SARACEN INVESTMENT FUNDS ICVC by ijr13051

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									      SARACEN INVESTMENT FUNDS ICVC




Unaudited Interim Report & Financial Statements
for the six months ended 30 June 2006
SARACEN INVESTMENT FUNDS ICVC


Directory

Authorised Corporate Director (ACD) :
Saracen Fund Managers Limited (www.saracenfundmanagers.com)
Authorised and Regulated by the Financial Services Authority

Address :
Burlington House
183 Bath Street
GLASGOW
G2 4HU

Telephone : 0141 248 2277 (Investment Management)

Directors of the Authorised Corporate Director :
James Clelland Fisher
John Cameron Spence
Julian Edward Campbell Fosh

Depositary :

The Bank of New York
Trust and Depositary Company Limited
One Canada Square
LONDON
E14 5AL

Authorised and Regulated by the Financial Services Authority

Administrator and Registrar :

Registered Address :                             Operating Address :
Sinclair Henderson Fund Administration Ltd       Sinclair Henderson Fund Administration Ltd
23 Cathedral Yard                                Beaufort House
EXETER                                           51 New North Road
EX1 1HB                                          EXETER
                                                 EX4 4EP

Authorised and Regulated by the Financial Services Authority

Telephone : 01392 477635 (Dealing & Administration)
Facsimile : 01392 412133

Independent Auditors :
Deloitte & Touche LLP
Lomond House
9 George Square
GLASGOW
G2 1QQ




                                             1
SARACEN INVESTMENT FUNDS ICVC


Contents



           REPORTS
3          Financial Highlights
4–6        Authorised Corporate Director’s Investment Report
7–8        Net Asset Value Per Share, Performance Record, Comparative Tables and
           Total Expenses Ratios
9          Statement of the Authorised Corporate Director’s (ACD’s) Responsibilities


           FINANCIAL STATEMENTS – SARACEN GROWTH FUND
10         Statement of total return
10         Statement of change in shareholders’ net assets
11 – 12    Portfolio Statement
13         Balance Sheet
13         Certification of the Financial Statements by Directors of the ACD
14         Summary of material portfolio changes
15 – 23    Notes to the Financial Statements


           FINANCIAL STATEMENTS – SARACEN SPECIAL SITUATIONS FUND
24         Statement of total return
24         Statement of changes in shareholders’ net assets
25         Balance Sheet
25         Certification of the Financial Statements by Directors of the ACD


           OTHER MATTERS
26 – 28    General Information




                                          2
SARACEN INVESTMENT FUNDS ICVC


FINANCIAL HIGHLIGHTS

FOR THE SIX MONTHS TO 30 JUNE 2006

                                   % Change             30 June 2006       31 December 2005

Fund Size (NAV)                         +63.4          £57.88 million        £35.43 million

Published Price per Alpha Share         +12.8           229.99 pence         203.89 pence

Published Price per Beta Share          +13.6           350.38 pence         308.55 pence

FTSE All Share Index*                    +6.1              3398.58              3202.93




PERFORMANCE FROM 8 MARCH 1999 to 30 JUNE 2006

                                   % Change             30 June 2006         8 March 1999

Published Price per Alpha Share       +234.9            229.99 pence         68.68 pence†

Published Price per Beta Share        +250.4            350.38 pence         100.00 pence

FTSE All Share Index*                   +29.5              3398.58             2624.55††



* Total Return Index

† A notional price that reflects the potential position of the Alpha Shares had they been
  created at the same time as the Beta Shares on 8 March 1999

†† Closing Index on Friday, 5 March 1999




                                                3
SARACEN INVESTMENT FUNDS ICVC


Authorised Corporate Director’s Investment Report

SARACEN GROWTH FUND

Investment Objective & Policy

The investment objective of SGF is to achieve a long term total return on the invested assets at
a higher rate than the total return on the FTSE All-Share Index (ASI). To meet this objective,
the ACD carefully selects and invests in a diversified portfolio of primarily United Kingdom
equity securities that provide the potential for long term growth. SGF may also invest in certain
overseas securities and may, from time to time, hold liquid assets such as cash or short term
money market instruments in the circumstances permitted by the Financial Services Authority
Regulations. In most cases this is likely to occur only where the ACD considers that equity
share prices have become overvalued.
The ACD employs a value-based approach, using both quantitative and qualitative techniques
to achieve the above objective. Risk is carefully controlled through diversification and rigorous
analysis. In addition to the objective of maximising returns, the ACD also seeks to protect the
capital of investors in SGF.

Results

Once again we are pleased to report a very good performance for SGF, both in absolute and
relative terms over the six month period to the end of June. The net asset value per share of
SGF Alpha shares increased by 12.8% and SGF Beta shares by 13.6% compared with a total
return of 6.1% for the FTSE All Share Index.
As a result we have maintained our consistent track record of having outperformed our
benchmark in every year (or part thereof) of the Fund’s existence. Consequently, this is
attracting the attention of a wide variety of investors, with net new investment over the six
months of over £18m into SGF increasing the total net assets to just under £58m at the end of
June.
I am also pleased to report that those shareholders who invested at the launch of SGF have now
enjoyed an uplift of over three and a half times their money (to the end of June 2006), after
deducting all of the expenses of operating SGF. This compares with an increase in the
benchmark index of only 29% over the same period.
Finally, we are delighted to report that SGF is ranked first ahead of over 250 other competing
funds in the UK All Companies sector over the three years to the end of June 2006. (Source :
Standard & Poor’s)

Portfolio Review

Excluding new money, the turnover* of the portfolio was under 15%. Putting this another way,
this equates to an average holding period of over six and a half years for the shares in your
portfolio. This should give you the reassurance that we are long term investors who have the
patience to wait for our investment returns.
Within the portfolio we only made nine sales within the period under review. Of the £4.5m
realised, over £1.2m was due to the sale of our entire holding in Victoria Oil & Gas. We initially
purchased the shares around the 52p level and sold a significant part of the holding at £1.34.
Subsequent to that sale, we reinvested at 78p when funds were raised to develop the company's

                                                4
SARACEN INVESTMENT FUNDS ICVC


Authorised Corporate Director’s Investment Report (Continued)



exploration activities. The entire holding was sold at prices ranging from £2.09 to £2.24,
realising significant profits for your fund. The shares are now trading at 72p. The proceeds of
the sale were invested in another oil share which we believed to be cheap – Imperial Energy –
at £6.20. We sold approximately two thirds of the holding at £10.06, an uplift of over 62% on
the original purchase price. We have, therefore, realised over £1.2m from an original
investment of £1m and we still had an investment of just under £0.6m at the end of the period.
SGF also benefited from the takeover of Mayborn, the baby products company, realising a 20%
profit on the original investment. The new investment of c£18m into SGF was principally
invested in existing holdings which we believed to be attractive.

Investment Review

Given that this was the year of the World Cup, perhaps we can open our investment review by
saying it was a game of two halves or, more aptly, two quarters. UK equities, as measured by
the FTSE All Share Index, produced a very respectable total return of 6.1% over the six month
period. This compared favourably with a negative return of 2.1% from UK gilts (five to fifteen
year). The equity return, however, was earned in the first quarter, with the ASI producing a
return of 8.1%. In the second quarter, the total return from UK equities was a negative 1.8%.
The swings in the equity market in May and June were very severe indeed, with some FTSE
100 share prices moving by 5% or more per day. Several smaller company share prices
experienced even more severe swings and in most cases this was driven by sentiment rather
than by any fundamental change in the companies' trading. Investors really did require nerves
of steel during this period of uncertainty.
The actual sell off in the market was in fact very short and sharp and, during the middle two
weeks in May, shares fell by more than 9%. An end of May rally and a 2% rise in June limited
the damage for the quarter. The May sell off was attributed to higher interest rates, rising
inflation, higher oil prices and a slowdown in growth. Combined with this, the market had
already experienced a very good run in the opening months of the year and, arguably, a
correction should have come as no surprise to investors.

Prospects

Given the strong performance of the UK stockmarket since the March 2003 low, the sharp
correction in May and the partial recovery since, it must be very tempting for investors to cash
in their profits. We do not, however, believe that global economic data either presages inflation
or recession. The inexorable rise in the oil price and rising interest rates are a cause for concern,
but in the short term we do not believe that they pose a threat to the UK equity market. UK
equity ratings do not look demanding, particularly as corporate profits and cash flows are
strong and balance sheets remain healthy.
As always, however, stock selection will remain the key to successful investment. The
outstanding returns which the Fund has been fortunate enough to deliver over its life are solely
due to good stock selection.




                                                 5
SARACEN INVESTMENT FUNDS ICVC


Authorised Corporate Director’s Investment Report (Continued)



We will endeavour to continue to add value to your shareholding by adhering to our well tried
and tested, successful investment philosophy and process. Of course, we cannot guarantee
success and as our Regulators would say, the past is no guide to the future, but we are quietly
confident that we continue to know how to make money for you over the medium to long term.
We thank you, once again, for your support.


July 2006

* purchases plus sales less net new investment, divided by the average fund size, expressed as
  a percentage




                                              6
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND



Net Asset Value Per Share, Performance Record and Comparative Tables

Net Asset Value per Share
The net asset values for the last three annual accounting dates and the current interim are:
Accounting    Total Net    Net Assets per   Number of Undivided     Net Assets per   Number of Undivided
  Date       Asset Value   Alpha Share      Alpha Shares in Issue    Beta Share      Beta Shares in Issue
                  £              p                                                            p
 31/12/03     7,290,832        122.46              285,290              183.39            3,785,151
 31/12/04    19,154,570        166.46            1,154,742              250.66            6,874,735
 31/12/05    35,428,409        203.93            2,736,573              308.62            9,671,325
 30/06/06    57,875,288        228.11            3,471,749              347.52           14,374,984

Both classes of share are accumulation shares. Further details are contained in General
Information on pages 25 and 26.
Accumulation Record
                                    NET INCOME
Calendar                   Alpha Share       Beta Share
  Year                      per Share        per Share
                                 p                p
  2001                          nil              0.81
  2002                          nil              0.17
  2003                          nil              0.31
  2004                         0.20              1.58
  2005                         0.81              2.56
  2006*                         nil               nil

* No distribution is payable for the six months ended 30 June 2006.
Capital Record
Alpha Shares were first issued on 8 February 2000 at £1, while Beta shares were first issued at
£1 on 22 February 1999. Prices below are published prices.
                                   ALPHA SHARES                              BETA SHARES
Calendar                      Highest         Lowest                   Highest         Lowest
  Year                         Price           Price                    Price           Price
                                 p               p                        p               p
  2001                        133.40          103.81                   196.81          153.41
  2002                        122.73           87.09                   182.00          129.50
  2003                        122.54           80.60                   183.51          120.12
  2004                        166.49          122.95                   250.72          184.14
  2005                        203.89          166.58                   308.55          250.87
  2006**                      252.96          207.34                   385.11          312.99

** For the six month period to 30 June 2006.
Total Expense Ratios
                           Alpha Share           Beta Share
01/01/05 – 31/12/05           1.90%                1.41%
01/07/05 – 30/06/06           1.86%                1.36%

A Total Expense Ratio is a figure representing all operating charges and expenses as a
percentage of the Fund’s value. It includes the annual management fee as well as all the
administrative costs incurred by the Fund.


                                                   7
SARACEN INVESTMENT FUNDS ICVC
SARACEN SPECIAL SITUATIONS FUND



Net Asset Value Per Share, Performance Record and Comparative Tables

Net Asset Value per Share

The net asset values for the last three annual accounting dates and the current interim are :

Accounting    Total Net    Net Assets   Number of Undivided
  Date       Asset Value   per Share      Shares in Issue
                  £            p
 31/12/03       100         100.00              100
 31/12/04       100         100.00              100
 31/12/05       100         100.00              100
 30/06/06       100         100.00              100

Accumulation Record

Calendar     Net Income
  Year       per Share*
                  p
   2003          nil
   2004          nil
   2005          nil
   2006**        nil

* Invested at 1 July 2003

Capital Record

Shares were first issued 1 July 2003 at £1.
Calendar       Highest      Lowest
  Year          Price        Price
                  p            p
   2003        100.00       100.00
   2004        100.00       100.00
   2005        100.00       100.00
   2006**      100.00       100.00

** For the six month period to 30 June 2006.

Total Expense Ratios

                            Share
01/01/05 – 31/12/05         0.00%
01/07/05 – 30/06/06         0.00%

A Total Expense Ratio is a figure representing all operating charges and expenses as a
percentage of the Fund’s value. It includes the annual management fee as well as all the
administrative costs incurred by the Fund. All expenses are charged to SGF.




                                               8
SARACEN INVESTMENT FUNDS ICVC


Statement of the Authorised Corporate Director’s (ACD’s) Responsibilities

The Open-Ended Investment Companies Regulations 2001 (OEIC Regulations) and the Financial
Services Authority’s Collective Investment Schemes Sourcebook (CIS Sourcebook) require the
ACD to prepare Financial Statements for each annual and interim accounting period that give
a true and fair view of the financial affairs of the Company and of its income/expenditure and
net gains/losses for the period. In preparing the Financial Statements, the ACD is required to :

• Select suitable accounting policies and then apply them consistently;

• Comply with the disclosure requirements of the Statement of Recommended Practice
  (SORP) relating to the Financial Statements of Authorised Funds, as issued by the Investment
  Management Association (IMA) in December 2005;

• Follow generally accepted accounting principles and applicable accounting standards;

• Prepare the Financial Statements on a going concern basis unless it is inappropriate to
  presume the Company will continue in operation.

The ACD is responsible for keeping proper accounting records which enable it to demonstrate
that the Financial Statements as prepared, comply with the above requirements.

The ACD is responsible for the management of the Company in accordance with its Instrument
of Incorporation, Prospectus and the Financial Services Authority Rules, and for ensuring that
reasonable steps are taken for the prevention and detection of fraud and other irregularities.




                                               9
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND



Statement of total return for the six months ended 30 June 2006

                                                                       30.06.2006                30.06.2005
                                              Notes               £             £           £             £

Net gains on investments during the period       2                      3,841,946                 1,310,052
Other losses                                     3                           (277)                        –
Income                                           4          557,124                   305,902
Expenses                                         5         (336,542)                 (172,708)
Finance costs : Interest                         7             (853)                   (1,157)

Net income before taxation                                 219,729                    132,037
Taxation                                         6            (948)                      (920)

Net income after taxation                                                218,781                   131,117

Total return before distributions                                       4,060,450                 1,441,169
Finance costs : Distributions                    7                         21,195                     5,935

Change in net assets attributable
 to shareholders                                                        4,081,645                 1,447,104




Statement of change in shareholders’ net assets for the six months ended 30 June 2006

                                                                       30.06.2006                30.06.2005
                                                                  £             £           £             £

Net assets at the start of the period                                  35,428,409                19,154,570
Movement due to issue and cancellation of shares :
 Add : Amounts receivable on issue of shares           20,154,732                    6,559,209
 Less : Amounts payable on cancellation
        of shares                                      (1,855,355)                   (733,571)

                                                                       18,299,377                 5,825,638
 Dilution levy charged                                                     74,850                     9,262
 Stamp duty reserve tax                                                    (8,993)                   (8,008)
 Change in net assets attributable to shareholders
  (see statement of total return above)                                 4,081,645                 1,447,104

Net assets at the end of the period                                    57,875,288                26,428,566




Notes to the Financial Statements are on pages 14 to 23.


                                                      10
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Portfolio Statement as at 30 June 2006                           Percentage
                                                      Market       of total
Investments                              Holding      value       net assets
                                                        £             %
United Kingdom – 86.43% (85.42%)
Basic Materials – 12.59% (12.60%)
Anglo Pacific Group                      1,366,000   1,748,480       3.02
China Goldmines                            640,000     512,000       0.88
Corus Group                                140,000     631,050       1.09
Firestone Diamonds                         385,000     431,200       0.75
Johnson Matthey                             10,000     134,800       0.23
Renova Energy                              940,000   1,410,000       2.44
Xstrata                                    113,000   2,307,460       3.99
Zotefoams                                  141,517     108,968       0.19

Consumer Goods – 3.16% (5.98%)
Blavod Extreme Spirits                     166,653     26,664        0.04
Chapelthorpe                             2,500,000    312,500        0.54
Dawson International                       370,000     23,125        0.04
Imperial Tobacco                            36,250    606,100        1.05
Scottish & Newcastle                       124,500    640,864        1.11
SSL International                           75,000    219,375        0.38

Consumer Services – 9.87% (13.72%)
Alliance Unichem                            47,000     491,855       0.85
Austin Reed Group                          260,000     306,800       0.53
Entertainment Rights                     2,400,000     756,000       1.31
Goals Soccer Centres                       700,000   1,645,000       2.84
Huveaux                                  1,848,710     794,945       1.37
InterContinental Hotels Group               22,916     217,244       0.38
Millennium & Copthorne Hotels               90,000     382,050       0.66
Moss Bros Group                            800,000     656,000       1.13
Sainsbury (J)                              100,786     335,617       0.58
Ulster Television                           38,000     129,295       0.22

Financials – 12.41% (7.33%)
Barclays                                   236,000   1,446,680       2.50
Close Bros Group                            72,000     652,680       1.13
Evolution Group                            370,000     543,900       0.94
Hammerson                                   54,000     638,280       1.10
iimia Investment Group                     408,100     808,038       1.40
London Asia Capital                      3,194,066     606,873       1.05
Royal & Sun Alliance Group               1,075,000   1,413,625       2.44
Slough Estates                              66,000     398,640       0.69
Unite Group                                170,000     674,900       1.16

Health Care – 2.99% (5.25%)
GlaxoSmithKline                           114,500    1,733,530       2.99

Industrials – 17.89% (15.00%)
Hamworthy                                  260,000     918,450       1.59
IndigoVision Group                         320,000   1,488,000       2.57
Invensys                                 6,075,000   1,184,625       2.04
Invensys, Nil Paid Rights                2,430,000     109,350       0.19
Laird Group                                 92,647     364,103       0.63
Low & Bonar                                700,000     896,000       1.55
May Gurney Integrated Services             370,000     788,100       1.36
Meggitt                                    200,000     642,500       1.11
                                         11
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

                                                                              Percentage
                                                             Market             of total
Investments                               Holding            value             net assets
                                                               £                   %
Industrials – 17.89% (15.00%) continued
MicroEmissive Displays Group                143,333           63,067              0.11
Romag Holdings                            1,170,199        1,380,835              2.39
Servocell Group                           1,121,111          706,300              1.22
Spectris                                     87,000          529,830              0.91
Weir Group                                  160,000          686,000              1.19
Zytronic                                    232,000          596,240              1.03

Oil & Gas – 11.97% (12.17%)
BP                                         333,000         2,112,885              3.65
Imperial Energy Corporation                 68,624           563,060              0.97
JKX Oil & Gas                              300,000         1,151,250              1.99
Melrose Resources                          137,375           495,237              0.86
Plexus Holdings                            880,000           598,400              1.03
Royal Dutch Shell ‘B’                       65,511         1,245,364              2.15
Tullow Oil                                 200,000           763,500              1.32

Technology – 9.49% (7.51%)
API Group                                    40,000           44,000              0.08
Axeon Holdings                              925,862          564,776              0.98
Bizspace                                  1,775,755        1,633,695              2.82
Concurrent Technologies                   2,275,000          637,000              1.10
Hyder Consulting                            458,086        1,169,264              2.02
Menzies (John)                               67,034          308,356              0.53
Sarantel Group                              381,950           76,390              0.13
SIG                                          73,200          644,526              1.11
Watermark Group                             340,000          414,800              0.72

Telecommunications – 3.68% (4.28%)
BT Group                                   883,000         2,094,917              3.62
Cable & Wireless                            30,000            34,125              0.06

Utilities – 2.38% (1.58%)
International Power                        484,000         1,374,560              2.38

Portfolio of investments                                  50,024,043             86.43

Net other assets – 13.57% (14.58%)                         7,851,245             13.57


Net assets                                                57,875,288            100.00


The percentages in brackets show the equivalent sector distribution at 31 December 2005.
The comparatives have been re-calculated as at 31st December 2005 as the FTSE Industry
Classifications have been re-classified.
All investments are in ordinary shares listed on recognised stock exchanges unless
otherwise stated.




                                          12
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Balance Sheet as at 30 June 2006

                                                                       30.06.2006      31.12.2005
                                                           Notes                £               £

Assets
Portfolio of investments                                                50,024,043      30,261,798



Debtors                                                      9           1,112,563         120,562
Cash and bank balances                                      10           7,055,218       5,283,053

Total other assets                                                       8,167,781       5,403,615

Total assets                                                            58,191,824      35,665,413

Liabilities
Creditors                                                   11            (316,536)       (237,004)


Net assets attributable to shareholders                                 57,875,288      35,428,409



Notes to the Financial Statements are on pages 14 to 23.



Certification of the Financial Statements by Directors of the Authorised Corporate
Director
In accordance with the requirements of the Open-Ended Investment Companies Regulations
2001 and the Collective Investment Schemes Sourcebook issued by the Financial Services
Authority, we hereby certify the Report on behalf of the ACD, Saracen Fund Managers
Limited.




J C Fisher (Director)                                              J C Spence (Director)
Saracen Fund Managers Limited                                      Saracen Fund Managers Limited
Authorised Corporate Director                                      Authorised Corporate Director
15 August 2006                                                     15 August 2006




                                                      13
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Summary of material portfolio changes for the six months ended 30 June 2006


Purchases                            Cost £         Sales                            Proceeds £

BP                                 2,261,697        Victoria Oil & Gas                1,235,370
Xstrata                            1,555,194        Imperial Energy Corporation         995,121
Royal & Sun Alliance Group         1,514,685        Mayborn Group                       618,947
Barclays                           1,261,549        D1 Oils                             516,344
Hyder Consulting                   1,230,204        Dobbies Garden Centres              460,113
Imperial Energy Corporation        1,048,947        Romag Holdings                      278,868
Low & Bonar                          846,721        I-Mate                              214,354
Romag Holdings                       839,198        Careforce Group                     153,463
May Gurney Integrated Services       709,849        InterContinental Hotels Group        30,907
International Power                  694,891
Concurrent Technologies              682,375
Servocell Group                      606,048
Evolution Group                      586,230
Axeon Holdings                       566,425
Anglo Pacific Group                  541,549
Goals Soccer Centres                 506,723
BT Group                             495,256
Invensys                             488,882
iimia Investment Group               459,901
Weir Group                           440,245

Other Purchases                   3,087,217

Total for the period (note 18)   £20,423,786        Total for the period (note 18)   £4,503,487




Note : The Summary of material portfolio changes identifies those purchases exceeding 2% of
       the net assets of the SGF at the beginning of the accounting period, subject to a
       minimum disclosure of the 20 largest Purchases and Sales. During the period, the SGF
       made only those sales shown above.




                                               14
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements

1      Accounting Policies

(a) Basis of accounting
The Financial Statements have been prepared in accordance with UK GAAP under the
historical cost convention, as modified by the revaluation of investments, and in accordance
with the Statement of Recommended Practice for Authorised Funds, issued by the Investment
Management Association (IMA) in December 2005.

(b) Recognition of income
Dividends from UK equities and preference stocks declared ex-dividend up to the accounting
date are shown net of tax charges; dividends on overseas investments are shown gross. Bank
and other interest receivable is included on an accruals basis. Underwriting commission is
taken to income and recognised when the issue takes place, except where the Sub-Funds are
required to take up some or all of those shares underwritten, in which case the appropriate
proportion is deducted from the cost of those shares.

(c) Treatment of stock and special dividends
The ordinary element of stocks received in lieu of cash dividends is recognised as income based
on the market value of the investments on the day they are quoted ex-dividend. Any
enhancement above the cash dividend is treated as a capital gain on the investment. Special
dividends are treated as either income or a repayment of capital depending on the facts of each
particular case.

(d) Treatment of expenses
All expenses (other than SDRT arising on the issue and cancellation of shares in the Company)
are charged against income and deducted for the purpose of calculating the distribution.

(e) Allocation of income and expenses to multiple share classes
All distributable income, expenses and tax will be allocated to the share class in respect of
which it was earned or incurred except where it cannot be considered attributable to one share
class, when it is normally allocated pro-rata to the value of the net assets attributable to each
share class.

(f) Taxation/Deferred Taxation
The charge to Corporation Tax is based on the income of the Sub-Fund. Deferred Tax is
provided for in full on all timing differences where the accounting and taxation treatments differ.

(g) Distribution/accumulation policy
Income produced from the underlying investments of the Sub-Fund accumulates during each
accounting period. If at the end of the annual accounting period, income exceeds expenses, the
net income is available to be allocated to shareholders in accordance with the Regulations. As
solely accumulation shares are available, no cash distributions are made. Instead, the income
available for distribution is reinvested and reflected in the price of a share.




                                                15
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

1      Accounting Policies (Continued)

(h) Basis of valuation of investments
Investments have been valued at bid-market value at 10.00 am on 30 June 2006 (mid at
10.00 am, 31 December 2005). This represents a change in accounting policy as directed by the
SORP. This treatment is to be consistent with the application stipulated in FRS 26 ‘Financial
Instruments: Measurements which will be adopted presently’. In accordance with the
transitional provisions, comparative figures have not been re-stated. Any unlisted or suspended
securities are valued by the ACD.

(i) Exchange rates
Transactions in foreign currencies are translated into Sterling at the exchange rate ruling at the
date of the transaction. Investments and other amounts in foreign currencies have been converted
into Sterling at the ASK exchange rates prevailing at 10.00 am on the 30 June 2006.




                                               16
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

2       Net Gains on Investments
                                                             30.06.2006    30.06.2005
                                                                      £             £

The net gains on investments during the period comprise :
Non-derivative securities                                     3,841,946     1,310,052


Net gains on investments                                      3,841,946     1,310,052



3       Other losses
                                                             30.06.2006    30.06.2005
                                                                      £             £

Other losses comprise:
Currency losses                                                    (277)           –


                                                                   (277)           –



4       Income
                                                             30.06.2006    30.06.2005
                                                                      £             £

UK dividends                                                    421,399       215,646
Overseas dividends                                               15,801         2,629
Bank interest                                                   119,924        87,627


Total income                                                    557,124       305,902




                                                        17
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

5       Expenses
                                                                  30.06.2006   30.06.2005
                                                                           £            £

Payable to the Authorised Corporate Director, associates of the
Authorised Corporate Director and agents of either of them :
Authorised Corporate Director’s Periodic charge                      258,519      123,999
Database fees                                                          7,438        7,438
Expenses                                                              11,653        8,678


                                                                     277,610      140,115


Payable to the Depositary, associates of the Depositary and
agents of either of them :
Depositary’s fees                                                      7,432        6,309
Depositary’s additional service charges                                  738            –
Transaction fees                                                       1,155          945
Safe custody fees                                                      3,365        1,707


                                                                      12,690        8,961


Other expenses :
Financial Services Authority fee                                         313        1,085
FT Listing fee                                                         3,374        3,205
Audit fee                                                              4,261        3,423
Other fees paid to auditors                                              437          484
Administration fee                                                    27,338       13,219
Registrar’s fee                                                        8,656        1,469
Typesetting fee                                                        1,267            –
Other sundry expenses                                                    596          747


                                                                      46,242       23,632


Total expenses                                                       336,542      172,708




                                                      18
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

6        Taxation
                                                                                     30.06.2006             30.06.2005
a) Analysis of charge in year                                                                 £                      £

Irrecoverable overseas tax                                                                   948                     920


b) Factors affecting the tax charge for the period
The tax assessed for the period is lower than the standard rate of Corporation Tax in the UK for an Open Ended
Investment Company (20%). The differences are explained below :
                                                                                     30.06.2006             30.06.2005
                                                                                              £                      £

Net income before taxation                                                               219,729                132,037


Theoretical tax at UK Corporation Tax rate of 20%                                         43,946                 26,407

Effect of :
UK dividends not taxable                                                                 (84,280)                (43,129)
Other expenses on which tax is not deductible                                              1,150                     530
Expenses in excess of income                                                              39,184                  16,192
Irrecoverable overseas tax                                                                   948                     920


Current tax charge for the period (note 6a)                                                  948                     920


c) Deferred Tax
The Deferred Tax provision at the period end was nil (2005 : nil).

At 30 June 2006, SGF had total surplus management expenses of £1,084,835 (31 December 2005 : £888,914). It is
unlikely that SGF will generate sufficient taxable profits in the future to utilise these expenses and therefore, no Deferred
Tax asset has been recognised.

7        Finance Costs
Distributions and Interest
The distributions take account of income received on the issue of shares and income deducted on the cancellation of
shares and comprise :
                                                                                     30.06.2006             30.06.2005
                                                                                              £                      £

Add : Income deducted on cancellation of shares                                            3,558                     633
Deduct : Income received on issue of shares                                              (24,753)                 (6,568)


Net distribution for the period                                                          (21,195)                 (5,935)


Interest and bank charges                                                                    853                   1,157


Total finance costs                                                                      (20,342)                 (4,778)




                                                            19
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

8        Movement between Net Income and Distribution
                                                        30.06.2006    30.06.2005
                                                                 £             £

Net distribution for the period                            (21,195)       (5,935)
Income carried forward to next period                      239,976       137,052


Net income for the period                                  218,781       131,117



9        Debtors
                                                        30.06.2006    31.12.2005
                                                                 £             £

Amounts receivable for issue of shares                     996,882        18,492
Dilution levy receivable                                         –         8,510
Sales awaiting settlement                                        –        11,469
Dividends receivable                                       103,573        72,492
Fixed interest                                                   –         3,582
Accrued interest                                             1,169         1,803
Recoverable Income Tax                                       4,582             –
Other debtors                                                1,380         2,750
Prepayments                                                  4,977         1,464


Total debtors                                            1,112,563       120,562



10       Cash and bank balances
                                                        30.06.2006    31.12.2005
                                                                 £             £

Capital account                                          6,852,057     5,026,842
Income account                                             203,161       256,211


Total cash and bank balances                             7,055,218     5,283,053



11       Creditors
                                                        30.06.2006    31.12.2005
                                                                 £             £

Amounts payable for cancellation of shares                       –       173,546
Purchases awaiting settlement                              231,337             –
Accrued expenses                                            85,199        63,458


Total creditors                                            316,536       237,004



                                             20
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

12     Equalisation
This applies only to shares purchased during the distribution period (Group 2 shares). It is the
average amount of income included in the purchase price of all Group 2 shares and is refunded
to the holders of these shares as a return of capital. Being capital it is not liable to Income Tax
but must be deducted from the cost of shares for Capital Gains Tax purposes.

13     Contingent liabilities and outstanding commitments
There were no contingent liabilities or outstanding commitments at the Balance Sheet date
(31 December 2005 : none).

14     Post Balance Sheet events
There were no material post balance sheet events which have a bearing on the understanding
of the Financial Statements (31 December 2005 : none).

15     Related Party transactions
Saracen Investment Funds, as authorised corporate director (ACD), is a related party, and acts
as principal in respect of all transactions of shares in the Company. The aggregate monies
received through issue and paid on cancellation are disclosed in the Statement of change in
shareholders’ net assets.

Management fees paid to the ACD are shown in note 5. The balance due to the ACD at the
period end in respect of the periodic charge was £48,896 (31 December 2005 : £32,166) and in
respect of expenses was £11,244 (31 December 2005 : £9,926).

Depositary fees, Safe Custody fees and Transaction charges paid to The Bank of New York
Trust and Depositary Company Limited are shown in note 5. The balance due to the Depositary
at the period end in respect of these fees was £5,919 (31 December 2005 : £3,180).

In addition, SGF receives interest on bank balances held by the Depositary. The amounts
received are shown in note 4, of which £784 (31 December 2005 : £1,161) remains receivable
at the period end.

The Managing Director and Lead Investment Manager of Saracen Fund Managers Limited, Jim
Fisher, held shares in each of the Sub-Funds as follows :
                                                          30 June 2006 31 December 2005
Saracen Growth Fund – Beta Shares                               5.45%            8.27%
Saracen Special Situations Fund                               100.00%          100.00%

The Investment Director and Investment Manager of Saracen Fund Managers Limited, Julian
Fosh, held shares in the Sub-Funds as follows :
                                                     30 June 2006   31 December 2005
Saracen Growth Fund – Alpha Shares                         0.06%                0.07%

The Director and Compliance Officer of Saracen Fund Managers Limited, John Spence, held
shares in the Sub-Funds as follows:
                                                    30 June 2006     31 December 2005
Saracen Growth Fund – Beta Shares                         0.01%                 0.02%

                                                21
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

16     Derivatives and other Financial Instruments
In pursuing its investment objectives, set out on page 4, SGF may hold a number of financial
instruments which comprise securities and other investments, cash balances, debtors and
creditors that arise directly from its operations. For example, in respect of sales and purchases
of securities awaiting settlement, amounts receivable for issue, and payable for cancellation of
shares, and debtors for accrued income.

17     Risks of Financial Instruments
Market risk – the primary risk facing SGF is market risk, being the risk that the value of
investment holdings will fluctuate as a result of changes in market prices caused by factors
other than interest rate or currency movement. The ACD’s policies for managing the market
risk are summarised below and have been applied throughout the period.

The investment portfolio of SGF is exposed to market price fluctuations, which are monitored
daily by the ACD in pursuance of the investment objective and policy set out on page 4.
Adherence to investment guidelines and to investment and borrowing powers set out in the
Instrument of Incorporation, the Prospectus and in the Regulations mitigates the risk of
excessive exposure to any particular type of security or issuer.

Currency Exposures – SGF has little exposure to foreign currency risk. The principal area
where foreign currency risk could impact is in the movement of exchange rates affecting
income received in a foreign currency and converted into Sterling on the day of receipt.
Sterling is the functional currency of SGF and at 30 June 2006, all of SGF’s net assets
£57,875,288 (31 December 2005 : £35,428,409) were denominated in sterling with the effect
that the Balance Sheet and the Statement of Total Return could not be affected by exchange
rates translation movements.

Liquidity risk – the main liability of SGF is the redemption of any shares that investors wish to
sell. The assets comprise readily realisable securities, which can be easily sold. There are no
borrowings or borrowing facilities, or unlisted securities and, therefore, there is little exposure
to liquidity risk.

Credit risk – certain transactions in securities which SGF enters into expose it to the risk that
the counter-party will not deliver the investment (purchase) or cash (sale) after SGF has
fulfilled its responsibilities.

SGF only buys and sells investments through stockbrokers that have been approved by the ACD
as an acceptable counter-party. These are reviewed on an ongoing basis.

Interest rate risk profile of financial assets and financial liabilities – SGF has little exposure to
interest rate risk. Exposure comes from cash deposits that are on floating rates.

Fair value of financial assets and financial liabilities – There is no material difference between the
value of the financial assets and liabilities as shown on the Balance Sheet, and their fair value.

No derivatives have been used by SGF during the period to 30 June 2006.



                                                 22
SARACEN INVESTMENT FUNDS ICVC
SARACEN GROWTH FUND

Notes to the Financial Statements (Continued)

18       Portfolio Transaction Costs
                                                                             £                 £

Analysis of total purchase costs
Purchases in period before transaction costs                                           20,288,552
Commissions                                                             46,620
Taxes                                                                   88,570
Panel on Takeover and Mergers levy                                          44


Total purchase costs                                                                      135,234


Gross purchases total                                                                  20,423,786


Analysis of total sale costs
Gross sales before transaction costs                                                    4,516,958
Commissions                                                             13,458
Panel on Takeover and Mergers levy                                          13


Total sale costs                                                                           13,471


Total sales net of transaction costs                                                    4,503,487



19       Dilution Levy
The policy of SGF is not to charge a dilution levy other than (a) where SGF is in continual
decline, (b) on SGF experiencing large levels of net sales relative to its size, (c) on large deals,
defined as any deal over £15,000, or, (d) in any other instance at the discretion of the ACD.

20       Share Classes and Types
SGF has two Share Classes available, Alpha Shares and Beta Shares. The Share Classes differ
in their charging structures and levels of minimum shareholdings. Details of the charging
structures are set out in General Information on page 24.

SGF has only Accumulation Shares available in each Share Class.

All distributable income, expenses and tax will be allocated to the Share Class in respect of
which it was earned or incurred except where it cannot be considered attributable to any one
Share Class, when it is normally allocated pro-rata to the value of the net assets attributable to
each Share Class.

In the event of the winding up of SGF, both Share Classes have equal rights attached to them.




                                                23
SARACEN INVESTMENT FUNDS ICVC
SARACEN SPECIAL SITUATIONS FUND

Statement of total return for the six months ended 30 June 2006

The Depositary currently holds £100 in a non-interest bearing account.

There was no income or expenses and no investment gains or losses recognised by SSS for the
period 1 January 2006 to 30 June 2006 (2005 : nil), therefore no Statement of Total Return has
been shown.

There were no other costs associated with SSS.

Statement of change in shareholders’ net assets for the six months ended 30 June 2006


                                                                30.06.2006       30.06.2005
                                                                         £                £

Net assets at the start of the period                                 100               100
Movement due to sales and repurchases of shares:                        –                 –


Net assets at the end of the period                                   100               100




No investment purchases or sales have been made by SSS in the period, therefore no Portfolio
Statement or Summary of Material Portfolio Changes has been shown.




                                                   24
SARACEN INVESTMENT FUNDS ICVC
SARACEN SPECIAL SITUATIONS FUND

Balance Sheet as at 30 June 2006

                                                               30.06.2006       31.12.2005
                                                                        £                £

ASSETS

Cash and bank balances                                               100               100


Total current assets                                                 100               100

LIABILITIES

Creditors                                                              –                 –


Net assets attributable to shareholders                              100               100




The accounting policies shown on pages 15 and 23, relating to Saracen Growth Fund also relate
to Saracen Special Situations Fund. No notes to these Financial Statements are shown.

Certification of the Financial Statements by Directors of the Authorised Corporate
Director
In accordance with the requirements of the Open-Ended Investment Companies Regulations
2001 and the Collective Investment Schemes Sourcebook issued by the Financial Services
Authority, we hereby certify the Report on behalf of the ACD, Saracen Fund Managers
Limited.




J C Fisher (Director)                                     J C Spence (Director)
Saracen Fund Managers Limited                             Saracen Fund Managers Limited
Authorised Corporate Director                             Authorised Corporate Director
15 August 2006                                            15 August 2006




                                             25
SARACEN INVESTMENT FUNDS ICVC


General Information

Saracen Growth Fund

Incorporation Date :                      19 January 1999

Launch Date :                             22 February 1999

First Day Trading :                       Alpha Shares          –     8 February 2000
                                          Beta Shares           –     8 March 1999

Accounting Periods :                      Interim               –     30 June
                                          Final                 –     31 December

Distribution Dates :                      Final                 –     31 March

Minimum Initial Investment :              Alpha Shares          –     £1,000
                                          Beta Shares           –     £250,000

Minimum Follow-On Investment :            Alpha Shares          –     £250
                                          Beta Shares           –     £10,000

Annual Management Charges :               Alpha Shares          –     1.5%
                                          Beta Shares           –     1.0%

The prelimininary charge on the Alpha Shares is 5% and up to 5% on the Beta Shares. The
Prospectus allows for the annual management charge to be increased up to a maximum of 3%
for Alpha Shares and 2% for Beta Shares, subject to giving shareholders 90 days written notice.

Share Prices
The price quoted for SGF is determined by reference to the underlying market value of the net
assets of SGF at the valuation point.

SGF is normally valued at 10.00 am each day for the purpose of determining the share price.

With the agreement of the Depositary, SGF may be valued at other times.

Dealing in shares
Shares may be bought and sold on any business day by application in writing to Saracen Fund
Managers Limited, c/o Sinclair Henderson Fund Administration Limited, Beaufort House,
51 New North Road, Exeter, EX4 4EP or by telephone on 01392 477635 between 9.00 am
and 5.30 pm. All transactions will be dealt on a forward pricing basis, i.e. at the next valuation
point following receipt of your application.

Contract notes are issued for all purchases and sales of shares and will be posted within 24
hours of the next valuation point following receipt of your application.




                                               26
SARACEN INVESTMENT FUNDS ICVC


General Information (Continued)

The shares of Saracen Growth Fund are non-certificated.

Shares may be sold back to the ACD at any time at the price applicable at the valuation point
following receipt of instructions.

You will receive a contract note setting out the details and a cheque will normally be issued
within four business days of receipt of the signed form of renunciation.

Saracen Growth Fund is valued on a mid market basis, with daily single prices appearing in the
FT Managed Funds Services section of the Financial Times.

A Word of Warning
The price of shares and also the income from them can go down as well as up, and you may
get back less than you invested. Stock market prices can decrease as well as increase, as a result
of which the investment in an open ended investment company must be regarded as long-term,
and is not suitable for money which may be required at short notice.

Past performance is not a guide to future performance. Neither income nor capital are guaranteed.
Dealing charges and the bid/offer spread on the underlying securities in the Sub-Fund could
have the effect that investors would not achieve the indicative returns stated. Changes in
exchange rates may also cause the value of investments to go down as well as up.

Cancellation Rights
Cancellation rights may arise under the Financial Services Regulations. If you decide to cancel
your contract during the 14 days after the date on which you receive a cancellation notice from
us, and the value of your investment has declined at the time we receive your completed
cancellation notice, you will not receive a full refund of your investment and an amount equal
to any decline in value will be deducted from the sum you originally invested.

Taxation

Income
Income earned by shareholders from SGF is liable to UK Income Tax at the rate applicable for
the individual shareholders. Tax Certificates will be issued annually on or around 31 March and
will disclose a credit for Income Tax purposes. The Tax Credit is 10% of the grossed-up
dividend and is not reclaimable. The aggregate of the distribution and the tax credit will be
included in the shareholder’s total income for Income Tax purposes. Shareholders liable to the
starting rate or basic rate only will have no further liability to Income Tax on a distribution.
There will be a further liability to Income Tax for higher rate taxpayers.




                                               27
SARACEN INVESTMENT FUNDS ICVC


General Information (Continued)

Capital Gains
There is no tax on capital gains within SGF. Gains realised on disposal of shares by shareholders
who are ordinarily resident in the UK for taxation purposes may be liable to Capital Gains Tax.

All taxation information in this Report is based on current legislation and may be subject to
change. Any tax reliefs referred to are those currently applying. Their value depends on the
individual circumstances of the investor and all investors are advised to seek tax advice from
their advisers. The Company is not in a position to give tax advice.

Reports and Prospectus
Copies of the Prospectus and the Annual and Interim Report and Financial Statements may be
obtained from the ACD at the address shown at the beginning of this Report. The Annual Report
and Financial Statements will be prepared for the year ended 31 December 2006 and will be
available at the end of March 2007.

Commission
Commission is payable to authorised intermediaries, rates are available on request and details
are set out on the contract note.

Stamp Duty Reserve Tax
From 6 February 2000, the surrender of shares to the ACD became subject to Stamp Duty
Reserve Tax. This is a tax levied each time a share is surrendered.

In accordance with the Regulations, Stamp Duty Reserve Tax payable on shares surrendered to
the ACD is charged to SGF and is included within the price of a share. The effect of this policy
on the share price is not significant.




                                               28

								
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