Distribution Number 7. Legal & General European Trust

Transcription

1 Distribution Number 7 Legal & General European Trust Final Manager s Report for the period ended 4 August 2011

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3 Contents Page Number Manager s Investment Report* 2 Authorised Status* 5 Directors Statement 5 Statement of the Manager s Responsibilities 6 Statement of the Trustee s Responsibilities 6 Report of the Trustee 7 Portfolio Statement* 8 Independent Auditors Report 10 Statement of Total Return 12 Statement of Change in Net Assets attributable to Unitholders 12 Balance Sheet 13 Notes to the Financial Statements 14 Distribution Table 24 Trust Facts 25 Performance Record 26 General Information* 28 * These collectively comprise the Manager s Report. 1

4 Manager s Investment Report Investment Objective and Policy The investment objective of the Trust is to secure capital growth from a portfolio exclusively invested directly or indirectly in European securities, other than those of the UK, which may be selected from all economic sectors. The Manager will select those securities that generally reflect both leading industrial and commercial concerns as well as opportunities offered by newly emerging companies. Manager s Investment Report During the period under review, the bid price of the Trust s E-Class distribution units rose by 4.62%. This compares to a fall of 2.27% in the FTSE All-World Europe (excluding UK) Index (Source: Bloomberg). Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. Market/Economic Review European equity markets rose strongly during the first half of the period under review, driven by the provision of plentiful liquidity to financial systems by central banks around the world. Add to the mix the heady combination of strong emerging markets demand and early signs of developed world economic recovery, and investors have recognised that equities represent good value, especially relative to other asset classes. However, the second half of the period saw a return to more volatile markets and some weakness with the threat of sovereign (government) debt restructuring in the peripheral countries of Europe, and its likely impact on the European Union as a whole, came to the fore again. We remain of the view that the fiscal strains and debt burdens on the more indebted nations of the region will be a drag on those countries growth for many years, such that there may indeed be a debt restructuring ahead of us. However, we do not believe that there is a threat to the European Union as a whole, as stronger core countries remain firmly behind their neighbours. A slowdown, or pause, in US economic growth has also become a concern for the market as investors try to determine whether growth will resume during the second half of the year, or whether this is the start of another recession. We remain of the former view and expect modest growth to resume in the US in coming months. The strongest sectors by far during the period were those that are most exposed to the growing strength of consumer demand in emerging countries. Leading the charge were the European, and especially German, car manufacturers and chemical companies. The Banking sector continued to post significant 2

5 Manager s Investment Report continued capital declines over the review period, despite a strong start to Fears over the acceleration of defaults, whether corporate or sovereign, and the need to bolster capital bases from fragile levels were the main factors contributing to this performance. Trust Review During the period, the Trust benefited from its holdings in the German car companies BMW and Volkswagen. Notable additions to the Trust during the period included the Norwegian oilfield services company, Petroleum Geo-Services. This company is the technological leader in the seismic mapping of potential oil reservoirs under the sea bed, and will benefit from the rising oil price and the desire of multinational oil companies to find new reserves of oil. In December 2010 the Trust also bought a holding in Sky Deutschland, the German media company partly owned by News Corporation, which is building out satellite broadcasting in Germany along the lines of Sky in the UK. Sky Deutschland is benefiting from a strong German consumer, as well as a reinvigorated marketing effort under new management To accommodate new positions in the Trust we have trimmed holdings in the pharmaceutical sector, where we believe that the short-term growth prospects are less attractive. The manager also bought French oil services company Technip, switching out of Total. This was on the view that Technip has a more attractive growth profile by supplying bigger oil companies than Total. Danish pharmaceuticals company Novo Nordisk was purchased over the period in favour of Vivendi which was sold. Both companies exhibit defensive characteristics; however Novo Nordisk has a stronger long term growth story based on its dominant presence in the diabetes market. The Trust has no exposure to the banks of countries such as Portugal or Ireland. 3

6 Manager s Investment Report continued Outlook The themes we expect to be prevalent in European markets during the remainder of 2011 include the ongoing tension in the peripheral countries over the affordability of their debts, set against a backdrop of improving economic growth in the core countries, led by Germany. External demand for European products, such as cars and luxury goods, especially from the emerging markets, will also be a theme in the forefront of investors thinking. Economically, we expect growth to improve modestly, and that through the course of the year there will be growing discussion of the likelihood of interest rate rises, especially as inflation starts to pick up, led by commodity prices. In such an environment the Trust retains its pro-cyclical bias, with little exposure to peripheral European countries and relatively modest exposure to the banking sector, balancing the risks with markets that expect further solid growth. European equity markets have displayed significant turbulence, particularly in early August. Two adverse developments have led to a broad based loss of confidence and sudden bout of risk aversion. First, public squabbling around the raising of the US debt-ceiling culminated in a US debt downgrade by S&P. Second, the European debt crisis has intensified, leading to sharp falls in the major European stock markets. Legal & General Investment Management Limited (Investment Adviser) 15 August

7 Authorised Status Authorised Status This Trust is an Authorised Unit Trust Scheme as defined in section 243 of the Financial Services and Markets Act 2000 and is a UCITs Retail Scheme within the meaning of the FSA Collective Investment Schemes sourcebook. Directors Statement We hereby certify that this Manager s Report has been prepared in accordance with the requirements of the FSA Collective Investment Schemes sourcebook. M. B. Boardman S. D.Thomas (Director) (Director) Legal & General (Unit Trust Managers) Limited 15 September

8 Statement of Responsibilities Statement of the Manager s Responsibilities The Manager of the Trust is required by the FSA Collective Investment Schemes sourcebook (COLL) to prepare financial statements for each accounting period which give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the net revenue and the net gains on the Scheme property for the accounting period, and the financial position of the Trust at the end of that period. In preparing these financial statements, the Manager is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are prudent and reasonable; state whether applicable Accounting Standards have been followed, subject to any material departure disclosed and explained in the financial statements; and prepare the financial statements on the basis that the Trust will continue in operation unless it is inappropriate to presume this. The Manager is also required to manage the Trust in accordance with the Trust Deed, the Prospectus and the COLL, maintain proper accounting records to enable them to ensure that the financial statements comply with the Statement of Recommended Practice for Authorised Funds issued by the Investment Management Association (IMA) in October 2010 and the COLL and take in these respects reasonable steps for the prevention and detection of fraud and other irregularities. Statement of the Trustee s Responsibilities The Trustee is responsible for the safekeeping of all the property of the Scheme (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the Trustee to take reasonable care to ensure that the Scheme is managed in accordance with the Financial Services Authority s Collective Investment Scheme sourcebook (COLL), as amended, the Scheme s Trust Deed and Prospectus, in relation to the pricing of, and dealings in, units in the Scheme; the application of the revenue of the Scheme; and the investment and borrowing of the Scheme. 6

9 Report of the Trustee Report of the Trustee to the Unitholders of Legal & General European Trust ( the Trust ) Having carried out such procedures as we considered necessary to discharge our responsibilities as Trustee of the Scheme, it is our opinion, based on the information available to us and the explanations provided, that, in all material respects, the Manager: has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme s units and the application of the Scheme s revenue in accordance with the COLL, the Trust Deed and Prospectus, and has observed the investment and borrowing powers and restrictions applicable to the Scheme. London The Royal Bank of Scotland Plc 15 September 2011 Trustee and Depositary Services 7

10 Portfolio Statement Portfolio Statement as at 4 August 2011 All investments are in ordinary shares unless otherwise stated. The percentages in brackets show the equivalent country holdings at 28 July Holding/ Market % of Nominal Value Net Value Investment Assets IRELAND 2.13% (0.00%) 850,000 C & C Group 2,443, CONTINENTAL EUROPE 93.16% (96.97%) Belgium 5.30% (4.13%) 76,600 Anheuser-Busch InBev 2,593, ,000 Umicore 3,475, ,069, Denmark 3.30% (0.00%) 52,360 Novo Nordisk 3,777, Finland 1.95% (0.00%) 70,150 Kone 2,238, France 18.39% (23.23%) 75,000 BNP Paribas 2,759, ,000 Faurecia 3,486, ,125 Groupe Danone 2,791, ,000 LVMH 3,828, ,500 Pernod-Ricard 2,603, ,000 Société Générale 1,919, ,345 Technip 3,685, ,074, Germany 27.13% (27.35%) 58,000 Allianz 4,307, ,350 Bayer 3,683, ,300 BMW 3,616, ,000 Deutsche Telekom 3,641, ,000 Henkel (Preferred) 2,132, ,307,968 Sky Deutschland 3,086, ,000 SAP 3,923, ,270 Siemens 3,457, ,000 Volkswagen (Preferred) 3,237, ,087, Luxembourg 2.83% (3.90%) 200,000 ArcelorMittal 3,245, Netherlands 4.95% (7.83%) 86,650 Akzo Nobel 2,872, ,276 ING Groep 2,803, ,676, Norway 2.18% (4.06%) 305,000 Petroleum Geo-Services 2,501,

11 Portfolio Statement continued Holding/ Market % of Nominal Value Net Value Investment Assets Spain 4.15% (4.02%) 360,000 Banco Santander SA 2,096, ,840 Industria de Diseno Textil 2,653, ,750, Sweden 2.12% (6.74%) 1,215,010 Swedish Orphan Biovitrum AB 2,434, Switzerland 20.86% (15.71%) 188,200 Credit Suisse Group 3,847, ,000 Nestlé 4,723, ,000 Novartis 4,205, ,275 Roche Holding 3,419, ,985 Sika AG 2,695, ,835 Swatch Group (B) 2,424, ,000 UBS 2,587, ,903, Portfolio of investments 109,200, Net other assets 5,395, Net assets 114,595, % Total purchases for the period: 178,192,739. Total sales for the period: 190,723,584. 9

12 Independent Auditors Report Independent Auditors Report to the Unitholders of Legal & General European Trust ( the Trust ) We have audited the financial statements of Legal & General EuropeanTrust for the period ended 4 August 2011 which comprise the statement of total return, the statement of change in net assets attributable to unitholders, the balance sheet, the related notes and the distribution table. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and the Statement of Recommended Practice Financial Statements of Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for Authorised Funds ). Respective responsibilities of Authorised Fund Manager and Auditors As explained more fully in the Statement of Manager s Responsibilities the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Trust s unitholders as a body in accordance with paragraph of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trust s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and the overall presentation of the financial statements. In addition we read all the financial and non-financial information in the Authorised Fund Manager s Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 10

13 Independent Auditors Report continued Opinion on the financial statements In our opinion the financial statements: give a true and fair view of the financial position of the Trust at 4 August 2011 and of the net revenue and the net gains of the scheme property of the Trust for the period then ended; and have been properly prepared in accordance with the Statement of Recommended Practice for Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. Opinion on other matters prescribed by the Collective Investment Schemes sourcebook In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Fund Manager s Report for the financial period for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Collective Investment Schemes sourcebook requires us to report to you if, in our opinion: proper accounting records for the Trust have not been kept; or the financial statements are not in agreement with the accounting records and returns. London PricewaterhouseCoopers LLP 15 September 2011 Chartered Accountants & Statutory Auditors The accounts are published at: managers-reports, which is a website maintained by the Manager. The maintenance and integrity of the Legal & General website is the responsibility of the Authorised Fund Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 11

14 Financial Statements Statement of Total Return for the period ended 4 August /07/10 to 29/07/09 to 04/08/11 28/07/10 Notes Income Net capital gains 2 6,080,574 5,776,439 Revenue 3 3,527,213 2,471,846 Expenses 4 (2,206,269) (1,612,226) Finance costs: Interest 6 (4,172) (998) Net revenue before taxation 1,316, ,622 Taxation 5 (444,158) (392,652) Net revenue after taxation for the period 872, ,970 Total return before distributions 6,953,188 6,242,409 Finance costs: Distributions 6 (872,614) (465,970) Change in net assets attributable to Unitholders from investment activities 6,080,574 5,776,439 Statement of Change in Net Assets attributable to Unitholders for the period ended 4 August /07/10 to 29/07/09 to 04/08/11 28/07/10 Opening net assets attributable to Unitholders 119,459,832 81,281,031 Amounts received on creation of units 335,668 1,548,107 In-specie creations 33,018,750 Amounts paid on cancellation of units (11,523,191) (2,374,979) (11,187,523) 32,191,878 Change in net assets attributable to Unitholders from investment activities 6,080,574 5,776,439 Retained distribution on accumulation units 242, ,310 Unclaimed distributions Closing net assets attributable to Unitholders 114,595, ,459,832 To accommodate the transfer of fund administration, the Trust s period end date, normally 28 July, was moved to 4 August. 12

15 Financial Statements continued Balance Sheet as at 4 August /08/11 28/07/10 Notes ASSETS Investment assets 109,200, ,842,142 Debtors 7 3,497,604 1,924,961 Cash and bank balances 8 6,395,570 2,434,600 Total other assets 9,893,174 4,359,561 Total assets 119,093, ,201,703 LIABILITIES Investment liabilities Creditors 9 (3,323,069) (194,565) Bank overdrafts 8 (584,571) (62,054) Distribution payable on distribution units (590,279) (485,252) Total other liabilities (4,497,919) (741,871) Total liabilities (4,497,919) (741,871) Net assets attributable to Unitholders 114,595, ,459,832 To accommodate the transfer of fund administration, the Trust s period end date, normally 28 July, was moved to 4 August. 13

16 Notes to the Financial Statements 1. Accounting policies (a) Changes to accounting policies The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investments, and in accordance with the Statement of Recommended Practice for Authorised Funds issued by the IMA in October 2010 ( the IMA SORP 2010 ). As at 28 July 2010, the financial statements were prepared in accordance with the Statement of Recommended Practice for Authorised Funds issued by the IMA in November There has been no impact on the financial statements disclosure for the period. (b) Recognition of revenue Revenue from quoted equities and non-equity shares is recognised net of attributable tax credits when the security is quoted ex-dividend. Revenue from unquoted equity investments is recognised net of attributable tax credits when the dividend is declared. All other revenue is recognised on an accruals basis. Overseas revenue received after the deduction of Withholding tax is shown gross of taxation, within the taxation consequences shown within the taxation charge. Special dividends are treated as either revenue or capital depending on the facts of each particular case. Underwriting commission is taken to revenue and recognised when the issue takes place, except where the Trust is required to take up all or some of the shares underwritten, in which case an appropriate proportion of the commission is deducted from the cost of those shares. Revenue from derivative instruments will be treated in accordance with Note 1(h). (c) Treatment of expenses All expenses (other than those relating to the purchase and sale of investments and Stamp Duty Reserve Tax) are charged against revenue on an accruals basis. (d) Distribution policy The policy is to distribute all available revenue, after deduction of those expenses which are chargeable in calculating the distribution. The Manager s periodic fee is deducted from revenue for the purpose of calculating the distribution. 14

17 Notes to the Financial Statements continued The ordinary element of stock dividends is treated as revenue and forms part of the distribution. In the case of an enhanced stock dividend, the value of the enhancement is treated as capital and does not form part of the distribution. Distributions which have remained unclaimed by Unitholders for over six years are credited to the capital property of the Trust. (e) Basis of valuation of investments All investments are valued at their fair value as at 12 noon on 4 August 2011, being the last working day of the accounting period. The fair value for non-derivative securities is bid market price, excluding any accrued interest and the fair value for derivative instruments is the cost of closing out the contract at the balance sheet date. Where values cannot be readily determined, the securities are valued at the Manager s best assessment of their fair value. (f) Taxation Provision is made for taxation at current rates on the excess of investment revenue over expenses, with relief for overseas taxation taken where appropriate. Deferred tax is provided for on all timing differences that have originated but not reversed by the balance sheet date, other than those differences that are regarded as permanent. Any liability to Deferred tax is provided for at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money. (g) Exchange rates Transactions in foreign currencies are translated at the rate of exchange ruling on the date of the transaction. Where applicable, assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange ruling at 12 noon on 4 August 2011, being the last working day of the accounting period. (h) Derivative instruments Financial derivative instruments may be used by the Trust for efficient portfolio management, for example to hedge investment exposure or to adjust exposure in a cost effective manner. Derivative instruments held within the Trust will be accounted for and taxed in accordance with the Statement of Recommended Practice for Authorised Funds (IMA SORP 2010). Derivative transactions will be treated as either revenue or capital depending on the motives and circumstances on acquisition. 15

18 Notes to the Financial Statements continued 2. Net capital gains 29/07/10 to 29/07/09 to 04/08/11 28/07/10 The net capital gains during the period comprise: Non-derivative securities 5,888,877 5,844,962 Currency gains/(losses) 195,751 (63,188) Transaction charges (4,054) (5,335) Net capital gains 6,080,574 5,776, Revenue 29/07/10 to 29/07/09 to 04/08/11 28/07/10 Non-taxable overseas dividends 3,525,872 1,724,170 Taxable overseas dividends 743,854 Bank interest 1,341 Underwriting commission 3,822 3,527,213 2,471,846 16

19 Notes to the Financial Statements continued 4. Expenses 29/07/10 to 29/07/09 to 04/08/11 28/07/10 Payable to the Manager, associates of the Manager and agents of either of them: Manager s periodic fee 1,963,644 1,428,052 Registration fees 196, ,303 2,160,008 1,546,355 Payable to the Trustee, associates of the Trustee and agents of either of them: Trustee s fees 15,576 11,078 Safe custody fees 20,774 19,443 36,350 30,521 Other expenses: Audit fee 7,700 7,500 VAT on Audit fees 890 1,139 FSA fee Legal and professional fees 1,175 26,570 9,911 35,350 Total expenses 2,206,269 1,612,226 17

20 Notes to the Financial Statements continued 5. Taxation (a) Analysis of taxation charge in period 29/07/10 to 29/07/09 to 04/08/11 28/07/10 Overseas tax 444, ,652 Current tax [note 5(b)] 444, ,652 Deferred tax [note 5(c)] Total taxation 444, ,652 (b) Factors affecting taxation charge for the period The Current tax charge excludes capital gains and losses for the reason that Authorised Unit Trusts are not subject to Corporation tax on these items. Current tax differs from taxation assessed on net expense before taxation as follows: Net revenue before taxation 1,316, ,622 Net revenue before taxation multiplied by the applicable rate of Corporation Tax at 20% (2010: 20%) 263, ,724 Effects of: Overseas tax 444, ,652 Relief for overseas tax treated as an expense (20,454) Revenue not subject to taxation (705,174) (344,834) Excess unutilised management expenses 441, ,293 Currency movement not subject to taxation (4,729) Current tax 444, ,652 (c) Provision for Deferred tax There is no deferred tax provision in the current or preceding period. At the period end there is a potential deferred tax asset of 640,113 ( 198,293 as at 28 July 2010) due to surplus management expenses. It is unlikely the Trust will generate sufficient taxable profits in the future to utilise these amounts and therefore no deferred tax asset has been recognised (28 July 2010: same). 18

21 Notes to the Financial Statements continued 6. Finance costs Distributions The distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units comprise: 29/07/10 to 29/07/09 to 04/08/11 28/07/10 Final distribution 832, ,562 Add: Revenue deducted on cancellation of units 40,121 7,357 Less: Revenue received on creation of units (309) (236,949) Distributions for the period 872, ,970 Interest Bank overdraft interest 4, Total finance costs 876, , Debtors 04/08/11 28/07/10 Amounts receivable for creation of units Sales awaiting settlement 1,658,467 Receivable for FX contracts 3,021,331 Accrued revenue 474,731 Bank interest 66 Recoverable overseas tax 265,332 Recoverable VAT ,497,604 1,924, Cash and bank balances 04/08/11 28/07/10 Cash and bank balances 6,395,570 2,434,600 Bank overdrafts (584,571) (62,054) Net uninvested cash 5,810,999 2,372,546 19

22 Notes to the Financial Statements continued 9. Creditors 04/08/11 28/07/10 Amounts payable for cancellation of units 96,311 30,492 Payable for FX contracts 3,004,919 Accrued expenses 221, ,049 Bank overdraft interest 24 3,323, , Contingent liabilities and outstanding commitments There were no contingent liabilities or outstanding commitments at the balance sheet date (28 July 2010: Same). 11. Risk in relation to financial instruments The Trust s investment objective is stated on page 2. In pursuing its objective, the Trust holds financial instruments which expose it to various types of risk. The main risks, and the Manager s policy for managing these risks, which were applied consistently throughout the current and preceding period, are set out below. (a) Credit and liquidity risk Credit risk is the risk of suffering loss due to another party not meeting its financial obligations. The primary source of this risk to the Trust is for trade counterparties to fail to meet their transaction commitments. This risk is managed by appraising the credit profile of financial instruments and trade counterparties. Liquidity risk relates to the capacity to meet liabilities. The primary source of this risk to the Trust is the liability to Unitholders for any cancellation of units. This risk is minimised by holding cash and readily realisable securities and via access to overdraft facilities. (b) Market risk Market risk arises mainly from uncertainty about future prices. The primary source of this risk to the Trust is the potential movement in the value of financial instruments held as a result of price fluctuations. The Manager adheres to the investment guidelines and borrowing powers established in the Trust Deed, Prospectus and the COLL. In this way, the Manager monitors and controls the exposure to risk from any type of security, sector or issuer. The Trust may also use derivative instruments to mitigate risk and reduce costs. These instruments are not utilised for speculative purposes. Derivative instruments were not utilised during the current or preceding period. 20

23 Notes to the Financial Statements continued (c) Foreign currency risk Foreign currency risk is the risk of movements in the value of overseas financial instruments as a result of fluctuations in exchange rates. This risk is managed by the utilisation of forward currency contracts as necessary. Forward currency contracts were not utilised during the current or preceding period. The foreign currency profile of the Trust s net assets at the balance sheet date was: Net foreign currency assets Monetary Non-monetary 04/08/11 exposures exposures Total Currency Danish Krone 1 3,778 3,779 Euro 5,552 76,584 82,136 Norwegian Krone 7 2,501 2,508 Swedish Krona 1 2,434 2,435 Swiss Franc ,903 24,350 Net foreign currency assets Monetary Non-monetary 28/07/10 exposures exposures Total Currency Euro 3,679 84,177 87,856 Norwegian Krone 4,846 4,846 Swedish Krona 7 8,057 8,064 Swiss Franc ,762 18,896 (d) Interest rate risk Interest rate risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates. The Trust s only interest bearing financial instruments were its bank balances and overdraft facilities as disclosed in note 8. Cash is deposited, and overdraft facilities utilised, on normal commercial terms and earn or bear interest based on LIBOR or its overseas equivalent. (e) Derivative risk Sensitivity analysis Derivative risk arises from uncertainty about future market movements. This risk is managed by the policies shown within Market risk. At the balance sheet date, no derivatives were held that could impact the Trust in a significant way (28 July 2010: same). (f) Fair value The fair value of a financial instrument is the amount for which it could be exchanged between knowledgeable, willing parties in an arm s length transaction. There is no significant difference between the value of the financial assets and liabilities, as shown in the financial statements, and their fair value. 21

24 Notes to the Financial Statements continued 12. Portfolio transaction costs 29/07/10 to 29/07/09 to 04/08/11 28/07/10 Analysis of total purchase costs: Purchases before transaction costs 177,729, ,273,251 Commissions 354, ,288 Taxes 108, Total purchase costs 463, ,539 Gross purchases total 178,192, ,451,790 Analysis of total sale costs: Sales before transaction costs 191,105,653 97,372,366 Commissions (382,062) (196,058) Fees (7) (7,120) Total sale costs (382,069) (203,178) Total sales net of transaction costs 190,723,584 97,169, Unit classes The Trust currently has two unit classes: E-Class and R-Class. The annual management charge on each unit class can be found on page 28. The net asset value of each unit class, the net asset value per unit and the number of units in each class are given in the comparative table on page 26. The distribution per unit class is given in the distribution table on page 24. All classes have the same rights on winding up. 22

25 Notes to the Financial Statements continued 14. Ultimate controlling party and related party transactions The Manager and Trustee are regarded as controlling parties of the Trust by virtue of having the ability to act in concert in respect of Trust operations. The ultimate controlling parties of the Manager and Trustee are Legal & General Group Plc and The Royal Bank of Scotland Plc, respectively. These entities and their subsidiaries are also related parties of the Trust. Legal & General (Unit Trust Managers) Limited acts as principal on all the transactions of units in the Trust. The aggregate monies received through creations or paid on cancellations are disclosed in the Statement of Change in Net Assets attributable to Unitholders. At the period end, the Manager and its associates held 61.43% (61.01% as at 28 July 2010) of the Trust's units in issue. There were no units held by the Trustee or its associates. Details of all other material related party transactions during the period and any payment amounts outstanding at the balance sheet date are disclosed in notes 4, 6, 7 and 9 to the financial statements and the Statement of Change in Net Assets attributable to Unitholders. Within note 9, accrued expenses and bank overdraft interest (including amounts due to associates and agents) of 7,444 ( 6,810 as at 28 July 2010) are due to the Trustee and 205,105 ( 148,377 as at 28 July 2010) are due to the Manager. 15. Post balance sheet market movements As at the close of business on the balance sheet date the Net Asset Value per distribution unit was p. The Net Asset Value per distribution unit for the Trust as at 12 noon on 14 September 2011 was p. This represents a decrease of 14.73% from the period end value. Over the same period the FTSE All-World Europe (excluding UK) Index fell by 10.42% (Source: Bloomberg). Although only over a short time period, the extreme moves in early August did not favour the Trust s longer term growth profile, as defensive areas of the market outperformed. 23

26 Distribution Table Distribution Table for the period ended 4 August 2011 Group 1: units purchased prior to a distribution period Group 2: units purchased during a distribution period Equalisation is the average amount of revenue included in the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. As capital it is not liable to Income tax but must be deducted from the cost of units for Capital Gains tax purposes. Final dividend distribution in pence per unit Period 29/07/10 04/08/11 Net Equalisation Distribution Distribution Revenue 28/09/11 28/09/10 E-Class distribution Group Group E-Class accumulation Group Group R-Class distribution Group Group R-Class accumulation Group Group

27 Trust Facts Total Expense Ratios 04 Aug Jul 10 E-Class 1.69% 1.69% R-Class 1.69% 1.69% The Total Expense Ratio is the ratio of the Trust s operating costs (excluding overdraft interest) to the average net assets of the Trust. To accommodate the transfer of fund administration, the Trust s period end date, normally 28 July, was moved to 4 August. 25

28 Performance Record Net Asset Values Net Asset Net Asset Number Of Accounting Value Of Value Per Units Date Trust Unit In Issue 28 Jul 09 E-Class Distribution Units 78,060, p 38,128,507 Accumulation Units 1,695, p 774,047 R-Class Distribution Units 252, p 123,250 Accumulation Units 1,273, p 581, Jul 10 E-Class Distribution Units 82,894, p 38,063,932 Accumulation Units 1,661, p 709,126 R-Class Distribution Units 298, p 137,268 Accumulation Units 34,604, p 14,767, Aug 11 E-Class Distribution Units 80,643, p 35,463,364 Accumulation Units 1,485, p 602,759 R-Class Distribution Units 408, p 179,855 Accumulation Units 32,057, p 13,007,486 To accommodate the transfer of fund administration, the Trust s period end date, normally 28 July, was moved to 4 August. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 26

29 Performance Record continued Unit Price Range and Net Revenue E-Class Units Highest Lowest Net Year Offer Bid Revenue Distribution Units p p p p p p p p p p p p p p p 2011 (1) p p p Accumulation Units p p p p p p p p p p p p p p p 2011 (1) p p p R-Class Units Highest Lowest Net Year Offer Bid Revenue Distribution Units p p p p p p p p p p p p p p p 2011 (1) p p p Accumulation Units p p p p p p p p p p p p p p p 2011 (1) p p p (1) The above tables show highest offer and lowest bid prices to 04 August 2011 and the net revenue per unit to 28 September Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 27

30 General Information Constitution Launch date: 9 September 1985 Period end date for distribution: 4 August (28 July thereafter) Distribution date: 28 September Minimum initial lump sum investment: E-Class 100,000 R-Class 500 Minimum monthly contribution: E-Class N/A R-Class 50 Valuation point: 12 noon Management charges: E-Class Annual 1.5% R-Class Annual 1.5% Initial charges: E-Class N/A R-Class 5% Pricing and Dealing The prices are published on the internet at daily-fund-prices immediately after they become available. Dealing in units takes place on a forward pricing basis, from 8:30am to 6:00pm, Monday to Friday. Buying and Selling Units Units may be bought on any business day from the Manager or through a financial adviser by telephoning, completing an application form or on the internet at Units may normally be sold back to the Manager on any business day at the bid price calculated at the following valuation point. ISA Status This Trust may be held within this tax advantaged savings arrangement. The favourable tax treatment of ISAs may not be maintained. For full written information please contact your usual financial adviser or ring Call charges will vary. We may record and monitor calls. Stamp Duty Reserve Tax Stamp Duty Reserve Tax suffered on the surrender of units where applicable, has been charged against the capital assets of the Trust. 28

31 General Information continued Prospectus and Manager s Reports The Manager will send to all persons on the Unitholder Register annual and interim short form reports. Copies of the Prospectus and the most recent annual or interim reports are available free of charge by telephoning , or by writing to the Manager. Do you have difficulty in reading information in print because of a disability? If so, we can help. We are able to produce information for our clients in large print and braille. If you would like to discuss your particular requirements, please contact us on Call charges will vary. We may record and monitor calls. Significant Changes Change to annual accounting date The accounting date for 28 July 2011 was moved to 4 August 2011, as allowed by the Collective Investment Schemes sourcebook. This change will apply to the current accounting date only and will revert to the usual date from 28 January 2012 and thereafter. The income allocation date, or pay date, for this accounting date will be made as usual on 28 September Change in Fund Accountant The Fund Accountant of the Trust has changed. Bank of New York Mellon (International) Limited ceased to be the Fund Accountant on 29 August 2011 and Northern Trust Global Services Limited has taken on responsibility thereafter. These changes have no impact upon individual clients investments and no action is required from investors. 29

32 General Information continued Manager Legal & General (Unit Trust Managers) Limited Registered in England No Registered office: One Coleman Street, London EC2R 5AA Telephone: Authorised and regulated by the Financial Services Authority Directors of the Manager M. B. Boardman S. C. Ellis M. J. Gregory S. R. Pistell S. D.Thomas Secretary A. Fairhurst Registrar Legal & General (Portfolio Management Services) Limited P. O. Box 6080 Wolverhampton WV1 9RB Authorised and regulated by the Financial Services Authority Dealing: Enquiries: Registration: Call charges will vary. We may record and monitor calls. Trustee The Royal Bank of Scotland Plc Trustee and Depositary Services Gogarburn P.O. Box 1000 Edinburgh EH12 1HQ Authorised and regulated by the Financial Services Authority Independent Auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT Investment Adviser Legal & General Investment Management Limited One Coleman Street, London EC2R 5AA Authorised and regulated by the Financial Services Authority 30

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36 Authorised and regulated by the Financial Services Authority Legal & General (Unit Trust Managers) Limited Registered in England No Registered office: One Coleman Street, London EC2R 5AA