MFM Slater OEIC

MFM Slater OEIC Interim Report For the six month period ended 31st October 2016 (Unaudited) MFM SLATER OEIC 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 MFM Slater Income Fund Slater Investments Limited Nicholas House 3 Laurence Pountney Hill London EC4R 0EU Telephone: (020) 7 2209460 Fax: (020) 7 2209469 Authorised and regulated by the Financial Conduct Authority. Auditor Barlow Andrews LLP Carlyle House 78 Chorley New Road Bolton BL1 4BY MFM SLATER OEIC CONTENTS PAGE AUTHORISED STATUS AND GENERAL INFORMATION 1 AUTHORISED CORPORATE DIRECTOR’S STATEMENT 2 MFM SLATER INCOME FUND AUTHORISED INVESTMENT ADVISER’S REPORT 3 FUND INFORMATION Price and distribution record 7 Number of shares in issue/Net asset value per share 8 Ongoing charges 8 Synthetic risk and reward indicator 8 Portfolio statement 9 Portfolio transactions 11 INTERIM FINANCIAL STATEMENTS Statement of total return 12 Statement of change in net assets attributable to shareholders 12 Balance sheet 13 Notes to the interim financial statements 13 MFM SLATER OEIC AUTHORISED STATUS AND GENERAL INFORMATION Authorised status MFM Slater OEIC is an investment company with variable capital (ICVC) incorporated under the Open Ended Investment Company (OEIC) Regulations 2001. It is a UCITS scheme as defined in the Collective Investment Schemes Sourcebook (COLL) and is an umbrella company for the purposes of the OEIC Regulations. The Company is incorporated in England and Wales with the registration number IC000910 and is authorised and regulated by the Financial Conduct Authority with effect from 22 August 2011. The shareholders are not liable for the debts of the Company. The sub-funds of the Company are segregated by law under the Protected Cell Regime. In the event that one sub-fund in the Company is unable to meet its liabilities, the assets of another sub-fund within the Company will not be used to settle these liabilities. The Company currently has one sub-fund, the MFM Slater Income Fund. Investment objectives MFM Slater Income Fund The investment objective of the Fund is to produce an attractive and increasing level of income while additionally seeking long term capital growth by investing predominantly in the shares of UK listed companies across the full range of market capitalisations, including those listed on the Alternative Investment Market (AIM). From time to time the Fund may also hold the shares of companies listed overseas as well as cash, money market instruments, the units of collective investment schemes, bonds and warrants as permitted by the rules applicable to UCITS schemes and the Prospectus. It is intended that the assets of the Fund will be managed so that it is eligible for quotation in the Investment Association’s UK Equity Income sector. The Fund has powers to borrow as specified in the FCA Collective Investment Schemes Sourcebook and may use derivatives for hedging and efficient portfolio management purposes only. Rights and terms attaching to each share class Each share of each class represents a proportional entitlement to the assets of the Fund. The allocation of income and taxation and the rights of each share in the event the Fund is wound up are on the same proportional basis. Change in prospectus No changes have been made since the last report. Up to date key investor information documents, the full prospectus and reports and accounts for any fund can be requested by the investor at any time. 1 MFM SLATER OEIC AUTHORISED CORPORATE DIRECTOR’S STATEMENT This report has been prepared in accordance with the requirements of the Collective Investment Schemes Sourcebook as issued and amended by the Financial Conduct Authority. ALLAN HAMER JOINT MANAGING DIRECTOR WAYNE D GREEN JOINT MANAGING DIRECTOR MARLBOROUGH FUND MANAGERS LTD 14 December 2016 2 MFM SLATER OEIC MFM SLATER INCOME FUND AUTHORISED INVESTMENT ADVISER’S REPORT For the six month period ended 31 October 2016 Percentage change and sector position to 31 October 2016 Six Months 1 year 3 years 5 years Since launch* MFM Slater Income Fund 1.58% -4.12% 21.53% 84.66% 91.80% Quartile Ranking** 4 4 2 1 1 * 19 September 2011 ** Based on ranking within The Investment Association’s UK Equity Income Sector External Source of Economic Data: Morningstar (Class P inc - mid to mid, net income reinvested) During the period, the MFM Slater Income Fund gained +1.58% compared with a rise in the benchmark of +7.61%. In the six months to the end of October the stockmarket experienced some violent ‘ups’ and ‘downs’, the dominant factor during this unsettled period being the EU referendum. Markets in May and June, in the main, were influenced by investor sentiment and polls tracking the referendum. Nevertheless, the performance of the Fund through to 23 June was positive, set against a relatively benign economic backdrop, underpinned by the consensus view that the UK would vote to remain in the EU. However, if a ‘week is a long time in politics’, then twenty four hours can be a lifetime on the financial markets. On the 24 June, following the unexpected vote to leave the EU, shockwaves reverberated around global stock markets. The uncertainty that this generated hit the most economically sensitive sectors in the UK the hardest, such as banks, housebuilding, construction, real estate and recruitment. In particular, some of the Fund’s more cyclical, interest rate sensitive, small to mid-cap holdings registered significant share price falls, which, for example, in the case of housebuilders factored in significantly lower house sales that did not materialise. The sharp fall in the UK stockmarket was then immediately followed by a violent rally in the largest FTSE 100 constituents. The thirty or so largest FTSE 100 companies, which effectively determine the index’s performance, were marked up aggressively to reflect currency movements. In many cases the uplift was 15-20%. Our experience is that we rarely participate meaningfully in such vertical upwards movements in indices over very short periods. Typically, we catch up over time and then outperform. Consequently, we were not surprised by the initial lag in the performance of the Fund immediately following the EU referendum followed by its subsequent strong outperformance against its benchmark in the third quarter of the calendar year, especially given that most UK economic data surprised on the upside. We believe that we are still in a period of catch-up with further recovery to come. This is evidenced by the value still to be found from many high yielding income stocks that were a challenge to find a year ago, but much easier to find today. It is worth recapping the Fund’s objective and the way in which the portfolio has been invested. The Fund aims to provide investors with at least 110% of the FTSE All-Share’s average dividend yield. The index currently yields 3.52%, making our target 3.87%. The Fund’s equity investments are currently yielding 4.80%, with 5.12% in prospect in twelve months. The dividends paid during the financial year are set out on page 5. The MFM Slater Income Fund invests across the market cap spectrum in companies that offer the prospect of attractive and growing dividends as well as capital growth upside. With 90% of the high yield universe outside the FTSE 100, we see no logic in restricting ourselves to large cap high yielders as many income funds choose to do. So long as we can achieve reasonable aggregate liquidity, we prefer to invest on the basis of value, not size. At the period end, the portfolio was 29.97% invested in FTSE 100 companies, 27.90% in the Mid 250, 17.34% in the Small Cap index, 0.45% in Fledgling companies, 16.73% in AIM companies, 6.15% in other categories including overseas companies and 1.46% in cash. In earlier reports we have explained that the portfolio seeks to achieve a consistent performance by broadly dividing the Fund into three complementary categories: growth companies with attractive yields; dividend stalwarts with earnings pointing upwards; and high yielders with more cyclical upside whose earnings have at least reached a degree of stability. The first category, growth companies with attractive yields, continued to post some good gains. These businesses are typically growing their earnings at an above average rate and often boast attractive PEG (Price / Earnings Growth) ratios as well. Their earnings growth rates are steady and reliable as opposed to dynamic, usually in the 8-12% per annum range. During the period M&A activity added to returns generated by the Fund. The standout performer in the growth category was commercial radio operator Wireless Group (+0.94% contribution). The strategic radio assets of the company were acquired by News Corp, a new entrant into commercial radio, following a recommended offer of 315p cash per share, representing a 70% share price premium immediately prior to the offer date. The takeover of Wireless Group illustrates the potential latent, unrealized value of many of the small to mid-cap stocks held by the Fund. 3 MFM SLATER OEIC MFM SLATER INCOME FUND AUTHORISED INVESTMENT ADVISER’S REPORT (CONTINUED) Other contributors of note (+0.30% and above) included Stobart Group (+0.62% contribution). The group signed heads of terms with CityJet, which potentially doubles the routes at Southend airport from April 2017 onwards and should lead to sustainable air passenger growth.

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