IFSL James Hambro Umbrella Fund

Transcription

1 IFSL James Hambro Umbrella Fund Annual Report and Audited Financial Statements for the year ended 31 st March 2017 IFSL James Hambro Barnham Broom Fund IFSL James Hambro Master Fund IFSL James Hambro Penrhos Fund IFSL James Hambro Harrier Capital Growth Fund IFSL James Hambro Rires Fund IFSL James Hambro Harrier Balanced Fund

2 Registered Office Marlborough House 59 Chorley New Road Bolton BL1 4QP Authorised Corporate Director (ACD) and Registrar Investment Fund Services Limited Marlborough House 59 Chorley New Road Bolton BL1 4QP (Authorised and regulated by the Financial Conduct Authority) Directors of the ACD Andrew Staley Nicholas F. J. Cooling Wayne D. Green Allan Hamer Helen Redmond Dom Clarke Helen Derbyshire Guy Sears (appointed 10 th April 2017) Bernard J. Leyland (Resigned 9 th February 2017) John R. Heap (Resigned 9 th February 2017) Investment Manager James Hambro & Partners LLP 45 Pall Mall London SW1Y 5EG (Authorised and regulated by the Financial Conduct Authority) Depositary National Westminster Bank plc 1st Floor 280 Bishopsgate London EC2M 4RB (Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) Custodian RBC Investor & Treasury Services Riverbank House 2 Swan Lane London EC4R 3AF Independent Auditor Ernst & Young LLP Ten George Street Edinburgh EH2 2DZ

3 CONTENTS PAGE AUTHORISED STATUS AND GENERAL INFORMATION 1 AUTHORISED CORPORATE DIRECTOR'S STATEMENT 3 STATEMENT OF AUTHORISED CORPORATE DIRECTOR S RESPONSIBILITIES 3 STATEMENT OF THE DEPOSITARY S RESPONSIBILITIES 4 REPORT OF THE DEPOSITARY 4 INDEPENDENT AUDITOR S REPORT 5 NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING POLICIES, DISTRIBUTION POLICIES AND RISK MANAGEMENT POLICIES OF THE COMPANY 7 INDIVIDUAL SUB-FUNDS FINANCIAL STATEMENTS IFSL JAMES HAMBRO BARNHAM BROOM FUND 11 IFSL JAMES HAMBRO MASTER FUND 24 IFSL JAMES HAMBRO PENRHOS FUND 37 IFSL JAMES HAMBRO HARRIER CAPITAL GROWTH FUND 51 IFSL JAMES HAMBRO RIRES FUND 65 IFSL JAMES HAMBRO HARRIER BALANCED FUND 79 The statements for each of the above sub-funds are set out in the following order: AUTHORISED INVESTMENT ADVISER S REPORT COMPARATIVE TABLE SYNTHETIC RISK AND REWARD INDICATOR PORTFOLIO STATEMENT FINANCIAL STATEMENTS STATEMENT OF TOTAL RETURN STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS BALANCE SHEET NOTES TO THE FINANCIAL STATEMENTS DISTRIBUTION TABLES

4 AUTHORISED STATUS AND GENERAL INFORMATION Authorised Status James Hambro Umbrella Fund is an open-ended investment company with variable capital incorporated under the Open Ended Investment Company (OEIC) Regulations It is a UCITS scheme as defined in the Collective Investment Schemes Sourcebook (COLL) and is an umbrella company for the purposes of the OEIC Regulations. The Company was incorporated in England and Wales on 13 June 2008 with the registration number IC and laid dormant until the scheme of amalgamation on 1 October The IFSL James Hambro Master Fund, IFSL James Hambro Penrhos Fund and IFSL James Hambro Rires Fund merged into the IFSL James Hambro Umbrella Fund on that date. The IFSL James Hambro Barnham Broom Fund and IFSL James Hambro Harrier Capital Growth Fund were launched on that date. The IFSL James Hambro Harrier Balanced Fund was launched on 6 May The Company is authorised and regulated by the Financial Conduct Authority. The shareholders are not liable for the debts of the Company. The sub-funds of the Company are segregated by law under the Protected Cell Regime. In the event that one sub-fund in the Company is unable to meet its liabilities, the assets of another sub-fund within the Company will not be used to settle these liabilities. Investment Objectives and Policies IFSL James Hambro Barnham Broom Fund The investment objective of the sub-fund is to provide a balance of capital growth and income by investing in a range of asset classes in any or all geographic areas of the world and in any or all economic sectors. The investment policy of the sub-fund is to invest, to the extent permitted by the regulations, in individual transferable securities, collective investments schemes, money market instruments and/or deposits. The sub-fund may from time to time invest principally in any one or more of such asset classes. Where the ACD considers that a defensive strategy is appropriate, deposits, cash and/or near cash may comprise a substantial portion of the value of the property of the sub-fund. IFSL James Hambro Master Fund The investment objective of the sub-fund is to provide a balance of capital and income growth and maintain the capital value of the sub-fund at least in line with inflation. The investment policy of the sub-fund is to invest in an actively managed and diversified portfolio of equity and fixed interest securities throughout the world. The sub-fund may also, from time to time, invest in warrants, money market instruments, deposits, cash and units in collective investment schemes. Cash and near cash will be held to enable the pursuit of the investment objective of the sub-fund or, as necessary, to enable redemption of shares and efficient portfolio management. While there will be no particular emphasis on any industry sector, there will be no investment in tobacco, alcohol or gambling companies, as defined by any of these activities representing more than 50% of the company s turnover. IFSL James Hambro Penrhos Fund The investment objective of the sub-fund is to provide long term capital growth principally through a diversified holding of securities. The investment policy of the sub-fund is to aim to generate superior investment returns through investing in what it believes to be quality companies and bonds worldwide. There will be no particular emphasis on any industry sector. From time to time, the subfund may invest in collective investment schemes, money market instruments, deposits, warrants, cash and near cash, derivatives and forward transactions and other investments to the extent that each is permitted by the regulations. IFSL James Hambro Harrier Capital Growth Fund The investment objective of the sub-fund is to provide long term capital growth through diversified investment in a range of quality stocks and funds on a global basis, but with a bias towards the UK market. There will be no particular emphasis on any industry sector. The investment policy of the sub-fund is to maintain a fairly concentrated portfolio of 30 to 50 holdings of UK companies and funds. The sub-fund has a bottom up, stock driven approach in identifying attractive investment opportunities. The sub-fund s allocation is driven by stock specific opportunities rather than the primary benchmark. The sub-fund may also invest in warrants, collective investment schemes, deposits, cash and near cash, money market instruments, other transferable securities, derivatives and forward transactions to the extent permitted by the regulations. 1

5 AUTHORISED STATUS AND GENERAL INFORMATION (continued) Investment Objectives and Policies (continued) IFSL James Hambro Rires Fund The investment objective of the sub-fund is to provide a balance of capital growth and income by investing in a range of asset classes in any or all geographic areas of the world and in any or all economic sectors. The investment policy of the sub-fund is to invest, to the extent permitted by the regulations, in individual transferable securities, collective investment schemes, money market instruments and/or deposits. The sub-fund may from time to time invest principally in any one or more of such asset classes. Where the ACD considers that a defensive strategy is appropriate, deposits, cash and/or near cash may comprise a substantial portion of the value of property of the sub-fund. IFSL James Hambro Harrier Balanced Fund The investment objective of the sub-fund is to provide a balance of capital and income growth. The sub-fund invests in a diversified portfolio of UK and international asset classes, without restriction on the economic and industry sectors. The sub-fund may invest through a wide range of investments in order to achieve its objective. The sub-fund invests no less than 40% in equities and fixed interest securities combined, but may also invest in warrants, collective investment schemes, deposits, cash and near cash, money market instruments, other transferable securities, derivatives and forward transactions to the extent that each is permitted by the regulations. Rights and Terms Attached to Each Share Class Each share of each class represents a proportional entitlement to the assets of the scheme. The allocation of income and taxation and the rights of each share in the event the scheme is wound up are on the same proportional basis. Change in Prospectus No significant changes have been made since the last report. The latest prospectus is dated 5 June Up to date Key Investor Information Documents, Prospectus and Long Reports and Financial Statements for any fund within the ACD s range can be requested by the investor at any time. Cross Holdings The sub-funds of the Company do not hold shares in other sub-funds of the Company. Remuneration policy In line with the requirement of UCITS V, Investment Fund Services Limited is subject to a remuneration policy which is consistent with the principles outlined in the European Securities and Markets Authority guidelines on sound remuneration policies under UCITS V. The remuneration policies are designed to ensure that any relevant conflicts of interest can be managed appropriately at all times and that the remuneration of its senior staff is in line with the risk policies and objectives of the UCITS funds it manages. The quantitative remuneration disclosure required will be reported after the end of the 2017 performance year because the ACD has not yet completed a full financial period since the regulations were introduced. The disclosure will be included in the Annual Long Report and Audited Financial Statements for the year ended 31 March Further information can be found on our website at ifslfunds.com. 2

6 AUTHORISED CORPORATE DIRECTOR S STATEMENT This report has been prepared in accordance with the requirements of the Collective Investment Schemes Sourcebook as issued and amended by the Financial Conduct Authority. ALLAN HAMER JOINT MANAGING DIRECTOR WAYNE D GREEN JOINT MANAGING DIRECTOR INVESTMENT FUND SERVICES LIMITED 19 July 2017 STATEMENT OF AUTHORISED CORPORATE DIRECTOR S RESPONSIBILITIES Investment Fund Services Limited is the Authorised Corporate Director (ACD) of the Company. The rules contained in the Collective Investment Schemes Sourcebook (COLL) and made by the Financial Conduct Authority pursuant to the Financial Services and Markets Act 2000 require the ACD to prepare financial statements for each annual accounting period, reporting the financial position of the scheme as at the end of that period and of its income for the period. In preparing those financial statements the ACD is required to: - Comply with the Statement of Recommended Practice relating to Authorised Funds issued by The Investment Management Association*, the Instrument of Incorporation, and the rules in COLL. - Select suitable accounting policies and then apply them consistently. - Make judgements and estimates that are reasonable and prudent. - State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. - Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in operation. The ACD is required to keep proper accounting records and to manage the Company in accordance with the regulations, the Instrument of Incorporation and the Prospectus. The ACD is responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities. The ACD is responsible for ensuring that, to the best of its knowledge and belief, there is no relevant audit information of which the auditor is unaware. It is the responsibility of the ACD to take all necessary steps as a director to familiarise themselves with any relevant audit information and to establish that the auditor is aware of that information. * Now known as the Investment Association 3

7 STATEMENT OF THE DEPOSITARY S RESPONSIBILITIES AND REPORT OF THE DEPOSITARY TO THE SHAREHOLDERS OF IFSL JAMES HAMBRO UMBRELLA FUND ( THE COMPANY ) FOR THE YEAR ENDED 31 MARCH 2017 The Depositary must ensure that the Company is managed in accordance with the Financial Conduct Authority's Collective Investment Schemes Sourcebook, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228) (the OEIC Regulations), as amended, the Financial Services and Markets Act 2000, as amended, (together the Regulations ), the Company's Instrument of Incorporation and Prospectus (together the Scheme documents ) as detailed below. The Depositary must in the contact of its role act honestly, fairly, professionally, independently and in the interests of the Company and its investors. The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Company in accordance with the Regulations. The Depositary must ensure that: the Company s cash flows are properly monitored and that cash of the Company is booked into the cash accounts in accordance with the Regulations; the sale, issue, redemption and cancellation of shares are carried out in accordance with the Regulations; the value of shares of the Company are calculated in accordance with the Regulations; any consideration relating to transactions in the Company s assets is remitted to the Company within the usual time limits; the Company s income is applied in accordance with the Regulations; and the instructions of the Authorised Fund Manager ( the AFM ) are carried out (unless they conflict with the Regulations). The Depositary also has a duty to take reasonable care to ensure that the Company is managed in accordance with the Regulations and the Scheme documents in relation to the investment and borrowing powers applicable to the Company. Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through the AFM: i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Company's shares and the application of the Company's income in accordance with the Regulations and the Scheme documents of the Company, and ii) has observed the investment and borrowing powers and restrictions applicable to the Company. National Westminster Bank plc 1st Floor 280 Bishopsgate London EC2M 4RB 19 July

8 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF IFSL JAMES HAMBRO UMBRELLA FUND We have audited the financial statements of IFSL James Hambro Umbrella Fund ( the Company ) comprising its sub-funds for the year ended 31 March 2017 which comprise the accounting, distribution and risk management policies, the Statement of Total Return, the Statement of Changes in Net Assets Attributable to Shareholders, the Balance Sheet, the related notes and the Distribution Tables for each of the Company s sub-funds. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), FRS 102 The Financial Reporting Standard applicable to the UK and the Republic of Ireland. This report is made solely to the Company's members, as a body, pursuant to Paragraph of the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the Authorised Corporate Director (ACD) and Auditor As explained more fully in the ACD s responsibilities statement set out on page 3, the ACD is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the Audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the ACD; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on Financial Statements In our opinion the financial statements: give a true and fair view of the financial position of the Company comprising each of its sub-funds as at 31 March 2017 and of the net revenue and the net capital gains on the scheme property of the Company comprising each of its subfunds for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice. 5

9 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF IFSL JAMES HAMBRO UMBRELLA FUND (continued) Opinion on other matters prescribed by the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority In our opinion: the financial statements have been properly prepared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority and the Instrument of Incorporation; the information given in the ACD s report for the financial year for which the financial statements are prepared is consistent with the financial statements; there is nothing to indicate that proper accounting records have not been kept or that the financial statements are not in agreement with those records; and we have received all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit. Ernst & Young LLP Statutory Auditor Edinburgh 19 July

10 NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING POLICIES, DISTRIBUTION POLICIES AND RISK MANAGEMENT POLICIES OF THE COMPANY 1 ACCOUNTING POLICIES During the period under review the IFSL James Hambro Umbrella Fund consisted of six sub-funds: IFSL James Hambro Barnham Broom Fund; IFSL James Hambro Master Fund; IFSL James Hambro Penrhos Fund; IFSL James Hambro Harrier Capital Growth Fund; IFSL James Hambro Rires Fund; and IFSL James Hambro Harrier Balanced Fund. The accounting policies apply to all the sub-funds of the Company. Basis of Preparation The financial statements have been prepared in compliance with Financial Reporting Standard (FRS) 102 and in accordance with the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Management Association (renamed to the Investment Association) in May The financial statements are prepared in sterling, which is the functional currency of the sub-funds. Monetary amounts in these financial statements are rounded to the nearest pound. The financial statements have been prepared on the historical cost convention, modified to include the revaluation of investments and certain financial instruments at fair value. The Company has early adopted the amendments to FRS 102 in relation to Fair Value Hierarchy disclosure as permitted. This has resulted in the Fair Value disclosure being shown under three levels as opposed to four under the SORP. The financial statements for IFSL James Hambro Umbrella Fund have been prepared on a going concern basis. Revenue Dividends from equities, preference shares and distributions receivable from onshore collective investment schemes are recognised when the security is quoted ex-dividend. Income from offshore collective investment schemes is recorded on the ex-dividend date and additional reported income is recognised when reported. Stock dividends, received as shares to the extent that the value of such dividends is equal to the cash dividends, are treated as revenue. Special dividends are reviewed on a case by case basis when determining if the dividend is to be treated as revenue or capital. The tax treatment follows the accounting treatment of the principal amount. Bank interest is accounted for on an accrual basis. Interest earned from fixed interest securities is accounted for on an effective yield basis. Allocation of Revenue Revenue, attributable after expenses to multiple share classes, with the exception of the ACD s periodic charge, which is directly attributable to individual share classes, is allocated to share classes pro-rata to the value of the net assets of the relevant share class on the day that the revenue is incurred. Expenses All expenses, other than those relating to the purchase and sale of investments, are charged against revenue on an accruals basis. Management Fee Rebates Management fee rebates on collective investment schemes management fees are accounted for on an accruals basis and are subsequently attributed to the sub-fund s revenue or capital depending on the fee structure of the collective investment schemes. Equalisation Distributions received from investments in collective investment schemes may include an element of equalisation which represents the average amount or revenue included in the price paid for the shares. The equalisation is treated as a return of capital for taxation purposes and does not carry a tax credit. 7

11 NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING POLICIES, DISTRIBUTION POLICIES AND RISK MANAGEMENT POLICIES OF THE COMPANY (continued) 1 ACCOUNTING POLICIES (continued) Valuation The valuation point was 13:00 on 31 March 2017 being the last valuation point of the accounting period. Listed investments are valued at fair value which is the bid price. Unlisted, unapproved, illiquid or suspended securities are valued at the ACD s best estimate of the amount that would be received from the immediate transfer at arm s length in a manner designed to show fair value. Where applicable, investment valuations exclude any element of accrued revenue. Investments in collective investment schemes have been valued at bid price for dual priced funds or the single price for single priced funds. Where these investments are managed by the ACD, the holdings have been valued at the cancellation price for dual priced funds or the single price for single priced funds. This price is the last available published price at the period end. Taxation Corporation tax has been provided for at 20% on taxable income less expenses. Deferred taxation is provided on a full provision basis on timing differences arising from the different treatment of items for accounting and tax purposes. Potential future liabilities and assets are recognised where the transactions, or events giving rise to them, occurred before the balance sheet date. Exchange Rates Assets and liabilities denominated in foreign currencies are translated into sterling at the exchange rates prevailing at 13:00 on 31 March 2017 being the last valuation point of the period. Revenue and expenditure transactions are translated at the rates of exchange ruling on the dates of the transactions. Exchange differences on such transactions follow the same treatment at the principal amounts. 2 DISTRIBUTION POLICIES Distributions The distribution policy for each sub-fund is to distribute or accumulate all available revenue, after deduction of expenses properly chargeable against revenue. Gains and losses on non-derivative instruments and currencies, whether realised or unrealised, are taken to capital and are not available for distribution. Revenue recognised from holdings in accumulation shares in collective investment schemes is included in the amount available for distribution. Distributions which have remained unclaimed by shareholders for six years are credited to the capital property of the sub-fund. Expenses For the purposes of determining the distribution, all ACD s periodic charges are borne by the revenue of the sub-funds, with the exception of the IFSL James Hambro Master Fund, whereby the ACD fees are allocated 50:50 between capital and revenue, and IFSL James Hambro Penrhos Fund whereby the ACD fees are borne by capital. The ACD s periodic charge for Harrier Capital Growth and Harrier Balanced is capped by the synthetic OCF calculated using the underlying OCF of the collective investment schemes held in the sub-fund. ACD Rebates The expenses incorporate fees payable to the investment advisor, depositary, administrator, custodian, auditor and other associated fund costs including printing and registration fees. With respect to the Barnham Broom, Master, Harrier Capital Growth, Harrier Balanced and Rires sub-funds, the ACD has agreed to cap the expenses of each sub-fund at the level of the ACD s periodic charge, therefore, these other expenses are not charged to the sub-fund and as such are not shown as a deduction in Note 7. In addition, the ACD s periodic charge for Harrier Capital Growth and Harrier Balanced have also been capped by the synthetic OCF, which is calculated using the underlying OCF s of collective investment schemes held in those sub-funds. 8

12 NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING POLICIES, DISTRIBUTION POLICIES AND RISK MANAGEMENT POLICIES OF THE COMPANY (continued) 3 RISK MANAGEMENT POLICIES In pursuing the investment objectives as set out on pages 1 and 2, the sub-funds may hold a number of financial instruments. These comprise: units and shares in collective investment schemes. listed investments such as UK equities, investment trusts and fixed interest bonds; cash, liquid resources and short-term debtors and creditors that arise from its operations; shareholders funds which represent investors monies which are invested on their behalf; and temporary borrowings used to finance investment activity. The main risks arising from the sub-funds financial instruments and the ACD s policies for managing these risks are summarised below. The ACD reviews (and agrees with the Depositary) the policies for managing each of these risks. The policies have remained unchanged since the beginning of the period to which these financial statements relate. The sub-funds are managed according to the COLL 5, Investment and Borrowing Powers which helps achieve the statutory objective of protecting consumers by laying down the minimum standards for the investments that may be held by an authorised fund. In particular: (a) the proportion of transferable securities and derivatives that may be held by the authorised fund is restricted if those transferable securities and derivatives are not listed on an eligible market. The intention of this is to restrict the transferable securities and derivatives that cannot be accurately valued and readily disposed of; and (b) authorised funds are required to comply with a number of investment rules that require the spreading of risk. Market Price Risk Market price risk arises mainly from uncertainty about future prices of financial instruments the sub-funds holds. It represents the potential loss the sub-funds might suffer through holding positions in the face of price movement. The sub-funds Investment Manager has responsibility for monitoring the existing portfolio selected in accordance with the overall assets allocation and seeks to ensure that individual stocks also meet the risk / rewards profile that is acceptable. Foreign Currency Risk The sub-funds financial assets and liabilities are substantially invested in other collective investment schemes. Most, but not necessarily all, of whose price is quoted in sterling. The sub-funds may therefore have direct exposure to foreign currency risk in respect of part of its portfolio. In addition, the value of some of the sub-funds underlying investments will be affected by movements in exchange rates against sterling, in respect of sterling non-denominated assets. The ACD has identified three areas where foreign currency risk could impact the sub-funds. These are: movements in exchange rates affecting the value of investments; short term timing differences such as exposure to exchange rate movements in the period between when an investment purchase or sale is entered into and the date when settlement of the investment occurs; and finally, movement in exchange rates affecting income received by a sub-fund. The sub-funds converts all receipts of income, received in currency, into sterling of the day of receipt. To manage foreign currency risk the sub-funds are permitted to invest in forward foreign currency contracts for the purpose of reducing the exposure of the sub-funds to a foreign currency. The foreign currency exposure within the sub-funds are monitored to ensure that this is manageable and sensible. Interest Rate Risk Interest rate risk is the risk that the value of the sub-funds investment holdings will fluctuate as a result of changes in interest rates. The sub-funds cash holdings are held in deposit accounts, whose rates are determined by the banks concerned on a daily basis. The sub-funds invest in fixed and floating rate securities. The income of the sub-funds may be affected by changes to interest rates relevant to particular securities or as a result of the manager being unable to secure similar returns on the expiry of contracts or sale of securities. The value of fixed interest securities may be affected by interest rate movements or the expectation of such movements in the future. Interest rate risk is managed through a limit framework and investment guidelines with which the sub-funds must comply. These include restrictions on position size, and the level of interest rate risk. The Investment Manager continuously reviews interest rates and inflation expectations, the assessment of this may result in a change in investment strategy. 9

13 NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING POLICIES, DISTRIBUTION POLICIES AND RISK MANAGEMENT POLICIES OF THE COMPANY (continued) 3 RISK MANAGEMENT POLICIES (continued) Liquidity Risk The sub-funds assets comprise mainly of readily realisable securities. The main liability of the sub-funds are the redemption of any shares that investors wish to sell. Assets of the sub-funds may need to be sold if insufficient cash is available to finance such redemptions. The liquidity of the sub-funds assets is regularly reviewed by the ACD. Credit Risk Certain transactions in securities that the sub-funds enter into expose them to the risk that the counterparty will not deliver the investment for a purchase, or cash for a sale after the sub-funds have fulfilled their responsibilities. The sub-funds only buy and sell investments through brokers which have been approved by the ACD as an acceptable counterparty. The sub-funds invest in fixed and floating rate interest bonds, which are generally viewed as lower-risk investments than equities. However, the solvency of government / organisations with whom the sub-funds invest cannot be guaranteed, and any difficulty may adversely affect the sub-fund s performance. The sub-funds are subject to investment limits for issuers of debt security and the sub-funds will seek to minimise risk by diversifying portfolios. The credit rating for the bonds held within the sub-funds are reviewed to ensure that they are appropriate in relation to the prospectus. Concentration Risk Some of the underlying collective investment schemes invest solely in certain markets, such as UK shares or fixed interest securities. This allows them to focus on those markets potential but means that they are not spread amongst a range of markets. Securities in the same market tend to be affected by the same factors, so the collective investment schemes may experience greater fluctuations in price. The asset allocations aim to minimise this risk whenever possible, whilst still meeting the objectives of the sub-funds. Derivatives and other financial instruments The ACD is permitted to use derivatives for the purposes of efficient portfolio management. Forward currency transactions may also be entered to hedge the portfolio against currency movement. Investment performance of derivatives can be volatile and may present greater risks than traditional investments. The ACD is obliged through FCA rules to put in place a risk management policy which sets out how the ACD measures and monitors these risks. 10

14 IFSL JAMES HAMBRO BARNHAM BROOM FUND AUTHORISED INVESTMENT MANAGER S REPORT Sub-fund performance to 31 March 2017 Six months 1 year 3 years Since inception* IFSL James Hambro Barnham Broom Fund 6.17% 17.23% 28.03% 51.78% FTSE WMA Stock Market Balanced TR Index 6.76% 19.51% 33.03% 54.54% *3 October 2012 Source: FE Financial Analytics (Total return net of fees) The year to 31 March 2017 was characterised by political activity, as electorates were taken to the polls on either side of the Atlantic and delivered results which overturned the expectations of market strategists, opinion polls and bookmakers odds alike. In the context of these events, we entered the year cautiously positioned and focused on avoiding the pitfalls that have the potential to permanently destroy capital. This was embodied by an underweight allocation to equities and an increased level of protection within the portfolio, in particular index-linked bonds, absolute return funds and cash. Yet in the case of both the UK s decision to leave the European Union and the US presidential election, the anticipated falls in equities failed to materialise and we had to remind ourselves that markets can quickly discount bad news and uncertainty, such that the performance of investments can appear completely at odds with the pre-conceived wisdom. This is particularly true of UK equities, which defied predictions by accelerating upwards following the Brexit decision. Over the year world equities rose 33.1%, the FTSE All Share 22% and the UK All Stocks Gilt Index 6.6% (all total returns in sterling). Clearly, the strength of these returns for a UK investor in part reflected the depreciation of sterling, which fell sharply in June before being further weakened by an interest rate cut in August. This provided a fillip for larger UK listed companies that earn a disproportionate percentage of their profits in overseas currencies. However, they were also driven by an increasingly positive global economic picture as growth and inflation gained momentum, with trends such as falling unemployment and rising wage growth accelerating. Over the second half of the year, we reacted to the changing environment by incrementally reducing our underweight equity stance by adding exposure to more economically sensitive companies. This involved a rigorous adherence to our core equity selection principles, retaining our preference for companies we perceive to have defendable franchises, resilient profitability and structurally growing end markets. While this served the sub-fund well, we continue to be extremely vigilant to the build-up of excesses in the market. Our underweight position in fixed income reflects the view that as inflation takes hold, interest rates will continue to rise pushing yields up and bond prices down. Underlying the broadly neutral position in equities is a preference for international over UK domestic companies and we maintain the balance of funds in alternative assets and cash. The bulk of our alternative allocation is to absolute return funds, which look to benefit from rising and falling markets and offer protection should the optimism in the equity market begin to fade. James Hambro & Partners LLP 5 May 2017 This report contains FTSE data. Source: FTSE International Limited ( FTSE ) FTSE FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE s express written consent. 11

15 IFSL JAMES HAMBRO BARNHAM BROOM FUND AUTHORISED INVESTMENT MANAGER S REPORT (continued) Distributions (pence per share) Year 2017 Year 2016 Year 2015 Year 2014 Income shares Net income paid 31 May Net income paid 30 November Total net income Material Portfolio Changes Major Purchases Cost ( ) Major Sales Proceeds ( ) AXA Framlington UK Mid Cap 747,250 JO Hambro Japan Dividend Growth 679,650 US Treasury 0.125% ,827 US Treasury 2% ,294 Invesco Perpetual Global Targeted Returns 656,233 US Treasury 2.375% ,744 BlackRock Asian Growth Leaders 653,100 Artemis Global Income 628,275 JO Hambro Japan 609,450 Kames UK Equity Absolute Return 600,800 JO Hambro Japan Dividend Growth 608,850 SSGA GBP Liquidity 500,156 HSBC Holdings 532,990 BlackRock Institutional Sterling Liquidity 500,146 Polar Capital Healthcare Opportunities 529,380 3i Group 484,630 JO Hambro Global Opportunities 499,800 AXA Framlington UK Mid Cap 441,000 British American Tobacco 494,913 Kerry Group 392,306 Vodafone Group 408,149 Henderson European Selected Opportunities 371,054 Glencore 390,772 WhiteWave Foods 358,392 Rentokil Initial 387,900 John Laing Group 354,274 Givaudan 363,217 JO Hambro Japan 342,750 Saga 343,927 Vodafone Group 338,089 JO Hambro UK Equity Income 338,440 LondonMetric Property 328,173 First Republic Bank 317,285 Saga 320,201 SSP Group 293,778 JPMorgan US Equity Income 298,200 JPMorgan Chase 288,220 BT Group 290,855 Amazon.com 283,821 Booker Group 287,091 Other purchases 1,612,159 Other sales 779,774 Total purchases for the year 11,017,461 Total sales for the year 9,600,854 12

16 IFSL JAMES HAMBRO BARNHAM BROOM FUND COMPARATIVE TABLE Income shares Year to Year to Year to Change in net assets per share pence pence pence Opening net asset value per share Return before operating charges* (0.19) Operating charges (2.00) (1.78) (1.67) Return after operating charges* (1.97) Distributions on income shares (1.02) (1.46) (1.53) Closing net asset value per share * after direct transaction costs of: Performance Return after charges 17.11% -1.54% 10.92% Other information Closing net asset value 30,152,680 24,550,585 23,604,150 Closing number of shares 20,770,101 19,667,601 18,403,501 Operating charges 1.48% 1.42% 1.40% Direct transaction costs 0.08% 0.10% 0.09% Prices Highest share price p p p Lowest share price p p p Operating charges are the same as the ongoing charges and are the total expenses paid by each share class in the year. Direct transaction costs are the total charges for the year, included in the purchase and sale of investments within the portfolio of the sub-fund. The operating charges include the percentage figure calculated for the OCF on the underlying collective investment schemes held by the sub-fund. These amounts are expressed as a percentage of the average net asset value over the year and the average shares in issue for the pence per share figures. SYNTHETIC RISK AND REWARD INDICATOR Lower risk Typically lower rewards Higher risk Typically higher rewards The risk and reward indicator above aims to provide you with an indication of the overall risk and reward profile of the sub-fund. It is calculated based on the volatility of the sub-fund using weekly historic returns over the last five years. If five years data is not available for a fund, the returns of a representative portfolio are used. This sub-fund has been measured as 4 because it has experienced moderate volatility historically. During the period the synthetic risk and reward indicator has remained unchanged. 13

17 IFSL JAMES HAMBRO BARNHAM BROOM FUND PORTFOLIO STATEMENT as at 31 March 2017 Holding or Bid Percentage of nominal value value total net assets % DEBT SECURITIES (11.99%) 350,000 UK Treasury Index-Linked 1.25% , ,000 UK Treasury Index-Linked 4.125% , ,000 US Treasury 0.125% , ,000 US Treasury 1.75% , Total Debt Securities 2,736, UNIT TRUSTS/OEICS (50.74%) 350,000 AXA Framlington UK Mid Cap 751, ,000 BlackRock Asian Growth Leaders 840, ,000 BlackRock Continental European Income 529, ,081 BNY Mellon Absolute Return Equity 900, ,000 Findlay Park American 742, ,000 Henderson UK Absolute Return 731, ,000 Hermes Asia Ex-Japan Equity 711, ,000 Invesco Perpetual Global Targeted Returns 664, ,000 JO Hambro Global Opportunities 559, ,000 JO Hambro Japan 632, ,000 JO Hambro Japan Dividend Growth 661, ,000 JO Hambro UK Equity Income 1,000, ,000 JPMorgan US Equity Income 1,021, ,000 Lazard Global Listed Infrastructure Equity 914, ,000 Polar Capital Global Technology 738, ,000 Polar Capital Healthcare Opportunities 520, ,000 Polar Capital North American 625, ,000 Schroder Asian Income 503, ,000,000 Standard Life UK Equity Income Unconstrained 561, ,000 Trojan 877, ,000 Trojan Income 668, Total Unit Trusts/OEICs 15,155, EQUITIES (25.64%) United Kingdom (18.47%) Banks (0.00%) 83,500 HSBC Holdings 546, Financial Services (2.56%) Fixed Line Telecommunications (1.34%) Food & Drug Retailers (0.97%) General Industrials (1.58%) 95,000 Smith (DS) 412, Life Insurance (1.11%) 60,000 Aviva 321,

18 IFSL JAMES HAMBRO BARNHAM BROOM FUND PORTFOLIO STATEMENT (continued) as at 31 March 2017 Holding or Bid Percentage of nominal value value total net assets % Media (3.19%) 70,000 Auto Trader Group 272, ,000 RELX 405, ,500 WPP 476, ,154, Mining (0.00%) 160,000 Glencore 497, Oil & Gas Producers (1.74%) 25,000 Royal Dutch Shell 'B' 551, Personal Goods (1.61%) 12,500 Unilever 491, Real Estate Investment Trusts (1.30%) Software & Computer Services (1.66%) 83,000 Sage Group 525, Support Services (0.00%) 160,000 Rentokil Initial 393, Tobacco (0.00%) 9,500 British American Tobacco 502, Travel & Leisure (1.41%) 28,235 Compass Group 424, ,400 SSP Group 296, , Total United Kingdom 6,116, Europe (4.42%) 225 Givaudan 323, ,500 Novartis 388, ,000 Thales Group 464, Total Europe 1,177, North America (2.75%) 425 Amazon.com 298, ,499 Amphenol 431, ,500 First Republic Bank 416, ,750 JPMorgan Chase 338, ,000 Visa 498, Total North America 1,983, Total Equities 9,277, Portfolio of investments 27,169, Net other assets 2,983, Net assets 30,152, The figures in brackets represent the percentage comparatives as at 31 March

19 IFSL JAMES HAMBRO BARNHAM BROOM FUND STATEMENT OF TOTAL RETURN Notes 31 March March 2016 Income: Net capital gains/(losses) 4 4,042,688 (626,932) Revenue 6 485, ,981 Expenses 7 (277,271) (237,725) Net revenue before taxation 208, ,256 Taxation 8 (5,236) (1,831) Net revenue after taxation 203, ,425 Total return before distributions 4,245,726 (351,507) Distributions 9 (203,038) (275,425) Change in net assets attributable to shareholders from investment activities 4,042,688 (626,932) STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS 31 March March 2016 Opening net assets attributable to shareholders 24,550,585 23,604,150 Amounts receivable on issue of shares 1,917,710 1,573,367 Amounts payable on cancellation of shares (358,303) 0 1,559,407. 1,573,367 Change in net assets attributable to shareholders from investment activities 4,042,688 (626,932) Closing net assets attributable to shareholders 30,152,680 24,550,585 16

20 IFSL JAMES HAMBRO BARNHAM BROOM FUND BALANCE SHEET as at 31 March 2017 Notes 31 March March 2016 Assets: Fixed Assets: Investment assets 16 27,169,394 21,696,538 Current Assets: Debtors ,694 63,700 Cash and bank balances 2,858,600 2,927,237 Total assets 30,272,688 24,687,475 Liabilities: Creditors: Distribution payable 9 94, ,246 Other creditors 11 25,934 12,644 Total liabilities 120, ,890 Net assets attributable to shareholders 30,152,680 24,550,585 17

21 IFSL JAMES HAMBRO BARNHAM BROOM FUND NOTES TO THE FINANCIAL STATEMENTS Notes 1 to 3 are on pages 7 to NET CAPITAL GAINS/(LOSSES) 31 March March 2016 The net gains/(losses) on investments during the year comprise: Non-derivative securities gains/(losses) 4,051,650 (607,090) Currency losses (9,290) (20,016) Transaction charges Net capital gains/(losses) 4,042,688 (626,932) 5 PURCHASES, SALES AND TRANSACTION COSTS 31 March March 2016 Purchases excluding transaction costs Equities 4,695,623 4,262,979 Debt securities 890,157 2,153,900 Collective Investment Schemes 5,413,264 8,014,359 10,999,044 14,431,238 Equities: Commissions 4,324 6,844 Taxes and other charges 14,093 18,460 Total purchase transaction costs 18,417 25,304 Purchases including transaction costs 11,017,461 14,456,542 Purchase transaction costs expressed as a percentage of the principal amount: Equities: Commissions 0.09% 0.16% Taxes and other charges 0.30% 0.43% Sales excluding transaction costs Equities 3,156,260 6,415,307 Corporate actions 4,480 0 Debt securities 1,504,161 1,169,405 Collective Investment Schemes 4,938,201 7,055,947 9,603,102 14,640,659 Equities: Commissions (2,224) (4,598) Taxes and other charges (24) (33) Total sale transaction costs (2,248) (4,631) Sales net of transaction costs 9,600,854 14,636,028 Sales transaction costs expressed as a percentage of the principal amount: Equities: Commissions 0.07% 0.07% Taxes and other charges 0.00% 0.00% Total purchases and sales transaction costs expressed as a percentage of the average net asset value over the year: Commissions 0.02% 0.05% Taxes and other charges 0.05% 0.08% 0.07% 0.13% No significant in-specie transfers were identified in the period (2016: nil). Transaction costs are commissions paid to agents, levies by regulatory agencies and securities exchanges, and transfer taxes and duties associated with investment transactions on the sub-fund. These exclude any differences between quoted bid and offer prices or internal administrative or holding costs. Transaction handling charges These are charges payable to the depositary in respect each transaction. ( 328) ( 174) 18

22 IFSL JAMES HAMBRO BARNHAM BROOM FUND NOTES TO THE FINANCIAL STATEMENTS (continued) 5 PURCHASES, SALES AND TRANSACTION COSTS (continued) Average portfolio dealing spread This spread represents the difference between the values determined respectively by reference to the bid and offer prices of investments expressed as a percentage of the value determined by reference to the offer price. Average portfolio dealing spread at the balance sheet date 0.03% 0.03% 6 REVENUE 31 March March 2016 UK dividends (franked) 334, ,491 UK dividends (unfranked) 0 19,240 Overseas income non taxable 103,388 94,298 Overseas income taxable (195) 18,994 Interest on debt securities 47,833 46,868 Bank interest Sundry revenue 0 80 Total revenue 485, ,981 7 EXPENSES 31 March March 2016 Payable to the ACD or associate: ACD's periodic charge 269, ,401 Administration fees 10, , ,612 Other expenses: Depositary's fees 0 26 Safe custody fees (460) 52 Financial Conduct Authority fee (850) 0 Sundry expenses (1,826) 35 (3,136) 113 Total expenses 277, ,725 The net audit fee is 7,500 (2016: 7,500) which is being met by the ACD. All expenses in the current year other than the ACD's periodic charge, are adjustments to the prior year expenses. 8 TAXATION 31 March March 2016 a Analysis of the tax charge for the year Overseas tax 5,236 1,831 Total tax charge (see note 8(b)) 5,236 1,831 b Factors affecting the tax charge for the year The taxation assessed for the year is lower than the standard rate of corporation tax in the UK for an open ended investment company (20%). The differences are explained below. Net revenue before taxation 208, ,256 Corporation tax at 20% (2016: 20%) 41,655 55,451 Effects of: Revenue not subject to taxation (87,578) (85,974) Amounts deductible for Index Linked Gilts 0 (401) Unrelieved excess management expenses 45,923 30,924 Overseas tax 5,236 1,831 Total tax charge (see note 8(a)) 5,236 1,831 At 31 March 2017 the sub-fund has deferred tax assets of 113,467 (2016: 67,544) arising from surplus management expenses of 567,336 (2016: 337,721) which have not been recognised due to uncertainty over the availability of future taxable profits. 19