Smith & Williamson Investment Funds Plc An investment company with variable capital constituted as an umbrella fund with segregated liability between sub-funds under the laws of Ireland and authorised by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 as amended and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 as amended (collectively the “Regulations”) Annual Report and Audited Financial Statements For the financial year ended December 31, 2018 No subscription can be received on the basis of financial reports. Subscriptions are only valid if made on the basis of the current Prospectus which will be accompanied by a copy of the latest available annual report and a copy of the latest available semi-annual report, if published after such annual report.
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Smith & Williamson Investment Funds Plc
An investment company with variable capital constituted as an umbrella fund with
segregated liability between sub-funds under the laws of Ireland and authorised by
the Central Bank of Ireland pursuant to the European Communities (Undertakings
for Collective Investment in Transferable Securities) Regulations 2011 as amended
and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1))
(Undertakings for Collective Investment in Transferable Securities)
Regulations 2015 as amended (collectively the “Regulations”)
Annual Report and Audited Financial
Statements
For the financial year ended
December 31, 2018
No subscription can be received on the basis of financial reports. Subscriptions are only
valid if made on the basis of the current Prospectus which will be accompanied by a copy of
the latest available annual report and a copy of the latest available semi-annual report, if
published after such annual report.
Smith & Williamson Investment Funds Plc
1
Table of contents
Directors and Other Information
2
Investment Manager’s Report
3
Depositary’s Report
4
Directors’ Report
5 - 7
Independent Auditor’s Report
8 - 10
Statement of Financial Position
11 - 18
Statement of Comprehensive Income
19 - 22
Statement of Changes in Net Assets Attributable to Holders of Redeemable
Participating Shares
23 - 26
Statement of Cash Flows 27 - 30
Notes to the Financial Statements
31 - 90
Schedule of Investments
91 - 126
Portfolio Changes (Unaudited)
127 - 140
Unaudited Section 141 - 142
Smith & Williamson Investment Funds Plc
2
Directors and Other Information
Registered Office
Trinity Point
10-11 Leinster Street South
Dublin 2
Ireland
Investment Manager and Distributor
Smith & Williamson Investment Management LLP
25 Moorgate
London EC2R 6AY
England
Directors
Peter Blessing (Irish - Independent director)*
William Cussans (British)*
Desmond Miller (Irish - Independent director)*
Paul Wyse (Irish)*
Noel Medici (British)*
Administrator, Registrar and Transfer Agent
BNP Paribas Fund Administration Services (Ireland) Limited
Trinity Point
10-11 Leinster Street South
Dublin 2
Ireland
Depositary
BNP Paribas Securities Services, Dublin Branch
Trinity Point
10-11 Leinster Street South
Dublin 2
Ireland
Independent Auditors
Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House
Earlsfort Terrace
Dublin 2
Ireland
Legal Advisers in Ireland
A&L Goodbody Solicitors
International Financial Services Centre
North Wall Quay
Dublin 1
Ireland
Company Secretary
Goodbody Secretarial Limited
International Financial Services Centre
North Wall Quay
Dublin 1
Ireland
Manager
Smith & Williamson Investment Management (Ireland)
Limited
Trinity Point
10-11 Leinster Street South
Dublin 2
Ireland
Company Number
316015
*non-executive Director
Smith & Williamson Investment Funds Plc
3
Investment Manager’s Report
As the key worries about a possible US recession and the damage that a trade way could inflict on global growth have
receded, equity markets worldwide recovered from the lows seen at the end of 2018. Whilst markets were looking
oversold and relatively cheap, a catalyst was needed to spur the recovery, and this time it came from a reversal in
policy from the Fed, who eased fears of rising rates with a flip-flop towards no rises. We may even see a cut in rates
this year.
Following the recovery in equity markets the one question still to be answered is whether the indicators of slowing
growth that we are seeing are simply another soft patch in what has been an extremely long but slow growth cycle, or
whether we are now at a stage in the process which leads to recession and thus falls in earnings and share prices. These
worries have been compounded recently by the inversion of the US yield curve, which in the past has been a good lead
indicator of an earnings contractions approaching – but not necessarily being imminent.
But not all the indicators are negative. Indeed, there have been many positive developments that continue to point to a
slow but steady period of economic growth. Much has actually improved since the end of last year – China in
particular is responding to further stimulus, and should we see good news coming from the US – Sino trade talks, as
has recently been leaked, this could also provide added stimulus to US and Asian equities in particular. Broadly, real
rates are still very accommodative and the US is proving to be resilient. Labour markets remain very strong in key
regions, with rising wages. We are running our US and Far East positions for now.
In the UK the uncertainty caused by Brexit is helping some parts of the economy and hindering others, but as a whole
the economy isn’t doing too badly. An apparent surge in stockbuilding ahead of the original Brexit day of 29th March
boosted the Markit/CIPS manufacturing index to a 13-month high in March. In contrast, by prompting firms to delay
spending decisions, the political uncertainty contributed to the services PMI falling to its lowest level since the 2016
referendum. At face value, the two activity surveys suggest that the economy may have stagnated in Q1. The risk to
estimates that GDP rose by 0.3% in Q1 lie on the downside, but it must be remembered that the UK equity market is
still at a low valuation, suggesting much bad news is in the price.
There has been some talk that the European economy is moving into a tricky period. Bund yields in Germany have
fallen back to below zero, leading to talk about the ‘Japanification’ of Europe. There are some parallels. Inflation and
interest rates are low. Economic growth has been feeble. The banking sector looks weak. Overall, we still expect
equity markets to advance, but the relative strength from Europe is currently challenged. We have been reducing our
exposure to Europe over the past six months, and this will continue.
We are modestly bullish for equities and bonds, encouraged by global activity momentum looking to be positive, with
the US being resilient, China turning higher and Europe stabilising. However, the bottom-up analyst consensus now
expects global EPS growth of 5% in 2019, down from 7% at the start of the year, and more in-line with the 4% top-
down forecast. Gains are still expected but possibly only modest from here until the outlook for 2020 becomes clearer.
Smith & Williamson Investment Management Ltd
March 2019
Smith & Williamson Investment Funds Pie
DEPOSITARY'S REPORT TO THE SHAREHOLDERS OF SMITH & WILLIAMSON INVESTMENT FUNDS PLC FOR THE FINANCIAL YEAR ENDED DECEMBER 31,2018
In our opinion, the Company has been managed during the financial year, in all material respects:
(i) in accordance with the limitations imposed on the investment and borrowing powers of the scheme by the memorandum and articles of association and by the Central Bank of Ireland under the powers granted to the Central Bank of Ireland by the European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2015 as amended from time to time (the "Regulations") and the Companies Act, 2014; and
(ii) Otherwise in accordance with the provisions of the memorandum and articles of associations and the Regulations.
)v0y)lo {:oJcllvV'~-BNP Paribas Securities ~e~iJs,~in Branch Trinity Point 10-11 Leinster Street South Dublin 2 Ireland April 15, 2019
4
Smith & Williamson Investment Funds Plc
5
Directors’ Report
The Directors present their annual report together with the audited financial statements for the financial year ended
December 31, 2018.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Directors’ report and the financial statements in accordance with the
Companies Act 2014 as amended (the “Act”) and the Regulations. They have elected to prepare the financial
statements in accordance with International Financial Reporting Standards as adopted by the European Union
(“IFRS”).
Under the Act, the Directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the assets, liabilities and financial position of the Company as at the financial year end date and of the
profit or loss of the Company for the financial year.
In preparing those financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether the financial statements have been prepared in accordance with the applicable accounting standards,
identify those standards, and note the effect and the reasons for any material departure from those standards; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors confirm that they complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to:
- correctly record and explain the transactions of the Company;
- enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined
with reasonable accuracy; and
- enable the Directors to ensure that the financial statements comply with the Act, and enable those financial
statements to be audited.
To achieve this, the Directors have appointed the Administrator to ensure that the requirements of the Act, are complied
with. The accounting records are maintained at the Administrator’s offices at Trinity Point, 10-11 Leinster Street South,
Dublin 2, Ireland.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. To help achieve this, the Directors have delegated custody of
the Company’s assets to the Depositary.
Principal Activities
The Company commenced activities on 31 March 2000 and has been approved by the Central Bank of Ireland as an
Undertaking for Collective Investment in Transferable Securities. The Company is an open ended umbrella type
investment company comprising separate sub–funds which also have separate investment objectives.
Business Review
The Investment Manager’s Report contains a review of the factors which contributed to the performance of the
Company during the financial year. The Directors do not anticipate any changes to the investment objectives of the
existing sub-funds. As at 31 December 2018, the Company had 11 active sub-funds in operation and 1 sub-fund was
terminated during the financial year.
Risks and uncertainties
The principal risks facing the Company are described in Note 14.
Results and Distributions
The results for the financial year are set out in the Statement of Comprehensive Income on pages 19-22 and details of
distributions to investors are set out in Note 18.
Smith & Williamson Investment Funds Plc
6
Directors’ Report (continued)
Directors
The Directors that served during the financial year are listed below. All of the Directors served for the whole of the
financial year under review.
Peter Blessing (Irish - Independent director)*
William Cussans (British)*
Desmond Miller (Irish - Independent director)*
Paul Wyse (Irish)*
Noel Medici (British)*
*non-executive Director
Directors’ Interests
As at December 31, 2018 William Cussans had a beneficial interest of 225,000 shares in the Smith &Williamson Cash
Fund. Noel Medici had a beneficial interest of 16,950 units in Smith & Williamson Global Inflation Linked Bond
Fund, 20,820 units in Smith & Williamson Enterprise Fund and 20,265 units in Smith & Williamson Artificial
Intelligence Fund.
Transactions Involving Directors
There were no contracts or arrangements of any significance in relation to the business of the Company in which the
Directors had any interest as defined in the Act at any time during the financial year ended December 31, 2018 except
for the Investment Management and Distribution Agreements between the Company and Smith & Williamson
Investment Management LLP of which Noel Medici and William Cussans are employees.
Transactions with Connected Persons
In accordance with the requirements of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1))
(Undertakings for Collective Investment in Transferable Securities) Regulations 2015 as amended the Directors
confirm that there are arrangements in place, evidenced by written procedures to ensure that any transactions carried
out between the Company and a connected person is conducted as arm’s length and in the best interests of the
shareholders. Connected persons means the Manager, Depositary and the delegates or sub-delegates of such a
management company or depositary (excluding any non-group company sub-custodians appointed by a depositary);
and any associated or group company of such a management company, depositary, delegate or sub-delegate. The
Company’s Board of Directors are satisfied that the transactions with connected persons during the financial year were
carried out as if negotiated at arm’s length and in the best interests of the shareholders.
Accounting Records
The Directors have ensured that the proper books and records requirements under Section 281 to 285 of the
Companies Act 2014 have been complied with by outsourcing this function to a specialist provider of such services.
The books of account are held at the Company’s registered office which is Trinity Point, 10 - 11 Leinster Street South,
Dublin 2.
Directors Compliance Statement
The Directors acknowledge that they are responsible for securing the Company’s compliance with the relevant
obligations as set out in Section 225 of the Companies Act 2014. The Directors confirm that:
A compliance policy document has been drawn up that sets out policies, that in our opinion are appropriate to the
company, respecting compliance by the company with its relevant obligations,
Appropriate arrangements or structures are in place that are, in our opinion, designed to secure material
compliance with the company's relevant obligations, and
During the financial year, the arrangements or structures referred to above have been reviewed.
Smith & Williamson Investment Funds Pie
Directors' Report (continued)
Statement of Relevant Audit Information The Directors acknowledge that they are responsible for providing all relevant audit information to the Company's statutory auditors in connection with preparing their report in accordance with Section 330 of the Companies Act 2014. The Directors confirm that:
• So far as the Directors are aware, there is no relevant audit information of which the Company's statutory auditors are not aware, and
• The Directors have taken all the steps that ought to have been taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company's statutory auditors are aware of that information.
Audit Committee Statement Section 167 (2) of the Act, requires the Board of Directors to either establish an audit committee or decide not to establish such a committee. The Directors believe that there is no requirement to form an audit committee as: Due consideration and oversight is given to the Company's financial reporting processes, internal controls and independent auditors at the quarterly Board meetings.
Voluntary Corporate Governance Code for the Irish Funds Industry The Company has complied with all elements of the Irish Funds' Corporate Governance Code for Collective Investment
Schemes and Management Companies during the financial year ended December 31, 2018.
Significant events during the financial year Smith &Williamson Medium Dated Corporate Bond Fund was terminated on June 15,2018.
A new Prospectus was issued on August 28, 2018.
Events post financial year end There were no significant events after the financial year end.
Independent Auditor The auditors, Deloitte Ireland LLP, Chartered Accountants and Statutory Audit Firm, have signified their willingness to continue in office in accordance with Section 383(2) of the Companies Act, 2014.
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF SMITH & WILLIAMSON INVESTMENT FUND PLC
Report on the audit of the financial statements
Opinion on the financial statements of Smith & Williamson Investment Fund Pie ("the company") In our opinion the financial statements:
• give a true and fair view of the assets, liabilities and financial position of the company as at December 31, 2018 and of the loss for the financial year then ended; and
• have been properly prepared in accordance with the relevant financial reporting framework, the applicable Regulations and, in particular, with the requirements of the Companies Act 2014 and the European Communities (Undertaking for Collective Investment in Transferable Securities) regulation 2011 and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in transferable Securities) Regulations 2015.
The financial statements we have audited comprise:
• the Statement of Financial Position; • the Statement of Comprehensive Income • the Statement of Changes in Net Assets attributable to holders of Redeemable Shares; • the Statement of Cash Flows; and • the related notes 1 to 25, including a summary of significant accounting policies as set out in note 2.
The relevant financial reporting framework that has been applied in their preparation is the Companies Act 2014 and Intrnational Finacnia Reporting Standards (IFRSs) as adopted by the European Union ("the relevant financial reporting framework").
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are described below in the "Auditor's responsibilities for the audit of the financial statements" section of our report .
We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion .
Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which ISAs (Ireland) require us to report to you where :
• the directors' use of the going concern basis of accounting in preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other information The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon .
Continued on next page/
8
Deloitte. / Continued from previous page
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF SMITH & WILLIAMSON INVESTMENT FUND PLC
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are requ ired to report that fact.
We have nothing to report in this regard.
Responsibilities of directors As explained more fully in the Directors ' Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act 2014, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company 's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion . Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it ex ists . Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
As part of an audit in accordance with ISAs (Ireland) , we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors ' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern . If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor's report . However, future events or conditions may cause the entity ( or where relevant, the group) to cease to continue as a going concern.
Continued on nex t page/
9
Deloitte. / Continued from previous page
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF SMITH & WILLIAMSON INVESTMENT FUND PLC
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that the auditor identifies during the audit .
This report is made solely to the company's shareholders, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company 's shareholders as a body, for our audit work, for this report, or for the opinions we have formed.
Report on other legal and regulatory requirements
Opinion on other matters prescribed by the Companies Act 2014 Based solely on the work undertaken in the course of the audit, we report that :
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit. • In our opinion the accounting records of the company were sufficient to permit the financial statements to be
read ily and properly audited . • The financial statements are in agreement with the accounting records. • In our opinion the information given in the directors' report is consistent with the financial statements and the
directors' report has been prepared in accordance with the Companies Act 2014.
Matters on which we are required to report by exception Based on the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.
We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to you if, ur opinion, the disclosures of directors' remuneration and transactions specified by law are not made.
is ian' acManus For and on behalf of Deloitte Ireland LLP Chartered Accountants and Statutory Audit Firm Deloitte & Touche House, Earlsfort Terrace, Dublin 2 Ireland
29 April 2019
10
Smith & Williamson Investment Funds Plc
11
Statement of Financial Position
as at December 31, 2018
Wye
Investment
Fund
Boulder
Investment
Fund
Santos
Investment
Fund
Smith &
Williamson
Defensive
Growth Fund
Smith &
Williamson
Cash Fund
Smith &
Williamson
Short Dated
Corporate
Bond Fund
Smith &
Williamson
Enterprise
Fund
Notes GBP GBP GBP GBP GBP GBP GBP
Assets
Financial assets at fair value through profit or loss 5,15 19,299,230 17,914,517 12,519,562 39,712,719 - 224,254,945 18,569,306
Cash at bank 7 80,192 157,686 187,762 2,597,868 6,731 1,657,844 13,406,091
Withholding tax on bond interest - - - - - 13,323 -
(Decrease)/increase in net assets from operations attributable
to holders of redeemable participating shares (1,738,558) (2,690,701) (939,373) (548,077) 158 (10,188,419) (7,616,316)
All amounts arose solely from continuing operations. There were no gains or losses other than those dealt with in the Statement of Comprehensive Income.
The notes 1 to 25 form an integral part of the financial statements.
Smith & Williamson Investment Funds Plc
20
Statement of Comprehensive Income
for the Financial Year Ended December 31, 2018 (continued)
Smith &
Williamson
Global
Inflation
Linked Bond
Fund
Smith &
Williamson
Medium Dated
Corporate
Bond Fund*
Smith &
Williamson
Mid Ocean
World
Investment
Fund
Smith &
Williamson
Blairmore
Global
Equity Fund
Smith &
Williamson
Artificial
Intelligence
Fund
Cross
Investments Total
Notes GBP GBP USD USD GBP GBP GBP
Income
Income from investments 3 1,100,596 26,315 1,607,681 571,425 787,815 - 18,890,247
Net realised gain/(loss) on investments at fair value through
profit or loss 12 (3,311,999) (71,702) 5,626,592 2,684,989 2,138,749 - (10,928,095)
Movement in unrealised (depreciation)/appreciation on
investments at fair value through profit or loss 12 1,244,068 (45,493) (15,904,677) (7,476,761) (8,660,299) (325,901) (34,405,325)
Total investment (loss)/income (967,335) (90,880) (8,670,404) (4,220,347) (5,733,735) (325,901) (26,443,173)
Interest charge on bank overdraft 6,732 19 4,843 - 6,813 - 32,689
Total finance cost 774,330 1,503 404,860 2,530 6,000 - 10,878,323
(Loss)/profit before tax (2,010,035) (122,857) (9,968,381) (4,622,978) (6,400,733) (325,901) (43,323,746)
Withholding tax on dividends - 332,584 87,729 137,421 625,954
Withholding tax on bond interest - - - - - 13,323
(Decrease)/increase in net assets from operations attributable
to holders of redeemable participating shares (2,010,035) (122,857) (10,300,965) (4,710,707) (6,538,154) (325,901) (43,963,023)
*Terminated on June 15, 2018.
All amounts arose solely from continuing operations. There were no gains or losses other than those dealt with in the Statement of Comprehensive Income.
The notes 1 to 25 form an integral part of the financial statements.
Smith & Williamson Investment Funds Plc
21
Statement of Comprehensive Income
for the Financial Year Ended December 31, 2017
Wye
Investment
Fund
Boulder
Investment
Fund
Santos
Investment
Fund
Smith &
Williamson
Defensive
Growth Fund
Smith &
Williamson
Cash Fund
Smith &
Williamson
Short Dated
Corporate
Bond Fund
Smith &
Williamson
Enterprise
Fund
Notes GBP GBP GBP GBP GBP GBP GBP
Income
Income from investments 3 626,744 394,212 357,467 329,702 163,781 15,719,967 1,938,939
Net realised gain on investments at fair value
through profit or loss 12 1,894,417 800,633 553,047 608,565 - 180,916 6,538,119
Movement in unrealised (depreciation)/appreciation on
investments at fair value through profit or loss 12 (255,032) 2,388,450 769,217 618,365 - (11,365,634) (397,183)
Total investment income 2,266,129 3,583,295 1,679,731 1,556,632 163,781 4,535,249 8,079,875
Withholding tax on bond interest - - - - - (762,684) -
Increase/(decrease) in net assets from operations attributable
to holders of redeemable participating shares 1,639,393 3,189,087 1,322,269 1,226,930 1 (10,895,286) 5,758,118
All amounts arose solely from continuing operations. There were no gains or losses other than those dealt with in the Statement of Comprehensive Income.
The notes 1 to 25 form an integral part of the financial statements.
Smith & Williamson Investment Funds Plc
22
Statement of Comprehensive Income
for the Financial Year Ended December 31, 2017 (continued)
Smith &
Williamson
Global Inflation
Linked Bond
Fund*
Smith &
Williamson
Medium Dated
Corporate Bond
Fund
Smith &
Williamson Mid
Ocean World
Investment
Fund
Smith &
Williamson
Blairmore
Global Equity
Fund
Smith &
Williamson
Artificial
Intelligence
Fund** Total
Notes GBP GBP USD USD GBP GBP
Income
Income from investments 3 266,692 143,385 1,623,686 468,776 50,983 21,615,381
Net realised gain on investments at fair value through
profit or loss 12 1,360,281 236,607 4,608,806 1,099,823 307,194 16,909,018
Movement in unrealised (depreciation)/appreciation on
investments at fair value through profit or loss 12 (583,700) (244,191) 15,380,180 6,381,318 2,323,196 10,137,905
Total investment income 1,043,273 135,801 21,612,672 7,949,917 2,681,373 48,662,304
Interest charge on bank overdraft 2,039 42 1,254 122 1,915 12,322
Total finance cost 132,951 104,267 408,510 990 1,915 15,189,306
Profit/(loss) before tax 813,738 (11,978) 20,156,065 7,564,939 2,501,266 26,492,997
Withholding tax on dividends - (2,395) 234,304 - 7,801 391,033
Withholding tax on bond interest - (2,667) - 81,467 - (702,142)
Increase/(decrease) in net assets from operations attributable
to holders of redeemable participating shares 813,738 (6,916) 19,921,761 7,483,472 2,493,465 26,804,106
* Formerly known as Smith & Williamson Global Government Bond Fund.
** Launched on June 23, 2017.
All amounts arose solely from continuing operations. There were no gains or losses other than those dealt with in the Statement of Comprehensive Income.
The notes 1 to 25 form an integral part of the financial statements.
Smith & Williamson Investment Funds Plc
23
Statement of Changes in Net Assets Attributable to Holders of
Redeemable Participating Shares
for the Financial Year Ended December 31, 2018
Wye
Investment
Fund
Boulder
Investment
Fund
Santos
Investment
Fund
Smith &
Williamson
Defensive
Growth Fund
Smith &
Williamson
Cash Fund
Smith &
Williamson
Short Dated
Corporate
Bond Fund
Smith &
Williamson
Enterprise
Fund
GBP GBP GBP GBP GBP GBP GBP
(Decrease)/increase in net assets from operations attributable
Net cash (outflow)/inflow from financing activities 63,729,345 (1,080,586) (12,721,053) (2,331,864) 41,082,057 (17,098,532)
Net increase/(decrease) in cash 647,581 (277,679) (894,801) (849,208) 1,634,547 (32,264,286)
Cash and cash equivalents at beginning of financial year 81,656 295,869 2,163,186 1,085,131 - 63,553,811
Cash and cash equivalents at end of financial year 729,237 18,190 1,268,385 235,923 1,634,547 31,289,525
* Formerly known as Smith & Williamson Global Government Bond Fund.
** Launched on June 23, 2017.
The notes 1 to 25 form an integral part of the financial statements.
Smith & Williamson Investment Funds Plc
31
Notes to the Financial Statements for the financial year ended December 31, 2018
1. Company background
Smith & Williamson Investment Funds Plc (the “Company”) is an authorised umbrella fund with segregated liability
between sub-funds pursuant to the Regulations. The Company was incorporated on November 30, 1999 as an open-
ended investment company with variable capital under the Regulations. The Company began trading on March 31,
2000.
The investment objective of Wye Investment Fund, Boulder Investment Fund and Santos Investment Fund is to achieve long term growth of capital through investment in stocks (which may include fixed interest stocks), shares, collective investment schemes and investment trust companies in the UK and overseas stock markets, and through investment in cash and money market instruments throughout the world.
The investment objective of Smith & Williamson Defensive Growth Fund is to achieve long-term steady capital growth by adopting a policy to normally invest at least 50% of the assets in zero dividend preference shares (zeros), which are a class of share issued by Split Capital Investment Trusts, and synthetic zeros (closed-ended investment companies listed on Recognised Markets that display the same characteristics as conventional zeros). The sub-fund may also invest in other transferable securities, money market instruments, deposits, collective investment schemes and warrants.
The investment objective of Smith & Williamson Cash Fund and Smith & Williamson Short Dated Corporate Bond Fund is to achieve a high rate of interest and ready access to capital.
The investment objective of Smith & Williamson Enterprise Fund is to achieve long term capital appreciation with low risk and low volatility. The investment objective of Smith & Williamson Global Inflation Linked Bond Fund is to achieve total returns in excess of the sub-funds benchmark, the FTSE Actuaries Government Securities UK Gilts All Stocks Index, by investing the majority of its Net Asset Value in debt securities.
The investment objective of Smith & Williamson Medium Dated Corporate Bond Fund is to achieve income returns and ready access to capital by investing the majority of its Net Asset Value in a variety of Sterling, US Dollar and Euro medium-dated investment grade corporate bonds. This Fund closed on June 15, 2018.
The investment objective of Smith & Williamson Mid Ocean World Investment Fund is investing the majority of its Net Asset Value in equity and equity-related securities and debt securities.
The investment objective of the Smith & Williamson Blairmore Global Equity Fund is to achieve capital appreciation through investment in an actively managed long-only portfolio consisting primarily of global equities.
The investment objective of the Smith & Williamson Artificial Intelligence Fund is to achieve capital appreciation through investing primarily in equity and equity-related securities issued by companies.
The following table provides the date of commencement of trading and closing for the various sub-funds established by the Company (the “sub-funds”):
Date of Trading Closure Date
Wye Investment Fund May 24, 2000
Boulder Investment Fund October 19, 2000
Santos Investment Fund July 2, 2002
Smith & Williamson Defensive Growth Fund September 28, 2004
Smith & Williamson Cash Fund March 18, 2008
Smith & Williamson Short Dated Corporate Bond Fund April 29, 2009
Smith & Williamson Enterprise Fund January 15, 2010
Smith & Williamson Global Inflation Linked Bond Fund May 25, 2012
Smith & Williamson Medium Dated Corporate Bond Fund July 13, 2012 June 15, 2018
Smith & Williamson Mid Ocean World Investment Fund April 1, 2014
Smith & Williamson Blairmore Global Equity Fund December 31, 2014
Smith & Williamson Artificial Intelligence Fund June 23, 2017
Smith & Williamson Investment Funds Plc
32
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies
The significant accounting policies adopted by the Company are as follows:
(a) Basis of Preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union (“EU”), applicable law comprising the Irish Companies Act 2014 as
amended, and the Regulations.
The Company has initially applied IFRS 9 from January 1, 2018. IFRS 15 Revenue from Contracts with Customers is
also effective from January 1, 2018 but does not have a material effect on the Company’s financial statements.
New standards and amendments effective after 1 January 2018:
IFRS 9, “Financial instruments”, addresses the classification, measurement and recognition of financial assets and
financial liabilities. An updated version of IFRS 9 was issued on November 10, 2013. It replaces the parts of IAS 39
that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be
classified into two measurement categories: those measured at fair value and those measured at amortised cost. The
determination is made at initial recognition. The classification depends on the entity’s business model for managing its
financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the
standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken
for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than the income statement, unless this creates an accounting mismatch. The effective
mandatory date in place for IFRS 9 is 1 January 2018. The Company classifies its financial assets as being at fair value
through profit or loss in accordance with its business model as its financial assets are managed and their performance
evaluated on a fair value basis in accordance with the documented investment strategy. The adoption of IFRS 9 did not
have a significant effect on the financial statements (refer to below for further detail).
IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2018)
In the current year the Company has adopted IFRS 9 “Financial Instruments”. Comparative figures for the period
ended December 31, 2017 have not been restated. Therefore, financial instruments in the comparative period are still
accounted for in accordance with IAS 39 Financial Instrument: Recognition and Measurement.
Classification of financial instruments effective from January 1, 2018 (IFRS 9)
Under IFRS 9, financial assets are measured at amortised cost if they are held within a business model whose objective
it is to hold financial assets in order to collect contractual cash flows (business model test), the contractual terms of
which give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
outstanding (SPPI test).
The primary objective of each sub-fund is disclosed under note 1, some of the financial instruments held lead to credit
exposure for one or more investments.
The Company considers this to be indicative of a ‘hold to collect’ business model as identified by IFRS 9. The
contractual cash flow characteristics of the financial assets are also deemed to meet the SPPI test.
The Company therefore classifies money market instruments, term deposits and certificate of deposits as measured at
amortised cost in line with the standard. The financial instruments which are valued at market prices with a
corresponding gain or loss being recognized in the Statement of Comprehensive Income are classified at fair value
through the profit or loss. Debt instruments are classified at fair value through profit or loss due to being valued at fair
value for which the results of the instruments are also monitored on a fair value basis and the default risk is assumed to
be zero.
The Company also includes short-term non-financing receivables including interest receivable and other receivables at
amortised cost.
Smith & Williamson Investment Funds Plc
33
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2018) (continued)
Classification of financial instruments effective from January 1, 2018 (IFRS 9) (continued)
In evaluating the classification of financial assets the Company has determined the following for financial instruments
at fair value through the profit or loss:
- Based on how performance is evaluated, how risks are managed and how compensation is paid, the business
model for financial assets is to manage on a fair value basis.
- The contractual cash flows of the financial assets are not solely payments of principal and interest.
Classification of financial instruments before January 1, 2018 (IAS 39)
- The Company classified its investments in money market instruments, term deposits and certificate of
deposits as loans and receivables in the Statement of Financial Position. Loans and receivables are non-
derivative financial assets with fixed or determinable payments that are not quoted in an active market.
- Financial instruments classified at fair value through profit or loss prior to January 1, 2018 will remain
classified at fair value through profit or loss based on the above and recognised as per below.
Recognition/derecognition of financial instruments
Investments at fair value through profit or loss are initially recognised at fair value, and transaction costs for all
financial assets and liabilities carried at fair value through profit or loss are expensed as incurred. Subsequent to initial
recognition, all financial assets and liabilities at fair value through profit or loss are measured at fair value.
Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company
has transferred substantially all risks and rewards of ownership. The Company derecognises a financial liability (or a
part of a financial liability) from its Statement of Financial Position when, and only when, it is extinguished, that is,
when the obligation specified in the contract is discharged or cancelled or expires.
Purchases and sales of investments at fair value through profit or loss are accounted for on the day the trade
transaction takes place. Investments are derecognized when the rights to receive cash flows from the investments have
expired or the risks and rewards of ownership have all been substantially transferred. Realised gains and losses on
disposals are calculated using the first-in first-out cost method and are reflected as net realised gains/(losses) on
financial instruments in the Statement of Comprehensive Income.
Gains and losses arising from changes in the fair value of financial assets and liabilities at fair value through profit or
loss category are included in the Statement of Comprehensive Income in the financial year in which they arise. The
computation of realised gains and losses on sales of financial assets and liabilities at fair value through profit or loss is
made on the basis of average cost.
Derivatives are recognised at fair value on the date on which a derivative contract is entered into and are subsequently
re-measured at their fair value. Fair values are determined by using forward exchange market rates at the Statement of Financial Position date. The fair value of contracts for differences is calculated as the difference between the contracted price and the quoted market price of the underlying security on the date of the Statement of Financial Position. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading
securities) is based on quoted market prices at the Statement of Financial Position date. The quoted market price used
for financial assets held by the Company is the bid price and for financial liabilities, the ask price. When the Company
holds derivatives with offsetting market risks it uses mid-market prices as a basis for establishing fair values for the
offsetting risk positions and applies the bid or ask price to the net open position, as appropriate.
Smith & Williamson Investment Funds Plc
34
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2018) (continued)
Recognition/derecognition of financial instruments (continued)
Financial instruments classified as loans and receivables are initially recognised at fair value and subsequently
measured at amortized cost using the effective interest method, less any allowance for impairment.
Impairment of financial assets effective from January 1, 2018
Under IFRS 9, impairments are recognised in three stages to reflect the potential variation in credit quality of financial
assets:
• Stage 1: Items that have not deteriorated significantly in credit quality since initial recognition. For these items, a
loss allowance equal to 12-month expected credit losses (“ECL”) is recognised. Interest income is calculated on the
gross carrying amount of the asset (i.e., without reduction for the loss allowance).
• Stage 2: Items that have deteriorated significantly in credit quality since initial recognition but that do not have
objective evidence of impairment. For these items, a loss allowance equal to lifetime ECL is recognised. Interest
income is still calculated on the gross carrying amount of the asset.
• Stage 3: Items that have objective evidence of impairment at the reporting date. For these items, a loss allowance
equal to lifetime ECL is recognised. Interest income is subsequently calculated on the net carrying amount (i.e.
reduced by the loss allowance).
As at 31 December 2018 all the Company’s loans and receivables are at Stage 1.
IFRS 9 permits the use of a practical expedient for financial assets with low credit risk. If the credit risk of a financial
instrument is low at the reporting date, impairment can be measured using a 12-month ECL. Where this applies, an
assessment of whether a significant increase in credit risk has occurred does not have to be carried out. In order to
avail of the expedient, the financial instrument must meet the following criteria:
It has a low risk of default;
The borrower is considered, in the short term, to have strong capacity to meet its obligations; and
The lender expects, in the longer term, that adverse changes in economic and business conditions might, but will
not necessarily, reduce the liability of the borrower to fulfil its obligations.
The investment manager will only invest in financial instruments which meet or exceed the required credit quality as
set out in the sub-fund’s investment objectives. Financial instruments at amortized cost are considered to have low
credit risk, and the loss allowance recognised during the period was therefore limited to 12 month expected losses.
Exposure to banks are monitored daily and comment from ratings agencies and the press is closely followed to ensure
that any deterioration in the credit standing of approved counterparties is identified in a timely manner and appropriate
action taken. No fixed deposit, certificate of deposit or floating rate note is to have a remaining maturity of more than
12 months, at date of purchase. Consideration is given to firms being retained as counterparties where their Fitch
Support rating is 1, indicating a strong probability of their receiving support from the authorities or a strong parent
should the need arise.
The Company has no appetite for crystallised credit risk which may result in poor outcomes or detriment. The level of
credit risk is expected to reflect the overall low risk appetite for financial risks. There is a comprehensive ladder of
roles and responsibilities designed to ensure that this low risk approach is implemented and monitored effectively.
Smith & Williamson Investment Funds Plc
35
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
Impairment of financial assets effective from January 1, 2018(continued)
As a result of this, loans and receivables measured at amortised cost are considered to have low credit risk, and the loss
allowance recognised during the period was therefore limited to 12 month ECL.
The 12-month ECL estimate provided for each investment is estimated by multiplying the probability of default by the
expected loss given default (“LGD”). The portfolio level expected loss is estimated by taking a weighted average of
each deal’s expected loss.
Given the nature of investments at amortised cost the investment manager considers the ECLs to be immaterial and not
disclosed in the financial statements.
Should the credit risk of a financial instrument be deemed to no longer qualify for the low risk expedient, the
Company will assess whether the increase has been significant such that a lifetime ECL should be recognised.
The carrying amount of financial assets best represents the maximum credit risk exposure at Statement of Financial
Position date. As at 31 December 2018, the Company’s financial assets exposed to credit risks which are accounted for
at amortised cost amounted to the following:
Smith & Williamson Cash Fund
31 December 2018 31 December 2017
GBP GBP
Assets
Loans and receivables 45,072,930 47,157,284
Cash and cash equivalents 6,731 1,925
Interest from deposits 47,619 22,666
Other assets 22,370 11,631
45,149,650 47,193,506
Smith & Williamson Short Dated Corporate Bond Fund
31 December 2018 31 December 2017
GBP GBP
Assets
Loans and receivables 23,974,130 34,937,175
Cash and cash equivalents 1,657,844 5,820,688
Other assets 6,083,079 6,997,985
31,715,053 47,755,848
Smith & Williamson Enterprise Fund
31 December 2018 31 December 2017
GBP GBP
Assets
Loans and receivables 99,604,614 90,185,890
Cash and cash equivalents 13,406,091 19,989,862
Interest from deposits 52,729 12,972
Other assets 162,237 1,231,539
113,225,671 111,420,263
Smith & Williamson Investment Funds Plc
36
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after January
1, 2018)
IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with
customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity
expects to be entitled in exchange for transferring goods or services to a customer.
These standards did not have a significant impact on the Company’s financial position or performance, the Company
will continue to classify its financial assets and financial liabilities as being at fair value through profit or loss.
(d) Income from Investments
Interest income on investments in loans and receivables and debt instruments is recognised when earned using the
effective interest method and is shown in the Statement of Comprehensive Income. The effective interest rate is the
rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
instrument to the net carrying amount of the financial asset or liability.
Dividends are credited to the Statement of Comprehensive Income on the dates on which the relevant securities are
listed as “ex-dividend”. Dividend income is shown gross of any non-recoverable withholding taxes, which is disclosed
separately in the Statement of Comprehensive Income, and net of any tax credits.
(e) Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount reported on the Statement of Financial Position when there
is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or
realise the assets and settle the liability simultaneously.
(f) Redeemable Participating Shares
The issued redeemable participating share capital is at all times equal to the net asset value of the Company.
Redeemable participating shares are redeemable at the shareholders option and are classified as financial liabilities.
Redeemable shares can be put back to the Company at any time for cash equal to a proportionate share of the
Company’s net asset value. The redeemable share is carried at the redemption amount that is payable at the Statement
of Financial Position date if the holder exercises the right to put the share back to the Company. The movement in the
number of participating shares is set out in Note 10. Each sub-fund’s NAV per share is calculated by dividing the ‘Net
Asset Value’ of each sub-fund being the value of its assets less its liabilities by the numbers of shares of each sub-fund
then in issue.
(g) Foreign Exchange
(i) Functional and presentation currency Items in the Company's financial statements are measured using the currency of the primary economic environment in which it operates. The functional currency for this Company and each sub-fund is Sterling except for Smith & Williamson Mid Ocean World Investment Fund and the Smith & Williamson Blairmore Global Equity Fund which are US Dollar.
(ii) Transactions and balances Foreign currency transactions are translated into the functional currency of the individual sub-funds using the exchange rate on the transaction date (as an approximation of actual). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year end rates of assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. The financial statements of the individual sub-funds are prepared in the functional currency of the respective sub-fund which is also the presentation currency. The functional currency of the Company is Sterling as this reflects the exposure of the sub-funds to securities issued by British companies, their shareholders and the markets in which the sub-funds are available. The aggregated financial statements of the Company are prepared in the presentation currency of the Company, Sterling. Amounts of the individual sub-funds in overseas currencies are translated for the purpose of the aggregation as follows:
Smith & Williamson Investment Funds Plc
37
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies (continued)
(g) Foreign Exchange (continued)
(ii) Transactions and balances (continued)
a) Using average exchange rates (as an approximation of actual) for the financial year for the Statement of Comprehensive Income.
b) Using average exchange rates (as an approximation of actual) for the period for the proceeds and cost of issue and redemption of shares, respectively, for the Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares.
c) Using period end exchange rates for the Statement of Financial Position.
For the purposes of producing the aggregated financial statements, the notional currency gain or loss on the re-translation of the opening net assets of individual sub-funds with functional currencies other than Sterling, the presentation currency of the Company, is included as the notional foreign exchange adjustment in the Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares. This figure also includes the notional gain or loss from use of average rates as noted above compared to the financial year end exchange rates for the Statement of Financial Position.
(h) Equalisation
An equalisation account is maintained by each sub-fund so that the amount distributed is the same for all shares of the same type notwithstanding different dates of issue. A sum equal to that part of the price of a share which reflects the net income accumulated at the date of issue or redemption is booked to the equalisation account and added or deducted to/from the first dividend in the same financial year as that in which the shares are issued or redeemed in arriving at the finance cost.
(i) Expenses
All expenses are recognised in the Statement of Comprehensive Income on an accrual basis.
(j) Cash
Cash includes current deposits with banks, and bank overdrafts with maturities of 3 months or less. Cash equivalents
are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an
insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than
for investment or other purposes. Bank overdrafts are presented within current liabilities on the Statement of Financial
Position.
The Investor Money Regulations became effective from July 1, 2016. Each sub-fund has chosen the sub-fund asset
route where by the subscription and redemption dealing accounts will be channelled through an umbrella cash
collection account in the name of each sub-fund. Cash balances held in the umbrella cash collection account are
regarded as an asset of the Company and are therefore recognised in the Statement of Financial Position within cash
and cash equivalents.
(k) Taxation
Liabilities relating to uncertain tax positions are accrued only subject to Irish tax if there are taxable Irish investors when such liabilities are probable and can be estimated with reasonable accuracy.
Capital gains, dividends, and interest received on investments made by the Company may be subject to withholding taxes or capital gains taxes imposed by the country of origin and such taxes may not be recoverable by the Company or its shareholders.
(l) Transaction costs
Transactions costs are costs incurred to acquire financial assets or liabilities at fair value through profit and loss. They include fees and commissions paid to agents, advisers, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the Statement of Comprehensive Income as an expense. Transaction costs during 2018 were GBP316,496 (2017: GBP402,729).
Smith & Williamson Investment Funds Plc
38
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
2. Significant Accounting Policies (continued)
(m) Financial derivatives
The sub-funds may enter into forward foreign currency exchange contracts and contracts for difference for the purposes of efficient portfolio management.
Forward Currency Contracts
When entering into a forward foreign currency exchange contract, the sub-fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed price upon an agreed future date. These contracts are valued daily at the forward rate and the sub-fund’s equity therein, representing unrealised gains or losses on the contracts, is included in the Statement of Comprehensive Income. The unrealised gain/(loss) on open forward foreign exchange contracts is calculated by reference to the difference between the contracted rate and the rate to close out the contract. Realised and movement in unrealised gains or losses are included in the Statement of Comprehensive Income.
Contracts for difference
Contracts for difference are over-the-counter derivatives which take advantage of the economical benefits which are not afforded through investing directly in certain securities markets. A sub-fund may purchase equity contracts for difference as a means of gaining exposure to the economic performance and cash flows of an equity security without the need for taking or making physical delivery of the security. A contract for difference is a financial instrument linked to an underlying share price. Consequently, no rights are acquired or obligations incurred relating to the underlying share and the sub-fund may buy or sell depending on the sub-fund manager’s view of a Company’s share price. Contracts for difference are highly leveraged instruments and for a small deposit it is possible for a sub-fund to hold a position much greater than would be possible with a traditional investment. These are valued daily based on quoted market prices at the Statement of Financial Position dates. The fair value of contracts for differences is the difference between the contracted price and the volume weighted average price of the financial instrument multiplied by the number of shares specified within the contract.
There were open forward foreign currency exchange contracts and contracts for differences at December 31, 2018, and
these are disclosed on the relevant Schedule of Investments of each sub-fund on pages 91 to 126.
(n) Critical accounting estimates and assumptions
Management makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition seldom equal the actual related results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. A description of the valuation techniques and the inputs used in the fair value measurement of level 3 financial instruments are disclosed in Note 15.
Smith & Williamson Investment Funds Plc
39
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
3. Income from Investments 2018
Boulder
Investment
Fund
Santos
Investment
Fund
Smith &
Williamson
Defensive
Growth Fund
Smith &
Williamson
Cash Fund
Smith &
Williamson
Short Dated
Corporate Bond
Fund
Smith &
Williamson
Enterprise Fund
Wye
Investment
Fund
GBP GBP GBP GBP GBP GBP GBP
Dividend income 628,371 332,132 217,596 448,327 7 - 2,421,767
* Mr. William Cussans & Mr. Noel Medici have waived their director’s fees for 2018. There are no out of pocket expenses included in the directors’ fees.
** Audit fees relate to the statutory audit of the Company. There are no fees paid to the auditors in respect of other assurance services, tax advisory services or other non-audit services.
*** Terminated on June 15, 2018.
Smith & Williamson Investment Funds Plc
42
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
* Mr. William Cussans & Mr. Noel Medici have waived their director’s fees for 2017. There are no out of pocket expenses included in the directors’ fees.
** Audit fees relate to the statutory audit of the Company. There are no fees paid to the auditors in respect of other assurance services, tax advisory services or other non-audit services.
*** Launched on June 23, 2017.
Smith & Williamson Investment Funds Plc
43
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
5. Financial Assets and Financial Liabilities at fair value through profit or loss
* Santos Investment Fund cross invest in Smith & Williamson Artificial Intelligence Fund and Smith & Williamson Global Inflation Linked Bond Fund. Smith & Williamson Mid Ocean World
Investment Fund and Smith & Williamson Blairmore Global Equity Fund cross invest in Smith & Williamson Artificial Intelligence Fund.
**Santos Investment Fund cross invest in Smith & Williamson Artificial Intelligence Fund and Smith & Williamson Global Inflation Linked Bond Fund. Smith & Williamson Mid Ocean World
Investment Fund and Smith & Williamson Blairmore Global Equity Fund cross invest in Smith & Williamson Artificial Intelligence Fund.
Smith & Williamson Investment Funds Plc
60
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
12. Net realised and movement in unrealised gains/(losses) on investments (continued)
2017
Wye
Investment
Fund
Boulder
Investment
Fund
Santos
Investment
Fund
Smith &
Williamson
Defensive
Growth
Fund
Smith &
Williamson
Short Dated
Corporate
Bond Fund
Smith &
Williamson
Enterprise
Fund
GBP GBP GBP GBP GBP GBP
Realised gains/(losses) on investments at fair
value through profit or loss
Equities and participation notes 1,894,417 800,633 352,626 608,565 - 1,834,188
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
13. Related Party Transactions
IAS 24 - Related Party Disclosures requires the disclosure of information relating to material transactions with parties
who are deemed to be related to the reporting entity.
Cross Investments Some of the sub-funds invest in other investment funds managed by the Investment Manager. These investments are
included in the schedule of investments and are precluded by the name Smith & Williamson. The total amount of the
unrealised gains relating to these investments for December 31, 2018 was GBP325,901 (December 31, 2017:
GBP523,108). For the Company’s total column in the primary statements these figures must be eliminated to avoid
double counting. As at December 31, 2018, Santos Investment Fund had cross investments in Smith & Williamson
Artificial Intelligence Fund and Smith & Williamson Global Inflation Linked Bond Fund which amounted to
GBP406,035 and GBP430,978 respectively. Smith & Williamson Mid Ocean World Investment Fund and Smith &
Williamson Blairmore Global Equity Fund each had cross investments in Smith & Williamson Artificial Intelligence
Fund which amounted to USD2,735,059 and USD403,095 respectively.
Management Fee
Smith & Williamson Investment Management LLP as the Investment Manager is a related party of the Company. The
Company has entered into a management agreement with Smith & Williamson Investment Management (Ireland)
Limited under which the Manager is entitled to a fee at an agreed annual rate of the Net Asset Value of each class of
shares.
All depositary and trustee fees will be borne by the Manager from its annual management fee, except for Wye
Investment Fund, Cash Fund and Blairmore Global Equity Fund which will bear such fees.
Performance Fee
The Investment Manager is entitled to receive a Performance Fee out of the assets of the Enterprise Fund in respect of
each class of Shares. The Performance Fee is calculated, accrued and valued monthly and is payable either quarterly in
arrears in respect of each calendar quarter (i.e. the three month period ending on 31 March, 30 June, 30 September and
31 December each financial year) (a Performance Period) or upon redemption in respect of any shares redeemed
during a Performance Period.
Management fee
Smith & Williamson Enterprise Fund Class E 1.75%
Smith & Williamson Enterprise Fund Class A & B 1.50%
Smith & Williamson Enterprise Fund Class C, D, F, Y and Z 0.90%
Santos Investment Fund 1.00%
Smith & Williamson Defensive Growth Fund A 1.00%
Smith & Williamson Defensive Growth Fund B 0.70%
Smith & Williamson Short Dated Corporate Bond Fund Class A 1.00%
Smith & Williamson Short Dated Corporate Bond Fund Class B Income, B Accumulation,
C & D 0.65%
Smith & Williamson Short Dated Corporate Bond Fund Class Y, Z income & Z Accumulation 0.45%
Smith & Williamson Boulder Investment Fund 1.00%
Smith & Williamson Global Inflation Linked Bond Fund Class C, D, X Income & X
Accumulation 0.25%
Smith & Williamson Global Inflation Linked Bond Fund Class Z Income & Z Accumulation 0.45%
Smith & Williamson Medium Dated Corporate Bond Fund Class A 1.00%
Smith & Williamson Medium Dated Corporate Bond Fund Class B 0.55%
Smith & Williamson Mid Ocean World Investment Fund Class A & B 1.50%
Smith & Williamson Mid Ocean World Investment Fund Class C & D 0.75%
Smith & Williamson Blairmore Global Equity Fund Class A USD, Class B & Class C EUR 1.00%
Smith & Williamson Artificial Intelligence Fund Class B & C 0.80%
Smith & Williamson Artificial Intelligence Fund Class X & Z 0.50%
Smith & Williamson Investment Funds Plc
63
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
13. Related Party Transactions (continued)
Performance Fee (continued) The Performance Fee is a percentage of the amount by which the Net Asset Value per Share on the last Business Day of the relevant Performance Period (the Calculation Day), without deduction of any accrued Performance Fee, exceeds the Performance Fee High Watermark (as defined below), at the following rates:
Class A Shares: 10% Class B Shares: 10% Class C Shares: 20% Class D Shares: 20% Class E Shares: 20% Class F Shares: 20% Class Y Shares: 10% Class Z Shares: 10%
In order for a Performance Fee to be payable in respect of a Performance Period, the Net Asset Value per Share of the relevant class on the relevant Calculation Day without deduction of any accrued Performance Fee (the Final Net Asset Value per Share) must exceed the Performance Fee High Watermark (as defined below).
Where the Performance Fee High Watermark is exceeded, the Performance Fee payable per class of Shares is equal to 10% or 20% (as applicable) of the amount by which the Final Net Asset Value per Share of the relevant class exceeds the Performance Fee High Watermark multiplied by the Shares in issue on the relevant Calculation Day.
Performance Fee High Watermark means the higher of (i) the initial issue price of the relevant class of Shares (excluding any sales charge or anti-dilution levy) and (ii) the last Final Net Asset Value per Share of the relevant class upon which a Performance Fee was paid, adjusted for any Performance Fees paid since such date. The Performance Fee High Watermark will be adjusted for the issue of new Shares to ensure that Shareholders are only charged a Performance Fee in respect of such Shares for the period during which those Shareholders remain invested. The Performance Fee High Watermark for the first Performance Period will be the initial issue price of the relevant class of Shares.
Performance fees charged by Smith & Williamson Enterprise Fund during 2018 were GBP8,593 (2017: GBP918,094) and performance fees payable at December 31, 2018 were GBPNil (December 31, 2017: GBP352,545).
Directors Fees
The Directors will be entitled to remuneration by the Company for their services as Directors provided however that
the aggregate emoluments of each Director in respect of any twelve month accounting period shall not exceed
GBP30,000 or such higher amount as may be approved by the Company in general meeting. In addition, the Directors
will also be entitled to be reimbursed for their reasonable expenses incurred not included out of pocket expenses in
discharging their duties as Directors.
Any Director who serves on any committee or who otherwise performs services which, in the opinion of the Directors
are outside the scope of the ordinary duties of a Director, may be paid such extra remuneration as the Directors may
determine.
Directors fees charged by Smith & Williamson Enterprise Fund during 2018 were GBP72,321 (2017: GBP58,781) and directors fees payable at December 31, 2018 were GBP17,928 (December 31, 2017: GBP13,280).
Transactions with Connected Persons
In accordance with the requirements of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1))
(Undertakings for Collective Investment in Transferable Securities) Regulations 2015 as amended the Directors
confirm that there are arrangements in place, evidenced by written procedures to ensure that any transactions carried
out between the Company and a connected person is conducted as arm’s length and in the best interests of the
shareholders. Connected persons means the Manager, Depositary and the delegates or sub-delegates of such a
management company or depositary (excluding any non-group company sub-custodians appointed by a depositary);
and any associated or group company of such a management company, depositary, delegate or sub-delegate. The
Company’s Board of Directors are satisfied that the transactions with connected persons during the financial year were
carried out as if negotiated at arm’s length and in the best interests of the shareholders.
Contingent liabilities
The Directors are not currently aware of any such existing or contingent liabilities as at December 31, 2018.
Smith & Williamson Investment Funds Plc
64
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks
In pursuing their investment objectives the sub-funds invest in transferable securities, with the aim of spreading risk. To the extent permitted by the investment objectives, restrictions and policies set forth in the sub-funds’ Prospectus, the sub-funds may also participate in various derivative-based transactions.
Investment in equities, bonds, money market deposits and derivatives expose the sub-funds to varying risks, including market risk (interest rate risk, currency risk and price risk) liquidity risk and credit risk. A description of the specific risks and the policies for managing these risks are included below. Derivative securities are instruments or agreements whose value is derived from an underlying security instrument, currency or index.
An analysis of the types of securities held at the financial year end is included in each respective sub-fund’s Schedule of Investments. Investments held at the financial year end are representative of the type of investments held during the financial year.
14.1.1 Market risk
Market risk embodies the potential for both loss and gains and includes interest rate risk, currency risk and price risk.
The Company's strategy on the management of investment risk is driven by the Company's investment objective as set
out in Note 1. The Company's market risk is managed on a daily basis by the Investment Manager. The Investment
Manager moderates this risk through a careful selection of securities and other financial instruments within specified
limits. Details of the nature of the Company's investment portfolio at the Statement of Financial Position date are
disclosed in the Schedule of Investments on pages 91 to 126.
Any increase or decrease in the market price of investments would alter the Company’s net asset value to the extent
that it was invested at the time. The Company’s investment portfolio complies with the investment restrictions as
disclosed in its prospectus.
The use of Financial Derivative Instruments (“FDI”) is restricted to forward foreign exchange transactions providing
passive hedging of currency share classes. A non-sophisticated user of FDI approach is being taken and hence the
commitment approach is to be used. The global position exposure is calculated taking into account the current value of
the underlying assets. The commitment approach converts the sub-funds FDI positions into equivalent positions of the
underlying assets and seeks to ensure that the sub-fund is monitored in terms of any future commitments to which it
may be obliged.
There is no leverage on the sub-funds with the exception of the Smith & Williamson Enterprise Fund. The total
exposure of the sub-fund (which is calculated taking leverage into account) will not exceed 200% of NAV and will be
monitored on a daily basis to ensure that the total exposure does not exceed this stated maximum.
At December 31, 2018 if the fair value of investments to which the sub-funds were exposed had changed by 5% with
all other variables held constant, this would have resulted in a change of net assets attributable to the shareholders by
the amounts detailed below:
2018 2017
Wye Investment Fund GBP 964,962 1,032,569
Boulder Investment Fund GBP 895,726 1,036,086
Santos Investment Fund GBP 625,978 655,575
Smith & Williamson Defensive Growth Fund GBP 1,985,636 1,236,286
Smith & Williamson Cash Fund GBP 2,253,647 2,357,864
Smith & Williamson Short Dated Corporate Bond Fund GBP 11,195,469 17,589,440
Smith & Williamson Enterprise Fund GBP 912,896 1,318,580
Smith & Williamson Global Inflation Linked Bond Fund GBP 5,658,053 3,300,824
Smith & Williamson Medium Dated Corporate Bond Fund** GBP - 187,084
Smith & Williamson Mid Ocean World Investment Fund USD 3,352,402 4,426,368
Smith & Williamson Blairmore Global Equity Fund USD 1,345,383 1,744,732
Smith & Williamson Artificial Intelligence Fund* GBP 5,707,307 2,056,291
* Launched on June 23, 2017.
**Terminated on June 15, 2018.
14.1.2 Interest rate risk
The Company's financial assets include direct interest bearing instruments. As a result the Company is exposed to fair
value interest rate risk due to fluctuations in the prevailing levels of market interest rates. The Company's interest rate
risk is managed on a daily basis by the Investment Manager.
Cash and cash equivalents are not considered significantly exposed to fair value interest rate risk due to the short term
nature of the instruments. Cash earns interest at a variable interest rate.
Smith & Williamson Investment Funds Plc
65
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.1.2 Interest rate risk (continued)
The interest bearing financial instruments significantly exposed to fair value interest rate risk are the corporate bonds.
Consequently, movements in interest rates would have an inverse effect on the movement of the net asset value of the
sub-funds. At December 31, 2018 an increase of 1% in interest rates as at the reporting date would have decreased the
Net Assets Attributable to Holders of Redeemable Participating Shares in the Statement of Financial Position and
increase/(decrease) per the Statement of Comprehensive Income by the amounts detailed below. A decrease of 1%
would have an equal but opposite effect.
2018 2017
Santos Investment Fund GBP 31,721 28,129
Smith & Williamson Defensive Growth Fund GBP 163,033 78,425
Smith & Williamson Cash Fund GBP 450,729 471,573
Smith & Williamson Short Dated Corporate Bond Fund GBP 2,482,291 3,852,838
Smith & Williamson Enterprise Fund GBP 996,046 901,859
Smith & Williamson Global Inflation Linked Bond Fund GBP 1,133,145 658,470
Smith & Williamson Medium Dated Corporate Bond Fund* GBP - 37,319
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.1.2 Interest rate risk (continued)
Smith & Williamson Enterprise Fund Less than 1 month to
1 month 3 months Total
December 31, 2017 GBP GBP GBP
EUR 494,425 - 494,425
GBP 19,495,437 36,987,125 56,482,562
19,989,862 36,987,125 56,976,987
Smith & Williamson Global Inflation Linked Bond
Fund Less than 3 years to Greater
1 month 5 years than 5 years Total
December 31, 2017 GBP GBP GBP GBP
AUD 5,778 153,960 393,863 553,601
CAD 1,032 107,526 1,063,369 1,171,927
EUR 39,890 2,954,574 9,636,214 12,630,678
GBP (267,640) 4,304,755 18,013,476 22,050,591
JPY 4,095 - 2,547,681 2,551,776
NZD 1,774 - 233,976 235,750
SEK 184 - 624,428 624,612
USD 6,925 8,587,004 17,226,124 25,820,053
(207,962) 16,107,819 49,739,131 65,638,988
Smith & Williamson Medium Dated Corporate Bond Fund Less than Greater
1 month than 5 years Total
December 31, 2017 GBP GBP GBP
EUR 815 - 815
GBP 13,665 2,883,477 2,897,142
USD 3,710 848,460 852,170
18,190 3,731,937 3,750,127
Smith & Williamson Mid Ocean World Investment Fund Less than
1 month Total
December 31, 2017 USD USD
AUD 126 126
CAD 3 3
EUR 935,305 935,305
GBP 495,712 495,712
USD 5,782 5,782
1,436,928 1,436,928
Smith & Williamson Blairmore Global Equity Fund Less than
1 month Total
December 31, 2017 USD USD
EUR 51,470 51,470
GBP 38,132 38,132
USD 146,321 146,321
235,923 235,923
Smith & Williamson Investment Funds Plc
71
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.1.2 Interest rate risk (continued)
Smith & Williamson Artificial Intelligence Fund* Less than
1 month Total
December 31, 2017 GBP GBP
GBP 2,542,950 2,542,950
2,542,950 2,542,950
* Launched on June 23, 2017
14.1.3 Currency risk
The sub-funds may invest in securities and enter into transactions denominated in currencies other than their reporting
currency. Consequently, the sub-funds are exposed to risks that the exchange rate of their currency relative to other
currencies may change in a manner which may have a favourable or unfavourable effect on the value of that portion of
the sub-funds’ assets which are denominated in currencies other than their own currency. The sub-funds’ currency risk
is managed on a daily basis by the Investment Manager. The sub-funds’ overall currency positions and exposures are
monitored on a quarterly basis by the Board of Directors.
The currency risk is in relation to the notional exposure on the forward currency contracts held by the sub-funds. The
Manager uses forward contracts for share class hedging. These are detailed on the Schedule of Investments.
At the reporting date the sub-funds had the following currency exposures:
Wye Investment Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
CHF 282,152 1.47 480,749 2.34
EUR 938,446 4.88 868,681 4.22
GBP 15,565,706 80.99 17,487,168 84.98
SGD 288,680 1.50 - -
USD 2,144,597 11.16 1,741,630 8.46
19,219,581 100.00 20,578,228 100.00
Boulder Investment Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
CHF - - 400,112 1.93
DKK 437,127 2.42 977,787 4.71
EUR 2,396,299 13.26 2,525,350 12.17
GBP 7,941,273 43.94 9,439,724 45.49
NOK 5 - 5 -
USD 7,296,720 40.38 7,406,978 35.70
18,071,424 100.00 20,749,956 100.00
Santos Investment Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
CHF 137,472 1.09 219,077 1.62
EUR 294,053 2.33 339,909 2.50
GBP 10,351,875 81.87 10,951,995 80.63
HKD 132,254 1.05 - -
USD 1,727,591 13.66 2,071,637 15.25
12,643,245 100.00 13,582,618 100.00
.
Smith & Williamson Investment Funds Plc
72
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.1.3 Currency risk (continued)
Smith & Williamson Defensive Growth Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
GBP 39,386,634 96.44 25,534,907 96.37
JPY - - 104,992 0.40
USD 1,454,655 3.56 856,935 3.23
40,841,289 100.00 26,496,834 100.00
Smith & Williamson Cash Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
GBP 45,058,310 100.00 47,154,323 100.00
45,058,310 100.00 47,154,323 100.00
Smith & Williamson Short Dated Corporate Bond Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
EUR 4,983,293 1.98 (2,203) -
GBP 156,114,357 62.10 246,895,992 62.99
USD 90,315,045 35.92 145,066,399 37.01
251,412,695 100.00 391,960,188 100.00
Smith & Williamson Enterprise Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
EUR 569,371 0.44 500,193 0.37
GBP 130,152,919 99.57 136,527,156 99.70
USD (17,850) (0.01) (91,539) (0.07)
130,704,440 100.00 136,935,810 100.00
Smith & Williamson Global Inflation Linked Bond Fund
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
AUD 1,562,912 1.35 553,601 0.83
CAD 1,490,248 1.29 1,171,926 1.76
EUR 22,384,457 19.40 12,635,337 19.01
GBP 33,604,844 29.14 22,897,412 34.45
JPY 7,615,076 6.60 2,551,776 3.84
NZD 631,794 0.55 235,750 0.35
SEK 680,044 0.59 624,612 0.94
USD 47,393,104 41.08 25,800,204 38.82
115,362,479 100.00 66,470,618 100.00
Smith & Williamson Investment Funds Plc
73
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.1.3 Currency risk (continued)
Smith & Williamson Medium Dated Corporate Bond Fund*
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
EUR - - 815 0.02
GBP - - 2,918,856 77.39
USD - - 852,170 22.59
- - 3,771,841 100.00
* Terminated on June 15, 2018.
Smith & Williamson Mid Ocean World Investment Fund
Currency
Total Exposure
USD
2018
(%) of Net
Assets
2018
Total Exposure
USD
2017
(%) of Net
Assets
2017
AUD 1,061,396 1.51 2,346,764 2.61
CAD 605 - 1,319,228 1.47
CHF 1,336,152 1.90 - -
EUR 6,505,215 9.27 11,331,334 12.63
GBP 4,435,650 6.33 8,070,579 9.00
HKD 2,655,286 3.79 7,170,886 7.99
JPY 6,306,900 8.99 13,295,230 14.82
KRW 732,714 1.04 1,485,676 1.66
SGD 159 - - -
USD 47,108,861 67.17 44,703,039 49.82
70,142,938 100.00 89,722,736 100.00
Smith & Williamson Blairmore Global Equity Fund
Currency
Total Exposure
USD
2018
(%) of Net
Assets
2018
Total Exposure
USD
2017
(%) of Net
Assets
2017
AUD 827,599 2.94 1,501,212 4.28
CAD 215,196 0.76 272,165 0.78
CHF - - 429,729 1.23
DKK (28) - 857,393 2.45
EUR 2,759,917 9.81 3,228,897 9.21
GBP 7,852,383 27.92 7,280,289 20.77
HKD 1,825,529 6.49 3,340,079 9.53
JPY 1,705,829 6.06 2,962,220 8.45
NOK 552,336 1.96 - -
SEK 226,370 0.80 - -
USD 12,167,317 43.26 15,172,995 43.30
28,132,448 100.00 35,044,979 100.00
Smith & Williamson Artificial Intelligence Fund*
Currency
Total Exposure
GBP
2018
(%) of Net
Assets
2018
Total Exposure
GBP
2017
(%) of Net
Assets
2017
AUD 7,291,369 5.94 1,228,918 2.82
EUR 9,141,468 7.45 3,562,640 8.18
GBP 11,560,490 9.43 5,546,155 12.73
HKD 3,280,060 2.67 854,619 1.96
JPY 12,183,134 9.93 2,708,016 6.21
USD 79,232,643 64.58 29,675,174 68.10
122,689,164 100.00 43,575,522 100.00
* Launched on June 23, 2017
Smith & Williamson Investment Funds Plc
74
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.1.4 Price risk
Price risk is the risk that the value of the instrument will fluctuate as a result of changes in market prices, whether
caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the
market. As the majority of the Company's financial instruments are carried at fair value with fair value changes
recognised in the Statement of Comprehensive Income, all changes in market conditions will directly affect the profit
or loss.
Price risk is managed by the Company's Investment Manager by constructing a diversified portfolio of instruments
traded on various markets. A breakdown of the investment assets and liabilities held by each sub-fund are shown on
the schedule of investments on pages 91 to 126.
14.2 Liquidity risk
Liquidity risk is the risk that the Company may not be able to generate sufficient cash resources to settle its obligations
in full as they fall due or can do so only on terms that are materially disadvantageous.
The Company's constitution provides for the creation and cancellation of shares and it is therefore exposed to liquidity
risk of meeting shareholders redemptions at any time. The majority of the Company's securities are considered to be
readily realisable as they are traded on active markets. All of the Company's assets and liabilities can be realised in less
than 1 financial year. The Company's liquidity is managed on a daily basis by the Investment Manager. The
Company's overall liquidity risks are monitored on a quarterly basis by the Board of Directors.
14.3 Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment
that it has entered into with the Company. The carrying amount of financial assets as per the Statement of Financial
Position on pages 11 and 12 best represent the maximum credit risk exposure as at the Statement of Financial Position
date. Credit risk on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled
transactions is considered small due to the short settlement period involved and the high credit quality of the broker
used. Substantially all of the assets of the Company are held by BNP Paribas Securities Services, Dublin Branch (“the
Depositary”) and Contract for Difference are held by Morgan Stanley. Bankruptcy or insolvency of the Depositary
may cause the Company's rights with respect to securities or cash held by the Depositary to be delayed or limited. The
Company manages its risk by monitoring the credit quality and financial position of the Depositary the Company uses.
The credit rating for the Depositary and Morgan Stanley as at December 31, 2018 was A and A+ (2017: A and A+)
published by Standard & Poor’s.
The Investment Manager manages issuer risk through building diversified portfolios to limit exposure to any one
issuer in accordance with the Company's investment objectives. The Company employs well known counterparties and
ensures that concentration of investment in any one stock or counterparty is monitored against set limits.
Additionally, if required, the Investment Manager will limit ownership of debt instruments to those instruments
carrying a credit rating equal to or in excess of that provided for in the Company's investment objectives. The
Investment Manager monitors compliance with these restrictions on a daily basis.
All transactions in listed securities are settled/paid upon delivery using approved brokers. The risk of default is
considered minimal as delivery of securities sold is only made once the broker has received payment. Payment is made
on a purchase once the securities have been received by the broker.
The credit ratings of all derivative counterparties are monitored regularly. The Front Office Risk Committee reviews
counterparty credit ratings and approves the use of such counterparties.
The credit rating for the Depositary as at December 31, 2018 was xxx published by Morgan Stanley.
Smith & Williamson Investment Funds Plc
75
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.3 Credit risk (continued)
The below table shows the breakdown by credit rating of the bonds in the sub-funds’ portfolios by Standard & Poor’s
rating agency:
Santos Investment Fund
December 31,
2018
December 31,
2018
December 31,
2017
December 31,
2017
Gross exposure
GBP
Gross exposure as
a % of NAV
Gross exposure
GBP
Gross exposure as
a % of NAV
BB- 605,742 4.79% 633,974 4.67%
BBB- 334,691 2.65% 361,206 2.66%
Not Rated 2,231,668 17.65% 1,817,722 13.38%
Total 3,172,101 25.09% 2,812,902 20.71%
Smith & Williamson
Defensive Growth Fund
December 31,
2018
December 31,
2018
December 31,
2017
December 31,
2017
Gross exposure
GBP
Gross exposure as
a % of NAV
Gross exposure
GBP
Gross exposure as
a % of NAV
Not Rated 16,303,265 39.92% 7,842,548 29.60%
Total 16,303,265 39.92% 7,842,548 29.60%
Smith & Williamson Short
Dated Corporate Bond Fund
December 31,
2018
December 31,
2018
December 31,
2017
December 31,
2017
Gross exposure
GBP
Gross exposure as
a % of NAV
Gross exposure
GBP
Gross exposure as
a % of NAV
AAA 12,696,499 5.06% 19,578,132 4.99%
AA+ 4,267,488 1.70% 6,498,532 1.66%
AA 13,280,420 5.28% 19,593,726 5.00%
A+ 25,003,201 9.95% 68,082,205 17.37%
AA- 25,277,270 10.05% 25,859,471 6.60%
A 20,618,048 8.20% 13,082,989 3.34%
A- 28,670,565 11.40% 59,020,150 15.06%
BBB+ 61,897,876 24.62% 90,084,403 22.98%
BBB 24,523,418 9.75% 38,862,518 9.91%
Not Rated 8,020,160 3.19% 9,684,538 2.47%
Total 224,254,945 89.20% 350,346,664 89.38%
Smith & Williamson Investment Funds Plc
76
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
14. Financial Instruments and Associated risks (continued)
14.3 Credit risk (continued)
Smith & Williamson Global
Inflation Linked Bond Fund
December 31,
2018
December 31,
2018
December 31,
2017
December 31,
2017
Gross exposure
GBP
Gross exposure as
a % of NAV
Gross exposure
GBP
Gross exposure as
a % of NAV
AAA 1,491,011 1.29% 1,170,895 1.76%
AA 5,330,016 4.62% 364,540 0.55%
AA+ 627,859 0.54% 233,976 0.35%
A- 3,769,913 3.27% 2,049,620 3.08%
BBB 4,421,076 3.83% - -
BBB+ - - 3,680,516 5.54%
Not Rated 97,674,623 84.67% 58,347,403 87.78%
Total 113,314,498 98.22% 65,846,950 99.06%
Smith & Williamson
Medium Dated
December 31,
2018
December 31,
2018
December 31,
2017
December 31,
2017
Corporate Bond Fund* Gross exposure
GBP
Gross exposure as
a % of NAV
Gross exposure
GBP
Gross exposure as
a % of NAV
A+ - - 459,089 12.17%
AAA - - 134,986 3.58%
AA- - - 282,146 7.48%
A - - 132,244 3.51%
A- - - 504,354 13.37%
BBB+ - - 1,580,588 41.90%
BBB - - 383,245 10.16%
Not Rated - - 255,285 6.77%
Total - - 3,731,937 98.94%
* Terminated on June 15, 2018.
14.4 Efficient Portfolio Management
The Company may employ investment techniques and instruments for efficient portfolio management of the assets of
the Company and, in particular, the Company may, for the purpose of hedging (whether against currency, exchange or
interest rate risks or otherwise), or for direct investment purposes, purchase or sell put options and call options, spot
contracts, forward contracts, futures contracts and other derivative instruments and may also enter into sale and
repurchase agreement.
The Company will employ a risk management process which will enable it to accurately monitor, measure and manage
the risks attached to financial derivative positions and details of this process have been provided to the Central Bank.
Subject to the conditions and within the limits otherwise stated in the investment objective and policies of the
Company, the Investment Managers may employ investment techniques and instruments such as futures, options,
forward foreign currency contracts and other derivatives for investment purposes, Hedging or efficient portfolio
management.
During the financial year the Company entered into forward currency translation and contract for difference on Smith
& Williamsons Short Dated Corporate Bond Fund (realized loss: GBP7,217,263), Smith & Williamson Enterprise
Fund (realised gain: GBP692,074, Smith & Williamson Global Inflation Linked Bond Fund (realised loss:
GBP5,167,939), Smith & Williamson Medium Dated Corporate Bond Fund (realised loss: GBP11,359) and Smith &
Williamson Mid Ocean World Investment Fund (realised gain: USD39,620) details of which can be found in note
2(m).
Smith & Williamson Investment Funds Plc
77
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments
The Company analyses investments by way of a fair value hierarchy. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest
priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under IFRS 7 are as
follows:
Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the
Company has the ability to access at the measurement date; Investments whose values are based on quoted
market prices in active markets, and are therefore classified within level 1, include active listed equities. The
Directors do not adjust the quoted price for such instruments, even in situations where the Directors hold a large
position and a sale could reasonably impact the quoted price.
Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly,
including inputs in markets that are not considered to be active; Investments that trade in markets that are not
considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within level 2. As level 2 investments include positions
that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to
reflect illiquidity and/or non-transferability, which are generally based on available market information.
Level 3 Inputs that are unobservable. These are indicative of third party pricing.
Wye Investment Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 2,985,984 - - 2,985,984
Investment Funds 16,313,246 - - 16,313,246
19,299,230 - - 19,299,230
Boulder Investment Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 15,492,744 - - 15,492,744
Investment Funds 2,421,773 - - 2,421,773
17,914,517 - - 17,914,517
Santos Investment Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 3,172,101 - - 3,172,101
Equities 4,814,959 - - 4,814,959
Investment Funds 4,532,502 - - 4,532,502
12,519,562 - - 12,519,562
Smith & Williamson Investment Funds Plc
78
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Defensive Growth Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 16,303,265 - - 16,303,265
Equities 11,593,009 - - 11,593,009
Investment Funds 11,816,445 - - 11,816,445
39,712,719 - - 39,712,719
Smith & Williamson Short Dated Corporate
Bond Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 224,254,945 - - 224,254,945
224,254,945 - - 224,254,945
Smith & Williamson Short Dated Corporate
Bond Fund Financial Liabilities at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial liabilities held for trading
Unrealised loss on forward currency contracts - 345,557 - 345,557
- 345,557 - 345,557
Smith & Williamson Enterprise Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 18,551,011 - 17,000 18,568,011
Unrealised gain on forward currency contracts - 1,295 - 1,295
18,551,011 1,295 17,000 18,569,306
Smith & Williamson Enterprise Fund Financial Liabilities at Fair Value as of December 31, 2018
Level l Level 2 Level 3 Total
GBP GBP GBP GBP
Financial liabilities held For trading
Unrealised loss on contracts for difference - 259,591 - 259,591
Unrealised loss on forward currency contracts - 51,799 - 51,799
- 311,390 - 311,390
Smith & Williamson Investment Funds Plc
79
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Global Inflation Linked
Bond Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 113,314,498 - - 113,314,498
Unrealised gain on forward currency contracts - 127,508 - 127,508
113,314,498 127,508 - 113,442,006
Smith & Williamson Global Inflation Linked
Bond Fund Financial Liabilities at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial liabilities held for trading
Unrealised loss on forward currency contracts - 280,953 - 280,953
- 280,953 - 280,953
Smith & Williamson Mid Ocean World
Investment Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
USD USD USD USD
Financial assets held for trading
Equities 64,312,979 - - 64,312,979
Investment Funds 2,735,060 - - 2,735,060
67,048,039 - - 67,048,039
Smith & Williamson Blairmore Global Equity
Fund Financial Assets at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
USD USD USD USD
Financial assets held for trading
Equities 24,609,978 - 267,680 24,877,658
Investment Funds 2,029,996 - - 2,029,996
26,639,974 - 267,680 26,907,654
Smith & Williamson Investment Funds Plc
80
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Artificial Intelligence Financial Assets at Fair Value as of December 31, 2018
Fund Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 114,146,135 - - 114,146,135
114,146,135 - - 114,146,135
Wye Investment Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 4,098,979 - - 4,098,979
Investment Funds 16,552,397 - - 16,552,397
20,651,376 - - 20,651,376
Boulder Investment Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 17,707,554 - - 17,707,554
Investment Funds 3,014,175 - - 3,014,175
20,721,729 - - 20,721,729
Santos Investment Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 2,812,902 - - 2,812,902
Equities 5,568,904 - - 5,568,904
Investment Funds 4,729,700 - - 4,729,700
13,111,506 - - 13,111,506
Smith & Williamson Investment Funds Plc
81
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Defensive Growth Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 7,842,548 - - 7,842,548
Equities 8,939,092 - - 8,939,092
Investment Funds 7,940,814 - 3,270 7,944,084
24,722,454 - 3,270 24,725,724
Smith & Williamson Short Dated Corporate
Bond Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 350,346,664 - - 350,346,664
Unrealised gain on forward currency contracts - 1,773,720 - 1,773,720
350,346,664 1,773,720 - 352,120,384
Smith & Williamson Short Dated Corporate
Bond Fund Financial Liabilities at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial liabilities held for trading
Unrealised loss on forward currency contracts - 331,580 - 331,580
- 331,580 - 331,580
Smith & Williamson Enterprise Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities
Unrealised gain on contracts for difference 26,546,250 - 17,645 26,563,895
Unrealised gain on forward currency contracts - 5,768 - 5,768
26,546,250 5,768 17,645 26,569,663
Smith & Williamson Enterprise Fund Financial Liabilities at Fair Value as of December 31, 2017
Level l Level 2 Level 3 Total
GBP GBP GBP GBP
Financial liabilities held for trading
Unrealised loss on contracts for difference - 106,531 - 106,531
Unrealised loss on forward currency contracts - 91,539 - 91,539
- 198,070 - 198,070
Smith & Williamson Investment Funds Plc
82
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Global Inflation Linked
Bond Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 65,846,950 - - 65,846,950
Unrealised gain on forward currency contracts - 319,269 - 319,269
65,846,950 319,269 - 66,166,219
Smith & Williamson Global Inflation Linked
Bond Fund Financial Liabilities at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial liabilities held for trading
Unrealised loss on forward currency contracts - 149,736 - 149,736
- 149,736 - 149,736
Smith & Williamson Medium Dated Corporate
Bond Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Bonds 3,731,937 - - 3,731,937
Unrealised gain on forward currency contracts - 9,746 - 9,746
3,731,937 9,746 - 3,741,683
Smith & Williamson Mid Ocean World
Investment Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
USD USD USD USD
Financial assets held for trading
Equities 84,648,855 - - 84,648,855
Investment Funds 3,878,503 - - 3,878,503
88,527,358 - - 88,527,358
Smith & Williamson Blairmore Global Equity
Fund Financial Assets at Fair Value as of December 31, 2017
Level 1 Level 2 Level 3 Total
USD USD USD USD
Financial assets held for trading
Equities 31,121,701 - 268,234 31,389,935
Investment Funds 3,478,869 - 24,401 3,503,270
Rights/Warrants 1,437 - - 1,437
34,602,007 - 292,635 34,894,642
Smith & Williamson Investment Funds Plc
83
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Artificial Intelligence Financial Assets at Fair Value as of December 31, 2017
Fund** Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets held for trading
Equities 41,125,822 - - 41,125,822
41,125,822 - - 41,125,822
** Launched on June 23, 2017.
There were no transfers between level 1 and level 2 during the financial year.
The Board of Directors has established a pricing committee that oversees the valuation of level three securities. The
Investment Manager recommends prices to this committee via their own Fair Value Pricing Committee and the Board
of Directors review these recommendations in line with the Pricing Policy document adopted by the Board of
Directors.
The following table provides details of the level 3 investments held during the financial year.
Smith & Williamson Defensive Growth Fund Fair Value Measurements using Level 3 Inputs
Unquoted funds held for trading at fair value
through profit or loss
2018 2017
GBP GBP
Balance as at January 1 3,270 4,206
Net Purchases and Sales (1,814) (1,512)
Gains /(Losses)
Realised 823 673
Unrealised (2,279) (97)
Balance as at December 31 - 3,270
Total losses for the financial year included in the Statement of Comprehensive Income for assets categorised as level 3
and held at the end of the financial year is GBP(2,279) (2017: GBP(97)).
Smith & Williamson Enterprise Fund Fair Value Measurements using Level 3 Inputs
Unquoted equities held for trading at fair value
through profit or loss
2018 2017
GBP GBP
Balance as at January 1 17,645 46,779
Net Purchases and Sales - -
Gains /(Losses)
Realised - -
Unrealised (645) (29,134)
Balance as at December 31 17,000 17,645
Total losses for the financial year included in the Statement of Comprehensive Income for assets categorised as level 3
and held at the end of the financial year is GBP(645) (2017: GBP(29,134)).
Smith & Williamson Investment Funds Plc
84
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
15. Fair Value of Financial Instruments (continued)
Smith & Williamson Blairmore Global Equity Fund Fair Value Measurement using Level 3 Inputs
Unquoted equities held for trading at fair value
through profit or loss
2018 2017
USD USD
Balance as at January 1 292,635 330,082
Net Purchases and Sales - -
Gains /(Losses)
Realised - -
Unrealised (24,955) (37,447)
Balance as at December 31 267,680 292,635
Total losses for the financial year included in the Statement of Comprehensive Income for assets categorised as level 3
and held at the end of the financial year is USD(24,955) (2017: USD(37,447)).
16. Forward currency contracts and other derivatives
Derivative financial instruments are initially recognised on trade date and are measured at fair value. After initial
recognition, derivative financial instruments are measured at fair value.
The realised gain or loss and unrealised gain or loss from forward currency contracts and Contracts for Difference are
included in the Statement of Comprehensive Income within “Movement in unrealised appreciation/ depreciation on
investments at fair value through profit or loss”.
17. Exchange rates
The following exchange rates were used at the financial year end to translate foreign currency denominated assets and
liabilities:
2018 2017
£1= 1.80915 AUD £1= 1.72957 AUD
£1= 1.73951 CAD £1= 1.69493 CAD
£1= 1.25553 CHF £1= 1.31826 CHF
£1= 8.31424 DKK £1= 8.38777 DKK
£1= 1.11414 EUR £1= 1.12657 EUR
£1= 9.97176 HKD £1= 10.57517 HKD
£1= 139.73673 JPY £1= 152.39126 JPY
£1= 11.02863 NOK £1= 11.06489 NOK
£1= 1.89939 NZD £1= 1.90210 NZD
£1= 11.29185 SEK £1= 11.07588 SEK
£1= 1.73600 SGD £1= 1.35279 USD
£1= 1.27363 USD
Smith & Williamson Investment Funds Plc
85
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
18. Distributions to holders of redeemable participating shares
The following dividends were declared and authorised on December 31, 2018 in respect of the financial year ended
December 31, 2018.
Wye Investment Fund GBP
Dividend of GBP 0.01669p per share on December 31, 2018 – Class A 199,262
Santos Investment Fund
Dividend of GBP 0.01061p per share on December 31, 2018 – Class A 85,025
Smith & Williamson Defensive Growth Fund
Dividend of GBP 0.04143p per share on December 31, 2018 – Class A 1,500
Dividend of GBP 0.00490p per share on December 31, 2018 – Class B 149,065
150,565
Smith & Williamson Cash Fund
Dividend of GBP 0.00136p per share on December 31, 2018 – Class A 61,127
Smith &Williamson Short Dated Corporate Bond Fund
Dividend of GBP 0.00556p per share on December 31, 2018 – Class A 13,665
Dividend of GBP 0.00628p per share on December 31, 2018 – Class B 253,521
Dividend of USD 0.00512c per share on December 31, 2018 – Class C 210,140
Dividend of EUR 0.00551c per share on December 31, 2018 – Class D 92,917
Dividend of GBP 0.00679p per share on December 31, 2018 – Class Z 1,297,766
Dividend of GBP 0.00654p per share on December 31, 2018 – Class Y 7
1,868,016
Smith & Williamson Global Inflation Linked Bond Fund
Dividend of USD 0.00334c per share on December 31, 2018 – Class C 3,016
Dividend of EUR 0.00375c per share on December 31, 2018 – Class D 3,314
Dividend of GBP 0.00448p per share on December 31, 2018 – Class X 471,629
Dividend of GBP 0.00326p per share on December 31, 2018 – Class Z 303
478,262
Smith & Williamson Mid Ocean World Investment Fund USD
Dividend of USD 0.90131c per share on December 31, 2018 – Class C 129,272
All distributions are declared in the currency of the share price.
Smith & Williamson Investment Funds Plc
86
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
18. Distributions to holders of redeemable participating shares (continued)
The following dividends were declared and authorised on December 31, 2017 in respect of the financial year ended
December 31, 2017.
Wye Investment Fund GBP
Dividend of GBP 0.01834p per share on December 31, 2017 – Class A 214,693
Boulder Fund
Dividend of GBP 0.00453p per share on December 31, 2017 – Class A 43,346
Santos Investment Fund
Dividend of GBP 0.00796p per share on December 31, 2017 – Class A 63,750
Smith & Williamson Defensive Growth Fund
Dividend of GBP 0.03565p per share on December 31, 2017 – Class A 1,204
Dividend of GBP 0.35647p per share on December 31, 2017 – Class B 85,780
86,984
Smith & Williamson Cash Fund
Dividend of GBP 0.00029p per share on December 31, 2017 – Class A 13,658
Smith &Williamson Short Dated Corporate Bond Fund
Dividend of GBP 0.00571p per share on December 31, 2017 – Class A 20,481
Dividend of GBP 0.00646p per share on December 31, 2017 – Class B 664,713
Dividend of USD 0.00680c per share on December 31, 2017 – Class C 323,737
Dividend of EUR 0.00647c per share on December 31, 2017 – Class D 142,571
Dividend of GBP 0.00698p per share on December 31, 2017 – Class Z 1,736,520
Dividend of GBP 0.00696p per share on December 31, 2017 – Class Y 7
2,888,029
Smith & Williamson Global Inflation Linked Bond Fund
Dividend of GBP 0.00288p per share on December 31, 2017 – Class B Acc 167,326
Smith &Williamson Medium Dated Corporate Bond Fund
Dividend of GBP 0.00601p per share on December 31, 2017 – Class B 22,482
Smith & Williamson Mid Ocean World Investment Fund USD
Dividend of USD 0.28000c per share on December 31, 2017 – Class C 44,027
Dividend of GBP 0.00739p per share on December 31, 2017 – Class D 930
44,957
All distributions are declared in the currency of the share price.
Smith & Williamson Investment Funds Plc
87
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
18. Distributions to holders of redeemable participating shares (continued) The following dividends were proposed and paid during the financial year ended December 31, 2018.
Wye Investment Fund GBP
Dividend of GBP 0.01798p per share on June 30, 2018 – Class A 214,466
Boulder Investment Fund
Dividend of GBP 0.00367p per share on June 30, 2018 – Class A 35,038
Santos Investment Fund
Dividend of GBP 0.01028p per share on June 30, 2018 – Class A 82,344
Smith & Williamson Defensive Growth Fund
Dividend of GBP 0.01907p per share on June 30, 2018 – Class A 736
Dividend of GBP 0.00329p per share on June 30, 2018 – Class B 74,077
74,813
Smith and Williamson Cash Fund
Dividend of GBP 0.00082p per share on June 30, 2018 – Class A 36,038
Smith & Williamson Short Dated Corporate Bond Fund
Dividend of GBP 0.00567p per share on June 30, 2018 – Class A 15,659
Dividend of GBP 0.00638p per share on June 30, 2018 – Class B 433,922
Dividend of USD 0.00643c per share on June 30, 2018 – Class C 283,890
Dividend of EUR 0.00629c per share on June 30, 2018 – Class D 140,555
Dividend of GBP 0.00689p per share on June 30, 2018 – Class Z 1,446,609
Dividend of GBP 0.00666p per share on June 30, 2018 – Class Y 7
2,320,642
Smith & Williamson Global Inflation Linked Bond Fund
Dividend of GBP 0.00337p per share on June 30, 2018 – Class Z 314
Dividend of GBP 0.00425p per share on June 30, 2018 – Class X 390,152
Dividend of EUR 0.00040c per share on June 30, 2018 – Class D 263
Dividend of USD 0.00339c per share on June 30, 2018 – Class C 108
390,837
Smith & Williamson Mid Ocean World Investment Fund USD
Dividend of USD 0.10316c per share on June 30, 2018 – Class A 4,983
Dividend of GBP 0.00042p per share on June 30, 2018 – Class B 368
Dividend of USD 1.71773c per share on June 30, 2018 – Class C 257,036
Dividend of GBP 0.00626p per share on June 30, 2018 – Class D 788
263,175
All distributions are declared in the currency of the share price.
Smith & Williamson Investment Funds Plc
88
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
18. Distributions to holders of redeemable participating shares (continued) The following dividends were proposed and paid during the financial year ended December 31, 2017.
Wye Investment Fund GBP
Dividend of GBP 0.01763p per share on June 30, 2017 – Class A 207,353
Boulder Fund
Dividend of GBP 0.00747p per share on June 30, 2017 – Class A 68,872
Santos Investment Fund
Dividend of GBP 0.01420p per share on June 30, 2017 – Class A 116,318
Smith & Williamson Defensive Growth Fund
Dividend of GBP 0.03637p per share on June 30, 2017 – Class A 1,110
Dividend of GBP 0.00438p per share on June 30, 2017 – Class B 66,470
67,580
Smith and Williamson Cash Fund
Dividend of GBP 0.00045p per share on June 30, 2017 – Class A 21,116
Smith & Williamson Short Dated Corporate Bond Fund
Dividend of GBP 0.00570p per share on September 30, 2017 – Class A 26,320
Dividend of GBP 0.00644p per share on September 30, 2017 – Class B 688,701
Dividend of USD 0.00679c per share on September 30, 2017 – Class C 321,742
Dividend of EUR 0.00658c per share on September 30, 2017 – Class D 143,920
Dividend of GBP 0.00696p per share on September 30, 2017 – Class Z 1,852,489
Dividend of GBP 0.00688p per share on September 30, 2017 – Class Y 7
Dividend of GBP 0.00564p per share on June 30, 2017 – Class A 26,523
Dividend of GBP 0.00638p per share on June 30, 2017 – Class B 745,139
Dividend of USD 0.00667c per share on June 30, 2017 – Class C 265,096
Dividend of EUR 0.00629c per share on June 30, 2017 – Class D 136,870
Dividend of GBP 0.00691p per share on June 30, 2017 – Class Z 2,051,171
Dividend of GBP 0.00691p per share on June 30, 2017 – Class Y 7
Dividend of GBP 0.00731p per share on March 31, 2017 – Class A 36,631
Dividend of GBP 0.00800p per share on March 31, 2017 – Class B 939,050
Dividend of USD 0.00818c per share on March 31, 2017 – Class C 339,756
Dividend of EUR 0.00800c per share on March 31, 2017 – Class D 167,490
Dividend of GBP 0.00746p per share on March 31, 2017 – Class Z 2,895,800
Dividend of GBP 0.00861p per share on March 31, 2017 – Class Y 9
10,636,721
Smith & Williamson Medium Dated Corporate Bond Fund
Dividend of GBP 0.00608p per share on September 30, 2017 – Class B 23,560
Dividend of GBP 0.00597p per share on June 30, 2017 – Class B 25,005
Dividend of GBP 0.00654p per share on March 31, 2017 – Class B 29,620
78,185
Smith & Williamson Mid Ocean World Investment Fund USD
Dividend of USD 0.64562c per share on June 30, 2017 – Class A 33,728
Dividend of USD 2.00338c per share on June 30, 2017 – Class C 325,447
359,175
All distributions are declared in the currency of the share price.
Smith & Williamson Investment Funds Plc
89
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
18. Distributions to holders of redeemable participating shares (continued) The Company declares a dividend for each sub-fund on the below basis:
Wye Investment Fund Bi-annually
Boulder Investment Fund Bi-annually
Santos Investment Fund Bi-annually
Smith & Williamson Defensive Growth Fund Bi-annually
Smith & Williamson Cash Fund Bi-annually
Smith & Williamson Mid Ocean World Investment Fund Bi-annually
Smith & Williamson Short Dated Corporate Bond Fund Quarterly
Smith & Williamson Medium Dated Corporate Bond Fund* Quarterly
Smith & Williamson Global Inflation Linked Bond Fund Quarterly
* Terminated on June 15, 2018.
The income available for distribution in respect of the Company will be determined in accordance with the terms of
the Company’s offering documents. It is the intention to pay dividends out of surplus net income, although the Articles
of Association of the Company also permit the distribution as a dividend of realised and unrealised capital gains less
realised and unrealised capital losses.
All distributions are declared in the currency of the share price.
19. Financial Derivative Instruments
The use of Financial Derivative Instruments (“FDI”) is restricted to forward foreign exchange transactions providing
passive hedging of currency share classes and contracts for difference. A non-sophisticated user of FDI approach is
being taken and hence the commitment approach is to be used. The global position exposure is calculated taking into
account the current value of the underlying assets. The commitment approach converts the sub-funds FDI positions
into equivalent positions of the underlying assets and seeks to ensure that each sub-fund is monitored in terms of any
future commitments to which it may be obliged.
20. Cross Liability
Liabilities incurred by a sub-fund of the Company may be discharged solely out of the assets of that sub-fund such that
creditors of sub-funds will not have recourse to the assets of the other sub-funds of the Company to settle any
liabilities incurred.
21. Taxation
Under current law and practice, the Company qualifies as an investment undertaking as defined in Section 739B of the
Taxes Consolidation Act, 1997, as amended. It is not chargeable to Irish tax on its income or capital gains. However,
the Company is obliged to apply a withholding tax on any distribution payments to Irish residents or ordinarily
resident shareholders on any encashment, redemption or transfer of units by an Irish resident or ordinarily resident
shareholder, unless the shareholder is exempted under Section 739D of the Taxes Consolidation Act, 1997, as
amended. Shareholders who complete a declaration confirming that they are not Irish residents are not liable to Irish
tax on the income or gains arising from their investment in the Company and no withholding tax will be deducted on
any payments made to them. Where the Company has a concession from the Revenue Commissioners it may be
possible to obtain an exemption from the requirement to have a valid non-resident declaration in place.
If the Company fails to deduct the tax or fails to collect the appropriate signed declaration from any non-resident or
exempted shareholders, the Company will remain liable for the tax. In these circumstances, the Company would seek
to recover the tax paid from the relevant shareholder.
Capital gains, dividends and interest received by the Company may be subject to withholding taxes imposed by the
country of origin and such taxes may not be recoverable by the Company or its shareholders.
Smith & Williamson Investment Funds Plc
90
Notes to the Financial Statements for the financial year ended December 31, 2018 (continued)
22. Events during the financial year
Smith &Williamson Medium Dated Corporate Bond Fund was terminated on June 15, 2018.
23. Events post financial year end
Dividends proposed as are disclosed in note 18.
There were no other post financial year events which require disclosure.
24. Soft commission arrangements
The Investment Manager has entered into soft commission arrangements for research purposes as permitted by
applicable regulation on behalf of the Fund with broker counterparties during the financial years ended December 31, 2018 and 2017.
25. Approval of the Financial Statements
The financial statements were approved and authorised for issue by the Board of Directors on April 15, 2019.
Smith & Williamson Investment Funds Plc
91
Schedule of Investments
Wye Investment Fund
As at As at
December December
Domicile
Shares/
Description
31, 2018 31, 2018
Par Value Fair Value % of Net
GBP Assets
EQUITIES
Germany (2017: 4.22%)
20,200 Deutsche Beteiligungs AG 608,279 3.16
Guernsey (2017: 2.19%)
- - -
Ireland (2017: 0.00%)
357,049 Greencoat Renewables Plc 330,083 1.72
Singapore (2017: 0.00%)
195,000 Ascendas Real Estate Investment 288,680 1.50
Switzerland (2017: 2.34%)
5,000 Pargesa Holding SA 282,152 1.47
United Kingdom (2017: 11.17%)
200,000 Martin Currie Asia Unconstra Fund 716,000 3.73
125,000 Secure Income REIT Plc 471,250 2.45
1,187,250 6.18
United States (2017: 0.00%)
3,200 Alexandria Real Estate Equity 289,540 1.51
Total Equities (2017: 19.92%) 2,985,984 15.54
INVESTMENT FUNDS
Europe (2017: 10.35%)
445,000 Blackrock Continental Europe Fund 618,105 3.22
Ireland (2017: 0.00%)
3,500 Egerton Capital Equity Fund Plc 1,096,375 5.70