MI Metropolis Valuefund

Transcription

1 Interim Reort 31 March 2018

2 Contents Page Directory Investment Objective and Policy Investment Manager s Reort Portfolio Statement Comarative Tables Statement of Total Return Statement of Change in Net Assets Attributable to Shareholders Balance Sheet Certification of the Interim reort by the Authorised Cororate Director General Information

3 Directory Authorised Cororate Director (ACD) & Registrar Maitland Institutional Services Ltd Sringfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telehone: Fax: Website: (Authorised and regulated by the Financial Conduct Authority) Customer Service Centre Sringfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telehone: Fax: (Authorised and regulated by the Financial Conduct Authority) Directors of the Authorised Cororate Director R. Ackermann J. Clark (aointed 21 December 2017) P.J. Foley-Brickley S. Georgala D. Jones G. Kok (aointed 30 November 2017) R.W. Leedham (retired 19 December 2017) Investment Manager Metroolis Caital Ltd Amersham Court, 154 Station Road, Amersham, Buckinghamshire HP6 5DW (Authorised and regulated by the Financial Conduct Authority) Fund Managers Jonathan Mills Simon Denison-Smith Deositary 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) Indeendent Auditor KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square, Canary Wharf, London E14 5GL 1

4 Investment Objective and Policy Investment Objective The investment objective of the Comany is to achieve long term caital growth mainly through investment in a concentrated ortfolio of securities in listed comanies. Investment Policy It is the Comany s olicy to invest mainly in securities (including shares and debt securities) of comanies whose securities are admitted to or dealt in on Eligible Markets (as defined in Aendix II in the rosectus) established in the EEA, the United States or Canada. At its discretion, the Comany may invest in securities (including shares and debt securities) of comanies whose securities are admitted to or dealt in on other Eligible Markets. The Comany may also invest in money market instruments, UK government and ublic securities, deosits, cash and near cash, closed end funds, and regulated collective investment schemes. The Comany may utilise derivatives for efficient ortfolio management uroses, including hedging. The Comany may invest in new issues but is unlikely to invest in new issues to any significant extent. The Comany will aim to maintain a concentrated ortfolio, tyically consisting of u to 25 comanies at one time. However the Comany reserves the right to a less concentrated ortfolio should they regard it as in the interests of Shareholders. In ursuing the investment objective and olicy, the Comany will seek to identify for investment comanies which it considers to have some or all of the following characteristics: a history of strong cashflow generation, a strong balance sheet, a strong cometitive osition in a market with high barriers to entry and security of future revenue streams (through, for examle, long-term contracts, a unique brand, infrastructure which is difficult to relicate, atents or licenses). In addition, the Comany will only invest in such comanies when it considers them to be undervalued by the market. Investment Manager s Reort for the eriod ended 31 March 2018 Performance Last twelve months During the eriod under review the NAV of the Fund decreased by -0.5%. We comleted the exit from Deere and International Worklace Grou and added one new osition. In the run u to Christmas, we took advantage of rice dis in Oracle and Allergan and built our osition in the Bank of Ireland Grou. The New Year started very quietly with markets scaling new heights; our cash osition eaked in late January at 14% in art because of a reduction in our osition in Cisco, which came close to intrinsic value. However, market volatility resumed in February and March, along with our trading activity. Over the course of the 2 months, we were able to deloy over 8% of that cash. We took advantage of the volatility to restructure the ortfolio slightly, reducing our ositions in NIKE - B (where recent increases in rice had taken it close to intrinsic value) and Sanofi (where our view of the quality of the business has taken a ste backwards), whilst increasing ositions in Alhabet - A, Berkshire Hathaway - B and State Street, which currently all have substantial margins of safety and the rosect of strong future returns. A combination of ositive udates to our models and the trading activity discussed above has ushed the intrinsic value of the Fund u by 11%. This, along with the reduction in the NAV, has increased the margin of safety across the ortfolio to levels that we have not seen since just after the Brexit referendum and materially higher than the average for the last 5 years. Share Class Change A Class Accumulation (Net Asset Value, ence) % 1 Net Asset Values of the Accumulation share classes are rovided by Maitland Institutional Services Ltd, the fund ACD and Administrator; historical rices for other share classes can be rovided on request. 2

5 Investment Manager s Reort continued Past erformance is not a guide to future erformance You can track the fund erformance on the following website: htt:// You can also track the erformance of the Fund through Bloomberg. Our Bloomberg tickers are: Ticker Share Class Bloomberg ID SFMET2A LN A Class Accumulation BBG004HSHLZ8 SFMET2I LN A Class Income BBG004HSJ493 Long-term Performance Over the last 7 years, the Fund has delivered a total return of 111.0% (net of fees), which reresents an annualised return of 11.3%, which is marginally below our erformance target (CPI + 10%) for the Fund. Fund Net Return 2 15 Aril 2011 to 31 March 2018 A Class (Acc) 2011 (8.5 months) -1.2% % % % % % % 2018 YTD -3.3% Returns since incetion (15 Aril 2011) Cumulative returns % Annualised +11.3% I am a better investor because I am a businessman, and a better businessman because I am an investor. Warren Buffett On another occasion, Buffett also stated: Can you really exlain to a fish what it s like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value. Buffett has ut these words into ractice by involving his two in-house fund managers, Todd Coombs and Ted Weschler, directly in some of Berkshire Hathaway s businesses. He stated that he was doing this so that they would get some business exerience, which would further imrove their investing skills. He resumably also believes that their involvement will be of benefit to the businesses. Buffett is making the same kind of distinction that the hilosoher Michael Oakeshott made when he wrote of the differences between theoretical knowledge and ractical knowledge. The former can be learned from a book, but the latter can only be learned from the ersonal exerience of doing something. So, one can learn the laws of football or cricket from a book, but it is only when one lays one of these sorts for many hours in the right environment that one can truly learn it. 2 Source: Sharefunds, Maitland. All dividends have been reinvested. 3 Year to 31 December. 3

6 Investment Manager s Reort continued This strong ersonal belief of Buffett s has, unlike almost everything else that he has said about investing and business over the years, been largely ignored both by the business community and the investment community. There is remarkably little overla between the two and few eole make the journey, in a rofessional caacity, from industry to ublic market investing, or vice versa. There are of course many successful entrereneurs and business eole who become investors in smaller businesses, articularly start-us in sectors where they have had direct exerience. Similarly, fund managers may invest some of their own money into rivate businesses but would be very unlikely to take on an executive role. There is rather more movement between the business community and rivate equity, with retiring CEOs becoming involved in PE funds though usually as oerating artners, rather than those who make the investment decisions. Buffett s unusual ability as a CEO, to look at acquisitions with a fund manager s ersective for return on caital, has been an enormous advantage for him (and Berkshire s other shareholders) over many decades because he has avoided over-aying. Similarly, his businesserson s ability to look at stock market investments through the eyes of a long-term owner has meant that he has been confident enough to see short-term market rice gyrations for what they are, and to take advantage of them. If more CEOs had exerience of fund management, might they be a little less keen on making over-riced acquisitions or undertaking caital exenditure, which fails to generate good returns? Similarly, if more fund managers had the exerience of running businesses, would they be more likely to think long term about the comanies in which they invest and be less concerned about stock rice movements driven by transitory news flow, macro events or market sentiment? But if Buffett is right, why is it that there is so little overla between the two worlds? Is the lack of movement because eole do not want to move, or because they cannot? To try to answer these questions, I have drawn some conclusions from my own ersonal journey. After University, I joined (along with Simon) a strategy consultancy, Bain & Co, where I learned the language of business and the value of alying logic, common sense and detailed analysis to business roblems. I left Bain and joined Schroders in its Cororate Finance team so that I could better understand the financial environment in which businesses oerate. There I learned a lot about financial markets, acquisitions, hostile takeovers and cororate defences, business auctions, demergers, rights issues, financial market regulation and suchlike. I left Schroders in 1994 and set u a business with just 30,000 of caital. Initially, the business was a ure entrereneurial, organic growth story. My conclusion from this eriod is that start-us are very hard work! Entrereneurs can never relax because new businesses are fragile. Entrereneurs must adat instantly (sometimes on the same day) to new information or changes in circumstances. They must be the lead sales erson as well as the rimary cost controller. It is an exhausting, immersive, 24- hour-a-day exerience that requires a huge amount of energy (and little slee). This ure start-u entrereneurialism is best done when one is young, has maximum energy, the highest levels of otimism and the ability to live on a low salary without deendent children. After 8 years of organic growth, the business was reliably cash generative and, insired by my first visit to Berkshire s Annual General Meeting, we started on a new ath growth by acquisition. This was all about deloying caital in a series of investments in different, uncorrelated sectors, initially within the media and then the software industries. We eventually made 30 acquisitions over a 9-year eriod. These were somewhat unusual as comany acquisitions because they were not driven by any strategic rationale. We knew before we made them that, because each business oerated in a unique industry niche, the synergies with the rest of the comany were minimal. Each acquisition therefore had to stand on its own legs and justify its urchase rice without meaningful cost savings or revenue growth. In this sense we aroached acquisitions more like a Private Equity (PE) investor than a strategic buyer, however, there was one major difference. Because of their fund structure, PE investors must eventually sell the comanies they buy, usually after 3-5 years, even if they would like to kee them. They therefore start thinking about the exit before the initial acquisition. In contrast, because the transaction costs in buying or selling a small business are so high in relation to its value, our strategy was to buy and hold forever. The last thing we wanted to do was try to find another buyer for a business in a few years time. We wanted to send our time buying businesses not selling them. In addition, our valuation disciline was such that we were not generally buying sexy businesses where we would exect to find someone willing to ay a remium in the future. We found that businesses with these characteristics were generally over-riced to begin with. 4

7 Investment Manager s Reort continued Our aroach was simly to focus on the fundamentals and value businesses on the discounted cash flows, which we believed we would receive if we held them forever. When you are sinking your own money into a business with effectively no way out if you make a oor decision, you tend to think very carefully about what you are doing. It is not the sort of thing one does on a whim and it is as far away from seculation as one can imagine. We inevitably became very selective both on quality and rice. There are 3 distinct hases to a successful acquisition: I. The initial investment assessment where one reads a new Information Memorandum, meets management, asks questions, conducts informal due diligence and determines business quality and value; II. The rocess of doing the deal, which involves formal due diligence (often conducted by an accountancy firm for the benefit of a bank with little real business insight) and the negotiation of a sale and urchase agreement (with heavy involvement from lawyers); and III. Post comletion integration which involves getting to know the eole, otentially moving them to a new location, adjusting roles, utting in lace new incentives, setting them u on new systems etc. Each of these requires different skillsets. The first is ure investment analysis, the second requires secific Merger and Acquisition (M&A) skills and the third is an oerational role concerned with managing eole and business systems. My exerience from reviewing over 750 sales memoranda, looking in detail at 150 otential deals and comleting on 30 was that 95% of our success arose from hase 1. The most imortant single success factor was a quality assessment, which ensured that we steered clear of most acquisitions. Having followed many of the comanies we assed on, I noticed that the majority significantly under-erformed. We were good at avoiding these mistakes. The second success factor was not overaying for the acquisitions we comleted. This had a double benefit as it meant that even if a business did less well than we exected, we still made a ositive return, whereas if it did as well as we hoed (or better) our returns were excellent. Phase 2, the M&A art, added very little real value but a lot of stress. It would be very rare to find that a bad decision in hase 1 could be rectified by work done in hase 2 which usually becomes confirmatory once a deal gets momentum behind it. There is certainly nothing that can be written into a Sale & Purchase Agreement by a clever lawyer or accountant, which will save a buyer from losing money if the quality of the business is too low or if the urchase rice is too high. The most imortant lesson I drew from the hase 3 oerational art, where many acquirers go wrong, is not to damage a business which is already working well. Acquirers often come in with an arrogant cororate mentality and a belief that they know better than the management who have been successfully running a business for years. Many acquired comanies then fail because what made them worth buying in the first lace is eroded, the culture changes and the best eole leave. Overall, from the 30 acquisitions the IRRs were over 30%.a. so financially everyone was hay. However, on a ersonal level, I realised that the first art of the rocess was the one where I added value and which I enjoyed. I found that analysing the quality and value of comanies was the most intellectually interesting asect of business. In contrast, the rocesses of executing acquisitions and integrating them held little aeal. Looking around at fellow CEOs, I also realised that, just as you never see a baby igeon, you never (or very rarely) meet an old CEO running a large business. While there are successful investors in their 70s and 80s, there are almost no CEOs of this age. The reasons are not hard to identify. All the most difficult roblems in a business end u on a CEO s desk and the constant barrage of these is wearing on anyone. This is one reason why average CEO tenure at the 300 largest listed UK comanies is just 4.8 years and the average age is a rather youthful 52. In contrast, investing in the ublic markets offered a far wider range of comanies to look at and almost no transaction costs to making an investment. As an original investor and non-executive director of my media business, Simon had shared this journey with me and was equally attracted to ublic equity investment. Simon s sale of his software business gave us the oortunity to ut this shared interest into ractice. We started off with a rivate fund in May 2008 almost exactly a decade ago. We ran this seriously and it did well, which attracted interest from friends and family. In order to manage money for other eole, we had to set u a regulated investment management comany and a regulated fund a rocess which took nearly 2 years. Seeded with the equity ositions from the rivate fund, we launched the Metroolis Valuefund in Aril

8 Investment Manager s Reort continued Understandably, the allocators who ut money into funds want to see erformance over a long eriod of time before they invest. Our erformance over the full decade of investing and the 7 years running a ublic fund has been strong, articularly on a risk adjusted basis. So far we have exceeded our original target of 10% lus inflation. We have just taken on our first segregated institutional account and now have a 5 star Morningstar rating, a 5 crown FE/Trustnet rating and the to Lier ratings for total return, consistent return and reservation. We are delighted that our assets under management are growing quickly (heading towards $200m). But this is after 10 years. Probably we could have done things more effectively earlier on the marketing front. But the requirement for a long track record and substantial AUM (a classic chicken and egg roblem) are very big barriers to start-us by eole from outside the fund management industry, however effective one might be at exlaining oneself. Simon s and my exerience demonstrates how difficult it is to cross the barrier from business into fund management. Not many successful CEOs or business owners would want to set out on a journey which takes 10 years to become a fully-formed business, if it goes well. It is only if one has a real assion and vocation for the role that one would start on this journey. The critical oint about ublic equity investment is that it is very difficult to sustain long-term outerformance on a art-time basis. To achieve above average results, one needs a clear and consistent investment hilosohy, a strong team of analysts, a discilined investment rocess and a culture of robust internal debate. Our style of investing also requires a great deal of time analysing new ositions before we invest (we average 30 erson days of work er investment) and continuous monitoring of investee comanies to check that they remain on the exected ath. All of this also has to take lace in a heavily regulated environment designed quite rightly to rotect investors money. In contrast, one can do rivate market investing in start-us while still working full time as a business executive, as it is unstructured and largely unregulated. Successful business eole can also ut their oerational skills to use in start-us, where they can rovide advice. If the journey from CEO to fund manager is difficult, the journey the other way is robably imossible. There is essentially no executive role within a ublic comany that a fund manager could naturally fit into other than investor relations, which would not be many fund managers first choice for a second career. My conclusion is therefore that the fund management industry and the cororate world are destined to remain searated in a way that Buffett regards as a loss to both. Clearly it is ossible to have success in either of these fields without direct exerience of the other. But it is interesting to consider whether those fund managers who are already very good could be even better if they had some direct business exerience. For our art, Simon and I are delighted we made the lea and have been extremely fortunate to receive advice and generous counsel from many friends over the years both outside and inside the fund management industry. If any of our readers have friends setting out on this journey, we would be hay to share our learnings. Metroolis Caital Ltd Investment Manager to the 25 May

9 Portfolio Statement as at 31 March 2018 Market % of total value net assets Holding Security 2018 INDUSTRIALS 13.75% (17.76%) Construction & Materials 0.59% (0.69%) 646,180 Smart (J) 697, Aerosace & Defense 1.96% (2.04%) 268,296 Rolls Royce Holdings 2,337, Electronic & Electrical Equiment 2.03% (2.15%) 762,762 Morgan Advanced Materials 2,421, Industrial Engineering 4.79% (5.91%) 457,109 Kubota 5,703, Suort Services 4.38% (6.97%) 1,133,242 Howden Joinery Grou 5,221, CONSUMER GOODS 11.57% (13.63%) Leisure Goods 6.82% (7.81%) 12,020 Samsung Electronics GDR Preferred 8,119, Personal Goods 4.75% (5.82%) 119,855 NIKE - B 5,655, HEALTH CARE 9.59% (11.53%) Pharmaceuticals & Biotechnology 9.59% (11.53%) 48,994 Allergan 5,873, ,759 Sanofi 5,550, CONSUMER SERVICES 15.96% (11.79%) 11,424, General Retailers 3.44% (3.61%) 1,255,318 Halfords Grou 4,092, Travel & Leisure 12.52% (8.18%) 1,505,999 Merlin Entertainment 5,219, ,986 Ryanair Holdings 9,701, FINANCIALS 22.81% (15.84%) 14,921, Banks 6.20% (3.29%) 558,000 Bank of Ireland Grou 3,484, ,047,862 Lloyds Banking Grou 3,910, ,394, Non-life Insurance 9.67% (7.74%) 194,880 Admiral Grou 3,593, ,695 Berkshire Hathaway - B 7,916, ,510,

10 Portfolio Statement continued Market % of total value net assets Holding Security 2018 Financial Services 6.94% (4.81%) 116,353 State Street 8,262, TECHNOLOGY 19.81% (20.35%) Software & Comuter Services 17.48% (16.22%) 12,991 Alhabet - A 9,593, ,970 Comutacenter 5,544, ,484 Oracle 5,688, ,825, Technology Hardware & Equiment 2.33% (4.13%) 91,316 Cisco 2,779, Investment assets 111,368, Net other assets 7,759, Net assets 119,127, All investments are ordinary shares or stock units on a regulated securities market unless otherwise stated. The ercentages in brackets show the equivalent % holdings as at Total urchases for the eriod: 36,038,745 Total sales for the eriod: 16,067,495 8

11 Comarative Tables Change in net assets er share A Income Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Closing net asset value er share ^After direct transaction costs of Performance Return after charges -0.55% 19.57% 25.91% 12.86% Other information Closing net asset value 5,656,575 5,725,602 2,370,000 4,039,000 Closing number of shares 2,756,408 2,774,662 1,367,971 2,920,687 Oerating charges 1.19% 1.21% 1.33% 1.35% Ongoing oerating charges* 1.19% 1.20% 1.33% 1.35% Direct transaction costs 0.13% 0.19% 0.29% 0.11% Prices Highest share rice Lowest share rice Closing net asset value year ending 30 Setember 2015 and 2016 rounded ( 000s). A Accumulation Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Retained distributions on accumulation shares Closing net asset value er share ^After direct transaction costs of Performance Return after charges -0.56% 20.20% 26.29% 12.66% Other information Closing net asset value 52,320,624 47,501,068 40,876,000 27,684,000 Closing number of shares 24,800,038 22,389,745 23,158,324 19,806,416 Oerating charges 1.19% 1.21% 1.33% 1.35% Ongoing oerating charges* 1.19% 1.20% 1.33% 1.35% Direct transaction costs 0.13% 0.19% 0.29% 0.11% Prices Highest share rice Lowest share rice Closing net asset value year ending 30 Setember 2015 and 2016 rounded ( 000s). 9

12 Comarative Tables continued Change in net assets er share S Income ^ Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Closing net asset value er share ^After direct transaction costs of Performance Return after charges -0.38% 20.32% 13.70% Other information Closing net asset value 17,140,074 12,517,488 3,107,000 Closing number of shares 8,448,073 6,146,252 1,822,113 Oerating charges 0.84% 0.86% 0.99% Ongoing oerating charges* 0.84% 0.85% 0.99% Direct transaction costs 0.13% 0.19% 0.29% Prices Highest share rice Lowest share rice ^Share classes S Income launched 1 June Closing net asset value year ending 30 Setember 2016 rounded ( 000s). S Accumulation ^ Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Retained distributions on accumulation shares Closing net asset value er share ^After direct transaction costs of Performance Return after charges -0.38% 20.62% 13.41% Other information Closing net asset value 42,888,445 34,701,336 13,765,000 Closing number of shares 20,930,274 16,870,614 8,071,635 Oerating charges 0.84% 0.86% 0.99% Ongoing oerating charges* 0.84% 0.85% 0.99% Direct transaction costs 0.13% 0.19% 0.29% Prices Highest share rice Lowest share rice ^Share classes S Accumulation launched 1 June Closing net asset value year ending 30 Setember 2016 rounded ( 000s). 10

13 Comarative Tables continued Change in net assets er share B Income B Accumulation ^^ ^ ^ Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Retained distributions on accumulation shares n/a n/a Closing net asset value er share ^After direct transaction costs of Performance Return after charges % 94.33% -0.43% 94.33% Other information Closing net asset value 828,990 1,121, ,346 Closing number of shares 427, , ,032 Oerating charges 0.96% 0.94% 0.96% Ongoing oerating charges* 0.95% 0.94% 0.95% Direct transaction costs 0.13% 0.19% 0.13% 0.19% Prices Highest share rice Lowest share rice ^Share classes B Income and Accumulation launched 20 June ^^B Income share class had no investments from 08 March Return after charges at this date was 3.22%. Obsolete shareclasses Institutional Income Institutional Accumulation ^^ ^^ Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Retained distributions on accumulation shares n/a n/a Closing net asset value er share ^After direct transaction costs of Performance Return after charges % 21.28% % 11.58% Other information Closing net asset value 21,000 2,481,000 Closing number of shares 15,154 1,810,920 Oerating charges 0.00% 1.36% 0.00% 1.35% Ongoing oerating charges* 0.00% 1.36% 0.00% 1.35% Direct transaction costs 0.29% 0.11% 0.29% 0.11% Prices Highest share rice Lowest share rice ^^Institutional Income and Accumulation share classes closed 31 May Return after charges at the closure date are 10.27% for Institutional Income and 10.36% for Institutional Accumulation. Closing net asset value year ending 30 Setember 2015 rounded ( 000s). 11

14 Comarative Tables continued Retail Income Retail Accumulation ^^ ^^ Oening net asset value er share Return before oerating charges^ Oerating charges Return after oerating charges^ Distributions Retained distributions on accumulation shares n/a Closing net asset value er share ^After direct transaction costs of Performance Return after charges % % 12.32% Other information Closing net asset value 297,000 Closing number of shares 220,837 Oerating charges 0.00% 0.00% 1.35% Ongoing oerating charges* 0.00% 0.00% 1.35% Direct transaction costs 0.11% 0.29% 0.11% Prices Highest share rice Lowest share rice ^^Retail Income share class closed 6 November Retail Accumulation share class closed 31 May Return after charges at the closure date are 0.00% for Retail Income and 10.34% for Retail Accumulation. Closing net asset value year ending 30 Setember 2015 rounded ( 000s). *Due to the changes in exenses art way through the year, taking an average of the daily net asset values for the last month of the year against anticiated annualised costs has the effect of decreasing the oerating charges by 0.01%. The ACD believes this to be more reresentative of the charges going forward. Oerating charges include indirect costs incurred in the maintenance and running of the Fund, as disclosed (but not limited to) the detailed exenses within the Statement of Total Return. The figures used within this table have been calculated by annualising the exenses incurred against the average Net Asset Value for the accounting eriod. The return after charges is calculated as the closing net asset value er share lus the distributions on income shares minus the oening net asset value er share as a % of the oening net asset value er share. Direct transaction costs include fees, commissions, transfer taxes and duties in the urchasing and selling of investments, which are offset (where alicable) against any dilution levies charged within the accounting eriod. The figures used within the table have been calculated against the average Net Asset Value for the accounting eriod. 12

15 Comarative Tables continued Risk and reward rofile The risk and reward indicator table demonstrates where the Fund ranks in terms of its otential risk and reward. The higher the rank the greater the otential reward but the greater the risk of losing money. It is based on ast data, may change over time and may not be a reliable indication of the future risk rofile of the Fund. The shaded area in the table below shows the Fund s ranking on the risk and reward indicator. Tyically lower rewards, Tyically higher rewards, lower risk higher risk The Fund is ranked 4 because funds of this tye have exerienced average rises and falls in value in the ast. 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: For funds investing globally, currency exchange rate fluctuations may have a ositive or negative imact on the value of your investment. This Fund holds a limited number of investments. If one of these investments falls in value this can have a greater imact on the Fund s value than if it held a larger number of investments. Risk warning An investment in an Oen Ended Investment Comany should be regarded as a medium to long-term investment. Investors should be aware that the rice of shares and the revenue from them can fall as well as rise and investors may not receive back the full amount invested. Past erformance is not a guide to future erformance. Investments denominated in currencies other than the base currency are subject to fluctuation in exchange rates, which can be favourable or unfavourable. 13

16 Statement of Total Return for the eriod ended 31 March Income Net caital (losses)/gains (968,858) 9,153,351 Revenue 455, ,600 Exenses (585,390) (381,891) Interest ayable and similar charges (96) Net loss before taxation (129,604) (115,387) Taxation (41,397) (20,228) Net loss after taxation (171,001) (135,615) Total return before distributions (1,139,859) 9,017,736 Distributions 3, Change in net assets attributable to Shareholders from investment activities (1,136,631) 9,018,243 Statement of Change in Net Assets Attributable to Shareholders for the eriod ended 31 March Oening net assets attributable to Shareholders 101,538,830 60,117,756 Amounts receivable on issue of shares 25,202,484 24,951,951 Less: Amounts ayable on cancellation of shares (6,477,309) (7,585,332) 18,725,175 17,366,619 Dilution levy 4,386 Change in net assets attributable to Shareholders from investment activities (see Statement of Total Return above) (1,136,631) 9,018,243 Closing net assets attributable to Shareholders 119,127,374 86,507,004 The oening net assets attributable to shareholders for the current eriod do not equal the closing net assets attributable to shareholders for the comarative eriod as they are not consecutive eriods. 14

17 Balance Sheet as at 31 March 2018 ASSETS Fixed Assets Investments 111,368,235 92,297,097 Current Assets Debtors 1,568, ,212 Cash and bank balances 6,877,745 9,160,450 Total current assets 8,446,418 9,481,662 Total assets 119,814, ,778,759 LIABILITIES Investment liabilities Creditors Bank overdrafts (103,873) Distribution ayable (116,554) Other creditors (583,406) (123,375) Total creditors (687,279) (239,929) Total liabilities (687,279) (239,929) Net assets attributable to Shareholders 119,127, ,538,830 The interim financial statements have been reared 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 interim financial statements have been reared on the same basis as the audited financial statements for the year ended 30 Setember The financial statements have been reared on the going concern basis. Certification of the Interim Reort by the Authorised Cororate Director This reort has been reared in accordance with the requirements of the Financial Conduct Authority s Collective Investment Schemes sourcebook ( the COLL Sourcebook ) and the Statement of Recommended Practice issued by the Investment Association. R. Ackermann D. Jones Directors Maitland Institutional Services Ltd 25 May

18 General Information Authorised Status (the Comany ) is structured as an Investment Comany with Variable Caital ( ICVC ), under regulation 12 (Authorisation) of the OEIC Regulations (Oen-Ended Investment Comanies Regulations 2001 (SI 2001/1228)). The Comany does not intend to have an interest in immovable roerty. The Comany is authorised and regulated in the UK by the Financial Conduct Authority ( FCA ) as a UCITS Retail Scheme and Umbrella Comany under the COLL Sourcebook. The Comany was incororated in England and Wales on 21 January 2011 under registration number IC The Shareholders are not liable for the debts of the Comany. Head Office Sringfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW. Address for Service The Head Office is the address in the United Kingdom for service on the Comany of notices or other documents required or authorised to be served on it. Base Currency The base currency of the Comany is Pounds Sterling. Share Caital The minimum share caital of the Comany is 1 and the maximum is 100,000,000,000. Shares in the Comany have no ar value. The share caital of the Comany at all times equals the sum of the net asset value of the Fund. Classes of Shares The Instrument of Incororation allows each Fund to issue different classes of shares in resect of any Fund. The Fund currently has the following classes of shares available for investment: A Income A Accumulation S Income S Accumulation B Income B Accumulation Holders of Income shares are entitled to be aid the revenue attributable to such shares in resect of each annual accounting eriod in the currency of the relevant share class. Holders of Accumulation shares are not entitled to be aid the revenue attributable to such shares, but that revenue is retained and accumulated for the benefit of shareholders and is reflected in the rice of shares. Valuation Point The scheme roerty of the Comany and each Fund will normally be valued at 16:30 on each dealing day for the urose of calculating the rice at which shares in the Comany may be issued, sold, reurchased or redeemed. For the urose of the ricing of shares, a business day is defined as a day on which the dealing office of the ACD is oen for the buying and selling of shares. The ACD may at any time during a business day carry out an additional valuation of the roerty of the Fund if the ACD considers it desirable to do so, with the Deositary s aroval 16

19 General Information continued Buying, Redeeming and Switching of Shares The ACD will accet orders for the urchase, sale and switching of shares on normal business days between 08:30 and 16:30. Instructions to buy or sell shares may either be in writing to: Sringfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Or by telehone on: The ACD has the right to establish facilities for recording telehone calls made or received on this telehone line. A contract note giving details of the shares urchased will be issued no later than the next business day after the business day on which an alication to urchase shares is received and instrumented by the ACD. Certificates will not be issued in resect of shares. Ownershi of shares will be evidenced by an entry on the register of shareholders. Pricing Basis There is a single rice for buying, selling and switching shares in a Fund which reresents the Net Asset Value of the Fund concerned. The share rice is calculated on a forward ricing basis, that is at the next Valuation Point after the urchase or redemtion is deemed to be acceted by the ACD. The rices of shares are ublished daily on Neither the ACD nor the Comany can be held resonsible for any errors in the ublication of the rices. The shares in the Comany will be issued and redeemed on a forward ricing basis which means that the rice will not necessarily be the same as the ublished rice. Other Information The Instrument of Incororation, Prosectus, Key Investor Information Document and the most recent interim and annual reorts may be insected at the office of the Comany which is also the Head Office of the Comany. Coies may be obtained free of charge uon alication. They are also available from the website of the Comany, the details of which are given in the directory of this reort. Shareholders who have comlaints about the oeration of the Comany should in the first instance contact the ACD, or, following that, may make their comlaint direct to the Financial Ombudsman Service, Exchange Tower, London E14 9SR. Risk Warning An investment in an Investment Comany with Variable Caital should be regarded as a medium to long-term investment. Investors should be aware that the rice of shares and the revenue from them can fall as well as rise and investors may not receive back the full amount invested. Past erformance is not a guide to future erformance. Investments denominated in currencies other than the base currency are subject to fluctuation in exchange rates, which can be favourable or unfavourable. 17

20 Registered in England No Authorised and regulated by the Financial Conduct Authority.