Discretionary Unit Fund

Fund overview

The investment objective of the fund is to provide maximum appreciation with above average yield for a growth fund. It is envisaged that the fund 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.

Investment manager's report for the year ended 30 April 2016

The last year saw more difficult conditions in the UK equity market with the FTSE All-Share Index falling by 6.8%. Smaller companies fared better but were unable to make any progress. The FTSE Small Cap Index declined by 1.4% and the Fledgling Index increased by 1.7%. It is therefore very pleasing to report that the bid price of the income units rose by 14.9%. The last six months saw modest further falls in markets. The FTSE All-Share Index dropped 2.8%, the FTSE Small Cap Index fell by 0.5% and the Fledgling Index declined by 0.4%.

Again, the Fund was able to make progress with the bid price of the income units increasing by 7.0%. The main reason that I gave six months ago for this success still holds true and there have been solid corporate performances from across the portfolio. The final distribution has been reduced slightly to 13.68p making 20.68p for the year. As is always the case, good capital performance often leads to an initial fall in net income because of increased management charges.

This report is being written just days before the EU Referendum. The importance of the result of this vote cannot be underestimated. Whatever the outcome, currency markets will swing violently in the short term and equity markets are likely to be highly volatile. Will it affect the portfolio? In the short term, the obvious answer is yes. In the longer term, the effect is more difficult to judge. The portfolio comprises well managed companies with good business models spread over wide geographies. They will undoubtedly adapt their strategies to the new situation.

Review of investment activities

There were some excellent performances in the last six months. The most notable were Hill & Smith Holdings, Macfarlane Group and Titon Holdings. Strong progress was achieved by Electrocomponents, Menzies (John) and Scapa Group. There were also good rises for Henry Boot, Castings, Churchill China, and Rights & Issues Investment Trust. There were also disappointments including Brammer, Hornby, Pendragon, Renold and Zotefoams. The offer for Tangent Communications was accepted. The holding of Renold was increased when it became substantially oversold. The holdings of Churchill China, Colefax Group, Hill & Smith Holdings, RPC Group, Scapa Group and Treatt were reduced to comply with the investment and borrowing regulations.

How to invest and further information

To deal in the units of Thornbridge Discretionary Unit Fund please call Maitland Institutional Services Ltd on +44 (0)345 305 4216.

Further information and forms are available from Maitland Institutional Services Ltd at www.maitlandgroup.com/fund-info/the-mi-discretionary-unit-fund/ or call +44 (0)345 305 4216.

For further enquiries on the Discretionary Unit Fund please contact James Bedford at Thornbridge Investment Management on +44 (0)20 8004 3275 / james.bedford@thornbridge.com