Secondary Story Headline

Volume 1, Issue 1

Knights Capital Management Investment Report

2

Contents

An Introduction

The Board of Trustees 3

Our investment Objectives 4

Our Responsibilities 4

Strategic Report

Global & domestic Research 5

Our Approach 8

Top to Bottom Analysis 10

Potential Risk Factor 11

Screening Criteria 12

Sector & Research Diversification 14

Holdings 15

Exit Strategy 16

Report from the Trustees

Financial Review

Realised Performance 17

Highlights 18

Portfolio vs Benchmark 20

Conclusion

Thoughts & Reflections 21

Appendix

Equity Chart 22

Sector Chart 23

Bibliography 24

Knights Capital Management Investment Report

“We safe guard your investment”

3

Introduction

The Board of Trustees

Daniel Lim

Portfolio Manager &

Director

Zahra Mohammed

Strategic Analyst

Risk Associate

Risk Associate

Chief Quantitative

Analyst

Chief Economist

Trade Execution &

Performance Analyst

Zahra Al-Lawati

Jason Cranfield

Asra Owais

Max Pease

Thompson Loh

4

We seek to deliver and achieve medium term capital growth through the use of multi sector diversi-

fication from a list of public listed companies in the UK. Our investment belief is based on the phi-

losophy that value can be added through active, fundamental management with an amalgamation

of top down macroeconomic research, sector analysis and a strategic asset allocation strategy we

will be able to maximize the portfolio’s performance.

Our portfolio is made of open-ended growth companies listed in the UK stock exchange. Through

the efficient screening process, superlative companies are selected from the nominated sectors of

the FTSE100, which assists to build greater liquidity by providing clear and independent benchmark-

ing the market. An additional advantage from using the FTSE100 would be the strength of this index.

FTSE100 being made up of the top 100 companies gives us great deal of exposure to both domestic

and international markets. Our risk-taking capacity is restricted by prudential considerations; small

caps were avoided in our investing strategy. Therefore, strictly large caps were chosen to achieve

sufficient yield over the medium term and to maintain the contribution proportion stable.

To eliminate the risk of serious capital loss, we have utilized market timing strategies, as well as

downside risk management.

Our responsibilities

Our primary focus is based on fulfilling our fiduciary duties towards

our clients. We aim to deliver the highest standards of client services.

Overcoming obstacles with the use of active risk management is inte-

gral to our investment activities, because our primary focus is based

on providing strategic solutions to our clients’ objectives. Finally, we

seek to manage our fund in a fair and ethical manner.

Introduction

Knights Capital Management Investment Report

Our Focus , Your Advantage

Our Investment Objectives

5

Strategic Report

Global & Domestic Research

Theme 1: Growth in UK, US, Eurozone & Emerging

Markets

Growth in the UK went up by 0.7% in the 4th quarter of 2013, compared to the previous

quarter. Since the beginning of the year 2013, UK’s GDP has been constantly increasing on

a quarterly basis.

At the end of 2013, the economy was growing at a moderate 2.4% pace. Another impor-

tant trend is the narrowing in the trade deficit, which is driven by both rising exports and

lower imports. On the supply side, the improvement has been attributable to the shale gas

story which is creating a cost advantage for the manufacturing sector (and also resulting in

lower energy imports); whereas, on the demand side, rising consumption of domestically

produced goods and services are having a clear impact.

The Eurozone is also showing signs of growth 2014 based on the European commission

autumn forecasts. External demand is expected to pick up over the coming quarters as the

global economy recovers. Countries in Eurozone with the strongest growth rates are Lux-

emburg, Malta, Estonia. Countries such as Germany & France show strong stability. In the

Eurozone, the Purchasing Managers’ Index (PMI) for manufacturing started 2014 at a 32-

month high, with Germany posting a robust reading, while France moved much closer to

the expansion threshold.

Overall the emerging Asian economies can ex-pect a growth of 6.9% per annum for the years 2014-2018. This is a fast and stable pace. How-ever, these figures were downgraded after the financial crisis when Asia’s growth was fore-casted at 8.6%. This slower rate of growth largely reflects the moderate rates of expansion in the two large Emerging Asian economies of China and India.

In the Southeast Asian region however, the ex-

pected growth will remain robust in the medium

term, growing at a pace which is similar to the

pre-global financial crisis. The real GDP growth

rate in the Southeast Asian is projected to aver-

age 5.4% per annum from 2014-18, against 5.5%

in 2000-07.

Knights Capital Management Investment Report

6

Strategic Report

Global & Domestic Research

Theme 2: Inflation rates in the UK

Inflation rates in the UK have remained at a low rate of inflation for the past 19 months.

In addition, inflation rates have dropped further from 2.7% to 2.2% from the previous

month in October. The UK has maintained inflation rates between 2% to 3%. The reason

for the reduction in the rate of inflation was due to reduced consumer prices of goods

and services.

This rate of infla-

tion is still con-

sidered as the

safe zone for the

UK government

Theme 3: Gap Between Disposable income

and inflation in the UK

Another concern for the UK economy is the gap between Real Income of house-

holds and Inflation. This means that in real terms disposable income is decreas-

ing. This is especially of concern because many analysts consider the recent

recovery to have been led by consumer spending. This cannot be sustained for

very long. There is some positive news though the deflationary trends we are

seeing in the inflation figures are a sign of potential respite for UK households.

Along with this the BoE have forecast real income to rise in 2014.

Knights Capital Management Investment Report

7

Strategic Report

Global & Domestic Research

Theme 4: Interest Rates on a Global Perspective

Inflation rates in the UK have remained at a low rate of inflation for the past 19 months.

In addition, inflation rates have dropped further from 2.7% to 2.2% from the previous

month in October. The UK has maintained inflation rates between 2% to 3%. The reason

for the reduction in the rate of inflation was due to reduced consumer prices of goods

and services. This rate of inflation is still considered as the safe zone for the UK govern-

ment and Bank of England.

In the Southeast Asian region however, the expected growth will remain robust in the

medium term, growing at a pace which is similar to the pre-global financial crisis. The real

GDP growth rate in the Southeast Asian is projected to average 5.4% per annum from

2014-18, against 5.5% in 2000-07.

The Bank of England is unlikely to increase interest rates in the near future mainly due to

falling inflation as well as a lack of foreign investment, whilst also mentioning there to be

no significant changes done before 2015.

In the US the signs that the economy is recovering has allowed the Fed to slow down its

QE programme. The US Fed is facing the prospect that between the end of February and

March they will run out of money, possibly forcing another government shutdown that

would influence the FTSE as it is strongly correlated to the NASDAQ. Although it quickly

recovered there was an immediate

effect on global markets.

Europe has a major influence on the

FTSE as they are highly correlated. Any

economic or political decision that

could have an impact on Europe will

have a certain impact on the UK. The

European Central Bank (ECB) thinks

inflation will stay well below its 2%

target for two more years. In order for

the ECB to change its policy there

must be drastic changes to Europe’s

recovery, e.g undershooting Inflation

and growth targets. However, if the

Eurozone does not recover as planned,

quantitative easing might be neces-

sary.

Knights Capital Management Investment Report

8

Our Approach

Returns/Risks:

To outperform the benchmark using risk-adjusted returns

To maximise growth across sectors

To keep the contribution rate stable

Horizon:

3 Years

Safety Measures:

Diversification across a few sectors

Invest in Large cap companies with financial flexibility

To review the portfolio quarterly

Selection Criteria:

Weight for each asset to be less than 5% of the portfolio.

Only to invest in Long Positions

Large Caps Companies

To have a PEG ratio not more than 2.

To have a Operating Margin greater than 5%

Benchmark:

FTSE100

Knights Capital Management Investment Report

Strategic Report

Knights Capital Management Investment Report

9

Strategic Report

Today’s Environment

Refocus on real economic growth

Increased Attractiveness in the Western Economies

Low Volatility of US & UK market according to the MSCI in-

dex

BOE Interest rates remain below Historical norms

Potential Opportunities

The hunt for under-priced companies and low dividends

Sectors with high overall returns

Expansion and reinvestments in companies is of key impor-

tance

Rising Corporate Profits/Returns

Companies with increasing liquidity and valuation

Lingering Uncertainty in the Eurozone

Political Unrest in Ukraine

Referendum on Europe

Scottish Independence

Interest Rates uncertainty

Potential Risks involved

Knights Capital Management Investment Report

Our Approach

10

Strategic Report

Central to portfolio maximisation is the screening

process. The first step is to choose either a top down

or a bottom up approach. For the purposes of our

portfolio we have chosen the former of the two. The

Top-down approach looks at the global picture and

narrows down the search depending on the perform-

ance of a sector or a geographic region. When con-

structing our portfolio we researched all the UK sec-

tors and selected stocks that belonged to the ones

with the most positive outlook. For example, we did in

-depth analysis of the UK domestic market and the

global economy research using indictors such as: GDP

growth, Inflation, Interest Rates and forecasting the

future economic condition. Once the sectors where

selected we conducted some microeconomic analysis.

We performed some fundamental analysis (PEG, Op-

erating Margin), supported by technical research

(Moving Averages). The objective was to locate stocks

that had the potential to beat the benchmark. KCM

chose the top down approach because it is not

restrictive and allows for the best chance of pick-

ing profitable stocks. This is because it has a two

tier profit potential: not only is the stock selected

picked for its potential to outperform its own sec-

tor, but moreover the sector was picked because

it showed signs of beating the index. We did not

use the bottom-up approach because we found it

too restrictive and it not suit are investment style

and objectives.

Macro Economic Analysis

Strategic Asset Allocation

Sector Determination

Security Selection

Knights Capital Management Investment Report

Top to Bottom Analysis

11

Global Risk Factors

Uncertainty in the Eurozone

There is still lingering uncertainty in the Eurozone. Despite some positive news at the turn of the year (PMI

at 32 month high), the sovereign debt crisis is not fully resolved (Ireland GDP down 2.3% 2013Q4). There

still a risk of nervousness in the markets.

Political Unrest in Ukraine

The growing political unrest in the region is having negative consequences on European markets. This un-

certainty is amplified by the tensions between Russia and the US over this conflict.

UK Risk Factors

European referendum

UK Conservative party have promised an in/out referendum on the UK’s EU membership.

This will create uncertainty over the UK economy because Europe is a major trade partner

Scottish independence

A referendum on the 18th September 2014 will decide if Scotland stays in the UK. This has the potential to

hamper the economy and derail the UK’s growth prospects as well as destabilise the country’s budget, reli-

ant on the income generated from North Sea oil.

Interest Rates Uncertainty

The Bank of England is being coy as to when it will raise the interest rates from their record low position of

0.5%. Falling inflation is working in favour of the central bank. We are not expecting any changes until at

least 2015

Potential Risk Factors

Knights Capital Management Investment Report

Strategic Report

12

As Trustees of the preeminent Knights Capital Management Fund, we aim to be effi-

cient in providing maximum returns for our fund, whilst keeping the overall risk to a

minimum. Our portfolio had been constructed with the idea of choosing UK equities

and short-term cash as our universe of instruments.

As part of our portfolio’s mandate, the most appropriate benchmark for assessing

our portfolio’s performance was the FTSE 100 index, which entails the 100 compa-

nies listed on the London Stock Exchange with the highest market capitalization.

The screening process which we implemented to identify a short list of stocks for in-

clusion in the portfolio was basically based on a top down approach, initially involving

a thorough sector analysis. By basing our investment decision through information

obtained by reading online web articles and the current news, we picked up those

sectors that were believed to show high levels of growth for the next three years,

whilst also providing superior returns.

Having decided on the sectors we would be investing for our portfolio, we ended up

with 49 companies that belonged to each of our chosen sectors. As the number of

companies (49) we ended up with was too high to be included in our portfolio, we

devised an appropriate screening process for selecting the companies.

Our stock screening process was implemented by following two vital criteria for as-

sessing stocks which are:

1. PEG ratio ≤ 2

2. Operating Margin > 5%

As our constructed portfolio significantly entails growth stocks, it was deemed appro-

priate by our team to use the PEG ratio as our basis for choosing companies in our

portfolio, as this criteria being very popular among growth investors, provides an in-

sight of how the P/E ratio of a firm relates to the estimated EPS growth for the com-

ing three years. Moreover, it indicates valuation of the expected growth in the com-

pany. We have chosen to select those companies with a PEG ratio less than or equal

to 2 as this signifies growth valuation at a reasonable price.

Screening Criteria

Knights Capital Management Investment Report

Strategic Report

13

In addition to the PEG ratio as one of the screening methods,

the team also included the operating margin as a screening

tool for selecting the stocks in our portfolio. This financial

risk metric gives the proportion of revenues remaining after

paying the costs of operating the business which include

overheard costs, depreciation, etc. We thought it is a useful

measure for assessing a company’s profitability based on the

profit made by each firm (before interests and taxes) for

each dollar of their sales. According to our criterion, the

higher the operating margin, the better.

We made use of the Bloomberg terminals to obtain the oper-

ating margin and the PEG ratio for each of the company (A

photo showing the process is included below). Implementing

these screening criteria, we ended up with 26 companies for

inclusion in our portfolio. We

then used optimisation tech-

niques including Solver to adjust

the weights in each of the 26

stocks, so as to maximise our

portfolio’s expected return.

Screening Criteria

Knights Capital Management Investment Report

Strategic Report

14

Sector Research & Diversification

The team felt that looking at annual reports on the various sectors would be a good place to start off.

According to the table below, we are able to see that all sectors had positive returns except for Basic

Materials had the potential to be good investments. After much discussions, the team decided to

look for various news articles to support our research. After extensive research, we had decided to

streamline our choices to Telecommunica-

tions, Healthcare, Industrials, Consumer

Services, Oil & Gas and Technology. We be-

lieve that these sectors have the potential

to be leaders in the market for the next few

years. Finally, we have only picked sectors

which coincide with our group’s objectives.

Sector: Total Return: Oil & Gas 12.70%

Basic Materials -11.00%

Industrials 29.30%

Consumer Goods 14.20%

Health Care 30.20%

Consumer Services 30.20%

Telecommunications 63.00%

Utilities 11.30%

Financials 18.10%

Technology 43.50%

KCM has handpicked all of these sectors after undertaking Sector research and annual aver-

age returns into consideration. (As shown in the chart to the bottom )

Knights Capital Management Investment Report

Strategic Report

15

Holdings

Knights Capital Management has handpicked the top 26 companies according to

our diversification strategy. We believe that these companies have huge potential

to perform better than our benchmark, the FTSE100.

Optimisation

Aside from diversifying assets across the chosen sectors and selecting various criteria’s, the

team decided to use the Mean-Variance Optimization and CAPM formula to optimize the

portfolio. Thus we had to determine the Optimal Risky Portfolio (ORP) which consisted of the

expected returns on assets and the standard deviation across the historical returns across

selected assets. In order to determine the expected returns for each asset, we had to use the

CAPM formula which consisted of using the expected returns on the FTSE All-Share, the risk

free rate of the chosen 3-Year Gilt and the calculated beta from the 4 years of historical re-

turns. As for the amount of risk on investment involved, we had decided to use a current 3-

Year Gilt which has a Risk-Free Rate of 0.78%.

(Diversification of weights after optimization.)

Knights Capital Management Investment Report

Strategic Report

16

Exit Strategy

The exit strategy is performed by capturing the movements of our assets in the market. In addition, we have also decided to set a stop loss for each company’s equities in the portfolio. This method used by calculating the percentage changes of the equities which have taken into account the expo-sure we have in each company’s equities, so we are able to quantify the kind off losses the portfolio is able to withstand depending on the exposure the portfolio has to each individual stock. We feel that mechanism prevents us from running the risk of being stopped-out of a stock just through its day to day fluctuations and will only close a position in a stock if it has entered a serious downtrend. There are many benefits by having a form of stop loss in our portfolio. Primarily, the stop loss pre-vents the portfolio from suffering a catastrophic loss in a time of uncertainty. Essentially, a stop loss allows decision making to be free from any emotional influences. At times, human being emotional creatures tend to develop feelings for a particular investment. Therefore, this defensive mechanism will pose huge advantage for our portfolio.

Company Weight

(%):

Change Needed(%):

British Sky Broadcasting 4.81% 15.19%

Vodafone 5.00% 15.00%

BT group plc 5.00% 15.00%

Petrofac LTD 3.78% 16.22%

Rolls Royce 5.00% 15.00%

Wolseley PLC 3.59% 16.41%

Travis Perkins PLC 3.51% 16.49%

Melrose PLCDaily 3.92% 16.08%

Experian PLC 3.45% 16.55%

Intertek Group PLC 4.17% 15.83%

smith group plc 3.61% 16.39%

TUI TRAVEL 1.69% 18.31%

Carnival PlcDaily 5.00% 15.00%

Sports Direct 2.45% 17.55%

ARM Holdings 2.53% 17.47%

G4S 3.52% 16.48%

Aggreko 5.00% 15.00%

WPP 4.76% 15.24%

Next Plc 5.00% 15.00%

ITV plc 1.88% 18.12%

Whitbread 5.00% 15.00%

Easy Jet 3.07% 16.93%

BG Group 5.00% 15.00%

AMEC PLC 3.59% 16.41%

Smith and Nephew 3.61% 16.39%

Babcock Plc 2.06% 17.94%

Knights Capital Management Investment Report

Strategic Report

17

Financial Review

(Performance of each stock in the portfolio from the 10th of Feb’14 to 10th of Mar’14.)

After analyzing the data over the investment term, it seems that the economic recovery

is facing a slow but steady trend. Unfortunately, the Manufacturing PMI is constantly

below expectations at around 57. In the FTSE 100 index the Industrials (20 securities in

the FTSE 100) have had mixed performances since the beginning of the year: Rolls Royce

Holding was down 12 % compared to the industry average of -0.42 %, causing an ad-

verse negative effect on our portfolio. This was because RR Holdings have declared a

pause in their growth, with their revenues and profits failing to show any significant

growth this year, owing to US defense cuts and the end of profitable contracts (The

Guardian,2014).. Melrose is down 1.8%. Petrofac and Sports Direct on the other hand,

are up double digits with 10.15% & 18.10% respectively.

Consumer cyclical: Wolseley Plc is up 3.03% with a high PE ratio of 31.28 PE on a TTM

basis. The worst performer in the sector is WPP Plc which lost 6.58%. Sports Direct is

doing well with a performance of 18.10 % which is the best performer in the portfolio.

In Consumer Non Cyclical the performance has been sluggish to negative. Experian &

Aggreko are down with 0.83% and 2.43% respectively.

Technology performance has been moving forward and is on the good run. Technology(1

security) ARM Holdings have returns of 8.3% respectively. Moreover, ARM Holdings also

has a very high PE ratio of 128.54.

Smartphones have changed the world and so the dimension of the telecom industry. In

the Telecom Sector Interestingly BT group has outperformed Vodafone are performing

relatively close to

each other with re-

turns 1.30% & 1.04%

respectively. Voda-

fone is fighting a tax

case in India. British

Sky Broadcasting has

done well with 3.2%

to date, and it has

Price-to-book ratio of

14.

Knights Capital Management Investment Report

Realized Performance

-15

-10

-5

0

5

10

15

20

AG

K

RR

MR

O

ITR

K

TPK

WO

S

EXP

G4

S

SMIN EZ

J

BA

B

WTB

CC

L

NX

T

WP

P

SPD

ITV TT B

SY BG

PFC

AM

EC

BT-

A

VO

D SN

AR

M

Re

turn

s(%

)

18

Financial Review

Highlights of Portfolio Total profits have been up by 1.77% of the

initial investment over the investment

horizon.

The Information Technology, Energy, Con-

sumer Discretionary and Industrial sectors

have outperformed their respective sector

benchmarks.

The Top 5 and Bottom 5 Performers have been

identified.

Considerable progress from investments is re-

quired in order for the portfolio to beat the

FTSE100.

Top 5 Winners

719.00

778.50

806.50822.00

809.00

14/2 21/2 28/2 07/03 10/03*

Sports Direct International

1317.00

1379.00 1368.00

1405.00

1357.00

14/2 21/2 28/2 07/03 10/03*

Petrofac Ltd

4077.004157.00

4487.00

4361.00 4345.00

14/2 21/2 28/2 07/03 10/03*

Whitebread PLC

931

970

1010 1001 992

14/2 21/2 28/2 07/03 10/03*

ARM Holding PLC

1415.001441.00

1471.00

1434.00 1437.00

14/2 21/2 28/2 07/03 10/03*

Babcock International Group PLC

Knights Capital Management Investment Report

19

Financial Review

Top 5 Losers

1317.00

1379.001368.00

1405.00

1357.00

14/2 21/2 28/2 07/03 10/03*

Smith Group PLC

1069.00

1100.00

1081.00

1046.00 1043.00

14/2 21/2 28/2 07/03 10/03*

Experian PLC

2507.00

2457.00 2463.00

2396.00 2391.00

14/2 21/2 28/2 07/03 10/03*

Carnival PLC

1346.00 1343.001308.00

1257.001221.00

14/2 21/2 28/2 07/03 10/03*

WPP PLC

1025

995 999

1026

1043

14/2 21/2 28/2 07/03 10/03*

Rolls-Royce Holding PLC

Knights Capital Management Investment Report

Highlights of Portfolio

20

Financial Review

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

11/2 13/2 17/2 19/2 21/2 25/2 27/2 3/3 5/3 7/3

KCM

FTSE100

Return: Portfolio(%): FTSE100(%):

Total Return 1.77 2.07

Maximum Return 2.1 1.72

Minimum Return -1.77 -1.49

Mean Return (Annualized) 39.48 51.66

Risk:

Standard Deviation(Annualized) 14.48 12.1

Downside Risk (Annualized) 10.05 8.55

Skewness 0.17 0.01

VaR 95^ (ex-post) -0.98 -1.12

Tracking Error(Annualized) 5.47

Risk/Return:

Sharpe Ratio 8.703 2.82

Jensen Alpha -0.2032

Information Ratio -1.06

Treynor Ratio 1.829

Beta (ex-post) 1.11

Correlation 0.9308

Unfortunately, the portfo-

lio did not manage to beat

the market over the in-

vestment horizon. Never-

theless, we managed to

make a profit with the use

of diversification strate-

gies and objective ori-

ented measures. Investing

in companies from sectors

such as Information tech-

nology, Energy, Consumer

Discretionary and Indus-

trial sectors really helped

to give us the competitive

edge in the market. How-

ever, the telecommunica-

tions and healthcare sec-

tors did not perform as

well as expected.

Portfolio vs FTSE100

Knights Capital Management Investment Report

21

Knights Capital Management Investment Report

Conclusion

We have implemented and maintained a unique investment strategy using UK equities primarily

as our investment vehicles. We had tailored our investment objectives and incorporated an ap-

propriate amount of risk in our investments, suited to our clients’ needs.

However, although in this instance, our portfolio underperformed the benchmark, we perceive

this to be owing to incidental circumstances relating to individual stocks in our portfolio that may

have suffered unforeseeable damage within our time horizon. One justifiable reason for the In-

dustrials sector having performed poorly in comparison to others could be the effect of the Rolls

Royce holdings within this sector that had declared a pause in its growth for the current year.

Our team eliminated any sources of unsystematic risk in our portfolio through diversification, by

investing in a broad range of sectors. However, an overview of the sector performance suggests

a few other good candidates for the sectors on our portfolio with promising substantial returns

but we had missed out, such as the Financials and Utilities sector. Nevertheless, this was com-

pensated by our diversification strategy that allowed us to minimize exposure to any large losses

within the chosen sectors in our portfolio.

We have had a notably remarkable performance in our portfolio through sectors such as Infor-

mation Technology and Energy, reaping returns of 8.30% and 4.65% within our overall portfolio

return of 1.77%.

However, potential risk factors within our investment grounds from a global and domestic out-

look might be useful in explaining why certain equities within the Energy sector, such as the Brit-

ish based AMEC plc, had generated considerably lower returns, possibly due to the lingering risk

factor within the UK regarding the Scottish independence. This news might have potentially ham-

pered the UK economy and the markets, causing an in-built unrest within the Energy sector.

Overall, our portfolio had shown a notably commendable performance, generating a positive re-turn of 1.77% and a Sharpe ratio of 1.82, overall signifying a positive risk-adjusted performance given our investment objectives.

Thoughts and Reflections

22

Knights Capital Management Investment Report

Appendix Eq

uit

y C

har

t

Com

pany

:Ti

cker

nam

e P

rice

at 1

0 Fe

brua

ryV

alue

on

Dat

e 10

Feb

'14

Qua

ntit

y Bo

ught

Pric

e at

10

Mar

chV

alue

on

Dat

e 10

Mar

'14

%£

Star

tEn

d

AG

K LN

AG

K LN

Equ

ity

1596

4400

82.3

827

5.74

1556

4364

36.0

6-0

.83%

-364

6.32

5.00

%4.

37%

AM

EC L

NA

MEC

LN

Equ

ity

1073

3851

49.7

358.

9510

8939

0892

.85

1.49

%57

43.1

53.

59%

3.87

%

ARM

LN

ARM

LN

Equ

ity

916

3351

57.6

236

5.89

992

3629

65.4

68.

30%

2780

7.84

2.53

%3.

44%

BAB

LNBA

B LN

Equ

ity

1342

3015

09.1

522

4.67

1437

3228

52.9

57.

08%

2134

3.80

2.06

%3.

13%

BG/

LNBG

/ LN

Equ

ity

1060

.545

6503

.68

430.

4610

87.5

4681

26.1

22.

55%

1162

2.44

5.00

%4.

55%

BSY

LNBS

Y LN

Equ

ity

889.

512

6355

.25

142.

0591

813

0403

.74

3.20

%40

48.4

94.

81%

1.27

%

BT/A

LN

BT/A

LN

Equ

ity

392

4999

99.4

512

75.5

139

7.1

5065

04.5

41.

30%

6505

.09

5.00

%5.

03%

CCL

LNCC

L LN

Equ

ity

2537

5019

78.6

819

7.86

2391

4730

90.6

7-5

.75%

-288

88.0

15.

00%

4.76

%

EXPN

LN

EXPN

LN

Equ

ity

1069

3647

18.9

634

1.18

1043

3558

48.3

4-2

.43%

-887

0.62

3.07

%3.

60%

EZJ L

NEZ

J LN

Equ

ity

1709

3485

77.8

920

3.97

1641

3347

08.2

1-3

.98%

-138

69.6

83.

45%

3.42

%

GFS

LN

GFS

LN

Equ

ity

229

3594

98.5

815

69.8

624

538

4616

.39

6.99

%25

117.

813.

52%

3.58

%

ITRK

LN

ITRK

LN

Equ

ity

2885

3939

47.3

313

6.55

3046

4159

31.9

15.

58%

2198

4.58

4.17

%3.

96%

ITV

LN

ITV

LN

Equ

ity

201.

129

8067

.81

1482

.19

196.

829

1694

.4-2

.14%

-637

3.41

1.88

%2.

94%

MRO

LN

MRO

LN

Equ

ity

300.

439

8740

.09

1327

.36

295

3915

72.3

2-1

.80%

-716

7.77

3.92

%4.

06%

NXT

LN

NXT

LN

Equ

ity

6235

4437

14.4

71.1

765

9546

9333

.83

5.77

%25

619.

435.

00%

4.52

%

PFC

LNPF

C LN

Equ

ity

1232

3959

92.2

732

1.42

1357

4361

70.0

610

.15%

4017

7.79

3.78

%4.

18%

RR/

LNRR

/ LN

Equ

ity

1189

4808

11.3

940

4.38

1043

4217

71.4

7-1

2.28

%-5

9039

.92

5.00

%4.

07%

SMIN

LN

SMIN

LN

Equ

ity

1386

3670

88.6

126

4.85

1354

3586

13.2

6-2

.31%

-847

5.35

3.61

%3.

55%

SN/

LNSN

/ LN

Equ

ity

917

3725

74.9

406.

3092

337

5012

.68

0.65

%24

37.7

83.

61%

3.73

%

SPD

LN

SPD

LN

Equ

ity

685

3190

19.5

746

5.72

809

3767

69.1

18.1

0%57

749.

532.

45%

3.48

%

TPK

LNTP

K LN

Equ

ity

1847

3781

76.3

920

4.75

1875

3839

09.4

41.

52%

5733

.05

3.51

%3.

83%

TT/

LNTT

/ LN

Equ

ity

433

2941

76.9

567

9.39

429.

829

2002

.9-0

.74%

-217

4.05

1.69

%2.

91%

VO

D L

NV

OD

LN

Equ

ity

222

4329

64.8

1950

.29

230.

144

8762

.17

3.65

%15

797.

375.

00%

4.46

%

WO

S LN

WO

S LN

Equ

ity

3328

3821

26.6

211

4.82

3429

3937

23.6

13.

03%

1159

6.99

5.00

%3.

79%

WPP

LN

WPP

LN

Equ

ity

1307

4354

19.8

633

3.14

1221

4067

69.4

3-6

.58%

-286

50.4

33.

59%

4.27

%

WTB

LN

WTB

LN

Equ

ity

3970

5044

46.8

612

7.06

4345

5520

96.1

29.

45%

4764

9.26

4.76

%5.

21%

Retu

rnPo

rtfo

lio W

eigh

t

23

Knights Capital Management Investment Report

Appendix Se

cto

r C

har

t

Ass

et

Cla

ss

Op

en

ing

Po

rtfo

lio

Val

ue

s

Op

en

ing

Po

rtfo

lio

We

igh

ts

Init

ial

Be

nch

mar

k

We

igh

tsD

ivid

en

ds/

Inte

rest

Clo

sin

g

Po

rtfo

lio

Mar

ket

Val

ue

s

Clo

sin

g

Po

rtfo

lio

We

igh

ts

Fin

al

Be

nch

mar

k

We

igh

ts

Po

rtfo

lio

Cap

ital

Re

turn

s

Po

rtfo

lio

Tota

l

Re

turn

s

Be

nch

mar

k

Tota

l Re

turn

s

Co

ntr

ibu

tio

n

fro

m A

sse

t

All

oca

tio

n

Co

ntr

ibu

tio

n

fro

m S

tock

sele

ctio

n

£mil

lio

n%

%R

ece

ive

d/p

aid

£mil

lio

n%

%%

%%

%%

31/1

2/11

UK

Eq

uit

ies-

Se

cto

r Ex

po

sure

s10

.00

100.

00%

50.0

8%0.

2103

10.2

0

97

.98%

48.8

1%2.

00%

4.10

%1.

25%

-0.1

5%3.

00%

Ene

rgy

1.24

12.3

7%16

.26%

0.02

691.

3012

.49%

16.9

3%5.

10%

7.27

%3.

66%

-0.1

4%0.

45%

Ind

ust

rial

s3.

7837

.83%

7.71

%0.

0432

4.20

40.3

4%7.

75%

11.0

1%12

.16%

-0.4

2%-0

.13%

4.76

%

He

alth

care

0.36

3.61

%8.

97%

0.01

860.

383.

65%

9.38

%5.

25%

10.4

1%4.

81%

-0.2

6%0.

20%

Co

nsu

me

r Se

rvic

es

3.37

33.6

6%7.

95%

0.02

183.

0028

.82%

8.14

%-1

0.87

%-1

0.22

%0.

98%

0.25

%-3

.77%

Tele

com

mu

nic

atio

ns

1.00

10.0

0%8.

17%

0.09

480.

969.

22%

5.51

%-4

.00%

5.48

%1.

38%

0.03

%0.

41%

Tech

no

logy

0.25

2.53

%1.

02%

0.00

500.

363.

46%

1.10

%42

.32%

44.3

0%6.

44%

0.10

%0.

96%

Cas

h &

Cu

rre

ncy

Inst

rum

en

ts0.

000.

00%

0.00

%0.

0000

0.21

2.02

%0.

00%

N/A

N/A

0.00

%0.

00%

0.00

%

Bas

e C

urr

en

cy (

Cas

h)

0.00

0.00

%0.

00%

0.00

000.

212.

02%

0.00

%0.

00%

0.00

%0.

00%

0.00

%0.

00%

TOTA

LS10

100.

00%

50.0

8%0.

2103

10.4

110

0.00

%48

.81%

Ge

arin

g In

stru

me

nts

0.00

0.00

%0.

00%

0.00

0.00

%0.

00%

Gro

ss B

orr

ow

ings

0.

000.

00%

0.00

%0.

0000

0.00

0.00

%0.

00%

TOTA

L N

ET P

OR

TFO

LIO

EX

PO

SUR

E1

0.0

01

00

.00

%5

0.0

8%

10

.41

10

0.0

0%

48

.81

%

TOTA

L G

RO

SS E

XP

OSU

RE

10

.00

10

0.0

0%

50

.08

%1

0.4

11

00

.00

%4

8.8

1%

24

Knights Capital Management Investment Report

Bibliography

‘UK construction sector growing at its fastest pace in six years (2014).’ The Independent. [Online].

Available from <http://www.independent.co.uk/news/business/news/uk-construction-sector-

growing-at-its-fastest-pace-in-six-years-8979600.html>. [8th March 2014].

Katie, Allen (2013) ‘UK manufacturing factor to grow faster than economy next year’. The Guardian.

2 December [Online]. Available from<http://www.theguardian.com/business/2013/dec/02/uk-

manufacturing-grow-faster-economy-eef-industry-report>. [8th March 2013].

Stewart, Heather (2013) ‘Strong UK services data ‘points to fastest economic growth in 15 years.’ The

Guardian. 3 October [Online]. Available from <http://www.theguardian.com/business/2013/oct/03/

strong-uk-services-data-fastest-growth>. [8th March 2013].

Vasagar, Jeevan (2013) ‘UK technology job creation outpaced other sectors for four years.’ The Finan-

cial Times. 20 October [Online]. Available from <http://www.ft.com/cms/s/2/1e04f794-327b-11e3-

91d2-00144feab7de.html#axzz2mQYuZL3f>. [8th March 2014].

Groom, Brian (2013) ‘UK manufacturing set to grow faster than economy’. The Financial Times.

[Online]. Available from <http://www.ft.com/cms/s/0/143315e0-5916-11e3-9798-

00144feabdc0.html#axzz2mQYuZL3f>. [8th March 2014].

Smith, Robert (2013) ‘Energy sector growth despite uncertainties.’ Process Engineering. 4 November

[Online]. Available from <http://processengineering.theengineer.co.uk/power-and-water/energy-

sector-growth-despite-uncertainties/1017417.article#>. [8th March 2014].

‘Region’s tourism riding the crest of wave as jobs in sector soar (2013)’.Halifax Courier. 3 December

[Online]. Available from <http://www.halifaxcourier.co.uk/news/calderdale/region-s-tourism-riding-

the-crest-of-wave-as-jobs-in-sector-soar-1-6291503>. [8th March 2014].

‘Factors affecting 2014 Medical Cost Trend (2013)’. PwC. [Online]. Available from <http://

www.pwc.com/us/en/health-industries/behind-the-numbers/index.jhtml>. [8th March 2014].

‘Global life sciences outlook- Resilience and reinvention in a changing marketplace (2013).’ Deloitte.

[Online]. Available from <https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-

Sciences-Health-Care/dttl-lshc-2014-global-life-sciences-sector-report.pdf>. [8th March 2014].

‘Price/Earnings to growth ratio’ – PEG ratio. Investopedia. [Online]. Available from <http://

www.investopedia.com/terms/p/pegratio.asp>. [8th March 2014].

Agrawal, Arpan ‘Operating Margin’ (2012).’ Wikinvest. [Online]. Available from <http://

www.wikinvest.com/metric/Operating_Margin>. [8th March 2014].

‘Operating Income’. Investopedia. [Online]. Available from <http://www.investopedia.com/terms/o/

operatingincome.asp >. [8th March 2014].

Payne, David (2014) ‘Kiplinger’s Economic Outlooks.’ Kiplinger. 28 February [Online]. Available from

<http://www.kiplinger.com/tool/business/T019-S000-kiplinger-s-economic-outlooks/

#1SpdsgEd6E1lXlYt.99>. [13th March 2014].

Smith, Anne (2014) ‘A Top Wall Street Strategist’s Bullish Outlook for 2014.’ Kiplinger. January

[Online]. Available from http://www.kiplinger.com/article/investing/T052-C000-S002-savita-

subramanian-interview-stocks-in-2014.html#jQhEmKlPRA0EI1E0.99>. [13th March 2014].

‘IMF raises UK economic growth forecast’. BBC news. 21 January [Online]. Available from <http://

www.bbc.co.uk/news/business-25823217>. [13th March 2014].

‘Brazil’s economy grows at twice the rate expected.’ BBC news. 27 February [Online]. Available from

<http://www.bbc.co.uk/news/business-26368704>. [13th March 2014].

25

Knights Capital Management Investment Report

‘Economic outlook for Southeast Asia, China and India 2014’. OECD [Online]. Available from

< http://www.oecd.org/site/seao/Pocket%20Edition%20SAEO2014.pdf>. [13th March 2014].

‘United Kingdom GDP Growth Rate’. Trading Economics [Online]. Available from http://

www.tradingeconomics.com/united-kingdom/gdp-growth>. [14th March 2014].

‘UK GDP: Fastest growth for three years.’ BBC news. 25 October 2013 [Online]. Available

from <http://www.bbc.co.uk/news/business-24668687>. [14th March 2014].

Milliken, David & Costa, Ana (2014) ‘Bank of England points to 2015 rate rise, blurs guid-

ance.’ Reuters. 12th February [Online]. Available from <http://uk.reuters.com/

article/2014/02/12/uk-britain-boe-idUKBREA1B00D20140212.> [14TH March 2014].

Financial times.com (2013). "UK employment rises to new peak of 29.87m". [ONLINE].

Available at: <http://www.ft.com/cms/s/0/7f38ce68-3641-11e3-aaf1-

00144feab7de.html#axzz2l2i46YMx>. [Accessed 18 November 13].

Stewart, Heather (2013) ‘Unemployment drops but income growth remains slow.’ The

Guardian. 16th October [Online]. Available from <http://www.theguardian.com/uk-

news/2013/oct/16/unemployment-rates-drop-income-growth-wages.> [14th March 2014].

Weldon, Duncan (2013) ‘Growth and Living Standards - the disconnect.’ Touch Stone Blog.

4th November [Online]. Available from http://touchstoneblog.org.uk/2013/11/growth-living-

standards-the-disconnect> [14th March 2014].

Monaghan, Angela (2014) ‘UK real incomes to rise at last in 2014, says Bank of England offi-

cial.’ The Guardian. 17th January [Online]. Available from <http://www.theguardian.com/

business/2014/jan/17/uk-incomes-rise-bank-england-inflation. [14th March 2013].

Bodie, Kane and Marcus (2010) ‘Investments and Portfolio Management.’ 9th Edition. Mc

Graw Hill, New York. United States.

Mui, Janet (2014) ‘Wealth Management- Investment Outlook.’ Schroders. February [Online].

[14th March 2013].

‘Investment Philosophy.’ HSBC (2014) [Online]. Available from <https://

www.emfunds.us.assetmanagement.hsbc.com/about-us/content/investment-

philosophy.fs>. [14th March 2013].

McCall, Matthew (2013) ‘A Top-Down Approach to Investing.’ Investopedia. 10th September

[Online]. Available from http://www.investopedia.com/articles/stocks/06/

topdownapproach.asp.> [16th March 2014].

Bibliography