The Virgin Stakeholder Pension Scheme. Final Report and Financial Statements For the year ended 15 December 2017

Transcription

1 The Virgin Stakeholder Pension Scheme Final Report and Financial Statements For the year ended 15 December 2017

2 Contents Manager s Report Page Management and professional services 1 Manager s investment report 2 Comparative tables 9 Portfolio statements 13 Summary of portfolio changes 14 Statements of total return 15 Statements of change in net assets attributable to unitholders 15 Balance sheets 16 Notes to the financial statements 17 tables 29 Statement of the Manager s responsibilities 32 Independent auditors report to the unitholders of the Virgin Stakeholder Pension Scheme ( the Scheme ) Trustee s responsibilities in relation to the property of the Scheme 35 Trustee s report to the unitholders of the Virgin Stakeholders Pension Scheme 35 33

3 Management and professional services Manager and registrar Virgin Money Unit Trust Managers Limited Directors: JA. Gadhia Jubilee House M. Martin Gosforth P. Bole (appointed 25 January 2017) Newcastle upon Tyne C. Keogh (appointed 25 January 2017) NE3 4PL G. Moreno (appointed 25 January 2017) G. Lyall (resigned 24 January 2017) G. Hull (resigned 24 January 2017) Telephone * Compliance Officer: G. Lyall Secretary: K. Marshall Authorised and regulated by the Financial Conduct Authority. Investment advisers State Street Global Advisors Limited 20 Churchill Place Canary Wharf London E14 5HJ Authorised and regulated by the Financial Conduct Authority. Trustee Citibank Europe plc Citigroup Centre Canada Square Canary Wharf London E14 5LB Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Independent auditors PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX * Calls to 03 numbers cost the same as calls to 01 or 02 numbers and they are included in inclusive minutes and discount schemes in the same way. Calls may be monitored and recorded. 1

4 Manager s investment report Overview of the Virgin Stakeholder Pension Scheme (the Scheme ) The Virgin Stakeholder Pension Scheme is an umbrella unit trust based pension scheme offering a range of five pension feeder funds to provide unitholders with choice and flexibility. Unitholders can invest directly through one or more of the funds, or through the default Automatic Fund Selector (AFS) lifestyle approach. Each pension feeder fund invests solely in one other Virgin authorised unit trust, safeguarded by independent trustees. The Scheme is categorised as an authorised Non-UCITS 1 retail scheme (feeder NURS) under the Financial Services and Markets Act The underlying Virgin unit trusts (qualifying master schemes) are categorised as authorised UCITS unit trusts under the Financial Conduct Authority (FCA) Collective Investments Schemes Sourcebook. The Manager of the Scheme, the pension feeder funds and the qualifying master schemes is Virgin Money Unit Trust Managers Limited (the Manager ). The Trustee of the Scheme, the pension feeder funds and the qualifying master schemes is Citibank Europe plc (the Trustee ). Pension Funds within the Scheme The Scheme offers the following five pension funds: The Virgin Pension Growth Fund (invested in the Virgin UK Index Tracking Trust) The Virgin Money Pension Bond and Gilt Fund 2 (invested in the Virgin Income Trust) The Virgin Pension Bond, Gilt and UK (invested in the Virgin Bond, Gilt and UK ) The Virgin Pension Bond, Gilt, UK and Overseas (invested in the Virgin Bond, Gilt, UK and Overseas ) The Virgin Pension Global (invested in the Virgin Global ) The two largest funds within the Scheme are the Virgin Pension Growth Fund and the Virgin Money Pension Bond and Gilt Fund. In the default AFS approach, contributions are invested in the Virgin Pension Growth Fund, and then starting from 10 years before retirement, 10% of investor s fund is moved into the Virgin Money Pension Bond and Gilt Fund each year. The majority of Scheme unitholders are invested in one or both of these funds. The other funds are available for Scheme unitholders who have chosen a tailored investment approach. The Manager continues to review the suitability of the current default investment strategy. Details of the individual investment objectives, policy and strategy for each NURS feeder fund are on pages 4 to 8. Half-yearly and annual long reports for the qualifying master schemes can be found online in the Personal Pension section of myvirginmoney.com under the header Helpful information, or free on request to the Manager. The Scheme only offers accumulation unit classes to investors in each of the funds as this aligns to the overall investment objective of the Scheme, which is to achieve capital growth. As a consequence any investment income earned is reinvested. Summary of performance in the year Fund Rise of unit price 3 Total Income per unit for the year ended 15 December 2017 The Virgin Pension Growth Fund (invested in Virgin UK Index Tracking Trust) Auto Enrolment units 4 The Virgin Money Pension Bond and Gilt Fund (invested in the Virgin Income Trust) Auto Enrolment units % 11.39% 4.24% 4.47% p p p p The Gilt and UK (invested in the Virgin Bond, Gilt and UK ) The Gilt, UK and Overseas (invested in the Virgin Bond, Gilt, UK and Overseas ) The Virgin Pension Global (invested in the Virgin Global ) 6.82% p 10.30% p 15.71% p 1 Undertakings for Investments in Transferable Securities (UCITS) that are established in accordance with the European Parliament and Council Directive of 13 July 2009 (No. 2009/65/EC). Where a scheme is authorised but not established in accordance with this Directive it is a Non-UCITS scheme. 2 Formerly known as The Virgin Pension Income Protector Fund. 3 Based on Net Asset Value. 4 The Virgin AE Pension Growth and the Virgin AE Pension Bond and Gilt classes are only available to customers who are automatically enrolled into the Virgin Stakeholder Pension Scheme under Automatic Enrolment Workplace Pension Scheme Legislation. 2

5 Manager s investment report Markets overview Each fund in the Scheme has its own investment strategy. This means each fund will perform differently depending on external and economic factors during the period. Despite uncertainty created by the ongoing negotiations regarding the UK s exit from the European Union, the UK stock market grew strongly and reached historical all-time highs during the twelve months. Most global stock markets also showed good growth. The global economy remained relatively strong: Unemployment fell to its lowest level in the UK for more than 42 years, its lowest level in the Eurozone for 8 years and in the US for 17 years. UK Gross Domestic Product (GDP a measure of economic growth) has grown each quarter for the last 19 quarters. The Eurozone continued to show steady growth whilst US GDP reached its highest level since the first quarter of Inflation did increase notably in the UK. This led to the Bank of England raising the base rate in November 2017, for the first time in ten years, to 0.5%. Stock market performance was positive: The FTSE All-Share Index set a record high due to a historically weak pound (which helped large exporting companies), an increase in the price of oil and the strength of stock markets globally. US stock markets rose on the back of the promised stimulus from President Trump and the significant rise of the mega tech companies like Amazon, Apple, Netflix and Google. In Europe stock markets grew despite the political and economic uncertainty and the potential impact upon future trading with the UK. Asia performed strongly with significant stock market growth in Japan. Emerging market performance was led by Brazil and India - largely due to the rise in the price of oil - while growth in the Chinese stock market was more subdued. The bond markets (including UK Government bonds known as gilts) ended the period positive. Although increased demand for stock market investments depressed the demand for lower risk investments, (as did the expectation of an increase in UK interest rates which ultimately took place in November), stock market volatility caused by key political events did mean that some demand remained for perceived lower risk investments. 3

6 Manager s investment report Investment objectives and strategy of the Funds in the Scheme The Scheme offers a range of five pension funds, each of which has its own investment objective, policy and strategy. Each pension fund invests solely in an associated Virgin authorised unit trust with a corresponding investment objective. As a result, the performance of each pension fund is affected by different external market and economic conditions. An overview of each pension fund is provided below. Further details on fund policies and strategy are available in the individual fund prospectus, which are available from the Manager free of charge on request. Virgin Pension Growth Fund The Virgin Pension Growth Fund invests in the Virgin UK Index Tracking Trust, with the aim of achieving capital growth over the long term by investing in the stock market and mirroring as closely as possible the performance of the FTSE 5 ALL-Share Index. UCITS Investment objective To closely match the performance of the FTSE 5 All-Share Index (the Index ), on a capital only and total return (after charges) basis. Policy and strategy To fully replicate the FTSE All-Share Index, which comprises approximately 600 company shares. This process will involve holding all the stocks that comprise the benchmark index, in the same proportions as the index subject to any restrictions on concentration of investment imposed by the regulations which prevent the Manager from achieving this. Futures contracts (derivatives) may also be used to manage cash before it is invested in stocks. This is for the purpose of efficient portfolio management. No trading or speculation is undertaken. Typical fund mix 100% in UK shares, across the 600+ companies on the FTSE All-Share Index. Performance: Rise in unit price during the year 11.01% (Auto Enrolment units 11.39%). Total income accumulation per unit for the year Commentary p (Auto Enrolment units p). The fund generated positive returns of 11.01% for the 12 months - not least because international companies whose shares are traded in the UK benefitted from the lower pound - but also due to the rising price of oil and the strength of stock markets globally. 5 "FTSE ", "FT-SE " and "Footsie " are trademarks jointly owned by London Stock Exchange Plc and London Stock Exchange Group Holdings Limited and are used by FTSE International Limited under licence. "All-World", "All-Share" and "All-Small" are trademarks of FTSE International Limited. The FTSE All-Share Index is calculated by FTSE International Limited. FTSE International Limited does not sponsor, endorse or promote this product and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyright in the index values and constituent lists vests in FTSE International Limited. Virgin Money Unit Trust Managers Limited has obtained full licence from FTSE International Limited to use such copyright in the creation of this product. 4

7 Manager s investment report Virgin Money Pension Bond and Gilt Fund Following approval from the FCA and the Trustees, on 30 June 2017, the Virgin Pension Income Protector Fund was renamed the Virgin Money Pension Bond and Gilt Fund. The Virgin Money Pension Bond and Gilt Fund invests in the Virgin Income Trust, with the aim of providing a lower risk alternative to the other available funds within the Scheme. It does so by investing in fixed instruments, like UK Government gilts, and low risk corporate bonds issued by leading UK and European companies. UCITS Investment objective Policy and strategy Typical fund mix To provide a level of income slightly above that which would be achieved by a fund invested solely in gilt-edged securities. The Manager pursues a low risk strategy while ensuring that the Trust qualifies for general ISA status under HM Revenue & Customs rules. The Manager s policy is to invest in UK gilts and a range of sterling denominated fixed interest and other permitted investments. 50% in UK Government Gilts and 50% in corporate bonds. Performance: Rise in unit price during the year 4.24% (Auto Enrolment units 4.47%). Total income accumulation per unit for the year Commentary 3.385p (Auto Enrolment units p). The fund generated a positive return of 4.24% for the 12 months. Although increased demand for stock market investments depressed the demand for lower risk investments (as did the expectation of an increase in UK interest rates which ultimately took place in November) stock market volatility caused by key political events did mean that a level of demand remained for perceived lower risk investments. 5

8 Manager s investment report Virgin Pension, Bond, Gilt and UK The Gilt and UK invests in the Virgin Bond, Gilt and UK, with the aim of long term capital growth by investing in a mix of passively managed investments which themselves invest in corporate bonds, government gilts and UK shares. UCITS Investment objective Policy and strategy Typical fund mix To provide long term capital growth, by investing predominantly in passive collective investment schemes (including exchange traded funds) managed by Virgin Money Unit Trust Managers Limited (the Manager ) or other fund managers, which provide the fund with exposure to a range of asset classes. The Manager intends to pursue a strategy of investing typically around 50% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in fixed income investments (bonds and gilts) and typically around 50% of the Scheme Property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in UK equities. The Manager s policy is to rebalance the assets of the fund on a quarterly basis so as to maintain the desired asset allocation. Subject to the investment objective and policy set out above the fund may also invest directly or indirectly into transferable securities, money market instruments, bonds, equities and deposits to the extent permitted for UCITS schemes. The fund may also invest in derivatives and forward transactions for the purposes of efficient portfolio management only. 50% in UK Government Gilts and corporate bonds and 50% in UK shares. Performance: Rise in unit price during the year 6.82% Total income accumulation per unit for the year Commentary p The fund generated a positive return of 6.82%. UK shares and UK bonds performed positively over the period with shares significantly outperforming bonds. The positive performance of UK shares was largely due to the pound falling in value during the period and a rise in the price of oil. 6

9 Manager s investment report Gilt, UK and Overseas The Gilt, UK and Overseas invests in the Virgin Bond, Gilt, UK and Overseas, with the aim of long term capital growth by investing in a mix of passively managed investments which themselves invest in corporate bonds, government gilts, UK shares, shares of companies outside the UK and shares of companies in developed overseas markets. UCITS Investment objective Policy and strategy Typical fund mix To provide long term capital growth, by investing predominantly in passive collective investment schemes (including exchange traded funds) managed by Virgin Money Unit Trust Managers Limited (the Manager ) or by other fund managers, which provide the fund with exposure to a range of asset classes. The Manager intends to pursue a strategy of investing typically around 50% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in UK Equities, 25% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in Overseas Equities and 25% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in fixed income investments (bonds and gilts). The Manager s policy is to rebalance the assets of the fund on a quarterly basis so as to maintain the desired asset allocation. Subject to the investment objective and policy set out above the fund may also invest directly or indirectly into transferable securities, money market instruments, bonds, equities and deposits to the extent permitted for UCITS schemes. The fund may also invest in derivatives and forward transactions for the purposes of efficient portfolio management only. 50% in UK shares, 25% in overseas shares, 25% in UK Government Gilts and corporate bonds. Performance: Rise in unit price during the year 10.30% Total income accumulation per unit for the year Commentary p Returns were positive for the 12 months, achieving 10.30% growth. Many overseas stock markets reached all-time highs as economic growth improved, the price of oil increased and economic stimulus was promised in the US. 7

10 Manager s investment report Virgin Pension Global The Virgin Pension Global invests in the Virgin Global, with the aim of achieving long term capital growth by investing in a mix of passively managed investments which themselves invest in UK shares, shares of companies outside the UK, shares of companies in developed overseas markets and shares of companies in emerging markets. UCITS Investment objective Policy and strategy Typical fund mix To provide long term capital growth by investing predominantly in passive collective investment schemes (including exchange traded funds) managed by other fund managers or the Manager, which provide the fund with exposure to a range of asset classes. The Manager intends to pursue a strategy of investing typically around 25% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in UK Equities, 50% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in Overseas Equities and 25% of the scheme property of the fund in passively managed collective investment schemes (including exchange traded funds) which invest in Emerging Market Equities. The Manager s policy is to rebalance the assets of the fund on a quarterly basis so as to maintain the desired asset allocation. Subject to the investment objective and policy set out above the fund may also invest directly or indirectly into transferable securities, money market instruments, bonds, equities and deposits to the extent permitted for UCITS schemes. The fund may also invest in derivatives and forward transactions for the purposes of efficient portfolio management only. 25% in UK shares, 50% in overseas shares and 25% in emerging market shares. Performance: Rise in unit price during the year 15.71% Total income accumulation per unit for the year Commentary p The fund has generated a positive return of 15.71% over the 12 months. Both UK and overseas shares performed well, as did shares in emerging markets many of which particularly benefited from a rise in the price of oil - such as Brazil - which was up over 25%. 8

11 Comparative tables as at 15 December 2017 The Virgin Stakeholder Pension Scheme was first offered on 1 November The initial offer price of both the Virgin Pension Growth Fund and Virgin Money Pension Bond and Gilt Fund was p per unit. On 18 February 2015, the Gilt and UK, Gilt UK and Overseas and Virgin Pension Global were offered at p per unit. On 2 April 2015, the Virgin AE Pension Growth Units and Virgin AE Pension Income Protector Units were offered at p per unit. Virgin Pension Growth Fund Units AE Units 6 Change in net assets per unit for the year ending 15 December December December December December December 2015 Opening net asset value per unit Return before operating charges (7.98) Operating charges # Return after operating charges (7.98) Distributions (9.06) (7.75) (7.09) (3.47) (2.96) (1.48) Retained distributions on accumulated units Closing net asset value per unit Performance Return after operating charges (%) (7.98) Other information 15 December December December December December December 2015 Closing net asset value ( ) 1,110,062,210 1,023,676, ,400,271 33,148,501 30,018,429 25,218,861 Closing number of units 327,117, ,876, ,182,412 27,478,208 27,717,069 27,406,614 Operating charges (%)^ Direct transaction costs (%) Prices Highest price Lowest price Launched 2 April # The Scheme incurs no direct operating charges (see note 1(c) on page 17). ^ No charges are levied at the NURS feeder fund level and these operating charges are the total expenses paid by the relevant qualifying master scheme. 9

12 Comparative tables as at 15 December 2017 Virgin Money Pension Bond and Gilt Fund Change in net assets per unit for the year ending Units AE Units 7 15 December December December December December December 2015 Opening net asset value per unit Return before operating charges (0.23) (2.16) Operating charges # Return after operating charges (0.23) (2.16) Distributions (3.39) (4.11) (4.71) (1.51) (1.63) (0.93) Retained distributions on accumulated units Closing net asset value per unit Performance Return after operating charges (%) (0.09) (2.16) Other information 15 December December December December December December 2015 Closing net asset value ( ) 292,673, ,339, ,619,991 7,393,525 7,584,955 4,403,339 Closing number of units 100,766,559 92,718,195 85,823,784 6,838,981 7,330,222 4,500,351 Operating charges (%)^ Direct transaction costs (%) Prices Highest price Lowest price Launched 2 April 2015 # The Scheme incurs no direct transaction costs (see note 1(c) on page 17). ^ No charges are levied at the NURS feeder fund level and these operating charges are the total expenses paid by the relevant qualifying master scheme. 10

13 Comparative tables as at 15 December 2017 Change in net assets per unit for the year ending Gilt and UK 8 Units Gilt, UK and Overseas 8 Units 15 December December December December December December 2015 Opening net asset value per unit Return before operating charges (5.29) (5.86) Operating charges # Return after operating charges (5.29) (5.86) Distributions (0.99) (1.02) - (1.30) (1.46) - Retained distributions on accumulated units Closing net asset value per unit Performance Return after operating charges (%) (5.29) (5.86) Other information 15 December December December December December December 2015 Closing net asset value ( ) 2,496,795 2,105, ,340 4,518,951 2,675,359 1,215,304 Closing number of units 2,227,908 2,006, ,089 3,715,634 2,426,370 1,290,943 Operating charges (%)^ Direct transaction costs (%) Prices Highest price Lowest price Launched 18 February 2015 # The Scheme incurs no direct transaction costs (see note 1(c) on page 17). ^ No charges are levied at the NURS feeder fund level and these operating charges are the total expenses paid by the relevant qualifying master scheme. 11

14 Comparative tables as at 15 December 2017 Virgin Pension Global 9 Units Change in net assets per unit for the year ending 15 December December December 2015 Opening net asset value per unit Return before operating charges (9.23) Operating charges # Return after operating charges (9.23) Distributions (1.43) (1.09) - Retained distributions on accumulated units Closing net asset value per unit Performance Return after operating charges (%) (9.23) Other information 15 December December December 2015 Closing net asset value ( ) 9,180,249 4,886,163 2,254,183 Closing number of units 6,890,888 4,244,080 2,483,380 Operating charges (%)^ Direct transaction costs (%) Prices Highest price Lowest price Launched 18 February 2015 # The Scheme incurs no direct transaction costs (see note 1(c) on page 17). ^ No charges are levied at the NURS feeder fund level and these operating charges are the total expenses paid by the relevant qualifying master scheme. 12

15 Portfolio statements as at 15 December 2017 Holdings Market Value 000 % of Net Assets Virgin Pension Growth Fund Holding in Virgin UK Index Tracking Trust Income Units (97.15%) ,050,782 1,110, Holding in Virgin UK Index Tracking Trust AE Income Units (2.85%) 10 29,649,567 33, Portfolio of investments 1,143, Net other assets 1 - Net assets 1,143, Holdings Market Value 000 % of Net Assets Virgin Money Pension Bond and Gilt Fund Holding in Virgin Income Trust Income Units (97.15%) ,268, , Holding in Virgin Income Trust AE Income Units (2.85%) 10 7,129,725 7, Portfolio of investments 300, Net other assets 4 - Net assets 300, Holdings Market Value 000 % of Net Assets Gilt and UK Holding in Virgin Bond, Gilt and UK (100.00%) 10 2,282,262 2, Portfolio of investments 2, Net other assets - - Net assets 2, Holdings Market Value 000 % of Net Assets Gilt, UK and Overseas Holding in Virgin Bond, Gilt, UK and Overseas (100.00%) 10 3,829,619 4, Portfolio of investments 4, Net other assets - - Net assets 4, Holdings Market Value 000 % of Net Assets Virgin Pension Global Holding in Virgin Global (100.00%) 10 7,061,730 9, Portfolio of investments 9, Net other assets - - Net assets 9, Comparative figures shown in brackets relate to percentage of total net assets at 15 December Investments in Collective Investment Schemes and are a related party to the funds (see note 10 on page 21). 13

16 Summary of portfolio changes Virgin Pension Growth Fund Cost 000 Proceeds 000 Purchases Sales Virgin UK Index Tracking Trust Income Units 65,704 Virgin UK Index Tracking Trust Income Units 61,026 Virgin UK Index Tracking Trust AE Income Units 4,681 Virgin UK Index Tracking Trust AE Income Units 4,039 70,385 65,065 Virgin Money Pension Bond and Gilt Fund Cost 000 Proceeds 000 Purchases Sales Virgin Income Trust Income Units 52,252 Virgin Income Trust Income Units 25,589 Virgin Income Trust AE Income Units 2,339 Virgin Income Trust AE Income Units 2,770 54,591 28,359 Gilt and UK Cost 000 Proceeds 000 Purchases Sales Virgin Bond, Gilt and UK 1,273 Virgin Bond, Gilt and UK 1,015 Gilt, UK and Overseas Cost 000 Purchases Sales Proceeds 000 Virgin Bond, Gilt, UK and Overseas 2,485 Virgin Bond, Gilt, UK and Overseas 911 Virgin Pension Global Fund Cost 000 Proceeds 000 Purchases Sales Virgin Global 4,414 Virgin Global

17 Statements of total return Income Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/2016 Notes Net capital gains on investments 2 84, ,753 8,003 8, Revenue 4 30,916 26,957 3,424 3, Interest payable and similar charges Net revenue 30,916 26,957 3,424 3, Total return before accumulation 115, ,710 11,427 12, s 6 (30,916) (26,957) (3,424) (3,807) (25) (11) (38) (25) (73) (33) Change in net assets attributable to unitholders from investment activities 84, ,753 8,003 8, Statements of change in net assets attributable to unitholders Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/2016 Notes Opening net assets attributable to unitholders 1,053, , , ,023 2, ,675 1,215 4,886 2,254 Amounts receivable on issue of units 39,129 40,868 50,957 41,699 1,240 1,457 2,433 1,892 4,317 2,715 Amounts payable on cancellation of units (64,605) (50,451) (28,281) (19,369) (1,011) (379) (908) (757) (972) (880) (25,476) (9,583) 22,676 22, ,078 1,525 1,135 3,345 1,835 Change in net assets attributable to unitholders from investment activities 84, ,753 8,003 8, Income retained on accumulation units 6 30,734 26,906 3,465 3, Closing net assets attributable to unitholders 1,143,211 1,053, , ,924 2,497 2,105 4,519 2,675 9,180 4,886 Notes to the financial statements are on pages 17 to

18 Balance sheets as at 15 December 2017 Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/2016 Notes Assets Fixed assets Investments 1,143,210 1,053, , ,920 2,497 2,105 4,519 2,675 9,180 4,886 Current assets Debtors Cash and bank balances Total current assets Total assets 1,143,321 1,053, , ,955 2,498 2,118 4,530 2,690 9,228 4,892 Liabilities Current Liabilities Creditors 9 (110) (102) (171) (31) (1) (13) (11) (15) (48) (6) Total liabilities (110) (102) (171) (31) (1) (13) (11) (15) (48) (6) Net assets attributable to unitholders 1,143,211 1,053, , ,924 2,497 2,105 4,519 2,675 9,180 4,886 Notes to the financial statements are on pages 17 to

19 Notes to the financial statements 1. Accounting policies (a) Basis of accounting The Financial Statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments, and in accordance with the United Kingdom Generally Accepted Accounting Practice as defined within Financial Reporting Standard (FRS) 102 and the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Management Association (now known as the Investment Association) in May 2014 (the 2014 SORP). (b) Revenue recognition Distributions receivable from the underlying unit trusts are credited to revenue, net of attributable tax credits, when the underlying unit trust is quoted ex-dividend. of revenue relating to accumulation units or shares held in underlying funds is recognised as revenue and included in the amount available for distribution. Equalisation received from distributions or accumulations on units or shares in underlying investments is treated as capital and deducted from the cost of the investment. (c) Treatment of expenses All expenses of the Scheme have been borne by the Manager. (d) Basis of valuation of investments Investments have been valued using the bid price of their creation and cancellation prices as at 5pm on Friday 15 December All purchases and sales are accounted for on the trade date. Where applicable, investment valuations exclude any element of accrued income. (e) Taxation Registered pension schemes are unable to reclaim tax suffered on investment revenue. As a result, tax on revenue received by the Scheme from its fund investments is irrecoverable. The Scheme is an approved personal pension plan for tax purposes. Consequently income and gains arising from investments are not subject to corporation tax. (f) The policy of the Scheme is to accumulate the net revenue of each fund to the capital account two months after the accounting period end. 17

20 Notes to the financial statements 2. Net capital gains on investments The net capital gains on investments during the year comprise: Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ Non-derivative securities 84, ,753 8,003 8, Portfolio transaction costs Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ Purchases including transaction costs 70,385 68,221 54,591 45,708 1,273 1,482 2,485 1,938 4,414 2,768 Sales net of transaction costs 65,065 50,788 28,359 19,431 1, Transaction costs for unit trusts cannot be separately identified as they form part of the dealing spread. The dealing spread represents the difference between the values determined for investments by reference to the bid and offer prices, expressed as a percentage of the value determined by reference to the offer price. Dealing spreads vary considerably depending on the transaction value and market sentiment. The average dealing spread of the investments at the balance sheet date was 0.00% (2016: 0.00%): 18

21 Notes to the financial statements 4. Revenue Distributions from unit trusts Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ ,916 26,957 3,424 3, Expenses During the year, all expenses of the Virgin Stakeholder Pension Scheme have been borne by the Manager including an audit fee of 25,704 (2016: 13,200). 6. s The accumulations take account of income received on the creation of units and income deducted on the cancellation of units, and comprises: Virgin Pension Growth Virgin Money Pension Gilt, UK and Overseas Fund Bond and Gilt Fund Gilt and UK Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ Interim 11,260 9,821 1,857 1, Final 19,474 17,085 1,608 1, ,734 26,906 3,465 3, Add: Equalisation deducted on cancellation of units Less: Equalisation received on issue of units (277) (286) (119) (104) (4) (8) (10) (13) (18) (12) Net accumulations for the year 30,916 26,957 3,424 3, Details of the accumulations per unit are set out in the tables on pages 29 to

22 Notes to the financial statements 7. Debtors Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ Sales awaiting settlement Amounts receivable for creation of units Total debtors Cash and bank balances Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ Cash and bank balances Creditors Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global 15/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ Purchases awaiting settlement Amounts payable for cancellation of units Total creditors

23 Notes to the financial statements 10. Related party transactions Virgin Money Unit Trust Managers Limited manages the following: NURS Feeder Fund Virgin Pension Growth Fund Virgin Money Pension Bond and Gilt Fund Gilt and UK Gilt, UK and Overseas Virgin Pension Global Qualifying Master Scheme Virgin UK Index Tracking Trust Virgin Income Trust Virgin Bond, Gilt and UK Virgin Bond, Gilt, UK and Overseas Virgin Global The details of units created and cancelled by Virgin Money Unit Trust Managers Limited are shown in the Statements of change in net assets attributable to unitholders. The details of investments held in the Virgin UK Index Tracking Trust; Virgin Income Trust; Virgin Bond, Gilt and UK ; Virgin Bond, Gilt, UK and Overseas Share Fund; and, Virgin Global are shown in the portfolio statement. Outstanding purchases and sales in the relevant qualifying master fund as at the end of the accounting year are included in notes 7 and Capital commitments and contingent liabilities At 15 December 2017, the Scheme had no capital commitments (2016: nil) and no contingent liabilities (2016: nil). 21

24 Notes to the financial statements 12. Financial risk management, derivatives and other financial instruments The Scheme has limited exposure to credit or cash flow risk, and as there are no borrowings or unlisted securities, exposure to liquidity risk is minimal. The main risks to the Scheme are the risks applicable to the underlying unit trusts which are set out below. (a) Financial risk management of the underlying unit trusts Financial risk can be separated into the following components: market risk, credit risk and liquidity risk. The table below and overleaf is provided to enable users of these financial statements to assess and understand the risks that arise in connection with the underlying unit trusts (the financial instruments held by the Funds) and how those risks are managed. Financial risks inherent to the Virgin Income Trust (Pension Bond and Gilt Fund) differ to those of the other four underlying unit trusts as no equity investments are held. Disclosures for the other underlying unit trusts, all of which hold equity investments, have been aggregated. Risks are set out in order of significance. Virgin Income Trust (Pension Bond and Gilt Fund) Risk Risk definition Risk background and significance Mitigation technique 1) Market risk The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: other price risk, interest rate risk, and currency risk. See below. See below. 1(a) Other price risk 1(b) Interest rate risk 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 and currency risk), whether those changes are caused by factors specific to individual financial instruments or its issuer, or other factors affecting similar financial instruments traded in the market. The risk that an investment s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. Other price risk arises from uncertainty about future prices of financial instruments the fund holds. It represents the potential loss the fund might suffer through holding market positions in the face of price movements. As with other unit trusts which hold corporate bonds, the fund is exposed to a moderate level of other price risk. As the fund invests in fixed rate securities, any change to the prevailing interest rates may result in income increasing or decreasing and the value of the securities held increasing or decreasing. In addition, changes in expectations of future interest rates may also result in an increase or decrease in the value of the securities held. In general, if interest rates rise, the income potential of the fund also rises but the value of the fixed rate securities will decline. A decline in interest rates will, in general, have the opposite effect. The investment approach for the corporate bond side of the fund is to only invest in A grade Corporate Bonds. The Investment Adviser (State Street Global Advisors) regularly carries out a review of the portfolio and replaces any bonds which have dropped below the A grade requirement. The Manager carries out a separate regular review of the portfolio holdings to ensure they are in-line with this approach and that all relevant regulations are being met. The Manager of the fund sets limits for interest rate risk. The Investment Advisor monitors this risk continuously, using a measure called modified duration, to ensure that the risk remains within the limits prescribed. 22

25 Notes to the financial statements Virgin Income Trust (Pension Bond and Gilt Fund) Risk Risk definition Risk background and significance Mitigation technique 1(c) Currency risk The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. 2) Credit risk The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. This includes counterparty risk and issuer risk. Bonds or other debt securities involve credit risk 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 vast majority of the net assets of the fund are denominated in sterling, with the effect that the balance sheet and total return cannot be materially affected by currency movements. Given this, the Manager does not consider the fund has a significant exposure to currency risk. Certain transactions in securities the fund enters into expose it to the risk that the counterparty will not deliver the investments for a purchase, or cash for a sale after the fund has fulfilled its responsibilities. Given the mitigation techniques followed, the Manager does not consider the fund has a significant exposure to counterparty risk. The fund's investments in bonds expose it to the default risk of the bond issuer with regards interest payments and principal repayments. At the balance sheet date none of the bonds held by the fund had low credit ratings. As the Manager does not consider the Fund has significant exposure to currency risk, no formal mitigation techniques are adopted by the Investment Adviser or the Manager. The fund only buys and sells investments through brokers which have been approved by the Manager as an acceptable counterparty. In addition, limits are set to the exposure to any individual broker that may exist at any time, and changes in brokers financial ratings are reviewed. The fund s assets, including cash, are held on trust for the benefit of unitholders by the Trustee. The financial position of the Trustee is itself monitored on a regular basis by the Manager. 3) Liquidity risk The risk that the fund will encounter difficulty in meeting obligations associated with financial liabilities, including redemption of liabilities. All of the fund s financial assets are considered to be readily realisable in accordance with the practices of the markets on which they are traded. Given this, the Manager does not consider that the fund has a significant exposure to liquidity risk. In general, the Investment Adviser manages the fund s cash to ensure it can meet its liabilities. Where investments cannot be realised in time to meet any potential liability, the fund may borrow up to 10% of its value to ensure settlement. For each of the risks in the table above, quantitative analysis in relation to that risk is available in the Financial Risk Management, Derivatives and Other Financial Instruments note within the latest Final Report and Financial Statements of the relevant underlying unit trust. These accounts can be obtained free of charge from the Manager on request or via the Virgin Money website. 23

26 Notes to the financial statements Virgin UK Index Tracking Trust (Growth Fund); Virgin Bond, Gilt and UK ; Virgin Bond, Gilt, UK and Overseas ; and, Virgin Global Share Fund. Risk Risk definition Risk background and significance Mitigation technique 1) Market risk The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: other price risk, interest rate risk, and currency risk. See below. See below. 1(a) Other price risk 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 and currency risk), whether those changes are caused by factors specific to individual financial instruments or its issuer, or other factors affecting similar financial instruments traded in the market. Other price risk arises from uncertainty about future prices of financial instruments the funds hold. It represents the potential losses the funds might suffer through holding market positions in the face of price movements. As with all equity based unit trusts, the funds are exposed to a significant level of other price risk. For the Virgin UK Index Tracking Trust, as the objective of the fund is to closely match the performance of the FTSE All-Share index, the Investment Adviser (State Street Global Advisors) considers the accuracy of the tracking of the index during its daily reviews of the fund portfolio and when assessing changes made to the constituents of the index. The Manager also carries out regular monitoring of the performance of the fund. The Investment Adviser only selects portfolio holdings which are in line with the investment objective of the fund and the Manager carries out a separate periodic review of the portfolio holdings to ensure they are in line with the investment objective and that all relevant regulations are being met. For the Virgin Bond, Gilt and UK, Virgin Bond, Gilt, UK and Overseas and Virgin Global, the Manager carries out regular monitoring of the performance of the fund. The Investment Adviser only selects portfolio holdings which are in line with the investment objective of the fund and the Manager carries out a separate periodic review of the portfolio holdings to ensure they are in line with the investment objective and that all relevant regulations are being met. 24

27 Notes to the financial statements Virgin UK Index Tracking Trust (Growth Fund); Virgin Bond, Gilt and UK ; Virgin Bond, Gilt, UK and Overseas ; and, Virgin Global Share Fund. Risk Risk definition Risk background and significance Mitigation technique 1(b) Interest rate risk The risk that an investment s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. For the Virgin Bond, Gilt and UK, around half of the fund s financial assets are equity shares and other investments which neither pay interest nor have a maturity date. Therefore, the fund s exposure to interest rate risk is considered insignificant for that half of the assets. The other half of the fund invests in fixed rate securities, for which any change to the prevailing interest rates may result in income increasing or decreasing and the value of the securities held increasing or decreasing. In addition, changes in expectations of future interest rates may also result in an increase or decrease in the value of the securities held. In general, if interest rates rise the income potential of the fund also rises, but value of the fixed rate securities will decline. A decline in interest rates will, in general, have the opposite effect. No formal mitigation techniques are adopted by the Investment Adviser or the Manager. Investments in fixed interest rate securities is wholly consistent with the Virgin Bond, Gilt and UK s investment objective. 1(c) Currency risk The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. For the Virgin UK Index Tracking Trust; Virgin Bond, Gilt, UK and Overseas ; and, the Virgin Global, the majority of the funds' financial assets are equity shares and other investments which neither pay interest nor have a maturity date. Therefore, those funds' exposure to interest rate risk is considered insignificant. This is consistent with the exposure during both the current and prior period. The vast majority of the net assets of the funds are denominated in sterling, with the effect that the balance sheet and total return cannot be materially affected by currency movements. Given this, the Manager does not consider the funds to have a significant exposure to currency risk. As the Manager does not consider the funds have significant exposure to currency risk, no formal mitigation techniques are adopted by the Investment Adviser or the Manager. 25