NORTHERN TRUST GLOBAL FUNDS PLC

Transcription

1 NORTHERN TRUST GLOBAL FUNDS PLC ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JANUARY 2018

2 (Company Number: ) Annual Report and Financial Statements for the Year Ended 31 January 2018

3 Contents Page Directory 2 General Information 3 Fund Summary Information 5 Directors Report 6 Report of the Depositary to the Shareholders 10 Investment Adviser s Report US Dollar Fund 11 Sterling Fund 12 Euro Liquidity Fund 13 Independent Auditor s Report 14 Statement of Comprehensive Income 17 Statement of Financial Position 19 Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders 21 Notes to the Financial Statements 23 Portfolio of Investments (Unaudited) US Dollar Fund 48 Sterling Fund 54 Euro Liquidity Fund 60 Material Purchases and Maturities (Unaudited) US Dollar Fund 66 Sterling Fund 67 Euro Liquidity Fund 68 Supplementary Unaudited Information 69 UCITS V Remuneration Policy (Unaudited) 70 Securities Financing Transactions Regulation (Unaudited) 71 1

4 Directory Registered Office Georges Court Townsend Street Dublin 2 Ireland Depositary Northern Trust Fiduciary Services (Ireland) Limited Georges Court Townsend Street Dublin 2 Ireland Independent Auditor KPMG Chartered Accountants 1 Harbourmaster Place International Financial Services Centre Dublin 1 Ireland Legal Advisers in Ireland Maples and Calder 75 St. Stephen s Green Dublin 2 Ireland Sponsoring Member Firm Maples and Calder 75 St. Stephen s Green Dublin 2 Ireland (until 10 March 2017) Directors of the Company Michael Boyce* Gerry Brady* Eleanor Fitzgerald (resigned 21 April 2017) John Fitzpatrick* Hazel McNeilage James Wright (resigned 22 September 2017) Martha Fee (appointed 12 December 2017) Bimal Shah (appointed 14 December 2017) *Independent Directors of the Company All are non-executive Directors Administrator Northern Trust International Fund Administration Services (Ireland) Limited Georges Court Townsend Street Dublin 2 Ireland Investment Adviser Northern Trust Global Investments Limited Bank Street Canary Wharf London, E14 5NT England Secretary Northern Trust International Fund Administration Services (Ireland) Limited Georges Court Townsend Street Dublin 2 Ireland 2

5 General Information The following information is derived from and should be read in conjunction with the full text and definitions section of the Prospectus. Northern Trust Global Funds plc (the Company ) was incorporated on 27 February 1996 with limited liability as an openended investment designated company with variable capital under the laws of Ireland and was listed on the Irish Stock Exchange until 10 March The Company was initially authorised by the Central Bank of Ireland under Part XIII of the Companies Act, The Company applied for this authorisation to be revoked and applied for authorisation instead by the Central Bank of Ireland as an undertaking for collective investment in transferable securities pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, supplemented or consolidated from time to time. The original authorisation was granted on 30 June At 31 January 2018, the Company is comprised of three separate portfolios of assets (each a Fund ), which are represented by separate classes of Shares. These are the US Dollar Fund, Sterling Fund, and Euro Liquidity Fund. The US Dollar Fund and Sterling Fund are managed with a constant NAV. The NAV is maintained at US$1.00 for the US Dollar Fund and 1.00 for the Sterling Fund. The Euro Liquidity Fund was launched on the 15 August 2014 as a variable NAV short-term money market fund. The Share Classes of the Fund are accumulating classes. The Fund does not seek to maintain a stable Net Asset Value and as a result, the Fund s Net Asset Value per Share will vary and reflect the effects of unrealised appreciation and depreciation and realised losses and gains. With the consent of the Central Bank of Ireland, the Company from time to time may create an additional fund or funds, the investment policy and objectives for which shall be outlined in a Supplemental Prospectus. Fund holdings are available on the northerntrust.com/pooled funds website. Some clients receive additional information and/or reports on a more frequent basis. Please contact your Relationship Manager to discuss any further reporting needs. The Company is an umbrella fund with segregated liability between the Funds. Investment Objective The objective of the US Dollar Fund and Sterling Fund is to preserve capital, maintain liquidity and generate current income by investing in high quality fixed income or adjustable rate securities denominated in the Funds Base Currency. The objective of the Euro Liquidity Fund is to achieve a return in line with prevailing money market rates by investing in high quality fixed income or adjustable rate securities denominated in the Base Currency of the Fund whilst aiming to preserve capital consistent with such rates and to maintain a high degree of liquidity. Prices There is a single price for buying, selling and switching Shares in the Company. This is represented by the Net Asset Value per Share. Other than the reservation of the right to impose a switching charge of up to 1.00% upon the conversion of Shares and a redemption fee of up to 2.00% in the event a Shareholder purchases and sells Shares on a short term basis or for trading or arbitrage purposes, the Company does not currently propose to charge a fee on the issue, conversion, transfer or redemption of Shares. However, the Company reserves the right in the future to charge a fee on the issue, conversion, transfer or repurchase of Shares of up to 1.00% of the value of the Shares issued, converted, transferred or repurchased. Dealing Any application received by the Administrator after the relevant deadline on the relevant Dealing Day, where the relevant Dealing Day is defined as each Business Day where the Net Asset Value is determined, shall be deferred until the next succeeding Dealing Day. Shares Each Fund may issue one or more classes of Shares. Shares may be issued as Accumulating Shares or Distributing Shares. It is the present intention that only Distributing Shares will be issued for the US Dollar Fund and Sterling Fund and only Accumulating Shares will be issued for the Euro Liquidity Fund. 3

6 General Information (Continued) Minimum Investment The minimum initial investment per Shareholder is the currency equivalent of at least US$100,000 for the US Dollar Fund, 100,000 for the Sterling Fund and 100,000 for the Euro Liquidity Fund and the minimum subsequent investment is the currency equivalent of at least US$1,000 for the US Dollar Fund, 1,000 for the Sterling Fund and 1,000 for the Euro Liquidity Fund. Dividends It is the intention of the Directors to declare a dividend on each Dealing Day in respect of the Distributing Shares of the US Dollar Fund and Sterling Fund. Such dividends will be paid monthly in cash, unless the Shareholder elects in writing to receive the dividends in the form of additional Shares. No dividend will be declared in respect of the Accumulating Shares of the Euro Liquidity Fund. 4

7 FUND SUMMARY INFORMATION Historical Information Net Asset Value Number of shares in issue Net Asset Value per Share 31 January 2018 US Dollar Fund US$13,186,312,337 13,186,312,337 US$1.00 Sterling Fund 10,418,797,319 10,418,797, Euro Liquidity Fund 2,146,923,841 2,176,337, January 2017 US Dollar Fund US$7,875,390,061 7,875,390,061 US$1.00 Sterling Fund 9,867,145,014 9,867,145, Euro Liquidity Fund 2,223,040,354 2,240,460, January 2016 US Dollar Fund US$7,818,626,461 7,818,626,461 US$1.00 Sterling Fund 7,187,462,414 7,187,462, Sterling Government Liquidity Fund* 39,899,431 39,899, Euro Liquidity Fund 1,745,191,704 1,750,389, *The Sterling Government Liquidity Fund ceased trading on 15 March

8 Directors Report The Directors present, herewith, their report for the year ended 31 January Review of Business Activities and Future Developments A detailed business review is outlined in the Investment Adviser's Reports on pages 11 to 13. Significant events during the year are included on the following page. Results for the Year and State of Affairs as at 31 January 2018 The results of operations are set out on page 17. Cross Liability Risk Following Shareholder approval and approval by the Central Bank of Ireland the Company amended its Prospectus, Memorandum and Articles of Association to put in place segregated liability protection on 27 June The assets of each Fund are not exposed to the liabilities of the other Funds of the Company. Principal Risks and Uncertainties The principal risks and uncertainties faced by the Company are market risk, including (price risk, interest rate risk and foreign currency risk), liquidity risk, credit risk, and operational risk. Further information on the Company s risk management policies is provided in note 10, pages 32 to 42. Dividends A dividend was declared on each Dealing Day during the year. The following dividends were declared for the year under review: US Dollar Fund US$119,726,733 US$50,513,692 Sterling Fund 20,089,198 27,950,679 Sterling Government Liquidity Fund* - 4,833 Euro Liquidity Fund - - *The Sterling Government Liquidity Fund ceased trading on 15 March Directors The Directors of the Company during the year ended 31 January 2018 were: Director Michael Boyce Gerry Brady Eleanor Fitzgerald (resigned 21 April 2017) John Fitzpatrick Hazel McNeilage James Wright (resigned 22 September 2017) Martha Fee (appointed 12 December 2017) Bimal Shah (appointed 14 December 2017) Soft Commission Arrangements and Directed Brokerage Services Nationality Irish Irish Irish Irish British British Irish British There were no soft commission arrangements, directed brokerage services or similar arrangements affecting the Company during the year ended 31 January 2018, nor were there any during the year ended 31 January Accounting Records The measures taken by Directors to secure compliance with the requirements of Sections 281 to 285 of the Companies Act 2014 with regard to the keeping of adequate accounting records are the use of appropriate systems and procedures and employment of competent persons. The accounting records of the Company are maintained by Northern Trust International Fund Administration Services (Ireland) Limited, at Georges Court, Townsend Street, Dublin 2, Ireland. 6

9 Directors Report (Continued) Directors and Secretary s Interests in Shares and Contracts The Directors and Company Secretary, who held office on 31 January 2018, had no interests in the Shares of the Company at the beginning or end of the financial year. The Directors do not have any proposed or existing service contracts with the Company. Political Donations There were no political donations made by the Company during the year ended 31 January 2018 (31 January 2017: Nil). Material Events During the Year and Principal Material Changes The US Dollar Fund, Sterling Fund and Euro Liquidity fund were delisted from the Irish Stock Exchange on 10 March Eleanor Fitzgerald resigned as a Director of the Company on 21 April James Wright resigned as a Director of the Company on 22 September Martha Fee was appointed as a Director of the Company on 12 December Bimal Shah was appointed as a Director of the Company on 14 December There were no other material events during the year. Subsequent Events There were no other material events subsequent to the year end date. Post Year-End Change to AUM of Each Sub-Fund As at 30 April 2018, the net assets under management within each of the Funds as reported by the Administrator of the Funds were as follows: US Dollar Fund US$ 11,857,135,739 Sterling Fund 10,703,966,134 Euro Liquidity Fund 2,064,196,727 Auditors KPMG have expressed their willingness to continue in office in accordance with the provisions of Section 383(2) of the Companies Act Resolutions re-appointing them and authorising the Directors to fix their remuneration will be proposed at the Annual General Meeting. Statement of Directors Responsibilities The Directors are responsible for preparing the Annual Report and Company s financial statements, in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with Financial Reporting Standard 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland ( FRS 102 ) issued by the Financial Reporting Council and published by the Institute of Chartered Accountants in Ireland. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company and of its increase/decrease in net assets attributable to holders of redeemable participating shares for that financial year and comply with the Companies Act

10 Directors Report (Continued) Statement of Directors Responsibilities (Continued) In preparing those financial statements, the Directors are required to: select suitable accounting policies for the Company financial statements and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; assess the Company s ability to continue as a going concern, disclosing as applicable, matters related to going concern; and use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position, assets, liabilities and profit or loss of the Company and to enable them to ensure that the financial statements are prepared in accordance with accounting standards generally accepted in Ireland and comply with the Companies Act 2014, and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ( the UCITS Regulations ) and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(l)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the Central Bank UCITS Regulations ). They are also responsible for safeguarding the assets of the Company and in fulfilment of this responsibility, they have entrusted the assets of the Company to a Depositary for safekeeping in accordance with the Memorandum and Articles of Association. They are responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors are also responsible for preparing a Directors Report that complies with the requirements of the Companies Act Directors Compliance Statement As required by Section 225(2) of the Companies Act 2014 ( the Act ), the Directors of the Company acknowledge the responsibility for securing the Company s compliance with the relevant obligations as defined by the Act. The Directors confirm that: (a) they have documented and approved a compliance policy statement which sets out the Company s policies which, in their opinion, is appropriate with respect to compliance by the Company with its relevant obligations set out in the Act; (b) they have put in place appropriate arrangements or structures that, in their opinion, are designed to secure material compliance with the Company's relevant obligations; and (c) during the course of the financial year ended 31 January 2018 to which this Directors Report relates, a review of the arrangements and structures put in place to ensure material compliance with the Company s relevant obligations has been completed. This review has not identified any material matters of non-compliance. The arrangements or structures in place provide a reasonable assurance of compliance in all material respects with the Company s relevant obligations. Statement on Relevant Audit Information As required by Section 330 of the Companies Act 2014, the Directors of the Company confirm that during the financial year ended 31 January 2018: 1) as far as the Directors are aware, there is no relevant audit information of which the Company s statutory auditors are unaware; and 2) the Directors have taken all necessary steps to make themselves aware of any relevant audit information and to establish that the Company s statutory auditors are aware of that information. 8

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13 US Dollar Fund - Investment Adviser s Report for the Year Ended 31 January 2018 Performance Data 6 months 1 year 3 years Fund 0.59% 1.04% 0.52% Benchmark 0.58% 1.00% 0.47% Performance Commentary During the year, the fund outperformed the benchmark by 4 basis points. AUM increased by 67.44% YoY from US$7.88bn to US$13.19bn for the year ended 31 January As always, due to the nature of the product, considerable client flows were experienced however the effect on performance was negligible. The US economy witnessed three rate hikes in In the March Monetary Policy Committee ( MPC ) meeting, the Federal Open Market Committee ( FOMC ) delivered on hawkish rhetoric and voted to raise interest rates to a range of 0.75% to 1.00%. The minutes from the meeting revealed an optimistic FOMC that saw the possibility for further two hikes and changes to reinvestment policy later this year. During the June meeting, the FOMC raised the target range for federal funds rate to % in a widely anticipated move, justified by the strength of the labour market and improved household spending. The Committee acknowledged recent softer inflation prints with downward revision to the 2017 projection, but maintained forecast of 2% inflation in the near term, as the labour market continues to tighten. During the July meeting, the FOMC kept the target range for federal funds rate unchanged and made only minor modifications to the statement. The Committee pointed to solid employment growth and acknowledged lower inflation prints. In November, officials expressed largely optimistic views of economic growth, but also started to worry that financial market prices are getting out of hand. Nevertheless, during the December meeting, in a widely anticipated move, the FOMC voted 7-2 to increase the target range for federal funds rate by 25bp to %. The FOMC appears to be more confident about transitory factors impacting inflation and its ability to stabilise around the 2% target, given a strengthening labour market. Meanwhile, President Trump nominated Jerome Powell as the new Chairman to Federal Reserve, bypassing Janet Yellen for a second term. Separately, House and Senate Republicans ironed out differences on the tax reform plan and approved a new version, giving President Trump a major legislative win. At Janet Yellen s final FOMC meeting as Fed Chair, before being replaced by newly confirmed Jerome Powell in February, the committee unanimously voted to leave interest rate target range unchanged at %. On the economic front, the US economy expanded at a slower than projected pace in the fourth quarter with headwinds from trade and inventories, offsetting strength in consumer spending and business investment that signals solid momentum entering GDP rose at a 2.6% annualised rate in Q4, 3.2% down from previous quarter. Q1 GDP had earlier surprised to the upside, revised up to 1.4% q/q, due to stronger consumption data. Non-farm payrolls headline print disappointed in May (138k) and readings for prior two months were revised downward (66k). However, the unemployment rate declined further to 4.3% in May. Non-farm payrolls rose by 148k in December. The biggest job gains by sector came from health care, construction and manufacturing. The unemployment rate stood at 4.1% for December. Average hourly earnings rose modestly by 2.5%. The underlying pace of inflation unexpectedly accelerated in December. Core CPI increased 1.8% from a year earlier after a 1.7% advance, while core CPI rose 0.3% m/m in December. Manufacturing PMI registered 55.1 in December, up from 53.9 in November. Meanwhile, retail sales increased 0.4% m/m in December after a 0.9% m/m increase in November. With a continued focus on capital preservation and liquidity, the portfolio strategy remained conservative. Northern Trust Global Investments Limited Investment Adviser April

14 Sterling Fund - Investment Adviser s Report for the Year Ended 31 January 2018 Performance Data 6 months 1 year 3 years Fund 0.17% 0.31% 0.43% Benchmark 0.12% 0.17% 0.26% Performance Commentary During the year, the fund outperformed the benchmark by 14 basis points. AUM increased by 5.59% YoY from 9.87bn to 10.42bn for the year ended 31 January As always, due to the nature of the product, considerable client flows were experienced, however the effect on performance was negligible. Without the Monetary Policy Committee ( MPC ) meeting in April, Brexit and internal politics dominated the news flow. Theresa May surprised markets and the public with an announcement of a snap General Election, scheduled for early June. Prime Minister May justified her decision by seeking unity at Westminster and a stronger mandate for the forthcoming Brexit negotiations. In the event, the Conservative Party failed to increase its parliamentary majority during snap elections and arranged a confidence and supply agreement with Northern Ireland s DUP to form a new government. Despite a new political situation, Brexit negotiations began. Moody s downgraded the UK s sovereign credit rating to Aa2 from Aa1 referring to Brexit related uncertainties. Following strong guidance from the Bank of England s ( BoE ) MPC in September, suggesting a possible hike over the coming months, market participants shifted their attention to the November meeting. With this, policy makers raised interest rates for the first time in a decade, yet expressed concern for Britain s Brexit-dented economy by indicating that another increase isn t imminent. Led by Governor Mark Carney, the MPC voted 7-2 to increase the benchmark rate to 0.50% from 0.25% during its November MPC meeting. The Bank in its December meeting held interest rates and maintained its quantitative easing programme. The BoE confirmed that further modest increases in interest rates may be necessary to help bring inflation down to its target of 2% over the next few years. In early December, the UK and EU reached an agreement on separation terms, which paves the way for talks on a transition period and a future trade deal. With no monetary policy meeting in January, Brexit news dominated during the month. The European Union finalised its Brexit negotiating position for the next phase of Brexit discussions, allowing work on a transition agreement to begin in earnest. The decision was made at a meeting of the EU s general affairs council in Brussels, which the UK did not attend as is convention for decisions regarding Brexit. On the economic front, Q2 GDP growth was confirmed at 0.3% q/q. The weakness in the headline print was driven by constrained private consumption, as real incomes experienced a further squeeze, which was not offset by improved contributions from net trade or business investments. The British economy strengthened in the final quarter of 2017 with the print also being the strongest reading in 12 months. According to the preliminary data, the GDP expanded at 0.5% q/q, up from 0.4% q/q in third quarter and above market expectations of a 0.4% rise. Despite the improved performance, annual GDP growth dipped to 1.8% in 2017, down marginally from an upwardly revised 1.9% in the previous year and the smallest expansion since Meanwhile, the labour market showed resilience in the September to November period. The unemployment rate remained at a multi-decade low of 4.3% during this period, matching market expectations. Consumer prices rose 0.4% m/m in December, up from November s 0.3%, while on an annual basis inflation in December ebbed to 3% from 3.1% y/y in the prior month. Separately, UK services PMI increased from 53.8 in November to 54.2 in December, while in contrast the manufacturing PMI decreased from 58.1 in November to 56.3 in December. With a continued focus on capital preservation and liquidity, the portfolio strategy remained conservative. Northern Trust Global Investments Limited Investment Adviser April

15 Euro Liquidity Fund - Investment Adviser s Report for the Year Ended 31 January 2018 Performance Data 6 months 1 year Since Inception Fund -0.23% -0.45% -0.98% Benchmark -0.28% -0.54% -1.38% Performance Commentary During the year, the fund outperformed the benchmark by 9 basis points. AUM decreased by 3.42% YoY from 2.223bn to 2.147bn for the year ended 31 January As always, due to the nature of the product, considerable client flows were experienced, however the effect on performance was negligible. The European Central Bank ( ECB ) kept all interest rates and forward guidance unchanged during the period in review. April s account of the monetary policy meeting revealed that the appetite for change in the forward guidance, given ongoing improvements in the economic outlook, diminishing risks and improving inflation dynamics. At the same time, the Committee noted that caution will be needed, as monetary and financial conditions are particularly sensitive to changes in monetary conditions, given a prolonged period of highly accommodative policy. The EU Council adopted the Money Market Funds Regulation, which introduces new fund structures, fees and gates, minimum liquidity requirements, transparency, rigorous stress testing and is expected to have a significant impact on the industry. July s Account of the monetary policy meeting did not reveal any substantial changes. The minutes confirmed the ongoing economic expansion and noted that risks to growth were broadly balanced. Some members expressed concern over the potential euro appreciation in the future, even though recent movement was attributed mostly to improved macroeconomic fundamentals in the Euro area. In October, the bank announced adjustments to non-standard monetary policy measures, as it continues with a substantial level of accommodative policy. The Quantitative Easing ( QE ) programme was extended until at least September 2018, but the pace of asset purchases was scaled down to 30bn/month from January Further, the ECB confirmed re-investment of maturing holdings, in the same jurisdiction as principal redemption, to reduce divergence from the capital key. During the press conference, President Draghi emphasized that there will be no sudden stop to the program and noted that majority of the Council favoured keeping QE open-ended to ensure continuation of the accommodative stance. With no Monetary Policy meeting in November, updates to Eurozone economic forecasts caught market attention. Eurozone economic growth is forecast to be 2.4% in 2017, 2.3% in 2018 and at 1.9% in Inflation forecasts were revised up for 2018, to 1.4% from 1.2%, and 1.7% in During the January policy meeting, the ECB kept all policy rates on hold and reiterated their commitment to its bond buying program at 30bn per month until at least September On the economic front, the Eurozone economy continued to grow robustly in the final quarter of 2017, wherein according to the preliminary estimate the GDP expanded 0.6% q/q, which was a notch below the third quarter s 0.7% rise. Initial inflation estimates for January were 1.3% y/y, matching expectations. This marks the lowest reading since July Meanwhile, the conditions in the labour market were broadly stable in December. The number of unemployed fell by 165K and the unemployment rate came in at 8.7% in December, unchanged from November. Sentiment in the Eurozone remained buoyant in January, although the Economic Sentiment Index declined modestly from December. January s fall was driven by a decline in confidence in the services and retail trade sectors, while the ZEW assessment of current situation increased to 95.2 in January from 89.3 in December. The Eurozone manufacturing purchasing managers index in December hit a record high of With a continued focus on capital preservation and liquidity, the portfolio strategy remained conservative. Northern Trust Global Investments Limited Investment Adviser April

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19 Statement of Comprehensive Income for the Year Ended 31 January January 2018US Dollar Fund US$ 02 January 2018Sterling Fund 04 January 2018Euro Liquidity Fund 05 January 2018Total* Year Ended 31 January 2018 US$ Notes Investment Income Interest income/(expense) 1 (b) 130,223,997 32,570,518 (9,800,242) 161,403,849 Unrealised loss on investments and currencies (24,781) (28,335) Realised gain on investments and currencies 29,033 10,132 20,054 65,148 Total Investment Income/(Expense) 130,253,030 32,580,650 (9,804,969) 161,440,662 Expenses Investment Adviser fees 2, 9 (8,432,058) (10,134,081) (1,839,753) (23,723,569) Administration fees 2, 9 (1,045,288) (1,107,045) (203,245) (2,718,326) Depositary fees 2, 9 (892,502) (1,104,001) (199,890) (2,557,743) Auditor's fees 11 (12,536) (9,243) (10,109) (36,123) Directors fees 5 (47,584) (57,494) (11,763) (135,853) Other expenses (96,329) (79,588) (41,797) (247,691) Total Operating Expenses (10,526,297) (12,491,452) (2,306,557) (29,419,305) Net income/(expense) before finance costs 119,726,733 20,089,198 (12,111,526) 132,021,357 Finance Costs Interest expense 1 (b) (34,855) (39,853) Distributions 14 (119,726,733) (20,089,198) (145,869,705) Change in Net Assets Attributable to Holders of Redeemable Participating Shares (12,146,381) (13,888,201) *Includes Sterling Fund figures converted at the average exchange rate of 1=US$ and Euro Liquidity Fund converted at the average exchange rates of 1= US$ The notes on pages 23 to 47 form an integral part of the financial statements. 17

20 Statement of Comprehensive Income for the Year Ended 31 January January 2018US Dollar Fund US$ 02 January 2018Sterling Fund 03 January 2018Sterling Govt Liquidity Fund** 04 January 2018Euro Liquidity Fund 05 January 2018Total* Year Ended 31 January 2017 US$ Notes Investment Income Interest income/(expense) 1 (b) 59,502,693 38,189,399 19,477 (8,081,131) 101,569,763 Unrealised gain on investments and currencies 76,220 83,941 Realised gain/(loss) on investments and currencies 28,753 43,078 (391,982) (345,475) Total Investment Income/(Expense) 59,531,446 38,232,477 19,477 (8,396,893) 101,308,229 Expenses Investment Adviser fees 2, 9 (6,948,042) (8,083,579) (1,769) (1,730,266) (19,638,630) Administration fees 2, 9 (1,048,894) (1,010,835) 510 (218,112) (2,636,773) Depositary fees 2, 9 (868,505) (1,010,447) (1,025) (216,283) (2,455,900) Transaction costs 1 (c) (3,591) (41,300) (58,681) Auditor's fees 11 (12,882) (11,923) (4,682) (10,349) (46,429) Directors fees 5 (40,407) (39,127) (217) (10,035) (103,940) Other expenses (95,433) (84,587) (7,119) (44,487) (266,753) Total Operating Expenses (9,017,754) (10,281,798) (14,302) (2,229,532) (25,207,106) Net income/(expense) before finance costs 50,513,692 27,950,679 5,175 (10,626,425) 76,101,123 Finance Costs Interest expense 1 (b) (342) (7,766) (9,009) Distributions 14 (50,513,692) (27,950,679) (4,833) (87,803,549) Change in Net Assets Attributable to Holders of Redeemable Participating Shares (10,634,191) (11,711,435) Gains and losses arose solely from continuing operations with the exception of Sterling Government Liquidity Fund which arose from discontinued operations. There were no gains and losses other than those dealt with in the Statement of Comprehensive Income. *Includes Sterling Fund and Sterling Government Liquidity Fund figures converted at the average exchange rates of 1=US$ and Euro Liquidity Fund converted at the average exchange rates of 1= US$ **The Sterling Government Liquidity Fund ceased trading on 15 March The notes on pages 23 to 47 form an integral part of the financial statements. 18

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22 Statement of Financial Position as at 31 January January 2018US Dollar Fund US$ 02 January 2018Sterling Fund 03 January 2018Sterling Govt Liquidity Fund** 04 January 2018Euro Liquidity Fund 05 January 2018Total* As at 31 January 2017 US$ Notes Assets Financial assets at fair value through profit or loss 10, 12 - Investments in transferable securities and money market instruments 6,107,509,519 7,553,943,313 1,438,102,069 17,165,282,507 - Time deposits 2,361,542,000 1,002,420, ,110,000 4,236,643,079 - Reverse repurchase agreements 1,525,000, ,250,000 2,319,812,375 Cash at bank 7 1, ,492 7,676 16,907 Accrued income 1,377,746 3,513,365 2,554,473 8,558,529 Other Assets 8,470,430,524 10,084,877,030 5,492 2,380,024,218 23,730,313,397 Liabilities: Amounts falling within one year Financial liabilities at amortised cost - Investment Adviser fee payable 9 (622,189) (942,351) (156,658) (1,977,061) - Administration fee payable 9 (94,524) (115,975) (18,588) (260,520) - Depositary fee payable 9 (79,327) (108,234) (18,397) (235,378) - Distributions payable 14 (5,435,957) (1,708,789) (7,585,784) - Other expenses payable (37,305) (36,172) (5,492) (40,221) (133,189) - Securities purchased payable (588,771,161) (214,820,495) (156,750,000) (1,028,436,551) Total Liabilities (excluding net assets attributable to holders of redeemable participating shares) (595,040,463) (217,732,016) (5,492) (156,983,864) (1,038,628,483) Total Net Assets attributable to holders of redeemable participating shares 7,875,390,061 9,867,145,014 2,223,040,354 22,691,684,914 Participating Shares 4, 6 7,875,390,061 9,867,145,014 2,240,460,165 Net Asset Value per Share $ *Includes Sterling Fund and Sterling Government Liquidity Fund figures converted at the year-end exchange rates of 1=US$ and Euro Liquidity Fund converted at the year-end exchange rates of 1= US$ **The Sterling Government Liquidity Fund ceased trading on 15 March The notes on pages 23 to 47 form an integral part of the financial statements. 20

23 Statement of Changes in Net Assets attributable to Redeemable Participating Shareholders for the Year Ended 31 January January 2018US Dollar Fund US$ 02 January 2018Sterling Fund 04 January 2018Euro Liquidity Fund 05 January 2018Total* As at 31 January 2018 US$ Notes Net assets attributable to holders of redeemable participating shares at start of the year 7,875,390,061 9,867,145,014 2,223,040,354 22,691,684,914 Foreign currency translation adjustment 1 (d) 2,043,432,423 Proceeds from issuance of redeemable participating shares 52,365,359,821 49,630,297,359 13,641,674, ,523,352,630 Payments for redemptions of redeemable participating shares (47,054,437,545) (49,078,645,054) (13,705,644,217) (126,567,684,144) Change in net assets attributable to holders of redeemable participating shares (12,146,381) (13,888,201) Net Assets attributable to holders of redeemable participating shares at the end of the year 13,186,312,337 10,418,797,319 2,146,923,841 30,676,897,622 Number of Participating Shares Participating shares in issue at the start of the year 7,875,390,061 9,867,145,014 2,240,460,165 Participating shares issued during the year 52,365,359,821 49,630,297,359 13,789,526,988 Participating shares redeemed during the year (47,054,437,545) (49,078,645,054) (13,853,649,775) Participating shares in issue at the end of the year 13,186,312,337 10,418,797,319 2,176,337,378 *Includes Sterling Fund figures converted at the average exchange rate of 1=US$ and Euro Liquidity Fund converted at the average exchange rates of 1= US$ The notes on pages 23 to 47 form an integral part of the financial statements. 21

24 Statement of Changes in Net Assets attributable to Redeemable Participating Shareholders for the Year Ended 31 January January 2018US Dollar Fund US$ 02 January 2018Sterling Fund 03 January 2018Sterling Govt Liquidity Fund** 04 January 2018Euro Liquidity Fund 05 January 2018Total* As at 31 January 2017 US$ Notes Net assets attributable to holders of redeemable participating shares at start of the year 7,818,626,461 7,187,462,414 39,899,431 1,745,191,704 19,959,024,508 Foreign currency translation adjustment 1 (d) (1,371,564,681) Proceeds from issuance of redeemable participating shares 36,493,751,487 47,349,810, ,399 13,983,651, ,055,093,094 Payments for redemptions of redeemable participating shares (36,436,987,887) (44,670,127,402) (40,824,830) (13,495,168,894) (110,939,156,572) Change in net assets attributable to holders of redeemable participating shares (10,634,191) (11,711,435) Net Assets attributable to holders of redeemable participating shares at the end of the year 7,875,390,061 9,867,145,014 2,223,040,354 22,691,684,914 Number of Participating Shares Participating shares in issue at the start of the year 7,818,626,461 7,187,462,414 39,899,431 1,750,389,327 Participating shares issued during the year 36,493,751,487 47,349,810, ,399 14,053,955,731 Participating shares redeemed during the year (36,436,987,887) (44,670,127,402) (40,824,830) (13,563,884,893) Participating shares in issue at the end of the year 7,875,390,061 9,867,145,014 2,240,460,165 *Includes Sterling Fund and Sterling Government Liquidity Fund figures converted at the average exchange rates of 1=US$ and Euro Liquidity Fund converted at the average exchange rates of 1= US$ **The Sterling Government Liquidity Fund ceased trading on 15 March The notes on pages 23 to 47 form an integral part of the financial statements. 22

25 Notes to the Financial Statements 1. Significant Accounting Policies a) Basis of Preparation The financial statements for the financial year ended 31 January 2018 are prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ( FRS 102 ). The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in Ireland and Irish statute comprising the Companies Act 2014, and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ( the UCITS Regulations ) and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the "Central Bank UCITS Regulations"). Accounting standards generally accepted in Ireland in preparing financial statements giving a true and fair view are those promulgated by the Institute of Chartered Accountants in Ireland and published by the Financial Reporting Council. The combined financial statements are presented in US Dollars (US$) and rounded to the nearest US$. The financial statements have been prepared on a historical cost basis, except for financial instruments classified at fair value through profit or loss that have been measured at fair value. In these financial statements, the Directors have chosen to apply the recognition and measurement provisions of IAS 39 Financial Instruments to the financial instruments that fall in scope of Sections 11 and 12 of FRS 102. In addition, the presentation and disclosure requirements of FRS 102 have been applied as required. The Company meets all the conditions set out in FRS 102, Section 7, and consequently has availed of the exemption available to certain funds not to prepare a Statement of Cash Flows. The financial statements have been prepared on a going concern basis. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company s financial statements. b) Income and Expense Recognition Interest income and expense is recognised in the Statement of Comprehensive Income as it accrues, using the original effective interest rate of the instrument calculated at the acquisition or origination date. Interest income includes the amortisation of any discount or premium, transaction costs or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis. Interest income on debt instruments designated at fair value through profit or loss is accrued using the original effective interest rate and classified to the interest income line item within the Statement of Comprehensive Income. Interest income is recognised on a gross basis, including withholding tax, if any. Interest income from reverse repurchase agreements represents interest earned on transactions whereby securities are purchased under agreement to sell the securities at a future date, at an agreed price. The interest income is accrued using the original effective interest rate and classified to the interest income line item within the Statement of Comprehensive Income. The counterparties for reverse repurchase agreements are disclosed in the Portfolio of Investments. Expenses are recorded on an accruals basis. 23

26 Notes to the Financial Statements (Continued) 1. Significant Accounting Policies (Continued) b) Income and Expense Recognition (Continued) The following table details the net interest income earned by each Fund during the year: Year ended 31 January 2018 US Dollar Fund US$ Sterling Fund Euro Liquidity Fund Total US$ Interest income/(expense) on financial investments designated at fair value through profit or loss - Investments in transferable securities 99,947,752 26,284,483 (6,031,348) 127,256,667 - Time deposits 30,235,139 3,393,275 (2,674,647) 31,592,762 - Reverse repurchase agreements 2,887,329 (1,094,247) 2,506,247 Cash interest income/(expense) 41,106 5,431 (34,855) 8,320 Total net interest income/(expense) 130,223,997 32,570,518 (9,835,097) 161,363,996 Year ended 31 January 2017 US Dollar Fund US$ Sterling Fund Sterling Govt Liquidity Fund Euro Liquidity Fund Total US$ Interest income/(expense) on financial investments designated at fair value through profit or loss - Investments in transferable securities 49,139,572 30,285, (3,576,796) 85,598,739 - Time deposits 10,261,408 2,306,065 (1,574,953) 11,602,972 - Reverse repurchase agreements 5,690 5,590,861 19,130 (2,929,382) 4,262,729 Cash interest income/(expense) 96,023 6,972 (342) (7,766) 96,314 Total net interest income/(expense) 59,502,693 38,189,399 19,135 (8,088,897) 101,560,754 c) Financial Instruments (i) Classification The category of financial assets and financial liabilities designated at fair value through profit or loss comprises financial instruments including treasury bills, certificates of deposit, time deposits, commercial paper, reverse repurchase agreements, corporate, government and government sponsored agency bonds. Financial assets and liabilities that are not at fair value through profit or loss include cash at bank, accrued income, accrued expenses, securities purchased payable, bank overdrafts and financial liabilities arising on redeemable participating Shares. (ii) Recognition and Measurement The Company recognises financial assets and liabilities on the trade date, the date it becomes party to the contractual provisions of the instrument. From this date any gains or losses arising from changes in fair value of the financial asset or financial liabilities carried at fair value are recorded in the Statement of Comprehensive Income. Financial liabilities are not recognised unless one of the parties has performed or the contract is a derivative contract not exempted from the scope of IAS 39. Financial instruments are measured initially at fair value (transaction price) plus, in the case of a financial asset or financial liability not designated at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilities designated at fair value through profit or loss are expensed immediately, while on other financial instruments they are amortised. 24

27 Notes to the Financial Statements (Continued) 1. Significant Accounting Policies (Continued) c) Financial Instruments (Continued) (ii) Recognition and Measurement (Continued) Subsequent to initial recognition, all instruments designated at fair value through profit or loss are measured at fair value with changes in their fair value recognised in the Statement of Comprehensive Income. Financial assets and liabilities other than those designated at fair value through profit or loss are measured at amortised cost using the effective interest rate method. (iii) Negative Yield on Financial Assets Negative yield on financial assets relating to interest from a negative effective interest rate on a financial asset is accreted daily and is recognised in the Statement of Comprehensive Income over the life of the underlying instrument within the interest income/(expense). (iv) Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market or in its absence, the most advantageous market to which the Fund has access at that date. When available the Fund measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is considered to be active if transactions for that asset or liability take place with sufficient frequency and value to provide pricing information on an ongoing basis. For financial reporting purposes, the quoted market price used is the last traded price for both financial assets and liabilities (if any). If a quoted market price is not available on a recognised stock exchange or from a broker / dealer for non-exchange-traded financial instruments, the fair value of the instrument is estimated using valuation techniques, including use of recent arm s length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. (v) Impairment Financial assets that are stated at cost or amortised cost are reviewed at each Statement of Financial Position date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the Statement of Comprehensive Income as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the Statement of Comprehensive Income. (vi) De-recognition A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that asset. This occurs when the contractual rights to the cash flow from the asset expire or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Fund neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset. A financial liability is derecognised when it is extinguished or when the obligation specified in the contract is discharged, cancelled or expired. 25

28 Notes to the Financial Statements (Continued) 1. Significant Accounting Policies (Continued) c) Financial Instruments (Continued) (vii) Offsetting Financial Instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the assets and settle the liability simultaneously. (viii) Transaction Costs Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. Transaction costs for the period of US$Nil (2017: US$58,681) have been included in the Statement of Comprehensive Income. (ix) Global Exposure to Financial Derivative Instruments The Investment Adviser s Risk Management department has assessed the risk profile of the Company and the related Funds on the basis of the investment policy, strategy and the use of financial derivative instruments. Based on the risk profile, Risk Management has determined that the method for the calculation of the global exposure to financial derivative instruments for all Funds will be the commitment approach, where the Fund holds financial derivative instruments. The Funds held no financial derivative instruments as at 31 January 2018 (2017: Nil). d) Foreign Currencies The functional and presentation currency of the Company is US Dollars ( US$ ). The assets and liabilities at the date of the financial statements of the Sterling Fund are denominated in Sterling ( ) and the Euro Liquidity Fund in Euro ( ), as these currencies represent the functional currencies of these funds and as for the purpose of foreign exchange rate determination these funds are considered to be foreign operations of the Company. The presentation currency of the Funds financial statements is the same as the functional currency. Monetary assets and liabilities denominated in other currencies are translated at the exchange rates prevailing at the Statement of Financial Position date. Non-monetary assets and liabilities that are measured at fair value are translated at the exchange rates prevailing at the dates the fair values are determined. Transactions in other currencies during the year are translated at the rates ruling at the date of the transaction. The resulting profits or losses are dealt with in the Statement of Comprehensive Income. Foreign exchange gains and losses on financial assets and financial liabilities designated at fair value through profit or loss (if any) are recognised together with other changes in the fair value of the line item to which they relate. For the purposes of combining the Financial Statements of Sterling and Euro denominated Funds of Northern Trust Global Funds Plc, amounts in the Statement of Financial Position have been translated into US Dollars at the Sterling exchange rate of ruling at 31 January 2018 (2017: ) and the Euro exchange rate of ruling at 31 January 2018 (2017: ). The amounts in the Statement of Comprehensive Income as well as proceeds from the subscription and redemption of Shares in the Statement of Changes in Net Assets attributable to Holders of Redeemable Participating Shares have been translated at the average Sterling exchange rate of (2017: ) for Sterling Fund, and the average Euro exchange rate of (2017: ) for Euro Liquidity Fund. The method of translation has no effect on the Net Asset Value per Share attributable to the individual Funds. A foreign currency adjustment arises as disclosed in the Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares from (i) the re-translation of the opening net assets at the year end exchange rate and (ii) the difference arising from the re-translation of the amounts in the Statement of Comprehensive Income as well as proceeds from the subscription and redemption of redeemable participating Shares at the average rates. The method of translation has no effect on the value of the net assets allocated to the individual Funds. This foreign currency adjustment was US$2,043,432,423 for the year ended 31 January 2018 (2017: US$(1,371,564,681)). 26