MI Brompton UK Recovery Unit Trust

Interim report 31 December 2016 MI Brompton UK Recovery Unit Trust

Contents Page

Directory ...... 1 Investment objective and policy ...... 2 Investment manager's report ...... 2 Portfolio statement ...... 5 Comparative table ...... 10 Statement of total return ...... 12 Statement of change in net assets attributable to unitholders ...... 12 Balance sheet ...... 13 Certification of interim report by the authorised unit trust manager ...... 13 General information ...... 14 MI Brompton UK Recovery Unit Trust

Directory

Authorised unit trust manager and 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 Maitland Institutional Services Ltd Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telephone: 0345 026 4288 Fax: 0845 280 2416 E-mail: [email protected] (Authorised and regulated by the Financial Conduct Authority)

Directors of the manager R.A. Ackermann (appointed 30 December 2016) P.J. Foley-Brickley S. Georgala D. Jones R.W. Leedham D.W. Munting (retired 14 October 2016)

Investment manager Brompton Asset Management LLP 1 Knightsbridge Green, London SW1X 7QA (Authorised and regulated by the Financial Conduct Authority)

Trustee To 31 August 2016 National Westminster Bank Plc Trustee & Depositary Services Younger Building, 1st Floor, 3 Redheughs Avenue, Edinburgh EH12 9RH (Authorised and regulated by the Financial Conduct Authority) From 01 September 2016 Northern Trust Global Services Ltd 50 Bank Street, Canary Wharf, London E14 5NT (Authorised and regulated by the Financial Conduct Authority)

Independent auditor KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square, Canary Wharf, London E14 5GL

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Investment objective The investment objective of the MI Brompton UK Recovery Unit Trust (the fund) is to achieve capital growth. Investment policy The fund will invest principally in the securities of UK Companies quoted on the London Stock Exchange that are experiencing difficult trading or that have growth prospects that are not duly recognised by the market. In addition to ordinary shares the fund may also invest in fixed interest securities, preference shares, debt securities convertible to ordinary stock, money market instruments, deposits and any other permitted asset type deemed appropriate to meet the investment objective. The fund may also invest outside the UK.

Investment manager's report for the period ended 31 December 2016 Performance The MI Brompton UK Recovery Unit Trust gained 15.29% over the six months to 31 December 2016, outperforming the UK equity market, which gained 11.51% while cash as measured by the three-month UK Interbank Rate returned 0.20%. At the period end, the gain from the fund’s July 2002 inception was 241.98% compared with the UK stockmarket’s 183.28% return while cash returned 30.40%. Manager’s review The six months under review was a strong period for UK equities. Markets were strong during the late summer and autumn of 2016 as the US Federal Reserve kept interest rates on hold despite improved US employment data. In the UK, Theresa May’s swift appointment as new prime minister removed some of the political uncertainty resulting from the leave vote in the UK European Union referendum at the end of June. The Bank of England added to the firm tone when it cut interest rates and announced fresh quantitative easing to counteract any weakness in corporate capital spending in response to the Brexit vote. The third component in the firm tone was the weakness in sterling, down 7.57% over the period against the dollar and 2.64% weaker against the euro. Such weakness was expected to boost UK exports, increase the overseas profits of UK companies in sterling terms and compensate potentially for the imposition by the EU of post-Brexit trade tariffs. Shares weakened in late October and early November as a result of political uncertainty. In the UK, May confirmed that Britain would formally trigger Brexit by the end of March 2017 while in the US investors were nervous ahead of the US presidential election at a time when expectations were growing that the Fed would finally raise interest rates again, expectations that were confirmed in December when rates rose by a quarter percentage point to 0.75%. Share prices performed strongly in the closing weeks of the year, however, despite the US interest rate rise and Fed signals about further rises in 2017 in response to strong US employment figures and strengthening commodity prices. Over the period under review, the oil price gained 11.82% in dollar terms while an equally-weighted basket of industrial commodities gained 12.02% in dollars. One reason for investor confidence was the robustness of UK economic growth in sharp contrast to the government and Bank of England warnings of weakness following a Brexit vote. Third-quarter gross domestic

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Investment manager's report continued Manager’s review (continued) product (GDP) figures in December showed a 0.6% rise, revised up from 0.5%, suggesting that the Brexit vote had little short-term effect on the UK economy, and economists forecast healthy growth for the final quarter. The strongest sectors within the UK stockmarket over the period were those likely to benefit from robust economic growth, rising commodity prices and rising interest rates. Basic materials returned 34.46%, technology, a sector where there has been a surge in takeover activity, returned 24.98% while financial stocks returned 24.54%. Some sectors were, however, conspicuously weak, notably those market areas populated by companies perceived as “bond proxies” and, therefore, likely to suffer in relative valuation terms as bond prices weaken in response to revived inflation and US monetary tightening. Over the period, telephony, utilities and healthcare fell 9.23%, 5.47% and 0.98% respectively. Portfolio review Within the portfolio, some of the strongest returns among large and medium-sized companies came in sectors such as industrials, basic materials, technology and financial services. Among industrial stocks, Melrose Industries returned 146.91%; in technology, Electrocomponents returned 85.28%; in mining, Anglo American and Rio Tinto returned 59.58% and 39.55% respectively; in financial services, HSBC, Legal & General and Royal Bank of Scotland returned 44.87%, 32.33% and 30.89% respectively. Other strong performers included Vesuvius in industrials, up 39.70%, and Redrow, in housebuilders, up 38.50%. Conspicuous weakness was, however, shown by International Personal Finance, an emerging markets subprime lender, Pearson in media and Halma in industrials, down 38.48%, 13.59% and 10.55% respectively. Among smaller stocks, Brammer, an industrial supplies business, returned 175.42% following a cash takeover bid from Advent, a private equity company, while Serica Energy recovered 30.33% in response to evidence that the company was generating cash at a time of renewed buoyancy for oil prices. Oil and gas equipment supplier Northbridge Industrial, up 29.22%, also benefited from oil price buoyancy while Johnson Service Group returned 29.85% as a result of improved profits. Concerns about UK housebuilding volumes following Brexit led to a 20.33% fall for Michelmersh Brick while Oxford BioMedica and LiDCO, down 13.38% and 7.54% respectively, both suffered from the lack of investor interest in young healthcare companies yet to achieve sustainable cash generation and profitability. During the period, the fund participated in a fundraising by LiDCO to provide resources for its US expansion plans and initiated new holdings in Advanced Oncotherapy, an early-stage healthcare company aiming to use advanced technology to reduce the cost of radiotherapy and improve its safety, and Serco, the outsourcing group, and completed its initial purchase of a holding in Intertek. The fund also increased a number of holdings on weakness. These included N Brown, IMI, Lloyds Banking, Michelmersh Brick, Northbridge Industrial, Royal Bank of Scotland, Serica and Vodafone. Partial profits, meanwhile, were taken in Anglo American, Electrocomponents, Hochschild Mining and Johnson Service Group.

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Investment manager's report continued Outlook Monetary trends suggest that the UK is heading for healthy economic growth during the early months of 2017, with the growth in narrow money expanding well ahead of inflation, leaving significant liquidity available for industrial output growth and corporate capital spending. Monetary trends do, however, suggest a growth slowdown later in the year. The third-quarter 2016 UK GDP figures showed consumer spending strong and there was also a revival in business investment after the weakness ahead of the Brexit vote. There have been concerns about the UK’s current account deficit, which reached 5.2% of GDP in the third quarter, but sterling’s weakness brought the UK’s international investment balance back into positive territory as a percentage of GDP in late 2016 for the first time since 2008. The international environment did, however, become less benign for financial markets at the end of 2016, with the gap closing between the global inflation-adjusted money supply and global industrial output growth. This suggests that global economic growth may peak in the spring and that liquidity available for investment in financial assets may reduce. Geographically, the real money growth slowdown was most marked in the US, implying relative weakness in US economic growth and the dollar and suggesting that US stocks may start to underperform other equities in 2017. This also suggests that US interest rate rises may not be as rapid as investors have been expecting. European and Chinese monetary trends, however, appeared more benign at the turn of the year while survey data show eurozone and Chinese manufacturing confidence at their highest levels since April 2011 and January 2013 respectively. Such trends suggest that eurozone and Chinese economic growth trends are likely to be healthier than in the US in 2017. Within the eurozone, German data were particularly strong at the turn of the year and price pressures were building up across the Continent. In such circumstances, relative performance among companies and sectors may vary significantly in early 2017 as in the closing months of 2016, emphasising the importance of stock selection in generating performance.

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Portfolio statement as at 31 December 2016 Market % of total value net assets Holding Security £ 2016 Oil & gas 3.33% (2.77%) Oil & gas producers 3.33% (2.77%) 442 Royal Dutch Shell 'A' 9,905 0.13 7,027 Royal Dutch Shell 'B' 165,345 2.09 613,988 Serica Energy* 87,493 1.11 262,743 3.33 Alternative energy 0.00% (0.00%) 81 Ocean Power Technologies 192 0.00 Basic materials 6.48% (7.82%) Mining 6.48% (7.82%) 14,745 Anglo American 170,895 2.16 63,327 Hochschild Mining 133,937 1.70 6,568 Rio Tinto 207,155 2.62 511,987 6.48 Industrials 30.30% (27.31%) Construction & materials 2.26% (1.26%) 53,326 Melrose Industries 105,452 1.33 153,000 Michelmersh Brick* 73,440 0.93 178,892 2.26 Aerospace & defence 1.89% (1.91%) 25,351 BAE Systems 149,317 1.89 General industrials 4.86% (4.75%) 41,950 DS Smith 171,030 2.17 10,366 Smiths 146,264 1.85 16,819 Vesuvius 66,486 0.84 383,780 4.86 Electronic & electrical equipment 5.21% (5.71%) 18,970 Halma 169,971 2.15 6,164 Renishaw 155,641 1.97 53,718 TT Electronics 86,083 1.09 411,695 5.21

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Portfolio statement continued Market % of total value net assets Holding Security £ 2016 Industrial engineering 2.74% (2.08%) 8,366 IMI 86,672 1.10 117,557 Northbridge Industrial Services* 129,313 1.64 300,000 Turbo Power Systems* 300 0.00 216,285 2.74 Support services 13.34% (11.60%) 60,640 Brammer 100,056 1.27 42,980 Electrocomponents 204,843 2.59 221,500 Hogg Robinson 150,620 1.91 3,015 Intertek 104,801 1.33 162,900 Johnson Service* 186,928 2.37 83,084 Rentokil Initial 184,613 2.34 84,600 Serco 120,978 1.53 1,052,839 13.34 Consumer goods 7.61% (7.79%) Beverages 0.97% (1.09%) 1,044 Dr Pepper Snapple 76,604 0.97 Household goods & home construction 5.06% (4.74%) 15,657 Bovis Homes 128,153 1.62 20,675 Colefax* 105,443 1.33 38,842 Redrow 166,632 2.11 400,228 5.06 Personal goods 1.58% (1.96%) 3,803 Unilever 125,024 1.58 Health care 3.98% (3.60%) Health care equipment & services 1.57% (0.77%) 75,000 Advanced Oncotherapy* 55,500 0.70 1,190,635 LiDCO* 68,462 0.87 123,962 1.57

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Portfolio statement continued Market % of total value net assets Holding Security £ 2016 Pharmaceuticals & biotechnology 2.41% (2.83%) 9,681 GlaxoSmithKline 151,072 1.91 973,287 Oxford BioMedica 39,613 0.50 190,685 2.41 Consumer services 16.35% (16.83%) Food & drug retailers 5.77% (6.00%) 106,031 Booker 186,084 2.35 45,911 J Sainsbury 114,456 1.45 67,393 Wm Morrison Supermarkets 155,341 1.97 455,881 5.77 General retailers 5.52% (5.25%) 31,871 Dixons Carphone 112,951 1.43 18,075 Inchcape 126,796 1.60 27,072 Kingfisher 94,725 1.20 45,719 N Brown 101,542 1.29 436,014 5.52 Media 4.19% (4.79%) 846,780 Dods* 116,432 1.47 250,000 Metrodome** - - 12,980 Pearson 106,176 1.34 11,009 Sky 109,099 1.38 331,707 4.19 Travel & leisure 0.87% (0.79%) 57,500 Peel Hotels* 69,000 0.87 Telecommunications 2.89% (3.38%) Fixed line telecommunications 1.47% (1.87%) 31,634 BT 116,034 1.47 Mobile telecommunications 1.42% (1.51%) 56,138 Vodafone 112,164 1.42

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Portfolio statement continued Market % of total value net assets Holding Security £ 2016 Financials 20.42% (20.00%) Banks 5.05% (3.87%) 21,875 HSBC 143,609 1.82 214,749 Lloyds Banking 134,175 1.70 53,800 Royal Bank of Scotland 120,835 1.53 398,619 5.05 Nonlife insurance 2.34% (2.28%) 31,783 RSA Insurance 184,977 2.34 Life insurance 3.11% (2.76%) 53,005 Legal & General 131,081 1.66 30,926 Standard Life 114,797 1.45 245,878 3.11 Real estate investment trust 4.16% (4.66%) 15,313 British Land 96,319 1.22 43,374 Intu Properties 121,838 1.54 71,000 Londonmetric Property 110,334 1.40 328,491 4.16 Real estate investment & services 1.56% (1.77%) 41,430 Capital & Counties Properties 123,047 1.56 Financial services 3.57% (3.94%) 38,183 H&T* 95,935 1.21 18,388 International Personal Finance 31,683 0.40 5,444 Provident Financial 154,773 1.96 282,391 3.57 Equity investment instruments 0.63% (0.72%) 6,516 Gresham House Strategic* 49,522 0.63 Technology 4.60% (4.71%) Software & computer services 2.92% (3.14%) 25,967 IndigoVision* 42,326 0.54 28,675 Sage 187,678 2.38 230,004 2.92

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Portfolio statement continued Market % of total value net assets Holding Security £ 2016 Technology hardware & equipment 1.68% (1.57%) 134,586 Spirent Communications 132,904 1.68

Investment assets 7,580,866 95.96 Net other assets 319,549 4.04 Net assets 7,900,415 100.00

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 30.06.16 * Quoted on the Alternative Investment Market. ** This is a delisted security and has been valued at the manager's best assessment of its fair value.

Total purchases for the period £436,663

Total sales for the period £351,030

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Comparative table Change in net assets per unit Accumulation units 31.12.16 30.06.16 30.06.15 30.06.14 pppp Opening net asset value per unit 300.73 312.73 290.55 252.66 Return before operating charges^ 48.65 -5.25 26.78 44.38 Operating charges -7.34 -6.75 -6.60 -6.49 Return after operating charges^ 41.31 -12.00 22.18 37.89 Distributions 0.00 -2.61 -1.67 -1.25 Retained distributions on accumulation unit 0.00 2.61 1.67 1.25 Closing net asset value per unit 342.04 300.73 312.73 290.55 ^After direct transaction costs of -0.10 -0.15 -0.21 0.12 Performance Return after charges 13.74% -3.84% 7.63% 15.00% Other Information Closing net asset value £7,900,415 £6,946,131 £7,204,345 £6,636,438 Closing number of units 2,309,773 2,309,773 2,303,664 2,284,118 Operating charges 2.24% 2.23% 2.20% 2.25% Ongoing operating charges* 2.28% ––– Direct transaction costs 0.03% 0.05% 0.07% 0.04% Prices Highest unit price 342.88 322.13 325.45 304.41 Lowest unit price 292.31 272.82 265.99 254.64

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. * There has been an increase in trustee and safe custody fees during the period. Taking an average of the daily net asset values for the last three months of the period has the effect of increasing operating charges by 0.04%. The Authorised unit trust manager believes this to be more representative of the charges going forward. The return after charges is calculated as the closing net asset value per unit plus the distributions on income units minus the open 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.

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Comparative tables continued 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 five 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:

• There may be cases where the company in which the fund owns shares falls into receivership due to trading difficulties. This could cause losses to the fund and reduce your investment.

• The fund invests in particular stocks that are experiencing difficulties or are undervalued. It may, therefore, not perform in line with funds that have a broader investment policy.

• 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 December 2016 31.12.16 31.12.15 £ £ £ £ Income Net capital gains/(losses) 951,135 (316,432) Revenue 88,321 88,808 Expenses (84,986) (78,755) Interest payable and similar charges (1) – Net revenue before taxation 3,334 10,053 Taxation (185) (113) Net revenue after taxation 3,149 9,940 Total return before distributions 954,284 (306,492) Distributions – – Change in net assets attributable to unitholders from investment activities 954,284 (306,492)

Statement of change in net assets attributable to unitholders for the period ended 31 December 2016 31.12.16 31.12.15 £ £ £ £ Opening net assets attributable to unitholders 6,946,131 7,204,345

Amounts receivable on issue of units – – Less: amounts payable on cancellation of units – – – – Change in net assets attributable to unitholders from investment activities (see statement of total return above) 954,284 (306,492) Closing net assets attributable to unitholders 7,900,415 6,897,853

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 December 2016

31.12.16 30.06.16 £ £ £ £ ASSETS Fixed assets Investments 7,580,866 6,543,665 Current assets Debtors 17,941 81,533 Cash and bank balances 354,105 363,949 Total current assets 372,046 445,482 Total assets 7,952,912 6,989,147

LIABILITIES Investment liabilities – – Creditors Other creditors (52,497) (43,016) Total creditors (52,497) (43,016) Total liabilities (52,497) (43,016) Net assets attributable to unitholders 7,900,415 6,946,131

The interim financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments and in accordance with FRS 102 and 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 June 2016. The financial statements have been prepared on the going concern basis. Certification of interim report by the authorised unit trust manager This report has been prepared in accordance with the requirements of the Financial Conduct Authority’s collective investment schemes sourcebook (the COLL sourcebook) and the statement of recommended practice issued by the investment association. R.A. Ackermann R.W. Leedham Directors Maitland Institutional Services Ltd 20 February 2017

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General information

Authorised status The MI Brompton UK Recovery Unit Trust (the fund) is an authorised unit trust scheme and UCITS scheme operating under chapter 5 of COLL. The fund qualifies for certification under the UCITS directive but does not currently have a UCITS certificate. The fund was established on 5 September 2006 and authorised by the Financial Conduct Authority on 6 September 2006. The fund does not intend to have an interest in immovable property. Unitholders are not liable for the debts of the fund. 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 fund of notices or other documents required or authorised to be served on it. Base currency The base currency of the fund is pounds sterling. Units The trust deed allows the fund to issue different classes of units in respect of the fund. The fund currently has the following units available for investment: Class A accumulation 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 fund will normally be valued at 12:00 on each dealing day for the purpose of calculating the price at which units in the fund 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 Authorised Unit Trust Manager (AUTM) is open for the buying and selling of units. The AUTM may at any time during a business day carry out an additional valuation of the property of the fund if the AUTM considers it desirable to do so, with the Trustee's approval

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General information continued

Buying, redeeming and switching of units The AUTM will accept orders for the purchase, sale and switching 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 on: 0345 026 4288 The AUTM 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 AUTM. 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 There is a single price for buying and selling units in a fund. This represents the net asset value of the fund concerned. The unit price is calculated on a forward pricing basis, that is at the next valuation point after the purchase or redemption is deemed to be accepted by the AUTM. The prices of units are published daily on www.maitlandgroup.com. Neither the AUTM nor the fund can be held responsible for any errors in the publication of the prices. The units in the fund 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. Other information The trust deed, prospectus, key investor information document and the most recent interim and annual reports may be inspected at the office of the AUTM which is also the head office of the fund. Copies of which may be obtained free of charge upon application. They are also available from the website of the AUTM. Details are given in the directory of this report. Unitholders who have complaints about the operation of the fund should in the first instance contact the AUTM, or, following that, may make their complaint direct to the Financial Ombudsman Service, Exchange Tower, London E14 9SR. Significant information On 1 September 2016 the trustee changed from National Westminster Bank Plc to Northern Trust Global Services Ltd.

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General information continued

16 MI Brompton UK Recovery Unit Trust Registered in England No 6252939. Authorised and regulated by the Financial Conduct Authority.