MELCHIOR INVESTMENT FUNDS

Transcription

1 MELCHIOR INVESTMENT FUNDS For the year ended 30 November 2013 THESIS UNIT TRUST MANAGEMENT LIMITED Authorised and regulated by the Financial Conduct Authority

2 SERVICE PROVIDERS' DETAILS AUTHORISED CORPORATE DIRECTOR ('ACD') Thesis Unit Trust Management Limited Head Office: Exchange Building St John's Street Chichester West Sussex PO19 1UP Telephone: (Authorised and regulated by the Financial Conduct Authority) REGISTRARS Northern Trust Global Services Ltd P.O. Box 3733 Royal Wootton Bassett Swindon SN4 4BG (Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) DIRECTORS OF THE ACD D.W. Tyerman - Chief Executive Officer S.R. Mugford - Finance Director A.J Edwards - Non-Executive Chairman G.S. Dalton Chief Operating Officer S. Noone Client Service Director A. Gilbert Non-Executive Director INVESTMENT MANAGERS Dalton Capital (Guernsey) Limited Third Floor National Westminster House Le Truchot, St Peter Port Guernsey GY1 1WD (Regulated by the Guernsey Financial Services Commission) Dalton Capital (Guernsey) Limited has delegated the day to day investment management of the assets of the Melchior Japan Advantage Fund to Dalton Capital (Japan) Inc., which is licensed and registered by the Financial Services Agency (of the Japanese Government). For the remaining funds Dalton Capital (Guernsey) Limited has delegated the day to day investment management to Dalton Strategic Partnership LLP, which is authorised and regulated by the Financial Conduct Authority. The principal activity of Dalton Strategic Partnership LLP is the provision of investment management services. DEPOSITARY National Westminster Bank plc Trustee & Depositary Services Younger Building 1st Floor 3 Redheughs Avenue Edinburgh EH12 9RH (Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) INDEPENDENT AUDITORS KPMG Audit plc 15 Canada Square London E14 5GL Melchior Investment Funds

3 CONTENTS Statement of ACD's Responsibilities... 3 Statement of Depositary Responsibilities and Report of the Depositary to the Shareholders of Melchior Investment Funds... 3 Certification of Accounts by Directors of the ACD... 4 Authorised Status... 4 Independent Auditors' Report to the Shareholders of Melchior Investment Funds... 5 AGGREGATED FINANCIAL STATEMENTS Aggregated Statement of Total Return... 7 Aggregated Statement of Change in Net Assets Attributable to Shareholders... 7 Aggregated Balance Sheet... 8 Notes to the Financial Statements... 9 MELCHIOR ASIAN OPPORTUNITIES FUND Investment Manager's Report Comparative Tables Portfolio Statement FINANCIAL STATEMENTS Statement of Total Return Statement of Change in Net Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Tables MELCHIOR GLOBAL EQUITY FUND Investment Manager's Report Comparative Tables Portfolio Statement FINANCIAL STATEMENTS Statement of Total Return Statement of Change in Net Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Tables MELCHIOR JAPAN ADVANTAGE FUND Investment Manager's Report Comparative Tables Portfolio Statement FINANCIAL STATEMENTS Statement of Total Return Statement of Change in Net Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Tables Melchior Investment Funds 1

4 CONTENTS (continued) MELCHIOR NORTH AMERICAN OPPORTUNITIES FUND Investment Manager's Report Comparative Tables Portfolio Statement FINANCIAL STATEMENTS Statement of Total Return Statement of Change in Net Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements General Information Melchior Investment Funds

5 STATEMENT OF ACD'S RESPONSIBILITIES The Open-Ended Investment Companies Regulations 2001 (the "OEIC Regulations") and the Collective Investment Schemes Sourcebook ("COLL") require the ACD to prepare financial statements for each financial year. These financial statements must be prepared in accordance with generally accepted accounting principles to give a true and fair view of the financial position of the Company at the year end and of the net revenue or expense and net capital gains or losses on the scheme property of the Company for the year. In preparing the Financial Statements the ACD is required to: prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in operation; select suitable accounting policies and then apply them consistently; comply with the disclosure requirements of the Statement of Recommended Practice relating to Authorised Funds issued by the Investment Management Association ( IMA ) in October 2010; follow generally accepted accounting principles and applicable United Kingdom accounting standards; keep proper accounting records which enable them to demonstrate that the Financial Statements as prepared comply with the above requirements; and make judgments and estimates that are reasonable and prudent. The ACD is responsible for the management of the Company in accordance with its Instrument of Incorporation, the Collective Investment Schemes Sourcebook ("COLL"), as amended, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228), as amended ("the OEIC Regulations") and the Prospectus. The ACD is also responsible for maintaining an appropriate system of internal controls and for taking reasonable steps for the prevention and detection of fraud and other irregularities. STATEMENT OF DEPOSITARY'S RESPONSIBILITIES AND REPORT OF THE DEPOSITARY TO THE SHAREHOLDERS OF MELCHIOR INVESTMENT FUNDS ( THE COMPANY ) The depositary is responsible for the safekeeping of all of the property of the company (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the depositary to take reasonable care to ensure that the company is managed in accordance with the Financial Conduct Authority's Collective Investment Schemes Sourcebook (COLL), as amended, the Open-ended Investment Companies Regulations 2001 (SI 2001/1228), as amended ('the OEIC Regulations'), the company's instrument of incorporation and prospectus, in relation to the pricing of, and dealings in, shares in the company; the application of revenue of the company; and the investment and borrowing powers applicable to the company. Having carried out such procedures as we considered necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the company acting through the authorised corporate director: has carried out the issue, sale, redemption and cancellation, and calculation of the price of the company's shares and the application of the company's revenue in accordance with COLL and, where applicable, the OEIC Regulations, the instrument of incorporation and prospectus of the company, and has observed the investment and borrowing powers and restrictions applicable to the company. National Westminster Bank plc Melchior Investment Funds 3

6 CERTIFICATION OF ACCOUNTS BY DIRECTORS OF THE ACD In accordance with the requirements of the Open-Ended Investment Companies Regulations 2001 (the "OEIC Regulations") and the COLL Sourcebook, we hereby certify this report on behalf of the ACD, Thesis Unit Trust Management Limited. D.W. TYERMAN Director S. NOONE Director 24 February 2014 AUTHORISED STATUS Melchior Investment Funds ( the Company ) is an investment company with variable capital under regulation 12 (Authorisation) of the OEIC Regulation [Open-ended Investment Companies Regulations 2001 (SI 2001/1228)] incorporated in England and Wales under registration number IC256 and authorised by the Financial Conduct Authority with effect from 22 September Shareholders are not liable for the debts of the Company. As the Company is an umbrella company, each Fund has a specific segregated portfolio of assets to which any liabilities attributable or allocated to a particular Fund shall be met first out of the property attributable, or allocated to, that particular Fund. Accordingly the assets of each Fund belong exclusively to that Fund and shall not be used to discharge directly, or indirectly, the liabilities of, or claims against, any other person or body, including the Company, or any other Fund, and shall not be available for any such purpose. 4 Melchior Investment Funds

7 INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF MELCHIOR INVESTMENT FUNDS ('THE COMPANY') We have audited the financial statements of the Company for the year ended 30 November 2013 which comprise the Statement of Total Return, the Statement of Change in Net Assets attributable to Shareholders, and the Balance Sheet together with the related notes, including the Distribution Table. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company's shareholders, as a body, in accordance with Rule of the Collective Investment Schemes sourcebook ('the COLL Rules') issued by the Financial Conduct Authority under the Open-Ended Investment Companies Regulations Our audit work has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Authorised Corporate Director ('the ACD') [Thesis Unit Trust Management Limited] and auditor As explained more fully in the Statement of ACD's Responsibilities set out on page 3 the ACD is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at Opinion on financial statements In our opinion the financial statements: give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the financial position of the Company as at 30 November 2013 and of the net revenue and the net capital gains on the property of the Company for the year then ended; and have been properly prepared in accordance with the Instrument of Incorporation, the Statement of Recommended Practice relating to Authorised Funds and the COLL Rules. Opinion on other matters prescribed by the COLL Rules In our opinion the information given in the Authorised Corporate Director's Report is consistent with the financial statements. We have received all the information and explanations which we consider necessary for the purposes of our audit. Melchior Investment Funds 5

8 INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF MELCHIOR INVESTMENT FUNDS ('THE COMPANY') (continued) Matters on which we are required to report by exception We have nothing to report in respect of the following matters where under the COLL Rules we are required to report to you if, in our opinion: proper accounting records for the Company have not been kept; or the financial statements are not in agreement with the accounting records. Ravi Lamba for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants 15 Canada Square Canary Wharf London E14 5GL 24 February Melchior Investment Funds

9 AGGREGATED FINANCIAL STATEMENTS AGGREGATED STATEMENT OF TOTAL RETURN FOR THE YEAR ENDED 30 NOVEMBER 2013 Notes Income Net capital gains 2 62,523,798 26,478,366 Revenue 3 3,231,439 5,461,744 Expenses 4 (2,962,918) (3,875,840) Finance costs: Interest 6 (1,251) (639,355) Net revenue before taxation 267, ,549 Taxation 5 (224,047) (338,515) Net revenue after taxation 43, ,034 Total return before distributions 62,567,021 27,086,400 Finance costs: Distributions 6 (495,718) (1,062,935) Change in net assets attributable to shareholders from investment activities 62,071,303 26,023,465 AGGREGATED STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS FOR THE YEAR ENDED 30 NOVEMBER 2013 Opening net assets attributable to shareholders 184,955, ,582,468 Currency translation (21,581,144) (11,035,859) 163,374, ,546,609 Amounts receivable on issue of shares of share 90,204, ,183,129 Less: Amounts payable on cancellation of shares (140,584,296) (153,682,534) (50,379,509) (41,499,405) Dilution levy charged 2,399 4,357 Stamp duty reserve tax (1) (846) Change in net assets attributable to shareholders (see Statement of Total Return above) 62,071,303 26,023,465 Retained distribution on Accumulation shares 468, ,658 Closing net assets attributable to shareholders 175,537, ,955,838* Notes 1 to 13 form part of these financial statements. * The comparative closing net assets attributable to shareholders includes the value of UK Opportunities Fund and Japan Opportunities Fund which terminated on 23 October 2013 and 31 July 2013 respectively. Melchior Investment Funds 7

10 AGGREGATED FINANCIAL STATEMENTS (continued) AGGREGATED BALANCE SHEET AS AT 30 NOVEMBER 2013 Notes ASSETS Investment assets 168,485, ,994,218 Other assets Debtors 7 3,860,561 5,306,957 Cash and bank balances 7,658,833 7,071,647 Total other assets 11,519,394 12,378,604 Total assets 180,005, ,372,822 LIABILITIES Derivative liabilities - (7,445) Other liabilities Creditors 8 (4,218,443) (5,954,198) Bank overdrafts (249,659) (1,455,341) Total other liabilities (4,468,102) (7,409,539) Total liabilities (4,468,102) (7,416,984) Net assets attributable to shareholders 175,537, ,955,838* Notes 1 to 13 form part of these financial statements. * The comparative closing net assets attributable to shareholders includes the value of UK Opportunities Fund and Japan Opportunities Fund which terminated on 23 October 2013 and 31 July 2013 respectively. 8 Melchior Investment Funds

11 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS AS AT 30 NOVEMBER ACCOUNTING POLICIES The principal accounting policies, which have been applied in both the current and prior year, are set out below: (a) Basis of accounting The 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 Management Association in October (b) Basis of aggregation The aggregated financial statements represent the sum of the individual sub-funds within the umbrella company which are recorded in their functional and presentational currency. For aggregation purposes the Financial Statements and notes to the accounts have been translated into sterling at the following rates. Melchior Asian Opportunities Fund * US dollars for each Sterling pound. Melchior Japan Advantage Fund Japanese yen for each Sterling pound. Melchior North American Opportunities Fund * US dollars for each Sterling pound. * These have been translated at different exchange rates due to the different valuation points for the respective funds. Please see Note 1(i) for further details. (c) Recognition of revenue Dividends on quoted equities and preference shares are recognised when the securities are quoted ex-dividend. Income from unquoted equity investments is recognised when the dividend is declared. Underwriting commission is wholly recognised as income when the issue takes place, except where the Company is required to take up all or some of the shares underwritten, in which case an appropriate proportion of the commission received is deducted from the cost of those shares. Interest on bank and other cash deposits is recognised on an accruals basis. All revenue is recognised as a gross amount that includes any withholding taxes but excludes any other taxes such as attributable tax credits. (d) Treatment of stock and special dividends The ordinary element of stock received in lieu of cash dividends is credited to capital in the first instance followed by a transfer to income of the cash equivalent being offered and this forms part of the distributable revenue. Special dividends are reviewed on a case by case basis in determining whether the dividend is to be treated as revenue or capital. Amounts recognised as income will form part of the distributable revenue. The tax accounting treatment follows the treatment of the principal amount. Melchior Investment Funds 9

12 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 1. ACCOUNTING POLICIES (continued) (e) Treatment of expenses All expenses, except for those relating to the purchase and sale of investments, stamp duty reserve tax and legal expenses of a capital nature are charged against revenue. Performance fees are initially charged against revenue, but subsequently transferred to capital for distribution purposes. All C and D Shares are subject to a performance fee. This is 15% of the outperformance of the share class over the applicable index plus a 1.5% hurdle. A performance fee may still be paid if the share class falls in value but still outperforms the benchmark index. The performance fee is calculated and paid after consideration of all other payments to be made by the Funds. As the performance fee is calculated in reference to a benchmark index there is no maximum performance fee that can be stated. Further details on the calculation method are available within the Fund s Prospectus and on request to the ACD. In relation to the Global Equity Fund, at the start of the prior period the Investment Manager waived their IM fee. The AMC was therefore reduced to the extent that it covered the administration fee and ACD fee. Both the Administrator and the ACD also agreed to waive 50 per cent of their annual minimums which equated to per day. ( 25,000 plus 10,000 per annum divide by 2 divide by 365). (f) Allocation of income and expenses to multiple share classes and sub-funds Any revenue or expense not directly attributable to a particular share class or sub-fund will normally be allocated pro-rata to the net assets of the relevant share classes and sub-funds. (g) Taxation Corporation tax is provided at 20% on taxable revenue, after deduction of allowable expenses. Where overseas tax has been deducted from overseas revenue that tax can, in some instances, be set off against the corporation tax payable, by way of double tax relief. Deferred tax is provided using the liability method on all timing differences arising on the treatment of certain items for taxation and accounting purposes, 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. Stamp duty reserve tax suffered on surrender of shares is deducted from capital. (h) Distribution policy Surplus revenue after taxation, as disclosed in the financial statements, after adjustment for items of a capital nature, is distributable to shareholders. Any income deficit is deducted from capital. Interim distributions may be made at the ACD s discretion. Final distributions are made in accordance with the Regulations. 10 Melchior Investment Funds

13 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 1. ACCOUNTING POLICIES (continued) (i) Basis of valuation of investments Listed investments for Melchior Asian Opportunities Fund and Melchior Japan Advantage Fund are valued at closing bid prices at 11am on the last business day of the accounting year. Listed investments for Melchior Global Equity Fund and Melchior North American Opportunities Fund are valued at closing bid prices at the Close of Business on the last business day of the accounting year. 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. Purchases and sales of investments are recognised when a legally binding and unconditional right to obtain, or an obligation to deliver, an asset or liability arises. (j) Exchange rates Transactions in foreign currencies are recorded in sterling at the rate ruling at the date of the transactions. Revenue received in currencies different to the base currency of each sub-fund have been translated into the base currency of each sub-fund at the rates of exchange ruling on or near the date of receipt by the depositary. Assets and liabilities expressed in foreign currencies at the end of the accounting period are translated into sterling at the closing exchange rates ruling on that date. (k) Dilution levy The ACD currently charges a dilution levy at 0.5% on the purchase and/or sale value of shares on all large deals (which for these purposes are defined as 5% of the size of the relevant sub-fund). The dilution levy is calculated by reference to the costs of dealing in the underlying investments of the sub-fund, including any dealing spreads, commission and transfer taxes. (l) Set up costs Initial set up costs are written off as they are incurred. (m) Hedging mechanism for the North American Opportunities Fund and Japan Advantage Fund hedged share classes The Investment Manager plans to undertake currency class hedging transactions with respect to the Sterling hedged class and Euro hedged class of shares in the Melchior North American Opportunities Fund and the Sterling hedged class of shares in the Melchior Japan Advantage Fund. This will be done with the aim of reducing the risk attached to these classes of share, by limiting the effect of movements in exchange rates on the value of the Sterling and Euro hedged share classes. The Investment Manager will aim to hedge USD assets back to the GBP currency of the Sterling hedged share class, and USD assets back to the Euro currency of the Euro hedged share class, in order to attempt to remove currency risk for investors. The total return, rather than just the capital, will be hedged, and the Investment Manager will generally aim to hedge at least 95% of the total value of the Sterling hedged class of share or Euro hedged class of share at any time. There can be no guarantee that even when the Investment Manager undertakes hedging on 100% of the total value of the Sterling or Euro hedged share classes that this will be a perfect hedge, and remove currency risk for holders of the Sterling or Euro hedged share classes. The Investment Manager will review the hedging position on each day where there is a valuation point, and will adjust the hedge appropriately if there is a material change to the dealing volume. Melchior Investment Funds 11

14 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 2. NET CAPITAL GAINS Net capital gains during the year comprise: Non-derivative securities 60,751,878 26,126,311 Derivative securities - (6,033) Currency gains 138, ,170 Forward currency contracts 1,728,519 9,968 Transaction charges (95,048) (99,050) Net gains 62,523,798 26,478, REVENUE Bank interest 40, ,118 Interest on debt securities - 1,507 Overseas dividends 3,138,557 4,662,714 Offshore CIS revenue 40, ,098 UK dividends 11,279 57,307 Total revenue 3,231,439 5,461, Melchior Investment Funds

15 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 4. EXPENSES Payable to the ACD, associates of the ACD and agents of either of them: ACD's periodic charge 2,462,466 3,323,402 Payable to the Depositary, associates of the Depositary and agents of either of them: Depositary fees 80, ,728 Safe custody and other bank charges 41,070 48, , ,565 Other expenses: Administration fees 39,891 32,246 Fees paid to auditors - audit 48,642 95,576 - tax services 14,212 6,989 FCA fee German taxation fees expense 6,732 8,542 Insurance premiums 22,250 12,738 Legal and professional fees 169,784 (40,669) Performance fees 45, Printing costs 10,516 5,604 Publication costs 2, Registration fees 17, , , ,873 Total expenses 2,962,918 3,875,840 Melchior Investment Funds 13

16 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 5. TAXATION a) Analysis of charge for the year Corporation tax at 20% - - Overseas tax 224, ,515 Current tax charge (note 5b) 224, ,515 Deferred tax - origination and reversal of timing differences (note 5c) - - Total taxation 224, ,515 b) Factors affecting current tax charge for the year The tax assessed for the year differs from the standard rate of corporation tax in the UK for an authorised fund (20%) ( : 20%) for the reasons explained below. Net revenue before taxation 267, ,549 Corporation tax at 20% 53, ,310 Effects of: DTR expensed (120) (177) Expenses not deductable for tax purposes 1,610 2,547 Non trade loan relationship 250 1,667 Non-taxable overseas dividends (645,667) (906,517) Overseas tax 224, ,515 Tax chargeable in different periods 12,816 (18,712) Tax effect of offshore funds 189,404 26,410 UK dividends (2,256) (33,281) Unutilised excess management expenses 390, ,753 Current tax charge (note 5a) 224, ,515 c) Deferred tax At the year end there is a potential deferred tax asset of 7,902,393 ( : 7,494,406) in relation to surplus management expenses. It is unlikely that the Fund will generate sufficient taxable profits in the future to utilise this amount and, therefore, no deferred tax asset has been recognised in the current or prior period. 14 Melchior Investment Funds

17 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 6. FINANCE COSTS Distributions The distributions take account of revenue received on the issue of shares and revenue deducted on cancellations of shares, and comprise: Final 468, , , ,658 Add: Revenue deducted on cancellation of shares 101, ,808 Deduct: Revenue received on issues of shares (74,035) (105,531) Net distributions for the year 495,718 1,062,935 Interest 1, ,355 Total finance costs 496,969 1,702,290 Distributions represented by: Net revenue after taxation 43, ,034 Allocations to capital: Performance fees 5,948 - Revenue deficit 446, ,268 Tax relief on capital management fees , ,359 Balance brought forward 4 12 Balance carried forward 95 (24,470)* Net distributions for the year 495,718 1,062,935 * The comparative Balanced carried forward figure includes the value of UK Opportunities Fund and Japan Opportunities Fund which terminated on 23 October 2013 and 31 July 2013 respectively. Melchior Investment Funds 15

18 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 7. DEBTORS Amounts receivable for issue of shares 117,676 60,589 Currency deals awaiting settlement 784, ,142 Sales awaiting settlement 2,481,954 3,870,857 Accrued revenue: UK dividends Overseas dividends 471, , , ,883 Prepaid expenses 1,037 1,490 Taxation recoverable: Overseas withholding tax 2,759 2,279 PID tax ,759 2,996 Total Debtors 3,860,561 5,306, Melchior Investment Funds

19 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 8. CREDITORS Amounts payable on cancellation of shares 1,012,256 1,356,080 Currency deals awaiting settlement 776, ,480 Purchases awaiting settlement 1,958,969 3,695,116 Accrued expenses: Amounts payable to the ACD, associates of the ACD and agents of either of them: ACD's periodic charge 204, ,069 Amounts payable to the Depositary, associates of the Depositary and agents of either of them: Depositary's fees 5,950 7,405 Transaction charges 14,188 21,931 Safe custody and other bank charges 7,251 15,357 27,389 44,693 Other expenses: Administration fees 36,182 6,218 Bank interest FCA fee 81 - Fees paid to auditors - audit 46,530 87,061 German taxation fees 30,602 14,467 Insurance premiums 12,760 - Legal and professional fees 104,645 88,480 Performance fees 5,936 - Printing costs 2,288 5,240 Publication costs Registration fees - 22, , ,760 Total creditors 4,218,443 5,954,198 Melchior Investment Funds 17

20 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 9. RELATED PARTY TRANSACTIONS Management Fees payable to Thesis Unit Trust Management Limited (the ACD) are disclosed in note 4 and amounts due at the year end are disclosed in notes 7 and 8. The aggregate monies received by the ACD through the issue of shares and paid on cancellation of shares are disclosed in the Statement of Change in Net Assets Attributable to Shareholders on page 7. The amounts outstanding at the year end in respect of these monies are shown in notes 7 and SHAREHOLDERS FUNDS The sub-funds, the share classes and the ACD's periodic charges are as follows: A' B' C' D' I % % % % % Melchior Asian Opportunities Fund Melchior Japan Advantage Fund* Melchior Global Equity n/a 1.50 n/a n/a 0.25 Melchior North American Opportunities Fund* All C and D shares are subject to the performance fee mechanism as described in the Prospectus. The net asset value per share class and the number of shares in each share class are given in the Comparative Tables of the sub-funds. * This includes GBP Hedged share classes. 11. CONTNGENT LIABILITIES AND COMMITMENTS Disclosure is made in note 11 of the Notes to the Financial Statements of the sub-funds. 12. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS In pursuing the investment objectives 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 currency contracts, may be utilised for hedging purposes. The main risks from the Company s holding of financial instruments, together with the ACD s policy for managing these risks, are set out below: i Credit risk The Company will be exposed to counterparty risk on parties with whom it trades and will bear the risk of settlement default. The Company minimises concentrations of credit risk by undertaking transactions with a large number of counterparties on recognised and reputable exchanges. The Company only buys and sells investments through brokers which have been approved by the investment adviser as an acceptable counterparty and from recognised product providers. 18 Melchior Investment Funds

21 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 12. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued) ii Interest rate risk Interest rate risk is the risk that the value of the Company s investments will fluctuate as a result of interest rate changes. The value of fixed interest securities may be affected by changes in the interest rate environment, either globally or locally. Changes in the rate of return in one asset class may influence the valuation basis of other classes. The amount of income receivable from floating rate securities and bank balances or payable on bank overdrafts will be affected by fluctuations in interest rates. Numerical disclosure of the interest rate risk profile is made in note 12 of the Notes to the Financial Statements of the sub-funds. iii Foreign currency risk The revenue and capital value of the sub-funds' investments can be significantly affected by foreign currency translation movements as the majority of each sub-funds' assets and revenue are denominated in currencies other than each sub-funds' functional currency. The managers have identified three principal areas where foreign currency risk could impact the sub-funds. These are, movement in exchange rates affecting the value of investments, short-term timing differences such as exposure to exchange rate movements during the period between when an investment purchase or sale is entered into and the date when settlement of the investment occurs, and finally movements in exchange rates affecting revenue received by the sub-fund. Revenue received in currencies different to the base currency of each sub-fund have been translated into the base currency of each sub-fund at the rates of exchange ruling on or near the date of receipt by the depositary. Numerical disclosure of the foreign currency risk profile is made in note 12 of the Notes to the Financial Statements of the sub-funds. iv. Liquidity risk The main liability of the Company is the cancellation of any shares that investors want to sell. Investments may have to be sold to fund such cancellations should insufficient cash be held at the bank to meet this obligation. To reduce liquidity risk the Investment Manager will ensure that a substantial portion of the Company s assets consist of readily realisable securities. v. Market price risk Market price risk is the risk that the value of the Company s financial instruments will fluctuate as a result of changes in market prices caused by factors other than interest rates or foreign currency movement. Market price risk arises primarily from uncertainty about the future prices of financial instruments that the Company holds. Market price risk represents the potential loss the Company may suffer through holding market positions in the face of price movements. The Company s investment portfolios are exposed to price fluctuations, which are monitored by the ACD in pursuance of the investment objectives and policies. For an equity portfolio the risk is generally regarded as consisting of two elements stock specific risk and market risk. Adherence to investment guidelines and avoidance of excessive exposure to one particular issuer can limit stock specific risk. Subject to compliance with the investment objective, spreading exposure across a broad range of global stocks can mitigate market risk. Melchior Investment Funds 19

22 NOTES TO THE AGGREGATED FINANCIAL STATEMENTS (continued) 12. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued) vi. Counterparty risk Transactions in investments entered into by the Company give rise to exposure to the risk that the counterparties may not be able to fulfill their responsibility by completing their side of the transaction. The Investment Manager minimises this risk by conducting trades through only the most reputable counterparties. 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. viii. Sensitivity analysis Disclosure is made in note 12 of the Notes to the Financial Statements of the sub-funds. 13. PORTFOLIO TRANSACTION COSTS Disclosure is made in note 13 of the Notes to the Financial Statements of the sub-funds. 20 Melchior Investment Funds

23 MELCHIOR ASIAN OPPORTUNITIES FUND INVESTMENT MANAGER'S REPORT FOR THE YEAR ENDED 30 NOVEMBER 2013 Investment Objective and Policy The investment objective of the Melchior Asian Opportunities Fund is to achieve longer term capital growth, without undue risk, through diversified investment in equities that are issued by companies that have their registered office or carry out a predominant portion of their economic activity in Asia and which are expected to benefit from the economic growth of China and its neighboring countries. The Fund may invest in other collective investment schemes and cash. There may be times in light of adverse conditions when the manager will wish to hold positions in cash or near cash instruments. Investment Review The Melchior Asian Opportunities Fund s USD B share class rose by % between the end of November 2012 and the end of November This compares to a net return (with dividends reinvested) of 6.33% from the benchmark MSCI AC Far East Ex Japan Index ( MSEUCFFX ). Statistical data has been sourced from Bloomberg. The past twelve months saw investment markets shrug off the previous eighteen months of concern over the fiscal situation in the United States and in Europe, and by the sluggish economic growth of caused by the post deleveraging of private and public debt. Developed equity markets posted a sprightly twelve month total return of 25% in Sterling terms. However, while inflation has remained quiescent, government bonds have declined. The total return in Sterling of the Citigroup World Government Bond Index was just shy of -5% over the twelve months under review. The key event of the period from a market perspective has been the anticipated timing and scale of a reduction ( tapering ) of the US Federal Reserve s bond purchasing programme. After a breath-taking first quarter for all asset classes (equities +15%; bonds +4%; commodities +7%), on May 1st the yield on the US 10 Year Treasury hit a low of 1.6%. Almost immediately investor speculation, fuelled by Chairman Bernanke s speech and the June FOMC press conference, focussed on the earlier prospect of interest rate rises and the consequences of a tighter policy. The resulting early summer jolt to all asset classes had a lingering effect on bond markets and emerging market equities, which both declined further for the rest of the period. In contrast, developed market equities pushed ever higher. Just after the period under review ended tapering duly arrived, but the prospect was so well digested that the impact was mildly positive. The stand out performer amongst equity markets was Japan. The strap line for the year was Buy Japan, Hedge the Yen. The Nikkei Index was up over 65% in Yen, but unhedged this was worth 30% in sterling terms. The period under review fitted neatly with the three arrows of new Prime Minister Abe s policies. Significant gains in Japanese equities had already been made when the new Bank of Japan Governor Kuroda took office in March and implemented a bigger than expected change in monetary policy, with the specific aim of getting inflation to 2% after years of deflation. Abe also announced economic stimulus packages and a plan to revitalize Japanese industrial competitiveness. The only hurdle on the horizon is the April 2014 increase in the consumption tax. European equity markets also signalled that investors anticipated recovery, ahead of clear evidence starting to emerge towards the period end. The UK has been surprising with positive economic growth in the second half of the year and equity returns picked up mid-year, shrugging off the drag from the travails of the major miners listed in the UK. Elsewhere on the continent some of the peripheral markets at the heart of the 2011/12 crisis Melchior Investment Funds 21

24 MELCHIOR ASIAN OPPORTUNITIES FUND INVESTMENT MANAGER'S REPORT (continued) Investment Review (continued) (Spain, Ireland, and Greece) have joined with Germany and France to post strong equity gains. Economic growth remains muted The Economist shows GDP growth of -0.4% for 2013 for the Euro area but has stabilized. Germany remains robust, Greece looks set to survive and the concerns over Cyprus have receded but political uncertainty overhangs Italy and there s little progress in addressing France s structural issues. The United States has been the solid engine of global equity returns, powered initially by housing market improvement and the decline in the federal deficit, and latterly by rock solid corporate profitability, lower energy costs as the shale gas benefits kick in. Political scares have produced bumps along the way, and the next year sees further deficit and debt limit hurdles to be negotiated. The strong equity gains have reflected multiple expansion rather than profit growth, and the challenge facing investors is whether corporate earnings will catch up. Finally, Emerging Markets have turned in a really poor twelve months, down 1% in Sterling but up 9% in local currency terms. China has been suffering as investors have adjusted to a slower rate of nominal GDP growth, currently about 7.7% according to The Economist. Credit growth, whilst also moderating, is still more than double the rate of GDP growth and the PBoC have been using various measures to tighten liquidity in the banking sector. Other Emerging Markets have been sensitive to slower Chinese growth, to tapering concerns and rises in US rates, particularly those countries with current account deficits and higher levels of inflation. However value opportunities are increasingly available in EM equities. Notable individual stock highlights were Tencent Holdings, Galaxy Entertainment Group, and Naver Corp, whilst poorly performing holdings included TPK Holding, Smartone Telecommunications and Hutchinson Telecomm Hong Kong. The largest individual purchases in the Fund were MTR Corp., Hong Kong Exchanges & Clear and Dorsett Hospitality International. The largest individual sales in the Fund were Hyundai Motor Co., Langham Hospitality Investment and Mediatek Inc. Top 5 Purchases and Sales Security Name (Purchases) Cost US$000 s US Treasury Bills 0.00% 18/07/ ,000 Hyundai Motor 2,763 Langham Hospitality Investments 2,490 Mediatek 2,413 Suprema 2,399 Security Name (Sales) Proceeds US$000 s US Treasury Bills 0.00% 18/07/ ,000 Cosmax 2,417 MTR 2,253 Hong Kong Exchanges & Clearing 2,108 Dorsett Hospitality International 1,918 DALTON CAPITAL (GUERNSEY) LIMITED Investment Manager 10 January Melchior Investment Funds

25 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES Price and Income History USD A Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year US$ US$ US$ (cents) * USD B Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year US$ US$ US$ (cents) * USD C Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year US$ US$ US$ (cents) 2009** USD I Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year US$ US$ US$ (cents) * * To 30 November ** To 30 November The USD D Accumulation share class was renamed USD I Accumulation on 1 January Melchior Investment Funds 23

26 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES (continued) Price and Income History (continued) GBP A Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year p p p * GBP I Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year p p p * GBP C Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year p p p * * To 30 November The GBP B Accumulation share class was renamed GBP I Accumulation on 1 January Melchior Investment Funds

27 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES (continued) Price and Income History (continued) GBP D Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year p p p * EUR A Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year (cents) * EUR B Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year (cents) * EUR C Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year (cents) 2009** * To 30 November ** To 30 November Melchior Investment Funds 25

28 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES (continued) Price and Income History (continued) EUR D Accumulation shares Highest Lowest Distribution Calendar Price Price per share Year (cents) 2009** ** To 30 November Melchior Investment Funds

29 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES (continued) Net Asset Value Net Asset Net Asset Value Shares in Value Date Share Class US$ issue per share USD 'A' 2,548, ,311 $2.72 USD 'B' 16,324,693 5,797,043 $2.82 USD 'D' 2,211, ,917 $2.79 GBP 'A' 30,209,314 11,070, p GBP 'B' 2,360, , p GBP 'C' 29,336 10, p GBP 'D' 243,608 86, p EUR 'A' 32,658 12, EUR 'B' 9,112,704 3,231, USD 'A' 6,417,548 1,901,316 $3.38 USD 'B' 14,938,622 4,260,823 $3.51 USD 'I' 2,562, ,438 $3.47 GBP 'A' 28,154,462 8,326, p GBP 'I' 1,208, , p GBP 'C' 36,291 10, p GBP 'D' 200,043 56, p EUR 'A' 69,944 20, EUR 'B' 11,347,867 3,231, USD 'A' 4,161,815 1,086,099 $3.83 USD 'B' 18,493,778 4,623,008 $4.00 USD 'I' 5,125,544 1,276,113 $4.02 GBP 'A' 26,086,046 6,795, p GBP 'I' 7,086,556 1,755, p GBP 'C' 41,878 10, p GBP 'D' 156,261 39, p EUR 'A' 45,971 12, EUR 'B' 33,773,083 8,434, Melchior Investment Funds 27

30 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES (continued) Price Per Share (Ex-distribution) Yield Date Share Class Price % USD 'A' $ USD 'B' $ USD 'I' $ GBP 'A' p 1.6 GBP 'I' p 1.6 GBP 'C' p 1.6 GBP 'D' p 1.6 EUR 'A' EUR 'B' Melchior Investment Funds

31 MELCHIOR ASIAN OPPORTUNITIES FUND COMPARATIVE TABLES (continued) Ongoing Charges Figure (OCF) % A B C D I Ongoing charges figure % A B C D I Ongoing charges figure The Ongoing Charges Figure is the ratio of the Fund's total discloseable costs (excluding overdraft interest) to the average net assets of the Fund. Synthetic Risk and Reward Calculator Lower Risk Typically lower rewards Higher Risk Typically higher rewards The SRRI table demonstrates where a Fund ranks in terms of risk and reward. The higher the risk the greater the potential reward but the greater the risk of losing money. It is based on past data, may change over time and may not be a reliable indication of the risk profile of the Fund. The shaded area on the table above shows the Fund's ranking on the risk and reward indicator. Melchior Investment Funds 29

32 MELCHIOR ASIAN OPPORTUNITIES FUND PORTFOLIO STATEMENT AS AT 30 NOVEMBER 2013 Total Net Assets Value Holding Portfolio of Investments US$ % % BERMUDA 2,972,000 Giordano International 2,576, ,000 Luk Food Holdings 2,951, ,670,400 Man Wah Holdings 2,749, ,563,000 Smartone Telecoms 1,743, ,100 VTech Holdings 1,908, TOTAL BERMUDA 11,929, CAYMAN ISLANDS 630,000 AAC Acoustic Technologies 2,852, ,458,000 Dorsett Hospitality International 304, ,242,000 Hutchison Telecommunication Hong Kong 1,619, ,352,000 Langham Hospitality Investments 2,155, ,192,000 SA International Holdings 3,713, ,000 Sands China 2,887, ,400,000 Sunny Optical Technology 2,262, ,600 Tencent Holdings 4,486, TOTAL CAYMAN ISLANDS 20,282, CHINA HONG KONG 513,000 Aia 2,600, ,000 BOC 2,415, ,000 China Overseas Land & Investments 2,791, ,000 Galaxy Entertainment 3,545, ,250,000 Lenovo 2,664, ,000 Link Real Estate Investment Trust 2,535, ,800 Prada 2,246, ,900 Samsonite International 2,779, ,342,500 Techtronic Industries 3,593, TOTAL HONG KONG 25,172, SOUTH KOREA 11,726 Hyundai Motor 2,792, ,016 NHN 3,933, ,305 Samsung Electronics 3,251, ,400 SK Hynix 2,522, ,698 Suprema 2,177, TOTAL SOUTH KOREA 14,677, Melchior Investment Funds

33 MELCHIOR ASIAN OPPORTUNITIES FUND PORTFOLIO STATEMENT (continued) Total Net Assets Value Holding Portfolio of Investments US$ % % TAIWAN 1,159,010 Chicony Electronics 2,894, ,800 Hon Hai Precision Industries 2,629, ,000 Largan Precision 2,566, ,000 Mediatek 2,869, ,000 Merry Electronics 2,958, ,000 Scinopharm Taiwan 2,449, ,000 Taiwan Semiconductor Manufacturing 2,203, TOTAL TAIWAN 18,571, Portfolio of investments 90,633, Net other assets 4,337, Net assets 94,970, Percentage of Total Market Investments Value Portfolio of Investments US$ % % Equities 90,633, ,633, Melchior Investment Funds 31