SouthernSun Value Fund p.l.c. (Investment Company with Variable Capital)

Transcription

1 (Investment Company with Variable Capital) Interim Report and Unaudited Condensed Financial Statements For the six months ended 30 June 2018 Registration No

2 For the financial period ended 30 June 2018 CONTENTS Interim Report and Unaudited Condensed Financial Statements General Information 1-2 Investment Manager's Report 3-4 Unaudited Statement of Financial Position 5 Unaudited Statement of Comprehensive Income 6 Unaudited Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares 7 Unaudited Statement of Cash Flows 8 Notes to the Financial Statements 9-15 Schedule of Investments 16 Appendix 1 - Significant Portfolio Changes During the Financial Period Page

3 General Information Board of Directors Paul McGowan* (Irish) Thomas Murray* (Irish) William P. Halliday (American) *Non-executive Directors independent of the Investment Manager. Registered Office 32 Molesworth Street Dublin 2 Ireland Registered No Company Secretary Investment Manager and Distributor Administrator Depositary Independent Auditor Legal Advisers as to Irish Law MFD Secretaries Limited 32 Molesworth Street Dublin 2 Ireland SouthernSun Asset Management LLC 240 Madison Avenue, Suite 700 Memphis, TN United States Maples Fund Services (Ireland) Limited 32 Molesworth Street Dublin 2 Ireland SMT Trustees (Ireland) Limited Block 5, Harcourt Centre Harcourt Road Dublin 2 Ireland KMPG Chartered Accountants and Statutory Audit Firm 90 South Mall Cork Ireland Maples and Calder 75 St Stephen's Green Dublin 2 Ireland 1

4 General Information (continued) Irish Tax Advisers Luxembourg Paying & Representation Agent German Information Agent** UK Representative Client Asset Account Holder KMPG 1 Harbourmaster Place IFSC Dublin 1 Ireland Caceis Bank Luxembourg 5 Allée Scheffer L2520 Luxembourg German Fund Information Service UG (GERFIS) Zum Eichhagen Brietlingen Germany Maples Fiduciary Services (UK) Limited 11th Floor, 200 Aldersgate Street London, ECVA 4HD United Kingdom Brown Brothers Harriman & Co. 140 Broadway New York, NY United States ** The prospectus, the Key Investor Information Documents ( KIIDs ), the articles, the annual and semi-annual reports, a list of changes in the composition of the portfolios, as well as the issue and redemption prices, are available free of charge pursuant to Sec. 297(1) of the German Capital Investment Code from the office of the German Information Agent. 2

5 Investment Manager's Report For the financial period ended 30 June 2018 SouthernSun US Value Fund The reasons behind the Fund's Performance during the preceding period (prepared and written by SouthernSun Asset Management LLC): The performance of the SouthernSun U.S. Value Fund during the year-to-date as of June 30, 2018 was negative on an absolute basis. The Y Share Class returned -0.89%, the Investor Share Class returned -1.18%, and the Institutional Share Class returned -1.17% on a net basis, while the Russell 2500 Index returned +5.46% for the period. Thor Industries, Inc. (THO), the leading detractor from performance on a relative basis in the period, is currently a market share leader in the U.S. recreational vehicle (RV) industry with roughly 50% share in towable RVs and 35% share in motor homes. We believe that its flexible manufacturing model and commitment to maintaining a de-levered balance sheet have contributed to its generation of cash flow and positive earnings every year since its founding in 1980, and to its ability to allocate capital through a range of economic conditions during that time. Recently, THO announced the funding of additional manufacturing capacity which we believe reflects its leading market position, customer demand and its ability to consolidate market share. We contend that RV demand remains consistent and that the company is diligent at tracking dealer inventory levels. We believe that attractive demographics and elevated consumer confidence may increase demand for recreational vehicles and that towable RVs lower price point may sustain demand in economic downturns and periods of higher energy prices. In our opinion, THO s balance sheet should also enable the business to withstand adverse conditions better than competitors, many of whom lack the same financial flexibility. We are also pleased that recent federal tax legislation should reduce the company s tax rate from in excess of 30% to an estimated 24%. THO reported earnings during the period and the stock responded positively following a period of weakness earlier in the period. We contend that management s inventory management comments, material and wage inflation, as well as its comments on financing at the dealer and consumer level combined with news of debt reduction and a $250 million share repurchase authorization as well as a positive earnings report from competitor Winnebago Industries, Inc., we contend reflecting positive industry trends, reaffirm our conviction in the stock despite its recent negative performance. Diebold Nixdorf (DBD), a leading global provider of hardware, software and related services to the banking and retail industries, was another leading detractor from performance on a relative basis in the period. The company manufactures and services automated teller machines (ATM) for banks and point-of-sale systems for retail. DBD has been a leader in ATM market share in the U.S. and South America and we believe that its 2016 acquisition of Wincor Nixdorf introduced a leadership position in Europe. Its revenue breakdown is approximately 55% servicing, 35% manufacturing and 10% software with roughly 75% from the banking channel and 25% from retail. Approximately 67% of its revenue comes from outside the Americas. Recently the company has faced several challenges: increased leverage from the Wincor Nixdorf acquisition, ongoing operational challenges and delays in customer spending on ATM upgrades and implementation of the next generation of software. DBD a new CEO in early 2018 and we are monitoring the impact of this change. Centene Corporation (CNC), a multi-line managed care organization providing Medicaid and other related services through government subsidized programs, was another leading contributor to performance on a relative basis in the period. The company s record of growth includes moving from managing health care programs for nine states in 2011 to 29 states in 2018 including the big four: California, Texas, Florida and New York. We contend that CNC continued to generate consistent levels of discretionary cash flow during the last year and that the stock is valued attractively versus those cash flows. We believe that the 2015 HealthNet acquisition provided CNC entry to the large and potentially lucrative California market and adds to its competencies in non-medicaid programs, where existing customers have expressed further interest in its capabilities. Additionally, we assert that CNC s investments in people and technology have contributed positively to its growth, the execution of its strategy, and driven lower costs through more preventative care and less expensive outcomes. During 2017, the company announced the acquisition of Fidelis Care. We believe that this deal is attractive because it is accretive to earnings from the outset, it adds to CNC s scale and provides it entry to New York State, the country s second leading Medicaid market. We believe this transaction will close during the second half of During the period, the company announced several other acquisitions and partnerships which we assert contribute further to its scale, consolidation and value creation. We contend that CNC continues to capitalize on existing opportunities in Medicaid and Medicare management for state governments while exploring relationship extensions in areas such as the delivery of health care solutions to corrections facilities. We believe that CNC has strong prospects for growth over the long term and that it provides high quality, affordable solutions to its customers in the health care sector.. 3

6 Investment Manager's Report (continued) For the financial period ended 30 June 2018 SouthernSun US Value Fund The reasons behind the Fund's Performance during the preceding period (prepared and written by SouthernSun Asset Management LLC): (continued) Broadridge Financial Solutions, Inc. (BR) was the leading contributor to performance on a relative basis in the period. It is a leading global provider of investor communications and technology-driven solutions to banks, broker-dealers, mutual funds and corporate issuers. BR is the former brokerage services division of ADP, LLC, was spun out in 2007, and since then has grown primarily through internal technological advances and select tuck-in acquisitions, distinguishing it further from its competitors. BR s cash flow generation has proven consistent over time. Its customers are primarily U.S. financial services companies and it enjoys market share exceeding 70% in both the U.S. and Europe. BR continues to target accretive acquisitions, with a clear strategic fit and a compelling growth profile. Its cash flows have been consistent enough to support this growth as well as regular dividend increases over time. We believe that recent results have been driven, in part, by event-driven activity, cost management, and favorable foreign currency movements. Our recent discussions with management have covered opportunities in wealth management and the potential to capitalize on the movement of technology and operations from banks and brokerages to third-party providers. We believe that key hires may further support the extension of relationships with certain key customers We are pleased with the status of our portfolio as it emerges from a recent transition that followed a period of global oversupply, falling commodity prices and an industrial recession. Several portfolio businesses have hired new senior executives who have implemented initiatives designed to improve operations and profitability. Certain stock prices reflect the progress of these initiatives while, in our opinion, others do not. We contend that many holdings continue to make capital allocation decisions and manage working capital in a manner that improves their cash flow generation. We believe that the portfolio is composed of high quality companies trading at attractive valuations. The portfolio s average leverage ratio compares favorably to the broader market and we believe that its overall niche dominance has improved due to product development, cost structure and supply chain management, and the financial flexibility we have identified in these companies. We assert that the portfolio includes businesses with a historic ability to reinvest in an array of economic and market conditions. We have remained close to many of these companies through site visits, meetings at trade shows and investor conferences, and onsite meetings in SouthernSun s offices. We attended the Hanesbrands, Inc. (HBI) investor day which included discussions of marketing and capital allocation, revealed the company s commitment to financial planning and analysis, and provided its new CFO a broad audience to demonstrate his skill set and outlook. Brink s Company (BCO) announced its acquisition of Dunbar Armored, Inc. during the period, a union that will create the leading cash management company by market share in the U.S. Our subsequent discussion with BCO executives delineated the scale, customer additions and financial opportunity the deal creates. We discussed returns on invested capital, industry consolidation and the competitive landscape in the U.S. convenience store business with the Murphy USA, Inc. (MUSA) executive team in our office during the period, as well. Our prospective travel plans include meetings with several current and prospective holdings in both the boardroom and on the factory floor in the coming months. The Adviser s outlook for the market and how it will affect the Fund over the next quarter: We continue to emphasize the purchase of high quality businesses at what we consider a fair price as we construct portfolios, and discretionary cash flow remains our primary quantitative metric of business quality and valuation. While many of our businesses have allocated capital to increase scale, consolidation and pricing power in recent years, we know from experience that the market recognizes these moves at different times and in varying increments. We believe that our process has produced excess return over time, often generated in discrete increments, and that the opportunity set and portfolio before us is capable of generating long-term returns similar to the ones we have posted historically. SouthernSun Asset Management LLC 29 August

7 Unaudited Statement of Financial Position As at 30 June 2018 Note SouthernSun US Value Fund/Total 30 June 2018 SouthernSun US Value Fund/Total 31 December 2017 Assets Deposits with credit institutions 2,248,788 5,723,508 Dividends receivable 17,625 22,665 Other receivables 121, ,681 Financial assets at fair value through profit or loss - Transferable Securities - Equities 4 40,284,106 76,372,057 Total assets 42,672,091 82,400,911 Liabilities Accrued expenses 140, ,152 Total liabilities (excluding net assets attributable to holders of Redeemable Participating Shares) 140, ,152 Net assets attributable to holders of Redeemable Participating Shares 42,532,084 82,226,759 The accompanying notes form an integral part of these financial statements. 5

8 Unaudited Statement of Comprehensive Income For the financial period ended 30 June 2018 Note SouthernSun US Value Fund/Total For the 6 months ended 30 June 2018 SouthernSun US Value Fund/Total For the 6 months ended 30 June 2017 Income Interest income 22,458 10,302 Dividend income 408, ,337 Other income 16,494 1,862 Net gain/(loss) on financial assets at fair value through profit or loss 3,121,856 (3,496,805) Net change in unrealised (losses)/gains on investments at fair value through profit or loss (5,492,520) 7,304,232 Net investment (expense)/income (1,923,168) 4,300,928 Expenses Investment management fees 5 (328,959) (397,759) Administration fees (62,121) (59,766) Directors' fees 5 (29,678) (26,864) Audit and related services fee (10,446) (9,403) Depositary fees (8,501) (9,920) Legal fees (29,842) (5,558) Other operating expenses (135,775) (116,033) Expense cap reimbursements 5 166, ,382 Total operating expenses (438,412) (463,921) Operating (loss)/profit for the financial period before withholding tax (2,361,580) 3,837,007 Withholding tax (122,563) (143,380) (Decrease)/increase in net assets attributable to holders of Redeemable Participating Shares resulting from operations (2,484,143) 3,693,627 There were no recognised gains or losses other than those dealt with in the Statement of Comprehensive Income. The accompanying notes form an integral part of these financial statements. 6

9 Unaudited Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial period ended 30 June 2018 SouthernSun US Value Fund/Total For the 6 months ended 30 June 2018 SouthernSun US Value Fund/Total For the 6 months ended 30 June 2017 Net assets attributable to holders of Redeemable Participating Shares at beginning of the financial period 82,226,759 77,869,373 Proceeds from issue of Redeemable Participating Shares 35,902 1,424,801 Payments for redemption of Redeemable Participating Shares (37,246,434) (3,341,596) Net decrease in net assets from share transactions (37,210,532) (1,916,795) (Decrease)/increase in net assets from operations attributable to holders of Redeemable Participating Shares (2,484,143) 3,693,627 Net assets attributable to holders of Redeemable Participating Shares at end of the financial period 42,532,084 79,646,205 The accompanying notes form an integral part of these financial statements. 7

10 Unaudited Statement of Cash Flows For the financial period ended 30 June 2018 Note SouthernSun US Value Fund/Total For the 6 months ended 30 June 2018 SouthernSun US Value Fund/Total For the 6 months ended 30 June 2017 Cash flows from operating activities (Decrease)/increase in net assets attributable to holders of Redeemable Participating Shares resulting from operations (2,484,143) 3,693,627 Adjustments for: Proceeds from sale of investments 39,478,943 9,538,131 Purchase of investments (5,761,656) (4,803,843) Realised (gain)/loss arising from sale of investments (3,121,856) 3,498,222 Change in unrealised loss/(gain) on investments 5,492,520 (7,304,232) Decrease/(increase) in dividends receivable 5,040 (9,656) Decrease in other receivables 161, ,916 (Decrease)/increase in accrued expenses (34,145) 420,594 Net cash provided by operating activities 33,735,812 5,278,759 Cash flows from financing activities Proceeds from issue of Redeemable Participating Shares 35,902 1,424,801 Payments for fund shares redeemed (37,246,434) (3,341,596) Net cash used in financing activities (37,210,532) (1,916,795) Net change in cash and cash equivalents (3,474,720) 3,361,964 Net cash and cash equivalents at beginning of the financial period 5,723,508 4,260,005 Net cash and cash equivalents at end of the financial period 2,248,788 7,621,969 Supplementary information: Taxations paid (121,050) (143,380) Dividends received 413, ,681 The accompanying notes form an integral part of these financial statements. 8

11 Notes to the Unaudited Financial Statements For the six months ended 30 June General information SouthernSun Value Fund p.l.c. (the "Company") is an open-ended umbrella investment company with variable capital and with segregated liability between sub-funds. The Company was incorporated and registered under the laws of Ireland on 28 May 2013 with registered number As at 30 June 2018, the Company had one sub-fund (the Sub-Fund ) in operation, the SouthernSun US Value Fund. The Sub-Fund s investments are managed by its Investment Manager, SouthernSun Asset Management LLC (the Investment Manager ), an investment management firm principally authorised and regulated in the United States of America by the Securities and Exchange Commission. The investment objective of the Sub-Fund is to provide long-term capital appreciation by investing primarily in common stocks of small to middle capitalisation U.S. companies that the Investment Manager selects using a research-driven, value-oriented investment strategy. The Sub-Fund is an accumulating fund and therefore, it is not currently intended to distribute dividends to the Shareholders. The income and earnings and gains of each Class in the Sub-Fund will be accumulated and reinvested on behalf of Shareholders. 2. Basis of preparation The condensed interim financial statements of the Company as at and for the financial period ended 30 June 2018 have been prepared in accordance with IAS 34: Interim Financial Reporting as adopted by the EU, and Irish Statute comprising the Companies Act, 2014 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (as amended) and the Central Bank s (Supervision and Enforcement) Act 2013 (section 48(1)) UCITS Regulations 2015, as amended (together the UCITS Regulations ). These financial statements should be read in conjunction with the annual audited financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards (IFRS). 3. Efficient Portfolio Management ("EPM") The Investment Manager may, on behalf of the Sub-Fund, engage in transactions in financial derivative instruments for the purposes of EPM and/or to protect against exchange risks within the conditions and limits laid down by the Central Bank from time to time. EPM transactions relating to the assets of the Sub-Fund may be entered into by the Investment Manager with one of the following aims: (a) a reduction of risk; (b) a reduction of cost; or (c) generation of additional capital or income for a Sub-Fund with a level of risk consistent with the risk profile of a Sub-Fund and the diversification requirements in accordance with the Central Bank s UCITS Regulations Eligible Assets and Investment Restrictions. In relation to EPM operations, the Investment Manager will look to ensure that the techniques and instruments used are economically appropriate in that they will be realised in a cost-effective way and must not result in a change to the investment objective of the Sub-Fund or add supplementary risks not covered in the Prospectus. The techniques and instruments are as prescribed in the Central Bank Notices. Such techniques may include foreign exchange transactions which alter the currency characteristics of assets held by a Sub-Fund. The Sub-Fund may engage with repurchase/reverse repurchase agreements counterparties and/or securities lending agents that are related parties to the Custodian or other service providers of the Company. There were no EPM techniques used by the Investment Manager during the financial period, or at the financial period end. 9

12 Notes to the Financial Statements (continued) For the six months ended 30 June Fair value hierarchy The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets are based on quoted market prices at the close of trading on the reporting date. The Company adopted IFRS 13 Fair Value Measurement and uses last traded market prices as its valuation inputs for listed securities. If market quotations are not available or are unrepresentative, estimation methods and valuation models may be used to calculate fair value. The fair value hierarchy has the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Certain inputs for the asset or liability that are not based observable market data (that is, unobservable inputs). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgement by the Investment Manager. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The following tables summarise the Sub-Fund s financial assets by class within the fair value hierarchy at 30 June 2018 and 31 December 2017: 30 June 2018 Level 1 Level 2 Level 3 Total SouthernSun US Value Fund Financial assets at fair value through profit or loss: Equities 40,284, ,284,106 40,284, ,284,106 10

13 Notes to the Financial Statements (continued) For the six months ended 30 June Fair value hierarchy (continued) 31 December 2017 Level 1 Level 2 Level 3 Total SouthernSun US Value Fund Financial assets at fair value through profit or loss: Equities 76,372, ,372,057 76,372, ,372,057 The fair value of financial assets approximates their carrying value. Investments whose values are based on quoted market prices in active markets are classified within Level 1. There were no Level 2 or Level 3 securities held by the Sub-Fund during the financial period ended 30 June 2018 or at the financial period end. Transfers between levels are deemed to have occurred when the pricing source for a particular security has changed which triggers a change in level as defined under IFRS 13. There were no transfers between Levels 1, 2 or 3 during the financial period ended to 30 June 2018 (31 December 2017: None). For each class of assets and liabilities not measured at fair value in the Statement of Financial Position but for which fair value is disclosed, IFRS 13 requires the Sub-Fund to disclose the level within the fair value hierarchy which the fair value measurement would be categorised and a description of the valuation technique and inputs used in the technique. Assets and liabilities not carried at fair value are carried at amortised cost; their carrying values are a reasonable approximation of fair value. Cash and cash equivalents include cash in hand, demand deposits and other short-term investments in an active market and they are categorised as Level 2. Debtors include the contractual amounts for settlement of trades and other obligations due to the Sub-Fund. Creditors represent the contractual amounts and obligations due by the Sub-Fund for settlement of trades and expenses. All Debtors and Creditors balances are categorised as Level 2. The puttable value of redeemable shares is calculated based on the net difference between total assets and all other liabilities of the Sub-Fund in accordance with the Company s Prospectus. A demand feature is attached to these shares, as they are redeemable at the holders option and can be put back to the Sub-Fund at any dealing date for cash equal to a proportionate share of the Sub-Fund s net asset value attributable to the share class. The fair value is based on the amount payable on demand. As such, Level 2 is deemed to be the most appropriate categorisation for net assets attributable to holders of Redeemable Participating Shares held in the Sub-Fund. 5. Related party disclosures Parties are considered to be related if one party has the ability to control the other party or is able to exercise significant influence over the other party in making financial or operational decisions. The Company appointed SouthernSun Asset Management LLC as Investment Manager under the terms of the Investment Management Agreement. 11

14 Notes to the Financial Statements (continued) For the six months ended 30 June Related party disclosures (continued) During the financial period ended 30 June 2018, Investment Management fees of 328,959 (30 June 2017: 397,759) were charged to the Company and are disclosed in the Statement of Comprehensive Income, of which 29,733 (31 December 2017: 69,712) remains unpaid at financial period end and are included within Accrued expenses in the Statement of Financial Position. There was an expense cap reimbursement of 166,910 (30 June 2017: 161,382) to the Company during the financial period, which is included in the Statement of Comprehensive Income. The Directors were appointed on 12 July Director William P. Halliday is an employee of SouthernSun Asset Management LLC. None of the Directors had any shareholding in the Company or the Sub-Fund as at 30 June 2018, or during the reporting financial period (31 December 2017: Nil). During the financial period ended 30 June 2018, Directors fees of 29,678 (period ended 30 June 2017: 26,864) were charged to the Company and are disclosed in the Statement of Comprehensive Income, of which 7,490 (31 December 2017: 541 payable) was prepaid at financial period end and is included within Other receivables in the Statement of Financial Position. SouthernSun Asset Management LLC entered into a fund distribution agreement with Paul McGowan, who is currently a Director of the Fund, on 22 November 2016 agreeing that Paul McGowan will be paid a fee for the sale of shares of the Fund to potential investors in Ireland. There were no fees paid to Paul McGowan during the financial period ended 30 June 2018 (period ended 30 June 2017: nil). As of 30 June 2018 there is one investor that holds 94% (96% as of 31 December 2017) of the shares in issue which is considered a significant shareholder. All related party transactions were made at arm s length on normal commercial terms and conditions. There have been no other transactions between the Company and its related parties during the reporting financial period. 6. Exchange rates All investments and other assets and liabilities are denominated in base currency of the Fund (). 7. Net Asset Value As at 30 June 2018 SouthernSun US Value Fund Institutional (I) Class SouthernSun US Value Fund Investor (A) Class SouthernSun US Value Fund Y Class Net asset value 11,468 1,060 42,519,556 Number of shares in issue , Net asset value per share

15 Notes to the Financial Statements (continued) For the six months ended 30 June Net Asset Value (continued) As at 31 December 2017 SouthernSun US Value Fund Institutional (I) Class SouthernSun US Value Fund Investor (A) Class SouthernSun US Value Fund Y Class Net asset value 11, ,843 82,104,313 Number of shares in issue , , Net asset value per share Reconciliation to dealing Net Asset Value ("NAV") In accordance with IFRS the establishment costs of the Company have been written off in the first period in the financial statements. However, as per the Prospectus these costs may be amortised over the first four Accounting Periods of the Company or such other period as the Directors may determine and in such manner as the Directors, in their absolute discretion, deem fair. The tables below reconcile the NAV in the financial statements to the dealing NAV. As at 30 June 2018 SouthernSun US Value Fund NAV per financial statements 42,532,084 Write-off of establishment costs - Published NAV as calculated in accordance with the Prospectus (dealing NAV) 42,532,084 Institutional (I) Class Investor (A) Class Y Class NAV per share per financial statements Write-off of establishment costs per share Published NAV per share

16 Notes to the Financial Statements (continued) For the six months ended 30 June Reconciliation to dealing Net Asset Value ("NAV") (continued) As at 31 December 2017 SouthernSun US Value Fund NAV per financial statements 82,226,759 Write-off of establishment costs - Published NAV as calculated in accordance with the Prospectus (dealing NAV) 82,226,759 Institutional (I) Class Investor (A) Class Y Class NAV per share per financial statements Write-off of establishment costs per share Published NAV per share Dividends There were no dividends paid during the financial period ended 30 June 2018 (period ended 30 June 2017: nil) 10. Soft commission arrangements The Investment Manager may effect transactions with or through the agency of another person with whom the Investment Manager or an entity affiliated to the Investment Manager has arrangements under which that person will, from time to time, provide to or procure for the Investment Manager and/or an affiliated party goods, services or other benefits such as research and advisory services, specialised computer hardware or software. No direct payment may be made for such goods or services but the Investment Manager may undertake to place business with that person provided that person has agreed to provide best execution with respect to such business and the services provided must be of a type which assists in the provision of investment services to the Company. There were no soft commission arrangements in place during the period ended 30 June 2018 (period ended 30 June 2017: Nil). 11. Comparatives The comparative figures used on the Statement of Financial position and related notes are as at 31 December Comparative figures for the period ended 30 June 2018 are presented for the Statement of Comprehensive Income, the Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares, the Statement of Cash Flows and the related notes. 14

17 Notes to the Financial Statements (continued) For the six months ended 30 June Connected party transactions Regulation 41 of the UCITS Regulations Restrictions of transactions with connected persons states that A responsible person shall ensure that any transaction between a UCITS and a connected person is conducted a) at arm s length; and b) in the best interest of the unit-holders of the UCITS. As required under UCITS Regulation 78.4, the Directors, as responsible persons are satisfied that there are in place arrangements, evidenced by written procedures, to ensure that the obligations that are prescribed by Regulation 41(1) are applied to all transactions with a connected party; and all transactions with a connected parties that were entered into during the period to which the report relates complied with the obligations that are prescribed by Regulation 41(1). 13. Significant events during the financial period During the period ended 30 June 2018, one significant shareholder reduced their shareholding from 96.61% to 93.53% at period end 30 June Significant events after the financial period end There were no significant events affecting the Company after the financial period end. 15. Approval of the financial statements The financial statements were approved by the Directors on 29 August

18 Schedule of Investments As at 30 June 2018 Transferable Securities Equities (31 December 2017: 92.88%) Currency Number of shares Fair value % of net assets United States (31 December 2017: 92.88%) AGCO Corp 24,031 1,459, % The Brink s Company 29,505 2,353, % Broadridge Financial Solutions Inc 13,903 1,600, % Centene Corp 18,998 2,340, % Clean Harbors Inc 44,119 2,450, % CommScope Holding Co Inc 35,296 1,030, % Darling Ingredients Inc 136,386 2,711, % Diebold Inc 70, , % Dycom Industries Inc 13,131 1,241, % Extended Stay America Inc 92,435 1,997, % Flowserve Corp 36,824 1,487, % Hanesbrands Inc 89,214 1,964, % IDEX Corp 11,390 1,554, % Knowles Corp 120,073 1,837, % Murphy USA Inc 26,486 1,967, % Newfield Exploration Co 82,209 2,486, % Polaris Industries Inc 14,223 1,737, % Thor Industries Inc 15,010 1,461, % Timken Co 46,516 2,025, % Trinity Industries Inc 57,805 1,980, % Western Union Co 111,329 2,263, % WestRock Co 26,226 1,495, % Total Equities 40,284, % Total Transferable Securities 40,284, % Total financial assets at fair value through profit or loss Cash and cash equivalents (31 December 2017: 6.95%) 2,248, % Other net liabilities (31 December 2017: other net assets 0.16%) (810) (0.00)% Net assets attributable to holders of Redeemable Participating Shares 42,532, % Analysis of Total Assets: Percentage of total assets Transferable securities admitted to an official stock exchange listing 94.71% Cash and cash equivalents 5.29% Other current asset 0.33% Total assets % 16

19 Appendix 1 - Significant Portfolio Changes During the Financial Period For the six months financial period ended 30 June 2018 SouthernSun US Value Fund Purchases* Number of shares AGCO Corp ,920 The Brink s Company 30,171 2,281,480 Clean Harbors Inc 3, ,999 CommScope Holding Co Inc 5, ,992 Dycom Industries Inc 1, ,689 Extended Stay America Inc 10, ,647 Hanesbrands Inc 22, ,273 Knowles Corp 29, ,081 Murphy USA Inc 3, ,848 Newfield Exploration Co 25, ,226 Polaris Industries Inc 2, ,859 Thor Industries Inc 2, ,493 Timken Co 4, ,497 WestRock Co 4, ,449 Sales** Number of shares Cost Proceeds AGCO Corp 23,261 1,519,612 The Brink s Company 21,695 1,629,882 Broadridge Financial Solutions Inc 24,741 2,668,245 Centene Corp 25,483 2,757,598 Clean Harbors Inc 39,495 1,911,669 Darling Ingredients Inc 152,459 2,641,992 Extended Stay America Inc 71,000 1,401,299 Flowserve Corp 41,209 1,909,099 Hanesbrands Inc 101,224 1,949,328 IDEX Corp 14,927 2,098,800 Knowles Corp 107,632 1,248,956 Murphy USA Inc 28,965 1,965,544 Newfield Exploration Co 76,779 2,180,109 OGE Energy Corp 50,167 1,592,076 Polaris Industries Inc 19,516 2,234,598 Thor Industries Inc 10,796 1,080,730 17

20 Appendix 1 - Significant Portfolio Changes During the Financial Period (continued) For the six months financial period ended 30 June 2018 SouthernSun US Value Fund (continued) Sales (continued)** Number of shares Proceeds Timken Co 47,324 2,161,853 Trinity Industries Inc 54,021 1,750,808 Western Union Co 98,976 1,889,086 WestRock Co 18,965 1,234,883 * There were no purchases in the period other than those listed. ** Only the top 20 sales in the period are listed. 18