FP Matterley Equity Fund

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Investment Objective and Policy

The investment objective of the FP Matterley Equity Fund is to generate capital growth from a portfolio consisting predominantly of companies which form the FTSE 350 Index. There may be occasions when the investment manager chooses to hold Collective Investment Schemes and a high level of bonds, government securities, cash and money market instruments.

Fund Facts

Interim/Annual Accounting End Dates Ex-dividend (xd) Dates Income Distribution/ Accumulation Dates 31 July 31 January 01 August 01 February 30 September 31 March

Risk Profile

Please refer to the Full Prospectus for details of all the risks. The Fund has exposure to credit, counterparty and usual market risks. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. You should always regard investments in the Fund as medium to long term.

Charges

Share Class Initial Charge

Annual Management Charge as at 31/07/15 Ongoing Charge Figures as at 31/07/15 Ongoing Charge Figures as at 31/01/15

Share Class A Income 0.00% 1.25% 1.55% 1.57%

Share Class A Accumulation 0.00% 1.25% 1.55% 1.57%

Share Class B Income 0.00% 0.75% 1.05% 1.07%

Share Class B Accumulation _0.00% _0.75% _1.05% _1.07%

FP Matterley Equity Fund

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FP Matterley Equity Fund │ Short Report for the six months ended 31 July 2015

Distributions/Accumulations

The distribution for Share Class A Income is 1.7537p per Share, payable 30 September 2015. The distribution for Share Class A Accumulation is 2.0556p per Share, payable 30 September 2015. The distribution for Share Class B Income is 1.4996p per Share, payable 30 September 2015. The distribution for Share Class B Accumulation is 1.5760p per Share, payable 30 September 2015.

Comparative Tables

Net Asset Value

Date

Net Asset Value of Share Class (£)

Shares in issue

Net Asset Value per Share (p)

Share Class A Income

31/01/13 1,591,456 1,059,944 150.15

31/01/14 1,487,812 918,079 162.06

31/01/15 289,610 173,430 166.99

31/07/15 233,198 138,287 168.63

Share Class A Accumulation

31/01/13 8,082,753 4,733,066 170.77

31/01/14 8,331,359 4,456,439 186.95

31/01/15 549,665 280,689 195.83

31/07/15 519,746 260,130 199.80

Share Class B Income

31/01/13 258 250 103.20

31/01/14 177,430 159,730 111.08

31/01/15 1,180,954 1,031,702 114.47

31/07/15 1,216,213 1,052,335 115.57

Share Class B Accumulation

31/01/13 31,019 29,834 103.97

31/01/14 389,623 341,286 114.16

31/01/15 8,503,895 7,070,125 120.28

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Comparative Tables (continued)

Price and Revenue History

Calendar Year Highest Published Share price (p) Lowest Published Share price (p) Net Revenue per Share (p)

Share Class A Income

2012 145.23 128.14 2.2633

2013 172.93 146.66 2.6313

2014 173.93 153.21 2.5512

2015 2 182.21 161.33 2.7619 †

Share Class A Accumulation

2012 164.05 142.36 2.5221

2013 198.60 165.67 2.9886

2014 200.52 178.61 2.8680

2015 2 _213.69 _188.07 _3.2239 _†

Share Class B Income

2012 1 _100.00 _98.00 _0.0000

2013 118.79 99.89 1.3501

2014 119.44 105.13 2.3461

2015 2 _125.10 _110.83 _2.4719 _†

Share Class B Accumulation

2012 1 _100.00 _98.00 _0.0000

2013 121.22 100.00 1.4256

2014 122.75 109.53 2.3989

2015 2 _131.45 _115.48 _2.5889 _†

1 _{From 10 December to 31 December 2012.} 2

From 1 January to 31 July 2015.

† Includes the distributions paid 31 March and payable 30 September 2015. Share Class B Income and B Accumulation were launched 10 December 2012.

Major Holdings Top 10 Holdings % of Fund as at 31/07/15 Inmarsat 3.31 Reed Elsevier 3.21 Prudential 3.10 Reckitt Benckiser 3.03 Johnson Matthey 2.93 Croda 2.91

British American Tobacco 2.82

Unilever 2.78 Bellway 2.77 Top 10 Holdings % of Fund as at 31/01/15 Prudential 3.54 Reed Elsevier 3.30 Johnson Matthey 3.25 Inmarsat 3.25

British American Tobacco 3.12

Senior 2.94

Unilever 2.78

Reckitt Benckiser 2.76

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Portfolio Information

Breakdown by Investment type

Comparative figures shown above in square brackets relate to 31 January 2015.

Risk and Reward Profile

As at 31 July 2015

Typically lower rewards Lower risk

Typically higher rewards Higher risk

FP Matterley Equity Fund Share Class A 1 2 3 4 5 6 7

FP Matterley Equity Fund Share Class B 1 2 3 4 5 6 7

• This indicator is based on historical data and may not be a reliable indication of the future risk profile of the Fund. 16.43% 15.53% 14.11% 11.48% 10.05% 7.95% 6.78% 4.37% _4.12% 3.77% _3.41% 2.00% 0 2 4 6 8 10 12 14 16 18

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Investment Manager’s Report

Investment Review and Market Overview

The period under review started strongly in the UK equity market and both the headline FTSE 100 Share Index and the Fund’s benchmark FTSE 350 Share Index posted record highs at the end of February. It has taken since 1999 for them to pass the previous high point and after a pause for breath the market pushed on to record a new all-time high at the end of April. This was a surprising move as the result of the UK general election due in May was far from clear and traditionally, uncertainty ahead of an election can put a damper on stock-market activity. When the outcome was known it is fair to say that the majority of pundits were well and truly caught out by the result and although the market tended to drift lower until the end of July any setback could have been steeper if we had been burdened with the economic uncertainty created by a hung parliament.

The other factors that have weighed heavily on stock market activity over the last six months have been the crisis in the Greek economy, the big question mark over just when interest rates will rise, worries about collapsing commodity prices, and the faltering Chinese economy.

After more than 5 years of increasingly regular European Union(EU) emergency summits to tackle the economic crisis in Greece matters finally came to a head in July when a settlement had to be reached or a so called “Grexit” from the EU and inevitable bankruptcy for a country already in dire problems would have been unavoidable. An eleventh hour settlement with EU partners was tentatively agreed and EU leaders returned to their countries but there is still a lot of behind the scenes negotiating to be completed before the problem can be described as even remotely solved.

Despite the headlines and political histrionics surrounding the Greek hiatus, equity markets in the UK and also in much of Europe remained remarkably firm and unlike the early days of the crisis more than 5 years ago, there was little fear of contagion among weaker members of the EU.

Commodity prices have fallen throughout the period under review as the Chinese demand for raw materials waned. The Fund has been traditionally overweight in mining shares and despite the weakness we have kept faith with BHP Billiton and Rio Tinto even though they recorded falls of 18.1%1 and 15%1 respectively for the last 6 months. Both companies are financially strong enough to survive any continuing weakness and should be well to the forefront of any recovery. BHP spun off some of their mining interests into a new company called South 32 which was first quoted in May. The holding was relatively small and we decided to sell rather than hold. Johnson Matthey, a refiner of rare metals has also suffered with a fall of 10.6%1 as demand fell but again we never fail to be impressed with the management team and will continue to hold.

The most disruptive fall has been in the price of crude oil. Not only do we hold the leading oil companies but also engineering companies which specialise in oilfield support. In June we decided to trim our exposure and sold BP. In addition to the usual woes allied to a low oil price the company will continue to be bogged down with law suits surrounding the Deepwater Horizon oil spill in 2010. We retained Royal Dutch Shell which although it fell by 11.6%1 over the period surprised markets with a bid for BG Group. We hold the latter which thanks to the bid appreciated by 23.2%1 . Although the terms of an agreed bid were announced in April it is unlikely that the take-over will be

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Investment Manager’s Report (continued)

Investment Review and Market Overview (continued)

We also sold the holding of IMI to decrease our weighting in companies which have a high dependency on the fortunes of the oil industry. IMI was also relying on growing trade in China and Brazil, two economies where growth is fading. Another total disposal was Elementis, a producer of bulk chemicals which had performed well over the first four months of the year but could have easily surrendered the rise if the uncertainty in commodity markets continues. We also made partial sales of Senior, Inmarsat, Prudential, BATs, and Sage Group with the idea of protecting profits after periods of out-performance and adding to our cash position.

Merger and acquisition activity has come to life in 2015 and in addition to the bid by Royal Dutch Shell for BG we have seen approaches to Rexam by the Ball Corporation of USA and an agreed bid for BRIT Insurance by the Canadian group Fairfax. BRIT was a recent purchase and we had been attracted to the company by its strong cash generation and bullish outlook whereas Rexam has been a valuable contributor to our performance since inception. A successful merger of Ball and Rexam will create monopolies in certain product lines in the United States thus adding to the regulatory hurdles that have to be crossed. With a successful outcome far from certain we sold approximately one third of our holding to consolidate a profit. New purchases have included IG Group, S&U, Victrex, IP Group, and Auto Trader. The first three companies generate a high level of excess cash thanks to a niche presence in their respective sectors. IG Group has been established for more than 40 years and provides specialist spread betting services, on line stockbroking and foreign exchange trading to more than 125,000 clients worldwide2. S & U is a provider of motor finance to customers looking to buy a second hand car. The company and its management are well known to the managers of the fund having been held in the Regular High Income Fund since 2009. Historically the company had a low rating but paid a high dividend thanks to strong cash flow. Over the years, growth in earnings and the share price has out-stripped the growth in dividends and although they may no longer be the preferred investment of an income fund they have ample growth credentials for the Equity fund.

Victrex is a provider of high performance polymer solutions serving 40 countries and several industries ranging from aerospace to medical3 . The financial management of the company is exemplary and the barrier to entry for would-be-competitors is high.

IP Group and Auto Trader are a slight departure from our traditional disciplines of seeking out companies that generate cash and can deliver earnings growth which in turn fuels a consistent pattern of dividend increases. IP Group is in the research commercialisation sector, which broadly means they endeavour to create value for shareholders through the commercialisation of University Research programmes. This is a growing area as UK research and development spend is approximately £10bn per annum and growing at 4.3%p.a. (source: Company statement at time of major fund raising in May 2015). IP Group will be raising cash rather than re-paying shareholders but their model of financing and managerial assistance should in the long term prove highly profitable and in many ways is very similar to Oxford Instruments which is a more mature company and which we have held for some time.

Our most recent purchase is Auto Trader the UK’s leading automotive market place; originally a car listing magazine for 37 years it has now converted to a fully digital platform. The company only came to the market in March 2015 and will not be paying a dividend until 2016 but it has a very strong position in the car market with 80% of retail forecourts

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Investment Manager’s Report (continued)

Outlook

Over the last few months the UK equity market has proved remarkably resilient in the face of the Greek crisis, a rapidly slowing Chinese economy with knock-ons to emerging market economies and already depressed commodity prices. It has been remarkably sanguine about the prospect of interest rate rises, while sanctions against Russia and the continuing extremism of Islamic State are rarely mentioned in the context of market movers.

Forecasts by many economists and carefully worded statements by the Bank of England in the UK and the Federal Reserve in the USA suggest that we shall see a move to raise interest rates in the US in the next few months and in the UK in Q1 2016. Hopefully the authorities on both sides of the Atlantic have had more than 5 years to rehearse all the possible scenarios but we do view any rise, no matter how small as possibly a major turning point for the market. Traditionally any interest rate rise was bad news for equities but as any rise will be coming from a point so low that it would have been considered impossible 10 years ago we do not think it will cause any great upset initially. However assuming that interest rates remain low for the Euro then the pound could attract buyers which could be harmful for UK exporters. The great unknown is just how many equities are in the hands of investors who have used record low rates to borrow and chase assets like shares, property, and even works of art. In any rush for the exit shares could prove the easiest item to sell. For this reason we continue to keep a cash cushion just in case share purchases of the last few years owe more to “irrational exuberance”4 fuelled by cheap money rather than old fashioned measures of value.

Source: 1_{Price source Bloomberg. Percentage move calculated from Way Group daily valuations.} 2_{annual report 2014}

3_{2014 annual report}

4_{Term used by Alan Greenspan, head of the US Federal Reserve in 1990s to describe the dot.com boom}

Investment Manager

Charles Stanley & Co. Limited 17 August 2015

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Important events during the period

The Investment Association (IA) has published in accordance with FRS 102 a revised Statement of Recommended Practice (SORP) in May 2014 which supersedes the previous SORP for the preparation of financial statements by UK Authorised Funds. The recommendations of this SORP are applicable to accounting periods beginning on or after 1 January 2015 and as a result the requirement for Umbrella Funds to present aggregated accounts has been removed for the interim financial statements of the Company.

Authorised Corporate Director Depositary Investment Manager Auditor

The information in this report is designed to enable shareholders to make an informed judgment on the activities of the Fund during the period it covers and the result of those activities at the end of the period. The long Report and Accounts are available free of charge on request. For more information about the activities and performance of the Fund during the period and previous periods, please contact: