MI Brompton UK Recovery Unit Trust

Transcription

1 Annual report 30 June 2018

2 Contents Page Directory* Investment objective and policy* Investment manager s report* Portfolio statement* Comparative table* Statement of the authorised unit trust manager s responsibilities Certification of the annual report by the authorised unit trust manager Statement of trustee s responsibilities Independent auditor s report to the unitholders of the fund Statement of total return Statement of change in net assets attributable to unitholders Balance sheet Notes to the financial statements Distribution table General information* * These collectively comprise the authorised unit trust manager s report.

3 Directory Authorised unit trust manager and registrar Maitland Institutional Services Ltd Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telephone: Fax: Website: (Authorised and regulated by the Financial Conduct Authority) Customer service centre Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telephone: Fax: (Authorised and regulated by the Financial Conduct Authority) Directors of the authorised unit trust manager R. Ackermann J. Clark (appointed 21 December 2017) P.J. Foley-Brickley S. Georgala D. Jones G. Kok (appointed 30 November 2017) R.W. Leedham (retired 19 December 2017) Investment manager Brompton Asset Management LLP 1 Knightsbridge Green, London SW1X 7QA (Authorised and regulated by the Financial Conduct Authority) Trustee Northern Trust Global Services PLC 50 Bank Street, Canary Wharf, London E14 5NT (Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) Independent auditor KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square, Canary Wharf, London E14 5GL 1

4 Investment objective The investment objective of the (the fund) is to achieve capital growth. Investment policy The fund will invest principally in the securities of UK companies quoted on the London Stock Exchange that are experiencing difficult trading or that have growth prospects that are not duly recognised by the market. In addition to ordinary shares the fund may also invest in fixed interest securities, preference shares, debt securities convertible to ordinary stock, money market instruments, deposits and any other permitted asset type deemed appropriate to meet the investment objective. The fund may also invest outside the UK. Investment manager s report for the year ended 30 June 2018 Performance The gained 10.02% over the year to 30 June 2018, outperforming the UK equity market, which gained 8.97% while cash as measured by the three-month UK Interbank Rate returned 0.50%. At the year end, the gain from the fund s July 2002 inception was % compared with the UK stockmarket s % return while cash had returned 45.66%. Manager s review The year under review was a mixed one for the UK stockmarket. During the first half of the year, the environment for equities had been benign as a result of the slow rise in inflation from subdued levels and only marginal monetary tightening by central banks. Risk aversion increased, however, in the second half and returns were more muted as investors grappled with the complexities of the UK s Brexit negotiations, with tightening monetary policy on both sides of the Atlantic and signs that President Trump s increasingly aggressive stance on tariff policies could degenerate into a full-scale trade war with the European Union and China. Such tensions were also visible in the currency markets, where sterling gained against the dollar and the yen but weakened against the euro. UK gross domestic product growth emerged at a modest 0.2% for the first quarter of 2018, leaving the annualised growth rate at 1.2%, the weakest level recorded since the year to end June 2012, but the upward revision to the original first-quarter estimate heightened expectations that the Bank of England would raise base rates by a quarter point to 0.75% in August. The reason for the upward revision was strength in the construction sector. Household consumption remained subdued, however, and business investment fell, with industrialists increasingly nervous about the Brexit discussions. The strongest sectors in the UK stockmarket over the year were those most likely to benefit from global economic growth and rising commodity prices and likely to be least affected by the modest monetary tightening by central banks in the UK and the US. With oil prices rising 57.46% in sterling terms, the energy sector was the strongest in the market, returning 37.77%. Basic materials were also noticeably strong, returning 30.01% as industrial commodity prices rose 10.63% in sterling as measured by Thomson Reuters. Consumer services returned 13.98% while industrial stocks returned 10.48%. So-called bond proxies, companies with steady non-cyclical characteristics whose dividend yields tend to be compared closely to government bond yields, were conspicuously weak in response to retreating global bond prices, down 0.28% in sterling over the year. Thus, telephony, utilities and consumer goods fell 14.46%, 6.26% and 4.83% respectively while healthcare returned only 2.34%. As measured by market value, the strongest market area was mid-cap stocks while smaller companies lagged both large and medium-sized companies. 2

5 Investment manager s report Portfolio review Within the portfolio, some of the strongest returns among large and medium-sized companies came in sectors such as basic materials, energy, media, technology and support services. Among the materials holdings, Anglo American and Rio Tinto returned 74.02% and 37.22% respectively. In energy, Royal Dutch Shell returned 39.52%; in media, Sky, which faced competing takeover bids, returned 49.96% and Pearson recovered 31.14%; in technology, Renishaw and Electrocomponents returned 48.08% and 33.88% respectively, while Intertek and Rentokil Initial, two support services stocks, returned 37.46% and 30.16% respectively. Conspicuous weakness was, however, shown by Provident Financial, the subprime lender, which fell 66.31%% in response to a profit warning, boardroom turmoil and a deep discount refinancing, while two retailers, N Brown and Dixons Carphone, fell 42.61% and 30.18% respectively amid concerns for traditional retailers in the face of online threats. The failure of a takeover offer from Hammerson combined with retail woes to leave Intu Properties, a leading shopping centre owner, 28.34% lower. Among smaller stocks, Advanced Oncotherapy recovered % after a significant cash injection to back its innovative medical technology while Oxford BioMedica responded strongly to fresh evidence of the efficacy of its early-stage treatments for cancer and other illnesses, rising %. Serica Energy gained % after it announced a transformational acquisition of North Sea assets from BP, financed without recourse to shareholders. Hogg Robinson, the corporate travel agency and expenses management group, advanced 83.04% following an agreed takeover bid while TT Electronics advanced 28.79% in response to further evidence of corporate recovery as a result of rationalisation measures. A number of smaller stocks were conspicuously weak, however, with IndigoVision falling 57.56% after a profit warning and a management shake-up. Investors also grew less optimistic about operational progress at Peel Hotels and LiDCO, down 47.72% and 27.45% respectively. During the year, the fund initiated a new holding in Marks & Spencer while increasing a number of holdings on weakness or as a result of share issues. These included N Brown, BT, Capital & Counties Properties, Dixons Carphone, GlaxoSmithKline, IMI, IndigoVision, Intu Properties, Kingfisher, Northbridge Industrial Services, Peel Hotels, Provident Financial, J Sainsbury, Serco, Standard Life and Vodafone. Partial profits, meanwhile, were taken in Electrocomponents, Renishaw, Rentokil Initial and Serica Energy and takeover bids resulted in disposals of the holdings in Dr Pepper Snapple and Booker. Outlook At the year end, monetary trends were relatively weak but had stabilised after a sharp deterioration in the early spring, suggesting that the recent economic growth slowdown would continue. Non-monetary indicators compiled by the Organisation for Economic Cooperation and Development were also confirming an economic slowdown. US economic activity was no longer delivering positive surprises although core US inflation during the late spring had risen to its highest level since This contributed to expectations among investors that official US interest rates would be subject to one or possibly two further rises over the remainder of Further uncertainty was triggered by the fact that in June, the Chinese renminbi staged its worst weekly fall since the August 2015 devaluation even though indicators for Chinese manufacturing were stable. This suggests that the trade skirmishes between China and the US may have serious ripple effects in the currency markets, something that is likely to cause a retreat by equity investors into less risky asset classes. Monetary trends in the UK and the eurozone recovered somewhat in the late spring but the trend remained weak, suggesting that pan-european economic news may continue to disappoint investors. The UK services sector appeared more robust in the late spring but this may merely reflect a catch-up after the unusually poor winter weather, not least because consumer confidence weakened in early 2018, with worries about unemployment increasing. Monetary trends, meanwhile, suggest that economic growth will hover around 1% on an annualised basis for some time. Relative performance among companies and sectors may, therefore, vary significantly over the second half of 2018, emphasising the importance of stock selection in generating performance. 3

6 Portfolio statement as at 30 June 2018 Market % of total value net assets Holding Security 2018 Oil & gas 3.66% (3.67%) Oil & gas producers 3.66% (3.67%) 442 Royal Dutch Shell A 11, ,027 Royal Dutch Shell B 190, ,888 Serica Energy* 150, , Alternative energy 0.00% (0.00%) 81 Ocean Power Technologies Basic materials 6.70% (6.18%) Mining 6.70% (6.18%) 14,745 Anglo American 249, ,327 Hochschild Mining 120, ,568 Rio Tinto 275, Industrials 32.14% (30.87%) 646, Construction & materials 2.54% (2.80%) 53,326 Melrose Industries 113, ,000 Michelmersh Brick* 131, , Aerospace & defense 1.70% (1.84%) 25,351 BAE Systems 163, General industrials 5.13% (5.21%) 41,950 Smith (DS) 218, ,366 Smiths 176, ,819 Vesuvius 100, , Electronic & electrical equipment 6.58% (6.15%) 18,970 Halma 259, ,623 Renishaw 244, ,718 TT Electronics 130, , Industrial engineering 3.12% (2.54%) 12,010 IMI 135, ,787 Northbridge Industrial Services* 164, ,

7 Portfolio statement Market % of total value net assets Holding Security 2018 Support services 13.07% (12.33%) 32,235 Electrocomponents 244, ,500 Hogg Robinson 264, ,015 Intertek 172, ,900 Johnson Service* 224, ,313 Rentokil Initial 218, ,699 Serco 137, Consumer goods 6.98% (8.20%) Beverages 0.00% (0.84%) 1,261, Household goods & home construction 5.33% (5.55%) 15,657 Bovis Homes 179, ,175 Colefax* 128, ,842 Redrow 206, , Personal goods 1.65% (1.81%) 3,803 Unilever 159, Heath care 4.98% (4.08%) Health care equipment & services 1.22% (1.44%) 75,000 Advanced Oncotherapy* 34, ,190,635 LiDCO* 83, , Pharmaceuticals & biotechnology 3.76% (2.64%) 11,200 GlaxoSmithKline 171, ,465 Oxford BioMedica 191, Consumer services 15.65% (16.75%) 363, Food & drug retailers 3.56% (5.45%) 54,018 J Sainsbury 173, ,393 Wm Morrison Supermarkets 169, , General retailers 6.93% (6.35%) 78,526 Dixons Carphone 146, ,075 Inchcape 140, ,394 Kingfisher 134, ,569 Marks & Spencer 134, ,079 N Brown 111, ,

8 Portfolio statement Market % of total value net assets Holding Security 2018 Media 4.56% (4.03%) 846,780 Dods* 108, ,000 Metrodome** ,249 Pearson 170, ,009 Sky 160, , Travel & leisure 0.60% (0.92%) 80,000 Peel Hotels* 57, Telecommunications 2.86% (3.17%) Fixed line telecommunications 1.40% (1.51%) 61,989 BT 134, Mobile telecommunications 1.46% (1.66%) 76,868 Vodafone 141, Financials 19.43% (20.20%) Banks 4.50% (5.00%) 22,703 HSBC 161, ,749 Lloyds Banking 135, ,800 Royal Bank of Scotland 137, , Non-life insurance 2.24% (2.25%) 31,783 RSA Insurance 215, Life insurance 1.46% (2.99%) 53,005 Legal & General 140, Real estate investment trusts 4.53% (4.47%) 21,583 British Land 145, ,905 Intu Properties 129, ,978 Londonmetric Property 162, , Real estate investment & services 1.47% (1.40%) 49,531 Capital & Counties Properties 142, Financial services 4.57% (3.40%) 38,183 H&T* 129, ,148 International Personal Finance 61, ,874 Provident Financial 131, ,472 Standard Life 118, , Equity investment instruments 0.66% (0.69%) 6,516 Gresham House Strategic* 63,

9 Portfolio statement Market % of total value net assets Holding Security 2018 Technology 4.08% (5.10%) Software & computer services 2.46% (3.29%) 50,175 IndigoVision* 56, ,675 Sage 180, , Technology hardware & equipment 1.62% (1.81%) 134,586 Spirent Communications 155, Investment assets 9,307, Net other assets 339, Net assets 9,647, All investments are ordinary shares or stock units on a regulated securities market unless otherwise stated. The percentages in brackets show the equivalent % holdings as at * Quoted on AIM. ** This is a delisted security and has been valued at the manager s best assessment of its fair value. 7

10 Comparative table Change in net assets per unit Accumulation units p p p Opening net asset value per unit Return before operating charges^ Operating charges Return after operating charges^ Distributions Retained distributions on accumulation units Closing net asset value per unit ^After direct transaction costs of Performance Return after charges 10.47% 24.89% -3.84% Other Information Closing net asset value 9,647,319 8,703,052 6,946,131 Closing number of units 2,325,104 2,317,185 2,309,773 Operating charges 2.18% 2.25% 2.23% Ongoing operating charges* 2.18% 2.19% 2.23% Direct transaction costs 0.04% 0.05% 0.05% Prices Highest unit price Lowest unit price Operating charges include indirect costs incurred in the maintenance and running of the fund, as disclosed (but not limited to) the detailed expenses within the statement of total return. The figures used within this table have been calculated by annualising the expenses incurred against the average net asset value for the accounting year. The return after charges is calculated as the closing net asset value per unit plus the distributions on accumulation units minus the opening net asset value per unit as a % of the opening net asset value per unit. Direct transaction costs include fees, commissions, transfer taxes and duties in the purchasing and selling of investments, which are offset where applicable against any dilution levies charged within the accounting year. The figures used within the table have been calculated against the average net asset value for the accounting year. 8

11 Comparative table Risk and reward profile The risk and reward indicator table demonstrates where the fund ranks in terms of its potential risk and reward. The higher the rank the greater the potential reward but the greater the risk of losing money. It is based on past data, may change over time and may not be a reliable indication of the future risk profile of the fund. The shaded area in the table below shows the fund s ranking on the risk and reward indicator. Typically lower rewards, lower risk Typically higher rewards, higher risk The fund is ranked five because funds of this type have experienced medium-to-high rises and falls in value in the past. Please note that even the lowest risk class can lose you money and that extreme market circumstances can mean you suffer severe losses in all cases. The indicator does not take into account the following risks of investing in this fund: There may be cases where the company in which the fund owns shares falls into receivership due to trading difficulties. This could cause losses to the fund and reduce your investment. The fund invests in particular stocks which are experiencing difficulties or are undervalued. It may therefore not perform in line with funds that have a broader investment policy. For further risk information please see the prospectus. Risk warning An investment in a unit trust should be regarded as a medium-to-long-term investment. Investors should be aware that the price of units and the revenue 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 fluctuation in exchange rates, which can be favourable or unfavourable. 9

12 Statement of the authorised unit trust manager s responsibilities The Collective Investment Schemes sourcebook published by the FCA, (the COLL Rules) require the authorised unit trust manager to prepare financial statements for each annual accounting period which give a true and fair view of the financial position of the fund and of the net income and net gains on the property of the fund for the period. In preparing the financial statements the authorised unit trust manager is responsible for: selecting suitable accounting policies and then apply them consistently; making judgements and estimates that are reasonable and prudent; following UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; complying with the disclosure requirements of the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Management Association in May 2014; keeping proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements; assessing the fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; using the going concern basis of accounting unless they either intend to liquidate the fund or to cease operations, or have no realistic alternative but to do so; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and taking reasonable steps for the prevention and detection of fraud and irregularities. The authorised unit trust manager is responsible for the management of the fund in accordance with its trust deed, the prospectus and the COLL Rules. Certification of the annual report by the authorised unit trust manager In accordance with the requirements of the regulations and COLL Sourcebook, we hereby certify the report on behalf of the authorised unit trust manager, Maitland Institutional Services Ltd. R. Ackermann D. Jones Directors Maitland Institutional Services Ltd 11 September

13 Statement of the trustee s responsibilities in respect of the scheme and report of the trustee to the unitholders of the (the fund) for the year end 30 June The trustee in its capacity as trustee of must ensure that the fund is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook, the Financial Services and Markets Act 2000, as amended, (together the regulations), the trust deed and prospectus (together the scheme documents) as detailed below. The trustee must in the context of its role act honestly, fairly, professionally, independently and in the interests of the fund and its investors. The trustee is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the fund in accordance with the regulations. The trustee must ensure that: the fund s cash flows are properly monitored and that cash of the fund is booked in cash accounts in accordance with the regulations; the sale, issue, repurchase, redemption and cancellation of units are carried out in accordance with the regulations; the value of units of the fund are calculated in accordance with the regulations; any consideration relating to transactions in the fund s assets is remitted to the fund within the usual time limits; the fund s income is applied in accordance with the regulations; and the instructions of the authorised unit trust manager, which is the UCITS management company, are carried out (unless they conflict with the regulations). The trustee also has a duty to take reasonable care to ensure that the fund is managed in accordance with the regulations and the scheme documents of the fund in relation to the investment and borrowing powers applicable to the fund. Having carried out such procedures as we considered necessary to discharge our responsibilities as trustee of the fund, it is our opinion, based on the information available to us and the explanations provided, that, in all material respects the fund, acting through the authorised unit trust manager: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the fund s units and the application of the fund s income in accordance with the regulations and the scheme documents of the fund; and (ii) has observed the investment and borrowing powers and restrictions applicable to the fund in accordance with the regulations and the scheme documents of the fund. Northern Trust Global Services PLC UK Trustee and Depositary Services 11 September

14 Independent auditor s report to the unitholders of (the fund) Opinion We have audited the financial statements of the fund for the year ended 30 June 2018 which comprise the statement of total return, the statement of change in net assets attributable to unitholders, the balance sheet, the related notes and distribution table and the accounting policies set out on pages 14 to 26. In our opinion the financial statements: give a true and fair view, in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, of the financial position the fund as at 30 June 2018 and of the net revenue and the net capital gains on the property for the year then ended; and have been properly prepared in accordance with the trust deed, the statement of recommended practice relating to Authorised Funds, and the COLL Rules. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the fund in accordance with, UK ethical requirements including the FRC Ethical Standard. We have received all the information and explanations which we consider necessary for the purposes of our audit and we believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Going concern We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects. Other information The authorised unit trust manager (AUTM) Maitland Institutional Services Ltd is responsible for the other information which comprises the manager s report and general information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work: we have not identified material misstatements in the other information; and in our opinion the information given in AUTM s report for the financial year is consistent with the financial statements. 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 fund have not been kept; or the financial statements are not in agreement with the accounting records. 12

15 Independent auditor s report to the unitholders of (the fund) Manager s responsibilities As explained more fully in their statement set out on page 10, the manager is responsible for: the preparation of financial statements that give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the fund or to cease operations, or have no realistic alternative but to do so. Auditor s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC s website at The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the fund s unitholders, as a body, in accordance with Rule of the Collective Investment Schemes sourcebook (the COLL Rules) issued by the Financial Conduct Authority under section 247 of the Financial Services and Markets Act Our audit work has been undertaken so that we might state to the fund s unitholders 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 fund and the fund s unitholders as a body, for our audit work, for this report, or for the opinions we have formed. Ravi Lamba for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square, London E14 5GL 11 September

16 Statement of total return for the year ended 30 June Note Income Net capital gains 2 842,560 1,677,602 Revenue 3 268, ,827 Expenses 4 (199,614) (178,935) Interest payable and similar charges 4 1 (1) Net revenue before taxation 68,998 51,891 Taxation 5 (141) (372) Net revenue after taxation 68,857 51,519 Total return before distributions 911,417 1,729,121 Distributions 6 (68,860) (51,516) Change in net assets attributable to unitholders from investment activities 842,557 1,677,605 Statement of change in net assets attributable to unitholders for the year ended 30 June Opening net assets attributable to unitholders 8,703,052 6,946,131 Amounts receivable on issue of units 52,850 47,800 Less: amounts payable on cancellation of units (20,000) (20,000) 32,850 27,800 Change in net assets attributable to unitholders from investment activities (see statement of total return above) 842,557 1,677,605 Retained distribution on accumulation units 68,860 51,516 Closing net assets attributable to unitholders 9,647,319 8,703,052 The notes on pages 16 to 25 form an integral part of these financial statements. 14

17 Balance sheet as at 30 June 2018 ASSETS Note Fixed assets Investments 9,307,538 8,547,785 Current assets Debtors 7 25,895 33,600 Cash and bank balances 9 346, ,209 Total current assets 372, ,809 Total assets 9,679,964 8,735,594 LIABILITIES Investment liabilities Creditors Other creditors 8 (32,645) (32,542) Total creditors (32,645) (32,542) Total liabilities (32,645) (32,542) Net assets attributable to unitholders 9,647,319 8,703,052 The notes on pages 16 to 25 form an integral part of these financial statements. 15

18 Notes to the financial statements for the year ended 30 June Accounting policies (a) Basis of accounting The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments and in accordance with FRS 102 and the Statement of Recommended Practice ( SORP ) for Financial Statements of UK Authorised Funds issued by the Investment Association (IA) in May The financial statements have been prepared on the going concern basis. The authorised status and head office of the fund can be found within the general information starting on page 27. The certification of the annual report by the authorised unit trust manager can be found on page 10. (b) Recognition of revenue Revenue is included in the statement of total return on the following basis: Dividends on quoted equities and preference shares are recognised when the securities are quoted ex-dividend. Interest on bank and short-term deposits is recognised on an earned basis. All revenue includes withholding taxes but excludes irrecoverable tax credits. (c) Treatment of stock and special dividends The ordinary element of stocks received in lieu of cash dividends is credited to capital in the first instance followed by a transfer to revenue of the cash equivalent being offered and this forms part of the distributable revenue. Special dividends are reviewed on a case by case basis in determining whether the dividend is to be treated as revenue or capital. Amounts recognised as revenue will form part of the distributable revenue. The tax accounting treatment follows the treatment of the principal amount. (d) Treatment of expenses All expenses, except for those relating to the purchase and sale of investments and stamp duty reserve tax, are charged against revenue for the year on an accruals basis. (e) Taxation Corporation tax is provided at 20% on revenue, after deduction of expenses. Deferred tax is provided using the liability method on all timing differences arising on the treatment of certain items for taxation and accounting purposes, 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. (f) Distribution policy The net revenue after taxation as disclosed in the financial statements, after adjustment for items of a capital nature, is distributable to unitholders as dividend distributions. Any revenue deficit is funded from capital. At the year end, there were no items of a capital nature. The policy of the fund is to make dividend accumulations on the last working day of August each year, where any revenue accumulated is transferred to the capital property of the fund. (g) Basis of valuation of investments Quoted investments are valued at close of business bid prices on the last business day of the accounting year excluding any accrued interest in the case of fixed and floating rate interest securities. Unquoted or suspended investments are valued by the investment manager taking into account where appropriate, latest dealing prices, valuations from reliable sources, financial performance and other relevant factors. Market value is defined by the SORP as fair value, which generally is the bid value of each security. 16

19 Notes to the financial statements (g) Basis of valuation of investments () Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1: Unadjusted quoted price in an active market for an identical instrument. Level 2: Valuation techniques using observable inputs other than quoted prices within level 1. Level 3: Valuation techniques using unobservable inputs. (h) 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 exchange rates ruling on that date. 2 Net capital gains Non-derivative securities 842,492 1,678,667 Currency gains 1, Transaction charges (1,088) (1,080) Net capital gains 842,560 1,677,602 3 Revenue UK dividends: Ordinary 258, ,905 UK dividends: Stock dividend 2,312 8,292 Overseas dividends 1,497 5,024 Property income dividends 4,742 11,636 UK dividends: Stock dividend 1,593 1,968 Sundry 2 Total revenue 268, ,827 17

20 Notes to the financial statements 4. Expenses Payable to the authorised unit trust manager, associates of the authorised unit trust manager and agents of either of them: Authorised unit trust manager s fee 29,500 29,500 Payable to the investment manager, associates of the investment manager and agents of either of them: Investment manager s fee 138, ,700 Payable to the trustee associates of the trustee and agents of either of them: Trustee s fee (including VAT) 12,000 11,762 Safe custody and other bank charges 6,631 5,584 18,631 17,346 Other expenses: Audit fee (including VAT) 7,200 7,380 Audit fee (including VAT): taxation services 1,500 1,308 Financial Conduct Authority (FCA) fee Legal fees 3,030 2,096 Printing costs 1,505 1,405 13,391 12,389 Expenses 199, ,935 Interest payable and similar charges (1) 1 Total 199, ,936 18

21 Notes to the financial statements 5. Taxation a) Analysis of charge in the year: Overseas tax Current tax charge (note 5b) b) Factors affecting taxation charge for the year: Net revenue before taxation 68,998 51,891 Corporation tax at 20% 13,800 10,378 Effects of: UK dividends (51,693) (40,781) Stock dividends not taxable (463) (1,658) Movement in surplus management expenses 38,656 33,066 Overseas tax expensed Non-taxable overseas earnings (300) (1,005) Current tax charge (note 5a) c) Deferred Tax At the year end there is a potential deferred tax asset of 255,586 (2017: 216,930) in relation to surplus management expenses. It is unlikely that the fund will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset has been recognised in the year. 6. Distributions Final distribution ,860 51,516 Distributions 68,860 51,516 Reconciliation of net revenue after taxation to net distributions: Net revenue after taxation per statement of total return 68,857 51,519 Undistributed revenue brought forward 4 1 Undistributed revenue carried forward (1) (4) Distributions 68,860 51,516 19

22 Notes to the financial statements 7. Debtors Accrued income: Dividends receivable 25,278 32,983 UK income tax recoverable Total debtors 25,895 33, Other creditors Accrued expenses: Amounts payable to the authorised unit trust manager, associates of the authorised unit trust manager and agents of either of them: Authorised unit trust manager s fee 2,425 2,465 Amounts payable to the investment manager, associates of the investment manager and agents of either of them: Investment manager s fee 12,109 10,891 Amounts payable to the trustee, associates of the trustee and agents of either of them: Trustee s fee (including VAT) 2,005 2,992 Safe custody and other bank charges 3,656 5,244 5,661 8,236 Other expenses: Audit fee (Including VAT) 7,200 7,200 Audit fee (including VAT): taxation services 4,500 3,000 Printing costs ,450 10,950 Total creditors 32,645 32, Cash and bank balances Cash and bank balances 346, ,209 Cash and bank balances 346, ,209 20

23 Notes to the financial statements 10.Related party transactions Authorised unit trust manager and other fees payable to Maitland Institutional Services Ltd (the authorised unit trust manager) are disclosed in note 4 and amounts due at the year end are shown in note 8. Amounts receivable on issue and payable on cancellation of units are disclosed in the statement of change in net assets attributable to unitholders and in note 6, amounts due at the year end are shown in notes 7 and 8. Fees payable to Brompton Asset Management LLP (the investment manager) are disclosed in note 4 and amounts due at the year end are shown in note 8. Brompton Asset Management LLP and its associates had the following unitholdings in the fund: Accumulation units Held at Change in Held at period New Star Investment Trust 659, , Contingent liabilities and outstanding commitments There were no contingent liabilities or outstanding commitments at the balance sheet date (2017: none). 12.Risk management policies and disclosures In pursuing its investment objectives, the fund may hold a number of financial instruments. These financial instruments comprise securities and other investments, cash balances, debtors and creditors that arise directly from the fund s operations, for example, in respect of sales and purchases awaiting settlement, amounts receivable for creations and payable for redemptions and debtors for accrued revenue. In doing so, the authorised unit trust manager accepts market price risk in relation to the investment portfolio. The fund may also enter into a range of derivative transactions whose purpose is efficient portfolio management. In addition the fund only executes derivative contracts where both the derivative instrument and the counterparty have been approved by the authorised unit trust manager. The risks arising from financial instruments and the authorised unit trust manager s policies for the monitoring and managing of these risks are stated below in accordance with the risk management policy of the authorised unit trust manager. These policies have been consistent for both years through which these financial statements relate. Market price risk Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the fund might suffer through holding market positions in the face of price movements. This means the value of an investor s holding may go down as well as up and an investor may not recover the amount invested. Investors should consider the degree of exposure of the fund in the context of all their investments. The fund s investment portfolio is exposed to market price fluctuations, which are monitored by the authorised unit trust manager as per the policies as set out in the prospectus. The investment guidelines and investment and borrowing powers set out in the instrument of incorporation, the prospectus and in the Financial Conduct Authority s Collective Investment Schemes Sourcebook describe the nature of the market risk to which the fund will be exposed. 21

24 Notes to the financial statements 12.Risk management policies and disclosures () Currency risk Although the fund s capital and income are denominated in sterling, a proportion of the fund s investments may have currency exposure and, as a result, the income and capital value of the fund are affected by currency movements. Currency risk is the risk that the value of the fund s investments will fluctuate as a result of changes in currency exchange rates. For funds where a proportion of the net assets of the fund is denominated in currencies other than sterling, the balance sheet can be affected by movements in exchange rates. The authorised unit trust manager monitors the currency exposure of the fund and may seek to manage exposure to currency movements by using forward exchange contracts or by hedging the sterling value of investments that are priced in other currencies. The table below details the currency risk profile at the balance sheet date Currency Euro 5,939 Sterling 9,639,644 Dollar 1, ,647,319 Currency Euro 5,789 Sterling 8,619,502 Dollar 77,761 8,703,052 At the balance sheet date, if the value of sterling increased or decreased by 10%, with all other variables held constant, then the net assets attributable to unitholders would increase or decrease by approximately 768 (2017: 8,355). Interest rate risk Interest rate risk, being the risk that the value of investments will fluctuate as a result of interest rate changes. The majority of the fund s assets comprise equity shares which neither pay interest nor have a maturity date. Interest receivable on bank deposits or payable on bank overdraft positions will be affected by fluctuations in interest rates. There is no material interest rate exposure in the fund (2017: none). Credit risk Credit risk arises from the possibility that the issuer of a security will be unable to pay interest and principal in a timely manner. Adhering to investment guidelines and avoiding excessive exposure to one particular issuer can limit credit risk. There are no net borrowings or unlisted securities and the authorised unit trust manager considers that the fund has little exposure to credit risk. 22

25 Notes to the financial statements 12.Risk management policies and disclosures () Liquidity risk Liquidity risk is the risk that a fund cannot raise sufficient cash to meet its liabilities when due. One of the key factors influencing this will be the ability to sell investments at, or close to, the fair value without a significant loss being realised. Under normal circumstances, a Fund will remain close to fully invested. However, where circumstances require: either because a view of illiquid securities markets or high levels of redemptions in the fund, the fund may hold cash and/or more liquid assets. Temporary higher liquidity levels may also arise during the carrying out of a change in asset allocation policy, or following a large issue of units. The manger considers that there is little exposure to liquidity risk. Counterparty risk The risk that the counterparty will not deliver the investments for a purchase or the cash for a sale after the Fund has fulfilled it s responsibilities which could result in the fund suffering a loss. The Investment manager minimises the risk by conducting trades through only the most reputable counter parties. Derivatives The fund may enter into derivative contracts for efficient portfolio management (EPM) purposes. The purposes of EPM must be to achieve reduction of risk, the reduction of cost, or the generation of additional income or capital with an acceptably low level of risk and the use of these instruments must not cause the fund to stray from its investment objectives. Any EPM transaction must be economically appropriate and the exposure fully covered. The authorised unit trust manager monitors the use of derivatives to ensure EPM rules are satisfied. In the opinion of the authorised unit trust manager there is no sophisticated derivative use within the fund and accordingly a sensitivity analysis is not presented. Fair value of financial assets and liabilities Investments disclosed as at the balance sheet date are at fair value. Current assets and liabilities disclosed in the balance sheet are at amortised cost which is approximate to fair value. 23

26 Notes to the financial statements 13.Portfolio transaction costs Purchases Analysis Net before of purchases purchase Commissions transaction cost paid Taxes cost % % Equities 656, % 3, % 653,285 Corporate actions 28, % 0.00% 28,056 Total purchases after commissions and tax 684,637 Sales Analysis Net before of sales sale Commissions Taxes transaction proceeds paid cost % % Equities 767, % % 767,636 Total sales after commissions and tax 767,360 Commission as a % of average net assets 0.01% Taxes as a % of average net assets 0.03% Purchases Analysis Net before of purchases purchase Commissions transaction cost paid Taxes cost % % Equities 712, % 2, % 709,761 Corporate actions 63, % 0.00% 63,651 Total purchases after commissions and tax 776,563 Sales Analysis Net before of sales sale Commissions Taxes transaction proceeds paid cost % % Equities 451, % % 451,535 Total sales after commissions and tax 451,086 Commission as a % of average net assets 0.01% Taxes as a % of average net assets 0.03% Commissions and taxes as a % of the average net assets form part of the direct transactions costs stated within the comparative tables on page 8. The direct transaction costs within the comparative tables may differ due to the effect of dilution levies charged (where applicable). 24

27 Notes to the financial statements 14.Portfolio dealing spread The average portfolio dealing spread at 30 June 2018 is 0.59% (2017: 0.52%). 15.Fair value disclosure Valuation technique Assets Liabilities Assets Liabilities Level 1^ 9,307,538 8,547,785 Level 2^^ Level 3^^^ ^ Level 1: unadjusted quoted price in an active market for an identical instrument. 9,307,538 8,547,785 ^^ Level 2: valuation techniques using observable inputs other than quoted prices within level 1. ^^^ Level 3: valuation techniques using unobservable inputs. 16.Unitholders funds Opening number of units 2,317,185 Units issued 12,931 Units cancelled (5,012) Closing number of units 2,325,104 25

28 Distribution table for the year ended 30 June 2018 Accumulation unit distribution Distribution Amount Amount reinvested reinvested p p Final Equalisation No equalisation is applied to transactions in units. 26

29 General information Authorised status The (the fund) is an authorised unit trust scheme and UCITS scheme operating under chapter 5 of COLL. The fund qualifies for certification under the UCITS directive but does not currently have a UCITS certificate. The fund was established on 5 September 2006 and authorised by the FCA on 6 September The fund does not intend to have an interest in immovable property. Unitholders are not liable for the debts of the fund. Head office of the authorised unit trust manager Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Address for service The head office is the address in the United Kingdom for service on the fund of notices or other documents required or authorised to be served on it. Base currency The base currency of the fund is pounds sterling. Units The trust deed allows the fund to issue different classes of units in respect of the fund. The fund currently has the following units available for investment: Class A accumulation units Holders of accumulation units are not entitled to be paid the revenue attributable to such units, but that revenue is retained and accumulated for the benefit of unitholders and is reflected in the price of units. Valuation point The scheme property of the fund will normally be valued at 12:00 on each dealing day for the purpose of calculating the price at which units in the fund may be issued, sold, repurchased or redeemed. For the purpose of the pricing of units, a business day is defined as a day on which the dealing office of the authorised unit trust manager (AUTM) is open for the buying and selling of units. The AUTM may at any time during a business day carry out an additional valuation of the property of the fund if the AUTM considers it desirable to do so, with the trustee s approval. Buying and selling of units The AUTM will accept orders for the purchase and sale of units on normal business days between 08:30 and 16:30. Instructions to buy or sell units may either be in writing to: Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Or by telephone on: The AUTM has the right to establish facilities for recording telephone calls made or received on this telephone line. A contract note giving details of the units purchased will be issued no later than the next business day after the business day on which an application to purchase units is received and instrumented by the AUTM. Certificates will not be issued in respect of units. Ownership of units will be evidenced by an entry on the register of unitholders. 27