Legal & General US Index Trust. Annual Manager s Short Report for the year ended 5 December Distribution Number 11

Transcription

1 Legal & General US Index Trust Annual Manager s Short Report for the year ended 5 December 2010 Distribution Number 11

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3 Investment Objective and Policy The investment objective of this Trust is to track the capital performance of the US equity market, as represented by the FTSE World USA Index, by investment in a representative sample of stocks selected from all economic sectors (including a stock or stocks reasonably expected to be shortly part of that Index). Securities in the FTSE World USA Index will be held with weightings generally proportionate to their company s market capitalisation. From time to time non-index constituents may be held as a result of corporate action and these holdings will be sold or transferred as soon as reasonably practical. Risk Profile Market Risk Market risk arises mainly from uncertainty about future prices. The Manager adheres to the investment guidelines and in this way, monitors and controls the exposure to risk from any type of security, sector or issuer. Currency Risk This Trust is invested in overseas financial securities. The performance of the Trust may therefore be affected by changes in exchange rates. This risk may be managed by the use of forward currency contracts, which aim to manage the effect of changing exchange rates. Trust Facts Period End Dates for Distributions: 5 Jun, 5 Dec Distribution Dates: 5 Aug, 5 Feb Total Expense Ratios: 5 Dec 10 5 Dec 09 R-Class 0.82% 0.78% I-Class 0.35% 0.33% The Total Expense Ratio is the ratio of the Trust s operating costs (excluding overdraft interest) to the average net assets of the Trust. 1

4 Trust Performance Net Asset Net Asset Number Of Accounting Value Of Value Per Units Date Trust Unit In Issue 5 Dec 08 R-Class Distribution Units 445,300, p 372,113,524 Accumulation Units 114,775, p 90,479,794 I-Class Distribution Units 114,391, p 95,620,570 Accumulation Units 357,062, p 277,972,012 5 Dec 09 R-Class Distribution Units 486,060, p 359,524,161 Accumulation Units 154,447, p 106,458,687 I-Class Distribution Units 140,646, p 104,040,545 Accumulation Units 365,190, p 247,603,149 5 Dec 10 R-Class Distribution Units 596,635, p 381,112,830 Accumulation Units 191,629, p 113,124,349 I-Class Distribution Units 146,196, p 93,378,394 Accumulation Units 476,885, p 275,636,357 Past performance is not a guide to future performance. The price of units and 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. Distribution Information R-Class The distribution payable on 5 February 2011 is p net per unit for distribution units and p net per unit for accumulation units. I-Class The distribution payable on 5 February 2011 is p net per unit for distribution units and p net per unit for accumulation units. 2

5 Portfolio Information The top 10 holdings and their associated weighting for the current and preceding year are: Top 10 Holdings at 5 December 2010 Percentage of Holding Net Asset Value Exxon Mobil 3.05% Apple 2.44% Microsoft 1.96% IBM 1.54% General Electric 1.49% Procter & Gamble 1.49% Johnson & Johnson 1.47% Chevron 1.44% AT&T 1.41% JPMorgan Chase & Co 1.31% Top 10 Holdings at 5 December 2009 Percentage of Holding Net Asset Value Exxon Mobil 3.41% Microsoft 2.51% Procter & Gamble 1.72% Johnson & Johnson 1.68% Apple 1.66% General Electric 1.61% IBM 1.58% AT&T 1.55% JPMorgan Chase & Co 1.55% Wal-Mart Stores 1.49% Trust Holdings as at 5 December % 17% 16% 15% 10% 12% 12% 11% 11% 10% 5% 4% 3% 3% 0% Technology Financials Consumer Services Industrials Oil & Gas Health Care Consumer Goods Basic Materials Utilities Telecommunications 1% Net Other Assets Trust Holdings as at 5 December % 17% 16% 15% 10% 12% 12% 12% 11% 10% 5% 3% 3% 3% 1% 0% Technology Financials Health Care Industrials Consumer Services Oil & Gas Consumer Goods Utilities Basic Materials Telecommunications Net Other Assets 3

6 Unit Price Range and Net Revenue 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 98.10p p 2010 (2) p p p 2011 (3) p Accumulation Units p p p p p p p p p p p p p p p 2010 (2) p p p 2011 (3) p I-Class Units Highest Lowest Net Year Offer Bid Revenue Distribution Units 2005 (1) p p p p p p p p p p p p 97.63p p 2010 (2) p p p 2011 (3) p Accumulation Units 2005 (1) p p p p p p p p p p p p p p 2010 (2) p p p 2011 (3) p (1) From 6 December (2) The above tables show highest offer and lowest bid prices to 5 December (3) The above tables show the net revenue per unit to 5 February Past performance is not a guide to future performance. The price of units and 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. 4

7 Manager s Investment Report During the year under review, the bid price of the Trust s R-Class distribution units rose by 15.8%. This compares to a rise in the FTSE World USA Index of 16.3%, on a price return basis in Sterling adjusted terms (Source: Bloomberg). The tracking difference is primarily due to the Trust being valued using prevailing prices at 3pm UK time, whereas the Index is valued using close of business US prices. Past performance is not a guide to future performance. The value of investments and 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. The FTSE World USA Index is calculated by FTSE International Limited ( FTSE ). FTSE does not sponsor, endorse or promote this product. All copyright in the index values and constituent list belongs to FTSE. Legal & General has obtained full licence from FTSE to use such copyright in the creation of this product. FTSE TM, FT-SE and Footsie are trade marks of the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited ( FTSE ) under licence. Market/Economic Review The global economy emerged from severe downward pressure during 2009, after financial markets were left reeling from a systemic failure of the banking system and one of the sharpest recessions on record. Throughout the course of 2009, policy makers undertook extraordinary measures to rebuild confidence in the financial system and stimulate economic activity. A batch of economic releases at the end of the first quarter of 2010 suggested the US economy was starting to recover. This, together with the pledge from the US Federal Reserve that interest rates would be set to remain at exceptionally low levels for an extended period, invigorated the market. Fears over European fiscal deficits led to a sharp swing in the market and a downward trend in May This drop was partly mitigated for UK based investors, as Sterling continued to weaken against the US Dollar. The second half of 2010 saw the equity market continue to rise on the back of improved earnings growth expectations and this strength saw the Index finish the year under review up at levels not seen since September

8 Manager s Investment Report continued Trust Review The quarterly review of the FTSE All-World USA Index in December 2009 saw 16 additions and 24 deletions, with two significant additions being Western Digital and Priceline.com. This resulted in two-way Index turnover of approximately 3%. During the year the US Treasury gradually sold its stake in Citigroup resulting in an increase to 100% free float by the year end. This meant several Index weight increases throughout the year as the Index provider reflected these share sales. Other notable events included the successful Initial Public Offering (IPO) of General Motors as it returned to public ownership following its bail-out by the US Government at the height of the financial crisis of 2008/2009. There was one significant takeover during the review year, Merck s acquisition of Schering-Plough in cash and stock worth approx US$41 billion. The quarterly review of the Index in March 2010 saw no additions or deletions but a number of shares in issue changes. The largest weight increase was Walt Disney and IBM saw a reduction. The June 2010 Index review saw no additions or deletions either but there were share in issue increases for Berkshire Hathaway B-Class shares and Citigroup. In September 2010 there was again limited turnover, the most significant event being the deletion of Transocean following its reclassification from a US to a Swiss company. There were several weight increases for banking stocks during the review year. The largest of these saw Bank of America shareholders approve the conversion into common stock of over US$19 billion worth of common equivalent securities. Other notable stocks that had Index share increases were Goldman Sachs and JPMorgan Chase & Co. Cadbury (UK) was acquired by Kraft Foods for stock and cash totalling 11.5 billion. Berkshire Hathaway s US$36 billion acquisition of Burlington Northern Santa Fe was completed with a mixture of cash and stock. The three largest Index constituents at the end of the year were Exxon Mobil (3.05%), Apple (2.44%) and Microsoft (1.96%). 6

9 Manager s Investment Report continued Outlook Market consensus appears to confirm the view that the US economy will continue to recover during 2011 supported by improving company earnings. What s more, the valuation gap that now exists between equities and bonds suggests asset allocators may respond to this by moving out of bonds and into stocks. With the additional support of a continued loose monetary policy, we believe that 2011 should produce positive returns for US equities. Legal & General Investment Management Limited (Investment Adviser) 24 December

10 Manager s Report and Accounts Copies of the most recent Interim and Annual Long Form Manager s Reports are available free of charge by telephoning or by writing to the Manager. Call charges will vary. We may record and monitor calls. Other Information The information in this report is designed to enable unitholders to understand how the Trust has performed during the year under review and how it is invested at the year end. Further information on the activities and performance of the Trust can be obtained by telephoning or by writing to the Manager. 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 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, Hay s Galleria, 1 Hay s Lane London SE1 2RD 8

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12 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 Q