Junior Gold Short Report For the period from 1st September 2015 to 31st August 2016
Fund Details Junior Gold Registered Office Marlborough House 59 Chorley New Road Bolton BL1 4QP Authorised Corporate Director and Registrar Marlborough Fund Managers Ltd Marlborough House 59 Chorley New Road Bolton BL1 4QP Investor Support: 0808 145 2500 (FREEPHONE) Authorised and regulated by the Financial Conduct Authority Depositary HSBC Bank plc 8 Canada Square London E14 5HQ Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Investment Adviser Sector Investment Managers Ltd 67 Grosvenor Street London W1K 3JN Authorised and regulated by the Financial Conduct Authority Auditor Barlow Andrews LLP Carlyle House 78 Chorley New Road Bolton BL1 4BY
GENERAL INFORMATION Investment Objective The investment objective of this Fund is to provide long-term capital growth from a globally diversified portfolio investing primarily in small to medium capitalisation companies specialising in identifying, developing and extracting gold. It may also invest in mining companies extracting other precious metals. There may be occasions, in light of adverse market conditions, where the Investment Manager chooses to hold high levels of cash, bonds and government securities. The Investment Manager may use derivatives for efficient portfolio management purposes only. Risk Profile The Fund invests primarily in small cap stocks, including AIM quoted companies. Smaller companies and AIM quoted companies are subject to a higher degree of performance and market risk than larger companies. Investments in the Fund are subject to normal stock market fluctuations and other risks inherent in all investments where market prices can change. It focuses investment in one particular industry which may give rise to higher risk than a fund which has a more broad spread of investments. The Fund aims to achieve capital growth over time by a spread of investments in the UK and overseas. The main risks arising from the financial instruments held are foreign currency and market price. These risks are monitored by the ACD in pursuance of the investment objective and policy set out in the prospectus. There is considered to be little exposure to credit risk and liquidity risk is monitored closely by the ACD. Risk Warning The past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested. The Fund is subject to an initial charge and consequently charges are not made uniformly throughout the period of the investment. Changes in exchange rates between currencies may cause the value of the investment to diminish or increase. The Fund invests in smaller companies which carry a higher degree of risk than larger companies. The shares of smaller companies may be less liquid and their performance more volatile over shorter time periods. The Fund has a concentrated portfolio which means greater exposure to a smaller number of securities than a more diversified portfolio. The Fund focuses on a specific sector which can lead to greater volatility. Reports and Accounts The purpose of this Short Report is to present you with a summary of how the Fund has performed during the accounting period in accordance with the FCA rules. If you wish to request further information, the more detailed long form report is available. For a copy please write to Marlborough Fund Managers Ltd, Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP or telephone Investor Support on 0808 145 2500. Change in Prospectus No changes have been made since the last report. Up to date key investor information documents, prospectus and reports and accounts for any fund can be requested by the investor at any time. 1
GENERAL INFORMATION (CONTINUED) Remuneration Policy In line with the requirement of UCITS V, Marlborough Fund Managers Ltd is subject to a remuneration policy which is consistent with the principles outlined in the European Securities and Markets Authority guidelines on sound remuneration policies under UCITS V. The remuneration policies are designed to ensure that any relevant conflicts of interest can be managed appropriately at all times and that the remuneration of its senior staff is in line with the risk policies and objectives of the UCITS funds it manages. Implementation of the policy remains ongoing and will apply in full for the 2016/17 performance year ended 31 August 2017. The quantitative remuneration disclosures have not been included in the annual report as they are considered not to be relevant, reliable or comparable as described under COLL 4.5.7A. Quantitative remuneration disclosures will be included in next year s Annual Report and Audited Financial Statements as the information will be readily available for the year. 2
AUTHORISED INVESTMENT ADVISER S REPORT For the year ended 31 August 2016 Percentage change to 31 August 2016 Six months 1 year 3 years 5 years Since launch* Junior Gold 85.44% 154.06% 15.67% -66.78% -46.56% * launched 01.09.2009 External Source of Economic Data: Morningstar (Class P - mid to mid, net income reinvested) The fund s performance in the twelve-month period to 31 August 2016 was very strong, gaining 154% in value. Its benchmark, the FTSE Gold Mines Index, rose by 89.5% indicating the return of confidence among investors towards gold mining companies. The price of Gold rose by 15.49% from $1,131.60 to $1,306.90 per ounce during the period encouraging investors to buy into mining shares. The fund has consistently been the best performing gold fund in the Date ranking as tracked by the Morningstar fund database: http://www.morningstar.co.uk/uk/fundquickrank/default.aspx We attribute the sudden change in sentiment towards gold to increased volatility in global equity markets and a corrective mood, which encouraged investors to re-allocate part of their portfolios towards safe havens, including gold. The change can be clearly seen in the rise of gold ETF holdings that are backed by bullion, which rose to 65.3 million ounces (moz) up 18.3 moz in the eight months, January to August. A similar development of the silver bullion ETF holdings saw their rise to 674.0 moz, up 67.9 moz during the same period. Some indicators point to significant risks to the global economy. The Brexit vote in June was an unexpected event showing public discontent due to the slow economic growth since the financial crisis of 2008. The American electorate seems to want major change in the status quo and a Trump victory would be the testament. The Eurozone will most certainly be weaker with Britain leaving and its banking sector appears under considerable stress. It remains to be seen how the ECB would respond to a new crisis other than printing yet more money. Gold and silver now shine brightly as safe havens under the circumstances. Given the large gains in the current year, there are bound to be some profit-taking periods of consolidation. We believe that the early stage of this rally was fuelled by speculative traders, many of which have reduced exposure in recent months. The generalist investors have just recently started showing interest in gold mining shares, principally buying into the larger capitalization names. Their continued interest is set to trickle down to the mid and small caps in the months to come, further re-rating share prices. A rise in the price of gold beyond $1,400/oz might be the catalyst, especially as such a move would help expand the profitability of producing companies. Our Junior Gold fund is positioned to benefit from the rise in gold prices. Our portfolio is concentrated primarily in the mid-tier gold producers with relatively higher all-in sustaining cost (AISC) that have focused on reducing costs, paying down debt and restoring their financial good-standing. As the gold price rises, those companies experience a much more rapid expansion in their profitability and cash flow generation, therefore, enjoying the largest re-rating in their share price. We have been adjusting the portfolio in selected cases, taking profits from those outperformers that reach target valuation and re-deploying capital to companies that have yet to feel the positive effect of higher revenues. We believe that this segment of the market will continue to out-perform given indications that gold is entering a new bull trend. Earlier stage projects are likely to remain erratic with very high risk of correction if gold stalls its recovery. We prefer, therefore, the relative safety of better capitalised companies that have survived and prospered in the five year bear market. This report contains FTSE data. Source: FTSE International Limited ( FTSE ) FTSE 2016. FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE s express written consent. 3
AUTHORISED INVESTMENT ADVISER S REPORT (CONTINUED) Material Portfolio Changes For the year ended 31 August 2016 Purchases Cost ( ) Sales Proceeds ( ) Newmarket Gold 1,141,949 Endeavour Mining 1,688,933 Goldcorp 1,019,509 Hochschild Mining 1,144,698 Doray Minerals 932,864 Great Panther Silver 1,034,360 Argonaut Gold 849,685 Asanko Gold 800,261 Kingsrose Mining 847,756 First Majestic Silver 706,895 First Majestic Silver 826,986 Richmont Mines 628,637 Primero Mining 823,953 Resolute Mining 590,496 Kingsgate Consolidated 794,362 Iamgold 544,556 Premier Gold Mines 765,698 Kirkland Lake Gold 541,502 Hochschild Mining 721,768 Timmins Gold 539,768 Troy Resources 592,400 Yamana Gold 537,573 Endeavour Mining 585,089 Argonaut Gold 491,847 Beadell Resources 486,888 Wesdome Gold Mines 403,116 Alexco Resource 458,084 Centamin 377,993 West African Resources 456,795 Lake Shore Gold 372,790 Ramelius Resources 455,873 Perseus Mining 354,885 Wesdome Gold Mines 452,526 Alexco Resource 342,160 Teranga Gold 443,733 Teranga Gold 305,415 Timmins Gold 418,573 OceanaGold 297,897 Great Panther Silver 408,453 Newmarket Gold 213,349 Other purchases 3,594,793 Other sales 613,248 Total purchases for the year 17,077,737 Total sales for the year 12,530,379 TOP TEN HOLDINGS AS AT 31 AUGUST 2016 TOP TEN HOLDINGS AS AT 31 AUGUST 2015 % % Doray Minerals 5.95 ECI Exploration & Mining 8.31 Endeavour Silver 5.36 Aureus Mining 7.44 Premier Gold Mines 5.12 Teranga Gold 5.88 Newmarket Gold 4.98 Endeavour Mining 5.85 Argonaut Gold 4.95 Asanko Gold 5.75 Kingsrose Mining 4.89 Lake Shore Gold 5.01 Teranga Gold 4.66 Perseus Mining 4.29 Beadell Resources 4.52 Continental Gold 4.22 Alexco Resource 4.50 Richmont Mines 4.22 Goldcorp 4.45 Doray Minerals 3.98 4
FUND FACTS Launched Accumulation Shares 1 September 2009 at 100p Class C and Class I shares were first issued on 1 September 2009. Class P shares were first issued on 13 December 2013. Accounting Dates (Final) 31 August (Interim) Last day of February Distribution Dates (Final) 31 October (Interim) 30 April Minimum Investment Class C 1,000 Class I 50,000 Class P 1,000,000 The Investment Association Sector Specialist SYNTHETIC RISK AND REWARD INDICATOR Lower risk Higher risk Typically lower rewards Typically higher rewards 1 2 3 4 5 6 7 The risk and reward indicator above aims to provide you with an indication of the overall risk and reward profile of the fund. It is calculated based on the volatility of the fund using weekly historic returns over the last five years. If five years data is not available for a fund, the returns of a representative portfolio are used. This Fund has been measured as 7 because it has experienced very high volatility historically. 5
COMPARATIVE TABLE Class C accumulation shares Change in net assets per share 31.08.16 31.08.15 31.08.14 Opening net asset value per share 20.32 38.06 45.19 Return before operating charges* 32.01 (17.21) (6.41) Operating charges (0.64) (0.53) (0.72) Return after operating charges* 31.37 (17.74) (7.13) Closing net asset value per share 51.69 20.32 38.06 Retained distributions on accumulation shares 0.00 0.00 0.00 * after direct transaction costs of: 0.19 0.03 0.08 Performance Return after charges 154.38% -46.61% -15.78% Other information Closing net asset value 4,388,039 1,831,270 3,909,233 Closing number of shares 8,489,885 9,010,699 10,270,967 Operating charges 1.91% 1.93% 1.97% Direct transaction costs 0.56% 0.11% 0.21% Prices Highest share price 63.81p 38.87p 45.64p Lowest share price 17.25p 20.27p 28.74p Class I accumulation shares Change in net assets per share 31.08.16 31.08.15 31.08.14 Opening net asset value per share 20.56 38.40 45.50 Return before operating charges* 32.41 (17.37) (6.49) Operating charges (0.54) (0.47) (0.61) Return after operating charges* 31.87 (17.84) (7.10) Closing net asset value per share 52.43 20.56 38.40 Retained distributions on accumulation shares 0.00 0.00 0.00 * after direct transaction costs of: 0.18 0.03 0.08 Performance Return after charges 155.01% -46.46% -15.60% Other information Closing net asset value 5,046,780 2,755,306 5,392,793 Closing number of shares 9,626,434 13,400,507 14,044,901 Operating charges 1.66% 1.68% 1.67% Direct transaction costs 0.56% 0.11% 0.21% Prices Highest share price 64.72p 39.21p 45.96p Lowest share price 17.47p 20.50p 29.02p 6
COMPARATIVE TABLE (CONTINUED) Class P accumulation shares Change in net assets per share 31.08.16 31.08.15 31.08.14 Opening net asset value per share 20.75 38.58 **29.90 Return before operating charges* 32.91 (17.48) 9.02 Operating charges (0.56) (0.35) (0.34) Return after operating charges* 32.35 (17.83) 8.68 Closing net asset value per share 53.10 20.75 38.58 Retained distributions on accumulation shares 0.00 0.00 0.00 * after direct transaction costs of: 0.25 0.03 0.06 Performance Return after charges 155.90% -46.22% 29.03% Other information Closing net asset value 9,053,297 658,790 786,121 Closing number of shares 17,048,203 3,174,692 2,037,856 Operating charges 1.26% 1.28% 1.28% Direct transaction costs 0.56% 0.11% 0.21% Prices Highest share price 65.54p 39.39p 45.20p Lowest share price 17.66p 20.68p 29.02p ** Opening net asset value per share on 16.12.13. The operating charges per share figure has been apportioned accordingly. Operating charges are the same as the ongoing charges and are the total expenses paid by each share class in the year. Direct transaction costs are the total charges for the year, included in the purchase and sale of investments in the portfolio of the Fund. These amounts are expressed are as a percentage of the average net asset value over the year and the average shares in issue for the per share figures. 7
GEOGRAPHICAL BREAKDOWN as at 31.08.2016 Australia 18.88 38.01 as at 31.08.2015 Canada 59.62 63.40 United Kingdom 3.74 9.24 United States 2.31 9.39 Cash (3.68) (0.91) (10) 0 10 20 30 40 50 60 70 % of total net asset value 8
Marlborough Fund Managers Ltd Marlborough House 59 Chorley New Road Bolton BL1 4QP Investor Support: 0808 145 2500 Dealing: 0808 145 2501 Fax: 01204 533045 Email: Website: enquiries@marlboroughfunds.com www.marlboroughfunds.com Marlborough Fund Managers Ltd Registered in England No. 2061177 Authorised and regulated by the Financial Conduct Authority and a member of The Investment Association