Distribution Number 15
Legal & General Sterling Corporate Bond Index Fund
Annual Manager’s Report for the year ended 20 May 2016
Contents Page Number Manager’s Investment Report*
2
Authorised Status*
5
Directors’ Statement
5
Statement of the Manager’s Responsibilities
6
Statement of the Trustee's Responsibilities
6
Report of the Trustee
7
Portfolio Statement*
9
Independent Auditors’ Report
30
Statement of Total Return
33
Statement of Change in Net Assets attributable to Unitholders
33
Balance Sheet
34
Notes to the Financial Statements
35
Distribution Tables
48
Fund Information
51
Risk and Reward Profile*
59
General Information*
60
* These collectively comprise the Authorised Fund Manager’s Report.
1
Manager’s Investment Report Investment Objective and Policy The objective of this Fund is to track the performance of the Markit iBoxx Sterling Non-Gilts ex BBB (after adjustment for management charge and taxation). The Fund will invest primarily in the securities that make up the constituents of the Markit iBoxx Sterling Non-Gilts ex BBB Index. Securities in the Markit iBoxx Sterling Non-Gilts ex BBB Index will be held with weightings generally proportionate to their issuance of debt. Manager’s Investment Report During the year under review, the bid price of the Fund’s I-Class accumulation units rose by 3.56%. Markit iBoxx, the Index compiler, calculates the benchmark Index at the end of the business day using closing prices, whereas the Fund is valued using prevailing prices at 12 noon. Therefore, for tracking purposes the Fund has been revalued using closing prices and adjusted for the effects of charges and taxation. On this basis, over the review year from close of business on 20 May 2015 to the close of business on 20 May 2016, the Fund rose by 4.23%, compared with the Index rise of 4.18% (Source: Bloomberg), producing a tracking difference of +0.05%. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up. Any intellectual property rights in any index referred to herein shall remain the exclusive property of the relevant index provider and/or its licensors (the “Index Provider”). The Index Provider does not sponsor, endorse or promote this product and is not in any way connected to Legal & General (Unit Trust Managers) Limited. Legal & General has obtained full licence from the Index Provider to use such copyright in the creation of this product. “iBoxx” is a registered trademark of International Index Company (IIC), a wholly-owned subsidiary of Markit Group.
Market/Economic Review Economic data in the major economies over the past twelve months has shown disparate trends. The US economy continued to grow steadily, despite fluctuations in quarterly economic growth, with the Federal Reserve sanctioning the first hike in interest rates since 2006 in December 2015. The UK economy also performed well, although growth remained unbalanced with business investment spending and exports failing to keep pace with a robust services sector. Inflationary pressures remained exceptionally subdued as commodity prices weakened and the oil price plunged to its lowest level since 2004, collapsing to below 30 US dollars per barrel in February 2016, before rebounding during March and April. In April, despite a rebound in oil prices, UK inflation fell for the first time in seven months as the Consumer Prices Index eased from 0.5% in March to 0.3% in April. With the euro zone experiencing deflation, the European Central Bank (ECB) sanctioned large-scale quantitative easing (asset purchases), increasing this monthly programme in March to shore up business and consumer confidence. 2
Manager’s Investment Report continued UK corporate bond yield spreads to government bonds finished wider over the review year, though total return was positive due to lower government bond yields. Corporate bonds softened through the second half of 2015 as equity markets fell but corporate yield spreads widened dramatically in January and February 2016, with the energy sector in focus, as commodity prices further declined. All credit sectors widened in sympathy on fears that the deceleration in Chinese growth may be stronger than anticipated. UK credit underperformed EUR and USD credit markets in February 2016 as ‘Brexit’ fears mounted following the announcement of a referendum date, with bonds issued by financials under particular pressure. The weakness of corporate bonds in January and February was followed by considerable strength in March and April. Catalysts were a recovery in oil and commodities, a more dovish tone (in favour of maintaining low interest rates) from the US Federal Reserve Bank (Fed) and the announcement from the ECB that they would expand quantitative easing to include euro-denominated corporate bonds. Liquidity constraints, as tighter regulations forced banks to hold more capital, thereby reducing the capacity of market makers, also weighed on the corporate bond market. Within UK corporate bonds, as credit spreads widened it was the lowerrated bonds that underperformed. AAA-rated bonds were the best performers whilst A-rated bonds were weakest. At a sector level, Utilities outperformed Industrials and it was Financials that underperformed all others. Liquidity concerns grew as tighter regulations forced banks to hold more capital, thereby reducing the capacity of market makers to hold an inventory of corporate bonds. Fund Review All investment activity was prompted either by unit holder activity or by monthly changes in the profile of the benchmark Index. During the period, 60 bonds were added to the Index, 55 of which were new issues and five were upgraded from a BBB to an A rating. In addition, 26 bonds left the Index after being downgraded to a BBB rating, notably bonds from issuers exposed to the energy sector such as E.On AG, Eni Spa and Centrica Plc. 49 bonds exited the Index after falling below one year to maturity, two bonds were called, one bond left the Index after its issuer's rating was withdrawn and one bond exited the Index following a tender offer which left the amount outstanding below the minimum required. The Fund participated in 55 new issues and 16 corporate actions in sectors such as financials and utilities. The Fund experienced net positive cash flow during the review year. The cash flows were used to adjust the Fund’s holdings in such a way so as to ensure the Fund maintained an Index distribution at all times. The Fund was also rebalanced at each month end in line with the revised Index distribution.
3
Manager’s Investment Report continued Outlook Recent commentary from the US Federal Reserve suggests that they continue to believe further rate hikes are warranted, despite the weak global economic backdrop. However, the fact that they continue to delay any policy action indicates caution on their part to avoid the risk of choking-off the domestic economic recovery. This has led to market pricing of interest rate rises in the US being pushed out further. Towards the end of the review year, surveys in the UK showed slowing activity in the construction sector and some contraction in manufacturing but this was overshadowed by the surprise UK referendum vote to leave the European Union (EU). The result creates a great deal of uncertainty and market volatility which is likely to continue for some time. The markets have moved to price in interest rate cuts in the UK and there is increasing speculation about the possibility of more Quantitative Easing. We have seen some uptick in GBP corporate bond issuance in 2016 following a soft 2015, though the UK continues to lag behind the USD and EUR markets where issuance has been very strong. We hope to see increased supply through the rest of 2016 which would help to address both a lack of liquidity in the market and the structural imbalance that exists in the UK where the inventory of bonds available is lower than that demanded by investors. Legal & General Investment Management Limited (Investment Adviser) 29 June 2016
4
Authorised Status Authorised Status This Fund is an Authorised Unit Trust Scheme as defined in section 243 of the Financial Services and Markets Act 2000 and is a UCITS Retail Scheme within the meaning of the FCA Collective Investment Schemes sourcebook. Directors’ Statement We hereby certify that this Manager’s Report has been prepared in accordance with the requirements of the FCA Collective Investment Schemes sourcebook.
A. J. C. Craven (Director)
S. D. Thomas (Director)
Legal & General (Unit Trust Managers) Limited 8 July 2016
5
Statement of the Responsibilities Statement of the Manager’s Responsibilities The Manager of the Fund is required by the FCA Collective Investment Schemes sourcebook (COLL) to prepare financial statements for each accounting period which give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the net revenue and the net capital gains or losses on the Scheme property for the accounting period, and the financial position of the Fund at the end of that period. In preparing these financial statements, the Manager is required to: •
select suitable accounting policies and then apply them consistently;
•
make judgements and estimates that are prudent and reasonable;
•
state whether applicable Accounting Standards have been followed, subject to any material departure disclosed and explained in the financial statements; and
•
prepare the financial statements on the basis that the Fund will continue in operation unless it is inappropriate to presume this.
The Manager is also required to manage the Fund in accordance with the Trust Deed, the Prospectus and the COLL, maintain proper accounting records to enable them to ensure that the financial statements comply with the Statement of Recommended Practice for Authorised Funds issued by The Investment Management Association in May 2014 and the COLL and take in these respects reasonable steps for the prevention and detection of fraud and other irregularities. Statement of the Trustee’s Responsibilities The Trustee is responsible for the safekeeping of all the property of the Fund (other than tangible moveable property) which is entrusted to it and for the collection of income that arises from that property. It is the duty of the Trustee to take reasonable care to ensure that the Trust is managed in accordance with the Financial Conduct Authority’s Collective Investment Schemes Sourcebook (“the Sourcebook”), the Financial Services and Markets Act 2000, as amended, the Trust Deed and Prospectus, in relation to the pricing of, and dealings in, units in the Fund; the application of income of the Fund; and the investment and borrowing powers of the Fund.
6
Report of the Trustee (For the period from 21 May 2015 to 13 November 2015) Report of the Trustee to the Unitholders of Legal & General Sterling Corporate Bond Index Fund (“the Fund”) – retirement of NatWest as Trustee With regard to our retirement as Trustee of the above authorised unit trust (the “Fund”) and in respect of the accounting period to the date of our retirement, it is our opinion, based on the information available to us and the explanations provided that in all material respects in relation to the Fund, the Fund Manager: (i) Has carried out the issue, sale, redemption and calculation of the price of units in accordance with COLL, the Trust Deed and Prospectus of the Fund, and (ii) Has observed the investment and borrowing powers and restrictions applicable to the Fund. There are no outstanding issues from our latest review of the Fund which we feel should be drawn to your attention.
London 13 November 2015
National Westminster Bank Plc Trustee and Depositary Services
7
Report of the Trustee (For the period from 14 November 2015 to 20 May 2016) Report of the Trustee to the Unitholders of the Legal & General Sterling Corporate Bond Index Fund (“the Fund”) for the year ended 20 May 2016 Having carried out such procedures as we considered necessary to discharge our responsibilities as Trustee of the Fund, it is our opinion, based on the information available to us and the explanations provided, that, in all material respects, the Manager: •
has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Fund’s units and the application of the Fund’s income in accordance with the Sourcebook, the Fund Deed and Prospectus, and
•
has, observed the investment and borrowing powers and restrictions applicable to the Fund.
Northern Trust Global Services Limited 8 July 2016
8
Portfolio Statement Portfolio Statement as at 20 May 2016 All investments are investment grade fixed interest securities unless otherwise stated. The percentages in brackets show the equivalent country holdings at 20 May 2015. Holding/ Nominal Value
Investment
Market Value £
% of Net Assets
GOVERNMENT BONDS — 1.13% (0.85%) £80,000
£170,000 £590,000 £198,000 £450,000
£175,000 £161,000 £298,000 £338,000
United Kingdom — 0.02% (0.00%) United Kingdom Gilt 1% 07/09/2017 Belgium — 0.47% (0.39%) Belgium (Kingdom of) 5% 24/04/2018 Belgium (Kingdom of) 1.125% 21/12/2018 Belgium (Kingdom of) 9.375% 21/02/2020 Belgium (Kingdom of) 5.7% 28/05/2032
Finland — 0.28% (0.21%) Finland (Republic of) 1.125% 07/12/2017 Finland (Republic of) 1% 17/12/2018 Finland (Republic of) 1.5% 19/12/2019 Finland (Republic of) 1.625% 15/12/2020
£451,000
Guernsey — 0.13% (0.12%) Guernsey (States of) 3.375% 12/12/2046
£149,000
Isle Of Man — 0.06% (0.07%) Isle of Man Government 5.375% 14/08/2034
£400,000 £100,000
Jersey — 0.13% (0.06%) State of Jersey 3.75% 09/06/2054 Israel — 0.04% (0.00%) Israel Government International 6.875% 21/10/2034
80,582 0.02 ————————————————
182,806
0.05
592,678
0.17
255,404
0.07
618,723 0.18 ———————————————— 1,649,611 0.47 ————————————————
175,897
0.05
161,969
0.04
303,862
0.09
345,961 0.10 ———————————————— 987,689 0.28 ————————————————
465,509 0.13 ————————————————
195,844 0.06 ———————————————— 468,662 0.13 ————————————————
148,650 0.04 ————————————————
CORPORATE BONDS — 97.62% (98.05%)
£400,000 £865,000 £1,251,000 £1,283,000
UNITED KINGDOM — 41.14% (43.24%) Abbey National Treasury Services 4.125% 14/09/2017 Abbey National Treasury Services 1.875% 17/02/2020 Abbey National Treasury Services 5.125% 14/04/2022 Abbey National Treasury Services 5.75% 02/03/2027
414,301
0.12
863,910
0.25
1,451,910
0.41
1,662,191
0.47
9
Portfolio Statement continued Holding/ Nominal Value £350,000 £750,000 £200,000 £150,000 £178,000 £100,000 £195,000 £510,000 £333,000 £186,000 £250,000 £118,000 £132,000 £167,113 £1,330,000 £810,000 £521,000 £370,000 £1,298,624 £320,000 £517,000 £357,000 £937,000 £526,000 £300,000 £565,000 £755,000 £500,000 £200,000 £357,000 £236,734 £329,000
10
Investment UNITED KINGDOM — (cont.) Abbey National Treasury Services 3.875% 15/10/2029 Abbey National Treasury Services 5.25% 16/02/2030 Affinity Sutton Capital Markets 5.981% 17/09/2038 Affinity Sutton Capital Markets 4.25% 08/10/2042 Affinity Water Finance 5.875% 13/07/2026 Affinity Water Programme Finance 4.5% 31/03/2036 Affordable Housing 2.893% 11/08/2043 Affordable Housing 3.8% 20/05/2044 Anglian Water Services Financing 5.837% 30/07/2022 Anglian Water Services Financing 6.875% 21/08/2023 Anglian Water Services Financing 4.5% 05/10/2027 Anglian Water Services Financing 6.625% 15/01/2029 Anglian Water Services Financing 6.293% 30/07/2030 Annington Finance No.1 8% 02/10/2021 Annington Finance No.4 0% 07/12/2022 Annington Finance No.4 0% 10/1/2023 Arkle Master Issue 3.986% 17/08/2017 Artesian Finance 6% 30/09/2033 Aspire Defence Finance 4.674% 31/03/2040 Aster Treasury 4.5% 18/12/2043 AstraZeneca 5.75% 13/11/2031 Bank of Scotland 4.875% 20/12/2024 Barclays Bank 4.25% 12/01/2022 BAT International Finance 6.375% 12/12/2019 BAT International Finance 6% 29/06/2022 BAT International Finance 7.25% 12/03/2024 BAT International Finance 4% 04/09/2026 BAT International Finance 6% 24/11/2034 BAT International Finance 5.75% 05/07/2040 BAT International Finance 4% 23/11/2055 BBC Pacific Quay Finance 5.563% 25/07/2034 BG Energy Capital 5.125% 07/12/2017
Market Value £
% of Net Assets
377,650
0.11
969,582
0.28
278,903
0.08
169,004
0.05
226,661
0.06
116,452
0.03
203,155 617,913
0.06 0.18
404,122
0.11
240,468
0.07
289,371
0.08
164,330
0.05
179,076
0.05
194,257
0.06
1,122,840
0.32
664,308
0.19
537,422 492,370
0.15 0.14
1,491,281 374,824 680,354 429,914 1,062,453
0.42 0.11 0.19 0.12 0.30
614,782
0.17
364,385
0.10
747,639
0.21
836,436
0.24
670,798
0.19
267,559
0.08
381,776
0.11
280,774
0.08
347,781
0.10
Portfolio Statement continued Holding/ Nominal Value £825,000 £871,000 £165,000 £119,435 £109,107 £771,000 £126,630 £480,000 £95,000 £475,000 £418,534 £297,665 £379,686 £295,000 £367,000 £491,000 £200,000 £200,000 £571,000 £200,000 £571,000 £510,000 £450,000 £584,950 £300,000 £368,000 £397,000 £320,000 £116,045 £142,000 £289,000 £76,760 £85,000 £639,000
Investment UNITED KINGDOM — (cont.) BG Energy Capital 5.125% 01/12/2025 BG Energy Capital 5% 04/11/2036 BG Energry Capital 6.5% 30/11/2072 BL Superstores Finance 4.482% 04/10/2030 BL Superstores Finance 5.27% 04/10/2030 BP Capital Markets 4.325% 10/12/2018 Broadgate Financing 4.949% 05/04/2029 Broadgate Financing 4.999% 05/10/2031 Broadgate Financing 4.851% 05/04/2033 Broadgate Financing 4.821% 05/07/2033 Broadgate Financing 5.098% 05/04/2035 Canary Wharf Finance 6.8% 22/04/2030 Canary Wharf Finance 6.455% 22/10/2033 Canary Wharf Finance 5.952% 22/01/2035 Cardiff University 3% 07/12/2055 Circle Anglia Social Housing 7.25% 12/11/2038 Circle Anglia Social Housing 5.2% 02/03/2044 Close Brothers Group 3.875% 27/06/2021 Community Finance 1 5.017% 31/07/2034 Compass Group 3.85% 26/06/2026 Coventry Building Society 4.625% 19/04/2018 Coventry Building Society 6% 16/10/2019 Coventry Building Society 5.875% 28/09/2022 CTRL Section 1 Finance 5.234% 02/05/2035 Dali Capital 4.79924% 21/12/2037 DWR Cymru Financing 6.907% 31/03/2021 DWR Cymru Financing 6.015% 31/03/2028 East Finance 5.486% 15/06/2042 Equity Release No.1 5.7% 26/02/2031 Equity Release No.2 5.88% 26/05/2032 Equity Release No.3 5.05% 26/04/2033 Exchequer 5.396% 13/7/2036 Friends Life Group 12% 21/05/2021 Friends Life Holdings 8.25% 21/04/2022
Market Value £
% of Net Assets
979,374 1,039,958 173,171
0.28 0.30 0.05
131,372
0.04
120,035
0.03
828,699
0.24
147,919
0.04
568,390
0.16
114,451
0.03
579,976
0.16
471,633
0.13
382,183
0.11
574,903
0.16
364,185 373,462
0.10 0.11
764,480
0.22
252,118
0.07
211,033
0.06
741,232 222,540
0.21 0.06
610,214
0.17
580,757
0.17
539,874
0.15
719,222 344,058
0.20 0.10
453,549
0.13
527,122 413,631 136,996
0.15 0.12 0.04
171,186
0.05
340,817 97,813 113,153
0.10 0.03 0.03
762,570
0.22
11
Portfolio Statement continued Holding/ Nominal Value £225,000 £753,000 £1,048,000 £856,000 £817,000 £610,000 £244,785 £100,000 £85,000 £287,868 £197,000 £316,000 £232,000 £698,000 £175,000 £835,000 £790,000 £671,000 £786,000 £550,000 £315,000 £59,766 £404,000 £466,000 £469,000 £522,000 £177,000 £592,000 £950,000 £507,000 £566,000 £650,000 £700,000 £989,000 £160,000 £208,903 £480,000 £550,000 £200,000
12
Investment UNITED KINGDOM — (cont.) Genfinance 6.064% 21/12/2039 GlaxoSmithKline Capital 3.375% 20/12/2027 GlaxoSmithKline Capital 5.25% 19/12/2033 GlaxoSmithKline Capital 6.375% 09/03/2039 GlaxoSmithKline Capital 5.25% 10/04/2042 GlaxoSmithKline Capital 4.25% 18/12/2045 Greater Gabbard OFTO 4.137% 29/11/2032 Greene King Finance 4.0643% 15/03/2035 Guardian Royal Exchange 6.625% 21/08/2023 Gwynt y Môr Offshore Wind Farm 2.778% 17/02/2034 Harbour Funding 5.28% 31/03/2034 Haven Funding 8.125% 30/09/2037 Heathrow Funding 9.2% 29/03/2021 Heathrow Funding 5.225% 15/02/2025 Heathrow Funding 7.075% 04/08/2028 Heathrow Funding 6.75% 03/12/2028 Heathrow Funding 6.45% 10/12/2031 Heathrow Funding 5.875% 31/05/2043 Heathrow Funding 4.625% 31/10/2046 High Speed Rail Finance 1 4.375% 01/11/2038 Holmes Master Issue 4.009% 15/10/2054 Housing Association 8.25% 07/06/2027 HSBC Bank 5% 20/03/2023 HSBC Bank 6.5% 07/07/2023 HSBC Bank 5.375% 04/11/2030 HSBC Bank 5.375% 22/08/2033 HSBC Bank 6.25% 30/01/2041 HSBC Bank 4.75% 24/03/2046 HSBC Holdings 6.375% 18/10/2022 HSBC Holdings 6.5% 20/05/2024 HSBC Holdings 5.75% 20/12/2027 HSBC Holdings 6.75% 11/09/2028 HSBC Holdings 7% 07/04/2038 HSBC Holdings 6% 29/03/2040 Hyde Housing Asociation 5.125% 23/07/2040 Integrated Accommodation Services 6.48% 31/03/2029 Intu Finance 3.875% 17/03/2023 Intu Finance 4.625% 17/03/2028 Intu Finance 4.25% 17/09/2030
Market Value £
% of Net Assets
302,704
0.09
793,481
0.23
1,334,284
0.38
1,241,714
0.35
1,057,348
0.30
688,164
0.20
271,892
0.08
100,403
0.03
104,661
0.03
286,635 240,724 479,817 305,758
0.08 0.07 0.14 0.09
811,704
0.23
246,615
0.07
1,129,673
0.32
1,094,389
0.31
912,376
0.26
920,068
0.26
621,382
0.18
326,403
0.09
79,517 417,661 556,541 498,888 574,214 226,289 612,490 990,348 621,889 617,308 760,910 865,260 1,098,099
0.02 0.12 0.16 0.14 0.16 0.06 0.17 0.28 0.18 0.18 0.22 0.25 0.31
198,510
0.06
260,788 506,940 612,911 213,134
0.07 0.14 0.17 0.06
Portfolio Statement continued Holding/ Nominal Value £500,000 £816,477 £268,000 £450,000 £177,000 £648,000 £332,000 £415,000 £415,000 £1,511,000 £1,093,000 £250,000 £300,000 £366,000 £101,000 £200,000 £1,239,000 £158,000 £350,000 £650,000 £125,000 £571,000 £1,358,000 £1,208,000 £1,133,000 £878,000 £300,000 £300,000 £310,000 £200,000 £134,000 £278,794 £520,000 £490,203 £137,369 £65,000 £200,000
Investment UNITED KINGDOM — (cont.) Intu Metrocentre 4.125% 06/12/2023 Juturna (ELOC 16) 5.0636% 10/08/2033 Land Securities Capital Markets 5.425% 31/03/2022 Land Securities Capital Markets 4.875% 29/09/2025 Land Securities Capital Markets 5.391% 27/02/2026 Land Securities Capital Markets 5.391% 31/03/2027 Land Securities Capital Markets 5.376% 30/09/2029 Land Securities Capital Markets 5.396% 31/07/2032 Land Securities Capital Markets 5.125% 07/02/2036 LCR Finance 4.5% 07/12/2028 LCR Finance 5.1% 07/03/2051 Leeds Building Society 4.25% 17/12/2018 Leeds Building Society 4.875% 16/11/2020 Legal & General Finance 5.875% 11/12/2031 Legal & General Finance 5.875% 05/04/2033 Libra Treasury 5.125% 02/08/2038 Lloyds TSB Bank 1.5% 02/05/2017 Lloyds TSB Bank 6.75% 24/10/2018 Lloyds TSB Bank 2.75% 09/12/2018 Lloyds TSB Bank 1.75% 31/03/2022 Lloyds TSB Bank 2.5% 01/06/2022 Lloyds TSB Bank 7.5% 15/04/2024 Lloyds TSB Bank 5.125% 07/03/2025 Lloyds TSB Bank 4.875% 30/03/2027 Lloyds TSB Bank 6% 08/02/2030 Lloyds TSB Bank 6.5% 17/09/2040 London & Quadrant Housing Trust 2.625% 05/05/2026 London & Quadrant Housing Trust 4.625% 05/12/2033 London & Quadrant Housing Trust 5.5% 27/01/2040 London & Quadrant Housing Trust 3.75% 27/10/2049 London Merchant Securities 6.5% 16/03/2026 Longstone Finance 4.791% 19/04/2030 Longstone Finance 4.896% 19/04/2031 Meadowhall Finance 4.986% 12/01/2032 Meadowhall Finance 4.988% 12/07/2037 Mercantile Investment Trust 6.125% 25/02/2030 Merseylink Issuer 3.842% 31/03/2043
Market Value £
% of Net Assets
536,471
0.15
931,563
0.27
304,621
0.09
526,610
0.15
212,797
0.06
795,827
0.23
415,066
0.12
527,419
0.15
519,169 1,925,687 1,710,279
0.15 0.55 0.49
269,718
0.08
345,156
0.10
467,139
0.13
129,129 240,830 1,247,542 177,312 359,950 647,730 127,094 766,086 1,669,340 1,474,753 1,553,082 1,278,456
0.04 0.07 0.36 0.05 0.10 0.18 0.04 0.22 0.48 0.42 0.44 0.36
304,369
0.09
359,264
0.10
414,732
0.12
214,464
0.06
170,235
0.05
313,076
0.09
551,731
0.16
588,922
0.17
164,035
0.05
81,796 240,810
0.02 0.07
13
Portfolio Statement continued Holding/ Nominal Value £100,000 £184,016 £479,000 £472,000 £312,000 £200,000 £291,000 £666,000 £408,000 £400,000 £177,000 £453,000 £323,000 £400,000 £177,000 £65,000 £492,000 £825,000 £523,000 £621,000 £253,000 £599,000 £537,094 £700,000 £907,000 £325,000 £767,000 £989,000 £1,264,000 £83,000 £70,000 £50,000
14
Investment UNITED KINGDOM — (cont.) Metropolitan Funding 4.125% 05/04/2048 Mitchells & Butlers Finance 5.574% 15/12/2030 Motability Operations Group 6.625% 10/12/2019 Motability Operations Group 5.375% 28/06/2022 Motability Operations Group 3.75% 16/07/2026 Motability Operations Group 4.375% 08/02/2027 Motability Operations Group 5.625% 29/11/2030 Motability Operations Group 3.625% 31/03/2036 National Grid Electricity Transmission 5.875% 02/02/2024 National Grid Electricty Transmission 4% 08/06/2027 National Grid Electricity Transmission 6.5% 27/07/2028 National Grid Electricity Transmission 7.375% 13/01/2031 National Grid Gas 6% 07/06/2017 National Grid Gas 6.375% 03/03/2020 National Grid Gas 7% 16/12/2024 National Grid Gas 8.75% 27/06/2025 National Grid Gas 6% 13/05/2038 Nationwide Building Society 5.625% 09/09/2019 Nationwide Building Society 2.25% 29/04/2022 Nationwide Building Society 5.625% 28/01/2026 Nationwide Building Society 3% 06/05/2026 Nationwide Building Society 3.25% 20/01/2028 NATS Route 5.25% 31/03/2026 Network Rail Infrastructure Finance 1% 07/12/2017 Network Rail Infrastructure Finance 4.625% 21/07/2020 Network Rail Infrastructure Finance 3% 07/09/2023 Network Rail Infrastructure Finance 4.75% 22/01/2024 Network Rail Infrastructure Finance 4.375% 09/12/2030 Network Rail Infrastructure Finance 4.75% 29/11/2035 Northern Electric Finance 8.875% 16/10/2020 Northern Electric Finance 5.125% 04/05/2035 Northern Powergrid Yorkshire 7.25% 15/12/2022
Market Value £
% of Net Assets
108,169
0.03
205,623
0.06
563,831
0.16
565,357
0.16
344,359
0.10
230,000
0.07
380,264
0.11
695,637
0.20
512,402
0.15
450,032
0.13
245,797
0.07
689,144 339,160
0.20 0.10
472,728 239,601 98,349 698,204
0.13 0.07 0.03 0.20
930,369
0.26
527,403
0.15
804,118
0.23
255,970
0.07
610,212 620,506
0.17 0.18
703,094
0.20
1,040,079
0.30
359,059
0.10
940,230
0.27
1,238,106
0.35
1,692,223
0.48
107,071
0.03
85,942
0.02
64,040
0.02
Portfolio Statement continued Holding/ Nominal Value £79,000 £151,000 £300,000 £231,000 £200,000 £290,819 £100,000 £300,000 £350,000 £98,464 £55,000 £219,000 £200,000 £210,000 £177,000 £177,000 £460,000 £444,000 £639,000 £515,000 £120,000 £600,000 £150,000 £303,000 £391,000 £737,000 £382,839 £200,000 £379,000 £260,089 £312,225 £40,000 £98,000 £105,000 £350,000 £256,000 £285,000 £322,000 £108,000 £600,000 £425,000
Investment UNITED KINGDOM — (cont.) Northern Powergrid Yorkshire 5.125% 04/05/2035 Northern Rock Asset Managment 6.375% 02/12/2019 Notting Hill Housing Trust 3.75% 20/12/2032 Notting Hill Housing Trust 5.25% 07/07/2042 Notting Hill Housing Trust 4.375% 20/02/2054 Octagon Healthcare Funding 5.333% 30/06/2036 Orbit Capital 3.5% 24/03/2045 Paragon Treasury 3.625% 21/01/2047 Peabody Capital No.2 4.625% 12/12/2053 Picts 5.218% 20/01/2039 Places for People Homes 8.625% 26/09/2020 Places for People Homes 5.09% 31/07/2043 Prudential 1.375% 19/01/2018 Prudential 1.75% 27/11/2018 Prudential 6.875% 20/01/2023 Prudential 5.875% 11/05/2029^ Prudential 6.125% 19/12/2031 Prudential 11.375% 29/05/2039 Prudential 5% 20/07/2055 Prudential 5.7% 19/12/2063 Quadrant Housing Finance 7.76% 10/02/2033 Rio Tinto Finance 4% 11/12/2029 Riverside Finance 3.875% 05/12/2044 Rolls-Royce 6.75% 30/04/2019 Rolls-Royce 3.375% 18/06/2026 Royal Bank of Scotland 5.125% 13/01/2024 RSL Finance No.1 6.625% 31/03/2038 Sanctuary Capital 6.697% 23/03/2039 Sanctuary Capital 5% 26/04/2047 Sanctuary Housing 8.375% 01/09/2031 Sceptre Funding No.1 5.253% 09/02/2027 Scottish Amicable Finance 8.5% Perpetual Segro 5.5% 20/06/2018^ Segro 6% 30/09/2019^ Segro 5.625% 07/12/2020^ Segro 6.75% 23/11/2021^ Segro 7% 14/03/2022^ Segro 6.75% 23/02/2024^ Segro 5.75% 20/06/2035^ Society of Lloyd's 4.75% 30/10/2024 Society of Lloyd's 7.421% Open Maturity
Market Value £
% of Net Assets
96,989
0.03
174,892
0.05
312,053
0.09
290,093
0.08
230,336
0.07
349,239 95,136
0.10 0.03
291,628
0.08
420,956 107,182
0.12 0.03
63,253
0.02
253,806 200,610 212,043 224,169 225,822 518,023 544,651 548,211 462,527
0.07 0.06 0.06 0.06 0.06 0.15 0.16 0.16 0.13
171,801 622,500
0.05 0.18
153,130 348,540 401,997
0.04 0.10 0.11
890,754 514,891
0.25 0.15
300,979 485,219
0.09 0.14
390,372
0.11
371,687
0.11
42,970 105,452 118,674 401,210 313,926 355,928 410,856 140,352 622,283
0.01 0.03 0.03 0.11 0.09 0.10 0.12 0.04 0.18
439,875
0.13
15
Portfolio Statement continued Holding/ Nominal Value £509,000 £296,000 £230,000 £425,000 £299,000 £453,000 £305,000 £250,000 £91,000 £350,000 £104,000 £200,000 £533,000 £200,000 £350,000 £573,000 £515,000 £650,000 £124,000 £650,000 £537,000 £351,000 £300,000 £84,150 £236,471 £264,254 £379,948 £700,000 £555,000 £200,000 £371,000 £235,000
16
Investment UNITED KINGDOM — (cont.) Southern Electric Power Distribution 5.5% 07/06/2032 Southern Electric Power Distribution 4.625% 20/02/2037 Southern Gas Networks 4.875% 21/03/2029 Southern Water Services Finance 6.125% 31/03/2019 Southern Water Services Finance 5% 31/03/2021 Southern Water Services Finance 6.64% 31/03/2026 Southern Water Services Finance 6.192% 31/03/2029 Southern Water Services Finance 5% 31/03/2041 Southern Water Services Finance 4.5% 31/03/2052 Southern Water Services Finance 5.125% 30/09/2056 Sovereign Housing 5.705% 10/09/2039 Sovereign Housing 4.768% 01/06/2043 SSE 5% 01/10/2018 SSE 4.25% 14/09/2021 SSE 5.875% 22/09/2022 SSE 8.375% 20/11/2028 SSE 6.25% 27/08/2038 Standard Chartered Bank 7.75% 03/04/2018 Standard Chartered Bank 5.125% 06/06/2034 Standard Chartered Bank 4.375% 18/01/2038 Standard Life 6.75% Open Maturity Sunderland Finance 6.38% 31/03/2042 Swan Housing Capital 3.625% 05/03/2048 Telereal Securitisation 4.9741% 10/09/2027 Telereal Securitisation 5.5534% 10/12/2031 Telereal Securitisation 5.3887% 10/12/2033 Telereal Securitisation 5.9478% 10/12/2033 Thames Water Utilities Cayman 4% 19/06/2025 Thames Water Utilities Cayman 3.5% 25/02/2028 Thames Water Utilities Cayman 4.375% 03/07/2034 Thames Water Utilities Cayman 5.5% 11/02/2041 Thames Water Utilities Cayman 4.625% 04/06/2046
Market Value £
% of Net Assets
641,552
0.18
341,366
0.10
276,878
0.08
477,384
0.14
339,997
0.10
600,516
0.17
407,877
0.12
303,800
0.09
106,799
0.03
474,083
0.13
139,806
0.04
243,190 577,739 222,405 421,868 872,142 699,393
0.07 0.16 0.06 0.12 0.25 0.20
714,565
0.20
108,383
0.03
655,303 577,956
0.19 0.16
471,792
0.13
292,380
0.08
92,667
0.03
271,700
0.08
298,664
0.08
447,301
0.13
777,602
0.22
583,945
0.17
224,475
0.06
485,570
0.14
277,700
0.08
Portfolio Statement continued Holding/ Nominal Value £275,000 £390,000 £300,000 £707,000 £85,000 £200,000 £307,000 £420,000 £673,000 £300,000 £300,000 £530,000 £320,000 £200,000 £300,000 £200,000 £500,000 £372,000 £720,000 £256,000 £300,000 £300,000 £100,000 £85,000 £478,000 £377,000 £50,000 £350,000 £199,000 £200,000 £200,000 £150,000 £300,000 £253,000
Investment UNITED KINGDOM — (cont.) Thames Water Utilities Cayman 7.241% 09/04/2058 Thames Water Utilities Finance 6.75% 16/11/2028 Thames Water Utilities Finance 6.5% 09/02/2032 Thames Water Utilities Finance 5.125% 28/09/2037 The Guinness Partnership Limited 9.125% 31/01/2025 The Guinness Partnership Limited 4% 24/10/2044 THFC Funding No.1 5.125% 21/12/2037 THFC Funding No.2 6.35% 08/07/2041 THFC Funding No.3 5.2% 11/10/2043 Together Housing Finance 4.5% 17/12/2042 Transport for London 1.25% 21/11/2017 Transport for London 2.25% 09/08/2022 Transport for London 2.125% 24/04/2025 Transport for London 4.5% 31/03/2031 Transport for London 4% 12/09/2033 Transport for London 5% 31/03/2035 Transport for London 3.875% 23/07/2042 Transport for London 3.625 15/05/2045 Transport for London 4% 07/04/2064 Unilever 4.75% 16/06/2017 Unilever 2% 19/12/2018 Unite (USAF) II 3.374% 30/06/2023 Unite (USAF) II 3.921% 30/06/2025^ United Utilities Water 5.375% 14/05/2018 United Utilities Water 5.75% 25/03/2022 United Utilities Water 5.625% 20/12/2027 United Utilities Water 5% 28/02/2035 University of Cambridge 3.75% 17/10/2052 University of Leeds 3.125% 19/12/2050 University of Liverpool 3.375% 25/06/2055 University of Manchester 4.25% 04/07/2053 Wales & West Utilities Finance 6.25% 30/11/2021 Wales & West Utilities Finance 4.625% 13/12/2023 Wales & West Utilities Finance 5.75% 29/03/2030
Market Value £
% of Net Assets
302,673
0.09
541,975
0.15
414,807
0.12
876,121
0.25
125,325
0.04
210,865
0.06
371,488
0.11
589,487 842,448
0.17 0.24
337,896
0.10
301,408
0.09
546,133
0.16
320,634
0.09
240,198 349,482 257,576
0.07 0.10 0.07
572,540
0.16
409,215 919,826 266,543 308,740 315,287 109,156
0.12 0.26 0.08 0.09 0.09 0.03
91,482
0.03
569,800
0.16
473,526 60,885
0.14 0.02
434,101
0.12
204,992
0.06
222,492
0.06
261,646
0.07
182,301
0.05
343,006
0.10
324,263
0.09
17
Portfolio Statement continued Holding/ Nominal Value £200,000 £530,000 £400,000 £200,000 £98,000 £97,000 £450,000 £300,000 £498,941 £196,594 £830,000 £193,000 £95,000 £350,000 £350,000 £300,000 £100,000 £114,000 £50,000 £405,000 £532,000
£206,000 £276,000 £200,000 £441,000
£570,000 £161,000
18
Investment UNITED KINGDOM — (cont.) Wellcome Trust Finance 4.75% 28/05/2021 Wellcome Trust Finance 4.625% 25/07/2036 Wellcome Trust Finance 4% 09/05/2059 Wessex Water Services Finance 4% 24/09/2021 Wessex Water Services Finance 5.375% 10/03/2028 Wessex Water Services Finance 5.75% 14/10/2033 Wheatley Group Capital 4.375% 28/11/2044 WHG Treasury 4.25% 06/10/2045 White City Property Finance 5.1202% 17/04/2035 Wods Transmission 3.446% 24/08/2034 Yorkshire Building Society 4.75% 12/04/2018 Yorkshire Electricity Distribution 9.25% 17/01/2020 Yorkshire Power Finance 7.25% 04/08/2028 Yorkshire Water Services Bradford 6% 21/08/2019 Yorkshire Water Services Bradford 3.625% 01/08/2029 Yorkshire Water Services Bradford 6.375% 19/08/2039 Yorkshire Water Services Finance 5.5% 28/5/2037 Yorkshire Water Services Odsal Finance 6.5876% 21/02/2023 Yorkshire Water Services Odsal Finance 6.454% 28/05/2027 Yorkshire Water Services Odsal Finance 6.6011% 17/04/2031 Zurich Finance UK 6.625% Open Maturity
IRELAND — 0.37% (0.27%) ESB Finance 6.5% 05/03/2020 Freshwater Finance 5.182% 20/04/2035 Freshwater Finance 4.556% 03/04/2036 Freshwater Finance 4.607% 17/10/2036
CHANNEL ISLANDS — 0.23% (0.40%) Annington Repackaging No.1 5.3236% 10/01/2023 Asif Jersey 5% 18/12/2018
Market Value £
% of Net Assets
233,203
0.07
693,092
0.20
539,658
0.15
219,359
0.06
121,678
0.03
128,227
0.04
499,329 326,662
0.14 0.09
587,461
0.17
206,310
0.06
887,252
0.25
242,909
0.07
134,143
0.04
398,738
0.11
374,479
0.11
428,631
0.12
129,140
0.04
142,536
0.04
66,272
0.02
562,164
0.16
585,067 0.17 ———————————————— 144,260,699 41.14 ———————————————— 240,760
0.07
336,472
0.10
226,072
0.06
501,502 0.14 ———————————————— 1,304,806 0.37 ————————————————
631,383 0.18 174,548 0.05 ———————————————— 805,931 0.23 ————————————————
Portfolio Statement continued Holding/ Nominal Value
Investment
Market Value £
% of Net Assets
687,764
0.19
689,697
0.20
NORTH AMERICA — 13.44% (13.72%) £670,000 £680,000 £350,000
£144,000 £50,000 £578,000 £50,000 £300,000 £268,054
£600,000 £608,000 £250,000 £545,000
£200,000 £575,000 £500,000 £425,000 £700,000 £500,000 £1,350,000 £150,000 £520,000 £98,000 £485,000 £448,000 £515,000 £672,000 £60,000 £206,000 £301,000 £154,000 £449,000 £506,000 £470,000
Canada — 0.49% (0.37%) Export Development Canada 1.875% 17/12/2018 Export Development Canada 1.375% 16/12/2019 Export Development Canada 1% 15/12/2020
Cayman Islands — 0.50% (0.57%) Asif 6.375% 05/10/2020 DWR Cymru Financing 4.473% Bond 31/03/2057 IPIC GMTN 6.875% 14/03/2026 Lunar Funding 5.494% 29/07/2020 Lunar Funding 5.75% 18/10/2033 Trafford Centre Finance 6.5% 28/07/2033
Mexico — 0.65% (0.74%) America Movil 5% 27/10/2026 America Movil 5.75% 28/06/2030 America Movil 4.948% 22/07/2033 America Movil 4.375% 07/08/2041
United States — 11.80% (12.04%) American Honda Finance 2.625% 14/10/2022 Apple 3.05% 31/07/2029 Apple 3.6% 31/07/2042 Bank of America 5.5% 04/12/2019 Bank of America 6.125% 15/09/2021 Bank of America 4.25% 10/12/2026 Bank of America 7% 31/07/2028 Cargill 5.375% 02/03/2037 Citigroup 7.625% 03/04/2018 Citigroup 6.25% 02/09/2019 Citigroup 5.15% 21/05/2026 Citigroup 6.8% 25/06/2038 Citigroup 7.375% 01/09/2039 Comcast 5.5% 23/11/2029 Federal National Mortgage Association 5.375% 07/06/2021 Federal National Mortgage Association 5.375% 07/12/2028 GE Capital UK Funding 6.75% 06/08/2018 GE Capital UK Funding 5.625% 25/04/2019 GE Capital UK Funding 4.375% 31/07/2019 GE Capital UK Funding 5.875% 04/11/2020 GE Capital UK Funding 5.125% 24/05/2023
347,327 0.10 ———————————————— 1,724,788 0.49 ———————————————— 167,949
0.05
60,644 737,673 55,960 384,141
0.02 0.21 0.01 0.11
358,370 0.10 ———————————————— 1,764,737 0.50 ———————————————— 692,933 0.20 734,796 0.21 280,568 0.08 558,265 0.16 ———————————————— 2,266,562 0.65 ————————————————
206,723 582,607 502,745 475,229 825,940 554,594 1,847,027 179,604 577,337 111,102 569,480 654,148 789,259 858,612
0.06 0.17 0.14 0.14 0.24 0.16 0.53 0.05 0.16 0.03 0.16 0.19 0.22 0.24
70,940
0.02
271,283
0.08
336,513
0.10
173,554
0.05
489,007
0.14
595,507
0.17
565,579
0.16
19
Portfolio Statement continued Holding/ Nominal Value £650,000 £682,000 £536,000 £658,000 £312,000 £108,000 £423,000 £858,000 £366,000 £515,000 £319,000 £508,000 £518,000 £64,000 £825,000 £350,000 £400,000 £593,000 £800,000 £750,000 £400,000 £499,000 £554,000 £210,000 £700,000 £559,000 £300,000 £300,000 £1,550,000 £521,000 £177,000 £177,000 £477,000 £382,000
20
Investment United States — (cont.) GE Capital UK Funding 4.125% 13/09/2023 GE Capital UK Funding 5.875% 18/01/2033 GE Capital UK Funding 6.25% 05/05/2038 GE Capital UK Funding 8% 14/01/2039 General Electric Capital 6.25% 15/12/2017 General Electric Capital 6.25% 29/09/2020 General Electric Capital 5.5% 07/06/2021 Goldman Sachs Group 4.25% 29/01/2026 General Electric Capital 5.25% 07/12/2028 General Electric Capital 4.875% 18/09/2037 General Electric Capital 5.375% 18/12/2040 Goldman Sachs Group 7.125% 07/08/2025 Goldman Sachs Group 7.25% 10/04/2028 HSBC Finance 6.25% 19/08/2019 IBM 2.75% 21/12/2020 IBM 2.625% 05/08/2022 Johnson & Johnson 5.5% 06/11/2024 JP Morgan Chase 1.875% 10/02/2020 JP Morgan Chase 3.5% 18/12/2026 Merrill Lynch 7.75% 30/04/2018 Metlife 5.25% 29/06/2020 Metlife 5.375% 09/12/2024 Metropolitan Life Global Funding 2.625% 05/12/2022 Metropolitan Life Global Funding 2.875% 11/01/2023 Metropolitan Life Global Funding 3.5% 30/09/2026 Nestle Holdings 1.75% 09/12/2020 PACCAR Financial Europe 1.513% 29/05/2018 PepsiCo 2.5% 01/11/2022 Pfizer 6.5% 03/06/2038 Procter & Gamble 6.25% 31/01/2030 Procter & Gamble 5.25% 19/01/2033 Tennessee Valley Authority 5.35% 07/06/2021 Tennessee Valley Authority 5.625% 07/06/2032 Tennessee Valley Authority 4.625% 07/06/2043
Market Value £
% of Net Assets
734,301
0.21
936,175
0.27
804,452
0.23
1,141,759
0.33
335,983
0.10
128,401
0.04
496,566
0.14
938,223
0.27
464,588
0.13
612,817
0.17
427,750
0.12
674,843
0.19
714,985 71,896 870,722 362,936
0.20 0.02 0.25 0.10
508,640
0.14
596,169 839,406 835,014 451,614 592,558
0.17 0.24 0.24 0.13 0.17
567,560
0.16
216,191
0.06
733,250 571,117
0.21 0.16
301,155 312,000 2,260,303
0.09 0.09 0.64
729,452
0.21
233,365
0.07
207,901
0.06
648,005
0.18
494,018
0.14
Portfolio Statement continued Holding/ Nominal Value £400,000 £635,000 £1,018,000 £957,000 £823,000 £930,000 £800,000 £600,000 £688,000 £900,000
Investment United States — (cont.) United Parcel Service 5.125% 12/02/2050 Wal-Mart Stores 5.75% 19/12/2030 Wal-Mart Stores 5.625% 27/03/2034 Wal-Mart Stores 5.25% 28/09/2035 Wal-Mart Stores 4.875% 19/01/2039 Wells Fargo 2.125% 22/04/2022 Wells Fargo 5.25% 01/08/2023 Wells Fargo 3.5% 12/09/2029 Wells Fargo 4.625% 02/11/2035 Wells Fargo 4.875% 29/11/2035
Market Value £
% of Net Assets
557,558 0.16 844,381 0.24 1,357,749 0.39 1,240,839 0.35 1,024,681 0.29 931,884 0.27 928,296 0.26 623,257 0.18 802,132 0.23 1,001,126 0.29 ———————————————— 41,362,808 11.80 ————————————————
CONTINENTAL EUROPE — 38.51% (37.16%) £500,000 £123,000
£561,000 £578,000 £600,000
£300,000 £368,000
£600,000 £225,000 £640,000 £574,000 £240,000 £485,000 £145,000 £205,000 £751,000 £200,000
Austria — 0.20% (0.14%) Oesterreichische Kontrollbank 2% 07/12/2018 Oesterreichische Kontrollbank 5.75% 07/12/2028
Belgium — 0.61% (0.60%) Anheuser-Busch Inbev 6.5% 23/06/2017 Anheuser-Busch Inbev 9.75% 30/07/2024 Anheuser-Busch Inbev 4% 24/09/2025
Denmark — 0.19% (0.08%) Erste Abwicklungsa 1% 07/03/2019 Kommunekredit 1.125% 07/12/2018
Eurobonds — 12.52% (10.91%) African Develoment Bank 0.875% 13/12/2018 Asian Development Bank 1.5% 15/12/2017 Asian Develoment Bank 1% 18/12/2018 Council of Europe Development Bank 1.875% 22/12/2018 Council of Europe Development Bank 1.125% 07/03/2019 Council of Europe Development Bank 1.25% 23/12/2019 Eurofima 5.5% 07/06/2032 European Bank for Reconstruction & Development 1.875% 17/12/2018 European Bank for Reconstruction & Development 5.625% 07/12/2028 European Bank for Reconstruction & Development 5.125% 07/06/2032
513,790
0.15
167,135 0.05 ———————————————— 680,925 0.20 ————————————————
592,363
0.17
877,566
0.25
661,170 0.19 ———————————————— 2,131,099 0.61 ———————————————— 299,337 0.09 369,714 0.10 ———————————————— 669,051 0.19 ————————————————
599,985
0.17
227,529
0.06
642,984
0.18
588,737
0.17
241,702
0.07
489,664 197,284
0.14 0.06
210,249
0.06
1,039,299
0.30
271,052
0.08
21
Portfolio Statement continued Holding/ Nominal Value £723,000 £1,006,000 £3,405,000 £1,011,000 £5,441,000 £191,000 £1,861,000 £1,851,000 £1,000,000 £215,000 £1,110,000 £1,217,000 £314,000 £539,000 £2,175,000 £850,000 £1,652,000 £1,142,000 £1,666,000 £727,000 £859,000 £177,000 £462,000 £500,000 £261,000 £697,000
£720,000
£261,000
22
Investment Eurobonds — (cont.) European Investment Bank 8.75% 25/08/2017 European Investment Bank 4.125% 07/12/2017 European Investment Bank 1.375% 15/01/2018 European Investment Bank 4.75% 15/10/2018 European Investment Bank 1.5% 01/02/2019 European Investment Bank 5.375% 07/03/2019 European Investment Bank 2.25% 07/03/2020 European Investment Bank 5.375% 07/06/2021 European Investment Bank 1.125% 07/09/2021 European Investment Bank 4.25% 07/12/2021 European Investment Bank 2.5% 31/10/2022 European Investment Bank 5.5% 15/04/2025 European Investment Bank 3.75% 07/12/2027 European Investment Bank 0% 07/12/2028 European Investment Bank 6% 07/12/2028 European Investment Bank 4.5% 07/06/2029 European Investment Bank 5.625% 07/06/2032 European Investment Bank 3.875% 08/06/2037 European Investment Bank 5% 15/04/2039 European Investment Bank 4.5% 07/03/2044 European Investment Bank 4.625% 12/10/2054 Inter-American Development Bank 1.625% 18/10/2017^ Inter-American Development Bank 1.25% 15/12/2017 Inter-American Development Bank 1.125% 17/12/2019 Inter-American Development Bank 5.25% 07/06/2021 International Bank for Reconstruction & Development 1.25% 02/10/2017 International Bank for Reconstruction & Development 1.375% 15/12/2020 International Bank for Reconstruction & Development 5.4% 07/06/2021
Market Value £
% of Net Assets
794,309
0.23
1,057,409
0.30
3,438,001
0.98
1,104,073
0.31
5,530,341
1.58
214,344
0.06
1,939,817
0.55
2,211,377
0.63
988,058
0.28
247,497
0.07
1,175,245
0.34
1,583,580
0.45
365,756
0.10
407,707
0.12
3,098,231
0.88
1,077,020
0.31
2,391,477
0.68
1,403,410
0.40
2,378,988
0.68
999,762
0.29
1,312,947
0.37
179,073
0.05
465,274
0.13
503,384
0.14
312,461
0.09
701,851
0.20
728,755
0.21
314,728
0.09
Portfolio Statement continued Holding/ Nominal Value £177,000
£488,000
£500,000 £177,000 £570,000
£674,000 £240,000 £256,000
£338,000 £511,000 £588,000 £400,000 £200,000 £200,000 £193,000 £200,000 £800,000 £500,000 £500,000 £700,000 £176,000 £600,000 £400,000 £622,000 £1,500,000 £600,000 £1,400,000 £1,100,000 £1,500,000 £400,000 £500,000 £900,000
Investment Eurobonds — (cont.) International Bank for Reconstruction & Development 4.875% 07/12/2028 International Bank for Reconstruction & Development 5.75% 07/06/2032 Nordic Investment Bank 1% 07/03/2019 Nordic Investment Bank 5.25% 26/11/2019 Nordic Investment Bank 5.2% 07/06/2032
Finland — 0.34% (0.42%) Municipality Finance 1.125% 07/12/2017 Municipality Finance 1.25% 07/03/2019 Pohjola Bank 2.5% 20/05/2022
France — 6.95% (6.15%) BNP Paribas 2.375% 20/11/2019 Caisse D'Amortissement Dette 1% 07/03/2018 Caisse D'Amortissement Dette 3.75% 15/10/2018 Caisse D'Amortissement Dette 1% 07/03/2019 Caisse des Dépôts 1.5% 12/06/2017 Caisse des Dépôts 1.5% 23/12/2019 Cie De Financement Foncier 5.5% 26/01/2027 Credit Agricole 5.5% 17/12/2021 Dexia 1.875% 17/07/2017 Dexia 1.125% 24/02/2019 Dexia 2% 17/06/2020 Dexia 2.125% 12/02/2025 Dexia 5.5% 16/07/2026 Électricité de France 6.875% 12/12/2022 Électricité de France 6.25% 30/05/2028 Électricité de France 5.875% 18/07/2031 Électricité de France 6.125% 02/06/2034 Électricité de France 5.5% 27/03/2037 Électricité de France 5.5% 17/10/2041 Électricité de France 5.125% 22/09/2050 Électricité de France 6% 23/01/2114 GDF Suez 6.125% 11/02/2021 GDF Suez 7% 30/10/2028 GDF Suez 5% 01/10/2060
Market Value £
% of Net Assets
234,767
0.07
720,425
0.21
502,411
0.14
203,991
0.06
797,995 0.23 ———————————————— 43,892,949 12.52 ————————————————
676,509
0.19
241,901 0.07 259,262 0.08 ———————————————— 1,177,672 0.34 ———————————————— 349,218
0.10
512,320
0.15
626,968
0.18
399,557 201,114 203,158
0.11 0.06 0.06
245,175 236,745 806,146 496,917 510,134 694,036 220,811
0.07 0.07 0.23 0.14 0.14 0.20 0.06
762,463
0.22
505,020
0.14
756,315
0.22
1,821,543
0.52
683,580
0.19
1,591,990
0.45
1,177,035 1,794,789 480,652 716,524 1,215,621
0.34 0.51 0.14 0.20 0.35
23
Portfolio Statement continued Holding/ Nominal Value £578,000 £292,000 £590,000 £399,000 £537,000 £668,000 £557,000 £540,000 £200,000 £300,000 £167,000 £511,000 £396,000 £348,000
£700,000 £169,000 £300,000 £167,000 £866,000 £408,000 £175,000 £219,000 £464,000 £147,000 £374,000 £432,000 £200,000 £244,000 £347,000 £517,000 £210,000 £327,000 £461,000 £300,000 £1,200,000 £900,000 £1,200,000 £1,200,000 £800,000 £1,056,000 £1,688,000 £377,000
24
Investment France — (cont.) IXIS Corporate & Investment Bank 5.875% 24/02/2020 LVMH Moet Hennessy 1.625% 20/12/2017 SNCF Reseau 5.5% 01/12/2021 SNCF Reseau 5.375% 18/03/2027 SNCF Reseau 5.25% 07/12/2028 SNCF Reseau 5.25% 31/01/2035 SNCF Reseau 5% 11/03/2052 SNCF Reseau 4.83% 25/03/2060 Société Générale 5% 20/12/2018 Suez Environnement 5.375% 02/12/2030 Total Capital 4.25% 08/12/2017 Total Capital 3.875% 14/12/2018 Total Capital 2.25% 17/12/2020 Total Capital 2.25% 06/09/2022
Germany — 11.06% (11.25%) Allianz Finance 4.5% 13/03/2043 BASF 1.375% 15/12/2017 Bayer 5.625% 23/05/2018 BMW Finance 1.75% 20/11/2017 BMW Finance 3.375% 14/12/2018 BMW Finance 1.875% 29/06/2020 BMW Finance 2.375% 01/12/2021 BMW UK Capital 5% 02/10/2017 BMW UK Capital 2% 20/11/2019 Daimler 1.25% 01/12/2017 Daimler 2.375% 16/07/2018 Daimler 2.75% 04/12/2020 Daimler 2.375% 16/12/2021 Daimler 2.125% 07/06/2022 Daimler International Finance 1.75% 08/11/2017 Daimler International Finance 3.5% 06/06/2019 Deutsche Bahn Finance 1.375% 30/10/2017 Deutsche Bahn Finance 2.75% 20/06/2022 Deutsche Bahn Finance 3.125% 24/07/2026 Deutsche Pfandbriefbank 1.875% 20/12/2019 FMS Wertmanagement 0.75% 15/12/2017 FMS Wertmanagement 1% 04/10/2018 FMS Wertmanagement 1.875% 07/12/2018 FMS Wertmanagement 1.25% 08/03/2019 FMS Wertmanagement 1.125% 13/12/2019 KFW 5.625% 25/08/2017 KFW 1% 07/12/2017 KFW 4.875% 01/02/2018
Market Value £
% of Net Assets
665,466
0.19
294,726 706,962 505,919 692,866 877,505 783,393 771,886 218,247
0.08 0.20 0.14 0.20 0.25 0.22 0.22 0.06
373,718 0.11 174,861 0.05 545,079 0.16 407,185 0.12 352,216 0.10 ———————————————— 24,377,860 6.95 ———————————————— 854,293 170,107 326,796 168,117 910,169 412,429 179,605 229,869 472,578 146,715 381,526 448,078 203,235 244,792
0.24 0.05 0.09 0.05 0.26 0.12 0.05 0.07 0.13 0.04 0.11 0.13 0.06 0.07
348,992
0.10
545,621
0.16
211,323
0.06
347,463
0.10
500,057
0.14
304,137
0.09
1,198,843
0.34
902,412
0.26
1,229,450
0.35
1,211,365
0.35
803,534 1,119,148 1,695,066 403,120
0.23 0.32 0.48 0.11
Portfolio Statement continued Holding/ Nominal Value £1,665,000 £1,228,000 £483,000 £240,000 £2,400,000 £177,000 £919,000 £2,753,000 £1,479,000 £634,000 £401,000 £557,000 £415,000 £380,000 £350,000 £250,000 £580,000 £386,000 £177,000 £400,000 £400,000 £700,000 £200,000 £700,000 £142,000 £259,000 £175,000 £488,000 £320,000
Investment Germany — (cont.) KFW 2% 06/12/2018 KFW 1.125% 23/12/2019 KFW 1.625% 05/06/2020 KFW 1.375% 01/02/2021 KFW 5.55% 07/06/2021 KFW 5% 10/09/2024 KFW 5.5% 18/06/2025 KFW 6% 07/12/2028 KFW 5.75% 07/06/2032 KFW 5% 09/06/2036 KFW 4.857% 15/03/2037 Landeskreditbank Baden-Wuer 0.875% 15/12/2017 Landeskreditbank Baden-Wuer 1.50% 23/12/2019 Landeskreditbank Baden-Wuer 1.375% 15/12/2020 Landeskreditbank Baden-Wuer 1.125% 12/05/2021 Landeskreditbank Baden-Wuer 1.125% 17/05/2021 Landwirtschaftliche Rentenbank 1% 15/12/2017 Linde Finance 5.875% 24/04/2023 Muenchener Rueckversicherungs 7.625% 21/06/2028 Muenchener Rueckversicherungs 6.625% 26/05/2042 Norddrhen-Westfalen 0.875% 07/03/2018 NRW Bank 0.875% 15/12/2017 Siemens Financieringsmaatschappij 2.75% 10/09/2025 Siemens Financieringsmaatschappij 3.75% 10/09/2042 Volkswagen Financial Services 1.75% 21/08/2017 Volkswagen Financial Services 2.375% 13/11/2018 Volkswagen Financial Services 2.625% 22/07/2019 Volkswagen Financial Services 1.75% 17/04/2020 Volkswagen Financial Services 2.75% 02/10/2020
Italy — 0.00% (0.08%) £350,000 £250,000 £300,000 £200,000 £277,000 £542,000 £465,000 £174,000
Netherlands — 3.77% (3.77%) ABN Amro Bank 2.25% 11/09/2017 ABN Amro Bank 2.5% 18/12/2018 ABN Amro Bank 4.875% 16/01/2019 ABN Amro Bank 2.375% 07/12/2021 Aegon 6.125% 15/12/2031 Aegon 6.625% 16/12/2039 Bank Nederlandse Gemeenten 3.25% 29/11/2017 Bank Nederlandse Gemeenten 4.5% 20/02/2018
Market Value £
% of Net Assets
1,714,266 1,235,675 494,491 242,523 2,903,798 222,114 1,209,618 3,985,502 2,189,679 899,097 565,509
0.49 0.35 0.14 0.07 0.83 0.06 0.34 1.14 0.62 0.26 0.16
557,032
0.16
422,770
0.12
383,571
0.11
348,549
0.10
247,788
0.07
582,060 480,880
0.17 0.14
194,252
0.06
454,500
0.13
399,865 700,220
0.11 0.20
206,964
0.06
768,572
0.22
141,973
0.04
261,982
0.07
177,766
0.05
481,722
0.14
326,395 0.09 ———————————————— 38,767,973 11.06 ————————————————
354,732 257,674 326,880 204,618 376,895 778,000
0.10 0.07 0.09 0.06 0.11 0.22
481,050
0.14
184,802
0.05
25
Portfolio Statement continued Holding/ Nominal Value £1,052,000 £260,000 £320,000 £461,000 £250,000 £243,000 £400,000 £551,000 £325,000 £220,000 £200,000 £312,000 £296,000 £545,000 £432,000 £502,000 £150,000 £510,000 £888,000 £101,000 £463,000 £250,000 £625,000
Netherlands — (cont.) Bank Nederlandse Gemeenten 1.875% 07/12/2018 Bank Nederlandse Gemeenten 5.75% 18/01/2019 Bank Nederlandse Gemeenten 1.125% 07/03/2019 Bank Nederlandse Gemeenten 1.375% 09/12/2019 Bank Nederlandse Gemeenten 1.125% 24/05/2021 Bank Nederlandse Gemeenten 5.375% 07/06/2021 Bank Nederlandse Gemeenten 5.2% 07/12/2028 ING Bank 5.375% 15/04/2021 Nederlandse Waterschapsbank 0.875% 07/03/2018 Nederlandse Waterschapsbank 2% 28/12/2018 Nederlandse Waterschapsbank 1% 09/12/2019 Nederlandse Waterschapsbank 5.375% 07/06/2032 Rabobank Nederland 3.25% 01/11/2017 Rabobank Nederland 4.625% 13/01/2021 Rabobank Nederland 2.25% 23/03/2022 Rabobank Nederland 4% 19/09/2022 Rabobank Nederland 4.875% 10/01/2023 Rabobank Nederland 5.25% 14/09/2027 Rabobank Nederland 4.625% 23/05/2029 Rabobank Nederland 4.55% 30/08/2029 Rabobank Nederland 5.25% 23/05/2041 Rabobank Nederland 5.375% 03/08/2060 Shell International Finance 2% 20/12/2019
£232,000 £942,000 £350,000
Norway — 0.85% (0.93%) DNB Bank 4.25% 27/01/2020 Kommunalbanken 1.125% 15/12/2017 Statoil 6.125% 27/11/2028 Statoil 6.875% 11/03/2031 Statoil 4.25% 10/04/2041
£200,000
Sweden — 1.35% (1.80%) Investor AB 5.5% 05/05/2037
£571,000 £338,000
26
Investment
Market Value £
% of Net Assets
1,074,817
0.31
291,938
0.08
321,120
0.09
465,371
0.13
247,138
0.07
289,627
0.08
521,744 639,028
0.15 0.18
324,780
0.09
225,777
0.07
198,680
0.06
425,459
0.12
304,942
0.09
608,652
0.17
437,798
0.13
553,324
0.16
172,288
0.05
559,190
0.16
921,682
0.26
117,990
0.03
580,019
0.17
348,444
0.10
636,803 0.18 ———————————————— 13,231,262 3.77 ———————————————— 623,436
0.18
339,301 0.09 305,962 0.09 1,332,223 0.38 382,481 0.11 ———————————————— 2,983,403 0.85 ———————————————— 256,970
0.07
Portfolio Statement continued Holding/ Nominal Value £320,000 £600,000 £350,000 £200,000 £250,000 £371,000 £550,000 £200,000 £250,000 £291,000 £470,000 £490,000
£550,000 £438,000 £132,000 £100,000 £977,000
Investment Sweden — (cont.) Kommuninvest I Sverige 1.125% 06/09/2019 Nordea Bank 2.125% 13/11/2019 Nordea Bank 2.375% 06/02/2022 Skandinaviska Enskilda Banken 3% 18/12/2020 Svenska Handelsbanken 1.875% 29/08/2017 Svenska Handelsbanken 4% 18/01/2019 Svenska Handelsbanken 3% 20/11/2020 Svenska Handelsbanken 2.375% 18/01/2022 Svenska Handelsbanken 2.75% 05/12/2022 Swedbank 1.625% 15/04/2019 Swedish Export Credit 1.875% 21/12/2018 Teliasonera 4.375% 05/12/2042
Switzerland — 0.67% (1.03%) Elm B.V. 6.3024% Open Maturity Nestle Finance International 2.25% 30/11/2023 Nestle Holdings 1.625% 11/12/2017 Roche Finance Europe 5.375% 29/08/2023 UBS 6.625% 11/04/2018
Market Value £
% of Net Assets
320,757 615,094 355,968
0.09 0.18 0.10
211,505
0.06
252,209
0.07
396,032
0.11
581,680
0.17
204,904
0.06
260,500 292,750
0.08 0.08
481,163 0.14 504,700 0.14 ———————————————— 4,734,232 1.35 ———————————————— 570,922
0.16
451,906 133,682
0.13 0.04
122,965 0.03 1,075,511 0.31 ———————————————— 2,354,986 0.67 ————————————————
ASIA — 1.29% (1.01%) £250,000 £350,000
£200,000 £300,000 £400,000 £200,000 £528,000 £100,000 £376,000
Hong Kong — 0.20% (0.09%) Hutchison Whampoa Finance UK 5.625% 24/11/2017 Hutchison Whampoa Finance UK 5.625% 24/11/2026
Japan — 0.69% (0.57%) East Japan Railway 4.75% 08/12/2031 East Japan Railway 5.25% 22/04/2033 East Japan Railway 4.875% 14/06/2034 East Japan Railway 4.5% 25/01/2036 Japan Bank for International Coop 2.625% 15/12/2020 Japan Finance for Municipal 5.75% 09/08/2019 Toyota Motor Credit 4% 07/12/2017
264,886
0.08
437,028 0.12 ———————————————— 701,914 0.20 ————————————————
246,156
0.07
388,524
0.11
496,502
0.14
238,363
0.07
553,402
0.16
113,999 0.03 392,861 0.11 ———————————————— 2,429,807 0.69 ————————————————
27
Portfolio Statement continued Holding/ Nominal Value £100,000 £571,000
£200,000 £300,000
Investment Singapore — 0.26% (0.25%) Temasek Financial 4.625% 26/07/2022 Temasek Financial 5.125% 26/07/2040
South Korea — 0.14% (0.10%) Korea Development Bank 2% 20//12/2018 The Export-Import Bank of Korea 2% 07/12/2017
Market Value £
% of Net Assets
117,013
0.04
781,700 0.22 ———————————————— 898,713 0.26 ————————————————
202,212
0.06
302,751 0.08 ———————————————— 504,963 0.14 ————————————————
PACIFIC BASIN — 2.64% (2.25%) £600,000 £861,000 £830,000 £550,000 £100,000 £750,000 £300,000 £551,000 £510,000 £598,000 £450,000 £100,000 £247,000 £403,000 £176,000 £50,000 £315,000 £610,000 £300,000
£136,000 £200,000
28
Australia — 2.53% (2.15%) BHP Billiton Finance 3.25% 25/09/2024 BHP Billiton Finance 4.3% 25/09/2042 Clydesdale Bank 4.625% 08/06/2026 Commonwealth Bank of Australia 2.25% 07/12/2018 Commonwealth Bank of Australia 4.875% 19/12/2023 Commonwealth Bank of Australia 3% 04/09/2026 Macquarie Bank 3.5% 18/12/2020 National Australia Bank 3.625% 08/11/2017 National Australia Bank 1.875% 20/02/2020 National Australia Bank 5.125% 09/12/2021 National Australia Bank 7.125% 12/06/2023 National Australia Bank 3% 04/09/2026 Scentre Management 2.375% 08/04/2022 Scentre Management 3.875% 16/07/2026 SPI Electric & Gas 7.125% 26/06/2018 Suncorp Insurance Funding 6.25% 13/06/2027 Vicinity Centres 3.375% 07/04/2026 Westpac Banking 5% 21/10/2019 Westpac Banking 2.625% 14/12/2022
New Zealand — 0.11% (0.10%) Fonterra Cooperative Group 9.375% 04/12/2023 Westpac Securities 2.5% 13/01/2021
609,060 874,810 989,792
0.17 0.25 0.28
564,036
0.16
105,819
0.03
794,324 316,871
0.23 0.09
570,026
0.16
515,458
0.15
687,829
0.20
490,132
0.14
106,321
0.03
247,442
0.07
436,667
0.13
195,585
0.06
50,636 328,110 678,859
0.01 0.09 0.19
307,100 0.09 ———————————————— 8,868,877 2.53 ————————————————
197,106 0.05 203,357 0.06 ———————————————— 400,463 0.11 ————————————————
Portfolio Statement continued
Portfolio of investments Net other assets Total net assets
Market Value £
% of Net Assets
346,293,027
98.75
4,392,858 1.25 ———————————————— £350,685,885 100.00% ————————————————
^ These are unrated securities and represent 0.66% of the net assets of the Fund. Total purchases for the year: £235,705,424. Total sales for the year: £86,021,848.
29
Independent Auditors’ Report Independent Auditors’ Report to the Unitholders of Legal & General Sterling Corporate Bond Index Fund (the “Fund”) Report on the financial statements Our opinion In our opinion, Legal & General Sterling Corporate Bond Index Fund’s financial statements, (the “financial statements”): •
give a true and fair view of the financial position of the Fund as at 20 May 2016 and of the net revenue and the net capital gains of the scheme property of the Fund for the year then ended; and
•
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed.
What we have audited The financial statements, which are prepared by Legal & General (Unit Trust Managers) Limited (the “Authorised Fund Manager”), comprise: •
the balance sheet as at 20 May 2016;
•
the statement of total return for the year then ended;
•
the statement of change in net assets attributable to unitholders for the year then ended;
•
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information; and
•
the distribution tables
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), the Statement of Recommended Practice ‘Financial Statements of UK Authorised Funds’ issued by the Investment Management Association (the “Statement of Recommended Practice for UK Authorised Funds”), the Collective Investment Schemes sourcebook and the Trust Deed. In applying the financial reporting framework, the Authorised Fund Manager has made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
30
Independent Auditors’ Report continued Opinions on matters prescribed by the Collective Investment Schemes sourcebook In our opinion: •
we have obtained all the information and explanations we consider necessary for the purposes of the audit; and
•
the information given in the Authorised Fund Manager’s Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion: •
proper accounting records have not been kept; or
•
the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Authorised Fund Manager’s Responsibilities Statement set out on page 5, the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Fund’s unitholders as a body in accordance with paragraph 4.5.12 of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
31
Independent Auditors’ Report continued What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: •
whether the accounting policies are appropriate to the Fund’s circumstances and have been consistently applied and adequately disclosed;
•
the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and
•
the overall presentation of the financial statements.
•
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
•
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Manager’s Report (the “Annual Report”) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 8 July 2016 Notes: a)
The maintenance and integrity of the Legal & General website is the responsibility of the Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
b)
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
32
Financial Statements Statement of Total Return for the year ended 20 May 2016 20/05/16 Notes
£
£
20/05/15 £
£
Income Net capital gains
3
Revenue
4
6,844,523
4,573,194
Expenses
5
(212,323)
(132,538)
Interest payable and similar charges
7
Net revenue before taxation Taxation
6
Net revenue after taxation for the year Total return before distributions Distributions
4,748,904
4,966,533
(42) ————————
(53) ————————
6,632,158
4,440,603
— ————————
— ————————
6,632,158 ——————————
4,440,603 ——————————
11,381,062 7
Change in net assets attributable to Unitholders from investment activities
9,407,136
(6,844,481) ——————————
(4,573,188) ——————————
£4,536,581 ——————————
£4,833,948 ——————————
Statement of Change in Net Assets attributable to Unitholders for the year ended 20 May 2016 20/05/16 £ Opening net assets attributable to Unitholders Amounts receivable on issue of units Amounts payable on cancellation of units
Change in net assets attributable to Unitholders from investment activities Retained distributions on accumulation units Closing net assets attributable to Unitholders
£
193,996,216
20/05/15 £
£
115,168,877
184,383,568
165,226,479
(34,200,348) ———————— 150,183,220
(92,059,496) ———————— 73,166,983
4,536,581
4,833,948
1,969,868 ——————————
826,408 ——————————
£350,685,885 ——————————
£193,996,216 ——————————
33
Financial Statements continued Balance Sheet as at 20 May 2016 Notes
20/05/16
20/05/15
£
£
346,293,027
191,870,882
8,335,950
4,287,672
ASSETS Fixed assets: Investments Current assets: Debtors
8
Cash and bank balances
9
Total assets
1,224,822 —————————— 355,853,799 ——————————
460,180 —————————— 196,618,734 ——————————
LIABILITIES Creditors: Bank overdrafts
9
Distributions payable Other creditors Total liabilities Net assets attributable to Unitholders
34
10
—
(257,971)
(1,959,508)
(1,252,915)
(3,208,406) —————————— (5,167,914) ——————————
(1,111,632) —————————— (2,622,518) ——————————
£350,685,885 ——————————
£193,996,216 ——————————
Notes to the Financial Statements 1. Statement of Compliance The Financial Statements have been prepared in compliance with UK Financial Reporting Standard 102 (FRS 102) and in accordance with the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Association in May 2014 (2014 SORP). 2. Summary of Significant Accounting Policies (a) Basis of Preparation The Financial Statements have been prepared on a going concern basis, under the historical cost convention as modified by the revaluation of certain financial assets and liabilities measured at fair value through profit or loss. The Fund has adopted FRS 102 and the 2014 SORP. This has resulted in some presentational changes to the primary statements; enhanced disclosures surrounding the transaction costs and risk exposure and additional disclosure in respect of the valuation techniques used for the financial instruments. In applying UK GAAP, and as a result of preparing the financial statements in compliance with FRS 102 for the first time, changes in the presentation of the accounts have been made, and certain comparative amounts have been restated. The net total return and the net assets attributable to Unitholders remain unchanged. Income tax payable has been moved from creditors to distribution payable, creditors have decreased by £752,408 (2015: 435,578), with an equivalent increase in distribution payable. The Fund has early adopted the amendment to FRS 102 in respect of the fair value hierarchy/valuation techniques disclosure. The principal accounting policies which have been applied consistently are set out below. (b) Functional and Presentation Currency The functional and presentation currency of the Fund is sterling. (c) Recognition of revenue Bond revenue is accounted for on an effective yield basis, calculated with reference to the purchase price. Revenue from derivative instruments will be treated in accordance with note 2(h). All other revenue is recognised on an accruals basis. (d) Treatment of expenses All expenses (other than those related to the purchase and sale of investments) are charged against capital on an accruals basis.
35
Notes to the Financial Statements continued (e) Distribution Policy The policy is to distribute all available revenue, after deduction of those expenses which are chargeable in calculating the distribution. In order to conduct a controlled dividend flow, interim distributions will be at the Manager’s discretion, up to a maximum of the distributable revenue for the year. All remaining revenue is distributed in accordance with the COLL. All expenses are charged to capital for the purpose of calculating the distribution. Distributions which have remained unclaimed by Unitholders for over six years are credited to the capital property of the Fund. (f) Basis of valuation of investments All investments are valued at their fair value as at 12 noon on 20 May 2016, being the last working day of the accounting year. The fair value for non-derivative securities is bid market price, excluding any accrued interest and the fair value for derivative instruments is the cost of closing out the contract at the balance sheet date. Where values cannot be readily determined, the securities are valued at the Manager’s best assessment of their fair and reasonable value. (g) Taxation Provision is made for taxation at current rates on the excess of investment revenue over expenses. Deferred tax is provided for on all timing differences that have originated but not reversed by the balance sheet date, other than those differences that are regarded as permanent. Any liability to deferred tax is provided for at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money. (h) Foreign exchange Transactions in foreign currencies are translated at the rate of exchange ruling on the date of the transaction. Where applicable, assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange ruling at 12 noon on 20 May 2016, being the last working day of the accounting year. 3. Net capital gains 20/05/16
20/05/15
£
£
4,738,570
4,966,533
10,334 ———————— 4,748,904 ————————
———————— 4,966,533 ————————
The net capital gains during the year comprise: Non-derivative securities Transaction charges Net capital gains
36
Notes to the Financial Statements continued 4. Revenue 20/05/16
20/05/15
£
£
Bond interest
6,842,594
4,571,841
Bank interest
1,929 ———————— 6,844,523 ————————
1,353 ———————— 4,573,194 ————————
5. Expenses 20/05/16
20/05/15
£
£
3,109
85,835
Payable to the Manager, associates of the Manager and agents of either of them: Manager’s periodic fee Fund management fees* Registration fees
207,412
—
603 ———————— 211,124 ————————
15,628 ———————— 101,463 ————————
314 ———————— 314 ————————
18,325 ———————— 18,325 ————————
Payable to the Trustee, associates of the Trustee and agents of either of them: Trustee’s fees
Other expenses: Audit fee**
732
10,410
VAT on audit fee
146
2,082
FCA fee
Total expenses
7 ———————— 885 ———————— 212,323 ————————
258 ———————— 12,750 ———————— 132,538 ————————
* With effect from 1 June 2015 the way expenses are charged to the Trust has changed - see Significant Changes on page 63. ** The total audit fee for the year is £11,090 plus VAT of £2,218. The audit fee disclosed in the table is reflective of the period up to 1 June 2015 and has been borne by the Trust. The remainder has been borne by the Manager out of its fund management fee.
37
Notes to the Financial Statements continued 6. Taxation (a) Analysis of taxation charge in year 20/05/16 £ Corporation Tax Current tax [note 6(b)] Deferred tax [note 6(c)] Total taxation
20/05/15 £
— ———————— —
— ———————— —
— ———————— — ————————
— ———————— — ————————
(b) Factors affecting taxation charge for the year The current tax charge excludes capital gains and losses for the reason that Authorised Unit Trusts are not subject to Corporation Tax on these items. Current tax differs from taxation assessed on net revenue before taxation as follows: Net revenue before taxation Net revenue before taxation multiplied by the applicable rate of Corporation Tax at 20% (2015: 20%)
6,632,157 ————————
1,326,431
4,440,603 ————————
888,121
Effects of: Interest distributions deductible for tax purposes Current tax
(1,326,431) ———————— — ————————
(888,121) ———————— — ————————
(c) Provision for deferred tax There is no deferred tax provision in the current or preceding year.
38
Notes to the Financial Statements continued 7. Distributions The distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units and comprise: 20/05/16 First Interim distribution
20/05/15
£
£
1,045,015
727,999
Second Interim distribution
1,440,961
931,515
Third Interim distribution
1,599,989
1,028,297
1,925,643 ———————— 6,011,608
1,109,279 ———————— 3,797,090
Final distribution
Add: Revenue deducted on cancellation of units Less: Revenue received on creation of units Add: Income tax deducted at source Distributions for the year
62,898
520,491
(598,938)
(659,021)
1,368,913 ———————— 6,844,481
914,628 ———————— 4,573,188
42 ———————— 6,844,523 ————————
53 ———————— 4,573,241 ————————
Interest payable and similar charges Bank overdraft interest
The differences between the net revenue after taxation and the distributions for the year are as follows:
Net revenue after taxation for the year Add: Fees borne by Capital Equalisation uplift on unit conversions Distributions for the year
20/05/16
20/05/15
£
£
6,632,158
4,440,603
212,323
132,538
— ———————— 6,844,481 ————————
47 ———————— 4,573,188 ————————
8. Debtors 20/05/16
20/05/15
£
£
Amounts receivable for creation of units
1,026,127
575,978
Sales awaiting settlement
1,684,406
391,028
Accrued revenue
5,625,417 ———————— 8,335,950 ————————
3,320,666 ———————— 4,287,672 ————————
39
Notes to the Financial Statements continued 9. Net uninvested cash 20/05/16 Cash and bank balances Bank overdrafts Net uninvested cash
20/05/15
£
£
1,224,822
460,180
— ———————— 1,224,822 ————————
(257,971) ———————— 202,209 ————————
10. Creditors 20/05/16
20/05/15
£
£
Amounts payable for cancellation of units
1,286,966
45,002
Purchases awaiting settlement
1,905,183
1,045,896
16,257 ———————— 3,208,406 ————————
20,734 ———————— 1,111,632 ————————
Accrued expenses
11. Contingent liabilities and outstanding commitments There were no contingent liabilities or outstanding commitments at the balance sheet date (20 May 2015: same).
40
Notes to the Financial Statements continued 12. Financial Instruments and Associated Risks The investments of a Fund in financial securities and derivatives are subject to normal market fluctuations and other risks inherent in investing in such instruments. Legal & General (Unit Fund Managers) Limited (UTM) is the Authorised Fund Manager and has responsibility for ensuring appropriate risk management processes are implemented for each Unit Fund. The UTM Board has delegated the risk oversight function to the Fund Manager Oversight Committee (FMOC), a committee of the Legal & General Investment Management (Holdings) Limited (LGIMH) Board that meets monthly. The primary objective of the FMOC is to ensure proper oversight of the investment management activities and associated services performed by LGIM, its delegates and other Fund Managers, under the Investment Management Agreement (IMA), on behalf of UTM in its capacity as Authorised Fund Manager. The committee consists of senior members of LGIMH and UTM, including members of the UTM Board. Other senior staff members are also in attendance, as required by the agenda. Each Fund has Investment Guidelines, an Investment Objective and Investment Restrictions, against which the fund manager will operate. These are set out in Schedule 1 of the IMA between LGIM and UTM. The Schedule is maintained by each fund manager, reviewed by the LGIM Operational Risk and Compliance Teams and approved senior members of UTM on behalf of the UTM board. The Schedule provides the detail needed to determine the risk profile for each Fund. Fund managers are not permitted to invest into any new instruments without first gaining approval from UTM. The Investment Objective and Policy of this Fund is detailed on page 2.
41
Notes to the Financial Statements continued (a) Market Risk arising from other price risk Market Risk arises mainly from uncertainty about future prices. It represents the potential loss the Fund may suffer through holding market positions in the face of market movements. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar instruments traded in the market. The assets held by the Fund can be seen in the Portfolio Statement starting on page 9. Movements in the prices of these investments result in movements in the performance of the Fund. The Manager adheres to the investment guidelines established in the Trust Deed, the Prospectus, the COLL and the Fund’s IOG (Investment Objectives and Guidelines), and in this way, monitors and controls the exposure to risk from any type of security, sector or issuer. At 20 May 2016, if the price of the investments held by the Trust increased or decreased by 5%, with all other variables remaining constant, then the net assets attributable to unitholders would increase or decrease by approximately £17,314,651 (20 May 2015: £9,593,544).
42
Notes to the Financial Statements continued (b) Interest Rate Risk Interest Rate Risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates. The Fund is exposed to interest rate risk through its holdings in debt securities. The market value of debt securities and any floating rate payments from debt securities held (and interest rate swaps) may fluctuate as a result of changes in interest rates. This risk is managed by the active monitoring and adjustment of the investments held by the Fund, in line with the stated investment objective and policy of the Fund. At 20 May 2016, if interest rates on the Fund increased or decreased by 1 basis point, with all other variables remaining constant, then the net assets attributable to unitholders would increase or decrease by approximately £34,532. This represents the Managers best estimate of a reasonable possible shift in interest rates, having regard to historical volatility of those rates. The interest rate profile of the Fund’s net assets and liabilities at the balance sheet date was:
20/05/16 Portfolio Other assets Other liabilities Total
20/05/15 Portfolio Other assets Other liabilities Total
Total £’000 346,293 9,561 (5,168)
Floating rate £’000 — * 1,225 **
No interest £’000
344,098
2,195
—
8,336
—
(5,168)
350,686
1,225
344,098
5,363
Total £’000
Floating rate £’000
Fixed rate £’000
No interest £’000
191,871
— **
Fixed rate £’000
190,689
1,182
4,748
460 **
—
4,288
(2,623)
(258) **
—
(2,365)
190,689
3,105
193,996
— *
202
* The Fund’s floating rate investments earn interest which is variable based on LIBOR or its overseas equivalent. ** The Fund’s floating rate other assets and liabilities are represented by its bank balances and overdraft facilities. Cash is deposited, and overdraft facilities utilised, on normal commercial terms and earn or bear interest based on LIBOR.
Currency Sterling
Fixed Rate Financial Assets Weighted average Weighted average Period for which Interest rate Rate is fixed % Years 20/05/16 20/05/15 20/05/16 20/05/15 2.53
2.74
13.02
13.67
The bonds shown in the Portfolio Statement with open maturity dates are assumed to mature on 31 December 2049 for the purpose of calculating the weighted average period for which the rate is fixed. 43
Notes to the Financial Statements continued (c) Foreign Currency Risk Foreign Currency Risk is the risk of movements in the value of financial instruments as a result of fluctuations in exchange rates. This risk may be managed by the use of forward currency contracts or currency futures as necessary. At the year end the Fund had no significant exposures to currencies other than Sterling. (d) Credit Risk Credit Risk is the risk of suffering financial loss as a result of a counterparty to a financial transaction being unable to fulfil their financial obligations as they fall due. Bonds or other debt securities involve credit risk to the issuer which may be evidenced by the issuer’s credit rating. Securities which are subordinated and/or have a lower credit rating are generally considered to have a higher credit risk and a greater possibility of default than more highly rated securities. The Fund’s investments in bonds expose it to the default risk of the bond issuer with regards interest payments and principal repayments. Bond holdings with low credit ratings (sub-investment grade) or those that are not rated by a reputable credit rating agency (unrated) are disclosed with the Portfolio Statement of pages 9 to 29. This risk is managed by appraising the credit profile of financial instruments and issuers in line with the Fund’s investment objective and policy. (e) Liquidity Risk Liquidity risk relates to the capacity to meet liabilities. The primary source of this risk to the Fund is the liability to Unitholders for any cancellation of units. This risk is minimised by holding cash and readily realisable securities and via access to overdraft facilities.
44
Notes to the Financial Statements continued (g) Fair value In the opinion of the Manager, there is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. 20/05/16 Valuation technique
Assets £
Liabilities £
Level 1 Level 2 Level 3
3,847,897 342,445,130 —
— — —
Total
346,293,027
—
Assets £
Liabilities £
Level 1 Level 2 Level 3
1,655,063 190,215,819 —
— — —
Total
191,870,882
—
20/05/15 Valuation technique
Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date. Level 2 Inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data) for the asset or liability, either directly or indirectly. Level 3 Inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability. 13. Portfolio transaction costs There were no transaction costs relating to the purchase or sale of assets during the year (20 May 2015: same). Total purchases for the year: £235,705,424. (20 May 2015: £185,926,166) Total sales for the year: £86,021,848 (20 May 2015: £112,599,887)
45
Notes to the Financial Statements continued 14. Unit classes The Fund currently has four unit classes: I-Class, F-Class, L-Class and C-Class. The annual management charge and fund management fee on each unit class can be found on page 60. The net asset value per unit of each unit class and the number of units in each class are given in the comparative table on pages 52 to 58. The distribution per unit class is given in the distribution tables on pages 48 to 50. All classes have the same rights on winding up. I-Class
Distribution
Opening Units
76,510,670
91,668,334
Units issued
24,659,371
112,322,694
Units cancelled
(10,259,367)
(17,980,792)
Units converted
(7,750,939)
—
Closing Units
83,159,735
186,010,236
F-Class
Distribution
Accumulation
Opening Units
1,998
1,072
Units issued
—
135,111
Units cancelled
—
—
Units converted
—
—
1,998
136,183
Closing Units L-Class
Distribution
Opening Units
194,397,382
Units issued
127,415,846
Units cancelled
(32,010,700)
Units converted
7,718,795
Closing Units
297,521,323
C-Class
Distribution
Opening Units
Accumulation
965,831
1,975
Units issued
31,497,061
42,770,466
Units cancelled
(1,287,182)
(2,156,615)
Units converted
—
—
31,175,710
40,615,826
Closing Units
46
Accumulation
Notes to the Financial Statements continued 15. Ultimate controlling party and related party transactions The Manager and Trustee are regarded as controlling parties of the Fund by virtue of having the ability to act in concert in respect of Fund operations. The ultimate controlling parties of the Manager and Trustee are Legal & General Group Plc and Northern Trust Global Services Limited, respectively. These entities and their subsidiaries are also related parties of the Fund. Legal & General (Unit Trust Managers) Limited acts as the principal on all the transactions of the units in the Fund. The aggregated monies received through creations or paid on cancellations are disclosed in the statement of change in net assets attributable to unitholders. At the year end, the Manager and its associates held 6.06% (15.48% as at 20 May 2015) of the Fund’s units in issue. There were no units held by the Trustee or its associates. Details of all other material related party transactions during the year and any payment amounts outstanding at the balance sheet date are disclosed in notes 5, 7, 8 and 10 to the financial statements, the statement of change in net assets attributable to unitholders. Within note 10, accrued expenses (including amounts due to associates and agents) of £nil (£1,677 as at 20 May 2015) are due to the Trustee and £16,257 (£6,529 as at 20 May 2015) are due to the Manager. 16. Post balance sheet market movements On 23 June 2016 the UK electorate voted to leave the European Union. This decision will start a process that is likely to take a minimum of two years to complete and it is important to note that at this time, the UK remains a member of the EU and the rules and regulations governing asset management remain unchanged. The protections that were in place for clients prior to the referendum remain in place today. However, the result is likely to usher in a period of uncertainty for the UK economy and financial markets and there is likely to be increased volatility. As at the close of business on the balance sheet date the Net Asset Value per I-Class distribution unit was 53.04p. The Net Asset Value per I-Class distribution unit for the Fund as at 12 noon on 7 July 2016 was 55.94p. This represents an increase of 5.47% from the year end value.
47
Distribution Tables Distribution Tables for the year ended 20 May 2016 Group 1: units purchased prior to a distribution period. Group 2: units purchased during a distribution period. Equalisation is the average amount of revenue included in the purchase price of all Group 2 units and is refunded to the holders of these units as a return of capital. As capital it is not liable to Income Tax but must be deducted from the cost of units for Capital Gains Tax purposes. 1st Interim interest distribution in pence per unit
Period 21/05/15 to 20/08/15
Gross Income Net Distribution Distribution Revenue Tax Revenue Equalisation 20/10/15 20/10/14 I-Class Distribution Units Group 1 0.3392 0.0679 Group 2 0.1288 0.0258 I-Class Accumulation Units Group 1 0.3620 0.0724 Group 2 0.0940 0.0188 F-Class Distribution Units Group 1 0.3429 0.0686 Group 2 — — F-Class Accumulation Units Group 1 0.3622 0.0725 Group 2 — — L-Class Distribution Units Group 1 0.3404 0.0681 Group 2 0.1797 0.0360 C-Class Distribution Units Group 1 0.3394 0.0679 Group 2 — — C-Class Accumulation Units Group 1 0.3599 0.0720 Group 2 — —
48
0.2713 0.1030
— 0.1683
0.2713 0.2713
0.3055 0.3055
0.2896 0.0752
— 0.2144
0.2896 0.2896
0.3188 0.3188
0.2743 —
— 0.2743
0.2743 0.2743
0.3166 0.3166
0.2897 —
— 0.2897
0.2897 0.2897
0.3298 0.3298
0.2723 0.1437
— 0.1286
0.2723 0.2723
0.3064 0.3064
0.2715 —
— 0.2715
0.2715 0.2715
0.3076 0.3076
0.2879 —
— 0.2879
0.2879 0.2879
0.3184 0.3184
Distribution Tables continued
2nd Interim interest distribution in pence per unit
Period 21/08/15 to 20/11/15
Gross Income Net Distribution Distribution Revenue Tax Revenue Equalisation 20/01/16 20/01/15 I-Class Distribution Units Group 1 0.3514 0.0703 Group 2 0.1314 0.0263 I-Class Accumulation Units Group 1 0.3773 0.0755 Group 2 0.1714 0.0343 F-Class Distribution Units Group 1 0.3530 0.0706 Group 2 — — F-Class Accumulation Units Group 1 0.3788 0.0758 Group 2 — — L-Class Distribution Units Group 1 0.3527 0.0706 Group 2 0.0523 0.0105 C-Class Distribution Units Group 1 0.3510 0.0702 Group 2 0.0670 0.0134 C-Class Accumulation Units Group 1 0.3767 0.0754 Group 2 0.2404 0.0481
0.2811 0.1051
— 0.1760
0.2811 0.2811
0.3163 0.3163
0.3018 0.1371
— 0.1647
0.3018 0.3018
0.3321 0.3321
0.2824 —
— 0.2824
0.2824 0.2824
0.3185 0.3185
0.3030 —
— 0.3030
0.3030 0.3030
0.3352 0.3352
0.2821 0.0418
— 0.2403
0.2821 0.2821
0.3175 0.3175
0.2808 0.0536
— 0.2272
0.2808 0.2808
0.3169 0.3169
0.3013 0.1923
— 0.1090
0.3013 0.3013
0.3314 0.3314
3rd Interim interest distribution in pence per unit
Period 21/11/15 to 20/02/16
Gross Income Net Distribution Distribution Revenue Tax Revenue Equalisation 20/04/16 20/04/15 I-Class Distribution Units Group 1 0.3577 0.0716 Group 2 0.1123 0.0225 I-Class Accumulation Units Group 1 0.3862 0.0773 Group 2 0.1653 0.0331
0.2861 0.0898
— 0.1963
0.2861 0.2861
0.3115 0.3115
0.3089 0.1322
— 0.1767
0.3089 0.3089
0.3306 0.3306
F-Class Distribution Units Group 1 0.3589 0.0718 Group 2 — — F-Class Accumulation Units Group 1 0.3899 0.0780 Group 2 0.0094 0.0019
0.2871 —
— 0.2871
0.2871 0.2871
0.3180 0.3180
0.3119 0.0075
— 0.3044
0.3119 0.3119
0.3340 0.3340
L-Class Distribution Units Group 1 0.3594 0.0719 Group 2 0.1853 0.0371
0.2875 0.1482
— 0.1393
0.2875 0.2875
0.3143 0.3143
0.2864 0.2243
— 0.0621
0.2864 0.2864
0.3165 0.3165
0.3092 0.0662
— 0.2430
0.3092 0.3092
0.3314 0.3314
C-Class Distribution Units Group 1 0.3580 0.0716 Group 2 0.2804 0.0561 C-Class Accumulation Units Group 1 0.3865 0.0773 Group 2 0.0828 0.0166
49
Distribution Tables continued Period 21/02/16 to 20/05/16
Final interest distribution in pence per unit
Gross Income Net Distribution Distribution Revenue Tax Revenue Equalisation 20/07/16 20/07/15 I-Class Distribution Units Group 1 0.3650 0.0730 Group 2 0.2242 0.0449 I-Class Accumulation Units Group 1 0.3962 0.0793 Group 2 0.1892 0.0379
0.2920 0.1793
— 0.1127
0.2920 0.2920
0.2997 0.2997
0.3169 0.1513
— 0.1656
0.3169 0.3169
0.3184 0.3184
F-Class Distribution Units Group 1 0.3678 0.0736 Group 2 — — F-Class Accumulation Units Group 1 0.3977 0.0796 Group 2 0.3402 0.0681
0.2942 —
— 0.2942
0.2942 0.2942
0.3108 0.3108
0.3181 0.2721
— 0.0460
0.3181 0.3181
0.3283 0.3283
L-Class Distribution Units Group 1 0.3668 0.0734 Group 2 0.1889 0.0378
0.2934 0.1511
— 0.1423
0.2934 0.2934
0.3009 0.3009
0.2923 0.1718
— 0.1205
0.2923 0.2923
0.3002 0.3002
0.3164 0.1328
— 0.1836
0.3164 0.3164
0.3184 0.3184
C-Class Distribution Units Group 1 0.3654 0.0731 Group 2 0.2148 0.0430 C-Class Accumulation Units Group 1 0.3955 0.0791 Group 2 0.1660 0.0332
50
Fund Information The Comparative Tables on pages 52 to 58 give the performance of each active share class in the Fund. The ‘Return after charges’ disclosed in the Comparative Tables is calculated as the return after operating charges per unit (plus distributions on income units) divided by the opening net asset value per unit. It differs from the Fund’s performance disclosed in the Manager's report, which is calculated based on the latest published price.
51
Fund Information continued Comparative Tables continued I-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Distributions on income units Closing net asset value per unit * after direct transaction costs of:
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14 (pence per unit)
52.34 49.47 50.63 ——————————————————————————— 1.91 4.18 0.17 (0.08) (0.08) (0.09) ——————————————————————————— 1.83 4.10 0.08 ——————————————————————————— (1.13) (1.23) (1.24) ——————————————————————————— 53.04 52.34 49.47 ——————————————————————————— —
—
—
3.50%
8.29%
0.16%
44,107,382 83,159,735 0.15% 0.00%
40,043,090 76,510,670 0.16% 0.00%
27,686,145 55,970,475 0.19% 0.00%
54.16p 51.15p
55.66p 49.16p
51.20p 47.74p
Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
† Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
52
Fund Information continued Comparative Tables continued I-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Closing net asset value per unit Retained distributions on accumulation units * after direct transaction costs of:
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14 (pence per unit)
55.94 51.63 51.52 ——————————————————————————— 2.07 4.40 0.21 (0.08) (0.09) (0.10) ——————————————————————————— 1.99 4.31 0.11 ——————————————————————————— 57.93 55.94 51.63 ——————————————————————————— 1.22
1.29
1.27
—
—
—
3.56%
8.35%
0.21%
107,759,194 186,010,236 0.15% 0.00%
51,283,178 91,668,334 0.16% 0.00%
11,445,012 22,166,348 0.19% 0.00%
58.83p 54.68p
58.81p 51.31p
52.24p 48.88p
Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
† Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
53
Fund Information continued Comparative Tables continued F-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Distributions on income units Closing net asset value per unit * after direct transaction costs of:
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14 (pence per unit)
52.50 49.80 51.10 ——————————————————————————— 1.93 4.15 0.14 (0.20) (0.19) (0.19) ——————————————————————————— 1.73 3.96 (0.05) ——————————————————————————— (1.13) (1.26) (1.25) ——————————————————————————— 53.10 52.50 49.80 ——————————————————————————— —
—
—
3.30%
7.95%
(0.10)%
1,061 1,998 0.38% 0.00%
1,049 1,998 0.37% 0.00%
995 1,998 0.38% 0.00%
54.25p 51.34p
55.96p 49.46p
51.65p 48.12p
Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
† Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
54
Fund Information continued Comparative Tables continued F-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Closing net asset value per unit Retained distributions on accumulation units * after direct transaction costs of:
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14 (pence per unit)
56.25 52.03 52.01 ——————————————————————————— 2.09 4.42 0.21 (0.22) (0.20) (0.19) ——————————————————————————— 1.87 4.22 0.02 ——————————————————————————— 58.12 56.25 52.03 ——————————————————————————— 1.21
1.32
1.29
—
—
—
3.32%
8.11%
0.04%
79,148 136,183 0.38% 0.00%
603 1,072 0.37% 0.00%
45,896 88,203 0.38% 0.00%
59.03p 54.96p
59.19p 51.71p
52.65p 49.32p
Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
† Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
55
Fund Information continued Comparative Tables continued L-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Distributions on income units Closing net asset value per unit * after direct transaction costs of:
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14 (pence per unit)
52.55 49.61 50.70 ——————————————————————————— 1.93 4.19 0.17 (0.02) (0.02) (0.02) ——————————————————————————— 1.91 4.17 0.15 ——————————————————————————— (1.14) (1.23) (1.24) ——————————————————————————— 53.32 52.55 49.61 ——————————————————————————— —
—
—
3.63%
8.41%
0.30%
158,630,069 297,521,323 0.04% 0.00%
102,161,325 194,397,382 0.03% 0.00%
75,988,802 153,186,753 0.04% 0.00%
54.45p 51.37p
55.87p 49.30p
51.27p 47.82p
Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
† Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
56
Fund Information continued Comparative Tables continued C-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Distributions on income units Closing net asset value per unit
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14* (pence per unit)
52.38 49.48 48.47 ——————————————————————————— 1.91 4.20 1.67 (0.05) (0.06) (0.03) ——————————————————————————— 1.86 4.14 1.64 ——————————————————————————— (1.13) (1.24) (0.63) ——————————————————————————— 53.11 52.38 49.48 ———————————————————————————
* after direct transaction costs of:
—
—
—
3.55%
8.37%
3.38%
16,556,469 31,175,710 0.10% 0.00%
505,866 965,831 0.12% 0.00%
1,007 2,035 0.16% 0.00%
54.23p 51.19p
55.70p 49.17p
50.38p 48.16p
Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
* C-Class units launched on 9 December 2013. † Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
57
Fund Information continued Comparative Tables continued C-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending
Opening net asset value per unit Return before operating charges* Operating charges (calculated on average price) Return after operating charges* Closing net asset value per unit Retained distributions on accumulation units
20/05/16 (pence per unit)
20/05/15 (pence per unit)
20/05/14* (pence per unit)
55.95 51.65 49.94 ——————————————————————————— 2.10 4.37 1.75 (0.06) (0.07) (0.04) ——————————————————————————— 2.04 4.30 1.71 ——————————————————————————— 57.99 55.95 51.65 ——————————————————————————— 1.21
1.29
0.66
—
—
—
3.64%
8.33%
3.42%
23,552,562 40,615,826 0.10% 0.00%
1,105 1,975 0.12% 0.00%
1,020 1,975 0.16% 0.00%
58.89p 54.71p
58.84p 51.33p
52.25p 49.62p
* after direct transaction costs of**: Performance Return after charges Other Information Closing net asset value (£) Closing number of units Operating charges† Direct transaction costs Prices Highest unit price Lowest unit price
* C-Class units launched on 9 December 2013. † Operating charges, otherwise known as the OCF is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a Fund and is calculated based on the last period's figures.
Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up.
58
Risk and Reward Profile Lower risk
Higher risk
Potentially lower rewards 1
2
3
Potentially higher rewards 4
5
6
7
•
This risk and reward profile is based on historical data which may not be a reliable indication of the Fund’s risk and reward category in the future.
•
The category is based on the rate at which the value of the Fund and the Index it is tracking have moved up and down in the past.
•
This Fund is in category three because it invests in investment grade bonds which generally provide higher rewards and higher risks than investments in cash and lower rewards and lower risks than investments in sub-investment grade bonds or company shares.
•
The Fund’s category is not guaranteed to remain the same and may change over time.
•
Even a fund in the lowest category is not a risk free investment.
59
General Information Constitution Launch date:
28 August 2012
Period end dates for distributions: 20 February, 20 May 20 August, 20 November Distribution dates: Minimum initial lump sum investment:
20 January, 20 April, 20 July, 20 October I-Class L-Class* F-Class** C-Class
£1,000,000 £500,000 £500 £100,000,000
Valuation point:
12 noon
Management charges: (to 31 May 2015)
I-Class L-Class* F-Class** C-Class
Fund management fees†:
I-Class Annual 0.14% (0.15% prior to 1 July 2015) L-Class* Annual 0.03% (0.04% prior to 1 July 2015) F-Class** Annual 0.37% (0.38% prior to 1 July 2015) C-Class Annual 0.09% (0.10% prior to 1 July 2015)
Initial charges:
I-Class L-Class* F-Class** C-Class
Annual 0.11% Nil Annual 0.20% Annual 0.06%
Nil Nil Nil Nil
* L-Class is not available to retail customers and is intended only for investment by Legal & General group companies. ** F-Class units are only available to: i) investors who have received advice from authorised intermediaries and platforms in relation to their investment in units in the Fund and ii) authorised intermediaries or distributers who the Manager reasonably considers will adequately bear the costs of marketing to and acquiring investors at no or limited cost to the Manager, and to whom the Manager has confirmed that such distributer or investor meets the criteria for investment in such units. † With effect from 1 June 2015 – see Significant Changes on page 63.
60
General Information continued Pricing and Dealing The prices are published on the internet at www.legalandgeneral.com/investments/fund-information/daily-fundprices immediately after they become available. Dealing in units takes place on a forward pricing basis, from 8:30am to 6:00pm, Monday to Friday. Buying and Selling Units Units may be bought on any business day from the Manager or through a financial adviser by telephoning, completing an application form or on the internet at www.legalandgeneral.com. Units may normally be sold back to the Manager on any business day at the bid price calculated at the following valuation point. ISA Status This Fund may be held within this tax advantaged savings arrangement. The favourable tax treatment of ISAs may not be maintained. For full written information, please contact your usual financial adviser or ring 0370 050 0955. Prospectus and Manager’s Reports The Manager will send to all persons on the Unitholder Register annual and interim short form reports. Copies of the Prospectus and the most recent annual or interim reports are available free of charge by telephoning 0370 050 0955 or by writing to the Manager. Do you have difficulty in reading information in print because of a disability? If so, we can help. We are able to produce information for our clients in large print and braille. If you would like to discuss your particular requirements, please contact us on 0370 050 0955. Call charges will vary. We may record and monitor calls. Information on Tracking Error The ‘Tracking Error’ of a Fund is the measure of the volatility of the differences between the return of the Fund and the return of the benchmark Index. It provides an indication of how closely the Fund is tracking the performance of the benchmark Index after considering things such as Fund charges and taxation. Using monthly returns, over the review year, the annualised Tracking Error of the Fund is 0.09%, whilst the annualised tracking error over the past three years to the end of May 2015 is 0.10%. These Tracking Errors are within the anticipated Tracking Error levels set out in the Fund’s Prospectus of +/- 0.50% per annum.
61
General Information continued EU Savings Directive The Fund has been reviewed against the requirements of the Directive 2003/48/EC on Taxation of savings in the form of interest payments (ESD), following the HM Revenue & Customs debt investment reporting guidance notes. Under the Directive, information is collected about the payment of distributions to residents in certain other countries and is reported to HM Revenue & Customs to be exchanged with Tax authorities in those countries. The Fund falls within the 25% debt investment reporting threshold. This means that details of all distributions and redemption proceeds paid to non UK investors will be reported by Legal & General (Unit Trust Managers) Limited to HM Revenue & Customs to be exchanged with the relevant Tax authorities. Dual Pricing Arrangement The Manager’s fixed dual pricing arrangement has a set spread to account for the costs of transacting in a particular Fund. Where the Manager operates a box through which unit subscriptions and unit redemptions are netted into a single trade instruction to the Trustee, the netting reduces the actual transaction costs and this generates a revenue to the Manager. With effect from 1 January 2016, the revenue generated from this activity is calculated on a monthly basis and returned to the Fund in the form of a payment from the manager. This provides an enhanced return to the Fund, through the size of any return will be dependent on the size of subscriptions and redemptions. Remuneration Disclosure In accordance with the Undertakings for collective investment in transferable securities (UCITS) Directive, often referred to as the UCITS V Directive, the L&G Sterling Corporate Bond Index Fund, as a UCITS Fund, is required to disclose the aggregate remuneration paid by the UCITS Manager and by the UCITS Fund to Identified Staff, together with the number of beneficiaries and, where relevant, performance fees paid by the UCITS Fund. The aggregate amount of remuneration must be broken down by category of employees or other staff members and be split into fixed and variable remuneration. EU Member States had until 18 March 2016 to transpose the Directive into National Law and the UCITS Remuneration Guidelines will apply from 1 January 2017, although early adoption is permitted. The reporting period covered by this report does not span an entire calendar year from when the guidelines became effective and as such the UCITS Manager has taken the decision not to disclose the part year figures, instead waiting to disclose full calendar year, meaningful figures in next year’s annual report.
62
General Information continued Significant Changes Changes to our charges From 1 June 2015, the charges, fees and expenses which were previously taken separately from our funds, was replaced with a single fixed Fund Management Fee (FMF). The FMF is a single fee payable from the Trust to Legal & General to cover the costs of running the Trust. This change will make it clearer for investors to understand exactly what they will be charged for their investment over the year. The FMF’s have been set at a level that reflects the Manager’s best estimate of the costs associated with running the Trust on an annual basis. The Manager’s estimates are based on the last known actual expenses incurred by the Trust prior to the introduction of the FMF. The FMF’s will be subject to an annual review by the Manager to ensure they remain appropriate and may move up or down in the future. Any increase will be subject to a 60 day notification to unitholders. Fund of Funds note: For most funds, the FMF and OCF will be the same. The exception is for those funds that invest in other funds run by external providers. Change in Trustee With effect from 13 November 2015, National Westminster Bank Plc ceased to be the Trustee of the Trust and Northern Trust Global Services Limited has been appointed to provide Trustee and Depositary services thereafter. As Trustee, Northern Trust Global Services Limited has the same duties and responsibilities as National Westminster Bank Plc. The change of Trustee has no impact on the way the Trust is operated. Change in Fund Management Fee (FMF) With effect from 1 July 2015, the FMF for all classes have been decreased as shown below: I-Class L-Class F-Class C-Class
Old FMF
New FMF
0.15% 0.04% 0.38% 0.10%
0.14% 0.03% 0.37% 0.09%
63
General Information continued Authorised Fund Manager Legal & General (Unit Trust Managers) Limited Registered in England and Wales No. 01009418 Registered office: One Coleman Street, London EC2R 5AA Telephone: 0370 050 3350 Authorised and regulated by the Financial Conduct Authority Directors of the Manager R. M. Bartley A. J. C. Craven J. Islam (resigned 15 January 2016) S. R. Pistell (resigned 29 June 2015) H. Solomon L. Toms (appointed 17 May 2016) S. D. Thomas S. Thompson (resigned 5 February 2016) A. R. Toutounchi* (appointed 10 May 2016) M. J. Zinkula * Non-executive Director Secretary B. Hall Registrar Legal & General (Unit Trust Managers) Limited P.O. Box 6080, Wolverhampton WV1 9RB Authorised and regulated by the Financial Conduct Authority Dealing: Enquiries: Registration:
0370 050 0956 0370 050 0955 0370 050 0955
Call charges will vary. We may record and monitor calls. Trustee to 13 November 2015 National Westminster Bank Plc Trustee and Depositary Services 135 Bishopsgate, London EC2M 3UR Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Trustee from 14 November 2015 Northern Trust Global Services Limited Trustee and Depositary Services 50 Bank Street, Canary Wharf, London E14 5NT Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority 64
General Information continued Independent Auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT Investment Adviser Legal & General Investment Management Limited One Coleman Street, London EC2R 5AA Authorised and regulated by the Financial Conduct Authority
65
Authorised and regulated by the Financial Conduct Authority Legal & General (Unit Trust Managers) Limited Registered in England and Wales No. 01009418 Registered office: One Coleman Street, London EC2R 5AA www.legalandgeneral.com
66
