The MI Discretionary Unit Fund
Interim Report 31 October 2016 The MI Discretionary Unit Fund
Contents Page
Directory ...... 1 Investment Objective and Policy ...... 2 Investment Manager’s report ...... 2 Portfolio Statement ...... 4 Comparative Tables ...... 6 Statement of Total Return ...... 8 Statement of Change in Net Assets Attributable to Unitholders ...... 8 Balance Sheet ...... 9 Certification of Interim Report by the Manager ...... 9 Distribution Tables ...... 10 General Information ...... 11 The MI Discretionary Unit Fund
Directory
Manager & Registrar Maitland Institutional Services Ltd Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telephone: 01245 398950 Fax: 01245 398951 Website: www.maitlandgroup.com (Authorised and regulated by the Financial Conduct Authority)
Customer Service Centre Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telephone: 0345 305 4213 Fax: 0845 280 0109 E-mail: [email protected] (Authorised and regulated by the Financial Conduct Authority)
Directors of the Manager P.J. Foley-Brickley S. Georgala D. Jones R.W. Leedham D.W. Munting (retired 14 October 2016)
Investment Manager Investment Manager to 20 September 2016: Discretionary Unit Fund Managers Limited Investment Manager from 21 September 2016: Thornbridge Investment Management LLP 1 Fore Street, London EC2Y 9DT (Authorised and regulated by the Financial Conduct Authority)
Trustee Trustee to 30 September 2016: National Westminster Bank Plc Trustee from 01 October 2016: The Northern Trust Global Services Limited 50 Bank Street Canary Wharf London E14 5NT (Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority)
Independent Auditor KPMG LLP Chartered Accountants and Registered Auditors 15 Canada Square, Canary Wharf, London E14 5GL
The MI Discretionary Unit Fund 1 The MI Discretionary Unit Fund
Investment Objective and Policy
Investment objective The investment objective of the Scheme is to provide maximum appreciation with above average yield for a growth fund. Investment policy It is envisaged that the Scheme will normally be fully invested subject to market considerations. The Scheme is to concentrate on smaller and medium sized UK companies. The policy does not envisage hedging either against price or currency fluctuations. Smaller and medium sized companies display characteristics of lower liquidity and investors should therefore recognise that the Manager reserves the right to control the rate of investment of new monies. The consequence of this is that from time to time the Scheme may hold liquidity in the range of 0% – 10%.
Investment Manager's Report for the period ended 31 October 2016 Over the period the FTSE 100 Index was buoyed by the sterling weakness following the UK vote to leave the European Union. Both the FTSE SmallCap Index and FTSE Fledgling Index initially fell away after the vote on fears of a UK slowdown but then subsequently rallied, largely making up lost ground over the FTSE 100 Index. The FTSE SmallCap Index rallied over 9% during the period while the Fund rose 4%. This was a comparatively subdued performance but understandable given the strong performance of the Fund in the previous period. Cash levels are high and investors remain nervous, all of which has contributed to the resilient performance of the indices over the period. The markets, however, remain extremely unforgiving of those companies that miss estimates or warn on profits. Interest rates have been further reduced and UK growth forecasts have been raised and while we remain cautiously optimistic on markets going forward we are also mindful of some high valuations in the UK Small Cap space and the need for estimates to rise for ratings to be maintained. After a strong run there has been profit taking on some of the Fund’s larger holdings towards the end of the period but evidence suggests that trading remains resilient at these companies and we continue to like the fundamentals. Review of Investment Activities The last six months has seen a wide range of performances. Treatt saw a substantial rise which is gratifying as it is the largest single holding in the portfolio. There were also strong performances from Churchill China, Dewhurst, Electrocomponents, Hill & Smith and Rights and Issues Investment Trust. Laird was unfortunately extremely weak over the period and there was softness in Castings, Pendragon and Zotefoams.
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Investment Manager's Report continued
The Fund took up its rights in John Menzies thereby increasing the position in the Fund. The company secured around 93% acceptances for its rights issue to fund the purchase of a unit of BBA Aviation and said a number of its directors took part in the issue. This followed an agreed a £202 million cash deal in September to buy ASIG from BBA Aviation. Florida-based ASIG is one of the largest independent providers of commercial airline services in the world, with operations across seven countries.
J A Bedford Fund Manager
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Portfolio Statement as at 31 October 2016 Market % of total value net assets Holding Security £ 2016 Chemicals 16.67% (14.90%) 650,000 Scapa* 1,854,125 4.86 1,700,000 Treatt 3,655,000 9.57 335,000 Zotefoams 854,250 2.24 6,363,375 16.67 Construction & Materials 8.13% (8.30%) 700,000 Boot (Henry) 1,372,000 3.60 1,500,000 Low & Bonar 1,050,000 2.75 800,000 Titon 680,000 1.78 3,102,000 8.13 General Industrials 10.74% (17.91%) 2,480,000 Coral Products* 496,000 1.30 4,500,000 Macfarlane 2,340,000 6.13 133,253 RPC 1,263,238 3.31 4,099,238 10.74 Electronic & Electrical Equipment 4.67% (4.33%) 330,000 Dewhurst 'A' Non Voting* 1,386,000 3.63 60,000 Dewhurst* 396,000 1.04 1,782,000 4.67 Industrial Engineering 13.48% (12.82%) 300,000 Castings 1,260,000 3.30 500,000 Chamberlin* 325,000 0.85 150,000 Fenner 326,625 0.85 150,000 Hill & Smith 1,506,000 3.95 2,595,198 Renold 1,025,103 2.69 15,900 Spirax-Sarco Engineering 701,508 1.84 5,144,236 13.48 Support Services 16.34% (15.57%) 520,000 Brammer 540,800 1.42 400,000 Electrocomponents 1,489,600 3.90 271,428 Menzies (John) 1,344,926 3.52 107,500 SIG 118,788 0.31 400,000 VP 2,742,000 7.18 1,900 WYG* 2,024 0.01 6,238,138 16.34
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Portfolio Statement continued Market % of total value net assets Holding Security £ 2016 Food Producers 1.00% (0.95%) 275,000 Carr's 380,875 1.00 Household Goods & Home Construction 9.69% (9.30%) 232,101 Churchill China* 1,880,018 4.93 375,000 Colefax* 1,818,750 4.76 3,698,768 9.69 Leisure Goods 0.31% (0.36%) 400,000 Hornby* 117,000 0.31 General Retailers 1.63% (1.84%) 13,600 Findel 28,152 0.07 2,000,000 Pendragon 595,000 1.56 623,152 1.63 Equity Investment Instruments 9.48% (8.10%) 232,000 Rights & Issues Investment Trust 3,619,200 9.48 Nonequity Investment Instruments 0.01% (0.00%) 4,000 VT Cape Wrath Focus Fund 3,921 0.01 Software & Computer Services 0.00% (0.24%) Technology Hardware & Equipment 1.00% (2.39%) 262,500 Laird 380,625 1.00
Investment assets 35,552,528 93.15 Net other assets 2,612,981 6.85 Net assets 38,165,509 100.00
All investments are ordinary shares or stock units on a regulated securities market unless otherwise stated. The percentages in brackets show the equivalent % holdings as at 30.04.16 * Quoted on the Alternative Investment Market. Total purchases for the period: £389,279 Total sales for the period: £3,272,117
The MI Discretionary Unit Fund 5 The MI Discretionary Unit Fund
Comparative Tables Change in net assets per unit Income Units 31.10.16 30.04.16 30.04.15 30.04.14 pppp Opening net asset value per unit 1,670.28 1,458.12 1,460.30 1,053.41 Return before operating charges^ 108.39 251.14 35.13 441.23 Operating charges -19.39 -18.30 -16.10 -14.88 Return after operating charges^ 89.00 232.84 19.03 426.35 Distributions -18.09 -20.68 -21.21 -19.46 Closing net asset value per unit 1,741.19 1,670.28 1,458.12 1,460.30 ^After direct transaction costs of -0.68 -0.64 -0.28 -0.27 Performance Return after charges 5.33% 15.97% 1.30% 40.47% Other Information Closing net asset value £25,958,695 £26,587,942 £25,598,842 £26,735,528 Closing number of units 1,490,856 1,591,824 1,755,604 1,830,821 Operating charges 1.15% 1.15% 1.13% 1.12% Ongoing operating charges* 1.12% ––– Direct transaction costs 0.04% 0.04% 0.02% 0.02% Prices Highest unit price 1,810.55 1,681.57 1,547.70 1,561.90 Lowest unit price 1,541.40 1,476.60 1,301.20 1,056.00
Accumulation Units 31.10.16 30.04.16 30.04.15 30.04.14 pppp Opening net asset value per unit 6,345.34 5,470.73 5,400.78 3,844.31 Return before operating charges^ 412.18 943.52 129.64 1,610.93 Operating charges -73.65 -68.91 -59.69 -54.46 Return after operating charges^ 338.53 874.61 69.95 1,556.47 Distributions -68.72 -77.80 -78.70 -71.24 Retained distributions on accumulation units 68.72 77.80 78.70 71.24 Closing net asset value per unit 6,683.87 6,345.34 5,470.73 5,400.78 ^ After direct transaction costs of -2.57 -2.39 -1.06 -0.97 Performance Return after charges 5.34% 15.99% 1.30% 40.49% Other Information Closing net asset value £12,206,814 £11,701,714 £10,880,235 £12,485,906 Closing number of units 182,631 184,414 198,881 231,187 Operating charges 1.15% 1.15% 1.13% 1.12% Ongoing operating charges* 1.12% ––– Direct transaction costs 0.04% 0.04% 0.02% 0.02% Prices Highest unit price 6,878.65 6,336.34 5,724.10 5,727.60 Lowest unit price 5,856.10 5,540.05 4,812.50 3,853.70 * During the period there has been a reduction in Trustee fees, which has the effect of reducing the Operating charges by 0.03%. The ACD believes this to be more representative of the charges going forward.
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Comparative Tables continued Change in net assets per unit (continued) Operating charges include indirect costs incurred in the maintenance and running of the Fund, as disclosed (but not limited to) the detailed expenses within the Statement of Total Return. The figures used within this table have been calculated against the average Net Asset Value for the accounting period. The return after charges is calculated as the closing net asset value per unit plus the distributions on income units minus the opening net asset value per unit as a % of the opening net asset value per unit. Direct transaction costs include fees, commissions, transfer taxes and duties in the purchasing and selling of investments, which are offset (where applicable) against any dilution levies charged within the accounting period. The figures used within the table have been calculated against the average Net Asset Value for the accounting period.
Risk and reward profile The risk and reward indicator table demonstrates where the Fund ranks in terms of its potential risk and reward. The higher the rank 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 future risk profile of the Fund. The shaded area in the table below shows the Fund’s ranking on the risk and reward indicator. Typically lower rewards, Typically higher rewards, lower risk higher risk
1 2 3 4 5 6 7
The Fund is ranked at 5 because funds of this type have experienced medium to high rises and falls in value in the past. Please note that even the lowest risk class can lose you money and that extreme market circumstances can mean you suffer severe losses in all cases. The indicator does not take into account the following risks of investing in this Fund: • Smaller company shares, including AIM companies, can be riskier as they may be more difficult to buy and sell and their share prices may fluctuate more than those of a larger company. • In difficult market conditions, the value of some investments may be less predictable than normal and the Fund may not be able to buy and sell these investments at the best time or at a fair price. This could affect the Fund’s performance, potentially reducing your returns. • The level of targeted income is not guaranteed and may not always be achieved. • For further risk information please see the prospectus.
Risk warning An investment in a Unit Trust should be regarded as a medium to long-term investment. Investors should be aware that the price of units and the revenue from them can fall as well as rise and investors may not receive back the full amount invested. Past performance is not a guide to future performance. Investments denominated in currencies other than the base currency are subject to fluctuation in exchange rates, which can be favourable or unfavourable.
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Statement of Total Return for the period ended 31 October 2016 31.10.16 31.10.15 £ £ £ £ Income Net capital gains 1,550,679 2,666,331 Revenue 627,494 530,000 Expenses (222,573) (223,532) Interest payable and similar charges – – Net revenue before taxation 404,921 306,468 Taxation – – Net revenue after taxation 404,921 306,468 Total return before distributions 1,955,600 2,972,799 Distributions (404,922) (169,525) Change in net assets attributable to Unitholders from investment activities 1,550,678 2,803,274
Statement of Change in Net Assets Attributable to Unitholders for the period ended 31 October 2016 31.10.16 31.10.15 £ £ £ £ Opening net assets attributable to Unitholders 38,289,656 36,479,077
Amounts receivable on issue of units 192,700 – Less: Amounts payable on cancellation of units (1,994,155) (1,295,984) (1,801,455) (1,295,984) Change in net assets attributable to Unitholders from investment activities (see Statement of Total Return above) 1,550,678 2,803,274 Retained distribution on accumulation units 125,511 50,949 Unclaimed distributions 1,119 3,591 Closing net assets attributable to Unitholders 38,165,509 38,040,907
The opening net assets attributable to unitholders for the current period do not equal the closing net assets attributable to unitholders for the comparative period as they are not consecutive periods.
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Balance Sheet as at 31 October 2016 31.10.16 30.04.16 £ £ £ £ ASSETS Fixed Assets Investments 35,552,528 37,145,810 Current Assets Debtors 17,616 115,910 Cash and bank balances 2,921,687 1,349,119 Total current assets 2,939,303 1,465,029 Total assets 38,491,831 38,610,839
LIABILITIES Investment liabilities – – Creditors Distribution payable (269,682) (217,719) Other creditors (56,640) (103,464) Total creditors (326,322) (321,183) Total liabilities (326,322) (321,183) Net assets attributable to Unitholders 38,165,509 38,289,656
The interim financial statements have been prepared under the historical cost basis, as modified by revaluation of investments and in accordance with the Statement of Recommended Practice (“SORP”) for Financial Statements of UK Authorised Funds issued by the Investment Association (IA) in May 2014. The interim financial statements have been prepared on the same basis as the audited financial statements for the year ended 30 April 2016. The financial statements have been prepared on the going concern basis.
Certification of Interim Report by the Manager This report has been prepared in accordance with the requirements of the The Financial Conduct Authority’s Investment Funds sourcebook (“the COLL sourcebook”) and the Statement of Recommended Practice issued by the Investment Association.
R.W. Leedham D. Jones Directors Maitland Institutional Services Ltd 19 December 2016
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Distribution Tables For the period ended 31 October 2016 Income Unit Distribution Distribution Units Net Equalisation Distribution Distribution revenue payable paid 2016 2015 pppp Interim Group 1 18.0891 – 18.0891 7.0000 Group 2 – 18.0891 18.0891 7.0000
Accumulation Unit Distribution Distribution Units Net Equalisation Amount Amount revenue reinvested reinvested 2016 2015 pppp Interim Group 1 68.7241 – 68.7241 26.2633 Group 2 21.4764 47.2477 68.7241 26.2633
Interim period: 01.05.16 - 31.10.16 Group 1: Units purchased prior to a distribution period Group 2: Units purchased during a distribution period
Equalisation Equalisation applies only to units purchased during the distribution period (Group 2 units). It represents accrued revenue included in the purchase price of the units. After averaging, it is returned with the distribution as a capital repayment. It is not liable to income tax but must be deducted from the cost of the units for capital gains tax purposes.
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General Information
Authorised Status The MI Discretionary Unit Fund (the “Scheme”) is an authorised unit trust scheme and UCITS scheme operating under chapter 5 of COLL.The Scheme was established on 8 August 1963. The Scheme does not intend to have an interest in immovable property. Unitholders are not liable for the debts of the Scheme. Head Office Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Address for Service The Head Office is the address in the United Kingdom for service on the Scheme of notices or other documents required or authorised to be served on it. Base Currency The base currency of the Scheme is Pounds Sterling. Units The Scheme may issue both Income and Accumulation units. Holders of Income units are entitled to be paid the revenue attributable to such units in respect of each accounting period in the currency of the relevant units. Holders of Accumulation units are not entitled to be paid the revenue attributable to such units, but that revenue is retained and accumulated for the benefit of unitholders and is reflected in the price of units. Valuation Point The scheme property of the Scheme will normally be valued at 10:00 on each dealing day for the purpose of calculating the price at which units in the Scheme may be issued, sold, repurchased or redeemed. For the purpose of the pricing of units, a business day is defined as a day on which the dealing office of the Manager is open for the buying and selling of units. The Manager may at any time during a business day carry out an additional valuation of the property of the Scheme if the Manager considers it desirable to do so, with the Trustee's approval.
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General Information continued
Buying and Redeeming Units The Manager will accept orders for the purchase and sale of units on normal business days between 08:30 and 16:30. Instructions to buy or sell units may either be in writing to: Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Or by telephone to: 0345 305 4213 The Manager has the right to establish facilities for recording telephone calls made or received on this telephone line. A contract note giving details of the units purchased will be issued no later than the next business day after the business day on which an application to purchase units is received and instrumented by the Manager. Certificates will not be issued in respect of units. Ownership of units will be evidenced by an entry on the register of unitholders. Pricing Basis The Scheme will value the scheme property using the dual pricing method. The Manager calculates prices at which investors buy and sell units, in accordance with the dual-pricing method set out below. The basis of the calculation is the value of the underlying assets of the Scheme. The Scheme is valued either on a bid basis or on an offer basis, as appropriate. The maximum permitted spread is wider than the spread the Manager normally quotes for dealing, but the Manager may deal at any prices calculated in accordance with the provisions set out below and notified to the Trustee. The maximum offer price may not be more than the issue price plus any preliminary charge and the maximum bid price may not be less than the cancellation price. The Scheme will be valued on a net asset value basis to determine the price of the units ('NAV price'). Units will be redeemed at the NAV price and purchased at a price that includes a preliminary charge at the rate applying to the Scheme. The prices of units are published daily on www.maitlandgroup.com. Neither the Manager nor the Scheme can be held responsible for any errors in the publication of the prices. The units in the Scheme will be issued and redeemed on a forward pricing basis which means that the price will not necessarily be the same as the published price.
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General Information continued
Other Information Copies of the Trust Deed and of any Supplemental Deeds of the Scheme, the Prospectus, Key Investor Information Document and the most recent annual and half-yearly reports may be inspected at the head office of the Manager at the address set out in the Directory and copies may be obtained free of charge upon application. Unitholders who have complaints about the operation of the Scheme should in the first instance contact the Manager, or, following that, may make their complaint direct to the Financial Ombudsman Service, Exchange Tower, London E14 9SR. Significant Information On 1 October 2016 the Trustee changed from National Westminster Bank Plc to Northern Trust Global Services Ltd. On 21 September 2016 the Investment Manager changed from Discretionary Unit Fund Managers Ltd to Thornbridge Investment Management LLP. Risk Warning An investment in a Unit Trust should be regarded as a medium to long-term investment. Investors should be aware that the price of units and the revenue from them can fall as well as rise and investors may not receive back the full amount invested. Past performance is not a guide to future performance. Investments denominated in currencies other than the base currency are subject to fluctuation in exchange rates, which can be favourable or unfavourable.
The MI Discretionary Unit Fund 13 Registered in England No 6252939. Authorised and regulated by the Financial Conduct Authority.