Interim Report and Financial Statements for MGTS Ardevora ... · Sourcebook (COLL) as issued and amended by the Financial Conduct Authority. T J Ricketts M D Jealous Margetts Fund

HEAD OFFICE MARGETTS FUND MANAGEMENT LTD DEALING

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GRAHAM STREET www.margetts.com BIRMINGHAM

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B1 3JR

Registered in England No. 4158249

TELEPHONE: 0121 236 2380 Authorised and Regulated by TELEPHONE: 0345 607 6808

FACSIMILE: 0121 236 2330 the Financial Conduct Authority FACSIMILE: 0121 236 8990

Interim Report and

Financial Statements

for MGTS Ardevora

UK Income Fund

For the six months ended 30 June 2017 (Unaudited)

ACD Margetts Fund Management Limited

1 Sovereign Court Graham Street

Birmingham B1 3JR

Tel: 0121 236 2380 Fax: 0121 236 2330

(Authorised and regulated by the Financial Conduct Authority)

Directors of the ACD T J Ricketts T H Ricketts A J M Quy

M D Jealous A S Weston

G M W Oakley (non-exec) J M Vessey (non-exec)

Depositary BNY Mellon Trust & Depositary (UK) Ltd

The Bank of New York Mellon Centre 160 Queen Victoria Street

London EC4V 4LA


Administrator and Registrar Margetts Fund Management Ltd

PO Box 17067 Birmingham

B2 2HL

Tel: 0345 607 6808 Fax: 0121 236 8990


Auditors Shipleys LLP

Chartered Accountants & Statutory Auditors 10 Orange Street

Haymarket London

WC2H 7DQ

Investment Advisers

Ardevora Asset Management LLP 130 Fleet Street London EC4A 2BH


Contents Investment Adviser’s Report 1 Certification of Accounts by Directors of the ACD 3 Authorised Status 3 Significant Purchases and Sales 4 Portfolio Statement 5 Net Asset Value per Share and Comparative Tables 8 Financial Statements

Statement of Total Return 11

Statement of Change in Net Assets Attributable to Shareholders 11 Balance Sheet 12 Notes to the Financial Statements 13 Distribution Table 21

General Information 22

1

Investment Adviser’s Report For the period ended 30 June 2017 Investment Objective & Policy The Ardevora UK Income Fund's investment objective is to achieve income and long-term capital appreciation with a bias towards income. The Fund will primarily invest in and gain exposure to, a diversified portfolio of UK equity or equity-related securities (such as ordinary and preference shares, global depository receipts and American depository receipts) listed or traded on Regulated Markets. The Investment Manager will, at all times, consider market valuations and the prevailing investment climate. In the event of a perceived negative investment climate the Fund may liquidate Investments and hold the proceeds or may retain amounts in cash or ancillary liquid assets (including money market funds, money market instruments such as commercial paper, certificates of deposit and cash deposits) pending investment or reinvestment. The Fund may invest in Collective Investment Schemes [CIS], transferable securities and money market instruments (such as short dated government backed securities, floating rate notes, commercial paper, certificates of deposit, treasury bills and treasury notes). Investment Review

MGTS Ardevora UK Income Inst 1.30% MGTS Ardevora UK Income Retail 1.20% Benchmarks FTSE All Share: 6.20% Source: Morningstar Direct. Performance growth in the period is bid to bid with income reinvested.

This period’s review comes in two parts: we start with a run though of the Fund’s performance, and some of the drivers connected to this. We follow with a discussion of the economic and political factors with a bearing on this period. Fund Review: UK Income

The UK stock market is an oblique window on the world. It contains many of the world’s largest mining companies and a few of the largest oil producers. There are companies selling booze and cigarettes, cough medicine and treatments for asthma. And in the undergrowth, only marginally influencing the path of the FTSE 100 Index, are businesses buffeted by the UK economy. Stock prices tend to move on shifting hopes or anxieties about the future. Some companies have more control over their future than others; some are more easily buffeted by the behaviour of their peers, by governments or central bankers, or by the whims of traders in currency or commodity markets. The daily news is awash with speculation on so many of these things. As you sit in your office, as a portfolio manager, you attempt to penetrate the noise, deciding which stocks to own, trying to find the ones which might reward you for some insight you think may you have. We frame our views around two focal points. First we judge how the managers who run companies are behaving. We assume most managers tend to view the future too optimistically and are tempted into taking too much risk; either they chase growth too aggressively or they resist evidence of a more difficult environment too stubbornly. We look for those where their views look realistic, conservative and safe. Our hunt for them helps us form a view on the overall stock market, from the bottom, up: where is risk building, where it is receding, where are management relaxed, where are they seemingly in denial?

2

Investment Adviser’s Report (continued) Second we judge how other investors are behaving. We have to take a lateral approach. Investors are a seething mass. We can only attempt to infer how the mass is behaving. We do this in two ways. First, we look at stock prices in relation to both their history and to attributes of the firm they represent (sales, profit, cash flow). Some patterns imply anxiety or scepticism; others imply a feeling of calm or hope. Second we watch how financial analysts are behaving; we can observe them more directly. They produce forecasts and they write reports. Their views can influence investors, so they give us a partial insight into the views of the seething mass. From analysts we can get a sense of where anxiety or hope is building and, where scepticism may be lingering. For most companies it is getting harder to grow. This can make normal management behaviour risky. In our experience most company managers like trying to grow their companies. They can be tempted into risky behaviour when their plans don’t fit reality. A fast growing company can miss growth targets and allow costs to run ahead of new sales. A slow growth company can be too slow to recognise disappointing sales or pricing is not fleeting, but long lasting. They hang on to old plans for too long. We see evidence of both in the UK. Faster growth slowing down is most obvious in healthcare. There are a few global speciality pharmaceutical companies quoted on the UK stock market. They have found it easy to grow for many years. Both Shire and Hikma do a lot of business in North America. Until recently they have been able to grow easily through a combination of new drug launches and higher prices. But it isn’t so easy now. Growing by pushing prices up, in particular, has become much more difficult. We have seen some very high profile businesses in North America run into trouble as the tougher environment has evolved and their company’s managers have pushed on with old growth plans regardless; Valeant and Endo for example. Usually when economic risk is rising, investors are tempted to buy healthcare stocks because demand for drugs is usually left unscathed. They look safe. We don’t think Hikma or Shire are safe now though. Growth disappearing altogether is most obvious in two quite different areas: retail and mining. Most UK based retailers are admitting that growth is harder. However they have mainly been blaming fickle or pressured customers, who they expect to return to their old ways. Food retailers seem to believe austerity minded shoppers will become more relaxed. Clothing retailers seem to believe that political convulsions around Brexit have temporarily neutered spending, or millennials shifting priorities towards eating out will settle down. Both areas of blame look dubious to us, and cover up an unwillingness of company managers to accept that growth is slipping away and not coming back soon. Many of the UK’s retailers have been behaving like the UK is in a recession, but many other businesses, which rely on the UK’s populations’ desire to spend money, have not. Aldi and Lidl are prospering. So are ASOS and BooHoo. Carnival Cruise fills its cruise ships. BMW seems to sell all of its Minis. There isn’t much evidence of a recession (yet). Instead, what is going on is more competition (not less demand). So when Next or M&S complain about disappointing sales and blame the economy they are, in our view, in denial. People are spending their money differently with businesses which give them what they want better or more cheaply. This isn’t going to change quickly. We are not in a recession yet, but if we are heading for one, life is going to get a lot more disappointing for those retailers that are already losing. Miners are also having a tough time. Demand is still there for what they produce, but new demand hasn’t been quite up to expectations for five years now. The people who run these businesses have gone through a period of blaming others for missing their targets, blaming their peers for behaving irrationally, until finally accepting conditions are not going to get easier quickly and running their businesses accordingly. Unlike UK retailers, who still look in denial, miners like Anglo American and Rio Tinto look like they have accepted the world has changed, and are now thinking more about risk than opportunity. How company managers are behaving is only one part of the puzzle that drives stock prices. The other is what other investors believe, or how they feel. If investors are anxious and managers are behaving in a risky way stock prices tend to keep going down, in our view. Anxiety, if you like, is not misplaced. If investors are anxious but management is taking action to reduce risk then anxiety is more likely to be misplaced and the stock price can rise, despite apparently bad news. Hence we argue that investors are anxious about UK retailers and speciality pharmaceutical businesses, but not anxious enough given management behaviour. Whereas investors are anxious about miners and sceptical about a recovery, but managers are behaving sensibly, reducing risk, so investors scepticism is more likely to be misplaced.

3

Investment Adviser’s Report (continued) There was a burst of widespread anxiety a year ago, when the vote for Brexit was passed. Instinctively investors believed that Brexit was bad and a recession would ensue. A year later and we are not in a recession. The housing market has not collapsed. But this does not mean these things will not come to pass. For the first time in a long time the agenda for monetary policy (controlled by the Bank of England) and the agenda for fiscal policy (controlled by the government) are diverging. Inflation is building, the currency is weak. This puts upward pressure on interest rates. But most people are struggling and unhappy and want the Government to spend more (and tax more). This makes for a stressful economy. The impact on the UK stock market is complex. Many large UK based companies are unaffected by the UK economy and are helped by a weaker pound. Their influence on the FTSE 100 Index is greater than those tied to the UK economy. This makes for an unusual situation. Bad news is not necessarily bad for the UK stock market, especially if you avoid risky management behaviour. Ardevora Asset Management LLP Investment Adviser 21 July 2017

Certification of Accounts by Directors of the ACD This report is signed in accordance with the requirements of the Collective Investment Schemes Sourcebook (COLL) as issued and amended by the Financial Conduct Authority.

T J Ricketts M D Jealous

Margetts Fund Management Ltd Date: 22 August 2017

Authorised Status

The MGTS Ardevora UK Income Fund is a sub-fund of the the umbrella company, MGTS Ardevora ICVC, which is an open-ended investment company with variable capital incorporated in England and Wales under registration number IC938 and authorised and regulated by the Financial Conduct Authority with effect from 24 February 2012.

The fund is classed as a UCITS scheme, which complies with the requirements of the FCA FUND and COLL handbooks. Shareholders are not liable for the debts of the fund.

4

Significant purchases and salesFor the period ended 30 June 2017

Total purchases for the period £53,405,657

Purchases Cost (£)

BP PLC 6,454,418

NATIONAL GRID PLC 5,227,301

ROYAL DUTCH SHELL PLC 4,109,938

SEVERN TRENT PLC 3,905,112

IMPERIAL BRANDS PLC 3,042,305

BHP BILLITON PLC 2,896,988

ROTORK PLC 2,569,432

TESCO PLC 2,300,120

VICTREX PLC 2,124,394

SPECTRIS PLC 1,956,265

ELECTROCOMPONENTS PLC 1,832,423

UNILEVER 1,799,053

GLAXOSMITHKLINE PLC 1,733,202

G4S PLC 1,714,498

SAGE GROUP PLC 1,607,996


RELX PLC 1,414,796

CARNIVAL PLC 1,355,407

Total sales for the period £50,928,327

Sales Proceeds (£)


DIAGEO PLC 3,310,036

BRITISH AMERICAN TOBACCO PLC 3,264,159

ROYAL MAIL PLC 3,215,102

SKY PLC 2,874,896

DIXONS CARPHONE PLC 2,524,699

ELECTROCOMPONENTS PLC 2,505,476

QINETIQ GROUP PLC 2,201,505

GREENE KING PLC 2,093,191

AMEC PLC 2,066,644

BP PLC 2,061,902

ROYAL DUTCH SHELL PLC 1,987,222

TESCO PLC 1,966,633

SEVERN TRENT PLC 1,835,863

BERENDSEN PLC 1,340,032

DCC PLC 1,272,007

IMPERIAL BRANDS PLC 1,105,046

RATHBONE BROTHERS PLC 1,037,611

5

Portfolio statement As at 30 June 2017

Total Net Assets

Holding Portfolio of Investments Value (£) 30.06.17

% 31.12.16

%

Aerospace & Defence Total - - 2.67

Beverages

89,867 Diageo PLC 2,038,633 2.56

25,868 Greene King PLC 174,221 0.22

Beverages Total 2,212,854 2.78 8.27

Energy

902,160 BP PLC 3,994,764 5.03

198,049 Royal Dutch Shell 4,084,761 5.14

Energy Total 8,079,525 10.17 5.68

Financial Services

28,210 London Stock Exchange 1,028,537 1.29

9,726 Rathbone Brothers 246,457 0.31

Financial Services Total 1,274,994 1.60 2.55

Food Producers

298,737 Dairy Crest Group 1,789,435 2.25

Food Producers Total 1,789,435 2.25 3.51

General Retailers

108,222 Dixons Carphone 306,918 0.39

17,871 ASOS 1,027,404 1.29

General Retailers Total 1,334,322 1.68 5.65

Household Goods

42,156 Unilever 1,751,582 2.20

Household Goods Total 1,751,582 2.20 -

Industrial

319,703 BAE Systems PLC 2,025,318 2.55

73,500 CRH 2,009,490 2.53

348,864 Electrocomponents 2,012,944 2.53

702,816 Glencore 2,018,487 2.54

63,075 Rio Tinto 2,044,891 2.57

858,864 Rotork PLC 2,021,765 2.54

817,062 Serco Group 938,804 1.18

110,172 Victrex PLC 2,066,827 2.60

118,100 Weir Group PLC 2,044,311 2.56

Industrial Total 17,182,837 21.60 18.95

Media

268,340 Auto Trader Group PLC 1,019,692 1.28

83,294 RELX PLC 1,382,680 1.74

Media Total 2,402,372 3.02 1.25

6

Portfolio statement (continued)

Total Net Assets


% 31.12.16

%

Mining

195,619 Anglo America PLC 2,003,139 2.52

170,789 BHP Billiton 2,008,479 2.53

Mining Total 4,011,618 5.05 2.64

Pharmaceuticals

49,951 Abcam PLC 486,273 0.61

59,906 Dechra Pharmaceuticals 1,018,402 1.28

369,614 GlaxoSmithKline 6,045,037 7.61

320,865 Indivior 1,003,345 1.26

Pharmaceuticals Total 8,553,057 10.76 8.43

Software & Computer Services

88,729 Micro Focus International 2,015,036 2.54

227,971 Sage Group PLC 1,568,440 1.97

Software & Computer Services Total 3,583,476 4.51 2.67

Support Services

321,379 Ascential 1,039,982 1.31

93,726 Diploma 1,035,672 1.30

515,516 G4S PLC 1,682,644 2.12

746,183 Rentokil Initial 2,039,318 2.57

151,487 Smith & Nephew 2,007,203 2.53

Support Services Total 7,804,819 9.83 16.17

Tobacco

37,899 British American Tobacco 1,983,634 2.50

116,158 Imperial Brands 4,005,709 5.04

Tobacco Total 5,989,343 7.54 8.97

Technology

78,927 Spectris PLC 1,991,328 2.51

Technology Total 1,991,328 2.51 -

Telecoms Total - - 3.72

Travel & Leisure

26,146 Carnival PLC 1,328,217 1.67

212,094 Merlin Entertainments 1,019,112 1.28

Travel & Leisure Total 2,347,329 2.95 1.15

Utilities

404,088 National Grid 3,846,110 4.84

183,261 Severn Trent 3,998,755 5.03

Utilities Total 7,844,865 9.87 6.05

7

Portfolio statement (continued)

Total Net Assets


% 31.12.16

%

Portfolio of Investments 78,153,756 98.32 98.34

Net Current Assets 1,331,393 1.68 1.66

Net Assets 79,485,149 100 100

The investments have been valued in accordance with note 1(b).

8

Net Asset Value per Share and Comparative Tables Institutional accumulation share class

Change in net assets per share 30/06/2017 31/12/2016 31/12/2015 31/12/2014

Opening net asset value per share 187.0656 179.6800 153.8100 151.4000

Return before operating charges * 1.9843 9.0756 27.4800 3.8300

Operating charges -0.9000 -1.6900 -1.6100 -1.4200

Return after operating charges 1.0843 7.3856 25.8700 2.4100

Distribution on income shares 0.0000 0.0000 0.0000 0.0000

Closing NAV per share 188.1499 187.0656 179.6800 153.8100

Retained distribution on acc shares 3.8497 7.4538 7.7616 5.0517

* After direct transaction costs of 0.7042 1.9119 2.9081 0.9638

Return after charges 0.58% 4.11% 16.82% 1.59%

Other Information

Closing net asset value (£) 62,773,149 63,697,227 57,068,197 45,634,420

Closing number of shares 33,363,370 34,050,731 31,761,039 29,669,413

OCF 0.95% 0.95% 0.95% 0.94%

Direct transaction costs 0.37% 1.07% 1.72% 0.64%

Prices

Highest share price (pence) 198.68 198.62 182.17 160.20

Lowest share price (pence) 186.52 160.51 150.96 139.42

Performance

Institutional income share class






Distribution on income shares -3.1825 -6.3543 -6.9192 -4.6681




Other Information

Closing net asset value (£) 16,010,205 13,434,342 7,954,577 5,380,297

Closing number of shares 10,507,997 8,687,140 5,137,019 3,881,733

OCF 0.95% 0.95% 0.95% 0.94%


Prices



Performance

9

Net Asset Value per Share and Comparative Tables (continued) Retail accumulation share class






Distribution on income shares 0.0000 0.0000 0.0000 0.0000


Retained distribution on acc shares 3.7884 7.3640 7.6761 5.0086



Other Information

Closing net asset value (£) 276,688 264,242 5,442,663 3,534,594

Closing number of shares 149,493 143,420 3,065,924 2,320,173

OCF 1.20% 1.20% 1.20% 1.19%


Prices



Performance

Retail income share class






Distribution on income shares -3.1554 -6.3131 -6.8911 -4.6598




Other Information

Closing net asset value (£) 425,107 377,333 107,180 109,923

Closing number of shares 281,558 245,912 69,575 79,523

OCF 1.20% 1.20% 1.20% 1.19%


Prices



Performance

10

Net Asset Value per Share and Comparative Tables (continued) Risk Warning

An investment in an open-ended investment company (OEIC) should be regarded as a medium to long term investment. Investors should be aware that the price of shares and the income 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. Fund Performance The performance of the fund is shown in the Investment Adviser’s Report.

Synthetic Risk and Reward Indicator Typically Lower Returns Typically Higher Returns

1 2 3 4 5 6 7

Lower Risk Higher Risk

The risk and reward score is based on past performance and calculated in accordance with European legislation. It may not be a reliable indication of the future risk profile.

11

Financial statements

Notes 30.06.17 30.06.16

Income £ £ £ £

Net capital losses 4 (810,722) (1,272,966)

Revenue 6 1,623,501 1,590,630

Expenses 7 (378,600) (319,720)

Finance costs: Interest 9 (2) -

Net revenue before taxation 1,244,899 1,270,910

Net revenue after taxation 1,244,899 1,270,910

434,177 (2,056)

Finance costs: Distribution 9 (1,623,499) (1,590,626)

(1,189,322) (1,592,682)

£ £ £ £

Opening net assets attributable to

shareholders77,773,144 70,572,618

8,314,854 10,565,029

(6,709,523) (11,381,490)

Dilution levy 5,943 41,341

1,611,274 (775,120)

(1,189,322) (1,592,682)

1,290,053 1,308,299

79,485,149 69,513,115

Statement of total returnFor the period ended 30 June 2017

Statement of change in net assets attributable to shareholdersFor the period ended 30 June 2017

Total return before distributions

Amounts receivable on issue of shares

Amounts payable on cancellation of shares

Change in net assets attributable to

shareholders from investment activities

Change in net assets attributable to

shareholders from investment activities

Closing net assets attributable to shareholders

Retained distribution on accumulation shares

12

As at 30 June 2017

Notes 30.06.17 31.12.16

Assets £ £ £ £ Investment assets 78,153,756 76,480,569

Debtors 10 6,712,638 777,640

Bank balances 1,297,900 880,231

Total other assets 8,010,538 1,657,871

Total assets 86,164,294 78,138,440

Liabilities

Creditors 11 6,290,826 103,278

Distribution payable on income shares 343,301 262,018

Bank overdrafts 45,018 - Total other liabilities 6,679,145 365,296Net assets attributable to shareholders 79,485,149 77,773,144

Balance sheet

13

Notes to the financial statements As at 30 June 2017

1 Accounting policies

a) Basis of accounting

The financial statements have been prepared under the historical cost basis in accordance with Financial Reporting Standard (FRS) 1O2, as modified by the revaluation of investments, and in accordance with the revised Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Association in May 2014.

b) Basis of valuation of investments

The investments are valued at quoted bid prices for dual priced funds and at quoted prices for single priced funds, on the last business day of the accounting period.

c) Foreign exchange rates

Transactions in foreign currencies are recorded in sterling at the rate ruling at the date of the transactions. Assets and liabilities expressed in foreign currencies at the end of the accounting period are translated into sterling at the closing middle exchange rates ruling on that date.

d) Revenue

All income allocations and distributions declared by the managers of the underlying funds up to the accounting date are included in Income, net of attributable tax credits. The net allocations which are retained in Income are included in the fund’s own income allocation. Bank and other interest receivable is accrued up to the accounting date. Equalisation on distributions received is deducted from the cost of the investment and not included in the fund’s income available for distribution.

e) Expenses

All of the expenses, including the ACD’s periodic charge, are charged against Capital.

f) Taxation

(i) The fund is treated as a corporate shareholder with respect to its underlying holdings and its income is subject to streaming into franked and unfranked.

(ii) Corporation tax is provided at 20% on income, other than the franked portion of distributions from collective investment schemes, after deduction of expenses.

(iii) The charge for deferred tax is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is provided using the liability method on all timing differences, 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.

2 Distribution policy

Income arising from investments accumulates during each accounting period. Surplus income is allocated to shareholders in accordance with the COLL regulations. In order to conduct a controlled dividend flow to shareholders, interim distributions will be made at the ACD’s discretion, up to a maximum of the distributable income available for the period. All remaining income is distributed in accordance with the COLL regulations.

14

3 Risk management policies

In pursuing the investment objective, 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 foreign exchange contracts, may be utilised for efficient portfolio management purposes. Political and economic events in the major economies of the world, such as the United States, Japan and the European Union, will influence stock and securities markets worldwide. The main risks from the fund’s holding of financial instruments with the ACD’s policy for managing these risks are set out below:

i. Credit Risk – The fund may find that collective investment schemes in which it invests fail to settle their debts or deliver the investments purchased on a timely basis.

ii. Interest Rate Risk – Debt securities may be held by the underlying investments of the fund.

The Interest Rate Risk of these securities is managed by the relevant manager.

iii. Foreign Currency Risk – Although the net assets of the fund are denominated in sterling, a proportion of the fund’s investments in collective investment schemes have currency exposure with the effect that the balance sheet and total return can be affected by currency movements.

iv. Liquidity Risk – The main liability of the fund is the cancellation of any shares that investors

want to sell. Securities may have to be sold to fund such cancellations should insufficient cash be held at the bank to meet this obligation. Smaller companies by their nature, tend to have relatively modest traded share capital, and the market in such shares can, at times, prove illiquid. Shifts in investor sentiment, or the announcement of new price-sensitive information, can provoke significant movement in share prices, and make dealing in any quantity difficult. The equity markets of emerging countries tend to be more volatile than the more developed markets of the world. Standards of disclosure and accounting regimes may not always fully comply with international criteria, and can make it difficult to establish accurate estimates of fundamental value. The dearth of accurate and meaningful information and insufficiencies in its distribution, can leave emerging markets prone to sudden and unpredictable changes in sentiment. The resultant investment flows can trigger significant volatility in these relatively small and illiquid markets. At the same time, this lack of liquidity, together with the low dealing volumes, can restrict the ACD’s ability to execute substantial deals.

v. Market Price Risk – Market Price Risk is the risk that the value of the fund’s financial instruments will fluctuate as a result of changes in market prices caused by factors other than interest rates or foreign currency movement. The Market Price Risk arises primarily from uncertainty about the future prices of financial instruments that the fund holds.

Market Price Risk represents the potential loss the fund may suffer through holding market positions in the face of price movements. This risk is generally regarded as consisting of two elements – Stock Specific Risk and Market Risk. The fund’s exposure to Stock Specific Risk is reduced for equities and bonds through the holding of a diversified portfolio in accordance with the investment and borrowing powers set out in the Instrument of Incorporation.

vi. Counterparty Risk – Transactions in securities entered into by the fund give rise to exposure to the risk that the counterparties may not be able to fulfil their responsibility by completing their side of the transaction.

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.

15

4 Net capital losses 30.06.17 30.06.16

£ £

Proceeds from sales on investments during the period 50,928,327 70,807,393

Original cost of investments sold during the period (48,826,419) (72,468,724)

Gains/(losses) realised on investments sold during the period 2,101,908 (1,661,331)

Net appreciation thereon already recognised in prior periods (1,871,951) (4,203,830)

Net realised appreciation/(depreciation) for the period 229,957 (5,865,161)

Net unrealised (depreciation)/appreciation for the period (1,040,679) 4,592,195

Net losses on non-derivative securities (810,722) (1,272,966)

Net capital losses on investments (810,722) (1,272,966)

5 Purchases, sales and transaction costs

Purchases excluding transaction costs 53,139,953 71,725,688

Commissions: 0.04% [0.06%] 22,712 42,380

Stamp duty and other charges: 0.46% [0.47%] 242,992 338,908

Trustee transaction charges: 0.01% [0.01%] 2,710 4,810Purchases including transaction costs 53,408,367 72,111,786

Sales excluding transaction costs 50,951,670 70,847,039

Commissions: 0.05% [0.06%] (23,007) (39,202)

Stamp duty and other charges: 0.00% [0.00%] (336) (444)

Trustee transaction charges: 0.01% [0.01%] (3,870) (3,870)Sales including transaction costs 50,924,457 70,803,523

Trustee transaction charges have been deducted in determining net capital

Transaction charges are displayed as percentage of purchase/sale

Total commission: 0.06% [0.12%] 45,719 81,528

Total stamp duty and other charges : 0.30% [0.50%] 243,328 339,352

Total trustee transaction charges : 0.01% [0.01%] 6,580 8,680

Total charges displayed as percentage of average net asset value

Average portfolio dealing spread : 0.06% [0.09%]

6 Revenue

UK franked dividends 1,613,507 1,582,769

Overseas unfranked income 9,994 7,861Total revenue 1,623,501 1,590,630

Equities

16

7 Expenses 30.06.17 30.06.16

£ £

ACD's periodic charge 301,243 256,362

Depositary's fee 22,198 19,266

Safe custody 5,893 5,482

28,091 24,748Other expenses:

FCA fee 81 131

Audit fee 4,330 3,440

Registration fees 751 724

Sundry charges 4,023 -

Printing costs - 190

Transfer agency fee 37,973 32,130

Distribution costs 2,108 1,995Total expenses 378,600 319,720

8 Taxation

a) Analysis of the tax charge for the period:

UK Corporation tax - -

Current tax charge (note 8b) - - Total tax charge - -

b) Factors affecting the tax charge for the period:

Net income before taxation 1,244,899 1,270,910

Corporation tax at 20% 248,980 254,182Effects of:

UK dividends (322,701) (316,554)

Movement in income accruals - (572)

Utilisation of excess management expenses 73,721 62,944

Corporation tax charge - - Current tax charge for the period (note 8a) - -

c) Provision for deferred taxation

No provision for deferred taxation has been made in the current or prior accounting year.

d) Factors that may affect future tax changes

Payable to the Depositary associates of the Depositary and agents of either:

Payable to the ACD, associates of the ACD and agents of either:

The fund has unutilised management expenses of £2,435,829 (prior year £2,067,224). The fund does not

expect to be able to utilise this in the forseeable future.

17

9 Finance costs 30.06.17 30.06.16

£ £

Distributions

Interim 1,633,354 1,540,021

1,633,354 1,540,021

Amounts deducted on cancellation of shares 59,422 124,768

Amounts received on issue of shares (69,277) (74,163)

Finance costs: Distributions 1,623,499 1,590,626

Finance costs: Interest 2 - Total finance costs 1,623,501 1,590,626

Represented by:

Net revenue after taxation 1,244,899 1,270,910Expenses charged to capital

ACD's periodic charge 301,243 256,362Other capital expenses 77,357 63,357Balance of revenue brought forward 28 25Balance of revenue carried forward (28) (28)Finance costs: Distributions 1,623,499 1,590,626

10 Debtors 30.06.17 31.12.16

£ £Amounts receivable for issue of shares 220,017 185,162Amounts receivable for investment securities sold 6,320,548 -

Accrued income:

UK franked dividends 166,291 588,613

166,291 588,613Prepayments 15 97Taxation recoverable 5,767 3,768Total debtors 6,712,638 777,640

11 Creditors

Amounts payable for cancellation of shares 26,973 32,127

Amounts payable for investment securities purchased 6,193,618 - Accrued expenses:

Amounts payable to the ACD, associates and agents:

ACD's periodic charge 50,932 48,152Amounts payable to the Depositary, associates and agents:

Depositary's fees 3,748 3,585Transaction charges 1,440 1,120Safe custody fee 948 2,107

6,136 6,812Other expenses 13,167 16,187Taxation payable:Total creditors 6,290,826 103,278

18

12 Contingent liabilities and commitments

There were no contingent liabilities or outstanding commitments at the balance sheet date. [30.06.17: £Nil]

13 Related party transactions

Margetts Fund Management Ltd as ACD, is a related party, and acts as principal in respect of all transactions of shares in the Company. The aggregate monies received through issues, and paid on cancellations are disclosed in the statement of change in net assets attributable to shareholders and note 9. Amounts paid to Margetts Fund Management Ltd in respect of management services are disclosed in note 7 and amounts due at the end of the year in note 11.

Inst Acc Inst Inc Retail Acc Retail Inc

Opening number of shares 34,050,732 8,687,140 143,420 245,912Shares issued 5,217,605 2,788,571 27,263 135,854Shares converted - - - - Shares redeemed (5,904,967) (967,714) (21,190) (100,208)Closing number of shares 33,363,370 10,507,997 149,493 281,558

14 Shareholders' funds

15 Post balance sheet events There were no material post balance sheet events which have a bearing on the understanding of the financial statements.

16 Risk disclosures – interest risk Interest risk - Debt securities may be held by the underlying investments of the fund. The Interest Rate Risk of these securities is managed by the relevant manager. The table below shows the Interest Rate Risk profile at the balance sheet date:

30.06.17 31.12.16

£ £

Floating rate assets (pounds sterling): 1,297,900 880,231

Floating rate liabilities (pounds sterling): (45,018) -

Assets on which interest is not paid (pounds sterling): 84,866,394 77,258,209

Liabilities on which interest is not paid (pounds sterling): (6,634,127) (365,296)

Net Assets 79,485,149 77,773,144

The floating rate financial assets and liabilities comprise bank balances, which earn or pay interest at rates linked to the UK base rate.

The fund has no interest bearing securities with maturity dates, other than collective investment schemes, which do not have maturity dates.

19

17 Fair Value Techniques

Assets 30.06.17 31.12.16

£ £

Quoted prices for identical instruments in active markets 78,153,756 76,480,569

Prices of recent transactions for identical instruments - -

Valuation techniques using observable data - -

Valuation techniques using non-observable data - - 78,153,756 76,480,569

18 Periodic Disclosure As required by COLL the ACD is required to disclose certain information periodically in relation to the Fund which is shown below. At the end of the reporting period the percentage of the Fund’s assets subject to special arrangements arising from their illiquid nature was 0% (2017: 0%) of the NAV. There have been no new arrangements introduced for managing the liquidity of the Fund. The risk characteristics of the Fund are explained in the Prospectus. In order to assess the sensitivity of the Fund’s portfolio to the risks to which the Fund is or could be exposed, Margetts Fund Management Ltd monitors relative value at risk, commitment, gross leverage and the results of stress tests. The ACD has set limits considered appropriate to the risk profile of the fund. Any breaches of these limits are investigated by the Margetts risk committee and appropriate action taken if necessary. During the reporting period there have been no changes to the maximum level of leverage that the Fund can employ or any right of reuse of collateral or any guarantee granted under leveraging arrangements. At the end of the reporting period the total amount of leverage, expressed as a ratio, calculated using the commitment approach was 1:0.98 and using the gross method was 1:0.98.

Leverage is limited to overdraft use and the gross exposure from EPM techniques. Although the ACD may use derivatives for EPM, no collateral arrangements are currently in place and no asset re-use arrangements are in place.

The maximum leverage expressed as the ratio of the exposure to net asset value using the commitment method is 1.1:1.0 and using the gross method 3.3:1.0. Please note that the maximum leverage under the gross method is theoretical and would only occur if market risk and currency risk were hedged across the entire Sub-fund whilst it was using the maximum borrowing facility of 10%. It is not anticipated that both market risk and currency risk would be simultaneously hedged and therefore the likely maximum leverage which would be used in normal circumstances using the commitment method is 1.1:1.0 and using the gross method 2.2:1.0.

20

19 Remuneration In accordance with the requirements of COLL the total amount of remuneration paid by the ACD to its staff for the financial year ended 30 September 2016 is:

£

Fixed Remuneration 1,351,756

Variable Remuneration 1,573,101 Total Remuneration 2,924,857

Full Time Equivalent number of staff 38

Analysis of senior management

Senior management 1,813,059

Staff whose actions may have a material impact on the funds -

Other - 1,813,059

The remuneration for senior management has been calculated in accordance with the Remuneration Policy and is reviewed annually. The remuneration policy and, where required by the FCA, how benefits are calculated together with details of the remuneration committee can be found on the website: www.margetts.com. A paper copy of this is available free of charge upon request by writing to the compliance officer at 1 Sovereign Court, Graham Street, Birmingham B1 3JR. No material changes were made to the Policy or irregularities reported at the last review.

20 Securities Financing Transactions (SFT) and Total Return Swaps (TRS)

As at the Balance Sheet date, the amount of securities and commodities on loan as a proportion of total lendable assets is 0.00%.

http://www.margetts.com/

21

Distribution Table For the six months ended 30 June 2017 – in pence per share Interim Group 1 – shares purchased prior to 01 January 2017 Group 2 – shares purchased on or after 01 January 2017 Institutional Accumulation Shares

Units Net Income Equalisation Allocating 31.08.17

Allocated 31.08.16

Group 1 3.8497 - 3.8497 3.9694 Group 2 3.1378 0.7119 3.8497 3.9694

Institutional Income Shares

Units Net Income Equalisation Payable 31.08.17 Paid 31.08.16

Group 1 3.1825 - 3.1825 3.4206 Group 2 2.1147 1.0678 3.1825 3.4206

Retail Accumulation Shares

Units Net Income Equalisation Allocating 31.08.17

Allocated 31.08.16

Group 1 3.7884 - 3.7884 3.9178 Group 2 0.9250 2.8634 3.7884 3.9178

Retail Income Shares

Units Net Income Equalisation Payable 31.08.17 Paid 31.08.16

Group 1 3.1554 - 3.1554 3.4000 Group 2 1.9656 1.1898 3.1554 3.4000

Equalisation only applies to shares purchased during the distribution period (group 2 shares). It represents the accrued income included in the purchase price of the shares. 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 shares for capital gains tax purposes.

22

General Information Valuation Point The Valuation Point of the fund is at 12 noon each business day. Valuations may be made at other times with the Depositary’s approval. Buying and Selling of Shares The ACD will accept orders to buy or sell shares on normal business days between 9.00am and 5.00pm and transactions will be effected at prices determined by the following valuation. Instructions to buy or sell units may be made either in writing to: Margetts Fund Management Ltd, PO Box 17067, Birmingham, B2 2HL or by telephone on 0345 607 6808. A contract note will be issued by close of business on the next business day after the dealing date to confirm the transaction. Prices The most recent mid prices of shares are published on the Margetts website at www.margetts.com. Other Information The Instrument of Incorporation, Prospectus, Key Investor Information Document, Supplementary Information Document and the latest annual and interim reports may be inspected at the offices of the ACD, with a copy available, free of charge, on written request. The register of shareholders can be inspected by shareholders during normal business hours at the offices of the Administrator. The Head Office of the Company is at 1 Sovereign Court, Graham Street, Birmingham B1 3JR and is also the address of the place in the United Kingdom for service on the Company of notices or other documents required or authorised to be served on it.

The base currency of the Company is pounds (£) sterling.

The maximum share capital of the Company is currently £10,000,000,000 and the minimum is £1,000. Shares in the Company have no par value and therefore the share capital of the Company at all times equals the Company’s current net asset value. Shareholders who have any complaints about the operation of the fund should contact the ACD or the Depositary in the first instance. In the event that a shareholder finds the response unsatisfactory, they may make their complaint direct to the Financial Ombudsman Service at Exchange Tower, London E14 9SR or email to: [email protected] or by telephone to 0800 023 4567. Data Protection Act Shareholders’ names will be added to a mailing list which may be used by the ACD, its associates or third parties, to inform investors of other products by sending details of such products. Shareholders who do not want to receive such details should write to the ACD, requesting their removal from any such mailing list.

Documents

Interim Report and Financial Statements for MGTS Ardevora ... · Sourcebook (COLL) as issued and amended by the Financial Conduct Authority. T J Ricketts M D Jealous Margetts Fund