Half-year Report

City Merchants High Yield Trust Limited

Half-Yearly Financial Report for the Six Months to 30 June 2016

KEY FACTS

City Merchants High Yield Trust Limited is a Jersey incorporated investment company listed on the London Stock Exchange. The Company commenced trading on 2 April 2012 as a successor company to City Merchants High Yield Trust plc.

Investment Objective

The Company’s investment objective is to seek to obtain both high income and capital growth from investment, predominantly in high-yielding fixed-interest securities.

Investment Policy

The Company seeks to provide a high level of dividend income relative to prevailing interest rates mainly through investment in bonds and other fixed-interest securities. The Company also invests in equities and other equity-like investments consistent with the overall objective.

Performance Statistics

	FOR SIX MONTHS TO  30 JUN 2016	YEAR  ENDED 31 DEC  2015
Total Return
Net asset value	+2.2%	+2.7%
Share price*	+1.2%	+0.7%
Ongoing Charges	1.03%	1.01%
Dividend for the period/year	5p	10p

Period End Information

	AT 30 JUN 2016	AT 31 DEC 2015
Net asset value per share	177.35p	178.34p
Share price*	177.75p	180.75p
Premium	0.2%	1.4%
Gearing
Gross gearing	nil	nil
Net cash	2.1%	7.0%

* Source: Thomson Reuters Datastream.

INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN’S STATEMENT

Chairman’s Statement

The Company has continued to provide shareholders with a positive return through the first half of 2016. In the six months to 30 June 2016, the net asset value (NAV) total return was +2.2% which compares with an average total return of +3.6% from the funds in the Investment Association Sterling Strategic Bond sector. In particular your portfolio managers took steps which successfully protected the NAV against the volatility in markets immediately following the UK’s vote to reject membership of the European Union. The Manager’s Investment Report provides some background on how this was achieved and how the portfolio is positioned. The NAV total return from 30 June 2016 to 15 August 2016, the latest practical date is 6.4%.

The Company has sustained the level of income for shareholders despite the continued challenges of a low interest rate environment. The first and second interim dividends for this year of 2.5p each, remain in line with our target of matching last year’s total dividends.

In the last annual report I remarked that demand for the Company’s shares in 2015 had been strong and as a result the shares had traded at a small premium to NAV. In the six months to 30 June 2016 this has continued, with the Company issuing another 1,280,000 shares to satisfy demand. The average price of these issues was 175.32p per share. Altogether, this represents £2.25 million of capital raised in the first half of this year and has enhanced net assets by approximately £19,000, after costs. A further 1,993,745 shares have been issued to the date of this report.

This year the Company’s half-year results have been published during the uncertain period of the aftermath of the unexpected decision by the UK to leave the European Union. The decision will have far-reaching consequences across Europe and the globe, and it is likely that it will further extend the prevailing low interest rate environment we are in. However, we are confident in our portfolio managers’ ability to continue to find income and take advantage of the opportunities that arise.

Finally, I am pleased to report that, as announced on 15 June 2016, Rhys Davies has been promoted to portfolio manager to co-manage the Company’s portfolio alongside Paul Causer and Paul Read.

Clive Nicholson

Chairman

16 August 2016

Manager’s Investment Report

Market Background

Despite a volatile backdrop, high yield bond markets delivered positive returns in the first half of 2016.

The year began with concerns over the European banking sector and ongoing weakness in commodity markets driving down sentiment. Parts of the financial sector came under significant pressure with negative sentiment also affecting high yield bonds and corporate hybrids. The market’s appetite for risk increased from February amid anticipation of significant further monetary easing from the European Central Bank (ECB). The ECB’s subsequent policy announcement exceeded expectations with a broad range of measures designed to stimulate the economy.

For bond markets, one of the ECB’s most significant announcements was the Corporate Sector Purchase Programme (CSPP). This is an expansion of the ECB’s quantitative easing programme, which will see the ECB buy corporate bonds. Anticipation of the programme, which did not begin until June, helped euro investment grade corporate bonds to rally strongly. In turn, high yield bonds also rallied as investors sought to maintain income.

Commodity markets strengthened over this period with Brent crude oil prices rising US$12 over the six months to US$49.6 a barrel by the end of June. This was particularly supportive for the US high yield market, which has a high concentration of energy related companies.

During May and June, the UK’s impending referendum on membership of the European Union became an increasing source of volatility. The unexpected result was a source of weakness for corporate bond markets. However, in the immediate aftermath the move in prices was not as extreme as some had feared. Some of the biggest moves have been in the Gilt market with 10 year Gilt yields falling 56 basis points during June to 0.87%. This environment favoured higher quality corporate bonds with high yield bonds weakening slightly through June.

According to data from Merrill Lynch, the total return for European high yield bonds in the first half of 2016 was 3.7% (in sterling hedged terms). The aggregate yield to maturity for the sector fell 94bps from 5.93% to 4.99%. By comparison, sterling investment grade corporate bonds returned 7.3% and Gilts returned 12.0%.

So far this year, high yield issuance has been much lower than during 2015 with the uncertainty of January and February leading to very low levels of issuance in what are traditionally very busy months for companies to raise capital. To 30 June 2016 Barclays report that €25.6 billion was issued in European currencies, which is 47% lower than the same period in 2015.

Portfolio Strategy

The Company’s NAV ended June 2016 at 177.35p, slightly below the NAV of 178.34p at the close of 2015. The Company paid a total dividend of 5p over the period. The NAV total return for the six months was 2.2%.

The portfolio holds a core of high yield corporate bonds, focused on seasoned issuers that we consider default-remote. In addition, we have significant exposure to areas of the market, which we believe offer relatively attractive yield. Approximately 25% of the portfolio is invested in bank capital, predominantly in the subordinated debt of large European banks. We took the opportunity of weakness in this sector earlier in the year to add some exposure to bonds we thought were attractively priced. In our view, the sector continues to pay a reasonable level of income for the risk. We also have around a 10% allocation to subordinated insurance bonds. Elsewhere we also have holdings in hybrid capital instruments, across sectors including telecoms and utilities. We believe the subordination risk of these more junior debt instruments is attractive in the context of the companies’ relatively strong balance sheets.

In the lead up to the referendum, we took a number of measures to mitigate the negative effect a leave vote would have on risk markets. This included increasing our exposure to the US dollar, raising our allocation to cash and initiating a position in US Treasuries. We are pleased to report these measures proved effective and the Company has subsequently delivered strong returns.

Outlook

The UK’s vote to reject membership of the European Union has raised a number of uncertainties. That said, the initial reaction to the referendum result was more moderate than might have been expected. However, the full impact of this event on our markets will only become clear over time, as we see the direction of the economic fundamentals and learn more about the future shape of relations between the UK, the European Union and the wider world. We remain cautious in our outlook and retain an overall defensive stance in the portfolio although we acknowledge the CSPP will continue to provide a strong technical support to markets. There are still pockets of value, particularly within the financial sector and corporate hybrids. In this low yield environment, we remain focused on seeking to deliver an attractive level of income.

Paul Read/Paul Causer/Rhys Davies

Portfolio Managers                        

16 August 2016

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risk factors relating to the Company can be summarised as follows:

–    Investment Objective – there is no guarantee that the Company’s investment objective will be achieved or will provide the returns sought by the Company.

–    Investment Risk – material changes affecting global capital markets may have a negative effect on the Company’s business, financial condition and results of operations. The poor performance of any individual portfolio investment has a negative effect on the value of the portfolio and consequently the Net Asset Value (NAV) per share. A majority of the portfolio comprises high-yield fixed-interest securities – these are subject to credit, interest rate, liquidity and duration risks, and a significant proportion of these are non-investment grade securities.

–    Foreign Exchange Risk – the movement of exchange rates may have unfavourable or favourable impact on returns as the majority of the assets are non-sterling.

–    Derivatives – the Company may enter into derivative transactions for efficient portfolio management. Derivative instruments can be highly volatile and expose investors to a high risk of loss.

–    Dividends – the ability of the Company to pay dividends is dependent on the level of income generated from the portfolio.

–    Ordinary Shares and Discount – the shares may trade at a discount to NAV and shareholders may be unable to realise their investment through the secondary market at NAV. The existence of a liquid market in the shares cannot be guaranteed.

–    Gearing of Returns through Borrowings – performance may be geared by means of the Company’s credit facility. Whilst gearing will be used with the aim of enhancing returns on the portfolio when the value of the Company’s assets is rising, it will have the opposite effect when the value is falling. There is no guarantee that any credit facility would be renewable at maturity on terms acceptable to the Company.

–    Operational Risk, including Reliance on Third Party Providers – failure by any service provider to carry out its obligations in accordance with the terms of its appointment could have a materially detrimental impact on the effective operation of the Company and on the ability of the Company to pursue its investment policy successfully.

–    Regulatory and Tax Related – whilst compliance with rules and regulations is closely monitored, breaches could affect returns to shareholders. Changes to regulation or to the Company’s tax status or tax treatment might adversely affect the Company.

A detailed explanation of these principal risks and uncertainties can be found on pages 10 and 11 of the Company’s 2015 annual financial report.

In the view of the Board, these principal risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the period under review.

RELATED PARTIES

Note 22 of the 2015 annual financial report gives details of related party transactions. The basis of these has not changed for the six months being reported. The 2015 annual financial report is available on the Company’s section of the Manager’s website at www.invescoperpetual.co.uk/citymerchants.

GOING CONCERN

The financial statements are prepared on a going concern basis. The Directors consider that going concern is the appropriate basis as they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion, the Directors have taken into account the Company’s investment objective, its risk management policies, the diversified nature of its investment portfolio, the borrowing facility which can be used to meet short-term funding requirements, the liquidity of most of its investments which could be used to repay any borrowings in the event that the facility could not be renewed or replaced and the ability of the Company to meet all of its liabilities and ongoing expenses.

BOND RATING ANALYSIS (STANDARD AND POOR’S RATINGS)

The definitions of these ratings are set out on page 62 of the 2015 annual financial report.

	30 JUN 2016		31 DEC 2015
RATING	% OF  PORTFOLIO	CUMULATIVE  TOTAL %	% OF  PORTFOLIO	CUMULATIVE  TOTAL %
Investment Grade:
AA+	6.1	6.1	—	—
A–	0.7	6.8	1.7	1.7
BBB+	4.7	11.5	3.6	5.3
BBB	4.0	15.5	7.7	13.0
BBB–	4.5	20.0	3.2	16.2
Non-investment Grade:
BB+	16.6	36.6	13.8	30.0
BB	4.3	40.9	4.0	34.0
BB–	9.9	50.8	13.4	47.4
B+	13.5	64.3	11.7	59.1
B	8.5	72.8	10.6	69.7
B–	4.6	77.4	3.5	73.2
CCC+	6.7	84.1	6.5	79.7
CCC	0.1	84.2	0.2	79.9
CCC-	-	84.2	0.1	80.0
NR (including equity)	15.8	100.0	20.0	100.0
	100.0		100.0

NR: Not rated

DIRECTORS’ RESPONSIBILITY STATEMENT

in respect of the preparation of the half-yearly financial report.

The Directors are responsible for preparing the financial report, using accounting policies consistent with applicable law and International Financial Reporting Standards.

The Directors confirm that to the best of their knowledge:

–    the condensed set of financial statements contained within the half-yearly financial report have been prepared in accordance with International Accounting Standards 34 ‘Interim Financial Reporting’;

–    the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the FCA’s Disclosure and Transparency Rules; and

–    the interim management report includes a fair review of the information required on related party transactions.

The half-yearly financial report has not been audited or reviewed by the Company’s auditor.

Signed on behalf of the Board of Directors.

Clive Nicholson

Chairman

16 August 2016

THIRTY LARGEST INVESTMENTS AT 30 JUNE 2016

ISSUER/ISSUE	MOODY/S&P RATING	INDUSTRY	COUNTRY OF INCORPORATION	MARKET VALUE £’000	% OF PORTFOLIO
US Treasury		Government Bond	USA
2.5% 15 Feb 2046	Aaa/AA+			9,351	6.08
Lloyds Banking Group –
Lloyds Bank &
LBG Capital		Financials	UK
7.875% Perpetual	NR/BB–			3,689
7% Var Perpetual	NR/BB–			2,878
				6,567	4.27
Aviva		Financials	UK
6.125% Perpetual	Baa1/BBB			3,640
8.875% Preference	NR/NR			1,530
				5,170	3.36
Société Genérale		Financials	France
8.875% FRN Perpetual	Ba2/BB+			4,383	2.84
Telefonica Europe		Telecommunications	Netherlands
6.75% Perpetual	Ba1/BB+			2,130
5.875% Perpetual	Ba1/BB+			1,190
4.9% Cnv 25 Sep 2017	NR/BB+			677
				3,997	2.60
Intesa Sanpaolo		Financials	Italy
8.375% FRN Perpetual	Ba3/B+			3,056
7% Perpetual	Ba3/B+			841
				3,897	2.53
Credit Agricole		Financials	France
7.589% FRN Perpetual	Ba2/BB+			2,309
7.5% Var Perpetual	NR/NR			823
8.125% FRN Perpetual	Ba2/BB+			537
				3,669	2.38
Standard Chartered		Financials	UK
5.125% 06 Jun 2034	A3/BBB–			1,670
5.7% 26 Mar 2044	A3/BBB–			1,519
				3,189	2.07
General Motors		Consumer Goods	USA
Wts 10 Jul 2019	Equity			3,145	2.04
Twinkle Pizza		Consumer Services	UK
6.625% 01 Aug 2021	B2/B			1,778
8.625% 01 Aug 2022	Caa1/CCC+			1,069
				2,847	1.86
Balfour Beatty		Industrials	UK
10.75p Convertible Preference	NR/NR			2,651	1.72
Chemours		Industrials	USA
6.625% 15 May 2023 (SNR)	B1/B+			1,770
6.125% 15 May 2023	B1/NR			533
7% 15 May 2025	B1/B+			154
				2,457	1.60
Premier Foods Finance		Consumer Goods	UK
6.5% 15 Mar 2021 (SNR)	B2/B			2,367	1.54
Marfrig		Consumer Goods	Netherlands
8.375% 09 May 2018	B2/B+			1,630
9.5% 04 May 2020 (SNR)	B2/B+			372
6.875% 24 June 2019 (SNR)	B2/B+			302
				2,304	1.50
Enel		Utilities	Italy
7.75% 10 Sep 2075	Ba1/BB+			1,525
6.625% Var 15 Sep 2076	Ba1/BB+			775
				2,300	1.49
Barclays		Financials	UK
9.25% Perpetual	Ba1/BB+			1,149
7% Perpetual	NR/B+			873
8% Perpetual	NR/B+			272
				2,294	1.49
Constellium		Basic Materials	France
8% 15 Jan 2023	Caa1/CCC+			681
7% 15 Jan 2023 (SNR)	Caa1/CCC+			672
4.625% 15 May 2021	Caa1/CCC+			459
5.75% 15 May 2024	Caa1/CCC+			293
				2,105	1.37
Citigroup Capital		Financials	USA
6.829% FRN	Ba1/BB+			2,097	1.36
28 Jun 2067
Koninklijke KPN		Telecommunications	Netherlands
6.875% FRN	Ba2/BB			2,064	1.34
14 Mar 2073
Iron Mountain		Financials	USA
6.125% 15 Sep 2022	Ba3/BB–			1,957	1.27
REA Finance		Consumer Goods	Netherlands
8.75% 31 Aug 2020	NR/NR			1,930	1.25
Greenko		Utilities	Netherlands
8% 01 Aug 2019	NR/B+			1,870	1.22
ECO-BAT Finance		Industrials	UK
7.75% 15 Feb 2017	B3/CCC+			1,843	1.20
BHP Billiton		Basic Materials	Australia
6.75% FRN 19 Oct 2075	Baa2/BBB+			964
6.5% Var 22 Oct 2077	Baa2/BBB+			835
				1,799	1.17
TMF		Financials	Netherlands
9.875% 01 Dec 2019	Caa1/CCC+			1,771	1.15
Catlin Insurance		Financials	USA
7.249% FRN Perpetual	NR/BBB+			1,727	1.12
Santos Finance		Oil and Gas	Australia
8.25% FRN 22 Sep 2070	NR/BB+			1,684	1.10
Electricite De France		Utilities	France
6% Perpetual	Baa2/BB+			1,169
5.875% Perpetual	Baa2/BB+			506
				1,675	1.09
Origin Energy		Utilities	Australia
7.875% 16 Jun 2071	Ba2/BB			1,630	1.06
Thames Water		Financials	UK
7.75% 01 Apr 2019	B1/NR			1,106
5.875% 15 Jul 2022 (SNR)	B1/NR			503
				1,609	1.05
				86,349	56.12
Other investments				67,503	43.88
Total investments				153,852	100.00

.

CONDENSED STATEMENT OF CHANGES IN EQUITY

	STATED CAPITAL £’000	CAPITAL RESERVE £’000	REVENUE RESERVE £’000	TOTAL £’000
FOR THE SIX MONTHS ENDED 30 JUNE 2016
At 31 December 2015	138,323	12,802	2,851	153,976
Net proceeds from issue of new shares – note 6	2,233	—	—	2,233
Total comprehensive income for the period	—	(1,038)	4,560	3,522
Dividends paid – note 4	(17)	—	(4,323)	(4,340)
At 30 June 2016	140,539	11,764	3,088	155,391
FOR THE SIX MONTHS ENDED 30 JUNE 2015
At 31 December 2014	128,209	17,610	2,392	148,211
Net proceeds from issue of new shares	6,070	—	—	6,070
Total comprehensive income for the period	—	13	4,217	4,230
Dividends paid – note 4	(25)	—	(4,059)	(4,084)
At 30 June 2015	134,254	17,623	2,550	154,427

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

	FOR SIX MONTHS TO 30 JUN 2016			FOR THE SIX MONTHS TO 30 JUN 2015
	REVENUE £’000	CAPITAL £’000	TOTAL £’000	REVENUE £’000	CAPITAL £’000	TOTAL £’000
Profit/(loss) on investments held at fair value	—	5,377	5,377	—	(2,989)	(2,989)
Exchange differences	—	(252)	(252)	—	(343)	(343)
(Loss)/profit on derivative financial instruments – currency hedges	—	(5,953)	(5,953)	—	3,554	3,554
Income – note 5	5,242	—	5,242	4,875	—	4,875
Investment management fee – note 2	(374)	(202)	(576)	(376)	(202)	(578)
Other expenses	(212)	—	(212)	(199)	—	(199)
Profit/(loss) before finance costs and taxation	4,656	(1,030)	3,626	4,300	20	4,320
Finance costs	(14)	(8)	(22)	(14)	(7)	(21)
Profit/(loss) before taxation	4,642	(1,038)	3,604	4,286	13	4,299
Tax	(82)	—	(82)	(69)	—	(69)
Profit/(loss) after taxation	4,560	(1,038)	3,522	4,217	13	4,230
Return per ordinary share	5.2p	(1.2)p	4.0p	5.1p	0.0p	5.1p
Weighted average number of shares in issue			87,090,536			82,263,980

The total column of this statement represents the Company’s statement of comprehensive income, prepared in accordance with International Financial Reporting Standards. The supplementary revenue and capital columns are both prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies. All items in the above statement derive from continuing operations and the Company has no other gains or losses. No operations were acquired or discontinued in the period.

.

CONDENSED BALANCE SHEET

Registered in Jersey No. 109714

	AT 30 JUNE 2016 £’000		AT 31 DEC 2015 £’000
Non-current assets
Investments held at fair value through profit or loss		153,852	141,833
Current assets
Other receivables – accrued income		3,032	2,936
Cash and cash equivalents		3,229	10,730
		6,261	13,666
Current liabilities
Other payables		(382)	(432)
Amount due to brokers		(586)	—
Derivative financial instruments
– unrealised loss on forward currency contracts		(3,754)	(1,091)
Net assets		155,391	153,976
Capital and reserves
Stated capital – note 6		140,539	138,323
Capital reserve		11,764	12,802
Revenue reserve		3,088	2,851
Shareholders’ funds		155,391	153,976
Net asset value per ordinary share		177.35p	178.34p
Number of shares in issue at the period end – note 6		87,617,459	86,337,459

CONDENSED STATEMENT OF CASH FLOW

	SIX MONTHS TO 30 JUNE 2016 £’000		SIX MONTHS TO 30 JUNE 2015 £’000
Cash flow from operating activities
Profit before taxation	3,604		4,299
Tax	(82)		(69)
Adjustment for:
Purchases of investments		(18,067)		(26,520)
Sales of investments		12,011		17,950
	(6,056)		(8,570)
(Profit)/loss on investments	(5,377)		2,989
Exchange differences	2		(51)
Net decrease/(increase) in derivative instruments – currency hedges	2,663		(699)
Finance costs	22		21
Operating cash flows before movements in working capital	(5,224)		(2,080)
(Increase)/decrease in receivables	(96)		235
Decrease in payables	(50)		(41)
Net cash flows from operating activities	(5,370)		(1,886)
Cash flow from financing activities
Finance costs paid	(22)		(22)
Net proceeds from issue of shares	2,233		6,070
Equity dividends paid – note 4	(4,340)		(4,084)
Net cash flows from financing activities	(2,129)		1,964
Net (decrease)/increase in cash and cash equivalents	(7,499)		78
Exchange differences	(2)		51
Cash and cash equivalents at the beginning of the period	10,730		9,577
Cash and cash equivalents at the end of the period	3,229		9,706

.

NOTES TO THE INTERIM FINANCIAL RESULTS

1.   Basis of Preparation

The condensed financial statements have been prepared using the same accounting policies as those adopted in the 2015 annual financial report. They have been prepared on an historical cost basis, except for the measurements at fair value of investments and derivatives, and in accordance with the applicable International Financial Reporting Standards (IFRS) and interpretations issued by the International Financial Reporting Interpretations Committee as adopted by the European Union.

Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the ’SORP’): is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

2.   Management Fee

Investment management fees and finance costs are allocated 35% to capital and 65% to revenue. The management fee is payable quarterly in arrear and is equal to 0.1875% of the value of the Company’s total assets under management less current liabilities at the end of each quarter. In addition, the Manager is paid a fixed administration fee of £25,000, based on £22,500 plus RPI per annum.

3.   Taxation

The Company is subject to Jersey income tax at the rate of 0% (2015: 0%). The overseas tax charge consists of irrecoverable withholding tax.

4.   Dividends Paid

	SIX MONTHS TO 30 JUNE	2016			2015
		PENCE	£’000	PENCE		£’000
	Interim dividends in respect of previous period	2.5	2,158	2.5		2,020
	First interim dividend	2.5	2,182	2.5		2,064
		5.0	4,340	5.0		4,084

Dividends paid in the period have been charged to revenue except for £17,000 (six months to 30 June 2015: £25,000) which was charged to stated capital. This amount is equivalent to the income accrued on the new shares issued in the period (see note 6).

A second interim dividend of 2.5p (2015: 2.5p) has been declared and will be paid on 22 August 2016 to ordinary shareholders on the register on 22 July 2016.

5.   Income

	SIX MONTHS TO 30 JUNE	2016 £’000	2015 £’000
	Investment income – interest:
	– UK	1,856	1,701
	– Overseas	3,086	2,948
	Dividends:
	– UK	283	211
	– Overseas	14	14
	Deposit interest	3	1
		5,242	4,875

6.   Stated Capital, including Movements

      Alloted ordinary shares of no par value.

		SIX MONTHS TO 30 JUN 2016	YEAR TO 31 DEC 2015
	Stated capital:
	Brought forward	£138,323,000	£128,209,000
	Net issue proceeds	£2,233,000	£10,190,000
	Dividend paid from stated capital	£(17,000)	£(76,000)
	Carried forward	£140,539,000	£138,323,000
	Number of ordinary shares:
	Brought forward	86,337,459	80,812,459
	Issued in period	1,280,000	5,525,000
	Carried forward	87,617,459	86,337,459
	Per share:
	– average issue price	175.32p	186.60p

Of the net issue proceeds of £2,233,000, an aggregate amount of £17,000 represented the accrued income element of the net asset value attributed to the new shares.

Subsequent to the period end 1,993,745 shares have been issued at an average price of 183.30p.

7.   Classification Under Fair Value Hierarchy

Note 19 of the 2015 annual financial report sets out the basis of classification.

There were no Level 3 holdings at any period end, and the total (not shown) is therefore the aggregate of Level 1 and Level 2.

		AT 30 JUN 2016		AT 31 DEC 2015
		LEVEL 1 £’000	LEVEL 2 £’000	LEVEL 1 £’000	LEVEL 2 £’000
	Financial assets designated at fair value through profit or loss:
	– Fixed interest securities(1)	—	142,369	—	124,977
	– Convertibles	—	2,862	—	2,588
	– Preference	2,825	—	2,930	—
	– Convertible Preference	2,671	—	6,866	—
	– Warrants	3,145	—	4,472	—
	Total for financial assets	8,621	145,231	14,268	127,565
	Financial liabilities designated at fair value through profit or loss:
	– Derivative financial instruments:
	Currency hedges	—	3,754	—	1,091
	Total for financial assets	—	3,754	—	1,091

(1)  Fixed interest securities include both fixed and floating rate securities.

8.   Status of Half-yearly Financial Report

The financial information contained in this half-yearly report which has not been audited by the Companies auditor and does not constitute statutory accounts as defined in Article 104 of Companies (Jersey) Law 1991. The financial information for the half year ended 30 June 2016 and the half year ended 30 June 2015 have not been audited. The figures and financial information for the year ended 31 December 2015 are extracted and abridged from the latest published accounts and do not constitute the statutory accounts for that year.

By order of the Board

R&H Fund Services (Jersey) Limited
Company Secretary

16 August 2016