Interim Report and Financial Statements for MGTS St Johns High Income Property Fund

Transcription

1 Interim Report and Financial Statements for MGTS St Johns High Income Property Fund For the six months ended 31 August 2016 (Unaudited) HEAD OFFICE MARGETTS FUND MANAGEMENT LTD DEALING 1 SOVEREIGN COURT PO BOX GRAHAM STREET BIRMINGHAM BIRMINGHAM VAT No. (GB) B2 2HL B1 3JR Registered in England No TELEPHONE: Authorised and Regulated by TELEPHONE: FACSIMILE: the Financial Conduct Authority FACSIMILE:

2 ACD Margetts Fund Management Limited 1 Sovereign Court Graham Street Birmingham B1 3JR Tel: Fax: (Authorised and regulated by the Financial Conduct Authority) Directors of the ACD T J Ricketts T H Ricketts A J M Quy J E J Clay M D Jealous A S Weston G M W Oakley (non-exec) J M Vessey (non-exec) Depositary BNY Mellon Trust & Depositary (UK) Ltd The Bank of New York Mellon Centre 160 Queen Victoria Street London EC4V 4LA (Authorised and regulated by the Financial Conduct Authority) Administrator and Registrar Margetts Fund Management Ltd PO Box Birmingham B2 2HL Tel: Fax: (Authorised and regulated by the Financial Conduct Authority) Auditors Shipleys LLP Chartered Accountants & Statutory Auditors 10 Orange Street Haymarket London WC2H 7DQ Investment Advisers St. Johns Asset Management Ltd AFH House Buntsford Drive Stoke Heath Bromsgrove Worcestershire B60 4JE (Authorised and regulated by the Financial Conduct Authority)

3 Contents Investment Adviser s Report 1 Certification of Accounts by Directors of the ACD 2 Portfolio Statement 3 Property Portfolio 4 Net Asset Value per Share and Comparative Table 6 Financial Statements Statement of Total Return 8 Statement of Change in Net Assets Attributable to Shareholders 8 Balance Sheet 9 Cash Flow 10 Notes to the Financial Statements 11 Distribution Table 20 General Information 21

4 Investment Adviser s Report For the six months ended 31 August 2016 Investment Objective The aim of the Fund is to carry on a property investment business and manage cash raised from investors for investment in the property investment business with the aim of providing high income and long term capital appreciation with a bias towards income. Investment Review MGTS St Johns High Income Property 1.62% Benchmark: IA Property Index 7.87% Source: FE Analytics. Calculated on a total return basis. Investment Summary During the period to , the MGTS St Johns High Income Property Fund entered into and completed two transactions, acquiring 5 property units in the process, taking the total number of properties held to 15 at 12 different locations. The 4.9m purchase of the freehold interest in a modern, newly built light industrial / distribution unit near to junction 31 of the M62 motorway gave the Fund exposure to an impressive building in a highly strategic location, followed shortly after by the 4.55m purchase of a mini portfolio of properties on the Sundorne Retail Park at Shrewsbury, including exposure to a Booker wholesale unit, thereby enhancing the diversification within the Fund. In both instances, the net initial yield on these transactions was north of 6% and helped avoid any material dilution to the existing yield characteristics of the fund. Both acquisitions provided lease exposure of 10 years or more, helping maintain the weighted average unexpired lease term of the fund at a relatively healthy 11 years or thereabouts. By , the Net Asset Value of the fund stood at very slightly under 43.53m. Generating Attractive Levels of Income The investment mandate requires the fund to focus on the generation of above average and attractive levels of income. It is possible the fund will generate long term capital appreciation; however capital growth is not the primary investment objective of the fund. The Fund can reasonably claim to be among the highest yielding UK bricks & mortar funds within the IA Property sector. As at , the annualised gross income paid to investors equated to a yield of c5.9%. Recent Investment Considerations As longer term investors in commercial property, the brief fall-out immediately following the surprise June 23 rd result, has resulted in a temporary reduction in Market participants and a slight easing, in some instances, of pricing expectations. In broad terms, this is generally good for the fund as it means we now have the chance to revisit one or two otherwise attractive investments that we were initially outbid for in the pre-june 23 rd investment landscape. One in particular, a light industrial unit near Warwick, is now in due diligence and is likely to be our 16 th property acquisition. Generally, we observe the flow of investable opportunities coming to the Market is not materially diminished in the immediate post June 23 rd landscape with no major disruption to pricing for the present. Summary Outlook We are presently operating in an environment where interest rates are likely to remain lower for longer. Despite the yield compression in the commercial property sector in recent years, whilst government gilts and corporate bonds offer negligible real yields, the income from risk assets (such as property) will remain attractive to investors. At the time of writing, the yield from the general commercial property sector was almost 500bps per annum greater than the redemption yield available from a 10 year UK government gilt. 1

5 Investment Adviser s Report (continued) Whilst none of us can presently accurately predict the outcome of planned Brexit negotiations and the medium to longer term impact this will have on the real estate sector in the UK, we mustn t lose sight of some of the other core drivers underpinning property valuation. Therefore, in considering the overall level of tenant demand for commercial premises, the supply of competing space and the availability and affordability of financing, we don t believe any of these drivers have turned sufficiently negative for us to make any immediate changes to our direction of travel. St Johns Asset Management Ltd Investment Adviser 30 September 2016 Certification of Accounts by Directors of the ACD This report is signed in accordance with the requirements of the Collective Investment Schemes Sourcebook (COLL) as issued and amended by the Financial Conduct Authority. T J Ricketts Margetts Fund Management Ltd 24 October 2016 M D Jealous Authorised Status The MGTS St Johns High Income Property Fund is an open-ended investment company with variable capital incorporated in England and Wales under regulation number IC954 and authorised by the Financial Conduct Authority with effect from 14 September It is a Non-UCITS Retail Fund (NURS) as classified under the FCA s Collective Investment Schemes Sourcebook. Shareholders are not liable for the debts of the fund. 2

6 Portfolio Statement As at 31 August 2016 Total Net Assets Portfolio of Investments Value ( ) % % Retail Warehouse Birmingham 3,450, Blackpool 1,165, Redditch 3,360, Shrewsbury 4,512, Total Retail Warehouse 12,487, Retail Burnley 4,725, Newark 1,025, Total Retail 5,750, Car Showroom Nottingham 3,880, Total Car Showroom 3,880, Office Fareham 2,185, Normanton 4,810, Solihull 4,400, Warrington 1,536, Total Office 12,931, Leisure Pembroke Dock 2,590, Total Leisure 2,590, Money Markets Goldman Sachs GBP Inst Liquidity Fund 5,000, Total Money Markets 5,000, Portfolio of Investments 42,638, Net Current Assets 888, Net Assets 43,527, The investments have been valued in accordance with note 1(b). 3

7 Property portfolio Between 1 million and 2.5 million in Value Principal Tenant Rental Income per annum Next Rent Review Blackpool Freehold steel portal framed unit of brick elevations and pitched roofs constructed in the 1990s, totalling 15,366 sq ft. 33 on-site car park spaces. Howden Joinery Properties Ltd 80,000 18/04/2018 Newark Freehold public house over 3 floors with basement totalling 12,202 sq ft. J D Wetherspoon Ltd 77,500 28/09/2018 Warrington Freehold detached modern two storey office building of steel frame construction with dedicated parking spaces. The property (excl. car park) totals 8,556 sq ft Parasol Ltd 117,000 01/01/2019 Fareham Virtually freehold, detached two storey office constructed in 2001, totalling 10,391 sq ft. The Injury Care Clinics Ltd 185,000 14/08/2018 Between 2.5 million and 5 million in Value Principal Tenant Rental Income per annum Next Rent Review Pembroke Freehold two storey 51 bedroom detached hotel, totalling 18,730 sq ft. The site has a car park with 42 spaces. Travelodge Hotels Ltd 184,781 30/11/2020 Redditch Freehold single storey retail warehouse constructed in the 1980s, totalling 11,734 sq ft. The site extends to approx 0.91 acres. Halfords Group Plc 236,019 31/10/2017 Birmingham A virtually freehold industrial warehouse unit constructed in 2009, totalling 47,530 sq ft. The unit has a secured external yard and separated car park. TW Metals Ltd 238,900 07/02/2017 Nottingham Freehold car showroom with two storey office accommodation and workshop. Display and car park spaces. Total area 32,568 sq ft. Volkswagen Group UK Ltd 285,000 30/08/2021 4

8 Property portfolio (continued) Between 2.5 million and 5 million in Value Principal Tenant Rental Income per annum Next Rent Review Normanton Freehold recently constructed industrial unit which includes two storey high specification offices and warehouse accommodation totalling 51,897 sq ft. Horizon Platforms Limited 315,000 11/04/2021 Shrewsbury Three modern retail warehouses, one of which has been split into two units. Total area 74,078 sq ft. Booker Ltd; Halfords Autocentres Ltd; Saint-Gobain Building Distribution Ltd; Wright Leisure Ltd 310,949 01/06/2019 (earliest) Solihull Freehold modern purpose built office building, constructed in The property size is 14,669 sq ft and has 53 car park spaces. Goodman Logistics Developments (UK) Limited 325,270 24/06/2018 Burnley Freehold retail warehouse with enclosed garden centre and car park. Total area 28,932 sq ft. The Range 337,500 11/05/2019 5

9 Net Asset Value per Share and Comparative Tables Accumulation share class Change in net assets per share 31/08/ /02/ /02/ /02/2014 Opening net asset value per share Return before operating charges * Operating charges Return after operating charges Distribution on income shares Closing NAV per share Retained distribution on acc shares * After direct transaction costs of Performance Return after charges 1.66% 6.52% 5.45% 0.81% Other Information Closing net asset value ( ) 264, , , ,084 Closing number of shares 230, , , ,269 Operating charges 1.27% 1.28% 1.30% 1.49% Direct transaction costs 0.00% 0.00% 0.00% 0.00% Prices Highest share price (pence) Lowest share price (pence) Income share class Change in net assets per share 31/08/ /02/ /02/ /02/2014 Opening net asset value per share Return before operating charges * Operating charges Return after operating charges Distribution on income shares Closing NAV per share * After direct transaction costs of Performance Return after charges 2.24% 6.42% 5.37% 0.78% Other Information Closing net asset value ( ) 43,262,334 32,915,910 27,264,355 17,048,043 Closing number of shares 44,658,244 33,746,147 28,362,973 17,710,937 Operating charges 1.27% 1.28% 1.30% 1.49% Direct transaction costs 0.00% 0.00% 0.00% 0.00% Prices Highest share price (pence) Lowest share price (pence)

10 Net Asset Value per Share and Comparative Tables (continued) Risk Warning An investment in an open-ended investment company (OEIC) should be regarded as a medium to long term investment. Investors should be aware that the price of shares and the income from them can fall as well as rise and investors may not receive back the full amount invested. Past performance is not a guide to future performance. Investments denominated in currencies other than the base currency are subject to fluctuations in exchange rates, which can be favourable or unfavourable. Fund Performance The performance of the fund is shown in the Investment Adviser s Report. 7

11 Financial statements Statement of total return For the period ended 31 August 2016 Notes Income Net capital (losses)/gains 4 (558,350) 280,063 Revenue 6 1,145,496 1,003,361 Expenses 7 (273,091) (220,219) Finance costs: Interest 9 (252) - Net revenue before taxation 872, ,142 Taxation 8 (217,654) (192,114) Net revenue after taxation 654, ,028 Total return before distributions 96, ,091 Finance costs: Distribution 9 (870,587) (773,216) Change in net assets attributable to shareholders from investment activities (774,438) 97,875 Statement of change in net assets attributable to shareholders For the period ended 31 August 2016 Opening net assets attributable to shareholders Amounts receivable on issue of shares Amounts payable on cancellation of shares 33,175,774 27,506,894 11,120,266 5,596,227 (526,684) (471,868) Dilution levy 526, ,959 11,119,781 5,368,318 Change in net assets attributable to shareholders from investment activities (774,438) 97,875 Retained distribution on accumulation shares 6,115 6,094 Closing net assets attributable to shareholders 43,527,232 32,979,181 8

12 Balance sheet As at 31 August 2016 Notes Fixed assets Tangible assets Land and buildings 37,638,389 28,321,000 Investments 5,000,000 3,000,000 Current assets Debtors 10 56, ,119 Bank balances 2,648,898 3,071,868 Total other assets 2,705,692 3,206,987 Total assets 45,344,081 31,527,987 Liabilities Creditors , ,788 Distribution payable on income shares 1,022, ,425 Total other liabilities 1,816,849 1,352,213 Net assets attributable to shareholders 43,527,232 30,175,774 9

13 Cash flow statement For the year ended 29 February Net cash flow from operating activities 925,883 1,837,083 Servicing of finance Distributions paid (642,714) (1,518,926) Taxation Taxation paid 67 (374,672) Financial investments Purchases of investments (11,875,739) (5,373,364) Financing Amounts received on issue of units 11,688,212 7,328,981 Amounts paid on cancellation of units (518,679) (1,814,784) Net cash at the start of the period 3,071,868 2,987,550 Increase/(decrease) in cash in the period (422,970) 84,318 Net cash at the end of the period 2,648,898 3,071,868 Net cash flow from operating activities Net revenue before tax 872,153 1,604,140 Decrease/(increase) in debtors 36, ,179 Increase in creditors 17,152 84,764 Net cash generated from operations 925,883 1,837,083 10

14 Notes to the financial statements As at 31 August Accounting policies a) Basis of accounting The financial statements have been prepared under the historical cost basis, in accordance with Financial Reporting Standard (FRS 102), as modified by the revaluation of investments, and in accordance with the revised Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Association in May No changes to the Net Asset Value of the fund have arisen from the adoption of the SORP. b) Basis of valuation of investments The investments are valued at quoted bid prices for dual priced funds and at quoted prices for single priced funds, on the last business day of the accounting period. Property that is held for long-term rental income or for capital appreciation or both, and that is not occupied by the Trust, is classified as investment property. Investment property is measured initially at cost, including related transaction costs, on the date of acquisition or the date of unconditional exchange, if earlier. After initial recognition, investment property is carried at open market value, after the deduction of unamortised lease incentives. Revaluation gains and losses are recognised in the Statement of Total Return. Valuations are performed by Lambert Smith Hampton Group Limited. Open market value is based on active market information, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, alternative valuation methods are used, such as recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices, or discounted cash flow projections. The principal assumptions underlying the estimation of open market value are those related to the receipt of contractual rentals, expected future market rentals, void periods, lease incentives, maintenance requirements and appropriate yields/discount rates. The expected future market rentals are determined on the basis of the current market rentals for similar properties in the same location and condition. Disposal of investment property are recognised on the legal completion. c) Foreign exchange rates Transactions in foreign currencies are recorded in sterling at the rate ruling at the date of the transactions. Assets and liabilities expressed in foreign currencies at the end of the accounting period are translated into sterling at the closing middle exchange rates ruling on that date. d) Revenue Dividends, interest and other revenue receivable include any withholding taxes but exclude any other taxes such as attributable tax credits. Rental income consists principally of rentals receivable from tenants in the period. Rental income received in advance is deferred and recognised in the period to which it relates. In accordance with the FRS102, rental income from properties which have been subject to a rent free period or inducement, is accounted for on a straight line basis over the lease term. The valuation of investment properties is reduced by all unamortised lease incentives. Dividends are recognised when the security is quoted ex-dividend. Equalisation on distributions received is treated as a repayment of capital and deducted from the cost of the investment. Interest on bank and short-term deposits is recognised on an earned basis. 11

15 Notes to the financial statements (continued) e) Expenses The ACD s periodic charge and all other expenses are deducted from Capital, with the exception of costs directly associated with the properties, which are taken from Income. f) Taxation (i) The fund is treated as a corporate shareholder with respect to its underlying holdings and its income is subject to streaming into franked and unfranked. (ii) The holding of land to generate rental income is tax-exempt and therefore the net rental income is not chargeable to corporation tax. (iii) The net income from the residual business is subject to the corporation tax rate of 20%. 2 Distribution policy Income arising from investments accumulates during each accounting period. Surplus income is allocated to shareholders in accordance with the COLL regulations. In order to conduct a controlled dividend flow to shareholders, interim distributions will be made at the ACD s discretion, up to a maximum of the distributable income available for the period. All remaining income is distributed in accordance with the COLL regulations. The fund will make, up to, three different types of distribution per accounting date according to the source of the income: Property income distributions will be paid out net of 20% income tax, however as the rental income is corporation tax exempt, clients are able to opt to have the distributions paid gross as long as they meet the necessary requirements of HMRC. PAIF interest distributions will be paid out net of 20% income tax, however clients are able to opt to have the distributions paid gross as long as they meet the necessary requirements of HMRC. PAIF dividend distributions will be paid out net of 10% tax credit, and cannot be paid gross. 3 Risk management policies In pursuing the investment objective, a number of financial instruments are held which may comprise securities and other investments, cash balances and debtors and creditors, that arise directly from operations. Derivatives, such as futures or forward foreign exchange contracts, may be utilised for efficient portfolio management purposes. Political and economic events in the major economies of the world, such as the United States, Japan and the European Union, will influence stock and securities markets worldwide. The main risks from the fund s holding of financial instruments with the ACD s policy for managing these risks are set out below: i. Credit Risk The fund may find that collective investment schemes in which it invests fail to settle their debts or deliver the investments purchased on a timely basis. ii. iii. Interest Rate Risk Debt securities may be held by the underlying investments of the fund. The Interest Rate Risk of these securities is managed by the relevant manager. Foreign Currency Risk Although the net assets of the fund are denominated in sterling, a proportion of the fund s investments in collective investment schemes have currency exposure with the effect that the balance sheet and total return can be affected by currency movements. 12

16 Notes to the financial statements (continued) iv. Liquidity Risk The main liability of the fund is the cancellation of any shares that investors want to sell. Securities may have to be sold to fund such cancellations should insufficient cash be held at the bank to meet this obligation. Freehold properties may not be readily saleable. Property is slow to transact in normal market conditions and hence illiquid. In poor market conditions it will take even longer to find a buyer to pay an acceptable price. Smaller companies by their nature, tend to have relatively modest traded share capital, and the market in such shares can, at times, prove illiquid. Shifts in investor sentiment, or the announcement of new price-sensitive information, can provoke significant movement in share prices, and make dealing in any quantity difficult. The equity markets of emerging countries tend to be more volatile than the more developed markets of the world. Standards of disclosure and accounting regimes may not always fully comply with international criteria, and can make it difficult to establish accurate estimates of fundamental value. The dearth of accurate and meaningful information and insufficiencies in its distribution, can leave emerging markets prone to sudden and unpredictable changes in sentiment. The resultant investment flows can trigger significant volatility in these relatively small and illiquid markets. At the same time, this lack of liquidity, together with the low dealing volumes, can restrict the ACD s ability to execute substantial deals. v. Market Price Risk Market Price Risk is the risk that the value of the fund s financial instruments will fluctuate as a result of changes in market prices caused by factors other than interest rates or foreign currency movement. The Market Price Risk arises primarily from uncertainty about the future prices of financial instruments that the fund holds. Market Price Risk represents the potential loss the fund may suffer through holding market positions in the face of price movements. This risk is generally regarded as consisting of two elements Stock Specific Risk and Market Risk. The fund s exposure to Stock Specific Risk is reduced for equities and bonds through the holding of a diversified portfolio in accordance with the investment and borrowing powers set out in the Instrument of Incorporation. vi. vii. Counterparty Risk Transactions in securities entered into by the fund give rise to exposure to the risk that the counterparties may not be able to fulfil their responsibility by completing their side of the transaction. Fair Value of Financial Assets and Financial Liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. 13

17 4 Net capital (losses)/gains Proceeds from sales on investments during the period 3,000,000 - Original cost of investments sold during the period (3,000,000) - Gains realised on investments sold during the period - - Net depreciation thereon already recognised in prior periods - Net realised appreciation for the period - - Net unrealised (depreciation)/appreciation for the period (496,300) 272,436 Rental amortisation (62,050) 7,627 Net (losses)/gains on non-derivative securities (558,350) 280,063 Net capital (losses)/gains on investments (558,350) 280,063 5 Purchases, sales and transaction costs Physical Property Purchases excluding transaction costs 9,257,056 2,229,578 Purchase costs: 6.01% [5.80%] 556, ,249 Purchases including transaction costs 9,813,687 2,358,827 Debt Securities Purchases excluding transaction costs 5,000,000 3,000,000 Purchases including transaction costs 5,000,000 3,000,000 Sales excluding transaction costs 3,000,000 - Sales including transaction costs 3,000,000 - Trustee transaction charges have been deducted in determining net capital Transaction charges are displayed as percentage of purchase/sale Total purchase costs 1.48% [0.41%] 556, ,249 Total charges displayed as percentage of average net asset value Average portfolio dealing spread : 0.00% [0.00%] Revenue Gross bond interest 7, Property rental revenue 1,137,497 1,003,221 Total revenue 1,145,496 1,003,361 14

18 7 Expenses Payable to the ACD, associates of the ACD and agents of either: ACD's periodic charge 188, ,501 Payable to the Depositary associates of the Depositary and agents of either: Depositary's fee 9,042 7,914 Safe custody 1,343 1,515 10,385 9,429 Other expenses: FCA fee Audit fee 3,100 3,660 Registration fees Sundry charges 3,760 11,774 Printing costs Aborted property costs 42,361 - Transfer agency fee 7,516 7,265 Independent valuation fees 7,805 19,999 Property management fee 6,808 6,240 Distribution costs 3,025 3,025 Total expenses 273, ,219 8 Taxation a) Analysis of the tax charge for the period: Income tax withheld 217, ,114 Current tax charge (note 8b) 217, ,114 Deferred tax (note 8c) - - Total tax charge 217, ,114 b) Factors affecting the tax charge for the period: Net income before taxation 872, ,142 Tax calculated at statutory rate of 20% 174, ,629 Expenses not allowable 43,223 35,485 Total tax payable 217, ,114 Current tax charge for the year (note 8a) 217, ,114 c) Provision for deferred taxation No provision for deferred taxation has been made in the current period or prior accounting year. 15

19 9 Finance costs Distributions Interim 1,028, ,860 1,028, ,860 Amounts deducted on cancellation of shares 7,013 6,937 Amounts received on issue of shares (164,723) (50,581) Finance costs: Distributions 870, ,216 Finance costs: Interest Total finance costs 870, ,216 Represented by: Net revenue after taxation 654, ,028 Expenses charged to capital ACD's periodic charge 188, ,501 Other capital expenses 28,009 23,705 Balance of revenue brought forward 31 9 Balance of revenue carried forward (60) (27) Finance costs: Distributions 870, ,216 16

20 10 Debtors Amounts receivable for issue of shares 10,503 52,250 Accrued income: Property rental revenue 44,625 47,968 Gross bond interest 1,514 1,145 46,139 49,113 Prepayments ,877 Amounts recharged to tenants - 7,879 Total debtors 56, , Creditors Amounts payable for cancellation of shares 16,615 8,610 Accrued expenses: Amounts payable to the ACD, associates and agents: ACD's periodic charge 37,397 26,885 Amounts payable to the Depositary, associates and agents: Depositary's fees 1,375 1,192 Safe custody fee (14) 365 1,361 1,557 Other expenses 33,723 46,811 Taxation payable: Deferred rental income 178, ,462 Income tax 420, ,796 VAT payable 106,895 95,667 Total creditors 794, , Contingent liabilities and commitments There were no contingent liabilities or outstanding commitments at the balance sheet date [ : Nil]. 13 Related party transactions Margetts Fund Management Ltd as ACD, is a related party, and acts as principal in respect of all transactions of shares in the Company. The aggregate monies received through issues, and paid on cancellations are disclosed in the statement of change in net assets attributable to shareholders and note 9. Amounts paid to Margetts Fund Management Ltd in respect of management services are disclosed in note 7 and amounts due at the end of the year in note Shareholders' funds Acc Inc Opening number of shares 229,520 33,746,147 Shares issued ,593,141 Shares redeemed (254) (2,681,044) Closing number of shares 230,138 44,658,244 17

21 15 Post balance sheet events As at 20 October 2015, there were no material post balance sheet events which have a bearing on the understanding of the financial statements. 16 Risk disclosures Interest risk - Debt securities may be held by the underlying investments of the fund. The Interest Rate Risk of these securities is managed by the relevant manager. The table below shows the Interest Rate Risk profile at the balance sheet date: Floating rate assets (pounds sterling): 2,648,898 3,071,868 Assets on which interest is not paid (pounds sterling): 37,695,183 28,456,119 Liabilities on which interest is not paid (pounds sterling): (1,816,849) (1,352,213) Net Assets 38,527,232 30,175,774 The floating rate financial assets and liabilities comprise bank balances, which earn or pay interest at rates linked to the UK base rate. There are no material amounts of non-interest bearing financial assets and liabilities, other than investment properties, which do not have maturity dates. 17 Tangible Assets Investment Properties Starting value 28,321,000 Additions 9,257,056 Disposals - Revaluations 60,333 Ending value 37,638,389 18

22 18 Fair Value Techniques Assets Quoted prices for identical instruments in active markets 5,000,000 3,000,000 Prices of recent transactions for identical instruments - - Valuation techniques using observable data - - Valuation techniques using non-observable data 37,638,389 28,321,000 42,638,389 31,321,000 Liabilities Quoted prices for identical instruments in active markets - - Prices of recent transactions for identical instruments - - Valuation techniques using observable data - - Valuation techniques using non-observable data Periodic Disclosure As required by FUND 3.2.5R the ACD is required to disclose certain information periodically in relation to the Fund which is shown below. At the end of the reporting period the percentage of the Fund s assets subject to special arrangements arising from their illiquid nature was 0% (2015: 0%) of the NAV. There have been no new arrangements introduced for managing the liquidity of the Fund. The risk characteristics of the Fund are explained in the Prospectus. In order to assess the sensitivity of the Fund s portfolio to the risks to which the Fund is or could be exposed, Margetts Fund Management Ltd monitors relative value at risk, commitment, gross leverage and the results of stress tests. The ACD has set limits considered appropriate to the risk profile of the fund. Any breaches of these limits are investigated by the Margetts risk committee and appropriate action taken if necessary. During the reporting period there have been no changes to the maximum level of leverage that the Fund can employ or any right of reuse of collateral or any guarantee granted under leveraging arrangements. At the end of the reporting period the total amount of leverage, expressed as a ratio, calculated using the commitment approach was 1:0.98 and using the gross method was 1:0.98. Leverage is limited to overdraft use and the gross exposure from EPM techniques. Although the ACD may use derivatives for EPM, no collateral arrangements are currently in place and no asset re-use arrangements are in place. The maximum leverage expressed as the ratio of the exposure to net asset value using the commitment method is 1.1:1.0 and using the gross method 3.3:1.0. Please note that the maximum leverage under the gross method is theoretical and would only occur if market risk and currency risk were hedged across the entire Fund whilst it was using the maximum borrowing facility of 10%. It is not anticipated that both market risk and currency risk would be simultaneously hedged and therefore the likely maximum leverage which would be used in normal circumstances using the commitment method is 1.1:1.0 and using the gross method 2.2:

23 20 Remuneration In accordance with the requirements of FUND 3.3.5(5) the total amount of remuneration paid by the ACD to its staff for the financial year ended 30 September 2015 is: Fixed Remuneration 1,132,404 Variable Remuneration 1,756,307 Total Remuneration 2,888,711 Full Time Equivalent number of staff 29 Analysis of senior management Senior management 2,180,362 Staff whose actions may have a material impact on the funds - Other - 2,180,362 Distribution Table For the period ended 31 August 2016 in pence per share Interim Group 1 shares purchased prior to 01 March 2016 Group 2 shares purchased on or after 01 March 2016 Accumulation shares Shares Gross Revenue Tax Net Revenue Equalisation Allocating Allocated Group Group Income shares Shares Gross Revenue Tax Net Revenue Equalisation Payable Paid Group Group Equalisation only applies to shares purchased during the distribution period (group 2 shares). It represents the accrued income included in the purchase price of the shares. After averaging it is returned with the distribution as a capital repayment. It is not liable to income tax but must be deducted from the cost of the shares for capital gains tax purposes. 20

24 General Information Valuation Point The Valuation Point of the fund is at 12 noon each business day. Valuations may be made at other times with the Depositary s approval. Buying and Selling of Shares The ACD will accept orders to buy or sell shares on normal business days between 9.00am and 5.00pm and transactions will be effected at prices determined by the following valuation. Instructions to buy or sell shares may be made either in writing to: Margetts Fund Management Ltd, PO Box 17067, Birmingham, B2 2HL or by telephone on A contract note will be issued by close of business on the next business day after the dealing date to confirm the transaction. Prices The most recent mid prices of shares are published on the Margetts website at Other Information The Instrument of Incorporation, Prospectus, Key Investor Information Document, Supplementary Information Document and the latest annual and interim reports may be inspected at the offices of the ACD, with a copy available, free of charge, on written request. The register of shareholders can be inspected by shareholders during normal business hours at the offices of the Administrator. The Head Office of the Company is at 1 Sovereign Court, Graham Street, Birmingham B1 3JR and is also the address of the place in the United Kingdom for service on the Company of notices or other documents required or authorised to be served on it. The base currency of the Company is pounds ( ) sterling. The maximum share capital of the Company is currently 10,000,000,000 and the minimum is 1,000. Shares in the Company have no par value and therefore the share capital of the Company at all times equals the Company s current net asset value. Shareholders who have any complaints about the operation of the fund should contact the ACD or the Depositary in the first instance. In the event that a shareholder finds the response unsatisfactory, they may make their complaint direct to the Financial Ombudsman Service at South Quay Plaza, 183 Marsh Wall, London E14 9SR. Data Protection Act Shareholders names will be added to a mailing list which may be used by the ACD, its associates or third parties, to inform investors of other products by sending details of such products. Shareholders who do not want to receive such details should write to the ACD, requesting their removal from any such mailing list. 21