SUMMIT MUTUAL FUNDS P.L.C. ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS

Transcription

1 SUMMIT MUTUAL FUNDS P.L.C. ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS (An open-ended Variable Capital Umbrella Investment Company with Segregated Liability between Sub-Funds) FINANCIAL YEAR ENDED 31 DECEMBER 2017

2 (An investment company with variable capital) Contents Page Company Information 2 Investment Manager s Report 3 Directors Report 6 Independent Auditors Report 10 Depositary Report to Shareholders 12 Statement of Comprehensive Income 13 Statement of Financial Position 15 Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders 17 Statement of Cash Flows 19 Notes to the Accounts 21 Schedule of Investments December 2017: The Balanced Fund 48 The Global Leaders Fund 52 The Growth Fund 54 Schedule of Investments December 2016: The Balanced Fund 58 The Global Leaders Fund 63 The Growth Fund 65 Portfolio Changes - Material Acquisitions/Disposals - Unaudited 69 Appendix I Remuneration Disclosure Unaudited 74 Notice of Annual General Meeting 75 1

3 Company Information Directors Secretary Registered Office Gerry Keenan* (Irish) John O Connell** (Irish) Patrick Burke* (Irish) Colm O Neill* (Irish) David Killeen* (Irish) Frank O Riordan** (Irish) Fiona McCormack Irish Life Centre Lower Abbey Street Dublin 1, Ireland Registered Number Manager Investment Manager Depositary Administrator Independent Auditors Legal Adviser Transfer Agent Summit Asset Managers Limited Beresford Court Beresford Place Dublin 1, Ireland Irish Life Investment Managers Beresford Court Beresford Place Dublin 1, Ireland Northern Trust Fiduciary Services (Ireland) Limited Georges Court Townsend Street Dublin 2, Ireland Northern Trust International Fund Administration Services (Ireland) Limited Georges Court Townsend Street Dublin 2, Ireland Ernst & Young Chartered Accountants EY Building Harcourt Centre Harcourt Street Dublin 2, Ireland McCann Fitzgerald Riverside One Sir John Rogerson s Quay Dublin 2, Ireland EBS Designated Activity Company The EBS Building 2 Burlington Road Dublin 4, Ireland *Non-Executive Director **Independent Non-Executive Director 2

4 Investment Manager s Report Executive Summary Global equities have generated strong positive returns over the course of 2017 while Eurozone bonds have also risen. Positive support for equities has been evident from an improving economic growth and earnings backdrop and relatively attractive valuations compared to other asset classes. Hopes for additional global fiscal stimulus to boost growth also contributed to the positive returns from equities throughout Immediately after the election of Donald Trump as US President, investors began to expect a fiscal stimulus programme would be implemented in the US in 2017/18 which was viewed as being potentially positive for growth. While progress on implementing any fiscal stimulus in the US was slow, it did eventually bear fruit, as President Trump signed the historic tax bill on the 22nd of December Political developments and central bank policies were also key influences on markets during the year. Through the first quarter, markets had been fearful over the possible election of Marine Le Pen as French President given her mandate to hold a referendum on French membership of the Euro and the EU. The resultant fears over a possible break-up of the EU and Euro in the event of Le Pen winning the French election caused French and peripheral spreads to widen against Germany in Q1 and also resulted in more muted returns in European and global equities. The election of a pro EU French President removed these fears and contributed to a recovery in French and peripheral bonds and further gains in European and global equities. Other political events had an effect on markets, although not to the same extent as the French elections. The UK Prime Minister Theresa May called a surprise general election for June, where initial polls suggested the Conservative party was set to gain a majority, which was seen as strengthening her hand in terms of Brexit negotiations. The surprise outcome of the election with the Conservatives ultimately losing their majority was seen to weaken their negotiating position, as highlighted by a number of concessions being made by the UK in early negotiations. Towards year end, the Catalonian independence issue gave rise to some temporary weakness in Spanish bonds although concerns over the potential market impact have since subsided with Catalonia expected to remain part of Spain. Most yields generally hit all-time lows post-brexit vote, but recovered throughout the course of The Eurozone >5 year benchmark rose 0.3% while the 1-5 year benchmark fell -0.2% over the course of the year. German 10 year yields were quite volatile in 2017, falling to a low of 0.19% in the first quarter due to a flight to safety associated with concerns over the French Presidential election. With Emmanuel Macron winning the French election, the risk of France holding a referendum on EU and Euro membership was removed and German yields began to rebound again. Recently, yields have been on an upward trajectory, pulled higher by speculation about the ECB adopting a less accommodative monetary stance while the persistence of low inflation has driven them lower at times. At the end of December, German 10 year yields were 0.43%. In the second half of 2017 central banks were again a key influence on markets. While there appeared to be a pause in the move towards the more hawkish policy stance which global central banks had adopted towards the end of Q2 due to the persistence of low inflation, central banks generally reaffirmed their intention to reduce policy accommodation at a relatively faster rate than expected by investors, giving yields their start on an upward trajectory. The spread in yields between the bond yield of peripheral Eurozone markets and German bonds were mixed over 2017, although a general tightening trend was visible towards the end of the year. Both Spanish 10 year spreads and Italian spreads were close to unchanged at year-end but were subject to bouts of volatility due to political uncertainties. 3

5 Investment Manager s Report (continued) Fund Performance The Balanced Fund 5.30% The invested asset split at the year-end was 64% equities, 31% bonds and 5% cash. The geographic split of the equity component at year-end was North America 37%, Eurozone 13%, UK 7%, Rest of World 4% and Rest of Europe 3%. The Global Leaders Fund 7.41% The fund focuses on large capitalisation stocks across a mix of geographic markets and industry sectors. The geographic invested asset split at year-end was North America 79%, UK 5%, Eurozone 3%, Rest of World 4%, Rest of Europe 6% and Japan 2% with a cash holding of 1%. The Growth Fund 8.19% The fund focuses on holding value stocks across geographic markets and industry sectors. The geographic invested asset split at year-end was North America 56%, Eurozone 20%, UK 10%, Rest of World 7% and Rest of Europe 4% with a cash holding of 3%. Equity Outlook An improving global economic and earnings backdrop supported equity markets in 2017 and is expected to remain in place through the coming year. With the expected recovery in global earnings on the back of this improving growth backdrop and with an additional boost to US earnings from the recent reduction in corporate tax to 21%, global economic data has been stronger than expected in recent quarters and market consensus for global growth in 2018 is approx. 3.5% which is above the 2.5-3% range evident from 2010 to The market expects global earnings to grow approx. 12% in While on absolute valuation measures, the significant undervaluation of equities evident immediately post the financial crisis has been removed, valuations are only back in line with long term averages and do not appear stretched. The positive earnings growth backdrop referred to above enables equities to generate reasonable gains in line with earnings growth without leading to further rises in valuation multiples. Equities remain very attractive on a relative valuation basis against bonds and cash given the historically low yields currently available on these assets. Recent evidence of improved flows into equity funds is also supportive of equity markets. While the fundamental backdrop remains positive, there are a number of risks which act as potential overhangs on equity markets. Political uncertainties and tensions are evident across Europe, the US, the Middle East and Asia. While rhetoric around trade restrictions has eased significantly compared to the time of the US Presidential election campaign, recently there have been some signs of renewed focus on the implementation of measures which could negatively impact trade and hence the global growth outlook. Despite the strength of the fundamental economic backdrop, questions remain over the potential length and ultimate end of the current economic cycle. Concerns are also evident over the potential impact on markets of the reduction in the level of policy accommodation being provided by central banks and possible upward pressure on global bond yields which could negatively impact equities. 4

6 Investment Manager s Report (continued) Given the above, bouts of volatility in markets are possible at some point in the coming months as these risks possibly come to the fore. Nevertheless, following the 20% gain in local currency terms in global equities in 2017, we expect gains of high single to double digits in 2018 as we believe the positive fundamental backdrop will overcome these risks. The eventual path of global growth and earnings and developments in the various risk factors will determine if and how markets vary from this potential return path over the year with sudden or extreme moves possibly presenting investors with opportunities to enhance returns at some points through Bond Outlook Global and European sovereign bond yields generally hit new all-time lows immediately after the Brexit referendum in July Since then global bond yields have drifted higher on the back of improving global growth, a rise in inflation partly due to the base effects of higher oil prices and expectations of reduced levels of policy accommodation from global central banks. This trend towards higher yields was given further impetus by Donald Trump s election as US President. The expectation of a boost to US and global growth via fiscal stimulus contributed to a further rise in inflation expectations and hence higher yields. US 10 year Treasury yields were 2.4% at the end of the year, having moved gradually higher in recent months as the Fed has reaffirmed its commitment to tightening interest rates on the back of low unemployment levels, an expected upward move in inflation towards its 2% target over time and the further underpinning of growth by the recently agreed fiscal stimulus package. Core Eurozone bond yields have not risen from their lows to the same extent as those in the US with the German 10 year yield at the end of January 2018 at 0.70%. German 10 year yields have however been somewhat volatile over the last year, falling to a low of 0.19% early in 2017 during the flight to safety associated with the political uncertainties in Europe, in particular the concerns over the French Presidential election. Since then German 10 year yields have moved higher as Eurozone growth has improved and concerns were evident that the ECB could begin to tighten monetary policy at a faster pace than previously expected. The upward pressure on core European yields relative to the US from the lows in mid-2016 has been limited by the lower prospects for fiscal stimulus in Europe, the existence of large output gaps in most European economies and the fact that inflation in the Eurozone is expected to lag both inflation in the US and the ECB s target of close to but just below 2% over the medium term. While the ECB has reduced the level of asset purchases under its Quantitative Easing programme to 30bn per month from January 2018, it has indicated asset purchases will continue until at least September and could extend to the end of As a result, with the ECB remaining a significant buyer of sovereign bonds for the time being, while some upward pressure on core Eurozone bond yields is expected through 2018, this is anticipated to be relatively limited. In this context, German 10 year yields are expected to trade in a range of % through Trends and developments in the oil price, Eurozone inflation readings, ECB policy announcements, political developments and other economic data will determine where within the range yields are trading at any particular point. Political developments and ECB actions will determine whether peripheral bonds can outperform core bonds in the Eurozone over the medium to long term. Peripheral spreads have narrowed significantly in recent months as better growth has improved debt dynamics in peripheral countries, increased hopes for further EU integration have been evident and expectations are that the upcoming general election in Italy will not result in any systemic risk being posed to the EU or Euro. However from current levels at the end of January 2018 of 10 year spreads against Germany of 73bps in the case of Spain and 133bps in the case of Italy, further spread compression is expected to be limited. 5

7 Directors Report The Directors have the pleasure of presenting to the shareholders their Annual Report and Audited Financial Statements of Summit Mutual Funds p.l.c. (the Company ), for the financial year ended 31 December The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union and the comparative information has been restated accordingly to comply with the Companies Act 2014 (including amendments by the Companies (Accounting) Act 2017), hereinafter (the Companies Act 2014 ). STATEMENT OF DIRECTORS RESPONSIBILITIES The Directors are responsible for preparing the Directors Report and the Financial Statements in accordance with Irish law and regulations. Irish company law requires the Directors to prepare Financial Statements for each financial year. Under the law, the Directors have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards ( IFRS ). Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the company as at the financial year end date and of the profit or loss of the company for the financial year and otherwise comply with the Companies Act In preparing these Financial Statements, the Directors are required to: select suitable accounting policies for the company Financial Statements and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether the Financial Statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for ensuring that the Company keeps adequate accounting records which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy and enable them to ensure that the Financial Statements and the Directors report comply with the Companies Act 2014, and are prepared in accordance with the UCITS Regulations and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (as amended) (the Central Bank UCITS Regulations ), and enable the Financial Statements to be audited. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. PRINCIPAL ACTIVITIES The Company is authorised as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) by the Central Bank of Ireland ( Central Bank ) and acts as an umbrella fund. It was incorporated in Ireland as a public limited company on 7 November As of the date of this report the Company has three active Sub-Funds, the Balanced Fund, the Global Leaders Fund and the Growth Fund (each a Sub-Fund, together the Sub-Funds ). HIGHLIGHTS OF THE FINANCIAL YEAR AND OUTLOOK A detailed review of the business and future developments is included in the Investment Manager s Report on pages 3 to 5. RISK MANAGEMENT OBJECTIVES AND POLICIES The Company seeks to provide investors with capital appreciation by investing in transferable securities. Investment in the Company carries with it a degree of risk including, but not limited to, the risks referred to in Note 10 of these Financial Statements. RESULTS The financial position and results for the financial year are set out on pages 13 to 20. No dividends have been paid or declared during the financial year or at the financial year end. 6

8 Directors Report (continued) GOING CONCERN The Directors report summarises the Company s activities, its financial performance and financial position together with any factors likely to affect its future development. In addition, it discusses the principal risks and uncertainties it faces. Note 10 to the Financial Statements summarises the Company s risk management objectives and policies together with its financial risks. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial Statements. DIRECTORS COMPLIANCE STATEMENT The Directors, in accordance with Section 225(2a) of the Companies Act 2014, acknowledge that they are responsible for securing compliance by the Company with its relevant obligations as defined in the Companies Act The Directors confirm that: They have drawn up and adopted a compliance policy statement setting out the Company s policies that, in the Directors opinion, are appropriate to the Company in respect of its compliance with its relevant obligations; Appropriate arrangements and structures that, in their opinion, are designed to secure material compliance with the Company s relevant obligations, have been put in place; and A review has been conducted, during the financial year ended 31 December 2017, of the arrangements and structures that have been put in place to secure the Company s compliance with its relevant obligations. AUDIT COMMITTEE STATEMENT In accordance with Section 167(2) of the Companies Act 2014, the Board is required to either establish an audit committee or to explain if one is not established. The Directors believe that there is no requirement to form an audit committee based on the following rationale: (a) The Company is authorised as an investment company with the Central Bank pursuant to UCITS Regulations and has appointed Summit Asset Managers Ltd ( SAM ) as its management company; (b) as a management company authorised pursuant to the UCITS Regulations & AIFMD, SAM is obliged by the Central Bank to have a Business Plan in place in which it identifies the Board member or other person (the Designated Person ) responsible for, among other areas, Capital and Financial Management, Distribution, Fund Risk Management, Operational Risk Management, Investment Management and Regulatory Compliance. As a result, SAM has systems in place whereby the named Designated Person takes initial responsibility for each such area and any material issues arising with respect to the Company are referred to the Board of Directors for review and, as applicable, action; (c) SAM has its own conflicts of interest policy and the Board of Directors receives confirmation of the auditor's independence annually; (d) the nature, scale and complexity of the Company s Sub-Funds do not warrant an audit committee; and (e) the Directors believe that the Company already has adequate procedures in place that cover, in all material respects, the areas of responsibility of an audit committee, as provided for in Section 167(7) of the Companies Act CORPORATE GOVERNANCE CODE The Irish Funds ( IF ) Corporate Governance Code was adopted by Summit Asset Managers Ltd in its capacity as management company to Summit Mutual Funds plc. As at the financial year end, the Board of Summit Mutual Funds plc. comprised of six Non-Executive Directors; including two Independent Directors. 7

9 EVENTS DURING THE FINANCIAL YEAR Summit Mutual Funds p.l.c. Directors Report (continued) On 12 June 2017, an updated Prospectus for Summit Mutual Funds p.l.c has been noted by the Central Bank of Ireland to incorporate the provisions of UCITS V, the Companies Act 2014 and the Investor Money Regulations. No other significant events have occurred in respect of the Company during the financial year which were deemed material for disclosure in the Financial Statements. EVENTS SINCE THE FINANCIAL YEAR END During the period from 1 January 2018 to 20 March 2018, 205,043 Participating Shares were purchased for a consideration of 449,651 and 694,899 Participating Shares were redeemed for a consideration of 1,486,561. Please refer to Note 17 for details. Mr. David Killeen resigned as Director with effect from 12 March 2018 There have been no other significant events requiring disclosure since the financial year ended 31 December DIRECTORS The names of the Directors holding office during the financial year ended 31 December 2017 were: Gerry Keenan John O Connell Patrick Burke Colm O Neill David Killeen Frank O Riordan The prior approval of the Central Bank is required for any election or appointment of a Director. There is no requirement under the Company s Articles of Association for Directors to retire, by rotation or otherwise, at the Annual General Meeting. DIRECTORS AND SECRETARY S INTERESTS IN SHARES The Directors and Secretary in office at 31 December 2017 held no shares in the Company (31 December 2016: Nil). TRANSACTIONS WITH CONNECTED PERSONS Any transaction carried out with a UCITS by a management company or depositary to the UCITS, the delegates or sub-delegates of the management company or depositary, and any associated or group of such a management company, depositary, delegate or subdelegate ( connected persons ) must be carried out as if negotiated at arm s length. Transactions must be in the best interests of the shareholders. The Directors are satisfied that there are arrangements (evidenced by written procedures) in place, to ensure that the obligations set out in Regulation 41(1) of the Central Bank UCITS Regulations are applied to all transactions with connected persons, and are satisfied that transactions with connected parties entered into during the financial year complied with the obligations set out in Regulation 41(1) of the Central Bank UCITS Regulations. AUDITORS The auditors, Ernst & Young, Chartered Accountants, will continue in office in accordance with Section 383(2) of the Companies Act

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15 Statement of Comprehensive Income for the financial year ended 31 December 2017 THE THE THE BALANCED GLOBAL GROWTH COMPANY Notes FUND LEADERS FUND FUND TOTAL Income Dividend income 257, ,788 1,095,578 1,845,643 Bond interest income 158, ,489 Net gain/(loss) on financial assets at fair value through profit or loss 4 716,473 1,055,737 3,640,898 5,413,108 Total net income/(loss) 1,132,239 1,548,525 4,736,476 7,417,240 Expenses Management fees 7 303, , ,581 1,450,987 Depositary fees 7 17,256 9,575 37,166 63,997 Administration fees 7 14,166 13,993 39,554 67,713 Audit fees 7 5,023 5,134 14,236 24,393 Bank interest expense 7,532 1,922 14,443 23,897 Other operating expenses 12,470 12,488 33,958 58,916 Total operating expenses 360, , ,938 1,689,903 Operating profit/(loss) 772,238 1,205,561 3,749,538 5,727,337 Profit/(loss) before tax 772,238 1,205,561 3,749,538 5,727,337 Withholding tax (29,636) (70,797) (125,707) (226,140) Profit/(loss) after tax 742,602 1,134,764 3,623,831 5,501,197 Increase/(decrease) in net assets attributable to holders of redeemable participating shares from operations 742,602 1,134,764 3,623,831 5,501,197 There are no recognised gains or losses arising during the financial year other than those included above. In arriving at the results for the financial year all amounts above relate to continuing operations. Please see accompanying notes to the Financial Statements. 13

16 Statement of Comprehensive Income for the financial year ended 31 December 2016 THE THE THE BALANCED GLOBAL GROWTH COMPANY Notes FUND LEADERS FUND FUND TOTAL Income Dividend income 287, ,579 1,190,711 1,977,468 Bond interest income 154, ,253 Net gain on financial assets at fair value through profit or loss 4 1,822,718 2,067,913 6,692,287 10,582,918 Total net income 2,264,149 2,567,492 7,882,998 12,714,639 Expenses Management fees 7 291, , ,636 1,354,709 Depositary fees 7 16,690 8,429 33,183 58,302 Administration fees 7 13,591 12,779 36,850 63,220 Audit fees 7 5,103 5,028 14,162 24,293 Bank interest expense 8,074 1,720 15,728 25,522 Other operating expenses 5,991 5,110 15,276 26,377 Total operating expenses 340, , ,835 1,552,423 Operating profit 1,923,461 2,260,592 6,978,163 11,162,216 Profit before tax 1,923,461 2,260,592 6,978,163 11,162,216 Withholding tax (34,519) (62,849) (138,387) (235,755) Profit after tax 1,888,942 2,197,743 6,839,776 10,926,461 Increase in net assets attributable to holders of redeemable participating shares from operations 1,888,942 2,197,743 6,839,776 10,926,461 There are no recognised gains or losses arising during the financial year other than those included above. In arriving at the results for the financial year all amounts above relate to continuing operations. Please see accompanying notes to the Financial Statements. 14

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18 Statements of Financial Position as at 31 December 2016 THE THE THE BALANCED GLOBAL GROWTH COMPANY Notes FUND LEADERS FUND FUND TOTAL Assets Financial assets at fair value through profit or loss 5 18,648,597 19,854,982 53,266,057 91,769,636 Cash and cash equivalents 1,775, ,871 3,619,815 5,725,713 Securities sold receivable - - 6,046 6,046 Bond interest receivable 79, ,832 Dividends receivable 16,147 24,220 67, ,799 Other receivables Total assets 20,519,807 20,210,269 56,959,913 97,689,989 Liabilities Securities purchased payable 8,928-36,772 45,700 Management fee payable 7 25,143 24,682 69, ,639 Depositary fee payable 7 1, ,938 5,107 Administration fee payable 7 1,174 1,151 3,257 5,582 Accrued expenses 9,508 8,435 25,520 43,463 Total liabilities 46,167 35, , ,491 Net assets attributable to holders of redeemable participating shares 15 20,473,640 20,175,246 56,821,612 97,470,498 Number of redeemable participating shares in issue 9 9,683,043 12,080,479 25,949,349 Net Asset Value per redeemable participating share Cent Please see accompanying notes to the Financial Statements. 16

19 Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders for the financial year ended 31 December 2017 THE THE THE BALANCED GLOBAL GROWTH COMPANY FUND LEADERS FUND FUND TOTAL Net assets attributable to holders of redeemable participating shares at 1 January ,473,640 20,175,246 56,821,612 97,470,498 Proceeds from issuance of redeemable participating shares 547, ,429 1,363,743 2,256,820 Payments on redemption of redeemable participating shares (1,396,143) (1,641,739) (4,882,809) (7,920,691) Net increase in net assets attributable to holders of redeemable participating shares 742,602 1,134,764 3,623,831 5,501,197 Net assets attributable to holders of redeemable participating shares at 31 December ,367,747 20,013,700 56,926,377 97,307,824 Please see accompanying notes to the Financial Statements. 17

20 Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders for the financial year ended 31 December 2016 THE THE THE BALANCED GLOBAL GROWTH COMPANY FUND LEADERS FUND FUND TOTAL Net assets attributable to holders of redeemable participating shares at 1 January ,346,093 18,794,068 53,194,023 91,334,184 Proceeds from issuance of redeemable participating shares 522, ,206 1,202,722 2,075,108 Payments on redemption of redeemable participating shares (1,283,575) (1,166,771) (4,414,909) (6,865,255) Net increase in net assets attributable to holders of redeemable participating shares 1,888,942 2,197,743 6,839,776 10,926,461 Net assets attributable to holders of redeemable participating shares at 31 December ,473,640 20,175,246 56,821,612 97,470,498 Please see accompanying notes to the Financial Statements. 18

21 Statements of Cash Flows for the financial year ended 31 December 2017 THE THE THE BALANCED GLOBAL GROWTH COMPANY FUND LEADERS FUND FUND TOTAL Cash flows from operating activities Cash generated by/(used in) operations 22,883 78,133 (9,850) 91,166 Purchase of investment securities (2,554,864) (974,291) (7,674,778) (11,203,932) Proceeds from sale and maturity of investment securities 2,640,498 2,105,920 9,363,877 14,110,295 Net cash flows from operating activities 108,517 1,209,763 1,679,249 2,997,529 Cash flows from financing activities Gross proceeds from issue of shares 547, ,429 1,363,743 2,256,820 Gross payments on redemption of shares (1,396,143) (1,641,739) (4,882,809) (7,920,691) Net cash flows from financing activities (848,495) (1,296,310) (3,519,066) (5,663,871) Net increase/(decrease) in cash and cash equivalents (739,978) (86,547) (1,839,817) (2,666,342) Cash and cash equivalents at the beginning of the financial year 1,775, ,871 3,619,815 5,725,713 Cash and cash equivalents at the end of the financial year 1,035, ,323 1,779,998 3,059,371 Supplementary disclosures on cash flow from operating activities Interest received 155, ,271 Dividend received net of withholding tax 231, , ,172 1,646,715 Interest paid (7,906) (2,077) (15,250) (25,233) Cash flows from operating activities Increase in net assets attributable to holders of redeemable participating shares from operations 742,602 1,134,764 3,623,831 5,501,197 Net investment (expense) on financial assets at fair value through profit or loss (719,454) (1,062,590) (3,646,807) (5,428,851) Decrease in debtors 1,053 6,635 16,297 23,985 (Decrease) in creditors (1,318) (676) (3,171) (5,165) Cash generated by/(used in) operations 22,883 78,133 (9,850) 91,166 Please see accompanying notes to the Financial Statements. 19

22 Statement of Cash Flows for the financial year ended 31 December 2016 THE THE THE BALANCED GLOBAL GROWTH COMPANY FUND LEADERS FUND FUND TOTAL Cash flows from operating activities Cash generated by operations 54, , , ,089 Purchase of investment securities (2,336,192) (79,521) (7,139,048) (9,554,761) Proceeds from sale and maturity of investment securities 3,190, ,473 12,099,985 16,052,665 Net cash flows from operating activities 908, ,932 5,062,978 6,780,993 Cash flows from financing activities Gross proceeds from issue of shares 522, ,206 1,202,722 2,075,108 Gross payments on redemption of shares (1,283,575) (1,166,771) (4,414,909) (6,865,255) Net cash flows from financing activities (761,395) (816,565) (3,212,187) (4,790,147) Net increase/(decrease) in cash and cash equivalents 146,688 (6,633) 1,850,791 1,990,846 Cash and cash equivalents at the beginning of the financial year 1,628, ,504 1,769,024 3,734,867 Cash and cash equivalents at the end of the financial year 1,775, ,871 3,619,815 5,725,713 Supplementary disclosures on cash flow from operating activities Interest received 157, ,196 Dividend received net of withholding tax 249, ,640 1,041,348 1,728,539 Interest paid (7,204) (1,565) (14,071) (22,840) Cash flows from operating activities Increase in net assets attributable to holders of redeemable participating shares from operations 1,888,942 2,197,743 6,839,776 10,926,461 Net investment income on financial assets at fair value through profit or loss (1,829,492) (2,067,124) (6,714,736) (10,611,352) (Increase)/decrease in debtors (369) 714 (11,539) (11,194) Decrease in creditors (5,013) (4,353) (11,460) (20,826) Cash generated by operations 54, , , ,089 Please see accompanying notes to the Financial Statements. 20

23 Notes to the Accounts 1. General Information Summit Mutual Funds p.l.c. (the Company ) is authorised as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) by the Central Bank of Ireland (the Central Bank ) and acts as an umbrella Fund. It was incorporated in Ireland as a public limited company on 7 November The Company s Registration Number is and its Registered Office is Irish Life Centre, Lower Abbey Street, Dublin 1, Ireland. At 31 December 2017 the Company has 3 Sub-Funds, the Balanced Fund, the Global Leaders Fund and the Growth Fund (each a Sub-Fund, together the Sub-Funds ). 2. Accounting Policies The significant accounting policies adopted by the Company were as follows: (a) Basis of preparation The Financial Statements have been prepared on a historical cost basis except for those financial assets and financial liabilities that have been measured at fair value. Statement of Compliance The Financial Statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ), as adopted by the European Union ( EU ), with Irish statute comprising the Companies Act 2014 (including amendments by the Companies (Accounting) Act 2017), hereinafter (the Companies Act 2014 ) and UCITS Regulations. The Financial Statements are stated in Euro ( ). Valuation Point As the financial year end fell on a weekend, the valuation point used to value securities for the purpose of the Financial Statements is that of 29 December Reference to 31 December 2017 throughout the Financial Statements is actually for 29 December 2017, the last business day of the financial year. Accounting Standards Accounting standards in issue that are not yet effective and have not been early adopted IFRS 9 Financial Instruments is effective for annual periods beginning on or after 1 January IFRS 9 deals with the classification and measurement of financial assets and financial liabilities, including a new expected credit loss model for calculating impairment of financial assets, and the new general hedge accounting requirements. The Company is currently considering the impact of this standard. The requirements of IFRS 9 represent a significant change from existing requirements in IAS 39 in respect of financial assets. Among other changes the standard contains three primary measurement categories for financial assets: at amortised cost, fair value through profit or loss (FVTPL) and fair value through other comprehensive income (FVOCI). A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset s contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. FVOCI applies to debt assets for which: (a) contractual cash flows are solely principal and interest; and (b) business model is to hold to collect cash flows and sell. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available for sale and loans and receivables. (b) Critical accounting estimates and judgements The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 21

24 Notes to the Accounts (continued) 2. Accounting Policies (continued) (c) Going concern The Company s management has made an assessment of the Company s ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on a going concern basis. (d) Functional and presentation currency The Company s functional and presentation currency is the currency of the primary economic environment in which it operates. For all Sub-Funds this is Euro. The Company s performance is evaluated and its liquidity is managed in that currency. Therefore, the currency is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. (e) Financial instruments (i) Classification The Company classifies its financial assets and financial liabilities into the categories below in accordance with IAS 39 Financial instruments: Recognition and measurement. Financial assets and liabilities at fair value through profit or loss The company has categorised its financial assets and liabilities as held for trading at fair value through the profit or loss: Financial assets and liabilities held for trading: Financial assets held for trading include equity securities and debt instruments. These assets are acquired principally for the purpose of generating a profit from short-term fluctuation in price. Other financial liabilities This category includes all financial liabilities, other than those classified at fair value through profit or loss. The Company includes in this category amounts relating to other short-term payables. The Company s accounting policy regarding redeemable participating shares is described in section (g) below. (ii) Recognition The Company recognises a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of that instrument. Purchases and sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset. (iii) Derecognition A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: The rights to receive cash flows from the asset have expired; or The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and Either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 22

25 Notes to the Accounts (continued) 2. Accounting Policies (continued) (e) Financial instruments (continued) (iii) Derecognition (continued) When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company s continuing involvement in the asset. The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled or expires. (iv) Initial measurement Financial assets and financial liabilities at fair value through profit or loss are recorded in the Statement of Financial Position at fair value. All transaction costs for such instruments are recognised directly in the Statement of Comprehensive Income. (v) Subsequent measurement After initial measurement, the Company measures financial instruments which are classified as at fair value through profit or loss at fair value. Subsequent changes in the fair value of those financial instruments are recorded in Net gain/(loss) on financial assets and liabilities at fair value through profit or loss. Interest earned and dividend revenue elements of such instruments are recorded separately as Interest or Dividend, respectively. (vi) Determination of fair value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price or binding dealer price quotations, without any deduction for transaction costs. Where a Sub-Fund has assets and liabilities with offsetting market risks, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies the bid or asking price to the net open position as appropriate. For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include: using recent arm s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible. An analysis of fair values of financial instruments and further details as to how they are measured are provided in Notes 5 and 6. (f) Foreign currency translations Monetary assets and liabilities denominated in currencies other than Euro are translated into Euro at the closing rates of exchange at each financial year end. Transactions during the financial year, including purchases and sales of securities, income and expenses, are translated at the rate of exchange prevailing on the date of the transaction. Foreign currency transaction gains and losses are included in net investment income/expense on financial assets at fair value through profit or loss. (g) Redeemable participating shares The Company provides its shareholders with the right to redeem their interest in the Company at any dealing date for cash equal to their proportionate share of the net asset value of the Company. Under IAS 32, this right represents in substance a liability of the Company to its shareholders. (h) Cash and cash equivalents Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting shortterm cash commitments rather than for investments or other purposes. 23

26 Notes to the Accounts (continued) 2. Accounting Policies (continued) (i) Securities sold receivable and Securities purchased payable Securities sold receivable are receivables for securities sold (in a regular way transaction) that have been contracted for but not yet received on the reporting date. Securities purchased payable are payables for securities purchased (in a regular way transaction) that have been contracted for but not yet delivered on the reporting date. (j) Interest income Interest income is recognised in the Statement of Comprehensive Income on an accruals basis. (k) Dividend income Dividend income is recognised when the Company s right to receive the payment is established. Dividend income is presented gross of any non-recoverable withholding taxes, which are disclosed separately in the Statement of Comprehensive Income. (l) Net gain/(loss) on financial assets at fair value through profit or loss This item includes changes in the fair value of financial assets held for trading or designated upon initial recognition as held at fair value through profit or loss and excludes interest and dividend income and interest expense. Unrealised gains and losses comprise changes in the fair value of financial instruments at the end of the financial year and are classified as fair value gains and losses through profit or loss. Realised gains and losses on disposals of financial instruments classified as at fair value gains and losses through profit or loss are calculated using the First-In, First-Out ( FIFO ) method. They represent the difference between an instrument s initial carrying amount and disposal amount, or cash payments or receipts made on derivative contracts (excluding payments or receipts on collateral margin accounts for such instruments). (m) Events after the reporting period The Financial Statements are adjusted to reflect significant events that have a material effect on the financial results and that have occurred between the financial year end and the date when the Financial Statements are authorised for issue, provided they give evidence of conditions that existed at the period end. Events that are indicative of conditions that arise after the financial year end that do not result in an adjustment to the Financial Statements are disclosed. (n) Offsetting Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income and expenses are not offset in the Statement of Comprehensive Income unless required or permitted to by an accounting standard or interpretation, as specifically disclosed in the international financial reporting policies of the Company. (o) Taxation Under current Irish law and practice the Company qualifies as an investment undertaking under Section 739B of the Taxes Consolidation Act, 1997 and is not therefore chargeable to Irish tax on its relevant income or relevant gains. No stamp, transfer or registration tax is payable in Ireland on the issue, redemption or transfer of Shares in the Company. Distributions and interest on securities issued in countries other than Ireland may be subject to taxes including withholding taxes imposed by such countries. The Company may not be able to benefit from a reduction in the rate of withholding tax by virtue of the double taxation agreement in operation between Ireland and other countries. The Company may not, therefore, be able to reclaim withholding tax suffered by it in particular countries. 24

27 Notes to the Accounts (continued) 2. Accounting Policies (continued) (o) Taxation (continued) To the extent that a chargeable event arises in respect of a Shareholder, the Company may be required to deduct tax in connection with that chargeable event and pay the tax to the Irish Revenue Commissioners. A chargeable event can include dividend payments to Shareholders, appropriation, cancellation, redemption, repurchase or transfer of shares, or a deemed disposal of Shares every 8 years beginning from the date of acquisition of those Shares. Certain exemptions can apply. To the extent that Shareholders have appropriate tax declarations in place with the Company there may be no requirement to deduct tax. Uncertainties exist with respect to the interpretation of complex tax regulations and changes in tax laws on foreign withholding tax. Given the wide range of international investments, differences arising between the actual investment income and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax expense already recorded. The Fund establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it invests. The amounts of such provisions are based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective investment s domicile. As the Fund assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised. (p) Transaction costs Transaction costs are costs incurred to acquire financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisers, brokers and dealers. Transaction costs, when incurred, are included as part of the cost of such purchases. Transaction costs are included in realised and unrealised gain/loss on investments. See Note 4 to the Financial Statements for further information. 3. Soft Commission and Directed Brokerage Services Arrangements No soft commission or directed brokerage services arrangements existed in the financial year ended 31 December 2017 or the financial year ended 31 December Net Gain/(Loss) on Financial Assets at Fair Value through Profit and Loss 31 December 2017 THE THE THE BALANCED GLOBAL GROWTH FUND LEADERS FUND FUND TOTAL Net change in unrealised gain/(loss) on investments 11, ,267 1,040,882 1,341,608 Realised gain/(loss) on investments 705, ,470 2,600,016 4,071, ,473 1,055,737 3,640,898 5,413, December 2016 THE THE THE BALANCED GLOBAL GROWTH FUND LEADERS FUND FUND TOTAL Net change in unrealised gain on investments 1,395,445 2,052,114 5,077,343 8,524,902 Realised gain on investments 427,273 15,799 1,614,944 2,058,016 1,822,718 2,067,913 6,692,287 10,582,918 25