interim report and financial statements for margetts ... · 1 sovereign court graham street...

HEAD OFFICE MARGETTS FUND MANAGEMENT LTD DEALING 1 SOVEREIGN COURT PO BOX 17067 GRAHAM STREET www.margetts.com BIRMINGHAM BIRMINGHAM VAT No. (GB) 795 0415 16 B2 2HL B1 3JR

Registered in England No. 4158249

TELEPHONE: 0121 236 2380 Authorised and Regulated by TELEPHONE: 0345 607 6808 FACSIMILE: 0121 236 2330 the Financial Conduct Authority FACSIMILE: 0121 236 8990

Interim Report and

Financial Statements

for Margetts Greystone

Balanced Fund

For the six months ended 31 March 2016 (Unaudited)

http://www.margetts.com/

ACD Margetts Fund Management Limited

1 Sovereign Court Graham Street

Birmingham B1 3JR

Tel: 0121 236 2380 Fax: 0121 236 2330

(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


Administrator and Registrar Margetts Fund Management Ltd

PO Box 17067 Birmingham

B2 2HL

Tel: 0345 607 6808 Fax: 0121 236 8990


Auditors Shipleys LLP

Chartered Accountants & Statutory Auditors 10 Orange Street

Haymarket London

WC2H 7DQ

Investment Advisers

Foundation Investment Management Limited Foundation House

Scott Drive Altrincham Cheshire

WA15 8AB


Contents Investment Adviser’s Report 1 Certification of Accounts by Directors of the ACD 5 Significant Purchases and Sales 6 Portfolio Statement 7 Net Asset Value per Share and Comparative Table 9 Financial Statements

Statement of Total Return 12 Statement of Change in Net Assets Attributable to Shareholders 12 Balance Sheet 13 Notes to the Financial Statements 14 Distribution Table 21

General Information 22

1

Investment Adviser’s Report For the six months ended 31 March 2016 Investment Objective and Policy

The Fund is designed to achieve capital growth and some income from an actively managed diversified portfolio of collective investment schemes and transferable securities from the global marketplace. Investment Review

Margetts Greystone Balanced: 4.55% Margetts Greystone Balanced R: 4.95% Benchmarks IA Mixed Investment 40-85% Shares: 3.73% (Source: Thomson Reuters Lipper Hindsight. Performance is bid to bid with income reinvested.) Economic and Market Commentary “Holding Our Nerve” A cursory glance at stock market indices at the start of the year compared to the end of the first quarter could easily lead to the conclusion that nothing of importance happened in financial markets during the first three months of 2016, as stock markets generally finished the period more or less where they started. However, that simple statistic masks the true story behind a difficult and bumpy journey as it has been a tale of two halves; for six weeks investors were fretting that the US Federal Reserve might raise interest rates too far too fast in the face of an impending recession and then, for little apparent reason, sentiment changed and relative calm and mild optimism followed and we had six weeks of low volatility with stock markets gradually recovering lost ground. January began with a bang with the Chinese stock market crashing seven per cent on the first trading day of the New Year and the newly installed "circuit breaker" forcing a suspension in trading. Asia and emerging markets also suffered from the bearish sentiment with double digit losses and what started in the east moved west with European and American markets all sharply down. The Chinese market fell further in the days that followed and the circuit breaker triggered another suspension. A slew of not so positive economic data added to the fear and in combination with the prospect of Iran resuming exports, the Oil price fell below $30 for the first time in over a decade. Western markets continued in free fall with some major markets down more than 10% in less than a month and stock markets had one of the worst starts to a year since records began. Markets stabilised towards the end of January with central bank actions, at least temporarily, supportive of equity markets but following further weakness in the price of oil, the wave of selling resumed in February and many stock markets entered bear market territory after falling more than 20% from their 2015 peaks. The main drivers for the decline were the falling oil price, slowing Chinese growth, worries over a recession in the US, and fears of a banking crisis, particularly in Europe. Perhaps the biggest surprise came from the Bank of Japan which moved interest rates into negative territory, after insisting only a week earlier that this would not happen. Oil prices have tended to lead equity prices lower over the past year. Lower oil prices directly undermine the energy sector which has a significant weighting in both equity and credit markets. Investors became concerned that bank exposure to the energy sector would lead to a systemic crisis in the banking sector similar to the subprime mortgage crisis in the run up to the financial crisis in 2008/09.

2

Investment Adviser’s Report (continued) Investors are prone to attribute human characteristics such as intelligence to the stock market and they assume that the market is trying to tell us something about the outlook for the world economy. For some reason we seem to fall into this anthropomorphism trap more when the market is in free fall as though it is better informed when things are going wrong. However as Howard Marks, a thoughtful and successful US investor, pointed out in a note to clients recently, people of different levels of ability buy and sell investments, but the market doesn't distinguish between the ones who have insight and the ones who don't, especially in the short term. The market price merely represents the average view, weighted by how much money backs each position........no more no less. In the short term the market is a voting machine not a weighing machine and it changes its mind on a regular basis. In times of market volatility, investors forget this and believe instead that price falls are some kind of canary in the coal mine, predicting recession or worse, so fuelling a self-feeding downward spiral. The market is no more intelligent than its participants and it is easy for pessimism to gain the upper hand with fear being a stronger emotion than a more balanced view with the result that market prices are driven down to unrealistic levels. At times like this markets are often irrational and the dismal start to 2016 provides an interesting insight into investors' capacity to switch their perception from the glass being half full to the glass being half empty. Two pieces of conventional wisdom have been turned on their heads so far this year. At the end of last year, cheaper energy was widely seen as a good thing, better for consumer’s disposable income and better for companies input costs. Fast forward to today's glass half empty world and the very same conditions are seen as a drag on energy companies’ profits and a threat to the banks who lent to them in the good years. We shouldn't forget, however, that net oil exporting countries account for only $5 trillion GDP* whilst the net consuming countries account for $50 trillion GDP*, a strong positive in favour of an increase in consumer spending at times of low oil prices. As for interest rates there has been a similar U-turn. Until recently the prospect of lower for longer interest rates has been viewed positively. The reason markets seemed to take December's Federal Reserve rate hike in their stride was the implicit promise that further increases would be slow and gradual. Less than three months later and investors seem to have decided that the Fed's caution on future rate hikes merely confirms that the global economy is in a fragile state. For the banks in the eye of the January and February market storm, the prospect of lower for longer interest rates was seen as unequivocally bad news. Banks lend at higher long term rates and fund their loans with cheaper short term money. This neat trick stops working when worries about growth squeeze long rates lower and there is nothing left in the middle for the lenders and so markets focus on the negatives rather that the positives of low interest rates. However, never has there been so much money available, so cheaply priced and so poorly allocated. If we can't invest for future growth when interest rates are at all-time lows, when can we invest? Institutions such as Legal & General willingly invest in long term regeneration projects similar to those in Leeds, Salford, Bristol and Cardiff. These types of projects should be a magnet for investment from UK and overseas institutions currently making negative returns on government bonds. The right size of project for institutional investment in regeneration, housing, transport, healthcare or energy is around £250million to £1billion*. There are many opportunities to invest in projects of this scale to help secure long term future growth. March gave way to calmer more rational markets when the oil price stabilised and worries about the health of the global economy began to take on a more balanced view with the realisation that the world economy is still growing, if only at a moderate pace. Fears about a hard landing in China also began to recede with the acceptance that China's economy is undergoing fundamental change. The transition from unsustainable export and investment led growth to sustainable consumption led growth is bumpy---but it is happening. Online retail sales in China rose 49%* last year and the country now spends more on research and development than anywhere else in the world outside the US.

*Source: The Financial Times Weekend Edition 26th/27thMarch

3

Investment Adviser’s Report (continued) The US economy is also still growing albeit at an uninspiring pace and investors can also take heart from a number of positives. Firstly the low oil price should eventually boost consumer spending. Secondly, US fiscal policy should support the economy through increased government expenditure and thirdly the US corporate sector is not over extended. Corporate cash flow remains strong and earnings growth is still positive. Fears of a banking crisis in the UK and Europe have also receded because the financial system is much stronger than it was in 2008 and UK banks have significantly increased their capital since the financial crisis. What remains a concern, however, is the increase in global debt. Since the financial crisis in 2007, global debt has more than doubled and now stands at more than €58 trillion*. It is therefore important to invest in good quality companies with strong cash flows, strong balance sheets, powerful brands, market share and pricing. These companies won't be immune to market volatility but they will bounce back more quickly. So after the investment turmoil in the early part of the year and the comparative calm in March, have we weathered the storm? What can we expect going forward? Global growth is positive if uninspiring. Central banks appear to have had a quiet word in Shanghai recently and decided that monetary policy divergence was unhelpful. A cap on the rising dollar takes the pressure off emerging markets and eases the pain for US exporters and overseas earners. The US has weathered the deflationary storm well but some commentators think equity valuations are looking stretched. Emerging markets are risky but valuations are back to levels not seen since the start of the century. Closer to home the investment outlook will be dominated by the "Brexit" debate. Already the slightest hint of a Leave vote is causing sterling to wobble. Over the next few months the stock market might follow suit. The first quarter is now behind us although market volatility will probably continue. Remember though that volatility is normal and creates opportunity. Throughout the dislocation in equity markets in the early part of 2016, we at Greystone held our nerve focusing as always on longer term fundamentals rather than the short term market noise. The Greystone Funds and Portfolios held up very well due to our lower risk approach, investment diversification and our carefully selected exposure to alternative assets such as absolute return funds, commercial property funds, fixed interest and cash. We remain confident that by following our five tiered successful investment procedure of active management, asset allocation, fund selection, portfolio construction and risk control we will continue to deliver returns ahead of our benchmarks whilst reducing volatility and minimising risk as much as possible. As always thank you for your continued support. Performance Summary The fund rose 4.55% over the six month review period versus the Investment Association (IA) Mixed Investment 40-85% Shares sector average, 3.73% and the IA Money Market, 0.14%. Data for the period 01.10.2015 to 01.04.2016. Data compiled from Thomson Reuters Lipper for Investment Management.

Since the fund mandate change on 1st September 2010, it has delivered a return of 49.42%, outperforming the IA sector average, 42.42% and IA Money Market, 1.82%. The fund’s share price on April 1st 2016 was; 164.66p. Data compiled from Thomson Reuters Lipper for Investment Management.

Fund Review & Outlook The fund’s objective is to deliver positive returns throughout the economic cycle via a diversified portfolio whilst maintaining a balanced attitude towards risk. There is a continued flexibility to rotate between asset classes which helps smooth returns and protects against volatility. *Source: The Financial Times Weekend Edition 26th/27thMarch

4

Investment Adviser’s Report (continued) The fund performed well in absolute and relative terms. Fixed interest, alternatives and overseas equities were all key drivers. All major equity markets were positive over the period. North America rallied most, followed by; Asia, Emerging Markets, Japan, Europe and the UK. Bond markets also delivered positive returns as did commercial property and global listed infrastructure. Within fixed interest our local currency emerging market debt fund led the way up. Currency appreciation along with spread tightening on Indian and Argentinian government bonds, were the key drivers. Our US Dollar denominated sovereign debt fund also powered ahead as investors sought shelter in government bonds, compressing yields and driving up capital values. Our real estate bond manager outperformed her peers and delivered positive returns. Insurance and bank bonds defended capital well despite credit market volatility. In the UK, a recently introduced absolute return fund struggled. Long positions in resources and IT, coupled with short positions in industrials and utilities, were the key reasons. Our UK small cap manager fared better. A window manufacturing business along with a FTSE 100 Put option helped to deliver solid growth. The fund also yields 4%. Consumer goods and pharmaceuticals bolstered returns for our growth and income fund, whilst house builders and banks drove performance for our core UK equity holding. Telecoms and tobacco stocks enabled our large cap income manager to deliver strong returns. He was the standout UK equity performer over the period. Asia, Emerging Market and North America equity indices, all did well. IT and healthcare powered returns for our best performing US manager, whilst Indonesian banks and Taiwanese semi-conductor stocks delivered for our core emerging market fund. Chinese internet and Korean utility stocks drove performance for our specialist Asian growth manager. He was the lead international performer, delivering over 20%. Our European absolute return manager was the laggard within the overseas component. Italian financials and a Norwegian seafood producer were the main detractors. Short financials and energy stocks coupled with long positions in resources and consumer staples drove returns for our global equity market neutral fund. Telecoms and oil stocks helped our equity long/short manager be the standout performer within the alternatives component. Our global listed infrastructure manager had another solid six months, Italian toll roads and US transport powered returns. Foundation Investment Management Limited Investment Adviser 29 April 2016

5

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 M D Jealous

Margetts Fund Management Ltd 18 May 2016

Authorised Status

The Margetts Greystone Balanced Fund is a sub-fund of the Margetts Greystone ICVC with investment powers equivalent to those of a UCITS Scheme. The umbrella company is Margetts Greystone ICVC which is an open-ended investment company with variable capital incorporated in England and Wales under regulation number IC403 and authorised by the Financial Conduct Authority with effect from 26 September 2005.

The fund is classed as a UCITS scheme. Shareholders are not liable for the debts of the fund.

Investor Notice

Greystone Wealth Management have established a separate group company (Foundation Investment Management) which they now wish to appoint as investment adviser of the Greystone funds, which will replace the existing group company (RW Harris Limited) that currently performs this function. The people, systems, processes and controls are identical.

6

Significant purchases and salesFor the period ended 31 March 2016

Total purchases for the period £17,460,969

Purchases Cost (£)

CF WOODFORD EQUITY INCOME C ACC 3,840,000

MAJEDIE ASSET MANAGEMENT US EQUITY FUND CLASS Z GB 2,810,000

ROGGE HEITMAN SHORT DURATION GLOBAL REAL ESTATE 2,730,000

POLAR CAPITAL UK ABSOLUTE EQUITY S STERLING 1,920,000

FP ARGONAUT ABSOLUTE RETURN R GBP ACC 1,850,000

F&C REAL ESTATE EQUITY LONG/SHORT ACC 1,820,000

GAM STAR CREDIT OPPORTUNITIES (GBP) INSTITUTIONAL 860,000

CF MITON UK VALUE OPP B INST ACC 850,000

CF MITON UK MULTI CAP INCOME INSTL B ACC 780,000

Total sales for the period £16,666,986

Sales Proceeds (£)

EDENTREE HIGHER INCOME FUND B INCOME 3,788,276

FIDELITY STRATEGIC BOND Y NET 2,819,890

MAJEDIE ASSET MANAGEMENT TORTOISE FUND 2,758,820

FIDELITY AMERICAN SPECIAL SITS W ACC 1,360,000

JUPITER EUROPEAN I ACC 1,030,000

MAJEDIE ASSET UK EQUITY X ACC 990,000

INVESCO PERPETUAL EUROPEAN EQUITY INCOME Z ACC 890,000

VANGUARD GLOBAL BOND INDEX INSTITUTIONAL USD HEDGE 590,000

OLD MUTUAL NORTH AMERICAN EQUITY R ACC 410,000

GLG UNDERVALUED ASSETS PROFESSIONAL C GBP ACC 370,000

OLD MUTUAL GLOBAL EQUITY ABSOLUTE RETURN R HDGD 340,000

TROJAN INCOME O ACC 250,000

F&C NORTH AMERICAN 2 ACC 240,000

LAZARD GLOBAL LISTED INFRASTRUCTURE EQ INST ACC 240,000

CAPITAL INTERNATIONAL GLOBAL HIGH INC OPPS Z GBP 190,000

MAJEDIE ASSET UK INCOME X ACC 160,000

CF MITON UK MULTI CAP INCOME INSTL B ACC 130,000

LGG MSN CLEARBRIDGE US AGGRESSIVE GRWTH PREM A INC 110,000

7

Portfolio statement As at 31 March 2016

Total Net Assets

Holding Portfolio of Investments Value (£) 31.03.16

% 30.09.15

%

UK

2,117,702 CF Miton UK Multi Cap Income Inst B 4,676,309 4.98

3,411,173 CF Miton UK Value Opps B Inst 5,506,998 5.86

3,151,363 CF Woodford Equity Income C 3,755,795 4.00

3,189,529 GLG Undervalued Assets Professional C 3,652,011 3.89

2,019,920 Majedie Asset UK Equity X 2,807,083 2.99

2,185,731 Majedie Asset UK Income X 3,699,787 3.94

151,893 Polar Capital UK Absolute Equity S 1,895,629 2.02

1,672,110 Trojan Income O 4,750,966 5.06

Total UK 30,744,578 32.74 30.70

Bonds

352,711 GAM Star Credit Opportunities Institutional 3,726,885 3.97

270,212 Rogge Heitman Short Duration Global Real Estate 2,707,524 2.88

37,579 Vanguard Global Bond Index Inst Hedged 3,675,598 3.91

Total Bonds 10,110,007 10.76 13.38

Property

158,123 F&C Real Estate Equity Long/Short 1,823,162 1.94

Total Property 1,823,162 1.94 -

Europe

1,035,769 FP Argonaut Absolute Return R 1,715,649 1.83

872,586 Invesco Perpetual European Equity Z 2,820,112 3.00

178,626 Jupiter European I 2,940,490 3.13

Total Europe 7,476,251 7.96 7.85

US

681,333 F&C North American 2 2,872,500 3.06

248,312 Fidelity American Special Sits W 2,798,471 2.98

16,797 Legg Mason Clearbridge US Aggressive Growth Prem A 2,778,329 2.96

2,035,957 Old Mutual North American Equity R 3,816,605 4.06

Total US 12,265,905 13.06 14.08

Asia Pacific (excl. Japan)

1,679,917 Hermes Asia Ex Japan Equity F 2,853,003 3.04

2,201,889 Majedie Asset Management US Equity Z 2,875,887 3.06

73,458 Prusik Asian Equity Income X 7,339,503 7.81

Total Asia Pacific (excl. Japan) 13,068,393 13.91 9.61

Global Emerging

2,258,599 Hermes Global Emerging Markets F 2,812,407 2.99

Total Global Emerging 2,812,407 2.99 2.60

8

Portfolio statement (continued)

Total Net Assets

Holding Portfolio of Investments Value (£) 31.03.16

% 30.09.15

%

Global

115,746 Capital International Global High Inc Opps Z 2,846,194 3.03

1,962,956 Lazard Global Listed Infrastructure Eq Inst 2,941,293 3.13

2,362,531 Old Mutual Global Equity Absolute Return R 3,701,849 3.94

Total Global 9,489,336 10.10 6.99

Alternative

1,260,367 City Financial Absolute Equity I 4,534,424 4.83

533,096 Majedie Asset Management Tortoise Fund 911,646 0.96

Total Alternative 5,446,070 5.79 9.01

Portfolio of Investments 93,236,109 99.25 94.22

Net Current Assets 700,682 0.75 5.78

Net Assets 93,936,791 100 100

The investments have been valued in accordance with note 1(b) and are authorised Collective Investment Schemes.

9

Net Asset Value per Share and Comparative Tables

Accumulation share class

Change in net assets per share 31/03/2016 30/09/2015 30/09/2014 30/09/2013

Opening net asset value per share 157.4500 152.4000 144.9500 129.0300

Return before operating charges * 8.4800 7.6200 9.8400 18.1700

Operating charges -1.2800 -2.5700 -2.3900 -2.2500

Return after operating charges 7.2000 5.0500 7.4500 15.9200

Distribution on income shares 0.0000 0.0000 0.0000 0.0000

Closing NAV per share 164.6500 157.4500 152.4000 144.9500

Retained distribution on acc shares 0.0061 0.5710 0.9984 1.3856

* After direct transaction costs of 0.0011 0.0014 0.0013 0.0010

Return after charges 4.57% 3.31% 5.14% 12.34%

Other Information

Closing net asset value (£) 6,071,546 8,181,823 15,087,075 30,616,453

Closing number of shares 3,687,667 5,196,657 9,900,133 21,122,256

Operating charges 2.49% 2.46% 2.51% 2.39%

Direct transaction costs 0.00% 0.00% 0.00% 0.00%

Prices

Highest share price (pence) 165.35 171.41 156.91 152.42

Lowest share price (pence) 152.86 146.19 144.77 128.00

Performance

Income share class






Distribution on income shares -0.0071 -0.5197 -0.9132 -1.2807




Other Information





Prices



Performance

10

Net Asset Value per Share and Comparative Tables (continued)

R accumulation share class






Distribution on income shares 0.0000 0.0000 0.0000 0.0000


Retained distribution on acc shares 0.6271 1.8163 2.1516 2.2209



Other Information





Prices



Performance

R income share class






Distribution on income shares -0.5568 -1.6269 -1.9550 -2.0524




Other Information





Prices



Performance

11

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.

Ongoing charges - Legacy Class 31.03.16 30.09.15

% %

ACD's Annual Management Charge 1.50 1.50

Other expenses 0.10 0.09

Total Expense Ratio 1.60 1.59

Synthetic TER 0.90 0.87

Complete OCF 2.50 2.46

Ongoing charges - R Class

ACD's Annual Management Charge 0.75 0.75

Other expenses 0.10 0.09

Total Expense Ratio 0.85 0.84

Synthetic TER 0.90 0.87

Complete OCF 1.75 1.71

Synthetic Risk and Reward Indicator

The risk and reward score is based on past performance and calculated in accordance with European legislation. It may not be a reliable indication of the future risk profile.

Typically Lower Returns Typically Higher Returns

1 2 3 4 5 6 7

Lower Risk Higher Risk

12

Financial statements

Notes 31.03.16 31.03.15

Income £ £ £ £

Net capital gains/(losses) 4 4,184,949 8,251,817

Revenue 6 751,171 1,018,902

Expenses 7 (434,094) (483,564)

Finance costs: Interest 9 2 (3,688)

Net revenue before taxation 317,079 531,650

Taxation 8 - 88

Net revenue after taxation 317,079 531,738

4,502,028 8,783,555

Finance costs: Distribution 9 (317,095) (531,734)

4,184,933 8,251,821

£ £ £ £

Opening net assets attributable

to shareholders93,180,230 94,178,253

4,679,119 7,067,421

(8,332,417) (10,230,525)

(3,653,298) (3,163,104)

4,184,933 8,251,821

224,926 362,490

93,936,791 99,629,460

Amounts payable on cancellation of

shares

Change in net assets attributable to

shareholders from investment activities

Change in net assets attributable to

shareholders from investment

Closing net assets attributable to shareholders

Retained distribution on accumulation

shares

Statement of total returnFor the period ended 31 March 2016

Statement of change in net assets attributable to shareholdersFor the period ended 31 March 2016

Total return before distributions

Amounts receivable on issue of shares

13

As at 31 March 2016

Notes 31.03.16 30.09.15

Assets £ £ £ £

Investment assets 93,236,109 87,793,056

Debtors 10 370,171 3,230,954

Bank balances 4,718,707 7,451,372

Total other assets 5,088,878 10,682,326

Total assets 98,324,987 98,475,382

Liabilities

Creditors 11 276,861 1,758,911

Distribution payable on income shares 89,914 128,511

Bank overdrafts 4,021,421 3,407,730

Total other liabilities 4,388,196 5,295,152

Net assets attributable to shareholders 93,936,791 93,180,230

Balance sheet

14

Notes to the financial statements As at 31 March 2016

1 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 2014. 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.

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

All income allocations and distributions declared by the managers of the underlying funds up to the accounting date are included in Income, net of attributable tax credits. The net allocations which are retained in Income are included in the fund’s own income allocation. Bank and other interest receivable is accrued up to the accounting date. Equalisation on distributions received is deducted from the cost of the investment and not included in the fund’s income available for distribution.

e) Expenses

The ACD’s periodic charge is deducted from Income. All of the other expenses are charged against Income except for costs associated with the purchase and sale of investments which are charged against Capital.

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) Corporation tax is provided at 20% on income, other than the franked portion of distributions from collective investment schemes, after deduction of expenses.

(iii) The charge for deferred tax is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be offset.

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.

15

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. 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.

iii. 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.

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. 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. 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.

vii. 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.

16

4 Net capital gains 31.03.16 31.03.15

£ £

Proceeds from sales on investments during the period 16,666,986 31,325,093

Original cost of investments sold during the period (15,694,897) (27,326,736)

Gains realised on investments sold during the period 972,089 3,998,357

Net appreciation thereon already recognised in prior periods (533,109) (3,300,755)

Net realised appreciation for the period 438,980 697,602

Net unrealised appreciation for the period 3,745,969 7,554,215

Net gains on non-derivative securities 4,184,949 8,251,817

Net capital gains on investments 4,184,949 8,251,817

5 Purchases, sales and transaction costs

Purchases excluding transaction costs 17,460,969 26,517,934

Dilution levy: 0.00% [0.04%] - 11,918

Trustee transaction charges: 0.00% [0.00%] 260 140Purchases including transaction costs 17,461,229 26,529,992

Sales excluding transaction costs 16,668,166 31,325,093

Dilution levy: 0.01% [0.00%] (1,180) -

Trustee transaction charges: 0.00% [0.00%] (380) (300)Sales including transaction costs 16,666,606 31,324,793

Trustee transaction charges have been deducted in determining net capital

Transaction charges are displayed as percentage of purchase/sale

Total dilution levy 0.00% [0.01%] 1,180 11,918

Total trustee transaction charges : 0.00% [0.00%] 640 440

Total charges displayed as percentage of average net asset value

Average portfolio dealing spread : 0.02% [0.02%] 17,672 21,271

6 Revenue

UK franked dividends 444,911 622,431

UK unfranked dividends 1,261 3,225

Bond interest 31,131 296,127

Overseas franked income 149,439 94,782

Overseas gross unfranked income 121,062 -

Rebate of annual management charges / renewal 3,367 1,724

Bank interest - 613Total revenue 751,171 1,018,902

Collective Investment Schemes

17

7 Expenses 31.03.16 31.03.15

£ £

ACD's periodic charge 390,262 438,354

Depositary's fee 25,460 26,104

Safe custody 6,447 6,680

31,907 32,784

Other expenses:

FCA fee 132 207

Audit fee 3,640 3,620

Registration fees 6,149 6,606

Distribution costs 2,004 1,993Total expenses 434,094 483,564

8 Taxation

a) Analysis of the tax charge for the period:

UK Corporation tax - -

Irrecoverable income tax - (88)

Current tax charge (note 8b) - (88)

Deferred tax (note 8c) - - Total tax charge - (88)

b) Factors affecting the tax charge for the period:

Net income before taxation 317,079 531,650

Corporation tax at 20% 63,416 106,330

Effects of:

UK dividends (118,870) (143,443)

Utilisation of excess management expenses 55,454 37,113

Corporation tax charge - -

Irrecoverable income tax - (88)Current tax charge for the period (note 8a) - (88)

c) Provision for deferred taxation

No provision for deferred taxation has been made in the current or prior accounting year.

d) Factors that may affect future tax changes

Payable to the Depositary associates of the Depositary and agents of either:

Payable to the ACD, associates of the ACD and agents of either:

The fund has unutilised management expenses of £3,537,165 (prior year £3,259,895). The fund does

not expect to be able to utilise this in the forseeable future.

18

9 Finance costs 31.03.16 31.03.15

£ £

Distributions

Interim 314,840 524,222

314,840 524,222

Amounts deducted on cancellation of shares 11,580 36,602

Amounts received on issue of shares (9,325) (29,090)

Finance costs: Distributions 317,095 531,734

Finance costs: Interest (2) 3,688Total finance costs 317,093 535,422

Represented by:

Net revenue after taxation 317,079 531,738

Balance of revenue brought forward 45 43

Balance of revenue carried forward (29) (47)

Finance costs: Distributions 317,095 531,734

19

10 Debtors 31.03.16 30.09.15

£ £

Amounts receivable for issue of shares 226,698 555,484Amounts receivable for investment securities sold - 2,570,000

Accrued income:UK franked dividends 31,235 -

31,235 -

Prepayments 93 224

Other receivables 2,399 1,726

Taxation recoverable 109,746 103,520

Total debtors 370,171 3,230,954

11 Creditors

Amounts payable for cancellation of shares 194,482 392,952

Amounts payable for investment securities purchased - 1,280,000

Accrued expenses:

Amounts payable to the ACD, associates and agents:

ACD's periodic charge 65,552 65,432

Amounts payable to the Depositary, associates and agents:

Depositary's fees 4,316 4,189

Transaction charges 120 110

Safe custody fee 2,579 2,330

7,015 6,629

Other expenses 9,813 13,898

Total creditors 276,862 1,758,911

12 Contingent liabilities and commitments There were no contingent liabilities or outstanding commitments at the balance sheet date [30.09.15 : £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 11.

20

Acc Inc R Acc R Inc

Opening number of shares 5,196,657 2,597,044 35,297,732 17,164,348

Shares issued 14,897 7,296 2,305,998 450,303

Shares converted (803,364) (266,753) 937,364 105,703

Shares redeemed (720,523) (132,622) (2,709,388) (1,600,105)


14 Shareholders' funds

15 Post balance sheet events There were no material post balance sheet events which have a bearing on the understanding of the financial statements.

16 Risk disclosures 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:

i. Interest risk 31.03.16 30.09.15

£ £

Floating rate assets (pounds sterling): 4,718,707 7,451,372

Floating rate liabilities (pounds sterling): (4,021,421) (3,407,730)

Assets on which interest is not paid (pounds sterling): 82,591,180 80,510,423

Assets on which interest is not paid (dollars): 11,015,101 10,513,587

Liabilities on which interest is not paid (pounds sterling): (366,776) (1,887,422)

Net Assets 93,936,791 93,180,230

ii. Currency risk 31.03.16 30.09.15

£ £

GBP 82,921,690 82,666,643

US Dollars 11,015,101 10,513,587

Net Assets 93,936,791 93,180,230

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 collective investment schemes, which do not have maturity dates.

21

17 Fair Value Techniques

Assets 31.03.16 30.09.15

£ £

Quoted prices for identical instruments in active markets 93,236,109 98,820,632

Prices of recent transactions for identical instruments - -

Valuation techniques using observable data - -

Valuation techniques using non-observable data - -

93,236,109 98,820,632

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 - -

- -

Distribution table For the period ended 31 March 2016 – in pence per share

Interim Group 1 – shares purchased prior to 01 October 2015 Group 2 – shares purchased on or after 01 October 2015

Accumulation Shares

Shares Net Income Equalisation Allocating 31.05.16

Allocated 31.05.15

Group 1 0.0061 - 0.0061 0.3963 Group 2 - 0.0061 0.0061 0.3963

Income Shares

Shares Net Income Equalisation Payable 31.05.16 Paid 31.05.15

Group 1 0.0071 - 0.0071 0.3597 Group 2 - 0.0071 0.0071 0.3597

R Accumulation Shares

Shares Net Income Equalisation Allocating 31.05.16

Allocated 31.05.15

Group 1 0.6271 - 0.6271 1.0063 Group 2 0.2889 0.3382 0.6271 1.0063

R Income Shares

Shares Net Income Equalisation Payable 31.05.16 Paid 31.05.15

Group 1 0.5568 - 0.5568 0.9024 Group 2 0.2941 0.2627 0.5568 0.9024

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.

22

General Information Valuation Point The Valuation Point of the fund is at 8.30am 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 0345 607 6808. 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 www.margettsfundmanagement.com. 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 £100. 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.

interim report and financial statements for margetts ... · 1 sovereign court graham street...

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