represent American Depositary Receipts.



REPORT AND ACCOUNTS


BONDS 96.99% (31.12.15: 96.10%)

CORPORATE BONDS – MATURITY 0 TO 5 YEARS 8.28% (31.12.15: 15.68%)Caesars Entertainment Resort Properties 11% 01/10/2021 USD 2,130,000 1,889 1.67

APX 8.75% 01/12/2020 USD 2,230,000 1,822 1.61

Sunoco 6.25% 15/04/2021 USD 1,512,000 1,249 1.10

First Quantum Minerals 6.75% 15/02/2020 USD 1,440,000 1,162 1.03

Cliffs Natural Resources 7.75% 31/03/2020 USD 1,375,000 1,154 1.02

Neiman Marcus 8% 15/10/2021 USD 1,720,000 1,038 0.92

Lock (FRN) 5.5% 15/08/2020 EUR 546,000 470 0.42

Atwood Oceanics 6.5% 01/02/2020 USD 560,000 416 0.37

Kinetic Concepts 9.625% 01/10/2021 USD 185,000 159 0.14 ––––––––––––––––––––––––––––––––––––––––––– 9,359 8.28 ––––––––––––––––––––––––––––––––––––––––––CORPORATE BONDS – MATURITY 5 TO 15 YEARS 85.72% (31.12.15: 74.81%)T-Mobile USA 6.5% 15/01/2026 USD 2,691,000 2,361 2.09

Tesoro 4.75% 15/12/2023 USD 2,400,000 1,963 1.74

ARD Finance 6.625% 15/09/2023 EUR 2,220,000 1,906 1.68

CenturyLink 7.5% 01/04/2024 USD 2,020,000 1,720 1.52

Petrobras Global Finance 4.75% 14/01/2025 EUR 2,000,000 1,670 1.48

MEDNAX 5.25% 01/12/2023 USD 1,930,000 1,618 1.43

CCO 5.125% 01/05/2023 USD 1,875,000 1,566 1.38

Diebold Nixdorf 8.5% 15/04/2024 USD 1,795,000 1,554 1.37

WMG Acquisition 4.125% 01/11/2024 EUR 1,740,000 1,542 1.36

Nexstar Escrow 5.625% 01/08/2024 USD 1,910,000 1,541 1.36

HCA 5% 15/03/2024 USD 1,840,000 1,536 1.36

Albertsons 6.625% 15/06/2024 USD 1,770,000 1,496 1.32

JC Penney 5.875% 01/07/2023 USD 1,780,000 1,496 1.32

MPT Operating Partnership 5.25% 01/08/2026 USD 1,882,000 1,486 1.31

CBS Radio 7.25% 01/11/2024 USD 1,670,000 1,427 1.26

California Resources 8% 15/12/2022 USD 1,970,000 1,425 1.26

Lions Gate Entertainment 5.875% 01/11/2024 USD 1,720,000 1,419 1.25

Equinix 5.875% 15/01/2026 USD 1,650,000 1,408 1.24

West 5.375% 15/07/2022 USD 1,780,000 1,394 1.23

Noble Holding International USD 1,800,000 1,390 1.23

NRG Energy 6.25% 15/07/2022 USD 1,700,000 1,385 1.22

PulteGroup 5.5% 01/03/2026 USD 1,670,000 1,348 1.19

Post 7.75% 15/03/2024 USD 1,480,000 1,332 1.18

International Game Technology 6.25% 15/02/2022 USD 1,520,000 1,319 1.17

Altice Financing 7.5% 15/05/2026 USD 1,550,000 1,310 1.16

Wynn Las Vegas 5.5% 01/03/2025 USD 1,600,000 1,292 1.14

Cable Communications Systems 5% 15/10/2023 EUR 1,420,000 1,288 1.14

Ensco 5.2% 15/03/2025 USD 1,820,000 1,282 1.13

Rowan Cos 7.375% 15/06/2025 USD 1,510,000 1,255 1.11

Cinemark USA 4.875% 01/06/2023 USD 1,520,000 1,253 1.11

Antero Midstream Partners 5.375% 15/09/2024 USD 1,510,000 1,244 1.10

Scientifi c Games International 10% 01/12/2022 USD 1,550,000 1,238 1.09

Level 3 Financing 5.375% 15/01/2024 USD 1,500,000 1,225 1.08

United States Steel 7.5% 15/03/2022 USD 1,460,000 1,222 1.08

Diamond 1 Finance 7.125% 15/06/2024 USD 1,360,000 1,216 1.07

Nielsen Finance 5% 15/04/2022 USD 1,430,000 1,184 1.05

Jaguar Land Rover Automotive 3.875% 01/03/2023 GBP 1,150,000 1,182 1.04

FAGE International 5.625% 15/08/2026 USD 1,450,000 1,179 1.04

Taylor Morrison Communities 5.875% 15/04/2023 USD 1,430,000 1,178 1.04

Gulfport Energy 6% 15/10/2024 USD 1,430,000 1,178 1.04

Precision Drilling 7.75% 15/12/2023 USD 1,370,000 1,175 1.04

Herc Rentals 7.75% 01/06/2024 USD 1,400,000 1,174 1.04

CONSOL Energy 8% 01/04/2023 USD 1,410,000 1,173 1.04

Portfolio Statement



REPORT AND ACCOUNTS


Portfolio Statement continued


CORPORATE BONDS – MATURITY 5 TO 15 YEARS 85.72% (31.12.15: 74.81%) (continued)KLX 5.875% 01/12/2022 USD 1,400,000 1,168 1.03

Sabine Pass Liquefaction 6.25% 15/03/2022 USD 1,296,000 1,158 1.02

PDC Energy 6.125% 15/09/2024 USD 1,380,000 1,146 1.01

Parsley Energy 6.25% 01/06/2024 USD 1,310,000 1,119 0.99

Entertainment One 6.875% 15/12/2022 GBP 1,039,000 1,118 0.99

Communications Sales & Leasing 7.125% 15/12/2024 USD 1,370,000 1,116 0.99

KB Home 7.5% 15/09/2022 USD 1,292,000 1,115 0.99

Hughes Satellite Systems 5.25% 01/08/2026 USD 1,400,000 1,115 0.99

Alcoa Nederland 6.75% 30/09/2024 USD 1,270,000 1,114 0.98

Spectrum Brands 4% 01/10/2026 EUR 1,250,000 1,105 0.98

Adient Global 4.875% 15/08/2026 USD 1,410,000 1,104 0.98

Kraton Polymers 10.5% 15/04/2023 USD 1,190,000 1,097 0.97

Sinclair Television 5.125% 15/02/2027 USD 1,420,000 1,091 0.96

Lennar 4.875% 15/12/2023 USD 1,340,000 1,080 0.95

CSC 10.125% 15/01/2023 USD 1,085,000 1,019 0.90

Catalent Pharma Solutions 4.75% 15/12/2024 EUR 1,100,000 989 0.87

FNAC 3.25% 30/09/2023 EUR 1,113,000 983 0.87

MSCI 4.75% 01/08/2026 USD 1,190,000 950 0.84

UPCB Finance IV 4% 15/01/2027 EUR 1,120,000 945 0.84

Royal Bank of Scotland 3.625% 25/03/2024 EUR 980,000 840 0.74

Sappi Papier 4% 01/04/2023 EUR 918,000 832 0.74

Acadia Healthcare 6.5% 01/03/2024 USD 1,010,000 831 0.73

GCP Applied Technologies 9.5% 01/02/2023 USD 855,000 797 0.71

Fiat Chrysler Automobiles 5.25% 15/04/2023 USD 918,000 759 0.67

Open Text 5.875% 01/06/2026 USD 850,000 729 0.64

AMC Networks 5% 01/04/2024 USD 865,000 704 0.62

Belden 5.5% 15/04/2023 EUR 720,000 660 0.58

Trinseo Materials Operating EUR 666,000 612 0.54

Ziggo Secured Finance 4.25% 15/01/2027 EUR 690,000 591 0.52

Valeant Pharmaceuticals International 4.5% 15/05/2023 EUR 950,000 589 0.52

PTC 6% 15/05/2024 USD 660,000 566 0.50

Virgin Media Secured Finance 5.125% 15/01/2025 GBP 550,000 562 0.50

Unitymedia 3.75% 15/01/2027 EUR 680,000 551 0.49

Ineos Finance 4% 01/05/2023 EUR 615,000 546 0.48

Belden 4.125% 15/10/2026 EUR 600,000 515 0.46

eircom Finance 4.5% 31/05/2022 EUR 570,000 512 0.45

Iron Mountain US 5.375% 01/06/2026 USD 650,000 511 0.45

Frontier Communications 11% 15/09/2025 USD 580,000 485 0.43

VWR Funding 4.625% 15/04/2022 EUR 539,000 480 0.42

Garfunkelux Holdco 3 7.5% 01/08/2022 EUR 524,000 471 0.42

AMC Entertainment 5.875% 15/11/2026 USD 550,000 458 0.41

INEOS 5.375% 01/08/2024 EUR 510,000 442 0.39

CONSOL Energy 5.875% 15/04/2022 USD 450,000 361 0.32

GTT Escrow 7.875% 31/12/2024 USD 390,000 333 0.30

Arrow Global Finance 5.125% 15/09/2024 GBP 300,000 300 0.27

Petrobras Global Finance 6.25% 17/03/2024 USD 360,000 280 0.25

Tenet Healthcare 8.125% 01/04/2022 USD 350,000 269 0.24

Ritchie Bros Auctioneers 5.375% 15/01/2025 USD 270,000 223 0.20

VWR Funding 4.625% 15/04/2022 EUR 110,000 98 0.09 ––––––––––––––––––––––––––––––––––––––––––– 96,989 85.72 ––––––––––––––––––––––––––––––––––––––––––CORPORATE BONDS – MATURITY 15+ YEARS 2.99% (31.12.15: 5.61%)AA Bond 5.5% 31/07/2043 GBP 1,189,000 1,215 1.07

CPUK Finance 7% 28/02/2042 GBP 1,000,000 1,060 0.94

Telefonica Europe 3.75% Perpetual EUR 700,000 586 0.52

Solvay Finance 5.118% Perpetual EUR 565,000 521 0.46 ––––––––––––––––––––––––––––––––––––––––––– 3,382 2.99 ––––––––––––––––––––––––––––––––––––––––––DERIVATIVES – CREDIT DEFAULT SWAPS 0.13% (31.12.15: (0.09%))Morgan Stanley 500BPS 20-12-2022 3,000,000 2,591 2.29

Morgan Stanley 500BPS 20-12-2021 (3,000,000) (2,439) (2.16) ––––––––––––––––––––––––––––––––––––––––––– 152 0.13 ––––––––––––––––––––––––––––––––––––––––––



REPORT AND ACCOUNTS

DERIVATIVES – CREDIT DEFAULT SWAPTION 0.04% (31.12.15: 0.00%)Goldman Sachs – iTraxx Europe Crossover Series 26 312.50 Put Swaption 15/02/2017 13,100,000 68 0.06

Goldman Sachs – iTraxx Europe Crossover Series 26 350 Put Swaption 15/02/2017 (13,100,000) (19) (0.02) ––––––––––––––––––––––––––––––––––––––––––– 49 0.04 ––––––––––––––––––––––––––––––––––––––––––FORWARD CURRENCY CONTRACTS (2.55%) (31.12.15: (1.73%))EuroBuy EUR 1,925,000 for GBP (1,617,002) 36 0.03

Sell EUR (25,032,384) for GBP 21,095,728 (399) (0.35)

US DollarBuy USD 7,190,000 for GBP (5,706,176) 136 0.12

Sell USD (113,388,219) for GBP 89,482,956 (2,661) (2.35) ––––––––––––––––––––––––––––––––––––––––––– (2,888) (2.55) ––––––––––––––––––––––––––––––––––––––––––Portfolio of investments^ 107,043 94.61

Net other assets 6,095 5.39 –––––––––––––––––––––––––––––––––––––––––––Net assets 113,138 100.00 ––––––––––––––––––––––––––––––––––––––––––^ Including derivative liabilities.

Fixed interest securities are traded on a regulated market, unless otherwise stated. Stocks shown as FRNs represent Floating Rate Notes – debt instruments that pay

a fl oating rate of interest, usually based on an accepted market benchmark rate such as LIBOR.

The credit default swaps, credit default swaptions and the forward foreign exchange contracts are not listed.


REPORT AND ACCOUNTS


Portfolio Analysis

As at 31 December 2016Credit Breakdown*

31.12.2016 31.12.2015 MARKET PERCENTAGE OF MARKET PERCENTAGE OF VALUE NET ASSETS VALUE NET ASSETSASSET (£’000) (%) (£’000) (%)

BBB – – 2,818 2.48

BB 44,602 39.41 53,304 47.22

B 51,793 45.79 46,212 40.91

CCC 13,335 11.79 6,217 5.49

Total bonds 109,730 96.99 108,551 96.10

*Bond ratings are Investec approximations.

REPORT AND ACCOUNTS


Authorised Corporate Director’s report

The Authorised Corporate Director (“ACD”) of Investec Funds Series ii (the “Company”) is Investec Fund Managers Limited.

The ACD is the sole director of the Company.

Authorised status

The Company is an investment company with variable capital incorporated in England and Wales under registered number

IC125 and authorised by the Financial Conduct Authority (“FCA”) with effect from 7 September 2001.

The Company is structured as an umbrella company, in that different sub-funds (the “Funds”) may be established from time

to time by the ACD with the approval of the FCA. The Company currently comprises of fi ve Funds.

The Company (and therefore the Funds) has been certifi ed by the FCA as complying with the conditions necessary for it to

enjoy rights conferred by the EC Directive on Undertakings for Collective Investment in Transferable Securities (“UCITS”). The

Company has an unlimited duration.

The assets of each Fund will be treated as separate from those of every other Fund and will be invested in accordance with

the investment objective and policy applicable to that Fund. Investment of the assets of each of the Funds must comply with

the FCA’s Collective Investment Scheme Sourcebook (“COLL”) and the investment objective and policy of the relevant Fund.

Each Fund has a specifi c portfolio to which that Fund’s assets and liabilities are attributable.

So far as shareholders are concerned, each Fund is treated as a separate entity.

Under English law, the Funds are segregated portfolios of assets and the assets of a Fund belong exclusively to that Fund.

The assets of a Fund shall not be used or made available to discharge (directly or indirectly) the liabilities of, or claims

against, any other person or body, including the Company and any other Fund and shall not be available for any such

purpose.

Subject to the above, each Fund will be charged with the liabilities, expenses, costs and charges of the Company

attributable to that Fund, and within each Fund charges will be allocated between share classes in accordance with their

terms of issue. Any assets, liabilities, expenses, costs or charges not attributable to a particular Fund may be allocated by

the ACD in a manner which it believes is fair to the shareholders generally. This will normally be pro rata to the net asset

value of the relevant Funds. Shareholders are not liable for the debts of the Company.

Accounting period covered by these accounts

The accounting period covered in these accounts is from 1 January 2016 to 31 December 2016.

Changes during the accounting period

No relevant changes were made during the period.

K. McFarland D. Aird

Director of the ACD Director of the ACD

2 7 February 2017

REPORT AND ACCOUNTS


Statement of Authorised Corporate Director’s (ACD) responsibilities

The ACD is responsible for the management of the Company in accordance with its Instrument of Incorporation, Prospectus

and the Regulations. The Financial Conduct Authority’s (formerly the Financial Services Authority) Collective Investment

Schemes Sourcebook requires the ACD to prepare Report and Accounts for each annual accounting period that give a true

and fair view of the state of affairs of the Company and of its income and expenditure, and gains/losses for the period.

The ACD confi rms that suitable accounting policies have been used and applied consistently, and reasonable and prudent

judgements and estimates have been made in the preparation of the Report and Accounts for the year ended 31 December 2016.

The Report and Accounts comply with the disclosure requirements of the Statement of Recommended Practice for

Authorised Funds issued by the IMA. The ACD also confi rms that applicable accounting standards have been followed and

that the Report and Accounts have been prepared on a going concern basis.

The ACD is responsible for keeping proper accounting records, for safeguarding the assets of the Company and hence for

taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Report and Accounts are published on the www.investecassetmanagement.com website, which is a website maintained

by Investec Asset Management Limited (“Investec”). The maintenance and integrity of the website maintained by Investec or

any of its subsidiaries is, so far as it relates to the Company, the responsibility of Investec. The work carried out by the

auditors does not involve consideration of the maintenance and integrity of this website and accordingly, the auditors accept

no responsibility for any changes that have occurred to the fi nancial statements since they were initially presented on the

website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and

dissemination of the accounts may differ from legislation in their jurisdiction.

REPORT AND ACCOUNTS


Statement of Depositary’s Responsibilities and Report to Shareholders

Statement of the Depositary’s Responsibilities in Respect of the Scheme and Report of the

Depositary to the Shareholders of the of the Investec Funds Series ii (“the Company”) for the

year ended 31 December 2016.

The Depositary must ensure that the Company is managed in accordance with the Financial Conduct Authority’s Collective

Investment Schemes Sourcebook, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228), as amended,

the Financial Services and Markets Act 2000, as amended, (together “the Regulations”), the Company’s Instrument of

Incorporation and Prospectus (together “the Scheme documents”) as detailed below.

The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the

Company and its investors.

The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the

Company in accordance with the Regulations.

The Depositary must ensure that:

• the Company’s cash fl ows are properly monitored1 and that cash of the Company is booked into the cash accounts in

accordance with the Regulations;

• the sale, issue, repurchase, redemption and cancellation of shares are carried out in accordance with the Regulations;

• the value of shares of the Company are calculated in accordance with the Regulations;

• any consideration relating to transactions in the Company’s assets is remitted to the Company within the usual time

limits;

• the Company’s income is applied in accordance with the Regulations; and

• the instructions of the Authorised Fund Manager (the AFM”) which is the UCITS Management Company, are carried out

(unless they confl ict with the Regulations).

The Depositary also has a duty to take reasonable care to ensure that Company is managed in accordance with the

Regulations and Scheme documents in relation to the investment and borrowing powers applicable to the Company.

Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the

Company, it is our opinion, based on the information available to us and the explanations provided, that in all material

respects the Company, acting through the AFM:

(i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Company’s shares and

the application of the Company’s income in accordance with the Regulations and the Scheme documents of the

Company, and

(ii) has observed the investment and borrowing powers and restrictions applicable to the Company.

State Street Trustees Limited1 This requirement on the Depositary applied from 18 March 2016.

27 February 2017

REPORT AND ACCOUNTS


Independent auditor’s report to the shareholders of Investec Series ii (‘the Company’)

We have audited the fi nancial statements of the Company for the year ended 31 December 2016 which comprise the

Statements of Total Return, the Statements of Changes in Net Assets Attributable to Shareholders, the Balance Sheets, the

Related Notes and Distribution Tables for each of the Company’s sub-funds listed on page 1 and the accounting policies set

out on page 4 6. The fi nancial reporting framework that has been applied in their preparation is applicable law and United

Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 The Financial

Reporting Standard applicable in the UK and Republic of Ireland.

This report is made solely to the Company’s shareholders, as a body, in accordance with Rule 4.5.12 of the Collective

Investment Schemes sourcebook (‘the COLL Rules’) issued by the Financial Conduct Authority under the Open-Ended

Investment Companies Regulations 2001. Our audit work has been undertaken so that we might state to the Company’s

shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s

shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Authorised Corporate Director (‘the ACD’) Investec Fund Managers

Limited, and the auditor

As explained more fully in the Statement of ACD’s Responsibilities set out on page 3 2 the ACD is responsible for the

preparation of fi nancial statements which give a true and fair view. Our responsibility is to audit, and express an opinion on,

the fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those

standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the fi nancial statements

A description of the scope of an audit of fi nancial statements is provided on the Financial Reporting Council’s website at

www.frc.org.uk/auditscopeukprivate.

Opinion on fi nancial statements

In our opinion the fi nancial statements:

• give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the fi nancial position of

each of the sub-funds as at 31 December 2016 and of the net revenue/losses and the net capital gains/losses on the

property of each of the sub-funds for the year then ended; and

• have been properly prepared in accordance with the Instrument of Incorporation, the Statement of Recommended

Practice relating to Authorised Funds, and the COLL Rules.

Opinion on other matters prescribed by the COLL Rules

In our opinion the information given in the Authorised Corporate Director’s Report is consistent with the fi nancial statements.

We have received all the information and explanations which we consider necessary for the purposes of our audit.

Independent Auditor’s report

REPORT AND ACCOUNTS


Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where under the COLL Rules we are required to report to you if,

in our opinion:

• proper accounting records for the Company have not been kept; or

• the fi nancial statements are not in agreement with the accounting records.

Ravi Lamba for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants

15 Canada Square

London

E14 5GL

2 7 February 201 7

REPORT AND ACCOUNTS


Comparative Table


America Fund

‘A’ Class (Accumulation shares) ‘A’ Class (GBP Hedge Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (p) (p) (p)

Change in net assets per shareOpening net asset value per share 225.24 222.79 188.36 170.38 177.04 158.24

Return before operating charges* 101.77 6.10 37.56 32.96 (3.76) 21.50

Operating charges (4.15) (3.65) (3.13) (2.94) (2.90) (2.70)

Return after operating charges* 97.62 2.45 34.43 30.02 (6.66) 18.80

Distributions (0.40) (0.07) (0.40) (0.22) (0.02) (0.23)

Retained distributions on accumulation shares* 0.40 0.07 0.40 0.22 0.02 0.23

Closing net asset value per share 322.86 225.24 222.79 200.40 170.38 177.04

*after direct transaction costs of: 0.16 0.07 0.07 0.11 0.05 0.06

PerformanceReturn after charges 43.34% 1.10% 18.28% 17.62% (3.76%) 11.88%

Other informationClosing net asset value (£’000) 72,188 64,837 155,599 287 219 303

Closing number of shares 22,359,127 28,785,293 69,842,321 143,134 128,731 171,266

Operating charges 1.60% 1.60% 1.59% 1.65% 1.65% 1.64%

Direct transaction costs‡ 0.06% 0.03% 0.03% 0.06% 0.03% 0.03%

PricesHighest share price 326.73 244.89 224.21 203.22 183.96 177.31

Lowest share price 202.30 205.53 183.78 148.68 160.22 152.37

‘A’ Class (USD Accumulation shares) ‘B’ Class (Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (c) (c) (c) (p) (p) (p)


Return before operating charges* 68.95 (8.42) 41.62 104.94 6.24 38.53


Return after operating charges* 63.41 (13.97) 36.47 101.32 3.11 35.83

Distributions (0.47) (0.13) (0.62) (1.09) (0.71) (0.92)




PerformanceReturn after charges 18.98% (4.01%) 11.71% 43.70% 1.36% 18.57%

Other informationClosing net asset value (USD’000) 648 436 1,511 – – –

Closing net asset (£’000) – – – 8,188 6,533 7,718

Closing number of shares 163,017 193,258 434,054 2,457,392 2,817,467 3,373,640






REPORT AND ACCOUNTS

Comparative Table


‘I’ Class (Accumulation shares) ‘R’ Class (Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (p) (p) (p)


Return before operating charges* 66.95 3.95 24.35 67.77 4.01 24.68


Return after operating charges* 65.49 2.70 23.28 65.87 2.37 23.26

Distributions (1.55) (1.19) (1.22) (1.13) (0.84) (0.92)




PerformanceReturn after charges 44.41% 1.86% 19.16% 44.05% 1.61% 18.77%







‘S’ Class (Accumulation shares) 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p)

Change in net assets per shareOpening net asset value per share 175.16 170.67 142.18

Return before operating charges* 79.89 4.66 28.62

Operating charges (0.22) (0.17) (0.13)

Return after operating charges* 79.67 4.49 28.49

Distributions (3.37) (2.71) (2.53)

Retained distributions on accumulation shares* 3.37 2.71 2.53

Closing net asset value per share 254.83 175.16 170.67

*after direct transaction costs of: 0.12 0.05 0.05

PerformanceReturn after charges 45.48% 2.63% 20.04%

Other informationClosing net asset value (£’000) 3,288 2,404 2,556

Closing number of shares 1,290,102 1,372,192 1,497,809

Operating charges 0.10% 0.10% 0.09%

Direct transaction costs‡ 0.06% 0.03% 0.03%

PricesHighest share price 257.85 188.39 171.76

Lowest share price 157.57 159.00 138.92

Portfolio transaction costsPortfolio transaction costs are incurred by funds when buying and selling investments. These costs vary depending on the types of investment, their market

capitalisation, country of exchange, method of execution and the quality of research provided. They are made up of direct and indirect portfolio transaction costs:

‡ Direct portfolio transaction costs: Broker execution commission, taxes, and costs of research from brokers and other research providers.

Indirect portfolio transaction costs: ‘Dealing spread’ – the difference between the buying and selling prices of the fund’s investments; some types of investment, such

as fi xed interest securities, have no direct transaction costs and only the dealing spread is paid. Details of the dealing spread is shown in note 5 of the ‘Notes to the

fi nancial statements’ for each of the individual funds.

REPORT AND ACCOUNTS


Comparative Table


Asia ex Japan Fund

‘A’ Class (Accumulation shares)(1) ‘B’ Class (Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (p) (p) (p)

Change in net assets per shareOpening net asset value per share 388.59 408.49 363.72 3,957.19 4,149.38 3,685.20

Return before operating charges* 99.3 0 (12.56) 51.54 1,012.98 (128.48) 523.47


Return after operating charges* 91.97 (19.90) 44.77 948.98 (192.19) 464.18

Distributions (4.53) (3.39) (1.56) (57.15) (45.39) (25.58)


Closing net asset value per share 480. 56 388.59 408.49 4,906.17 3,957.19 4,149.38


PerformanceReturn after charges 23.6 7% (4.87%) 12.31% 23.98% (4.63%) 12.60%

Other informationClosing net asset value (£’000) 55,348 58,955 86,027 4,131 3,864 4,211

Closing number of shares 11,517,436 15,171,771 21,059,529 84,20 7 97,649 101,484

Operating charges 1.7 1% 1.75% 1.78% 1.4 6% 1.50% 1.53%


PricesHighest share price 528.75 487.98 426.01 5,395.74 4,960.36 4,323.98

Lowest share price 342.93 345.19 343.65 3,492.38 3,512.09 3,482.62



Return before operating charges* 48.8 6 (6.22) 25.04 28.4 1 (3.61) 14.61


Return after operating charges* 46.8 3 (8.24) 23.09 26.9 4 (5.09) 13.23

Distributions (3.82) (3.20) (2.20) (1.90) (1.57) (1.00)


Closing net asset value per share 237. 17 190.34 198.58 137. 88 110.94 116.03


PerformanceReturn after charges 24.6 0% (4.15%) 13.16% 24. 28% (4.39%) 12.87%








REPORT AND ACCOUNTS

Comparative Table




Return before operating charges* 105.26 (13.43) 53.76


Return after operating charges* 104.29 (14.51) 52.64

Distributions (11.66) (10.10) (8.37)




PerformanceReturn after charges 25.54% (3.43%) 14.22%

Other informationClosing net asset value (£’000) 314 165 112

Closing number of shares 61,158 40,416 26,509

Operating charges 0.2 1% 0.25% 0.28%










REPORT AND ACCOUNTS


Comparative Table


Global Energy Fund

‘A’ Class (Accumulation shares) ‘A’ Class (USD Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (c) (c) (c)


Return before operating charges* 78.14 (47.56) (41.98) 57.72 (86.62) (88.14)


Return after operating charges* 75.15 (50.67) (46.09) 53.68 (91.23) (94.93)

Distributions (2.49) (1.89) (1.17) (3.07) (2.80) (1.81)




PerformanceReturn after charges 48.81% (24.76%) (18.38%) 23.53% (28.56%) (22.91%)

Other informationClosing net asset value (£’000) 33,577 23,834 45,867 – – –

Closing net asset value (USD’000) – – – 1,759 1, 760 1,334






‘I’ Class (Accumulation shares) ‘I’ Class (Income shares)(1)

31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (p) (p) (p)


Return before operating charges* 84.8 0 (51.28) (45.05) 27.84 (17.17) (25.66)


Return after operating charges* 83. 06 (53.11) (47.40) 27.23 (17.75) (26.06)

Distributions (4.20) (3.53) (3.30) (1.38) (1.21) (0.44)

Retained distributions on accumulation shares* 4.20 3.53 3.30 - - -

Closing net asset value per share 249. 46 166.40 219.51 80.39 54.54 73.50


PerformanceReturn after charges 49.9 2% (24.19%) (17.76%) 49.93% (24.15%) (26.06%)

Other informationClosing net asset value (£’000) 47,146 32,653 58,932 6,211 5 1

Closing number of shares 18,898,859 19,623,340 26,846,851 7,726,908 9,413 1,000






REPORT AND ACCOUNTS

Comparative Table


‘R’ Class (Accumulation shares) ‘S’ Class (Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (p) (p) (p)


Return before operating charges* 35. 20 (21.40) (18.74) 54. 52 (32.83) (28.63)


Return after operating charges* 34. 24 (22.27) (20.01) 54.3 5 (33.01) (28.85)

Distributions (1.53) (1.26) (1.09) (3.65) (3.24) (3.36)


Closing net asset value per share 103.3 5 69.11 91.38 160.8 2 106.47 139.48


PerformanceReturn after charges 49. 54% (24.37%) (17.96%) 51.0 5% (23.67%) (17.14%)

Other informationClosing net asset value (£’000) 261 70 11 3,949 3,169 26,164

Closing number of shares 252,040 101,235 11,782 2,455,418 2,976,693 18,758,425





(1) Launched 27 June 2014







REPORT AND ACCOUNTS


Comparative Table


Global Strateg ic Equity Fund

‘A’ Class (Accumulation shares)(1) ‘A’ Class (USD Accumulation shares) 31.12.16 31.12.15 31.12.14 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p) (c) (c) (c)


Return before operating charges* 163.34 31.52 82.28 42.94 (1.24) 79.86


Return after operating charges* 152.45 21.21 73.07 28.28 (17.28) 64.56

Distributions (2.07) (0.47) (0.76) (2.59) (0.17) (1.91)




PerformanceReturn after charges 24.09% 3.47% 13.57% 3.02% (1.81%) 7.26%

Other informationClosing net asset value (£’000) 185,187 177,808 201,692 – – –

Closing net asset value (USD’000) – – – 115 1 66 1,547




PricesHighest share price 792.29 699.30 618.29 976.36 1,064.46 984.73







Distributions (1.81) (1.33) (1.27) (1.29) (0.88) (0.86)












REPORT AND ACCOUNTS

Comparative Table







Distributions (3.78) (3.07) (2.78)







Operating charges 0.1 1% 0.11% 0.12%










REPORT AND ACCOUNTS


Comparative Table



‘A’ Net Class (Accumulation shares) ‘A’ Net Class (Income-2 shares)(1)





Return after operating charges* 22.53 (0.48) 1.66 7.50 (0.27) 0.66

Distributions (8.27) (6.59) (9.35) (3.56) (2.91) (3.49)

Retained distributions on accumulation shares* 8.27 6.59 9.35 – – –


*after direct transaction costs of: – – – – – –

PerformanceReturn after charges 11.85% (0.25%) 0.88% 11.35% (0.39%) 0.92%


Closing number of shares 6,822,562 10,114,631 15,463,065 40,905,210 56,520,743 99,248,928





‘I’ Net Class (Accumulation shares) ‘I’ Net Class (Income-2 shares)(1)



Return before operating charges* 20.3 7 1.58 3.42 12.21 0.92 2.35


Return after operating charges* 19.1 1 0.41 2.24 11.45 0.18 1.57

Distributions (7.52) (5.90) (7.53) (5.15) (4.16) (5.00)


Closing net asset value per share 173.4 1 154.30 153.89 101.61 95.31 99.29




Closing number of shares 10,191,159 6,829,407 4,046,382 43,632,233 37,617,342 24,454,144






REPORT AND ACCOUNTS

Comparative Table


‘R’ Net Class (Accumulation shares) ‘R’ Net Class (Income-2 shares)(1)






Distributions (5.03) (3.96) (5.11) (4.88) (3.95) (4.74)





Other informationClosing net asset value (£’000) 263 7 7 757 707 725

Closing number of shares 223,417 6,280 6,250 786,703 783,085 770,192





‘S’ Gross Class (Accumulation shares) 31.12.16 31.12.15 31.12.14Financial year (p) (p) (p)





Distributions (14.57) (10.99) (12.52)



*after direct transaction costs of: – – –




Operating charges 0.11% 0.10% 0.11%




(1) Share class names changed effective 6 April 2015 (previously ‘Income’ classes)







REPORT AND ACCOUNTS


Notes to the Financial Statements of the CompanyFor the year ended 31 December 2016

1. Accounting policiesa) Basis of accounting The fi nancial statements on pages 46 to 100 have been prepared under the historical cost basis, as modifi ed by the revaluation of investments, in compliance with

the Financial Conduct Authority’s Collective Investments Schemes Sourcebook. They have been prepared in accordance with United Kingdom Generally Accepted

Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard Applicable in the UK and Republic of Ireland “FRS 102”), and in

accordance with the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the Investment Management Association

in May 2014 (‘the 2014 SORP’). The fi nancial statements are prepared on the going concern basis.

Changes in accounting policies There have been no changes to the accounting policies as detailed in the audited fi nancial statements for the year ended 31 December 201 5.

b) Valuation of investments The investments of the Funds have been valued at market value at noon on 31 December 2016 net of any accrued interest. Suspended securities are valued at the

last traded price or at the Fund Manager’s best estimate of fair value based on market information and particular circumstances that led to the suspension subject to

agreement from the ACD’s valuation committee.

Market value is defi ned by the SORP as fair value which is generally the bid value.

Open Forward Currency Contracts are shown in the Portfolio Statement and are valued using contracted forward rates. The net gains/(losses) are refl ected in

“Forward currency contracts” in Net capital gains/(losses).

Open Swap Contracts are shown in the Portfolio Statement and are at fair value. The net gains/(losses) are refl ected in “Derivative contracts” in Net capital

gains/(losses).

c) Exchange ratesAssets and liabilities held in overseas currencies have been translated into sterling at the exchange rates ruling at noon on 31 December 2016. Transactions during

the year are translated at the rate ruling on the transaction date.

d) Recognition of revenueIncome encompasses both revenue and capital gains/(losses). Revenue generally includes items such as dividends, interest and other similar items that were

previously referred to as ‘income’. Capital is the return from holding investments other than part of the return that is revenue.

All dividends and scrip (stock) dividends on equities are recognised when the securities are quoted ex-dividend net of any attributable tax credits. Bank interest,

interest on investments and other receivables are accrued up to the accounting date.

Accumulation of revenue relating to accumulation units or shares held in collective investment schemes is recognised as revenue and included in the amount

available for distribution. Equalisation received from distributions or accumulations on units or shares in collective investment schemes is treated as capital and

deducted from the cost of the investment.

Revenue from debt securities is accounted for on an effective interest basis.

Underwriting commission is taken to revenue and recognised when the issue takes place, unless the Funds are required to take up all or some of the underwritten

shares. In this case the commission is used to reduce the cost of those shares.

Special dividends are treated as revenue or capital depending on the facts of each particular case.

Stocklending revenue is accounted for on an accruals basis. Fees earned from stock lending are included in revenue on a net basis.

Where derivatives are used to protect or enhance revenue, any gains or losses are treated as revenue of the Fund. Where derivatives are used to protect or enhance

capital, depending on the motives and circumstances, any gains or losses are treated as capital property of the Funds.

e) Expenses Expenses are accounted for on an accruals basis.

f) TaxationProvision is made for corporation tax at current rates on the excess of taxable revenue over allowable expenses. Stamp duty reserve tax (SDRT) suffered on the

surrender and reissue of shares has been charged against the net assets of the Fund through the Statement of Change in Net Assets Attributable to Shareholders.

g) Deferred taxationWhere applicable, a provision is made on all material timing differences between the recognition of revenue in the fi nancial statements and its recognition in the

Funds’ annual tax returns. Deferred tax liabilities are recognised to the extent that it is possible that an actual liability will crystallise and deferred tax assets are

recognised where it is more than likely that an asset is recoverable.

No deferred tax assets have been recognised as there is uncertainty over future net revenues to utilise such assets.

Investec Funds Series ii

REPORT & ACCOUNTS

47

Notes to the Financial Statements of the Company continuedFor the year ended 31 December 2016

2. Distribution policiesa) Basis of distributionIf at the end of the distribution period, revenue exceeds expenses borne by revenue for distribution purposes, the net revenue after taxation of that Fund is available

to be distributed to its shareholders. In order to conduct a controlled dividend fl ow to shareholders, interim distributions will be at the ACD’s discretion, up to a

maximum of the distributable revenue available for the period. At the end of the year, all remaining net revenue is distributed.

The Monthly High Income Fund will distribute revenue on a monthly basis. The ACD may even out the revenue within an accounting period by carrying forward

revenue otherwise distributable with a view to augmenting amounts to be paid out at a later date within the same accounting period.

Distributions are paid annually by reference to net revenue arising during the year ended 31 December 2016.

Any defi cit of revenue after taxation will reduce the capital of the Fund.

Distributions on accumulation shares are retained by the Fund and increase the value of the accumulation shares.

b) Apportionment to multiple share classesThe allocation of revenue and non class specifi c expenses is based upon the proportion of the Funds’ assets attributable to each share class, on the day the revenue

is earned or expense is suffered.

c) Stock dividendsOrdinary scrip dividends are treated as revenue and will form part of any distribution. A transfer is made from capital to revenue to compensate for the amount of

revenue foregone. In the case of enhanced scrip dividends, any enhancement is taken to capital.

d) Interest from debt securitiesAs noted in note 1d above, revenue from fi xed interest securities is accounted for on an effective interest basis, where applicable, UK interest distributions are also

based on an effective interest basis.

e) Expenses Management expenses including the General Administration Charge (GAC) and custody fee are charged against revenue unless otherwise stated in the Prospectus.

The only exception is the Monthly High Income Fund, where expenses are borne by capital for distribution.

f) EqualisationEqualisation takes account of the distributable revenue in the share price that is received on the creation of shares and paid on cancellation of shares and is allocated

to the distribution account to equalise the distribution payable to Shareholders.

3. Risk management policiesAny investment in stock market funds involves risk. Some of these risks are general, which means that they apply to all funds. Others are specifi c, which means that

they apply to individual funds only.

We monitor our Funds’ portfolios against certain parameters, seeking to ensure that they meet an acceptable risk: reward profi le.

Risk management processThe stock selection and asset allocation of the portfolios are reviewed at periodic fund review meetings. Consideration is given to whether the risk associated with

the exposure to particular investment categories or stocks is prudent in the context of the investment objective. The Investment Manager has responsibility for

monitoring the existing portfolios in accordance with an overall investment category deviation parameter and seeks to ensure that the portfolios as a whole meet an

acceptable risk: reward profi le. Monthly market risk reviews are conducted on core funds, investigating levels and trends in risk exposures and the overall diversity of

risk contributors. For certain forms of derivative intensive funds, daily predicted Value at Risk levels are also monitored.

General risk factorsRisks Associated with InvestmentsAccountingAccounting, auditing and fi nancial reporting standards, practices and disclosure requirements vary between countries and can change and this can be a source of

uncertainty in the true value of investments and can lead to a loss of capital or income.

Active ManagementThe Investment Manager has discretion to purchase and sell assets of the Funds in accordance with each Fund’s investment policy which is further described in

Appendix I. It may be as a consequence of the Investment Manager actively electing to deviate from the constituents of any related market index that a Fund may not

participate in the general upward move as measured by that market’s index and that a Fund’s value may decline even while any related index is rising.

Effi cient Portfolio ManagementEffi cient Portfolio Management may be used by the Funds to reduce risk, reduce costs or for the generation of additional capital or income in the Funds at an

acceptably low level of risk.

The Funds may use derivatives repo contracts, and stock lending for Effi cient Portfolio Management.

It is not intended that using derivatives for Effi cient Portfolio Management will increase the volatility of the Funds. In adverse situations, however, a Fund’s use of

derivatives may become ineffective in hedging or Effi cient Portfolio Management and a Fund may suffer signifi cant loss as a result.

A Fund’s ability to use Effi cient Portfolio Management techniques may be limited by market conditions, regulatory limits and tax considerations. Any income or capital

generated by Effi cient Portfolio Management techniques will be paid to the Funds.

The Investment Manager may use one or more separate counterparties to undertake transactions on behalf of these Funds. A Fund may be required to pledge or

transfer collateral from its assets to secure the exposure of such contracts entered into for Effi cient Portfolio Management. There may be a risk that a counterparty

will wholly or partially fail to honour their contractual arrangements with regards the provision and/or return of collateral and any other payments due to the relevant

Fund. The ACD measures the creditworthiness of counterparties as part of the risk management process.

A counterparty may be an associate of the ACD or the Investment Manager which may give rise to a confl ict of interest. For further details on the ACD’s confl icts of

interest policy please contact the ACD.

Exchange Rate FluctuationCurrency fl uctuations may adversely affect the value of a Fund’s investments and the income thereon. Currency fl uctuations may also adversely affect the profi tability

of an underlying company in which a Fund invests.

REPORT AND ACCOUNTS



3. Risk management policies continued)Income YieldThe level of any yield arising from interest and/or dividend payments, and other such sources of income, for a Fund may be subject to fl uctuations and is not

guaranteed. Therefore the related distribution amount paid, or deemed to be paid, from any Fund’s Share Classes may also fl uctuate over time and is not guaranteed.

Infl ation & Defl ationInfl ation erodes the real value of all investments and changes in the anticipated rate of infl ation could lead to capital losses in a Fund’s investments.

Defl ation risk is the risk that prices throughout an economy may decline over time. Defl ation may have an adverse effect on the creditworthiness of issuers and may

make issuer default more likely, which may result in a decline in the value of a Fund’s portfolio.

Initial Public Offerings (IPO) & PlacementWhen a Fund subscribes for an IPO or a placing there is a (potentially lengthy) period between the Fund submitting its application and fi nding out whether the

application has been successful. If the Fund is not allocated the full amount subscribed for due to oversubscription or the security is listed at lower than the issue

price (in respect of an IPO only), this may result in a sudden change in the Fund’s price. There is also the opportunity cost of having cash committed to the

subscription (and therefore out of the market), and not receiving the full allocation.

Political & RegulatoryExpropriation by the state, social or political instability, or other restrictions on the freedom of a Fund to deal in its investments, may all lead to investment losses. It

should also be noted that there may be occasions when a government imposes restrictions on a company’s operations and / or the free movement of cash.

The regulatory environment is evolving and changes therein may adversely affect the ability of a Fund to pursue its investment strategies. In addition, the regulatory or

tax environment for derivative and related instruments is evolving and may be subject to modifi cation by government or regulatory authorities which may adversely

affect the value of the investments held by a Fund. The effect of any future regulatory or tax change on the Funds is impossible to predict. The regulatory environment

within which the Funds operate may be different to the regulatory requirements of the investors’ home countries.

Risks Associated with Share ClassesBase Currency Hedged Share ClassesFor the base currency Hedged Share Classes, the ACD will implement a currency hedging strategy to limit exposure to the currency position of the relevant Fund’s

Base Currency relative to the currency denomination of the relevant base currency hedged Share Class (“BCHSC Currency”). However, there can be no assurance

that the strategy implemented by the ACD will be successful.

The currency hedging transactions will be entered into regardless of whether the Base Currency is declining or increasing in value relative to the BCHSC Currency.

Consequently, while such hedging will largely protect investors against a decline in the value of the relevant Base Currency relative to the BCHSC Currency, it will also

mean that investors will not benefi t from an increase in the value of that Base Currency relative to the BCHSC Currency.

Due to the impossibility of forecasting future market values the currency hedging will not be perfect and the returns of the base currency hedged Share Class,

measured in the BCHSC Currency, will not be exactly the same as the returns of an equivalent Share Class denominated in and measured in the relevant Base

Currency.

Shareholders should also note that liabilities arising from a Hedged Share Class in a Fund may affect the Net Asset Value of the other Share Classes in that Fund.

Charges to CapitalWhere the income generated by a Fund’s investments is not suffi cient to offset the charges and expenses of the Fund they may instead be deducted from the capital

of the Fund. This will constrain the rate of capital growth.

For the Inc-2 Share Classes, all expenses attributable to that Share Class will be charged against the capital account of that Share Class. This has the effect of

increasing the Share Class’ distributions (which may be taxable) whilst reducing its capital to an equivalent extent. This could constrain future capital and income

growth.

Currency DenominationThe Currency Denomination of a Share Class in a Fund may not necessarily be an indicator of the currency risk to which its Shareholders are exposed. Currency risk

derives from the currency exposures of the underlying assets of a Fund, while the currency denomination of a Share Class only indicates the currency in which the

Net Asset Value of that Share Class is valued in.

It is also particularly important to be aware of the difference between a Share Class that is denominated in a given currency and a Share Class that is hedged into

that currency. For a full overview of the different Share Classes available please refer to Section “3” of this Prospectus.

Distribution from CapitalInc-2 Shares may make distributions from capital as well as from net realised and unrealised capital gains before deduction of fees and expenses. Whilst this might

allow more income to be distributed, it may also have the effect of reducing capital and the potential for long-term capital and income growth. In addition, this

distribution policy may have tax implications for your investment in such Income Shares. If in doubt, please consult your tax adviser.

Initial ChargesWhere an Initial Charge is made, investors who sell their Shares may not, even in the absence of a fall in the value of the Shares, recover the total amount originally

subscribed.

Transactional Risks Arising From The Hedged Share ClassesThere is a risk that where a Fund has Share Classes that operate a hedge as well as Share Classes that do not, the returns of the latter may be affected, positively or

negatively, by inaccuracies and imperfections in the operation of the hedge. This risk arises because Share Classes are not separate legal entities. Hedged Share

Classes and un-hedged Share Classes of the same Fund participate in the same pool of assets and/or liabilities of the same Fund.

Shareholders should also note that assets and/or liabilities arising from one Share Class in a Fund may affect the Net Asset Value of the other Share Classes in that

Fund.

Portfolio Currency Hedged Share ClassDue to the impossibility of forecasting future market values and the primary currency exposures in the relevant Fund’s portfolio, portfolio currency hedging will never

be perfect and the returns of PCHSC may be impacted by exchange rate movements.

Currency hedging transactions will be entered into regardless of whether the primary currency exposures are declining or increasing in value relative to the currency

denomination of the PCHSC. Consequently, while such hedging will largely protect investors against a decline in the value of the relevant the primary currency

exposures relative to the currency denomination of the PCHSC, it will also mean that investors will not benefi t from an increase in the value of those primary currency

exposures relative to the currency denomination of the PCHSC.

Shareholders should also note that liabilities arising from a hedged Share Class in a Fund may affect the Net Asset Value of the other Share Classes in that Fund.

REPORT AND ACCOUNTS



3. Risk management policies continuedBy virtue of the hedging techniques used, the performance of any PCHSC will diverge from the performance of the equivalent Share Class that does not make use of

these hedging strategies.

Risks Associated with Shareholder Dealing and Portfolio TransactionsCancellationIf you exercise any cancellation rights you may have, you may not get back the full amount of your investment.

Confl icts of InterestIn relation to an investment in a Fund, it should be noted that the Management Company, the Global Distributor and Service Provider, the Investment Manager and

other companies within the Investec Group may, from time to time, act as management company, investment manager or adviser to other funds, Funds or other client

mandates which are competitors to the Fund in question because they follow similar investment objectives to that Fund. It is therefore possible that the Management

Company, the Global Distributor and Service Provider and the Investment Manager may in the course of their business dealings have potential confl icts of interest

with the Fund. Each of the Management Company, the Global Distributor and Service Provider and the Investment Manager will, however, have regard in such event

to their regulatory and contractual obligations and to their overall duty to act in a commercially reasonable manner to act in the best interests of all customers and to

treat all customers fairly when undertaking any investment business where potential confl icts of interest may arise.

Counterparty – TradingA Fund may enter into transactions with counterparties, thereby exposing it to the counterparties’ credit worthiness and their ability to perform and fulfi l their fi nancial

obligations (including the timely settlement of trades). This risk may arise at any time a Fund’s assets are deposited, extended, committed, invested or otherwise

exposed through actual or implied contractual agreements.

When entering derivatives transactions and making use of effi cient portfolio management techniques, a Fund may be adversely impacted by confl icts of interest

arising from the relationship of the counterparties to the relevant investment manager or another member of the relevant Investment Manager’s group of companies.

DilutionIn certain circumstances a dilution adjustment may be made on the purchase or sale of Shares (see paragraph “Dilution”). In the case of purchases this will reduce

the number of Shares acquired, in the case of sales this will reduce the proceeds. Where a dilution adjustment or dilution levy is not made, existing investors in the

Fund in question may suffer dilution which will constrain capital growth.

Liquidity risk - fund investmentsA Fund may invest in certain securities that subsequently become diffi cult to sell because of reduced liquidity. This would have an adverse impact on the market price

or the ability to realise the asset. Reduced liquidity for such securities may be driven by a specifi c economic or market event, such as the deterioration in the

creditworthiness of an issuer.

Risk of Deferred Settlement on RedemptionsThe Board of Directors may decide that the settlement of redemption requests may be deferred with the approval of the affected Shareholder. In addition, in the case

of individual or collective redemptions and/or conversions which are in aggregate 10% or more of the net asset value of a Fund or a Class of Shares within that Fund

on a Business Day, the Board of Directors may decide without Shareholder approval to defer settlement of redemptions for a period not exceeding 30 days (see

section 5.5). Shareholders should note that deferred settlement means that Shareholders will need to wait for a time period before they can receive their redemption

proceeds.

Risk of Market ClosureCertain markets in which a Fund invests may not open every Business Day. The consequence is that the prices at which the Shares may be bought or sold will be

based on prices for the underlying investments that are out of date to a greater or lesser extent. This will cause the returns of the Fund to be affected if purchases or

sales of Shares are followed immediately by increases or decreases in the prices of the underlying investments. Causes of market closures can be either from

differences in normal market trading days, national or localised public holidays or from non-standard market closures imposed as emergency measures.

Risk of Remittance RestrictionsIn some countries, the proceeds from the sale of a security, or dividends or other income, which is due to foreign investors, may not be payable, in full or in part, due

to governmental or other restrictions. Any such restrictions will reduce the profi t potential of a Fund and may lead to losses. Other such risks may include the

introduction of unexpected taxation rules. In some circumstances, governmental or regulatory controls may be imposed affecting the effi cient movement of capital

(e.g. exchange limitations or currency movements/repatriation).

Risk of SuspensionIn certain circumstances, Shareholders’ right to redeem, switch or convert sell Shares (including a sale by way of conversion) may be suspended (see section 6.7).

This will mean that on a temporary basis Shareholders will not have access to their money.

Central Securities DepositariesFor the purposes of the UCITS Directive, entrusting the custody of the Company’s assets to the operator of a securities settlement system (“SSS”) is currently not

considered as a delegation by the Depositary and the Depositary would therefore be exempted from its obligation to return an asset lost by an SSS.

CustodyEach Fund’s assets are safe kept by the Depositary or its sub-custodians (which may not be part of the same group of companies as the Depositary) and

Shareholders in a Fund are exposed to the risk of the Depositary its sub-custodian not being able to fully meet its obligation to return in a short time frame all of the

assets held at the Depositary or a sub-custodian in the case of its insolvency. Securities of a Fund will normally be identifi ed in the Depositary’s or sub-custodian’s

books as belonging to the Fund and will be segregated from the Depositary or the sub-custodian’s assets. This provides protection for the Fund’s assets in the event

of the insolvency of either the Depositary or its sub-custodian, but does not exclude the risk that the assets will not be returned promptly in the event of insolvency.

A Fund’s assets may also be pooled with the securities of other clients of the Depositary or sub-custodian. In this circumstance, if there were problems with the

settlement or custody of any security in the pool then, subject to the requirements of COLL, the loss would be spread across all clients in the pool and would not be

restricted to the client whose securities were subject to loss.

In addition, a Fund may be required to place assets outside of the Depositary and the sub-custodian’s safekeeping network in order for the Fund to trade in certain

markets. In such circumstances the Depositary remains responsible for the proper selection and supervision of the persons safekeeping such assets in the relevant

markets. In such markets, Shareholders should note that there may be delays in settlement and/or uncertainty in relation to the ownership of a Fund’s investments

which could affect the Fund’s liquidity and which could lead to investment losses.

REPORT AND ACCOUNTS



3. Risk management policies continuedThe Depositary is liable to a Fund for the loss of an asset held in custody by the Depositary and its sub-custodians. However, the Depositary may have no liability for

the loss of an asset where the Depositary can prove that the loss is due to an event beyond it reasonable control, the consequences of which would have been

unavoidable despite all reasonable efforts to the contrary by the Depositary.

A Fund’s cash held on deposit with a Depositary or its sub-custodian is not segregated from the assets of the Depositary or its sub-custodian and is held at the risk

of the Fund.

Economically ViableIf a Fund does not reach a sustainable size, this will constrain the Investment Manager from implementing all of the investment decisions that it would like to for the

Fund and/or the effect of charges and expenses may be higher than anticipated and the value of the investment consequently reduced. Also, in accordance with the

relevant Instrument of Incorporation, a Fund may be liquidated if it does not reach assumed sustainable size and is no longer viable to operate.

Fair Value PricingFair value pricing adjustments may be made to the price of an underlying asset of a Fund, at the absolute discretion of the Board of Directors, to refl ect predicted

changes in the last available price between the market close and the Valuation Point. There is, however, a risk that this predicted price is not consistent with the

subsequent opening price of that security.

FraudA Fund’s assets may be subject to fraud. This includes but is not limited to fraudulent acts at the sub-custodian level such that the sub-custodian does not maintain

books and records that refl ect the benefi cial ownership of the Fund to its assets. Fraud may also arise with regards to counterparty default and/or fraudulent acts of

other third parties.

Fund Legal Action There is no certainty that any legal action taken by a Fund against its Service Providers, agents, counterparties or other third parties will be successful and

Shareholders may not receive compensation in full or at all for any losses incurred. Recourse through the legal system can be lengthy, costly and protracted.

Depending on the circumstances, a Fund may decide not to take legal action and/or the Fund may decide to enter into settlement negotiations which may or may not

be successful.

Liabilities of each Company and the Funds Under the OEIC Regulations, each Fund within a Company is a segregated portfolio of assets and those assets can only be used to meet the liabilities of, or claims

against, that Fund. Whilst the provisions of the OEIC Regulations provide for segregated liability between Funds in the same Company, the concept of segregated

liability is relatively new. Accordingly, where claims are brought by local creditors in foreign courts or under foreign law contracts, it is not yet known whether a foreign

court would give effect to the segregated liability and cross-investment provisions contained in the OEIC Regulations. Therefore, it is not possible to be certain that

the assets of a Fund will always be completely insulated from the liabilities of another Fund in the same Company in every circumstance. However, for the avoidance

of doubt there is no liability between Funds in different Companies.

Liquidity risk – shareholder activitySubscriptions, conversions or redemptions of Shares in a Fund may have an impact on the other Shareholders of that Fund, which is commonly known as dilution or

concentration.

To match subscriptions, conversions and redemptions of Shares from a Fund, assets may be bought or sold and such transactions may incur costs that the Fund

must meet. Where a Fund is forced to buy or sell a signifi cant volume of assets relative to the liquidity normally available in the market, it may affect the price at which

those assets are bought or sold (and this may be different from the price at which they are valued), therefore having a dilutive or concentrative impact for the other

Shareholders. In addition, the weighting of different holdings within the Fund may change, therefore altering the construction and composition of the Fund. The

impact will vary to a lesser or greater extent depending on the volume of transactions, the purchase and sale price of the assets and valuation method used to

calculate net asset value of the Fund.

The ACD may at its discretion, but always acting in the best interests of Shareholders, in times of severe illiquidity, utilise liquidity management tools including, without

limitation, the power to defer redemptions and suspend dealing in the Shares of a Fund.

Securities LendingSecurities lending involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, a Fund engaged in securities lending

transactions may lose money and there may be a delay in recovering the lent securities. A Fund could also lose money if it does not recover the securities and/or the

value of the collateral falls, including the value of assets purchased with re-invested cash collateral.

A Fund’s portfolio exposure to market risk will not change by engaging in securities lending. However, securities lending carries the specifi c market risk of the

counterparty defaulting. To mitigate this risk, the Fund will receive collateral relating to its securities lending transactions in accordance with the ESMA Guidelines

2012/832. This collateral shall take any of the forms described under the ESMA Guidelines 2012/832.

In the event of default by the counterparty to a securities lending transaction, the collateral provided will need to be sold and the lent securities repurchased at the

prevailing price, which may lead to a loss in value for the relevant Fund. There can therefore be no assurance that the relevant Fund’s investment objectives will be

achieved.

Securities lending also carries operational risks such as the non-settlement of instructions associated with securities lending. Such operational risks are managed by

means of procedures, controls and systems implemented by the securities lending agent and the Fund.

When engaging in securities lending, a Fund may be adversely impacted by confl icts of interest arising from the relationship of the counterparties to such transactions

with the relevant investment manager or another member of the relevant investment manager’s group of companies.

TaxTax laws may change without notice and may impose taxes on a retrospective basis. Taxes may be deducted at source without notice to a Fund and/or the

Investment Manager. Tax charged may vary between Shareholders.

Third-Party Operational (including Counterparty – Service Providers)Each Fund’s operations depend on third parties, either for the purpose of segregating duties, or due to delegation/outsourcing of functions by the Investment

Manager. Investors in a Fund may suffer disruption or fi nancial loss in the event of third-party operational failure.

REPORT AND ACCOUNTS



3. Risk management policies continuedContingent Convertibles or CoCosA Fund may invest in contingent convertibles (CoCos). CoCos are Tier 1 and Tier 2 subordinated debt securities issued by fi nancial institutions. CoCos generally

contain loss absorption mechanisms, or ‘bail-in’ clauses, to avoid public sector intervention to keep the issuer of such securities from insolvency or bankruptcy.

Investors in CoCos may suffer losses prior to investors in the same fi nancial institution holding equities or bonds ranking alongside or junior to the CoCo bond

holders. CoCos tend to have higher price volatility and greater liquidity risk than other securities which do not expose investors to the aforementioned risks.

Additionally, Shareholders should be aware that the structure of CoCos is yet to be tested and there is some uncertainty as to how they may perform in a stressed

environment. Depending on how the market views certain triggering events, there is the potential for price contagion and volatility across the asset class.

Furthermore, this risk may be increased depending on the level of underlying instrument arbitrage and in an illiquid market, price formation may be increasingly

diffi cult.

CreditWhere the value of an investment depends on a party (which could be a company, government or other institution) fulfi lling an obligation to pay, there exists a risk that

that obligation will not be satisfi ed. This risk is greater the weaker the fi nancial strength of the party. The Net Asset Value of a Fund could be affected by any actual or

feared breach of the party’s obligations, while the income of the Fund would be affected only by an actual failure to pay, which is known as a default.

Distressed DebtA Fund may invest in distressed debt securities. Investment in such distressed debt securities (which qualify as transferable securities) involves purchases of

obligations of companies that are experiencing signifi cant fi nancial or business distress, including companies involved in bankruptcy or other reorganisation and

liquidation proceedings. Acquired investments may include senior or subordinated debt securities, bank loans, promissory notes and other evidences of

indebtedness, as well as payables to trade creditors. Although such purchases may result in signifi cant investor returns, they involve a substantial degree of risk and

may not show any return for a considerable period of time. In fact, many of these investments ordinarily remain unpaid unless and until the company reorganises and/

or emerges from bankruptcy proceedings, and as a result may have to be held for an extended period of time. The level of analytical sophistication, both fi nancial and

legal, necessary for successful investment in companies experiencing signifi cant business and fi nancial distress is unusually high. There is no assurance that the

Investment Manager will correctly evaluate the nature and magnitude of the various factors that could affect the prospects for a successful reorganisation or similar

action. In any reorganisation or liquidation proceeding relating to a company in which a Fund invests, an investor may lose its entire investment or may be required to

accept cash or securities with a value less than the original investment. Under such circumstances, the returns generated from the investment may not compensate a

Fund adequately for the risks assumed.

Investing in distressed debt can also impose duties on the Investment Manager which may confl ict with duties which it owes to a Fund. A specifi c example of where

the Investment Manager may have a confl ict of interest is where it invests the assets of a Fund in a company in serious fi nancial distress and where that investment

leads to the Investment Manager investing further amounts of the Fund’s assets in the company or taking an active role in managing or advising the company, or one

of the Investment Manager’s employees becomes a director or other offi cer of the company. In such cases, the Investment Manager or its employee may have duties

to the company and/or its members and creditors which may confl ict with, or not correlate with, the interests of the Shareholders of that Fund. In such cases, the

Investment Manager may also have discretion to exercise any rights attaching to the Fund’s investments in such a company. The Investment Manager will take such

steps as it considers necessary to resolve such potential confl icts of interest fairly.

High Yield Debt SecuritiesHigh yield debt securities, that is those that are rated BB+ by Standard & Poor’s or Ba1 by Moody’s or lower, or are unrated, are subject to greater risk of loss of

income and principal due to default by the issuer than are higher-rated debt securities. It may also be more diffi cult to dispose of, or to determine the value of, high

yield debt securities.

High yield debt securities rated BB+ or Ba1 or lower are described by the ratings agencies as “predominantly speculative with respect to capacity to pay interest and

repay principal in accordance with the terms of the obligation. While such debt will likely have some quality and protective characteristics, these are outweighed by

large uncertainties or major risk exposures to adverse conditions”.

Interest RateThe earnings or market value of a Fund may be affected by changes in interest rates. This risk can be particularly relevant for Funds holding fi xed-rate debt securities

(such as bonds), since their values may fall if interest rates rise. Furthermore, Funds holding fi xed-rate debt securities with a long time until maturity may be more

sensitive to changes in interest rates than shorter-dated debt securities, for example a small rise in long-term interest rates may result in a more than proportionate

fall in the price of a long-dated debt security.

Investment GradeThe price of securities involved in initial public offerings are often subject to greater and more unpredictable price changes than more established securities.

Money Market InstrumentMoney market instruments in which a Fund invests are subject to the solvency of the underlying issuer. The buying and selling of money market instruments is

exposed to liquidity constraints in the market.

While every effort will be made to maintain the capital value of the Fund, there is no guarantee that this will be the case as a loss made on an instrument held by the

Fund could reduce the capital value of the Fund.

Mortgage Backed and Other Asset Backed SecuritiesMortgage BackedA mortgage-backed security is a generic term for a debt security backed or collateralised by the income stream from an underlying pool of commercial and/or

residential mortgages. This type of security is commonly used to redirect the interest and principal payments from the pool of mortgages to investors. A mortgage-

backed security is normally issued in a number of different classes with varying characteristics depending on the riskiness of the underlying mortgages assessed by

reference to their credit quality and term and can be issued at a fi xed or a fl oating rate of securities. The higher the risk contained in the class, the more the

mortgage-backed security pays by way of income.

Asset BackedTraditional debt securities typically pay a fi xed rate of interest until maturity, when the entire principal amount is due. By contrast, payments on asset-backed

securities (ABS) typically include both interest and partial payment of principal. Principal may also be prepaid voluntarily, or as a result of refi nancing or forced

repayment. A Fund may have to invest the proceeds from prepaid investments under less attractive terms and yields. Compared to other debt, ABS are less likely to

increase in value during periods of declining interest rates and have a higher risk of decline in value during periods of rising interest rates and they can increase the

volatility of a Fund. Some ABS receive only portions of payments of either interest or principal of the underlying debt. The yields and values of these investments are

extremely sensitive to changes in interest rates and in the rate of principal payments on the underlying mortgages. The market for these investments may be volatile

and illiquid, which may make it diffi cult to buy or sell them, and the secondary market may be smaller than that for more traditional debt securities.

REPORT AND ACCOUNTS



3. Risk management policies continuedCDOs/CLOsCollateralised Debt Obligations (CDOs) represent a participation in, or are secured by, a pool of fi xed or fl oating rate debt obligations. CDOs are issued in separate

classes with different stated maturities that may have different credit and investment profi les. As the debt pool experiences prepayments, the pool pays off investors

in classes with shorter maturities fi rst. Prepayments may cause the actual maturity of a CDO to be substantially shorter than its stated maturity. Conversely, slower

than anticipated prepayments can extend the effective maturities of CDOs, subjecting them to a greater risk of decline in market value in response to rising interest

rates than traditional debt securities, and, therefore, potentially increasing their volatility. CDOs and other instruments with complex or highly variable prepayment

terms generally entail greater market, prepayment and liquidity risks than other asset backed securities (ABS). CDOs are generally subject to each of the risks

discussed under asset-backed (ABS) securities.

Risks Associated with Derivative InstrumentsCash FlowA Fund may have insuffi cient cash to meet the margin calls necessary to sustain its position in a derivatives contract. This may result in the Fund having to close a

position (or sell other securities to raise the cash) at a time and / or on terms that it may otherwise not have done. This could lead to capital losses for the Fund.

Credit Default Swaps and Other Synthetic SecuritiesA portion of a Fund’s investments may consist of credit default swaps and other synthetic securities the reference obligations of which may be leveraged loans,

high-yield debt securities or similar securities. Investments in such types of assets through the purchase of credit default swaps and other synthetic securities

present risks in addition to those resulting from direct purchases of such investments. With respect to each synthetic security, a Fund will usually have a contractual

relationship only with the counterparty of such synthetic security, and not the reference obligor on the reference obligation. A Fund generally will have no right directly

to enforce compliance by the reference obligor with the terms of the reference obligation nor any rights of set-off against the reference obligor, may be subject to

set-off rights exercised by the reference obligor against the counterparty or another person or entity, and generally will not have any voting or other contractual rights

of ownership with respect to the reference obligation. In addition, a Fund will not directly benefi t from any collateral supporting the reference obligation and will not

have the benefi t of the remedies that would normally be available to a holder of such reference obligation. In addition, in the event of the insolvency of the

counterparty, a Fund will be treated as a general creditor of such counterparty, and will not have any claim with respect to the reference obligation. Consequently, a

Fund will be subject to the credit risk of the counterparty as well as that of the reference obligor. As a result, concentrations of synthetic securities entered into with

any one counterparty will subject a Fund to an additional degree of risk with respect to defaults by such counterparty as well as by the reference obligor.

Additionally, while the Investment Manager expects that the returns on a synthetic security will generally refl ect those of the related reference obligation, as a result of

the terms of the synthetic security and the assumption of the credit risk of the synthetic security counterparty, a synthetic security may have a different expected

return, a different (and potentially greater) probability of default and expected loss characteristics following a default, and a different expected recovery following

default. Additionally, when compared to the reference obligation, the terms of a synthetic security may provide for different maturities, distribution dates, interest

rates, interest rate references, credit exposures, or other credit or non-credit related characteristics. Upon maturity, default, acceleration or any other termination

(including a put or call) other than pursuant to a credit event (as defi ned therein) of the synthetic security, the terms of the synthetic security may permit or require the

issuer of such synthetic security to satisfy its obligations under the synthetic security by delivering to the relevant Fund securities other than the reference obligation

or an amount different than the then current market value of the reference obligation.

Derivative BasisThe value of a derivative typically depends on the value of an underlying asset. The value of the derivative may not be 100% correlated with the value of the underlying

asset and therefore a change in the value of the asset may not be matched by a proportionate corresponding change in the value of the derivative.

DerivativesThe use of derivatives may lead to large changes in the value of a Fund and includes the potential for large fi nancial loss.

Exchange DerivativesFutures contracts may have restricted liquidity due to certain exchanges limiting fl uctuations in certain futures contract prices during a single day by regulations

referred to as “daily price fl uctuation limits” or “daily limits”. These prevent trades from being executed at prices beyond the daily limits during a single trading day.

Also, once the price of a contract for a futures contract has increased or decreased by an amount equal to the daily limit, positions in the future can neither be taken

nor liquidated unless traders are willing to effect trades at or within the limit.

LeverageWhere a Fund uses derivatives to create aggregate exposure that is greater than its net assets, this may lead to potentially large fi nancial loss. This also creates the

effect that the Fund will have greater exposure to certain risks that are associated with the use of derivatives (e.g. Counterparty Risk – Trading, OTC Derivatives Risk

and market risk).

OTC Derivative InstrumentsPricing of these instruments is subjective and their valuation is limited to a small number of market professionals who often act in a dual capacity, as the counterparty

and pricing agent for the same transactions. In addition, OTC Derivative Instruments may be exposed to Counterparty Risk - Trading – please see the appropriate risk

factor.

Short ExposureWhere a Fund uses derivatives to create short exposure there is potential for gains to be made when the underlying securities are falling in value, but a loss could be

incurred when the underlying security is rising in value. This means the Fund’s performance will be less closely related to the performance of the type of assets in

which it will ordinarily invest.

Risks Associated with Emerging Market InvestmentsChina RiskInvestments in China are particularly exposed to China’s economic, social and political system, which may behave differently to other markets, and investments in

China may be harder to assess for suitability or risk. China has enjoyed signifi cant economic prosperity in recent years but continued growth cannot be assumed and

a decline in China’s economic performance may affect a Fund’s investment.

Investments in China are subject to State-imposed restrictions, including the operation of trading quotas and currency management; while other State and regulatory

intervention may be more unpredictable or intrusive than in other markets. China’s laws and regulations relating to securities (including surrounding taxation) are new

and evolving, their application is subject to uncertainty, and they may be subject to change in the future. Investments in China may be subject to greater or more

frequent rises and falls in value than other markets and may be harder or impossible to buy or sell.

Accounting and auditing standards in China may also be less rigorous than their international equivalents and this could result in investments being overvalued.

Investments held by Chinese brokers may be mixed with other investors’ assets or subject to lower safekeeping standards than investments held domestically, which

could lead to delays in payment or losses should the broker become insolvent. Chinese investments are denominated in Renminbi and its value may fl uctuate widely

from other international currencies.

REPORT AND ACCOUNTS



3. Risk management policies continuedOther applicable risks:Investors should also note the following risk factors, which may be applicable to the Fund, each of which is described in more detail in this Appendix: Accounting,

Emerging Markets, Equity Investment, Exchange Rates, Market Action, Market Closure, Political, Settlement and Custody and Tax.

Emerging MarketsEmerging Markets investments may be more volatile and less liquid than investments in developed markets and the investments of a Fund in such markets may be

considered speculative and subject to signifi cant delays in settlement. In addition, there may be a higher than usual risk of exchange rate, political, economic, social

and religious instability and of adverse changes in government regulations. Some of these markets may not be subject to accounting, auditing and fi nancial reporting

standards and practices comparable to those of more developed countries and the securities markets of such markets may be subject to unexpected closure. In

addition, there may be less government supervision, legal regulation and less well defi ned tax laws and procedures than in countries with more developed securities

markets.

Stock ConnectTo the extent that a Fund’s investments in China are dealt via Hong Kong Shanghai Stock Connect or Shenzhen Stock Connect (“Stock Connect”), such dealing will

be subject to additional risk factors.

Stock Connect is a relatively new trading programme, therefore the relevant rules and regulations are untested and subject to change. Since investments through

Stock Connect are subject to certain restrictions (including trading day restrictions, pre-trade checking, eligibility of stock, quota limits and daily trade quotas),

investments may be subject to greater or more frequent rises and falls in value and may be harder to buy or sell.

Under Stock Connect, overseas investors such as the investing Funds may invest directly in certain China A shares listed on the Shanghai Stock Exchange or

Shenzhen Stock Exchange (“Stock Connect Shares”). The Funds trade Stock Connect Shares through a broker who is affi liated to the Hong Kong sub-custodian

appointed by the Depositary.

Stock Connect Shares purchased through Stock Connect are uncertifi ed and held in accounts in the Hong Kong Central Clearing and Settlement System maintained

by the Hong Kong Securities and Clearing Corporation Limited (“HKSCC”), the central securities depositary in Hong Kong. HKSCC in turn holds the legal title to the

Stock Connect Shares of all its participants through a nominee omnibus securities account in its name, registered with ChinaClear, the central securities depositary

in China.

A failure or delay by the HKSCC in the performance of its obligations may result in a failure of settlement, or the loss, of Stock Connect Shares and/or monies in

connection with them and the Funds may suffer losses as a result.

Foreign investors like the Funds investing through the Stock Connect remain benefi cial owners of the Stock Connect Shares and are only eligible to exercise their

rights to the Stock Connect Shares in China through the HKSCC nominee.

In the event of a default of ChinaClear, HKSCC through its nominee is likely to seek to recover any outstanding Stock Connect Shares on behalf of the Funds from

ChinaClear through available legal channels but it is not obligated to do so. If HKSCC does not enforce claims against ChinaClear the Fund may not be able to

recover all of its Stock Connect Shares.

Trading under Stock Connect will not be covered by Hong Kong’s Investor Compensation Fund nor the China Securities Investor Protection Fund.

Investors should also consider the China Risk detailed in this Appendix which applies to investment in China.

Discount/PremiumFrom time to time the prices of closed ended investment company shares can trade at either a premium or discount to their underlying value. This can create volatility

in the price of a Fund that invests in closed ended investment company shares in excess of the volatility of the underlying markets in which the investment trust

invests in and this consequently poses a greater risk to capital.

Equity InvestmentThe value of equities and equity-related investments may vary according to company profi ts and future prospects as well as more general market factors. In the event

of a company default, the owners of their equity rank last in terms of any fi nancial payment from that company.

Smaller CompaniesSmaller company shares may be less liquid and more volatile than the shares of larger companies, due to the smaller number of shares in issue and the frequently

less diversifi ed and less established nature of the business. These factors can create a greater potential for signifi cant capital losses.

Risks Associated with Investment Strategy ConcentrationA Fund which invests in a concentrated portfolio of holdings may be more volatile than more broadly diversifi ed funds.

Income PriorityWhere a Fund gives priority to income over capital growth this may constrain the rate of future capital and income growth. In addition, this distribution policy may

have tax implications for your investment in the Shares. If in doubt, please consult your tax adviser.

Multi-Asset InvestmentLosses may be made due to adverse movements in equity, bond, commodity, currency and other market prices and to changes in the volatility of any of these.

Risk of higher Ongoing Charges when investing in fundsWhere a Fund invests in other UCITS and/or UCIs, there may be additional costs of investing in these UCITS/UCIs which may increase the TER and/or Ongoing

Charges.

Sector and/or GeographicalA Fund that restricts investment to a small number of related sectors and / or geographical locations may decline even while broader based market indices are rising.

Furthermore, investments which offer exposure to commodities may include additional risks e.g. political risk, natural events or terrorism. This may infl uence the

production and trading of commodities and the value of fi nancial instruments offering exposure to such commodities.

REPORT AND ACCOUNTS



3. Risk management policies continuedListed below are the specifi c risks applicable to the Funds. Investors should refer to Clause 5, Appendix 1 (for specifi c risks) and Appendix VI of the prospectus for a

detailed explanation of each of the risks highlighted below.

American FundDerivatives

Equity Investment

Sector and/or Geographical Risk

Asia ex Japan FundChina Risk

Derivatives

Emerging Markets

Equity Investment


Global Energy FundDerivatives

Emerging Markets


Smaller Companies

Global Strategic Equity FundChina Risk

Derivatives

Equity Investment

Stock Connect

Monthly High Income FundContingent Convertibles or CoCos

Credit

Credit Default Swaps and Other Synthetic Securities

Derivatives

High Yield Debt Securities

Income Priority

Interest Rate

Leverage

Mortgage Backed and Other Asset Backed Securities

OTC Derivative Instruments

Stock Connect

Sensitivity analysisThe table below shows the fund’s beta; this is a historical measure of the funds’ sensitivity to movements in well known markets. A beta of 1.0 would suggest that a

fund had experienced a close relationship to the volatility of the market index against which it was being measured, rising when the market rises and falling when it

falls in a one to one manner. A beta of 1.5 would suggest that a fund had experienced movements of 1.5 times the index i.e. the fund was more volatile than the

market. A beta of 0.5 would suggest that a fund had experienced movements in values of half of the index’s movement i.e. the fund was less volatile than the market.

Broadly speaking, if a fund has a beta of ‘B’ to an index, it means that if the index value changes by ‘X’% we could expect the fund value to change by ‘B’ multiplied

by ‘X’%. Of course, this is only an expectation, but it is a good indicator of the risk currently faced by particular funds.

01/01/2016 01/01/2014 31/12/2016 31/12/2016Group/Investment Calculation Benchmark Beta Beta

Unclassifi ed Investec American A Acc Net GBP BofAML Global HY Cons GBP Hedged (from 01.11.15) 0.39 0.94

Investec Asia ex Japan A Acc Net BofAML Global HY Cons GBP Hedged (from 01.11.15) 1.51 1.47

Investec Global Energy A Acc Net GBP BofAML Global HY Cons GBP Hedged (from 01.11.15) 1.62 2.64

Investec Global Strat Eq A Acc Net GBP BofAML Global HY Cons GBP Hedged (from 01.11.15) 0.98 1.30

Investec Monthly Hi Inc A Inc 2 Net GBP BofAML Global HY Cons GBP Hedged (from 01.11.15) 0.89 0.79

Unclassifi edInvestec American A Acc Net GBP FTSE AllSh TR GBP 0.77 0.66

Investec Asia ex Japan A Acc Net FTSE AllSh TR GBP 1.37 0.93

Investec Global Energy A Acc Net GBP FTSE AllSh TR GBP 1.39 1.43

Investec Global Strat Eq A Acc Net GBP FTSE AllSh TR GBP 1.28 0.97

Investec Monthly Hi Inc A Inc 2 Net GBP FTSE AllSh TR GBP 0.48 0.34

Unclassifi edInvestec American A Acc Net GBP MSCI World NR USD 0.83 0.91

Investec Asia ex Japan A Acc Net MSCI World NR USD 1.65 1.21

Investec Global Energy A Acc Net GBP MSCI World NR USD 1.03 1.22

Investec Global Strat Eq A Acc Net GBP MSCI World NR USD 1.10 1.07

Investec Monthly Hi Inc A Inc 2 Net GBP MSCI World NR USD 0.22 0.29

REPORT AND ACCOUNTS



Bank of America Merrill Lynch Global High Yield Constrained FTSE MSCI GBP hedged*201 6 All-Share Index* World Index* (from 01.06.2012)

American Fund 0.60 0.90 1.01

Asia ex Japan Fund 0.89 0.98 1.30

Global Energy Fund 1.36 1.20 2.57

Global Strategic Equity Fund 0.95 1.10 1.49

Month High Income Fund† 0.35 0.36 0.69

* Source: Lipper 01.01.1 6 – 31.12.1 6 using monthly sub-periods for class ‘A’ accumulation shares.

† ‘A’ income 2 shares.

Past performance is not a guide to future performance.

4. Dilution adjustmentA dilution adjustment may be applied at the ACD’s discretion to all purchases, sales and switches of shares where the impact of the net deals is believed to have

material dilution effect.

A dilution adjustment or levy is a method to ensure fair treatment between investors joining, leaving or remaining in a Fund. We reserve the right to levy a dilution

adjustment on any or all deals. The price of the shares of a Fund may be adjusted to protect its value from being reduced in the case of larger scale movements into

or out of the Fund.

Full details on the ACD policy for dilution adjustment can be found in the Prospectus.

We hereby certify the Annual Report and Accounts on behalf of the Directors of Investec Fund Managers Limited

K. McFarlandDirector of the ACD

2 7 February 2017

D. AirdDirector of the ACD

REPORT AND ACCOUNTS


Statement of Total Return

For the year ended 31 December 2016

31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

IncomeNet capital gains 4 38,217 3,497

Revenue 6 2,103 2,635

Expenses 7 (1,363) (2,007)

Interest payable and similar charges 9 (2) –

Net revenue before taxation 738 628

Taxation 8 (287) (366)

Net revenue after taxation 451 262

Total return before distributions 38,668 3,759Distribution 9 (456) (308)

Change in net assets attributable to shareholders from investment activities 38,212 3,451

Statement of Change in Net Assets Attributable to Shareholders


31.12.16 31.12.15 £’000 £’000 £’000 £’000

Opening net assets attributable to shareholders 98,571 187,822 Amounts receivable on creation of shares 16,523 23,886

Amounts payable on cancellation of shares (31,195) (116,874)

(14,672) (92,988)

Dilution adjustment – 12


Retained distribution on accumulation shares 437 274

Closing net assets attributable to shareholders 122,548 98,571

Notes to the fi nancial statements are on pages 57 to 6 1.

Balance Sheet


31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

ASSETSInvestment assets 112,394 94,365

Current assets

Debtors 10 286 146

Cash and bank balances 11 10,074 4,245

Total other assets 10,360 4,391

Total assets 122,754 98,756

LIABILITIES Creditors

Other creditors 12 206 185

Total liabilities 206 185

Net assets attributable to shareholders 122,548 98,571


American Fund

REPORT AND ACCOUNTS


1. Accounting policiesThe Accounting policies for the Fund are disclosed in the notes to the fi nancial statements on page 46.

2. Distribution policiesThe Distribution policies for the Fund are disclosed in the notes to the fi nancial statements on page 47.

3. Risk management policiesThe Risk management policies for the Fund are disclosed in the notes to the fi nancial statements on pages 47 to 5 5.

4. Net capital gainsThe net capital gains during the year comprise:

31.12.16 31.12.15 £’000 £’000

Non-derivative securities 37,634 2,847

Gains on foreign exchange 598 665

Transaction charges (15) (15)

Net capital gains 38,217 3,497

5. Purchases, sales and transaction costsAnalysis of total trade costs.

Purchases Sales 31.12.16 31.12.15 31.12.16 31.12.15 £’000 £’000 £’000 £’000

Equities 40,968 14,227 56,038 103,882

Bonds – 5,800 4,589 –

Trades excluding transaction costs 40,968 20,027 60,627 103,882

CommissionsEquities 28 8 (33) (32)

TaxesEquities – – (1) (2)

Total costs 28 8 (34) (34)

Net trades in the year after transaction costs 40,996 20,035 60,593 103,848

Notes to the Financial StatementsFor the year ended 31 December 2016

American Fund

REPORT AND ACCOUNTS


Total transaction cost expressed as a percentage of asset type cost Purchases Sales

31.12.16 31.12.15 31.12.16 31.12.15 % % % %

Commissions Equities 0.07 0.06 0.06 0.03

TaxesEquities 0.00 0.00 0.00 0.00

Total transaction cost expressed as a percentage of average net asset value 31.12.16 31.12.15 % %

Commissions 0.06 0.03

Taxes 0. 00 0.00

Total costs 0.06 0.03

Average portfolio dealing spreadThe average portfolio dealing spread at the balance sheet was 0.03% (31.12.15: 0.06%).

6. Revenue 31.12.16 31.12.15 £’000 £’000

Overseas dividends 2,081 2,597

Interest on debt securities 2 9

Property revenue from overseas REITs 19 18

Bank interest 1 1

Stocklending income – 10

Total revenue 2,103 2,635

7. Expenses 31.12.16 31.12.15 £’000 £’000

Payable to the ACD or associates of the ACD, and agents of either of them:ACD fee 1,266 1,879

General administration charge (GAC) 83 112

1,349 1,991

Payable to the Depositary or associates of the Depositary, and agents of either of them:Safe custody fee 15 19

15 19

Other expenses: Stock lending fee – 1

VAT refund (1) (4)

(1) (3)

Total expenses 1,363 2,007

Please refer to the Prospectus for a full description of expenses covered by the GAC.

The audit fee for the year is £8,000 (31.12.15: £8,000).

VAT is currently recovered in respect of certain expenses paid under the GAC.

Notes to the Financial Statements continuedFor the year ended 31 December 2016

American Fund

REPORT AND ACCOUNTS


8. Taxationa) Analysis of the tax charge in the year: 31.12.16 31.12.15 £’000 £’000

Overseas tax 287 366

Current tax charge 287 366

Deferred tax charge (note 8(c)) – –

Total tax charge (note 8(b)) 287 366

b) Factors affecting current tax charge for the year:The tax assessed for the year is lower than the standard rate of corporation tax in the UK for an authorised OEIC (20%) (31.12.15: 20%). The differences are explained

below:

31.12.16 31.12.15 £’000 £’000

Net revenue before taxation 738 628

Corporation tax of 20% 148 126

Effects of: Revenue not subject to taxation (416) (520)

Overseas tax expensed (1) –

Movement in excess management expenses 269 394


Total tax charge (note 8(a)) 287 366

c) Provision for deferred taxation:There is no provision required for deferred taxation at the Balance Sheet date in the current or prior year.

d) Factors affecting future tax charge: The Fund has surplus management expenses that have resulted in an unrecognised deferred asset of £6,504,000 (31.12.15: £6,235,000). This asset has not been

recognised in the fi nancial statements due to the inherent uncertainty of the Fund to generate suffi cient taxable net revenue.

9. Finance costsDistributions and InterestThe Distributions take account of equalisation received on the creation of shares and deducted on the cancellation of shares, and comprises:

31.12.16 31.12.15 £’000 £’000

Final 437 274

437 274

Add: Equalisation deducted on cancellation of shares 55 40

Less: Equalisation received on creation of shares (36) (6)

Finance costs: Distribution 456 308

Finance cost: Interest 2 –

Total fi nance costs 458 308

The net distribution for the year is represented by: 31.12.16 31.12.15 £’000 £’000

Net revenue after taxation 451 262

Equalisation on conversion shares 5 46

Finance costs: Distribution 456 308

REPORT AND ACCOUNTS


10. Debtors 31.12.16 31.12.15 £’000 £’000

Amounts receivable for creation of shares 145 24

Accrued bond interest (1) 7

Accrued dividends and bank interest 142 116

Unrealised currency hedge – (1)

286 146

11. Cash and bank balances 31.12.16 31.12.15 £’000 £’000

Cash and bank balances 10,074 4,245

10,074 4,245

12. Creditors 31.12.16 31.12.15 £’000 £’000

Amounts payable for cancellation of shares 72 69

Accrued ACD fee 123 105

Accrued general administration charge 8 7

Accrued safe custody fee 3 2

Accrued transaction charges – 2

206 185

13. Capital commitments and contingent liabilitiesThe Fund had no contingent liabilities or capital commitments at the year end date. (31.12.15: Nil).

14. Related party transactions Investec Fund Managers Limited, as Authorised Corporate Director (ACD), is a related party, and acts as a principal in respect of all transactions of shares in the

Company. The aggregate monies received through issues and paid on cancellation of shares are disclosed in the Statement of Change in Shareholders’ Net Assets.

In accordance with the prospectus the ACD collects from the Fund, a general administration charge (GAC), ACD fees and safe custody fees. Please refer to notes 7,

12 and 16 for further details.

Any amounts due to/from Investec Fund Managers Limited at the end of the accounting year are disclosed in notes 10 and 12.

15. Dilution adjustmentPlease refer to note 4 of the notes to the fi nancial statements for a detailed description of dilution adjustment.

16. ACD fees and chargesThe different level of ACD fees payable per annum as at 31 December 2016 for each share class is detailed below:

‘A’ Shares 1.50%

‘B’ Shares 1.25%

‘I’ Shares 0.75%

‘R’ Shares 1.00%

‘S’ Shares 0.00%

The GAC is charged at 0.08% of the Net Asset Value of each share class.

All shares within the sub-fund have the same rights on winding up.


American Fund

REPORT AND ACCOUNTS


Reconciliation of the shares movement in the year:

31.12.15 31.12.16 Opening Closing shares in Shares shares in issue Creations Cancellations converted issue

‘A’ Class (Accumulation shares) 28,785,293 4,535,815 (8,465,378) (2,496,603) 22,359,127

‘A’ Class (GBP Hedge Accumulation shares) 128,731 73,735 (59,332) – 143,134

‘A’ Class (USD Accumulation shares) 193,258 610,129 (640,370) – 163,017

‘B’ Class (Accumulation shares) 2,817,467 9,126 (264,634) (104,567) 2,457,392

‘I’ Class (Accumulation shares) 16,250,525 1,517,018 (3,986,325) 3,989,499 17,770,717

‘R’ Class (Accumulation shares) 118,082 55,754 (53,447) (16,107) 104,282

‘S’ Class (Accumulation shares) 1,372,192 301,146 (383,236) – 1,290,102

17. Risk considerationsPlease refer to note 3 of the notes to the fi nancial statements of the company for a detailed description of the risk considerations. There are no further specifi c risks

for this Fund.

The Fund’s currency exposure as at 31 December 2016 was: Currency exposure Total Total 31.12.16 31.12.15Currency £’000 £’000

Sterling (51) (162)

US Dollar 122,599 98,733

Total 122,548 98,571

The majority of the Fund’s fi nancial assets are equity shares and other investments which neither pay interest nor have a maturity date. Therefore, the Fund’s

exposure to interest risk is not considered to be signifi cant.

18. Fair value 31.12.16 31.12.15 Assets Liabilities Assets LiabilitiesValuation technique £’000 £’000 £’000 £’000

Level 1 112,394 – 94,365 –

The three levels of the fair value hierarchy under FRS 102 are as follows:

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is,

derived from prices);

Level 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

REPORT AND ACCOUNTS


Distribution Tables


Final distribution paid 28 February 2017 Group 1 – shares purchased before 1 January 2016

Group 2 – shares purchased between 1 January 2016 and 31 December 2016

Distribution Distribution Net payable paid Income Equalisation 28–Feb–17 29–Feb–16 pence pence pence pence

‘A’ Share Class – Accumulation Group 1 0.4018 – 0.4018 0.0746

Group 2 0.2160 0.1858 0.4018 0.0746

‘A’ Share Class – Accumulation (GBP Hedge)Group 1 0.2151 – 0.2151 0.0189

Group 2 0.0844 0.1307 0.2151 0.0189

‘B’ Share Class – AccumulationGroup 1 1.0918 – 1.0918 0.7142

Group 2 0.6631 0.4287 1.0918 0.7142

‘I’ Share Class – AccumulationGroup 1 1.5479 – 1.5479 1.1938

Group 2 0.5021 1.0458 1.5479 1.1938

‘R’ Share Class – AccumulationGroup 1 1.1268 – 1.1268 0.8375

Group 2 0.7710 0.3558 1.1268 0.8375

‘S’ Share Class – AccumulationGroup 1 3.3653 – 3.3653 2.7149

Group 2 1.3952 1.9701 3.3653 2.7149

Distribution Distribution Net payable paid Income Equalisation 28–Feb–17 29–Feb–16 US cent US cent US cent US cent

‘A’ Share Class USD – Accumulation Group 1 0.4670 – 0.4670 0.1270

Group 2 0. 0879 0. 3791 0.4670 0.1270

EqualisationEqualisation applies only to shares purchased during the distribution period (Group 2 shares). It is the average amount of income included in the purchase price of

all Group 2 shares and is refunded to holders of these shares as a return of capital. Being capital, it is not liable to income tax but must be deducted from the cost of

shares for capital gains tax purposes.

American Fund

REPORT AND ACCOUNTS


Asia ex Japan Fund



31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

IncomeNet capital gains/(losses) 4 33,046 (9,670)

Revenue 6 4,295 4,157

Expenses 7 (1,923) (2,113)

Interest payable and similar charges 9 (1) (1)

Net revenue before taxation 2,371 2,043

Taxation 8 115 (96)

Net revenue after taxation 2,486 1,947

Total return before distributions 35,532 (7,723)Distribution 9 (2,496) (1,978)

Change in net assets attributable toshareholders from investment activities 33,036 (9,701)



31.12.16 31.12.15 £’000 £’000 £’000 £’000

Opening net assets attributable to shareholders 153,936 156,292Amounts receivable on creation of shares 19,567 40,096


(21,156) 5,253

Change in net assets attributable to shareholders from investment activities 33,036 (9,701)

Retained distribution on accumulation shares 2,323 2,092


Notes to the fi nancial statements are on pages 64 to 67.

Balance Sheet


31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

ASSETSInvestment assets 166,411 149,737

Current assets

Debtors 10 225 596



Total assets 168,512 154,231

LIABILITIESCreditors





REPORT AND ACCOUNTS



Asia ex Japan Fund



3. Risk management policiesThe Risk management policies for the Fund are disclosed in the notes to the fi nancial statements on pages 47 to 5 5.

4. Net capital gains/(losses)The net capital gains/(losses) during the year comprise:

31.12.16 31.12.15 £’000 £’000

Non-derivative securities 33,084 (9,601)



Net capital gains/(losses) 33,046 (9,670)

5. Purchases, sales and transaction costsAnalysis of total trade costs

Purchases Sales 31.12.16 31.12.15 31.12.16 31.12.15 £’000 £’000 £’000 £’000

Equities 74,718 84,314 91,455 79,776


TaxesEquities 42 47 (148) (109)

Total costs 103 119 (226) (185)



31.12.16 31.12.15 31.12.16 31.12.15 % % % %

CommissionsEquities 0.08 0.09 0.09 0.10

TaxesEquities 0.06 0.06 0.16 0.14



Taxes 0.12 0.10



6. Revenue 31.12.16 31.12.15 £’000 £’000


Offshore distribution non-taxable from collective investment schemes 84 59

Bank interest 7 13


REPORT AND ACCOUNTS


7. Expenses 31.12.16 31.12.15 £’000 £’000



1,760 1,920


163 193

Other expenses:VAT refund (3) (5)

Out of pocket expenses 2 3

Publishing fee 1 2

– –






Overseas tax (115) 96

Current tax charge (115) 96


Total tax charge (note 8(b)) (115) 96


below:

31.12.16 31.12.15 £’000 £’000



Effects of:Revenue not subject to taxation (857) (830)


Overseas tax (115) 96

Total tax charge (note 8(a)) (115) 96


d) Factors affecting future tax charge:The Fund has surplus management expenses that have resulted in an unrecognised deferred asset of £4,007,000 (31.12.15: £3,624,000). This asset has not been


REPORT AND ACCOUNTS



Asia ex Japan Fund


31.12.16 31.12.15 £’000 £’000

Final 2,323 2,093

2,323 2,093



Finance costs: Distribution 2,496 1,978

Finance cost: Interest 1 1

Total fi nance costs 2,497 1,979





10. Debtors 31.12.16 31.12.15 £’000 £’000


Sales awaiting settlement – 191


225 596



1,876 3,898

12. Creditors 31.12.16 31.12.15 £’000 £’000


Purchases awaiting settlement 83 59




Accrued transaction charges 6 10

373 295


14. Related party transactionsInvestec Fund Managers Limited, as Authorised Corporate Director (ACD), is a related party, and acts as a principal in respect of all transactions of shares in the






REPORT AND ACCOUNTS




‘B’ Shares 1.25%






Reconciliation of the shares movement in the year: 31.12.15 31.12.16 Opening Closing shares in Shares shares in issue Creations Cancellations converted issue

‘A’ Class (Accumulation shares) 15,171,771 898,654 (3,556,380) (996,609) 11,517,436

‘B’ Class (Accumulation shares) 97,649 133 (13,377) (198) 84,207



‘S’ Class (Accumulation shares) 40,416 31,086 (10,344) – 61,158


for this Fund.


Hong Kong Dollar 71,114 66,718

Indian Rupee 13,458 15,767

Indonesian Rupiah 3,836 2,224

Philippine Peso – 1,125

Singapore Dollar 2,893 2,789

South Korean Won 31,431 28,530

Sterling 1,713 3,859

Taiwan Dollar 22,216 17,139

Thai Baht 4,149 2,192

US Dollar 17,329 13,593

Total 168,139 153,936




Level 1 162,562 – 146,612 –

Level 2 3,849 – 3,125 –

Total fair value 166,411 – 149,737 –






REPORT AND ACCOUNTS


Asia ex Japan Fund

Distribution Table


Final distribution paid 28 February 2017Group 1 – Shares purchased before 1 January 2016

Group 2 – Shares purchased between 1 January 2016 and 31 December 2016

Distribution Distribution Net payable paid Income Equalisation 28-Feb-17 29-Feb-16 pence pence pence pence

‘A’ Share Class – AccumulationGroup 1 4.5321 – 4.5321 3.3921

Group 2 2.2583 2.2738 4.5321 3.3921

‘B’ Share Class – AccumulationGroup 1 57.1508 – 57.1508 45.3912

Group 2 22.9152 34.2356 57.1508 45.3912


Group 2 2.1209 1.7011 3.8220 3.2024


Group 2 1.2785 0.6259 1.9044 1.5687


Group 2 8.9757 2.6884 11.6641 10.0987




REPORT AND ACCOUNTS




31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

Income Net capital gains/(losses) 4 30,324 (23,424)

Revenue 6 2,421 2,511

Expenses 7 (823) (1,035)



Taxation 8 (149) (205)


Total return before distributions 31,772 (22,156)Distribution 9 (1,450) (1,308)




31.12.16 31.12.15 £’000 £’000 £’000 £’000



64 (48,542)





Balance Sheet


31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

ASSETS Investment assets 90,270 59,807 Current assets

Debtors 10 722 428



Total assets 92,905 61,502


Distribution payable 107 –





Global Energy Fund

REPORT AND ACCOUNTS




3. Risk management policiesThe Risk management policies for the Fund are disclosed in the notes to the fi nancial statements on page s 47 to 5 5.


31.12.16 31.12.15 £’000 £’000





5. Purchases, sales and transaction costsAnalysis of total trade costs

Purchases Sales 31.12.16 31.12.15 31.12.16 31.12.15 £’000 £’000 £’000 £’000

Equities 71,328 70,986 70,016 115,915


TaxesEquities 49 53 (6) (6)

Total costs 90 107 (47) (81)



31.12.16 31.12.15 31.12.16 31.12.15 % % % %


TaxesEquities 0.07 0.07 0.01 0.01



Taxes 0.07 0.07



6. Revenue 31.12.16 31.12.15 £’000 £’000

UK dividends 723 334


Property revenue from overseas REITs 1 –

Bank interest 2 2

Stocklending income 23 117

Interest on historic foreign tax reclaim amounts received 1 6



Global Energy Fund

REPORT AND ACCOUNTS


7. Expenses 31.12.16 31.12.15 £’000 £’000

Payable to the ACD or associates of the ACD, and agents of either of them:ACD fee 751 926


812 999


13 20

Other expenses: Stock lending fee 3 16

VAT refund (6) (4)

ADR issuance fee 1 4

(2) 16

Total expenses 823 1,035





Indian capital gains tax – 1






below:

31.12.16 31.12.15 £’000 £’000

Net revenue before taxation 1,5 97 1,473


Effects of: Revenue not subject to taxation (469) (459)

Overseas tax expensed (1) (2)




Revenue taxable in different periods – (4)





REPORT AND ACCOUNTS



Global Energy Fund


31.12.16 31.12.15 £’000 £’000

Final 1,375 1,097

1,375 1,097











10. Debtors 31.12.16 31.12.15 £’000 £’000




Overseas tax recoverable 14 29

722 428



1,913 1,267

12. Creditors 31.12.16 31.12.15 £’000 £’000


Purchases awaiting settlement – 510





224 582








REPORT AND ACCOUNTS











‘A’ Class (Accumulation shares) 15,478,271 5,438,021 (4,212,321) (2,049,868) 14,654,103

‘A’ Class (USD Accumulation shares) 771,645 64,981 (212,367) – 624,259


‘I’ Class (Income shares) 9,413 7,999,724 (282,229) – 7,726,908

‘R’ Class (Accumulation shares) 101,235 – (19,403) 170,208 252,040

‘S’ Class (Accumulation shares) 2,976,693 1,198,847 (1,720,122) – 2,455,418


for this Fund.


Australian Dollar 2 2

Canadian Dollar 7,089 7,664

Danish Krone 104 –

Euro 8,813 4,148


Indian Rupee 104 815

Norwegian Krone 1,448 1,660

Sterling 13,356 8,711

Swedish Krona 1,040 –

US Dollar 57,025 35,272

Total 92,574 60,920



REPORT AND ACCOUNTS



Global Energy Fund

18. Effi cient portfolio management techniques risk exposure The exposure obtained through effi cient portfolio management techniques and identity of counterparties as at 31 December 2016 was as follows:

a) Stock lending The aggregate value of securities on loan at 31 December 2016 is £nil (31.12.15: £9,385,000). The identities of these counterparties are listed in the counterparties

table below. Securities on loan are included in the portfolio statement and no account is taken of any collateral held. The aggregate value of collateral held at

31 December 2016 is £nil (31.12.15: £9,616,000). This collateral is listed in the collateral held table below. There were no securities on loan at 31 December 2016.

The gross earnings and fees paid for the year are £22,578 (31.12.15: £116,592) and £3,010 (31.12.15: £15,542).

Market value 31.12.16 31.12.15 Value of stock on loan by counterparty £’000 £’000

Barclays – 437

Bank of Nova Scotia – 449

BNP Paribas – 1,420

Citigroup – 150

Deutsche – 877

Goldman Sachs – 1,682

JPMorgan – 594

Merrill Lynch – 1,767

Morgan Stanley – 584

Nomura – 20

Societe Generale – 205

Scotia Capital – 1,200

Total – 9,385

31.12.16 31.12.15Collateral held £’000 £’000

Equities – 9,616

Total – 9,616


Level 1 90,270 – 59,807 –






REPORT AND ACCOUNTS


Global Energy Fund

Distribution Tables


Final distribution paid 28 February 2017 Group 1 – Shares purchased before 1 January 2016




Group 2 1.2487 1.2446 2.4933 1.8850


Group 2 2.6900 1.5114 4.2014 3.5305

‘I’ Share Class – IncomeGroup 1 1.3821 – 1.3821 1.2141

Group 2 1.0564 0.3257 1.3821 1.2141


Group 2 1.5339 – 1.5339 1.2602


Group 2 2.2254 1.4295 3.6549 3.2386


‘A’ Share Class USD – AccumulationGroup 1 3.0709 – 3.0709 2.7992

Group 2 2.4087 0.6622 3.0709 2.7992




REPORT AND ACCOUNTS




31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

Income Net capital gains 4 127,893 18,072

Revenue 6 12,285 10,734

Expenses 7 (5,185) (5,408)



Taxation 8 (1,048) (1,102)


Total return before distributions 133,937 22,291Distribution 9 (6,052) (4,355)




31.12.16 31.12.15 £’000 £’000 £’000 £’000



(48,076) 19,023





Balance Sheet


31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

ASSETS Investment assets 637,541 555,127Current assets

Debtors 10 1,695 1,250



Total assets 658,831 569,945


Other creditors 12 3,754 575

Total liabilities 3,754 575




REPORT AND ACCOUNTS





4. Net capital gainsThe net capital gains during the year comprise:

31.12.16 31.12.15 £’000 £’000

Non-derivative securities 128,215 18,634

Losses on foreign exchange (280) (527)


Net capital gains 127,893 18,072

5. Purchases, sales and transaction costs

Analysis of total trade costs

Purchases Sales 31.12.16 31.12.15 31.12.16 31.12.15 £’000 £’000 £’000 £’000

Equities 253,802 249,944 296,606 229,114


Taxes Equities 60 70 (46) (79)

Total costs 190 248 (215) (233)



31.12.16 31.12.15 31.12.16 31.12.15 % % % %


TaxesEquities 0.02 0.03 0.02 0.03

Total transaction cost expressed as a percentage of average net asset value. 31.12.16 31.12.15 % %


Taxes 0.02 0.02



6. Revenue 31.12.16 31.12.15 £’000 £’000

UK dividends 280 532


Property revenue from overseas REITs 172 188

Bank interest 16 33

Interest on historic foreign tax reclaim amounts received 25 3




REPORT AND ACCOUNTS


7. Expenses 31.12.16 31.12.15 £’000 £’000



5,025 5,232


138 146

Other expenses: VAT refund (12) (3)

ADR issuance fee 32 31

Out of pocket expenses 2 2

22 30






Overseas tax 1,048 1,102

Current tax charge 1,048 1,102


Total tax charge (note 8(b)) 1,048 1,102


below:

31.12.16 31.12.15 £’000 £’000


Corporation tax of 20% 1,418 1,064

Effects of: Revenue not subject to taxation (2,345) (2,024)

Overseas tax expensed (9) (18)


Overseas tax 1,048 1,102

Revenue taxable in different periods – 68

Total tax charge (note 8(a)) 1,048 1,102






REPORT AND ACCOUNTS



31.12.16 31.12.15 £’000 £’000

Final 5,899 4,432

5,899 4,432










10. Debtors 31.12.16 31.12.15 £’000 £’000




Overseas tax recoverable 417 396

1,695 1,250



19,595 13,568

12. Creditors 31.12.16 31.12.15 £’000 £’000


Purchases awaiting settlement 2,886 –





3,754 575







At the year end date 1.5% of the Fund’s shares (by net asset value) were held by other Funds managed by the ACD (31.12.15: 0.7%).


REPORT AND ACCOUNTS











‘A’ Class (Accumulation shares) 28,100,916 852,984 (3,348,797) (2,020,320) 23,584,783

‘A’ Class (USD Accumulation shares) 17,711 90 (5,882) – 11,919



‘S’ Class (Accumulation shares) 70,447,396 3,091,674 (1,216,408) – 72,322,662


for this Fund.


Australian Dollar 5,163 1

Canadian Dollar 1 –

Chinese Yuan (Offshore) 17,428 22,074

Danish Krone 5,284 7,221

Euro 103,762 73,979


Israeli Shekel 9 8

Japanese Yen 65,664 92,348

Malaysian Ringgit 6,048 5,100

Mexican Peso 5,247 –

South African Rand 4 3

South Korean Won 10,279 –

Sterling 35,321 23,914

Swedish Krona 679 606

Swiss Franc 9,104 142

Taiwan Dollar – 8,102

Turkish Lira 5,255 5,022

US Dollar 361,146 304,471

Total 655,077 569,370



1 8. Fair value 31.12.16 31.12.15 Assets Liabilities Assets LiabilitiesValuation technique £’000 £’000 £’000 £’000

Level 1 637,541 – 555,127 –








REPORT AND ACCOUNTS


Distribution Tables


Final distribution paid 28 February 2017 Group 1 – Shares purchased before 1 January 2016




Group 2 0.9173 1.1552 2.0725 0.4731


Group 2 0.8035 1.0099 1.8134 1.3332


Group 2 0.0609 1.2303 1.2912 0.8794


Group 2 0.6652 3.1127 3.7779 3.0655


‘A’ Share Class USD – Accumulation Group 1 2.5944 – 2.5944 0.1726

Group 2 2.5944 – 2.5944 0.1726

Equalisation Equalisation applies only to shares purchased during the distribution period (Group 2 shares). It is the average amount of income included in the purchase price of




REPORT AND ACCOUNTS




31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

Income Net capital gains/(losses) 4 7,639 (4,111)

Revenue 6 7,083 6,966

Expenses 7 (1,068) (1,387)



Taxation 8 (2) (27)


Total return before distributions 13,648 1,438Distributions 9 (6,741) (6,626)




31.12.16 31.12.15 £’000 £’000 £’000 £’000



(8,483) (28,566)

Dilution adjustment 58 32



Unclaimed distributions 2 3



Balance Sheet


31.12.16 31.12.15 Note £’000 £’000 £’000 £’000

ASSETS Investment assets 112,561 108,776 Current assets

Debtors 10 1,858 1,921



Total assets 121,342 117,746

LIABILITIESInvestment liabilities 5,518 2,275

Creditors

Bank overdrafts 406 152

Distribution payable 2,117 1,054

Other creditors 12 163 1,303

Total other liabilities 2,686 2,509

Total liabilities 8,204 4,784





REPORT AND ACCOUNTS





31.12.16 31.12.15 £’000 £’000


Derivative contracts 37 (473)

Forward currency contracts (11,032) 2,773

(Losses)/gains on foreign exchange (7,815) 456



5. Purchases, sales and transaction costs

There were no transactions costs incurred during the year to 31 December 2016.

Purchases Sales 31.12.16 31.12.15 31.12.16 31.12.15 £’000 £’000 £’000 £’000

Bonds 136,804 134,531 162,353 159,394

Options 81 46 41 12

Swaps 27,674 25,355 27,464 24,703

Cash Collateral – 210 – 740

Trades excluding transaction costs 164,559 160,142 189,858 184,849

CommissionsBonds – – – –

Options – – – –

Swaps – – – –

Cash Collateral – – – –

Total commissions – – – –

TaxesBonds – – – –


Swaps – – – –


Total taxes – – – –

Total costs – – – –



31.12.16 31.12.15 31.12.16 31.12.15 % % % %

Commissions Bonds – – – –


Swaps – – – –


Taxes Bonds – – – –


Swaps – – – –




REPORT AND ACCOUNTS



Commissions – –

Taxes – –

Total costs – –


6. Revenue 31.12.16 31.12.15 £’000 £’000

Interest on debt securities 6,983 6,810

Interest on credit default swaps 61 (15)

Offshore distribution taxable from collective investment schemes – 75

Bank interest 13 17

Stocklending income 26 79


7. Expenses 31.12.16 31.12.15 £’000 £’000

Payable to the ACD or associates of the ACD, and agents of either of them:ACD fee 959 1,252


1,047 1,357


18 21

Other expenses: Stock lending fee 3 10

VAT refund (1) (1)

Out of pocket expenses 1 –

3 9







REPORT AND ACCOUNTS



Overseas tax 1 26

Adjustments in respect of prior years 1 1





below:

31.12.16 31.12.15 £’000 £’000


Corporation tax of 20% 1,202 1,115

Effects of:Tax deductible interest distributions (1,202) (1,115)

Income tax prior year adjustment 1 1

Overseas tax 1 26




31.12.16 31.12.15 £’000 £’000

January 314 532

February 329 510

March 328 502

April 329 460

May 327 457

June 320 451

July 325 391

August 321 384

September 374 379

October 377 375

November 379 372

Final 1,750 552

Income tax deducted at source 1,279 1,189

6,752 6,554





Finance cost: Margin interest 1 1

4 3




Amounts charged to capital:

ACD fee 663 987

General administration charge 59 78

Safe custody fee 12 16

Equalisation on conversion shares (2) (4)


REPORT AND ACCOUNTS


10. Debtors 31.12.16 31.12.15 £’000 £’000


Accrued bond interest 1,791 1,899

1,858 1,921



Amounts held at futures clearing houses and brokers 285 287

6,923 7,049

12. Creditors 31.12.16 31.12.15 £’000 £’000

Amounts payable for cancellation of shares 69 1,203





163 1,303







At the year end date 4.5% of the Fund’s shares (by net asset value) were held by other Funds managed by the ACD (31.12.15: 3.7%).











‘A’ Net Class (Accumulation shares) 10,114,631 405,123 (1,880,062) (1,817,130) 6,822,562

‘A’ Net Class (Income-2 shares) 56,520,743 914,860 (6,046,915) (10,483,478) 40,905,210

‘I’ Net Class (Accumulation shares) 6,829,407 3,028,920 (1,750,650) 2,083,482 10,191,159

‘I’ Net Class (Income-2 shares) 37,617,342 2,767,863 (4,019,892) 7,266,920 43,632,233

‘R’ Net Class (Accumulation shares) 6,280 36 (6,308) 223,409 223,417

‘R’ Net Class (Income-2 shares) 783,085 3,618 – – 786,703

‘S’ Gross Class (Accumulation shares) 4,399,255 5,041,688 (6,556,174) – 2,884,769



REPORT AND ACCOUNTS



for this Fund.


Euro 248 (40)

Sterling 113,237 113,058

US Dollar (347) (56)

Total 113,138 112,962

Interest rate risk profi le of fi nancial assets and liabilities as at 31 December 2016 was as follows:

Financial Floating rate Fixed rate liabilities not fi nancial fi nancial carrying assets assets interest Total 31.12.16 31.12.16 31.12.16 31.12.16Currency £’000 £’000 £’000 £’000

Euro 459 19,274 (19,485) 248

Sterling 6,641 5,437 101,159 113,237

US Dollar (113) 84,549 (84,783) (347)

Total 6,987 109,260 (3,109) 113,138

Interest rate risk profi le of fi nancial assets and liabilities as at 31 December 2015 was as follows:

Financial Floating rate Fixed rate liabilities not fi nancial fi nancial carrying assets assets interest Total 31.12.15 31.12.15 31.12.15 31.12.15Currency £’000 £’000 £’000 £’000

Euro 1,124 61,755 (62,919) (40)

Sterling 7,023 16,458 89,577 113,058

US Dollar (146) 29,234 (29,144) (56)

Total 8,001 107,447 (2,486) 112,962

18. Effi cient portfolio management techniques risk exposure The exposure obtained through effi cient portfolio management techniques and identity of counterparties as at 31 December 2016 was as follows:

a) Stock lending The aggregate value of securities on loan at 31 December 2016 is £nil (31.12.15: £14,296,000). The identities of these counterparties are listed in the counterparties

table below. Securities on loan are included in the portfolio statement and no account is taken of any collateral held. The aggregate value of collateral held at

31 December 2016 is £nil (31.12.15: £14,648,000). This collateral is listed in the collateral held table below. There were no securities on loan at 31 December 2016.

The gross earnings and fees paid for the year are £25,511 (31.12.15: £78,750) and £3,401 (31.12.15: £10,497).

Value of stock on loan 31.12.16 31.12.15 Value of stock on loan by counterparty £’000 £’000

Barclays – 2,274

BNP Paribas – 345

Citigroup – 2,231

Credit Suisse – 902

Goldman Sachs – 1,817

HSBC – 1,369

JPMorgan – 196

Merrill Lynch – 2,139

Morgan Stanley – 1,589

Nomura – 383

Societe Generale – 686

Scotia Capital – 168

UBS – 197

Total – 14,296

REPORT AND ACCOUNTS


31.12.16 31.12.15 Collateral held £’000 £’000

Cash – 14,648

b) Forwards Market Value 31.12.16 31.12.15Counterparty £’000 £’000

Barclays – 7

Citibank (2,814) (577)

Goldman Sachs (31) (1,461)

HSBC (32) 7

JPMorgan (11) –

Standard Chartered – (10)

State Street – 91

UBS – (13)

Total (2,888) (1,956)


Level 2 112,561 (5,518) 108,776 (2,275)








REPORT AND ACCOUNTS



Distribution Tables


Interim distribution paid 31 March 2016 Group 1 – First interim shares purchased before 1 January 2016

Group 2 – First interim shares purchased between 1 January 2016 and 31 January 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 31-Mar-16 31-Mar-15 pence pence pence pence pence pence

‘A’ Share Class Net – Accumulation Group 1 0.5229 0.1046 0.4183 – 0.4183 0.6875

Group 2 0.1416 0.0283 0.1133 0.3050 0.4183 0.6875

‘A’ Share Class Net – Income-2Group 1 0.2750 0.0550 0.2200 – 0.2200 0.2500

Group 2 0.1288 0.0258 0.1030 0.1170 0.2200 0.2500

‘I’ Share Class Net – AccumulationGroup 1 0.5204 0.1041 0.4163 – 0.4163 0.5554

Group 2 0.0226 0.0045 0.0181 0.3982 0.4163 0.5554

‘I’ Share Class Net- Income-2Group 1 0.3965 0.0793 0.3172 – 0.3172 0.3584

Group 2 0.1978 0.0396 0.1582 0.1590 0.3172 0.3584

‘R’ Share Class Net – AccumulationGroup 1 0.3424 0.0685 0.2739 – 0.2739 0.3772

Group 2 – – – 0.2739 0.2739 0.3772

‘ R’ Share Class Net – Income-2Group 1 0.3758 0.0752 0.3006 – 0.3006 0.3398

Group 2 0.3758 0.0752 0.3006 – 0.3006 0.3398

‘S’ Share Class Gross – AccumulationGroup 1 0.8572 – 0.8572 – 0.8572 0.9336

Group 2 0.8572 – 0.8572 – 0.8572 0.9336

REPORT AND ACCOUNTS


Monthly High Income Fund continued

Distribution Tables


Interim distribution paid 30 April 2016Group 1 – Second interim shares purchased before 1 February 2016

Group 2 – Second interim shares purchased between 1 February 2016 and 29 February 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 30-Apr-16 30-Apr-15 pence pence pence pence pence pence

‘A’ Share Class Net – AccumulationGroup 1 0.5258 0.1052 0.4206 – 0.4206 0.6899

Group 2 – – – 0.4206 0.4206 0.6899


Group 2 0.0200 0.0040 0.0160 0.2040 0.2200 0.2500


Group 2 – – – 0.4184 0.4184 0.5576


Group 2 0.0374 0.0075 0.0299 0.2875 0.3174 0.3585


Group 2 – – – 0.2753 0.2753 0.3787

‘R’ Share Class Net – Income-2Group 1 0.3759 0.0752 0.3007 – 0.3007 0.3399

Group 2 0.0069 0.0014 0.0055 0.2952 0.3007 0.3399


Group 2 – – – 0.8626 0.8626 0.9386

REPORT AND ACCOUNTS


Distribution Tables


Interim distribution paid 31 May 2016Group 1 – Third interim shares purchased before 1 March 2016

Group 2 – Third interim shares purchased between 1 March 2016 and 31 March 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 31-May-16 31-May-15 pence pence pence pence pence pence


Group 2 – – – 0.4156 0.4156 0.6923


Group 2 – – – 0.2200 0.2200 0.2500


Group 2 – – – 0.4172 0.4172 0.5599


Group 2 – – – 0.3176 0.3176 0.3586


Group 2 – – – 0.2741 0.2741 0.3802


Group 2 – – – 0.3007 0.3007 0.3400


Group 2 – – – 0.8665 0.8665 0.9439

REPORT AND ACCOUNTS



Distribution Tables


Interim distribution paid 30 June 2016Group 1 – Fourth interim shares purchased before 1 April 2016

Group 2 – Fourth interim shares purchased between 1 April 2016 and 30 April 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 30-Jun-16 30-Jun-15 pence pence pence pence pence pence


Group 2 – – – 0.4129 0.4129 0.4745


Group 2 – – – 0.2200 0.2200 0.2500


Group 2 – – – 0.4169 0.4169 0.4626


Group 2 – – – 0.3177 0.3177 0.3588


Group 2 – – – 0.2737 0.2737 0.3052


Group 2 0.3761 0.0752 0.3009 – 0.3009 0.3402


Group 2 – – – 0.8707 0.8707 0.9296

REPORT AND ACCOUNTS


Distribution Tables


Interim distribution paid 31 July 2016Group 1 – Fifth interim shares purchased before 1 May 2016

Group 2 – Fifth interim shares purchased between 1 May 2016 and 31 May 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 31-Jul-16 31-Jul-15 pence pence pence pence pence pence


Group 2 – – – 0.4142 0.4142 0.4792


Group 2 – – – 0.2200 0.2200 0.2500


Group 2 – – – 0.4184 0.4184 0.4668


Group 2 – – – 0.3179 0.3179 0.3590


Group 2 – – – 0.2747 0.2747 0.3080


Group 2 – – – 0.3010 0.3010 0.3404


Group 2 – – – 0.8753 0.8753 0.9382

REPORT AND ACCOUNTS



Distribution Tables


Interim distribution paid 31 August 2016Group 1 – Sixth interim shares purchased before 1 June 2016

Group 2 – Sixth interim shares purchased between 1 June 2016 and 30 June 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 31-Aug-16 31-Aug-15 pence pence pence pence pence pence


Group 2 – – – 0.4167 0.4167 0.4831


Group 2 – – – 0.2200 0.2200 0.2500


Group 2 – – – 0.4205 0.4205 0.4688


Group 2 – – – 0.3180 0.3180 0.3592


Group 2 – – – 0.2761 0.2761 0.3094


Group 2 – – – 0.3011 0.3011 0.3405


Group 2 – – – 0.8802 0.8802 0.9403

REPORT AND ACCOUNTS


Distribution Tables


Interim distribution paid 30 September 2016Group 1 – Seventh interim shares purchased before 1 July 2016

Group 2 – Seventh interim shares purchased between 1 July 2016 and 31 July 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 30-Sep-16 30-Sep-15 pence pence pence pence pence pence


Group 2 – – – 0.4114 0.4114 0.4004


Group 2 – – – 0.2200 0.2200 0.2200


Group 2 – – – 0.4191 0.4191 0.4023


Group 2 – – – 0.3182 0.3182 0.3162


Group 2 – – – 0.2748 0.2748 0.2643


Group 2 0.3765 0.0753 0.3012 – 0.3012 0.2997


Group 2 – – – 0.8844 0.8844 0.8297

REPORT AND ACCOUNTS



Distribution Tables


Interim distribution paid 31 October 2016Group 1 – Eighth interim shares purchased before 1 August 2016

Group 2 – Eighth interim shares purchased between 1 August 2016 and 31 August 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 31-Oct-16 31-Oct-15 pence pence pence pence pence pence


Group 2 – – – 0.4089 0.4089 0.4071


Group 2 – – – 0.2200 0.2200 0.2200


Group 2 – – – 0.4189 0.4189 0.4071


Group 2 – – – 0.3184 0.3184 0.3164


Group 2 – – – 0.2745 0.2745 0.2676


Group 2 0.3768 0.0754 0.3014 – 0.3014 0.2999


Group 2 0.8887 – 0.8887 – 0.8887 0.8371

REPORT AND ACCOUNTS


Distribution Tables


Interim distribution paid 30 November 2016Group 1 – Ninth interim shares purchased before 1 September 2016

Group 2 – Ninth interim shares purchased between 1 September 2016 and 30 September 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 30-Nov-16 30-Nov-15 pence pence pence pence pence pence


Group 2 – – – 0.5005 0.5005 0.4124


Group 2 – – – 0.2500 0.2500 0.2200


Group 2 – – – 0.4934 0.4934 0.4096


Group 2 – – – 0.3620 0.3620 0.3166


Group 2 0.4063 0.0813 0.3250 – 0.3250 0.2695


Group 2 0.4284 0.0857 0.3427 – 0.3427 0.3000


Group 2 1.0184 – 1.0184 – 1.0184 0.8392

REPORT AND ACCOUNTS



Distribution Tables


Interim distribution paid 31 December 2016Group 1 – Tenth interim shares purchased before 1 October 2016

Group 2 – Tenth interim shares purchased between 1 October 2016 and 31 October 2016

Distribution Distribution Gross Income Net paid paid Income Tax @20% Income Equalisation 31-Dec-16 31-Dec-15 pence pence pence pence pence pence


Group 2 – – – 0.5017 0.5017 0.4085


Group 2 – – – 0.2500 0.2500 0.2200


Group 2 – – – 0.4952 0.4952 0.4089


Group 2 – – – 0.3621 0.3621 0.3168


Group 2 0.4076 0.0815 0.3261 – 0.3261 0.2688


Group 2 0.4285 0.0857 0.3428 – 0.3428 0.3001


Group 2 – – – 1.0242 1.0242 0.8432

REPORT AND ACCOUNTS


Distribution Tables


Interim distribution pa yable 31 January 2017Group 1 – Eleventh interim shares purchased before 1 November 2016

Group 2 – Eleventh interim shares purchased between 1 November 2016 and 30 November 2016

Distribution Distribution Gross Income Net payable paid Income Tax @20% Income Equalisation 31-Jan-17 31-Jan-16 pence pence pence pence pence pence


Group 2 – – – 0.5070 0.5070 0.4089


Group 2 – – – 0.2500 0.2500 0.2200


Group 2 – – – 0.4988 0.4988 0.4099


Group 2 – – – 0.3623 0.3623 0.3169


Group 2 – – – 0.3287 0.3287 0.2694


Group 2 0.4286 0.0857 0.3429 – 0.3429 0.3003


Group 2 1.0302 – 1.0302 – 1.0302 0.8474

REPORT AND ACCOUNTS



Distribution Tables


Final distribution pa yable 28 February 2017Group 1 – Final shares purchased before 1 December 2016

Group 2 – Final shares purchased between 1 December 2016 and 31 December 2016

Distribution Distribution Gross Income Net payable paid Income Tax @20% Income Equalisation 28-Feb-17 29-Feb-16 pence pence pence pence pence pence


Group 2 0.8348 0.1670 0.6678 2.7736 3.4414 1.0464


Group 2 0.2991 0.0598 0.2393 0.8156 1.0549 0.3074


Group 2 0.6183 0.1237 0.4946 2.1958 2.6904 0.7915


Group 2 0.3571 0.0714 0.2857 1.2365 1.5222 0.4291


Group 2 0.9240 0.1848 0.7392 1.1111 1.8503 0.5594


Group 2 1.8053 0.3611 1.4442 – 1.4442 0.4081


Group 2 4.5165 – 4.5165 – 4.5165 1.1717

Equalisation Equalisation applies only to shares purchased during the distribution period (Group 2 shares). It is the average amount of income included in the purchase price of



REPORT AND ACCOUNTS


Securities Financing Transactions (‘SFTs’)(unaudited)

Global Energy Fundas at 31 December 2016

At 31 December 2016 there were no securities out on loan and no collateral held.

GLOBAL DATA

Proportion of securities and commodities on loan £’000 %

Total lendable assets excluding cash and cash equivalents: n/a

Securities and commodities on loan n/a 0.00%

Assets engaged in SFTs and total return swaps £’000 %

Fund assets under management (AUM) 92,692

Absolute value of assets engaged in:

Securities lending n/a 0.00%

RETURN AND COST

Manager of Collective Collective Investment Investment Third Parties Undertaking Undertaking (e.g. lending agent) Total £’000 £’000 £’000 £’000

Securities lendingGross return 26 – 6 32

% of total gross return 81.25% 0.00% 18.75%

Cost* – – – –

* All direct costs from securities lending are borne by lending agent.


At 31 December 2016 there were no securities out on loan and no collateral held.

GLOBAL DATA

Proportion of securities and commodities on loan £’000 %

Total lendable assets excluding cash and cash equivalents n/a

Securities and commodities on loan n/a 0.00%

Assets engaged in SFTs and total return swaps £’000 %

Fund assets under management (AUM) 114,682

Absolute value of assets engaged in:

Securities lending n/a 0.00%

RETURN AND COST

Manager of Collective Collective Investment Investment Third Parties Undertaking Undertaking (e.g. lending agent) Total £’000 £’000 £’000 £’000

Securities lendingGross return 29 – 7 36

% of total gross return 80.56% 0.00% 19.44%

Cost* – – – –

* All direct costs from securities lending are borne by lending agent.

REPORT AND ACCOUNTS

102

Other information

ISA status

During the period under review, the shares of the funds met the requirements for eligibility to be held in a stocks and shares

ISA as determined by the regulations which govern ISAs.

Investec Fund Managers Limited offer the ‘A’ shares of the funds through its own ISA plan.

Distributions

Where a distribution is to be paid, it has been calculated as at 31 December 2016 and will be distributed to shareholders,

where applicable, on 28 February 2017. For accumulations shares income distribution payments are deemed to be paid on

28 February 2017.

Telephone calls

Telephone calls may be recorded for training and quality assurance purposes.

Cross holding table

There were no cross holdings between sub-funds in Investec Funds Series ii ICVC as at 31 December 2016.

UCITS V Directive on remuneration

The effective date of UCITS V Directive on remuneration was 18 March 2016, however as the UCITS management company

has not completed its fi rst annual performance period since that effective date, and in line with the ESMA Guidelines on

sound remuneration policies under the UCITS Directive, full disclosure is not made for the current period. The full UCITS V

Directive on remuneration disclosure shall be made in the annual report for the year ending 30 September 2017.

Remuneration

Remuneration paid for 2016 to all staff employed by the management company, split into fi xed and variable remuneration

paid. IFML does not employ any staff.

Aggregate remuneration paid for 2016 to senior management and members of staff whose actions have a material impact on the risk profi le of IFML Other members Senior of staff with Management material impact

Fixed Remuneration £12,826 £2,201

Variable Remuneration £106,882 £674

Number of Staff 7 2

Investec Funds Series ii


REPORT AND ACCOUNTS

Chile Peru Switzerland UK

American Fund ✓ ✓ ✓

Asia ex Japan Fund ✓ ✓ ✓

Global Energy Fund ✓ ✓ ✓

Global Strategic Equity Fund ✓ ✓ ✓

Monthly High Income Fund ✓ ✓ ✓ ✓

Notes: Chile and Peru to be distributed to AFPs (Pension Funds) only.

The Company’s Prospectus, Key Investor Information Documents, Instrument of Incorporation, annual and semi-annual reports and accounts may be

obtained, free of charge, from Investec Fund Managers Limited or, in Switzerland, from the Swiss Representative and Paying Agent, RBC Investor Services

Bank S.A., Esch-sur-Alzette, Zweigniederlassung Zurich, Badernerstrasse 567, P ostfach 1292, CH-80 48 Zurich.

A copy of the full portfolio changes during the period under review, is available free of charge from the Swiss Representative.

ACD fees during the year 01/01/16 to 31/12/16.

Effective Commission for Commission for charge administration administration and daily monthly paid according to calculated to ACD the prospectusSub-Fund Class (%) (%) (%)

American Fund ‘A’ Class 0.00410959 0.12500000 1.50

American Fund ‘B’ Class 0.00342466 0.10416667 1.25

American Fund ‘I’ Class 0.00205479 0.06250000 0.75

American Fund ‘R’ Class 0.00273973 0.08333333 1.00

American Fund ‘S’ Class 0.00000000 0.00000000 0.00

Asia ex Japan Fund ‘A’ Class 0.00410959 0.12500000 1.50

Asia ex Japan Fund ‘B’ Class 0.00342466 0.10416667 1.25

Asia ex Japan Fund ‘I’ Class 0.00205479 0.06250000 0.75

Asia ex Japan Fund ‘R’ Class 0.00273973 0.08333333 1.00

Asia ex Japan Fund ‘S’ Class 0.00000000 0.00000000 0.00

Global Energy Fund ‘A’ Class 0.00410959 0.12500000 1.50

Global Energy Fund ‘I’ Class 0.00205479 0.06250000 0.75

Global Energy Fund ‘R’ Class 0.00273973 0.08333333 1.00

Global Energy Fund ‘S’ Class 0.00000000 0.00000000 0.00

Global Strategic Equity Fund ‘A’ Class 0.00410959 0.12500000 1.50

Global Strategic Equity Fund ‘I’ Class 0.00205479 0.06250000 0.75

Global Strategic Equity Fund ‘R’ Class 0.00273973 0.08333333 1.00

Global Strategic Equity Fund ‘S’ Class 0.00000000 0.00000000 0.00

Monthly High Income Fund ‘A’ Class 0.00342466 0.10416667 1.25

Monthly High Income Fund ‘I’ Class 0.00178082 0.05416667 0.65

Monthly High Income Fund ‘R’ Class 0.00205479 0.06250000 0.75

Monthly High Income Fund ‘S’ Class 0.00000000 0.00000000 0.00

Registration in overseas markets

REPORT AND ACCOUNTS


Year Ended Year Ended Year Ended 31-Dec-16 31-Dec-15 31-Dec-14 % % %

American Fund‘A’ Acc 43.32 1.11 18.38

‘A’ Acc (GBP Hedged) 17.61 (3.73) 12.06

‘A’ Acc USD 41.91 1.55 18.76

‘B’ Acc 43.68 1.37 18.68

‘I’ Acc 44.39 1.87 19.29

‘R’ Acc 44.02 1.62 18.99

‘S’ Acc 45.47 2.64 20.15

Investment Association North America 30.09 4.5 3 17.77

S&P 500 NDR 32.67 6.58 20.02

Asia ex Japan Fund‘A’ Acc 23.58 (4.86) 12.35

‘B’ Acc 23.93 (4.64) 12.63

‘I’ Acc 24.55 (4.15) 13.20

‘R’ Acc 24.23 (4.40) 12.90

‘S’ Acc 25.48 (3.44) 14.04

Investment Association Asia Pacifi c Excluding Japan 26.00 (2.80) 9.73

MSCI All Countries Asia ex Japan NDR 25.77 (3.91) 11.32

Global Energy Fund‘A’ Acc 48.80 (24.81) (18.33)

‘A’ Acc USD 47.34 (24.47) (18.07)

‘I’ Acc 49.90 (24.24) (17.71)

‘I’ Inc (1) 49.93 (24.64) n/a

‘R’ Acc 49.54 (24.43) (17.90)

‘S’ Acc 50.86 (23.61) (17.10)

MSCI All Countries World Energy NDR 52.27 (17.70) (8.09)

Global Strategic Equity Fund‘A’ Acc 24.05 3.50 13.56

‘A’ Acc USD 22.84 3.91 13.92

‘I’ Acc 24.97 4.27 14.42

‘R’ Acc 24.66 4.02 14.13

‘S’ Acc 25.90 5.05 15.27

Investment Association OE Global 23.94 2.8 5 7.05

MSCI All Countries World NDR 28.66 3.29 10.64

Monthly High Income Fund ‘A’ Acc Net 11.64 (0.20) 0.98

‘A’ Inc-2 Net (2) 11.33 (0.39) 0.97

‘I’ Acc Net 12.18 0.32 1.57

‘I’ Inc-2 Net (2) 12.00 0.20 1.56

‘R’ Acc Net 12.10 0.25 1.50

‘R” Inc-2 Net (2) 11.89 0.09 1.17

‘S’ Acc Gross 14.13 1.93 3.50

Investment Association OE £ High Yield 11.25 0.03 2.02

Bank of America Merrill Lynch Global High Yield Constrained

GBP Hedged (Bank of America Merrill Lynch European Currency

Non-Financial High Yield Constrained GBP Hedged Pre 01/11/15) 15.73 (0.98) 5.63

Source: Morningstar, total return, net of UK basic rate tax, no initial charges net of fees in GBP. Index shown for performance comparison purposes only.

Past performance should not be taken as a guide to the future and there is no guarantee that this investment will make

profi ts. Returns will vary with market action, fee levels and taxes, and in certain market conditions losses may be

exaggerated.

(1) Launched 27 June 2014.

(2) Share class names changed effective 6 April 2015 (previously ‘Income’ classes’).

Fund performance


REPORT AND ACCOUNTS

31 DecemberSub-Fund Class 2016

American Fund‘A’ Acc 1.60%

‘A’ Acc ‘A’ Acc (GBP Hedged) 1.66%

‘A’ Acc USD 1.61%

‘B’ Acc 1.36%

‘I’ Acc 0.86%

‘R’ Acc 1.11%

‘S’ Acc 0.11%

Asia ex Japan Fund‘A’ Acc 1.71%

‘B’ Acc 1.46%

‘I’ Acc 0.96%

‘R’ Acc 1.21%

‘S’ Acc 0.21%

Global Energy Fund‘A’ Acc 1.63%


‘I’ Acc 0.88%

‘I’ Inc 0.88%

‘R’ Acc 1.13%

‘S’ Acc 0.13%

Global Strategic Equity Fund‘A’ Acc 1.61%


‘I’ Acc 0.86%

‘R’ Acc 1.11%

‘S’ Acc 0.11%

Monthly High Income Fund ‘A’ Acc Net 1.36%

‘A’ Inc-2 Net 1.36%

‘I’ Acc Net 0.76%

‘I’ Inc-2 Net 0.76%

‘R’ Acc Net 0.86%

‘R’ Inc-2 Net 0.86%

‘S’ Acc Net 0.11%

Total expense ratios

REPORT AND ACCOUNTS


The total expense ratio is calculated in accordance with the principles set down by EFAMA, the Pan-European umbrella

organisation of the Investments Funds Industry to comply with the Code of Conduct for the Swiss Funds Industry.

Defi nition of TER

The Total Expense Ratio (TER) represents the relevant annualised operating expenses of each Share Class for the year as a

percentage of the average Net Asset Value of that share class over the same period.

TER = Operating costs

Average NAV

The ratio will be expressed as a percentage to 2 decimal places.

Source of operating cost:

(a) The following list is indicative, but not exhaustive, of the types of expenses included within the TER fi gure:

• fund management fees;

• administration fees;

• trustee or depositary fees;

• custody fees;

• audit fees;

• fund accounting fees;

• valuation fees;

• fees for shareholder services;

• registration fees and regulatory fees;

• legal and advisory fees relating to fund establishment and operation;

• performance fees (if applicable disclosed separately).

(b) The total operating costs do not include:

• transaction costs (including transfer taxes);

• interest on borrowing;

• payments incurred because derivatives;

• fees paid directly by the investors, such as entry/exit fees;

• soft commissions.

Average NAV

The average net assets are calculated using fi gures that are based on the Funds net assets at each calculation point of the

net asset value (NAV).

Total expense ratio (‘TER’) methodology

REPORT AND ACCOUNTS


Active management

An active investment approach is one where a portfolio manager aims to beat the market through research, analysis and his/

her judgement. (See also passive management).

Asset allocation

A fund’s allotment to different asset classes.

Asset class

The main types of investment available. The traditional asset classes are equities, bonds and cash.

Bear market

A market where prices fall consistently over a long period of time. Investors are referred to as ‘bearish’ if they believe prices

are going to fall.

Benchmark

A comparative performance index.

Bond

A form of loan issued by a government or company. Typically, an investor should receive a regular coupon and the return of

the principal originally lent when the bond matures. Note: Not all bonds are interest bearing (see zero coupon bond), and not

all bonds are fi xed rate (e.g. index linked, fl oating rate and stepped rate bonds).

Bottom-up investing

An investment approach that concentrates on the analysis of individual companies and considers the company’s history,

management and potential as more important than macroeconomic trends.

Bull market

A market where prices rise consistently over a long period of time. Investors are referred to as ‘bullish’ if they believe prices

are going to rise.

Cash

The most liquid form in which to store capital. While it is regarded as a safe asset class, over time the purchasing power of

cash tends to be eroded by infl ation.

Central bank base rate

The basic rate of interest set by a central bank that determines the cost of borrowing.

Commodities

An asset class which comprises physical assets such as oil, base and precious metals and agricultural produce.

Credit rating agency

An institution that assigns credit ratings to debt issuers, such as companies and governments. Standard & Poor’s and

Moody’s are well-known examples.

Glossary

REPORT AND ACCOUNTS


Glossary continued

Credit risk

The risk that a bond issuer or borrower will be unable to meet their contractual obligations.

Credit spread

The differences in yield between ‘risk-free’ bonds, such as gilts or US treasuries, and non-treasury (or gilt) bonds, which are

identical in all respects except for the quality of their rating. Corporate bonds tend to offer additional yield to compensate

investors for the potential risk of default.

Currency risk

The risk of incurring losses of foreign assets due to adverse movements in exchange rates between domestic and foreign

currencies.

Defl ation

As opposed to infl ation, it describes conditions in which there is a widespread, consistent decline in prices. It conveys the

rarer occurrence of the money in one’s pocket actually increasing in buying power, rather than the more usual opposite.

Derivatives

An instrument whose value depends on the performance of an underlying security or rate which requires no initial exchange

of principal. Options, futures and swaps are all examples of derivatives.

Developed markets

Refers to industrialised countries with relatively high levels of economic productivity, high standards of living and stable

economies.

Disinfl ation

Refers to a slowing down in price growth, as opposed to defl ation where prices are already falling.

Diversifi cation

Holding a range of assets to reduce risk.

Dividend

The portion of company net profi ts paid out to shareholders.

Dividend yield

The annual dividend per share divided by the current share price.

Duration

A measure of a bond investment’s sensitivity to changes in interest rates. The longer the duration, the more sensitive it is.

Calculating ‘duration’ for a fi xed income investment such as a bond is a complicated sum. It takes into account the current

value of the bond, the coupon or interest payment, the book cost, and the number of years the bond has left to run. Put

simply, the higher the duration number the higher the potential return (and the greater the risk).

REPORT AND ACCOUNTS


Emerging markets

Countries in the process of industrialising which tend to have rapidly growing economies.

Emerging market debt

Debt issued by governments and corporates in emerging markets.

Equity

Refers to shares. A share in a company provides an investor with part ownership of that company.

Fixed Income

An investment that provides a return in the form of fi xed periodic payments and the eventual return of principal at maturity.

Future

An obligation to buy or sell an asset on a specifi c date in the future at an agreed price.

Gilt

A bond that is issued by the British government which is generally considered low risk. Bonds issued by South African and

Irish governments are also referred to as gilts.

Hedging

A technique seeking to offset or minimise the exposure to specifi c risk by entering an opposing position.

High yield bond

A below investment grade rated bond, providing the investor with greater returns due to its higher default risk. (See Junk

bond).

Index-linked bonds

Bonds whose coupons and principal payment are linked to movements in infl ation.

Infl ation

Describes conditions in which there have been a consistent rise in prices.

Initial public offering (IPO)

The fi rst public sale of a company’s equity resulting in a quoted stock price on a stock exchange.

Interest

The return earned on funds which have been deposited, loaned, or invested.

Investment grade bonds

Bonds considered of the highest quality by credit rating agencies. The threshold credit rating for Standard & Poor’s is BBB

and Baa3 for Moody’s.

REPORT AND ACCOUNTS


Glossary continued

Liabilities

Financial obligations that must be met.

Liquidity

The ease with which an asset can be sold at a reasonable price for cash.

Long dated bond

A bond with usually 15 years or more remaining before redemption, at which point the principal is paid to the holder.

Long-term investment

Holding an asset for an extended period of time. Depending on the security, a long-term asset can be held for as little as one

year or for as long as 30 years.

Macroeconomic

Refers to the big trends in an economy as a whole, such as infl ation and unemployment, while microeconomic forces refer to

the factors affecting individual situations or companies.

Market capitalisation

The total value of a company’s equity, calculated by the number of shares multiplied by their market price.

Maturity

With regards to bonds, maturity refers to the time at which the principal of the bond is repayable and it ceases to exist. In

terms of a pension fund, it conveys the average age of the membership and the time until benefi ts are payable.

Outperformance

The return of a fund in excess of the comparative performance index.

Overweight

When a fund has greater exposure to an asset than the comparative performance index.

Peer group

A group of funds that can be compared with one another for performance purposes. A peer group will usually be based on

the funds’ investment scope, for example UK equities.

Performance

The results of an investment over a given period.

Portfolio

A grouping of fi nancial assets, such as equities, bonds and cash equivalents. Portfolios are held directly by investors and/or

managed by fi nancial professionals.

REPORT AND ACCOUNTS


Rally

A swift rise.

Real estate

An asset class comprising buildings and land.

Risk premium

The extra return expected by an investor in compensation for holding a risky asset.

Security

A general term for a tradable fi nancial instrument.

Short-term investment

Investments that are held for or mature in 12 months or less.

Standard deviation

A measure of risk, deriving from the historic volatility of a particular asset.

Top-down investing

Contrasting with bottom-up analysis, a top-down approach to investment analysis begins with an assessment of

macroeconomic factors, then business cycles before moving on to look at individual sectors and companies.

Treasuries

Debt securities issued by the US government. Treasuries fall under three categories: treasury bills (T-bills), treasury notes

(T-notes) and treasury bonds (T-bonds).

Underweight

When a fund has less exposure to an asset than the benchmark.

Volatility

Price movements. Standard deviation is a measure of an asset’s historic volatility.

Year-to-date (YTD)

Refers to the period extending from the beginning of the current calendar year to the present date.

Yield

A measure of the income return earned on an investment. In the case of a share the yield expresses the annual dividend

payment as the percentage of the market price of the share. In the case of a property, it is the rental income as a percentage

of the capital value. In the case of a bond the running yield (or fl at or current yield) is the annual interest payable as a

percentage of the current market price. The redemption yield (or yield to maturity) allows for any gain or loss of capital which

will be realised at the maturity date.

REPORT AND ACCOUNTS


Yield curve

A graphical representation off all the yields of bonds of the same quality with maturities ranging from the shortest to the

longest available.

Yield spread

The difference in yield between different bonds.

Yield to maturity

The annualised return (internal rate of return) that would be earned on a bond if held to maturity.

Glossary continued

REPORT AND ACCOUNTS


Authorised Corporate Director (ACD) Investec Fund Managers LimitedContact address PO Box 9042, Chelmsford CM99 2XL

Telephone +44 (0)20 7597 1900

Free phone 0800 389 2299

Email [email protected]

Indicator online valuation service

www.investecassetmanagement.com

Registered address Woolgate Exchange

25 Basinghall Street

London EC2V 5HA

Investment AdviserInvestec Asset Management LimitedWoolgate Exchange

25 Basinghall Street

London EC2V 5HA

Registered number for Investec Funds Series iiIC125 England and Wales

RegistrarInternational Financial Data Services (UK) LimitedIFDS House

St. Nicholas Lane

Basildon

Essex SS15 5FS

DepositaryState Street Trustees Limited20 Churchill Place

London E14 5HJ

Fund AccountingState Street Bank and Trust Company Limited20 Churchill Place

London E14 5HJ

Independent AuditorsKPMG LLP15 Canada Square

Canary Wharf

London E14 5GL

Issued by Investec Fund Managers Limited, February 2017.

Authorised and regulated by the Financial Conduct Authority.

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