Interim Report & Financial Statements. FP Matterley Investment Funds. For the six months ended 31 July 2015 (unaudited) FUND PARTNERS

Transcription

1 Interim Report & Financial Statements FP Matterley Investment Funds For the six months ended 31 July 2015 (unaudited) FUND PARTNERS

2 contents FP Matterley Investment Funds Page Authorised Corporate Director s ( ACD ) Report* 3 Certification of Financial Statements by Directors of the ACD* 4 Individual Funds Investment Commentary and Financial Statements FP Matterley Bond Opportunities Fund 5 FP Matterley Equity Fund 14 FP Matterley International Growth Portfolio 26 FP Matterley Regular High Income Fund 32 FP Matterley UK & International Growth Fund 46 General Information 57 Contact Information 59 * Collectively, these comprise the ACD s Report.

3 FP Matterley Investment Funds Authorised Corporate Director s Report We are pleased to present the Interim Report & Financial Statements for FP Matterley Investment Funds for the six month period ended 31 July Authorised Status FP Matterley Investment Funds ( the Company ) is an investment company with variable capital incorporated in England and Wales under registered number IC and authorised by the Financial Conduct Authority ( FCA ) with effect from 2 June The Company has an unlimited duration. Shareholders are not liable for the debts of the Company. Head Office: The Head Office of the Company is at Cedar House, 3 Cedar Park, Cobham Road, Wimborne, Dorset BH21 7SB. The Head Office is the address of the place in the UK for service on the Company of notices or other documents required or authorised to be served on it. Structure of the Company The Company is structured as an umbrella company, in that different Funds may be established from time to time by the ACD with the approval of the FCA. On the introduction of any new Fund or Class, a revised prospectus will be prepared setting out the relevant details of each Fund or Class. The Company is a UCITS scheme. The assets of each Fund will be treated as separate from those of every other Fund and will be invested in accordance with the investment objective and investment policy applicable to that Fund. Investment of the assets of each of the Funds must comply with the FCA s Collective Investment Schemes Sourcebook ( COLL ) and the investment objective and policy of the relevant Fund. In the future there may be other Funds established. Crossholdings There were no shares in any sub-fund held by other sub-funds of the ICVC. Important events during the period The Investment Association (IA) has published in accordance with FRS 102 a revised Statement of Recommended Practice (SORP) in May 2014 which supersedes the previous SORP for the preparation of Financial Statements by UK Authorised Funds. The recommendations of this SORP are applicable to accounting periods beginning on or after 1 January 2015 and as a result the requirement for Umbrella Funds to present aggregated accounts has been removed for the interim Financial Statements of the Company. Base Currency: The base currency of the Company is Pounds Sterling. Each Fund and class is designated in Pounds Sterling. Share Capital: The minimum Share capital of the Company is 1 and the maximum is 100,000,000,000. Shares in the Company have no par value. The Share Capital of the Company at all times equals the sum of the Net Asset Values of each of the Funds. 3

4 FP Matterley Investment Funds Certification of Financial Statements by Directors of the ACD For the six months ended 31 July 2015 (unaudited) Directors Certification This report has been prepared in accordance with the requirements of COLL, as issued and amended by the FCA. We hereby certify the report on behalf of the Directors of Fund Partners Limited. The Directors are of the opinion that it is appropriate to continue to adopt the going concern basis in the preparation of the Financial Statements as the assets of the Funds consist predominately of securities that are readily realisable and, accordingly, the Funds have adequate resources to continue in operational existence for the foreseeable future. The exception to this being for the FP Matterley International Growth Portfolio. For some time, the Fund has experienced significant continual outflows to the point where Fund Partners Limited (FP) and the management of Charles Stanley & Co Limited believe that it is no longer commercially viable to continue with. Charles Stanley & Co Limited has also informed Fund Partners of its intention to redeem its own holdings in the Fund which represents a very a high percentage of the current shares in issue. This would leave a disproportionately small residual value in the Fund and would increase the Total Expense Ratios to a level that would be detrimental for any remaining Shareholders. As a result Fund Partners has taken the decision to perform an orderly wind up of the Fund whereby Charles Stanley s discretionary holders have agreed to remain invested up until the final Valuation Point. We believe this is the best course of action to protect all of the Shareholders in the Fund. K. Lavery J. Gardner Fund Partners Limited 24 September

5 FP Matterley Bond Opportunities Fund Investment Manager s Report For the period ended 31 July 2015 (unaudited) Investment Objective and Policy The Fund aims to achieve a positive total return per annum over an investment period of 3 years, combining both income and capital growth, through global investment in transferable securities, ETFs and derivatives. Capital invested in the Fund is at risk and there is no guarantee that the investment objective will be met over the 3 year investment period or in respect of any other period. The Fund will specifically seek out opportunities arising from fluctuating interest rates in the changing global bond markets. The Fund will invest directly in government securities but may also invest indirectly through ETFs and derivatives. Such government securities may be either fixed, floating rate or index-/inflation linked. The Fund will use derivatives and forward transactions for investment, hedging, and efficient portfolio management purposes. The Fund may also invest in ETFs with other exposures, money market instruments, cash and near cash, and deposits. Investments of the Fund will not be restricted by geographic sector, meaning that, from time-totime, investment may be focussed on one, or on a limited number of countries. The Fund operates with an absolute return focus rather than an index based focus. The Fund s portfolio will be managed on a concentrated basis and may include long and short synthetic positions with a fixed interest portfolio used to provide collateral. The Fund is actively managed via a macro style investment strategy driven by research into bespoke positioning and valuation techniques. The Fund has a global investment framework to identify catalysts for change and will be positioned accordingly. It is not intended that the use of derivatives for either investment purposes or efficient portfolio management will change the risk profile of the Fund. Borrowing will be permitted under the terms of the Regulations. Investment Review and Market Overview The Fund returned -3.2% 1 during the review period. It was a difficult time to launch this strategy which focuses on the short dated part of some of the emerging market government yield curves. At the launch of the Fund we invested 20% 2 in each of the following bond markets: Brazil, South Africa and Mexico in 2 to 5 year maturities. Yields in these markets rose by 14, 37 and 8 basis points in Brazil, South Africa and Mexico respectively and this compares with a fall of 10 basis points for 10 year UK Gilts 3. The markets began to discount interest rate rises by policy makers in these countries with the view to reducing inflation. The absolute negative return, however, was mainly due to the movement in the respective currencies as Brazilian Real fell by 7.67% 3, the South African Rand fell by 18.81% and the Mexican Peso by 6.57%. We had bought some USD call options out of the above emerging market currencies which helped to limit the downside to some extent but not the full move. The move was driven by the prospect of a US interest rate hike in Quarter which would result in capital outflows away from emerging markets back into the US. By the end of the period we had fully hedged the currencies back into the base currency GBP, leaving the Fund with a short weighting in the emerging market currencies in favour of USD via options. In addition to the above positions the Fund had an 11% position in long dated US Treasury bonds, which were fully hedged with financial futures, and a short position in 10 year UK Gilts, again via futures. The remaining 29% was invested in cash and UK government Treasury Bills. In addition, the Fund had a further 7% exposure to the USD out of EUR through a forward contract. During the review period bond markets had to wrestle with the prospect of an interest rate hike in the US and the probability of the UK following suit shortly afterwards. In addition there was a great deal of concern as to whether Greece would be bailed out and remain in the Euro zone or not. The latter contributed to considerable volatility to markets in general but particularly to risk assets and 5

6 FP Matterley Bond Opportunities Fund Investment Manager s Report (continued) For the period ended 31 July 2015 (unaudited) Investment Review and Market Overview (continued) non core markets. In contrast to the Anglo Saxon markets, bonds in Europe were well supported by further quantitative easing by the European Central Bank against an economic backdrop of continued subdued inflation and economic growth. Following the UK general election in early May, GBP was reasonably stable against the other major currencies, rising by 0.55% versus USD and by 1.56% against EUR. Outlook We are bearish for conventional bond markets at current yield levels. Corporate bonds have next to no dealing liquidity and we are concerned that when the interest rate cycle finally turns, there will be exaggerated moves due to this lack of liquidity. In addition, core government bond yields are at very low levels offering little protection to investors. The first principle of bond investing is real yields, after inflation returns. In the core markets index linked government bond yields are negative in the UK, Germany and Japan and just above zero in the US. This compares with a long term average of between 2 and 3%. History suggests that, even when a rise in interest rates is well flagged as in 1994, bond markets perform poorly. Over the next 12 months we expect bond markets to react negatively to the change in the interest cycle in the US and the UK. If we are wrong and the Federal Reserve hold off on raising rates because of global events such as China, we think the bond markets will still react negatively on concerns that policy makers are taking risks with future inflation. If deflation globally takes hold, then governments around the world are effectively bankrupt. Therefore, we cannot think of a scenario that would be promising for core bond markets either corporate or government. That being said, we do think there are a few remaining opportunities where there is still value. We think that short maturities (2-5 years) in local government bond markets in Brazil, South Africa and Mexico represent an excellent opportunity despite recent volatility. Returning to the concept of real or inflation adjusted returns, in Brazil index linked or real yields are currently at 7% as monetary policy has been tightened to combat inflation. We think that these levels of interest rates will begin to weigh very heavily on the economy and expect to see the market begin to discount sharp falls in rates soon. It is likely that the currency will take the strain, continuing to depreciate further, certainly against USD. A falling yield environment with further weakness in the currency would be positive for our strategy, given that we are now short the currency, via options, into USD. The same strategy applies to South Africa and Mexico where real yields are above 2%,and in nominal terms they are 8% and 5%. We will continue to trade the UK Gilt market from a short perspective in anticipation of a correction in core bond markets as yields begin to normalize. Finally, we are looking to add to the EUR short, USD long currency position as the greenback benefits from a relatively tight monetary policy in comparison to the Euro zone. Sources: 1. State Street daily price sheets 2. Bloomberg AIM system 3. Bloomberg Investment Manager Charles Stanley & Co Limited 17 August

7 FP Matterley Bond Opportunities Fund Net Asset Value per Share and Comparative Table Net Asset Value Date Net Asset Value of Share Class ( ) Shares in issue Net Asset Value per Share (p) Share Class A Income 31/07/ Share Class A Accumulation 31/07/15 19,375 20, Share Class B Income 31/07/15 13,211,188 13,722, Share Class B Accumulation 31/07/15 247, , Price and Revenue History Calendar year Highest Published Share price (p) Lowest Published Share price (p) Net Revenue per Share (p) Share Class A Income Share Class A Accumulation Share Class B Income Share Class B Accumulation From 20 May to 31 July Includes the distribution payable 30 September Distribution The distribution for Share Class A Income is p per Share, payable 30 September The distribution for Share Class A Accumulation is p per Share, payable 30 September The distribution for Share Class B Income is p per Share, payable 30 September The distribution for Share Class B Accumulation is p per Share, payable 30 September

8 FP Matterley Bond Opportunities Fund Performance Information Ongoing Charge Figures Date AMC (%) Other expenses (%) Total ongoing charge figures (%) 31/07/15 Share Class A Share Class B The Ongoing Charge Figure (OCF) is the ratio of the Fund s total discloseable costs (excluding overdraft interest) to the average net assets of the Fund. Risk and Reward Profile As at 31 July 2015 Typically lower rewards Typically higher rewards Lower risk Higher risk Share Class A Share Class B This indicator is based on historical data and may not be a reliable indication of the future risk profile of the Fund. The risk category shown is not guaranteed to remain unchanged and may shift over time. The lowest category does not mean risk free. The Fund appears as a 4 on the scale. This is because it invests in fixed income investments whose values do not fluctuate widely. Risk Warning An investment in an Open-Ended Investment Company should be regarded as a medium to long term investment. Investors should be aware that the price of Shares and the income from them may 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 of a fund are subject to fluctuation in exchange rates, which may be favourable or unfavourable. 8

9 FP Matterley Bond Opportunities Fund Portfolio Statement Holdings or Nominal Value Investments Market Value % of Total Net Assets Bonds 90.40% Brazil 19.70% 4,040,000 Brazil Letras do Tesouro Nacional 01/01/ , ,651,000 Brazil Notas do Tesouro Nacional Serie F 01/01/ , ,240,000 Brazil Notas do Tesouro Nacional Serie F 01/01/ , ,895,000 Brazil Notas do Tesouro Nacional Serie F 01/01/ , Luxembourg 13.43% 18,200,000 European Investment Bank 7.5% 30/01/ , ,160,000 European Investment Bank 9% 21/12/ , Mexico 20.84% 17,480,000 Mexican Bonos 4.75% 14/06/ , ,148,000 Mexican Bonos 5% 11/12/ , ,980,000 Mexican Bonos 5% 15/06/ , ,495,000 Mexican Bonos 8.5% 13/12/ , South Africa 6.79% 17,800,000 South Africa Government Bond 8% 21/12/ , United Kingdom 18.52% 1,000,000 United Kingdom Treasury Bill 0% 16/11/ , ,000,000 United Kingdom Treasury Bill 0% 05/10/ , ,000 United Kingdom Treasury Bill 0% 09/11/ , United States 11.12% 1,800,000 United States Treasury Bond 4.5% 15/02/2036 1,498, ,184, Options 0.66% 15,000,000 Option Call GBP Put USD August , (3,000,000) Option Call USD Put ZAR November 2015 (4,164) (0.03) 3,100,000 Option Call USD Put ZAR November , (5,500,000) Option Call USD Put MXN November 2015 (9,826) (0.07) 3,100,000 Option 17 Call USD Put MXN November , ,000 Option Call USD Put MXN November , ,100,000 Option Call USD Put BRL November , ,000 Option Call USD Put BRL November , (6,610,000) Option Call USD Put BRL November 2015 (20,184) (0.15) 89, Forwards Contracts 0.88% Bought ZAR6,000,000 for GBP308,404 Settlement 03/09/2015 (7,782) (0.06) Bought USD1,500,000 for EUR1,337,542 Settlement 03/09/ , Sold BRL14,000,000 for GBP2,641,509 Settlement 03/09/2015 3,

10 FP Matterley Bond Opportunities Fund Portfolio Statement (continued) Holdings or Nominal Value Investments Market Value % of Total Net Assets Forwards Contracts 0.88% (continued) Sold MXN17,000,000 for GBP676,657 Settlement 03/09/2015 6, Sold MXN34,000,000 for GBP1,344,618 Settlement 03/09/2015 3, Sold MXN17,000,000 for GBP680,136 Settlement 03/09/2015 9, Sold USD2,440,000 for GBP1,554,358 Settlement 03/09/2015 (12,746) (0.09) Sold ZAR6,000,000 for GBP310,664 Settlement 03/09/ , Sold ZAR12,700,000 for GBP643,201 Settlement 03/09/2015 6, Sold ZAR43,300,000 for GBP2,248,008 Settlement 03/09/ , , Futures Contracts (0.21%) (25) UK Long Gilt Futures September 2015 (5,550) (0.04) (15) US Treasury Long Bond CBT Futures September 2015 (22,263) (0.17) (27,813) (0.21) Portfolio of investments 12,363, Net other assets 1,114, Net assets 13,477, All investments are Collective Investment Schemes unless otherwise stated. Gross purchases for the period: 15,864,293. Total sales net of transaction costs for the period: 6,893,673. Credit Ratings as at 31 July 2015 % of Total Net Assets Bond Rating AAA AA A BBB Bonds Options 0.66 Forward Contracts 0.88 Futures Contracts (0.21) Uninvested Cash 8.27 Net Assets The above information has been supplied by the Investment Manager. Bonds not rated are of investment grade, but rating not sought by issuer. 10

11 FP Matterley Bond Opportunities Fund Statement of Total Return For the period ended 31 July 2015 (unaudited) 20/05/15 to 31/07/15 Income Net capital losses (452,031) Revenue 112,726 Expenses (21,759) Finance costs: Interest (586) Net revenue before taxation 90,381 Taxation Net revenue after taxation 90,381 Total return before distributions (361,650) Finance costs: Distributions (90,382) Change in net liabilities attributable to Shareholders from investment activities (452,032) Statement of Change in Net Assets Attributable to Shareholders For the period ended 31 July 2015 (unaudited) 20/05/15 to 31/07/15 Amounts received on issue of Shares 13,928,997 Less: Amounts paid on cancellation of Shares (665) 13,928,332 Change in net liabilities attributable to Shareholders from investment activities (see above) (452,032) Retained distribution on accumulation Shares 1,692 Closing net assets attributable to Shareholders 13,477,992 11

12 FP Matterley Bond Opportunities Fund Balance Sheet 31/07/15 Assets Investment assets 12,446,123 Debtors 204,763 Cash and bank balances 1,032,900 Total other assets 1,237,663 Total assets 13,683,786 Liabilities Investment liabilities (82,515) Creditors (36,805) Bank overdrafts (35) Distribution payable on income Shares (86,439) Total other liabilities (123,279) Total liabilities (205,794) Net assets attributable to Shareholders 13,477,992 Notes to the Financial Statements For the period ended 31 July 2015 (unaudited) Accounting Basis, Policies and Valuation of Investments (a) Basis of accounting The interim Financial Statements have been prepared under the historical cost basis, as modified by the revaluation of investments and in accordance with the Statement of Recommended Practice ( SORP ) for Financial Statements of Authorised Funds issued by the Investment Association (formerly the Investment Management Association) in May The accounting policies applied are consistent with those of the annual Financial Statements for the year ended 31 January 2015 and are described in those Financial Statements. In this regard, comparative figures from previous periods are prepared to the same standards as the current period, unless otherwise stated. As described in the Certification of Financial Statements by Directors of the ACD on page 4, the ACD continues to adopt the going concern basis in the preparation of the Financial Statements of the Fund. 12

13 FP Matterley Bond Opportunities Fund Notes to the Financial Statements (continued) For the period ended 31 July 2015 (unaudited) Accounting Basis, Policies and Valuation of Investments (continued) (b) Basis of valuation of investments Listed investments are valued at close of business bid prices excluding any accrued interest in the case of fixed interest securities, on the last business day of the accounting period. Market value is defined by the SORP as fair value which is the bid value of each security. Unlisted or suspended investments are valued by the Investment Manager taking into account, where appropriate, latest dealing prices, valuations from reliable sources, financial performance and other relevant factors. The fair value of derivative instruments is marked to market value. The forward currency contracts are valued at the prevailing forward exchange rates. 13

14 FP Matterley Equity Fund Investment Manager s Report For the six months ended 31 July 2015 (unaudited) Investment Objective and Policy The investment objective of the FP Matterley Equity Fund is to generate capital growth from a portfolio consisting predominantly of companies which form the FTSE 350 Index. There may be occasions when the investment manager chooses to hold Collective Investment Schemes and a high level of bonds, government securities, cash and money market instruments. Investment Review and Market Overview The period under review started strongly in the UK equity market and both the headline FTSE 100 Share Index and the Fund s benchmark FTSE 350 Share Index posted record highs at the end of February. It has taken since 1999 for them to pass the previous high point and after a pause for breath the market pushed on to record a new all-time high at the end of April. This was a surprising move as the result of the UK general election due in May was far from clear and traditionally, uncertainty ahead of an election can put a damper on stock-market activity. When the outcome was known it is fair to say that the majority of pundits were well and truly caught out by the result and although the market tended to drift lower until the end of July any setback could have been steeper if we had been burdened with the economic uncertainty created by a hung parliament. The other factors that have weighed heavily on stock market activity over the last six months have been the crisis in the Greek economy, the big question mark over just when interest rates will rise, worries about collapsing commodity prices, and the faltering Chinese economy. After more than 5 years of increasingly regular European Union(EU) emergency summits to tackle the economic crisis in Greece matters finally came to a head in July when a settlement had to be reached or a so called Grexit from the EU and inevitable bankruptcy for a country already in dire problems would have been unavoidable. An eleventh hour settlement with EU partners was tentatively agreed and EU leaders returned to their countries but there is still a lot of behind the scenes negotiating to be completed before the problem can be described as even remotely solved. Despite the headlines and political histrionics surrounding the Greek hiatus, equity markets in the UK and also in much of Europe remained remarkably firm and unlike the early days of the crisis more than 5 years ago, there was little fear of contagion among weaker members of the EU. Commodity prices have fallen throughout the period under review as the Chinese demand for raw materials waned. The Fund has been traditionally overweight in mining shares and despite the weakness we have kept faith with BHP Billiton and Rio Tinto even though they recorded falls of 18.1% 1 and 15% 1 respectively for the last 6 months. Both companies are financially strong enough to survive any continuing weakness and should be well to the forefront of any recovery. BHP spun off some of their mining interests into a new company called South 32 which was first quoted in May. The holding was relatively small and we decided to sell rather than hold. Johnson Matthey, a refiner of rare metals has also suffered with a fall of 10.6% 1 as demand fell but again we never fail to be impressed with the management team and will continue to hold. The most disruptive fall has been in the price of crude oil. Not only do we hold the leading oil companies but also engineering companies which specialise in oilfield support. In June we decided to trim our exposure and sold BP. In addition to the usual woes allied to a low oil price the company will continue to be bogged down with law suits surrounding the Deepwater Horizon oil spill in We retained Royal Dutch Shell which although it fell by 11.6% 1 over the period surprised markets with a bid for BG Group. We hold the latter which thanks to the bid appreciated by 23.2% 1. Although the terms of an agreed bid were announced in April it is unlikely that the take-over will be completed before the first quarter of 2016 although their respective strengths are complimentary rather than over-lapping. 14

15 FP Matterley Equity Fund Investment Manager s Report (continued) For the six months ended 31 July 2015 (unaudited) Investment Review and Market Overview (continued) We also sold the holding of IMI to decrease our weighting in companies which have a high dependency on the fortunes of the oil industry. IMI was also relying on growing trade in China and Brazil, two economies where growth is fading. Another total disposal was Elementis, a producer of bulk chemicals which had performed well over the first four months of the year but could have easily surrendered the rise if the uncertainty in commodity markets continues. We also made partial sales of Senior, Inmarsat, Prudential, BATs, and Sage Group with the idea of protecting profits after periods of out-performance and adding to our cash position. Merger and acquisition activity has come to life in 2015 and in addition to the bid by Royal Dutch Shell for BG we have seen approaches to Rexam by the Ball Corporation of USA and an agreed bid for BRIT Insurance by the Canadian group Fairfax. BRIT was a recent purchase and we had been attracted to the company by its strong cash generation and bullish outlook whereas Rexam has been a valuable contributor to our performance since inception. A successful merger of Ball and Rexam will create monopolies in certain product lines in the United States thus adding to the regulatory hurdles that have to be crossed. With a successful outcome far from certain we sold approximately one third of our holding to consolidate a profit. New purchases have included IG Group, S&U, Victrex, IP Group, and Auto Trader. The first three companies generate a high level of excess cash thanks to a niche presence in their respective sectors. IG Group has been established for more than 40 years and provides specialist spreadbetting services, on line stockbroking and foreign exchange trading to more than 125,000 clients worldwide 2. S & U is a provider of motor finance to customers looking to buy a second hand car. The company and its management are well known to the managers of the fund having been held in the Regular High Income Fund since Historically the company had a low rating but paid a high dividend thanks to strong cash flow. Over the years, growth in earnings and the share price has out-stripped the growth in dividends and although they may no longer be the preferred investment of an income fund they have ample growth credentials for the Equity fund. Victrex is a provider of high performance polymer solutions serving 40 countries and several industries ranging from aerospace to medical 3. The financial management of the company is exemplary and the barrier to entry for would-be-competitors is high. IP Group and Auto Trader are a slight departure from our traditional disciplines of seeking out companies that generate cash and can deliver earnings growth which in turn fuels a consistent pattern of dividend increases. IP Group is in the research commercialisation sector, which broadly means they endeavour to create value for shareholders through the commercialisation of University Research programmes. This is a growing area as UK research and development spend is approximately 10bn per annum and growing at 4.3%p.a. (source: Company statement at time of major fund raising in May 2015). IP Group will be raising cash rather than re-paying shareholders but their model of financing and managerial assistance should in the long term prove highly profitable and in many ways is very similar to Oxford Instruments which is a more mature company and which we have held for some time. Our most recent purchase is Auto Trader the UK s leading automotive market place; originally a car listing magazine for 37 years it has now converted to a fully digital platform. The company only came to the market in March 2015 and will not be paying a dividend until 2016 but it has a very strong position in the car market with 80% of retail forecourts advertising through the website and a loyal following of both buyers and sellers. The rating is high but certainly no more expensive than other digital providers like Moneysupermarket.com and Zoopla (on line estate agency). However Auto Trader should grow earnings faster than any rise in their cost base a fact which endears them to our fund. 15

16 FP Matterley Equity Fund Investment Manager s Report (continued) For the six months ended 31 July 2015 (unaudited) Outlook Over the last few months the UK equity market has proved remarkably resilient in the face of the Greek crisis, a rapidly slowing Chinese economy with knock-ons to emerging market economies and already depressed commodity prices. It has been remarkably sanguine about the prospect of interest rate rises, while sanctions against Russia and the continuing extremism of Islamic State are rarely mentioned in the context of market movers. Forecasts by many economists and carefully worded statements by the Bank of England in the UK and the Federal Reserve in the USA suggest that we shall see a move to raise interest rates in the US in the next few months and in the UK in Q Hopefully the authorities on both sides of the Atlantic have had more than 5 years to rehearse all the possible scenarios but we do view any rise, no matter how small as possibly a major turning point for the market. Traditionally any interest rate rise was bad news for equities but as any rise will be coming from a point so low that it would have been considered impossible 10 years ago we do not think it will cause any great upset initially. However assuming that interest rates remain low for the Euro then the pound could attract buyers which could be harmful for UK exporters. The great unknown is just how many equities are in the hands of investors who have used record low rates to borrow and chase assets like shares, property, and even works of art. In any rush for the exit shares could prove the easiest item to sell. For this reason we continue to keep a cash cushion just in case share purchases of the last few years owe more to irrational exuberance 4 fuelled by cheap money rather than old fashioned measures of value. Source: 1 Price source Bloomberg. Percentage move calculated from Way Group daily valuations. 2 annual report annual report 4 Term used by Alan Greenspan, head of the US Federal Reserve in 1990s to describe the dot.com boom Investment Manager Charles Stanley & Co. Limited 17 August

17 FP Matterley Equity Fund Net Asset Value per Share and Comparative Table Net Asset Value Date Net Asset Value of Share Class ( ) Shares in issue Net Asset Value per Share (p) Share Class A Income 31/01/13 1,591,456 1,059, /01/14 1,487, , /01/15 289, , /07/15 233, , Share Class A Accumulation 31/01/13 8,082,753 4,733, /01/14 8,331,359 4,456, /01/15 549, , /07/15 519, , Share Class B Income 31/01/ /01/14 177, , /01/15 1,180,954 1,031, /07/15 1,216,213 1,052, Share Class B Accumulation 31/01/13 31,019 29, /01/14 389, , /01/15 8,503,895 7,070, /07/15 8,482,109 6,895,

18 FP Matterley Equity Fund Net Asset Value per Share and Comparative Table (continued) Price and Revenue History Calendar year Highest Published Share price (p) Lowest Published Share price (p) Net Revenue per Share (p) Share Class A Income Share Class A Accumulation Share Class B Income Share Class B Accumulation From 10 December to 31 December From 1 January to 31 July Includes the distributions paid 31 March and payable 30 September Share Class B Income and B Accumulation were launched 10 December Distribution The distribution for Share Class A Income is p per Share, payable 30 September The distribution for Share Class A Accumulation is p per Share, payable 30 September The distribution for Share Class B Income is p per Share, payable 30 September The distribution for Share Class B Accumulation is p per Share, payable 30 September

19 FP Matterley Equity Fund Performance Information Ongoing Charge Figures Date AMC (%) Other expenses (%) Transaction costs (%) Total ongoing charge figures (%) 31/07/15 Share Class A Share Class B /01/15 Share Class A Share Class B The Ongoing Charge Figure (OCF) is the ratio of the Fund s total discloseable costs (excluding overdraft interest) to the average net assets of the Fund. Risk and Reward Profile As at 31 July 2015 Typically lower rewards Typically higher rewards Lower risk Higher risk Share Class A Share Class B This indicator is based on historical data and may not be a reliable indication of the future risk profile of the Fund. The risk category shown is not guaranteed to remain unchanged and may shift over time. The lowest category does not mean risk free. The Fund appears as a 5 on the scale. This is because it invests in the shares of companies whose values tend to vary more widely. Risk Warning An investment in an Open-Ended Investment Company should be regarded as a medium to long term investment. Investors should be aware that the price of Shares and the income from them may 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 of a fund are subject to fluctuation in exchange rates, which may be favourable or unfavourable. 19

20 FP Matterley Equity Fund Portfolio Statement Holdings or Nominal Value Investments Market value % of Total Net Assets UNITED KINGDOM EQUITIES BASIC MATERIALS Chemicals 8.06% [7.61%] 10,000 Croda 303, ,500 Johnson Matthey 305, ,000 Victrex 232, , Mining 3.42% [4.08%] 15,500 BHP Billiton 183, ,000 Rio Tinto 174, , TOTAL BASIC MATERIALS 11.48% [11.69%] 1,199, CONSUMER GOODS Automobiles & Parts 0.00% [0.02%] Beverages 2.41% [2.58%] 7,500 SABMiller 252, , Food Producers 4.50% [4.90%] 33,000 Tate & Lyle 179, ,000 Unilever 290, , Household Goods & Home Construction 5.80% [4.84%] 12,000 Bellway 289, ,150 Reckitt Benckiser 316, , Tobacco 2.82% [3.12%] 7,750 British American Tobacco 294, , TOTAL CONSUMER GOODS 15.53% [15.46%] 1,623, CONSUMER SERVICES Food & Drug Retailers 1.01% [0.97%] 40,000 Sainsbury (J) 105, , Media 7.39% [5.61%] 65,000 Auto Trader 220, ,000 Pearson 216, ,000 Reed Elsevier 335, ,

21 FP Matterley Equity Fund Portfolio Statement (continued) Holdings or Nominal Value Investments Market value % of Total Net Assets CONSUMER SERVICES (continued) Travel & Leisure 1.65% [1.60%] 20,000 Greene King 172, , TOTAL CONSUMER SERVICES 10.05% [8.18%] 1,050, ELECTRONIC & ELECTRICAL EQUIPMENT Electronic Components & Equipment 3.77% [3.57%] 22,500 Oxford Instruments 205, ,000 Renishaw 188, , TOTAL ELECTRONIC & ELECTRICAL EQUIPMENT 3.77% [3.57%] 394, FINANCIALS Banks 1.89% [1.97%] 34,000 HSBC 197, , General Financials 6.57% [2.08%] 50,000 Aberdeen Asset Management 181, ,000 IG 202, ,000 IP 121, ,500 S&U 182, , Life Insurances 3.10% [3.54%] 21,500 Prudential 324, , Real Estate Investment Trusts 2.55% [1.59%] 56,000 St. Modwen Properties 266, , TOTAL FINANCIALS 14.11% [9.18%] 1,474, HEALTHCARE Pharmaceuticals & Biotechnology 2.00% [2.09%] 15,000 GlaxoSmithKline 209, , TOTAL HEALTHCARE 2.00% [2.09%] 209, INDUSTRIALS Aerospace & Defence 6.77% [6.39%] 50,000 BAE Systems 240, ,000 QinetiQ 236, ,000 Rolls Royce 230, ,

22 FP Matterley Equity Fund Portfolio Statement (continued) Holdings or Nominal Value Investments Market value % of Total Net Assets INDUSTRIALS (continued) Construction & Materials 1.95% [1.44%] 11,500 Galliford Try 204, , General Industrials 3.56% [3.54%] 36,500 Rexam 202, ,000 Smiths 169, , Industrial Engineering 4.15% [6.76%] 75,000 Senior 218, ,000 Weir 215, , TOTAL INDUSTRIALS 16.43% [18.13%] 1,716, OIL & GAS Oil & Gas Producers 4.48% [6.75%] 25,000 BG 273, ,500 Royal Dutch Shell B 195, , Oil Equipment, Services & Distribution 2.30% [2.08%] 38,500 Wood (John) 240, , TOTAL OIL & GAS 6.78% [8.83%] 709, TECHNOLOGY Software & Computer Services 2.09% [2.28%] 42,000 Sage 218, , Technology Hardware & Equipment 2.03% [2.08%] 21,000 ARM 211, , TOTAL TECHNOLOGY 4.12% [4.36%] 430, TELECOMMUNICATIONS Fixed Line Telecommunications 2.44% [2.18%] 55,000 BT 255, , Mobile Telecommunications 5.51% [5.37%] 39,000 Inmarsat 346, ,000 Vodafone 229, , TOTAL TELECOMMUNICATIONS 7.95% [7.55%] 831,

23 FP Matterley Equity Fund Portfolio Statement (continued) Holdings or Nominal Value Investments Market value % of Total Net Assets UTILITIES Electricity 1.45% [1.53%] 10,000 Scottish & Southern Energy 151, , Gas, Water & Utilities 1.96% [2.13%] 24,000 National Grid 204, , TOTAL UTILITIES 3.41% [3.66%] 356, Portfolio of investments 9,994, Net other assets 456, Net assets 10,451, All investments are ordinary Shares unless otherwise stated and admitted to official stock exchange listings. Comparative figures shown above in square brackets relate to 31 January Gross purchases for the six months: 1,150,632 [2014: 544,336]. Total sales net of transaction costs for the six months: 1,018,800 [2014: 846,301]. 23

24 FP Matterley Equity Fund Statement of Total Return For the six months ended 31 July 2015 (unaudited) 01/02/15 to 31/07/15 01/02/14 to 31/07/14 Income Net capital gains 105, ,844 Revenue 192, ,486 Expenses (58,794) (69,409) Finance costs: Interest (92) Net revenue before taxation 134, ,985 Taxation (1,274) Net revenue after taxation 134, ,711 Total return before distributions 239, ,555 Finance costs: Distributions (134,150) (140,539) Change in net assets attributable to Shareholders from investment activities 105, ,016 Statement of Change in Net Assets Attributable to Shareholders For the six months ended 31 July 2015 (unaudited) 01/02/15 to 31/07/15 01/02/14 to 31/07/14 Opening net assets attributable to Shareholders 10,524,124 10,386,224 Amounts received on issue of Shares 150, ,982 Less: Amounts paid on cancellation of Shares (442,996) (413,740) (292,412) (193,758) Stamp duty reserve tax* (86) Change in net assets attributable to Shareholders from investment activities (see above) 105, ,016 Retained distribution on accumulation Shares 114, ,399 Closing net assets attributable to Shareholders 10,451,266 10,527,795 The above statement shows the comparative closing net assets at 31 July 2014 whereas the current accounting period commenced 1 February * Abolished from 30 March 2014 for OEICs. 24

25 FP Matterley Equity Fund Balance Sheet 31/07/15 31/01/15 Assets Investment assets 9,994,964 9,756,169 Debtors 25,640 17,996 Cash and bank balances 483, ,637 Total other assets 508, ,633 Total assets 10,503,945 10,571,802 Liabilities Investment liabilities Creditors (34,473) (35,898) Distribution payable on income Shares (18,206) (11,780) Total other liabilities (52,679) (47,678) Total liabilities (52,679) (47,678) Net assets attributable to Shareholders 10,451,266 10,524,124 Notes to the Financial Statements For the six months ended 31 July 2015 (unaudited) Accounting Basis, Policies and Valuation of Investments (a) Basis of accounting The interim Financial Statements have been prepared under the historical cost basis, as modified by the revaluation of investments and in accordance with the Statement of Recommended Practice ( SORP ) for Financial Statements of Authorised Funds issued by the Investment Association (formerly the Investment Management Association) in May The accounting policies applied are consistent with those of the annual Financial Statements for the year ended 31 January 2015 and are described in those Financial Statements. In this regard, comparative figures from previous periods are prepared to the same standards as the current period, unless otherwise stated. As described in the Certification of Financial Statements by Directors of the ACD on page 4, the ACD continues to adopt the going concern basis in the preparation of the Financial Statements of the Fund. (b) Basis of valuation of investments Listed investments are valued at close of business bid prices excluding any accrued interest in the case of fixed interest securities, on the last business day of the accounting period. Market value is defined by the SORP as fair value which is the bid value of each security. The fair value of derivative instruments is marked to market value. The forward currency contracts are valued at the prevailing forward exchange rates. 25

26 FP Matterley International Growth Portfolio Investment Manager s Report For the six months ended 31 July 2015 (unaudited) Investment Objective and Policy The investment objective of the FP Matterley International Growth Portfolio aims to achieve long term capital growth from a diversified portfolio of predominantly Collective Investment Schemes without restrictions to any geographical or industrial sector. The portfolio may include a variety of specialist funds to target higher levels of growth. There may be occasions when the investment manager chooses to hold direct equities, investment trusts, Exchange Traded Funds (ETFs), Exchange Traded Commodities (ETCs), bonds, government securities, cash and money market instruments. Investment Review The Fund returned 2.7% over the 6-months to July 2015, ahead of the return from both the FTSE World ex UK Index (+1.9%) and the IA Global peer group median (+1.9%). From a country perspective, the sizeable allocation to the US was positive as was the limited exposure to Asia and Emerging Markets. Scottish Mortgage Trust (+9.8%) and Brown Advisory US Smaller Companies (+9.3%) were key contributors. Hedging the Japanese Yen exposure proved beneficial over the review period as JOHCM Japan GBP hedged (+15.1%) was protected from a c9% fall in Yen versus sterling. Despite protecting capital better than the MSCI Emerging Markets Index (-8.3%), RAM emerging Markets Equities (-6.7%) detracted from returns. The number of positions was reduced signficantly over the review period, concentrating the Fund into the very best ideas. Edinburgh Partners Global Opportunities, European Investment Trust, Invesco Japanese Core Equity (GBP) hedged and Origo Partners were all sold. Outlook Volatility has picked up since the last review period driven, in our view, by three key risks: the situation in Greece and possible contagion elsewhere, the slowdown in economic activity and stock market falls in China and the possibility of an increase in US interest rates. In spite of these risks we remain constructive on the outlook for financial markets whilst acknowledging that it is highly probable that future returns are unlikely to match those of the recent past. The arguments in favour of equity exposure include the fact that valuations are fair, earnings are growing and balance sheets are not overly leveraged. We continue to like those markets still supported by unconventional central bank monetary policy (Eurozone and Japan) and favour them over those regions where policy seems likely to be tightened over the next 12-month time horizon (US, UK) or held neutral (Asia). Investment Manager Charles Stanley & Co Limited 21 August

27 FP Matterley International Growth Portfolio Net Asset Value per Share and Comparative Table Net Asset Value Date Net Asset Value of Share Class ( ) Shares in issue Net Asset Value per Share (p) Share Class A Accumulation 31/01/13 3,162,686 2,543, /01/14 2,780,723 2,085, /01/15 340, , /07/15 293, , Share Class B Accumulation 31/01/13 12,388,828 11,499, /01/14 13,326,351 11,483, /01/15 18,428,188 13,842, /07/15 9,027,325 6,599, Price and Revenue History Calendar year Highest Published Share price (p) Lowest Published Share price (p) Net Revenue per Share (p) Share Class A Accumulation Share Class B Accumulation From 10 December to 31 December From 1 January to 31 July Includes the distributions paid 31 March and payable 30 September Share Class B Accumulation was launched 10 December Distribution The distribution for Share Class B Accumulation is p per Share, payable 30 September At the period end, expenses exceeded revenue, generating a shortfall position on Share Class A Accumulation. Therefore there will be no distribution. 27

28 FP Matterley International Growth Portfolio Performance Information Ongoing Charge Figures Date AMC (%) Other expenses (%) Synthetic expense ratio (%) Total ongoing charge figures (%) 31/07/15 Share Class A Share Class B /01/15 Share Class A Share Class B The Ongoing Charge Figure (OCF) is the ratio of the Fund s total discloseable costs (excluding overdraft interest) to the average net assets of the Fund. When a Fund invests a substantial proportion of its assets in other UCITS or Collective Investment Undertakings (CIU), the OCF shall take account of the ongoing charges incurred in the underlying CIUs and disclose as a Synthetic expense ratio. Risk and Reward Profile As at 31 July 2015 Typically lower rewards Typically higher rewards Lower risk Higher risk Share Class A Share Class B This indicator is based on historical data and may not be a reliable indication of the future risk profile of the Fund. The risk category shown is not guaranteed to remain unchanged and may shift over time. The lowest category does not mean risk free. The Fund appears as a 5 on the scale. This is because it invests in the Shares of funds and companies whose values tend to vary more widely. Risk Warning An investment in an Open-Ended Investment Company should be regarded as a medium to long term investment. Investors should be aware that the price of Shares and the income from them may 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 of a fund are subject to fluctuation in exchange rates, which may be favourable or unfavourable. 28