Interim Report and Financial Statements for MGTS AFH DA European Equity Fund

Transcription

1 Interim Report and Financial Statements for MGTS AFH DA European Equity Fund For the period ended 31 August 2018 (Unaudited) HEAD OFFICE MARGETTS FUND MANAGEMENT LTD DEALING 1 SOVEREIGN COURT PO BOX GRAHAM STREET BIRMINGHAM BIRMINGHAM VAT No. (GB) B2 2HL B1 3JR Registered in England No TELEPHONE: Authorised and Regulated by TELEPHONE: FACSIMILE: the Financial Conduct Authority FACSIMILE:

2 ACD Margetts Fund Management Limited 1 Sovereign Court Graham Street Birmingham B1 3JR Tel: Fax: (Authorised and regulated by the Financial Conduct Authority) Directors of the ACD T J Ricketts A J M Quy M D Jealous A S Weston T H Ricketts (non-exec) G M W Oakley (non-exec) J M Vessey (non-exec) Depositary The Bank of New York Mellon (International) Limited One Canada Square London E14 5AL (Authorised and regulated by the Financial Conduct Authority) Administrator and Registrar Margetts Fund Management Ltd PO Box Birmingham B2 2HL Tel: Fax: (Authorised and regulated by the Financial Conduct Authority) Auditors Shipleys LLP Chartered Accountants & Statutory Auditors 10 Orange Street Haymarket London WC2H 7DQ Investment Advisers AFH Independent Financial Services Limited AFH House Buntsford Drive Stoke Heath Bromsgrove Worcestershire B60 4JE (Authorised and regulated by the Financial Conduct Authority)

3 Contents Investment Adviser s Report 1 Certification of Accounts by Directors of the ACD 3 Significant Purchases and Sales 4 Portfolio Statement 5 Net Asset Value per Share and Comparative Table 7 Financial Statements Statement of Total Return 9 Statement of Change in Net Assets Attributable to Shareholders 9 Balance Sheet 10 Notes to the Financial Statements 11 General Information 19

4 Investment Adviser s Report For the period commencing from the launch of the sub fund 02 October 2017 and ending 31 August 2018 Investment Objective & Policy To provide long term growth principally through capital growth as well as income from a portfolio of investments. The sub-fund will primarily invest in quoted mainland European companies. The sub-fund may also invest in collective investment schemes (restricted to 10%), cash, money market instruments, and other transferable securities (including UK and non-eea securities) and, including collective investments schemes of which the Manager (or one of its associates) is the appointed manager. Investment Review MGTS AFH DA European Equity Fund R -3.37% MGTS AFH DA European Equity Fund -4.01% Benchmark: IA UK Smaller Companies Sector 2.60% Source: Morningstar Direct. Performance growth in the period is bid to bid with income reinvested. Review of the period The underperformance over the period has been characterised by headwinds in stock selection, while asset allocation has remained in line with the index. Altran has been the biggest detractor over the six months. The business is a French outsourced R&D provider. To provide customers with a broader offering they acquired a US business, Aricent. We saw strategic merit in this and bought the shares to take advantage of price weakness after the announcement. Fraud has subsequently been discovered at Aricent, making the price paid look expensive and challenging the acquisition. The market reaction was savage, the shares falling 35% from their pre-deal level. The shares now trade on a low valuation, and in trying to keep some perspective we have retained most of the holding. Ipos and Danske also detracted over the period. On the positive side, Oil & Gas service businesses Lundin Petroleum and PGS had strong performance, rising 67% and 56% respectively. Earlier in 2018 we identified that the supply and demand dynamics in this area were favourable, but under-appreciated by the market. As the demand for seismic ships and exploration apparatus had bottomed out, coupled with historically low reserve discoveries, we envisaged that day rates for the Oil & Gas Services sector would increase, benefitting businesses whose peers have folded since the oil price fell so dramatically in Other positive contributors were Teleperformance, Lagardere and Netcompany. Investment Activity We sold the positions in Bayer, Grand City Properties, Pandora, Nokian Renkaat, Hispania Activos and ABN Amro. We initiated positions in Amadeus, BNP Paribas, Galp, Netcompany, and Post NL. 1

5 Investment Adviser s Report (continued) To focus on one of these; Amadeus is a booking system and (increasingly) software provider to airlines, travel agents, and aggregators. It benefits from the growth of passengers over the long term and pricing power, but like many a good business, it trades at a higher premium than historically. However, we believe that it will be able to replicate a similar platform business model within a hotel & hospitality ecosystem potentially a larger opportunity than airlines given the myriad of different options hotel guests can choose and the potential to drive incremental revenue for the hotel. For evidence, press releases of Premier Inn and IHG as well as competitor Sabre suggests there is a clear need and requirement to adapt, digitalise and personalise the customer experience with hotels that is currently underserved, and Amadeus has a long track record of delivering that. Outlook and Policy After strong performance in recent years, the upside within the European market is diminished. We do now see clearer evidence of higher nominal economic growth becoming embedded, but from here it seems more likely momentum will fade, albeit the central case should be for still positive growth with higher inflation. This has on balance somewhat unfavourable implications for profits growth and revisions. A consideration from a more strategic point of view is that the powerful nature of western democracy is reshaping the overall backdrop which, peering through the mists, potentially also has positive investment implications for previously unloved areas of the market. Post Brexit and Trump, political risk appears elevated but as usual this is well discounted in the market so this should not be seen as a reason to sell. On a relative basis Europe at the present time appears a beacon of political stability, Italy excepted. Schroder Investment Management Limited Delegated adviser to the fund 15 October

6 Certification of Accounts by Directors of the ACD This report is signed in accordance with the requirements of the Collective Investment Schemes Sourcebook (COLL) as issued and amended by the Financial Conduct Authority. T J Ricketts Margetts Fund Management Ltd 29 October 2018 M D Jealous Authorised Status The MGTS AFH DA European Equity Fund is a sub fund of the MGTS AFH DA Fund an open-ended investment company with variable capital incorporated in England and Wales under regulation number IC1086 and authorised by the Financial Conduct Authority with effect from 02 August The fund is classed as a UCITS scheme, which complies with the requirements of the FCA FUND and COLL handbooks. Shareholders are not liable for the debts of the fund. Investor Notice With effect from 01 February 2018, the trustee and depositary, as appropriate, of the funds, BNY Mellon Trust & Depositary (UK) Limited ("T&D") retired and was replaced by The Bank of New York Mellon (International) Limited ("BNYMIL"). This change has been agreed by the Financial Conduct Authority and the Manager/Authorised Corporate Director. As a result, the activities previously carried out by T&D will be performed by BNYMIL. The change did not impact on the effective organisation of the trustee and depositary as carried out by BNYMIL, the business address remained the same and all commercial terms remained unchanged including the fee structure and costs. The sub fund launch date is 02 October 2017 and the figures quoted are from this date up until 31 August

7 Significant purchases and sales For the period ended 31 August 2018 Total purchases for the period 117,201,369 Purchases Cost ( ) BAYER AG-REG 5,321,445 ORANGE SA 4,385,218 KONINKLIJKE KPN NV 4,350,622 KBC GROEP NV 3,915,229 AXA SA 3,868,307 TELEFONICA SA 3,839,072 ALTRAN TECHNOLOGIES SA 3,686,213 ING GROEP NV 3,270,876 DANSKE BANK A/S 3,140,091 TOTAL SA 3,130,312 NOVO NORDISK A/S-B 3,000,085 BANKINTER SA 2,807,030 IPSOS 2,780,222 ZURICH INSURANCE GROUP AG 2,737,757 LUNDIN PETROLEUM AB 2,631,401 LANXESS AG 2,597,432 ABN AMRO GROUP NV-CVA 2,587,447 BNP PARIBAS 2,508,217 CONTINENTAL AG 2,453,105 BORR DRILLING LTD 2,450,169 LAGARDERE SCA 2,419,093 RENAULT(REGIE NTL) EUR3.81 2,387,510 SUBSEA 7 SA USD2 2,348,919 AURELIUS EQUITY OPPORTUNITIE 2,342,677 TELEPERFORMANCE 2,082,623 CARGOTEC CORPORATION 'B' NPV 2,072,986 GRUPO CATALANA OCCIDENTE SA 2,062,034 ENI SPA 2,029,225 Total sales for the period 39,345,549 Sales Proceeds ( ) BAYER AG-REG 4,300,064 KBC GROEP NV 2,560,548 ABN AMRO GROUP NV-CVA 2,386,103 ING GROEP NV 1,680,822 GRAND CITY PROPERTIES 1,546,796 DEUTSCHE TELEKOM AG-REG 1,501,930 Bpost SA de Droit Public 1,476,829 Hispania Activos Inmobiliarios Socimi SA REIT EUR1 1,345,244 CELLNEX TELECOM SAU 1,254,475 CONTINENTAL AG 1,244,626 PETROLEUM GEO-SERVICESASA NOK3 1,126,205 AXA SA 1,117,714 NOKIAN RENKAAT OYJ 1,039,562 LUNDIN PETROLEUM AB 1,011,196 4

8 Portfolio statement As at 31August 2018 Total Net Assets Holding Portfolio of Investments Value ( ) % Industrials 95,399 Ahlsell AB 426, ,696 Cargotec Oyj 1,855, ,235 PORR AG 413, ,937 Teleperformance SE 1,783, Total Industrials 4,479, Healthcare 52,756 Grifols SA 878, Total Healthcare 878, Financial Services 5,640 Allianz SE 938, ,682 Aurelius Equity Opportunities Se & Co 1,835, ,884 AXA SA 2,562, ,000 Bankinter SA 2,443, ,979 BNP Paribas 2,368, ,235 Danske Bank A/S 1,862, ,203 Grupo Catalana Occidente SA 2,109, ,383 ING Groep NV 1,184, ,300 Intertrust NV 1,454, ,868 Intesa Sanpaolo 783, ,991 KBC Group SA/NV 1,160, ,224 Swiss Re AG 1,643, ,784 Zurich Insurance Group AG 2,568, Total Financial Services 22,916, Technology 210,110 Altran Technologies 1,766, ,254 Amadeus IT Group SA 1,847, ,922 Atea ASA 1,076, ,017,809 IQE PLC 963, ,276 Netcompany Group AS 2,064, Total Technology 7,718, Energy 730,074 Borr Drilling Ltd 2,332, ,408 Eni SpA 2,282, ,125 Galp Energia SGPS SA 2,136, ,003 Ipsos SA 2,510, ,634 Petroleum Geo-Services ASA 868, ,675 Subsea 7 SA 2,274, ,816 Total SA 3,012, Total Energy 15,417, Basic Materials 31,452 Lanxess AG 1,912, Total Basic Materials 1,912,

9 Portfolio statement (continued) Total Net Assets Holding Portfolio of Investments Value ( ) % Communication Services 1,631,512 Koninklijke KPN NV 3,227, ,071 Orange SA 3,941, ,411 Telefonica SA 2,736, Total Communication Services 9,905, Consumer Cyclical 6,418 Continental AG 906, ,039 Lagardere SCA 2,530, ,056 Renault SA 1,131, Total Consumer Cyclical 4,568, Oil & Gas E&P 100,200 Lundin Petroleum AB 2,731, Total Oil & Gas E&P 2,731, Healthcare 63,807 Novo Nordisk A/S 2,414, ,076 Roche Holding AG 1,172, Total Healthcare 3,586, Portfolio of Investments 74,114, Net Current Assets 7,146, Net Assets 81,260, The investments have been valued in accordance with note 1(b). 6

10 Net Asset Value per Share and Comparative Tables Accumulation share class Change in net assets per share 31/08/2018 Opening net asset value per share Return before operating charges * Operating charges Return after operating charges Distribution on income shares Closing NAV per share Retained distribution on acc shares * After direct transaction costs of Performance Return after charges -3.22% Other Information Closing net asset value ( ) 97 Closing number of shares 100 OCF 1.02% Direct transaction costs 0.37% Prices Highest share price (pence) Lowest share price (pence) R Accumulation share class Change in net assets per share 31/08/2018 Opening net asset value per share Return before operating charges * Operating charges Return after operating charges Distribution on income shares Closing NAV per share Retained distribution on acc shares * After direct transaction costs of Performance Return after charges -4.06% Other Information Closing net asset value ( ) 81,260,392 Closing number of shares 84,697,027 OCF 0.82% Direct transaction costs 0.42% Prices Highest share price (pence) Lowest share price (pence)

11 Net Asset Value per Share and Comparative Tables (continued) Risk Warning An investment in an open-ended investment company (OEIC) should be regarded as a medium to long term investment. Investors should be aware that the price of shares and the income from them can fall as well as rise and investors may not receive back the full amount invested. Past performance is not a guide to future performance. Investments denominated in currencies other than the base currency are subject to fluctuations in exchange rates, which can be favourable or unfavourable. Fund Performance The performance of the fund is shown in the Investment Adviser s Report. Synthetic Risk and Reward Indicator Typically Lower Returns Typically Higher Returns Lower Risk Higher Risk The risk and reward score is based on past performance and calculated in accordance with European legislation. It may not be a reliable indication of the future risk profile. 8

12 Financial statements Statement of total return For the period ended 31 August 2018 Notes Income Net capital gains/(losses) 4 (3,767,390) Revenue 6 1,918,942 Expenses 7 (398,496) Finance costs: Interest 9 6,421 Net revenue before taxation 1,526,867 Net revenue after taxation Total return before distributions 1,526,867 (2,240,523) Finance costs: Distribution Change in net assets attributable to shareholders from investment activities 9 - (2,240,523) Statement of change in net assets attributable to shareholders For the period ended 31 August 2018 Opening net assets attributable to shareholders - - Amounts receivable on issue of shares Amounts payable on cancellation of shares 84,816,737 (1,403,687) Dilution levy 87,962 Change in net assets attributable to shareholders from investment activities Closing net assets attributable to shareholders 83,501,012 (2,240,523) 81,260,489 9

13 Balance sheet As at 31 August 2018 Notes Assets Investment assets 74,114,214 Debtors 10 2,549,248 Bank balances 4,707,516 Total other assets 7,256,764 Total assets 81,370,978 Liabilities Creditors ,489 Total other liabilities 110,489 Net assets attributable to shareholders 81,260,489 10

14 Notes to the financial statements As at 31 August Accounting policies a) Basis of accounting The financial statements have been prepared under the historical cost basis in accordance with Financial Reporting Standard (FRS) 102, as modified by the revaluation of investments, and in accordance with the revised Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Association in May b) Basis of valuation of investments The investments are valued at quoted bid prices for dual priced funds and at quoted prices for single priced funds, on the last business day of the accounting period. c) Foreign exchange rates Transactions in foreign currencies are recorded in sterling at the rate ruling at the date of the transactions. Assets and liabilities expressed in foreign currencies at the end of the accounting period are translated into sterling at the closing middle exchange rates ruling on that date. d) Revenue All income allocations and distributions declared by the managers of the underlying funds up to the accounting date are included in Income, net of attributable tax credits. The net allocations which are retained in Income are included in the fund s own income allocation. Bank and other interest receivable is accrued up to the accounting date. Equalisation on distributions received is deducted from the cost of the investment and not included in the fund s income available for distribution. e) Expenses The ACD s periodic charge is deducted from Income. All of the other expenses are charged against Income except for costs associated with the purchase and sale of investments which are charged against Capital. f) Taxation (i) (ii) (iii) The fund is treated as a corporate shareholder with respect to its underlying holdings and its income is subject to streaming into franked and unfranked. Corporation tax is provided at 20% on income, other than the franked portion of distributions from collective investment schemes, after deduction of expenses. The charge for deferred tax is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be offset. 2 Distribution policy Income arising from investments accumulates during each accounting period. Surplus income is allocated to shareholders in accordance with the COLL regulations. In order to conduct a controlled dividend flow to shareholders, interim distributions will be made at the ACD s discretion, up to a maximum of the distributable income available for the period. All remaining income is distributed in accordance with the COLL regulations. 11

15 3 Risk management policies In pursuing the investment objective, a number of financial instruments are held which may comprise securities and other investments, cash balances and debtors and creditors, that arise directly from operations. Derivatives, such as futures or forward foreign exchange contracts, may be utilised for efficient portfolio management purposes. Political and economic events in the major economies of the world, such as the United States, Japan and the European Union, will influence stock and securities markets worldwide. The main risks from the fund s holding of financial instruments with the ACD s policy for managing these risks are set out below: i. Credit Risk The fund may find that collective investment schemes in which it invests fail to settle their debts or deliver the investments purchased on a timely basis. ii. iii. iv. Interest Rate Risk Debt securities may be held by the underlying investments of the fund. The Interest Rate Risk of these securities is managed by the relevant manager. Foreign Currency Risk Although the net assets of the fund are denominated in sterling, a proportion of the fund s investments in collective investment schemes have currency exposure with the effect that the balance sheet and total return can be affected by currency movements. Liquidity Risk The main liability of the fund is the cancellation of any shares that investors want to sell. Securities may have to be sold to fund such cancellations should insufficient cash be held at the bank to meet this obligation. Smaller companies by their nature, tend to have relatively modest traded share capital, and the market in such shares can, at times, prove illiquid. Shifts in investor sentiment, or the announcement of new price-sensitive information, can provoke significant movement in share prices, and make dealing in any quantity difficult. The equity markets of emerging countries tend to be more volatile than the more developed markets of the world. Standards of disclosure and accounting regimes may not always fully comply with international criteria, and can make it difficult to establish accurate estimates of fundamental value. The dearth of accurate and meaningful information and insufficiencies in its distribution, can leave emerging markets prone to sudden and unpredictable changes in sentiment. The resultant investment flows can trigger significant volatility in these relatively small and illiquid markets. At the same time, this lack of liquidity, together with the low dealing volumes, can restrict the ACD s ability to execute substantial deals. v. Market Price Risk Market Price Risk is the risk that the value of the fund s financial instruments will fluctuate as a result of changes in market prices caused by factors other than interest rates or foreign currency movement. The Market Price Risk arises primarily from uncertainty about the future prices of financial instruments that the fund holds. Market Price Risk represents the potential loss the fund may suffer through holding market positions in the face of price movements. This risk is generally regarded as consisting of two elements Stock Specific Risk and Market Risk. The fund s exposure to Stock Specific Risk is reduced for equities and bonds through the holding of a diversified portfolio in accordance with the investment and borrowing powers set out in the Instrument of Incorporation. vi. vii. Counterparty Risk Transactions in securities entered into by the fund give rise to exposure to the risk that the counterparties may not be able to fulfil their responsibility by completing their side of the transaction. Fair Value of Financial Assets and Financial Liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. 12

16 4 Net capital losses Proceeds from sales on investments during the period 39,345,549 Original cost of investments sold during the period (41,834,645) Losses realised on investments sold during the period (2,489,096) Net depreciation thereon already recognised in prior periods - Net realised depreciation for the period (2,489,096) Net unrealised depreciation for the period (1,225,483) Net losses on non-derivative securities (3,714,579) Net losses on derivatives (52,811) Net capital losses on investments (3,767,390) 5 Purchases, sales and transaction costs Collective Investment Schemes Purchases excluding transaction costs 117,117,261 Commissions: 0.07% 84,108 Stamp Duty: 0.07% 83,921 Trustee transaction charges: 0.04% 29,690 Purchases including transaction costs 117,314,980 Sales excluding transaction costs 39,391,899 Commissions: 0.12% (46,350) Trustee transaction charges: 0.02% (7,863) Sales including transaction costs 39,337,686 Debt Securities Sales excluding transaction costs 39,345,549 Sales including transaction costs 39,345,549 Trustee transaction charges have been deducted in determining net capital Transaction charges are displayed as percentage of purchase/sale Total commission charges 0.22% 130,458 Total stamp duty and other charges: 0.14% 83,921 Total trustee transaction charges : 0.06% 37,553 Total charges displayed as percentage of average net asset value Average portfolio dealing spread : 0.11% 6 Revenue Overseas franked income 1,918,603 Overseas gross unfranked income 390 Bank interest (51) Total revenue 1,918,942 13

17 7 Expenses Payable to the ACD, associates of the ACD and agents of either: ACD's periodic charge 354,660 Payable to the Depositary associates of the Depositary and agents of either: Depositary's fee 27,710 Safe custody 51,940 79,650 Other expenses: FCA fee 129 Audit fee 3,581 Registration fees 16 Sundry charges (65,405) Transfer agency fee 9,472 Account Setup Fee 16,393 Total expenses 398,496 8 Taxation a) Analysis of the tax charge for the period: UK Corporation tax - Irrecoverable income tax - Current tax charge (note 8b) - Deferred tax (note 8c) - Total tax charge - b) Factors affecting the tax charge for the period: Net income before taxation 1,526,867 Corporation tax at 20% 305,374 Effects of: UK dividends (383,721) Utilisation of excess management expenses 78,347 Corporation tax charge - Irrecoverable income tax - Current tax charge for the period (note 8a) - c) Provision for deferred taxation No provision for deferred taxation has been made in the current or prior accounting year. d) Factors that may affect future tax changes The fund has unutilised management expenses of 391,735 (prior year 0). The fund does not expect to be able to utilise this in the forseeable future. 9 Finance costs Distributions Interim - - Amounts deducted on cancellation of shares - Amounts received on issue of shares - Finance costs: Distributions - Finance costs: Interest (6,421) Total finance costs (6,421) 14

18 10 Debtors Amounts receivable for issue of shares 615,339 Amounts receivable for investment securities sold 51,096 Accrued income: UK franked dividends 1,345,682 Overseas franked dividends 288,996 1,634,678 Taxation recoverable 248,135 Total debtors 2,549, Creditors Accrued expenses: Amounts payable to the ACD, associates and agents: ACD's periodic charge 44,539 Amounts payable to the Depositary, associates and agents: Depositary's fees 2,978 Transaction charges 19,630 Safe custody fee 33,257 55,865 Other expenses 10,085 Total creditors 110, Contingent liabilities and commitments There were no contingent liabilities or outstanding commitments at the balance sheet date. 13 Related party transactions Margetts Fund Management Ltd as ACD, is a related party, and acts as principal in respect of all transactions of shares in the Company. The aggregate monies received through issues, and paid on cancellations are disclosed in the statement of change in net assets attributable to shareholders and note 9. Amounts paid to Margetts Fund Management Ltd in respect of management services are disclosed in note 7 and amounts due at the end of the year in note Unitholders' funds Acc R Acc Opening number of units - - Units issued ,704,307 Units converted - - Units redeemed - (7,007,280) Closing number of units ,697, Post balance sheet events There were no material post balance sheet events which have a bearing on the understanding of the financial statements. 15

19 16 Risk disclosures Debt securities may be held by the underlying investments of the fund. The Interest Rate Risk of these securities is managed by the relevant manager. The table below shows the Interest Rate Risk profile at the balance sheet date: i. Interest risk Floating rate assets (pounds sterling): 4,707,516 Assets on which interest is not paid (pounds sterling): 16,405,002 Assets on which interest is not paid (swedish krona): 3,157,249 Assets on which interest is not paid (swiss franc): 5,383,969 Assets on which interest is not paid (euro): 51,717,242 Assets on which interest is paid (pounds sterling): Liabilities on which interest is not paid (pounds sterling): (110,489) Net Assets 81,260,489 ii. Currency risk GBP 21,002,028 Swedish Krona 3,157,249 Swiss franc 5,383,969 Euro 51,717,242 Net Assets 81,260,489 The floating rate financial assets and liabilities comprise bank balances, which earn or pay interest at rates linked to the UK base rate. 17 Securities Financing Transactions (SFT) and Total Return Swaps (TRS) As at the Balance Sheet date, the amount of securities and commodities on loan as a proportion of total lendable assets is 0.00% 17 Fair Value Techniques Assets Quoted prices for identical instruments in active markets 74,114,214 Prices of recent transactions for identical instruments - Valuation techniques using observable data - Valuation techniques using non-observable data - 74,114,214 16

20 19 Periodic disclosure As required by FUND 3.2.5R the ACD is required to disclose certain information periodically in relation to the Fund which is shown below. At the end of the reporting period the percentage of the Fund s assets subject to special arrangements arising from their illiquid nature was 0% of the NAV. There have been no new arrangements introduced for managing the liquidity of the Fund. The risk characteristics of the Fund are explained in the Prospectus. In order to assess the sensitivity of the Fund s portfolio to the risks to which the Fund is or could be exposed, Margetts Fund Management Ltd monitors relative value at risk, commitment, gross leverage and the results of stress tests. The ACD has set limits considered appropriate to the risk profile of the fund. Any breaches of these limits are investigated by the Margetts risk committee and appropriate action taken if necessary. During the reporting period there have been no changes to the maximum level of leverage that the Fund can employ or any right of reuse of collateral or any guarantee granted under leveraging arrangements. At the end of the reporting period the total amount of leverage, expressed as a ratio, calculated using the commitment approach was 1:0.91 and using the gross method was 1:0.91. Leverage is limited to overdraft use and the gross exposure from EPM techniques. Although the ACD may use derivatives for EPM, no collateral arrangements are currently in place and no asset re-use arrangements are in place. The maximum leverage expressed as the ratio of the exposure to net asset value using the commitment method is 1.1:1.0 and using the gross method 3.3:1.0. Please note that the maximum leverage under the gross method is theoretical and would only occur if market risk and currency risk were hedged across the entire Fund whilst it was using the maximum borrowing facility of 10%. It is not anticipated that both market risk and currency risk would be simultaneously hedged and therefore the likely maximum leverage which would be used in normal circumstances using the commitment method is 1.1:1.0 and using the gross method 2.2:

21 20 Remuneration In accordance with the requirements of Coll 4.7.7(7) the total amount of remuneration paid by the ACD to its staff for the financial year ended 30 September 2017 is: Fixed Remuneration 2,077,507 Variable Remuneration 1,223,483 Total Remuneration 3,300,990 Full Time Equivalent number of staff 45 Analysis of senior management Senior management 1,964,095 Staff whose actions may have a material impact on the funds - Other - 1,964,095 The remuneration for senior management has been calculated in accordance with the Remuneration Policy and is reviewed annually. The remuneration policy and, where required by the FCA, how benefits are calculated together with details of the remuneration committee can be found on the website: A paper copy of this is available free of charge upon request by writing to the compliance officer at 1 Sovereign Court, Graham Street, Birmingham B1 3JR. No material changes were made to the Policy or irregularities reported at the last review. 18

22 General Information Valuation Point The Valuation Point of the fund is at 12 noon each business day. Valuations may be made at other times with the Depositary s approval. Buying and Selling of Shares The ACD will accept orders to buy or sell shares on normal business days between 9.00am and 5.00pm and transactions will be effected at prices determined by the following valuation. Instructions to buy or sell shares may be made either in writing to: Margetts Fund Management Ltd, PO Box 17067, Birmingham, B2 2HL or by telephone on A contract note will be issued by close of business on the next business day after the dealing date to confirm the transaction. Prices The most recent mid prices of shares are published on the Margetts website at Other Information The Instrument of Incorporation, Prospectus, Key Investor Information Document, Supplementary Information Document and the latest annual and interim reports may be inspected at the offices of the ACD, with a copy available, free of charge, on written request. The register of shareholders can be inspected by shareholders during normal business hours at the offices of the Administrator. The Head Office of the Company is at 1 Sovereign Court, Graham Street, Birmingham B1 3JR and is also the address of the place in the United Kingdom for service on the Company of notices or other documents required or authorised to be served on it. The base currency of the Company is pounds ( ) sterling. The maximum share capital of the Company is currently 10,000,000,000 and the minimum is 1,000. Shares in the Company have no par value and therefore the share capital of the Company at all times equals the Company s current net asset value. The prospectus has been updated to state that The Bank of New York Mellon s charges for transfer agency services are subject to annual inflationary increases capped at 3% per annum. Shareholders who have any complaints about the operation of the fund should contact the ACD or the Depositary in the first instance. In the event that a unitholder finds the response unsatisfactory, they may make their complaint direct to the Financial Ombudsman Service at Exchange Tower, London E14 9SR or to: complaint.info@financial-ombudsman.org.uk or by telephone to