ANNUAL REPORT. Royal London Property Trust Annual Report for the year ended 31 December 2017 ASSET MANAGEMENT

Transcription

1 ANNUAL REPORT Annual Report for the year ended 31 December 2017 ASSET MANAGEMENT

2 TRUST INFORMATION Contents Page Trust Information 2 Manager s Investment Report* 3 Portfolio Statement* 4 Purchases and Sales 5 Comparative Table 6 Statement of Manager s Responsibilities* 7 Statement of the Trustee s Responsibilities 8 Report of the Trustee 8 Independent Auditors Report 9 Statement of Total Return 11 Statement of Change in Net Assets Attributable to Unitholders 11 Balance Sheet 12 Notes to the Financial Statements 13 Distribution Table 18 Fact File 19 Remuneration Policy (unaudited) 20 General Information 21 * The Manager s report comprises of these items. The ( the Trust ) is an authorised unit trust. The unit trust is a feeder fund which has been established to facilitate investment by Bodies Corporate into the Royal London Property Fund (RLPF, the Fund ). For more details, please refer to general information on pages 21 and 22. Manager The Manager is Royal London Unit Trust Managers Limited which is the sole director. Place of business and Registered office: 55 Gracechurch Street, London, EC3V 0RL Authorised and regulated by the Financial Conduct Authority; a member of The Investment Association (IA). T: F: Directors of the Manager Directors: A.S. Carter R.A.D. Williams P.A.C. Hillier (resigned 28 July 2017) A. Hunt (appointed 4 July 2017) R.S. James (resigned 31 December 2017) R. Kumar (appointed 20 June 2017) J.B. Platt (resigned 28 July 2017) S. Spiller (appointed 17 July 2017) C.R. Read (appointed 11 January 2018) Investment Advisor and Registrar Royal London Asset Management Limited Place of business and Registered office: 55 Gracechurch Street, London, EC3V 0RL Authorised and regulated by the Financial Conduct Authority. Trustee National Westminster Bank plc 280 Bishopsgate, London, EC2M 4RB Authorised and regulated by the Financial Conduct Authority. Independent Auditors PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 7 More London Riverside, London, SE1 2RT 2

3 MANAGER S INVESTMENT REPORT Fund performance for 12 months to 31st December month total return % Royal London Property Fund 6.68 AREF/IPD UK Quarterly Property Fund Index Other balanced property fund index Source: MSCI, as at 31 December Returns are net of management fees. It should be remembered that past performance is not a reliable indicator of future performance and that the value of shares, and the income derived from them, can vary. Portfolio commentary The property portfolio is currently valued at m, held in 37 properties with 150 tenants, a portfolio income yield of 4.30% and a reversionary portfolio yield of 4.74%. During the year, the Fund made three disposals, an Industrial Estate in Glasgow, for 4.70m, an Industrial Estate in Cirencester for 8.40m and a retail asset in York for 6.75m. The Fund made one purchase over the year, Lodge Farm Trade Park in Northampton, acquired in September for 10.42m. For the twelve months to 30 December 2017 the Fund had a return of 6.68% as measured by AREF/IPD UK Quarterly Property Fund Index. The Other Balanced Fund Index, comprising 20 Funds, showed a return of 10.58% in the same period. Consensus view is that Central London offices will see further rental falls and on average will underperform. Importantly, this is a market consensus view of the subsector and may not be indicative of individual assets. Part of this is cyclical, with some rents already high compared to historical averages. This position is in large part due to Brexit uncertainty, which has weighed on occupier demand and has delayed corporate decision making. Nevertheless, one area of the market benefitting from this has been flexible or shared workspace providers, who have grown very rapidly and increased their footprint on the landscape. To summarise, last year exceeded expectations. With a shortage of good product and other asset classes remaining expensive, we could see a repeat in 2018, but a number of the risks from twelve months ago have not disappeared and stock selection will remain paramount. Market commentary Looking back at 2017, in spite of a number of headwinds, the UK economy was surprisingly resilient. Despite ongoing uncertainty surrounding Brexit, a snap general election and heightened geo-political tensions in parts of the world, the UK economy delivered steady, if unspectacular growth. Twelve months ago we had anticipated that 2017 could be a difficult year for the UK real estate market. At the time, we believed the increasingly uncertain macroeconomic environment could dampen investor sentiment. Despite these concerns, commercial property in the UK delivered a relatively strong year, with total returns of 11.24%, as reported by the IPD Monthly Index. On average, capital values have increased by 5.44% when compared to twelve months ago. One of the main drivers of this capital appreciation, and a key component has been the continued wave of overseas investment into UK real estate. While total investment turnover at 56bn for the year did not match the level seen in 2015, it was up slightly on The proportion of investment involving overseas capital continues to grow and is a particularly dominant trend in the UK market. As an asset class, real estate remains very popular. As the hunt for yield persists and investors seek income, many global institutions have increased their allocation to the sector. We expect these trends to continue in the near term. The major cities of the UK remain attractively priced in a global context, and also when compared to domestic bond yields. Stephen Elliott Fund Manager 26 January 2018 Royal London Asset Management The views expressed are the author s own and do not constitute investment advice and are not an indicator of future Fund performance. Source: RLAM, unless otherwise stated. Following the end of the reporting period, the fund manager of the RL Property Fund, Stephen Elliott, who has managed the Fund since 2007, has left RLAM on 30 March 2018 to pursue other opportunities. Gareth Dickinson, RLAM s Head of Property, will take over the RL Property Fund on an interim basis, working closely with Andrew Johnston who has been Deputy Fund Manager for many years. Another feature of 2017 was the outperformance of the industrial sector, which surged ahead in both capital and rental terms. Supply and demand dynamics still look favourable and should support further growth. While momentum could cool and returns could therefore decline, we expect the sector to outperform the market average again this year. 3

4 PORTFOLIO STATEMENT AS AT 31 DECEMBER 2017 Fair/Market Total net Holding Investment value ( 000) assets (%) Property Authorised Investment Fund % (31/12/ %) 12,546,807 Royal London Property Fund 88, Total value of investments 88, Net other assets Total net assets 88, The comparative percentage figures in brackets are as at 31 December

5 SUMMARY OF MATERIAL PORTFOLIO CHANGES FOR THE YEAR ENDED 31 DECEMBER 2017 Purchases and Sales There were no purchases or sales in the Royal London Property Fund during the year (31/12/16: 686,000). 5

6 COMPARATIVE TABLE Class A Accumulation Change in net assets per unit 31/12/17 (p) 31/12/16 (p) 31/12/15 (p) Opening net asset value per unit Return before operating charges Operating charges Return after operating charges Distributions on accumulation unit (18.66) (16.56) (14.19) Retained distribution on accumulation units Closing net asset value per unit Performance Return after charges 6.02% 4.25% 7.78% Other information Closing net asset value ( 000) 88,852 83,838 79,763 Closing number of units 12,546,807 12,546,807 12,449,113 Operating charges 0.00% 0.00% 0.00% Prices Highest unit price Lowest unit price It should be remembered that past performance is not a reliable indicator of future performance and that the value of units, and the income derived from them, can vary. 6

7 STATEMENT OF MANAGER S RESPONSIBILITIES Financial statements for the year ended 31 December 2017, and this Manager s Report have been prepared in accordance with the rules of the Collective Investment Schemes Sourcebook, published by the Financial Conduct Authority (FCA). These require the Manager to prepare financial statements for each accounting year which give a true and fair view of the financial affairs of the Trust and of its net revenue and the net capital gains on the property of the Trust for the year. In preparing the financial statements the Manager is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; comply with the requirements of the Statement of Recommended Practice relating to Authorised Funds and the Trust Deed; follow United Kingdom Generally Accepted Accounting Practice and applicable accounting standards; keep proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements and; prepare accounts on a going concern basis unless inappropriate to do so. The Manager is responsible for the management of the Trust in accordance with its Trust Deed, Prospectus and the FCA s rules. The Manager has general responsibility for taking such steps as are reasonably open to him to prevent and detect fraud and other irregularities. 7

8 STATEMENT OF THE TRUSTEE S RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS OF THE TRUST The Trustee must ensure that the Trust is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook, the Investment Funds Sourcebook, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228) (the OEIC Regulations), as amended, the Financial Services and Markets Act 2000, as amended, (together the Regulations ), the Trust s Instrument of Incorporation and Prospectus (together the Scheme documents ) as detailed below. The Trustee must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Trust and its investors. The Trustee is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Trust in accordance with the Regulations. The Trustee must ensure that: the Trust s cash flows are properly monitored and that cash of the Trust is booked into the cash accounts in accordance with the Regulations; the sale, issue, redemption and cancellation of units are carried out in accordance with the Regulations; the values of units of the Trust are calculated in accordance with the Regulations; any consideration relating to transactions in the Trust s assets is remitted to the Fund within the usual time limits; the Trust s income is applied in accordance with the Regulations; and the instructions of the Alternative Investment Fund Manager ( the AIFM ) are carried out (unless they conflict with the Regulations). The Trustee also has a duty to take reasonable care to ensure that the Trust is managed in accordance with the Scheme documents and the Regulations in relation to the investment and borrowing powers applicable to the Trust. REPORT OF THE TRUSTEE TO THE UNITHOLDERS OF THE ROYAL LONDON PROPERTY TRUST Having carried out such procedures as we consider necessary to discharge our responsibilities as Trustee of the Trust, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Trust, acting through the Authorised Corporate Director: (i) has carried out the issue, sale, redemption and cancellation, and the calculation of the price of the Trust s units and the application of the Trust s revenue in accordance with the COLL Sourcebook and, where applicable, the OEIC regulations and the Instrument of Incorporation and Prospectus of the Fund; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Trust. National Westminster Bank plc 23 April

9 INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF THE ROYAL LONDON PROPERTY TRUST Report on the audit of the financial statements Opinion In our opinion, s financial statements: give a true and fair view of the financial position of the Trust as at 31st December 2017 and of the net revenue and the net capital gains on its scheme property for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable law, the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. We have audited the financial statements, included within the Annual Report (the Annual Report ), which comprise: the balance sheet as at 31st December 2017; the statement of total return, the statement of change in net assets attributable to unitholders and the statement of cash flows for the year then ended; the distribution tables; the accounting policies; and the notes to the financial statements, which include a description of the significant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ( ISAs (UK) ) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when: the Manager s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the Manager has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Trust s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Trust s ability to continue as a going concern. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors report thereon. The Authorised Fund Manager is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Managers Investment Report In our opinion, the information given in the Manager s Investments Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 9

10 INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF THE ROYAL LONDON PROPERTY TRUST (CONTINUED) Responsibilities for the financial statements and the audit Responsibilities of the Manager for the financial statements As explained more fully in the Statement of Manager s Responsibilities in Relation to the Financial Statements of the Trust set out on page 7, the Manager is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Manager is also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Manager is responsible for assessing the Trust s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intend to wind up or terminate the Trust, or have no realistic alternative but to do so. Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council s website at: auditorsresponsibilities. This description forms part of our auditors report. Use of this report 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. Other required reporting Opinion on matter required 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. Collective Investment Schemes sourcebook exception reporting Under the Collective Investment Schemes sourcebook we are also required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 23 April

11 FINANCIAL STATEMENTS Statement of Total Return for the year ended 31 December December December 2016 Note Income Net capital gains 7 2,673 1,317 Revenue 8 2,827 2,528 Expenses 9 Net revenue before taxation 2,827 2,528 Taxation 10 (486) (456) Net revenue after taxation 2,341 2,072 Total return before distributions 5,014 3,389 Distributions 11 (2,341) (2,072) Change in net assets attributable to unitholders from investment activities 2,673 1,317 Statement of Change in Net Assets Attributable to Unitholders for the year ended 31 December December December Opening net assets attributable to unitholders 83,838 79,763 Amounts receivable on issue of units 686 Amounts payable on cancellation of units 686 Change in net assets attributable to unitholders from investment activities 2,673 1,317 Retained distribution on accumulation units 2,341 2,072 Closing net assets attributable to unitholders 88,852 83,838 11

12 FINANCIAL STATEMENTS (CONTINUED) Balance Sheet as at 31 December 2017 ASSETS Fixed assets: 31 December December 2016 Note Investments 17 88,852 83,838 Current assets: Debtors Cash and cash equivalents 12 Total assets 88,852 83,838 LIABILITIES Creditors: Other creditors Distribution payable Total liabilities Net assets attributable to unitholders 88,852 83,838 The notes on pages 13 to 17 are an integral part of these financial statements. (Director) Royal London Unit Trust Managers Limited (Director) Royal London Unit Trust Managers Limited 12

13 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER General information About the Fund The (the Trust ) was authorised on 28 May The Trust is a non-ucits Fund. 2. Statement of compliance The individual financial statements of the Trust have been prepared in compliance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook and in accordance with the United Kingdom Accounting Standards, including Financial Reporting Standard 102, The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland ( FRS 102 ), the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the Investment Association in May 2014 (the 2014 SORP ) and the Trust Deed. 3. Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The company has adopted FRS 102 in these financial statements. Basis of preparation These financial statements are prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of land and buildings and certain financial assets and liabilities measured at fair value through profit or loss. The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Trust s accounting policies. There were no areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements during the current or prior year. Going concern As stated in the Statement of Manager s Responsibilities on page 7, the Manager continues to adopt the going concern basis in the preparation of the financial statements of the Trust. Exemptions for qualifying entities under FRS 102 FRS 102 allows a qualifying entity certain disclosure exemptions. The Trust has not taken advantage of any available exemption for qualifying entities. Recognition of revenue Revenue from equities and non-equity shares is recognised when the security is quoted ex-dividend. Revenue from unquoted equity instruments is recognised when the dividend/distribution is declared. Expenses recognition Expenses are recognised on an accruals basis. All expenses of the Trust are charged to, and paid for, by the Royal London Property Fund ( the Fund ). Taxation Income tax has been provided for at an appropriate rate for distribution to unitholders and the calculation of the unit price is net of tax. Income received from investment in the Royal London Property Fund is taxed depending on the income stream. Property Income being taxed at 20%, interest income being taxed at 20% and dividend income at 0%. Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred tax is not recognised on permanent differences. Deferred tax assets are recognised only to the extent that it is more likely than not that there will be taxable profits from which the future reversal of the underlying timing differences can be deducted. Units Units are classified as equity. Incremental costs directly attributable to the issue of new unit are shown in equity as a deduction, net of tax, from the proceeds. Units have no par value and, within each Class subject to their denomination, are entitled to participate equally in the profits arising in respect of, and in the proceeds of, the winding up of the Trust. Units do not carry preferential or pre-emptive rights to acquire further Units. Distribution to unitholders Dividends and other distributions to Trust s unitholders are recognised as a liability in the financial statements in the period in which the dividends and other distributions are approved by the Trustee. These amounts are recognised in the statement of changes in net assets attributable to unitholders. Related party transactions The Trust discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with its parent or with members of the same group that are wholly owned. 4. Distribution policies Basis of distribution Revenue is generated by the Trust s investments during each accounting period. Where revenue exceeds expenses, the net income of the Trust is available to be distributed to unitholders. In order to conduct a controlled distribution flow to unitholders, interim distributions will be made at the Manager s discretion, up to a maximum of the distributable income available for the period. Revenue attributable to accumulation unitholders is retained at the end of the distribution period and represents a reinvestment of revenue. Expenses In determining the net revenue available for distribution, expenses related to the purchase and sale of investments are ultimately charged to the Capital of the Fund. 13

14 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER Risk Management policies The Trust has a concentrated portfolio (it invests 100% of its assets in the Fund) and if this investment declines in value or is otherwise adversely affected, it will have a direct effect on the Trust s value. With the exception of the above, the risk factors applicable to the Fund also apply to the Trust as follows: Market price risk and valuation of property The exposure to market risk arising from the prevailing general economic conditions and market sentiment, may affect the balance sheet and total return of the Fund. Immovable property and immovable property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to uncertainty and are a matter of an independent valuers opinion. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where a sale occurs shortly after the valuation date. 6. Changes to how interest will be distributed from investment funds in the UK Following changes announced in the March 2016 Budget, interest distributions from authorised investment funds may be paid without deducting income tax (currently 20%). The Royal London Property Fund is a Property Authorised Investment Fund. Distributions from the fund comprise three streams of income: Property Income Distributions, Interest Income and Dividend Income. As a result of the changes, prices for the share classes of the Royal London Property Fund have been calculated without an accrual for the deduction of income tax on interest distributions from 1 March Market risk is minimised through holding a geographically diversified portfolio that invests across various property sectors. The Manager adheres to the investment guidelines and investment and borrowing powers established in the Prospectus, scheme particulars and in the rules governing the operation of open ended investment companies. Credit risk and liquidity risk The Trust can be exposed to credit risk arising from the possibility that another party fails to fulfil its obligations and liquidity risk surrounding its capacity to meet its liabilities. Investments in immovable property are relatively illiquid and more difficult to realise than most equities or bonds. If an asset cannot be liquidated in a timely manner then it may be harder to attain a reasonable price. The liquidity risk, derived from the liability to shareholders, is minimised through holding cash which can meet the usual requirements of share redemptions. However, in times of poor liquidity, the Authorised Fund Manager may permit deferral of redemptions for up to one month where a validly submitted redemption notice was received and accepted for a redemption exceeding 5% of the Net Asset Value. Currency risk All financial assets and financial liabilities of the Trust are in Sterling, thus the Trust has no exposure to currency risk at the balance sheet date. Interest rate risk The Trust has the ability to borrow up to 10% of the value of the Trust, but it did not take advantage of this. However, the Fund held 29.7m (31/12/16: 19.4m) cash at the end of the year and this is exposed to interest rate risk. 14

15 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER Net capital gains The net capital gains during the year comprise: 31 December December Non-derivative securities 2,673 1,317 Net capital gains 2,673 1, Revenue 31 December December Property income distribution 2,430 2,266 Interest income distribution 2 14 Dividend income distribution Total revenue 2,827 2, Expenses All fees and expenses of the Trust will be paid by the Royal London Property Fund to ensure parity of Unit prices in the Funds and share prices of the relevant classes of the Royal London Property Fund. As a result of this arrangement, Unitholders will bear their proportionate share of the fees and expenses of the Fund through their indirect investment in the Royal London Property Fund. No charges or expenses for their establishment and ongoing administration will be payable by the Trust. In the event that this arrangement is changed, the applicable fees will be set out in this section of the Prospectus. 10. Taxation a) Analysis of charge for the year 31 December December Corporation tax Current tax charge b) Factors affecting the current tax charge for the year The tax assessed for the year is lower (31/12/16: lower) than the standard rate of corporation tax in the UK for authorised unit trusts (AUT) (20%). The differences are explained below: Net revenue before taxation 2,827 2,528 Corporation 20% Effects of: Revenue not subject to taxation (79) (49) Current tax charge for the year c) Deferred tax There was no provision required for deferred tax at the balance sheet date (31/12/16: same). 15

16 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER Distributions Accumulation units 31 December December First Interim Second Interim Third Interim Final Net distribution for the year 2,341 2, Cash and cash equivalents The does not have a separate bank account. It is an integral part of the Property Authorised Investment Fund (PAIF) structure as corporate investors are required by the FCA and HMRC to invest into the RLPF via a trust known as a feeder fund. 13. Reconciliation of number of units Class A Accumulation Opening units issued at 01/01/17 12,546,807 Unit movements 01/01/17 to 31/12/17 Units issued Closing units at 31/12/17 12,546, Contingent liabilities and outstanding commitments There were no contingent liabilities or outstanding commitments at the balance sheet date (31/12/16: same). 15 Related party transactions The Trust s Manager, Royal London Unit Trust Managers Limited ( the Manager ) and the Trustee, National Westminster Bank plc, are related parties to the Trust as defined by Financial Reporting Standard 8 Related Party Disclosures. Management fees charged by the Manager are paid by the Royal London Property Fund and details of units created and cancelled by the Manager are shown in the statement of change in net assets attributable to unitholders. At the year end, the balance due to the Manager in respect of these transactions was nil (31/12/16: nil). Trustee fees, safe custody fees and activity fees charged by National Westminster Bank plc are paid by the Royal London Property Fund. At the year end, the balance due to National Westminster Bank plc and their associates in respect of these transactions was nil (31/12/16: nil). Royal London Asset Management (Nominees) Limited, as a material unitholder, is a related party holding units comprising 100% of the total net assets of the Trust as at 31 December 2017 (31/12/16: 100%). 16

17 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER Portfolio transaction costs For the year ended 31 December 2017 Value Commissions Analysis of total purchases costs % Purchases in the year 0.00 Total Total purchases including commissions For the year ended 31 December 2016 Value Commissions Analysis of total purchases costs % Purchases in the year Total 686 Total purchases including commissions Fair value of investments The primary financial instruments held by the Trust at 31 December 2017 were property related investments, cash, short term assets and liabilities to be settled in cash. The Trust did not hold, and was not a counterparty to, any derivative instruments either during the year or at the year end. The policies applied to the management of the financial instruments are set out in note 3. The fair values of the Trust s assets and liabilities are represented by the values shown in the balance sheet on page 12. There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. The Trust only holds Level 3 Assets. The fair value of investments has been determined using the following hierarchy: Category 1 Category 2 Category 3 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date. Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly. Inputs are unobservable (i.e for which market data is unavailable) for the asset or liability. For the year ended 31 December 2017 Category Total Investments Investment properties 88,852 88,852 For the year ended 31 December 2016 Category Total Investments Investment properties 83,838 83, Event after the end of reporting period The final distribution for the year ended 31 December 2017 was paid on 12 January

18 DISTRIBUTION TABLE FOR THE YEAR ENDED 31 DECEMBER 2017 Distribution in pence per unit Class A Accumulation Total net Total net Gross Income Net distributions distributions Distribution period income tax income January February March April May June July August September October November December From 6 April 2017, the UK government has announced no tax will be deducted from any interest distribution. 18

19 FACT FILE Launch date Class A Accumulation shares 28 May 2010 Accounting end dates Distribution dates (Institutional) 31 December (Final) 30 June (Interim) 31 January (Final) Minimum investment 100,000 Last business day of every month (Interim) Management charges Preliminary charge 0.00% ACD s periodic management charge 0.75% Performance fee -0.10% to +0.30% The Trust was launched following the conversion of the Royal London Authorised Property Unit Trust on 28 May 2010 into the Royal London Property Fund. 19

20 REMUNERATION POLICY (UNAUDITED) The Authorised Corporate Director of the, Royal London Unit Managers Trust Limited ( RLUTM ), is subject to remuneration policies, procedures and practices (together, the Remuneration Policy ), as required under the UCITS Directive ( UCITS V ). RLTUM has appointed Royal London Asset Management Limited ( RLAM ) as the Investment Adviser to the Fund. The Remuneration Policy is in line with the business strategy, objectives and values of the ACD and the interests of the and the investors in the trust and includes measures to avoid conflicts of interest. The Remuneration Policy applies to staff of the ACD whose professional activities have a material impact on the risk profile of the ACD or the ICVC, and ensures that an individual cannot be involved in determining or approving their own remuneration. The Remuneration Policy will be reviewed and updated annually by the board of directors of the ACD (the Board of Directors ). Details of the up-to-date Remuneration Policy (provided in the form of the UCITS Summary Remuneration Policy ), include a description of how remuneration and benefits are calculated, the identity of persons responsible for awarding the remuneration and benefits and the composition of the remuneration committee (if any). The UCITS Summary Remuneration Policy is available on the ACD s website and a paper copy may be obtained, free of charge, at the registered office of the ACD, upon request. RLUTM must identify its code staff, whose professional activities have a material impact on the risk profiles of RLUTM and the Fund. Code staff includes senior management, risk takers, control functions, and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and risk takers. The Remuneration Policy outlines how fixed and variable remuneration is calculated, which includes, but not limited to: an assessment of the individual member of staff s performance, the relevant Fund, the business unit and its risks; restrictions on the awarding of guaranteed variable remuneration; the balance between fixed and variable remuneration; payment of non-financial remuneration in the form of units or shares in the UCITS funds the Authorised Unit Trust Manger manages; a mandatory deferral period of at least 3 years for the payment of a substantial portion of the variable remuneration component; and the reduction or cancellation of remuneration in the case of under-performance. RLUTM has a board of directors (the Directors ). The Directors have waived their entitlement to receive a director s fee from RLUTM. RLUTM has no employees and therefore there are no other controlled functions, or senior management employed and paid by RLUTM. However, for the financial year ending 31 December 2016, total remuneration of 7,205,000 was paid to 10 individuals whose actions may have a material impact on the risk profile of RLUTM, of which 4,530,000 related to senior management. The fixed element of the total remuneration mentioned above is 2,502,000 and the variable element is 4,703,000. In accordance with the Remuneration Policy and the requirements of UCITS V, staff working for RLAM are not remunerated by the ACD but they are subject to remuneration requirements which are equally as effective as those in place under the UCITS Directive. RLAM is also subject to the Financial Conduct Authority s Remuneration Codes. 20

21 GENERAL INFORMATION The is an authorised unit trust. The unit trust is a feeder fund which has been established to facilitate investment by Bodies Corporate into the Royal London Property Fund (RLPF). RLPF is a Property Authorised Investment Fund (the PAIF ). The PAIF is an open ended investment company (OEIC) and PAIFs may invest in real property (commercial and residential) and units in UK Real Estate Investment Trusts (UK REITs). The Trust was created because corporate investors are required by the FCA and HMRC to invest into the PAIFs via a Feeder Fund in order to counter potential tax avoidance rules which prevent corporate investors from holding 10% or more of the PAIF but the rules allow them to participate through an intermediate feeder fund. Therefore, the feeder fund s sole investment comprises shares in the PAIF. As the feeder owns only shares of the PAIF, it will have the same ultimate investments, assets and liabilities as the PAIF. It will also have the same price, charges and performance as the PAIF. Consequently, these financial statements should be read in conjunction with the financial statements for the PAIF. Pricing and Dealing The buying (offer) price and selling (bid) price of units are determined by reference to the underlying market value of the net assets of the Trust at the relevant valuation point. Unit prices are normally calculated monthly however, if the markets are exceptionally volatile the Manager may conduct more frequent valuations to reflect any significant changes in the value of the Trust s underlying assets. Dealing in units conducted on a monthly basis; on the seventh business day following the end of the previous month, between 9:00 a.m. and 5:00 p.m. Buying Units Investors should complete an application form available from the Manager and send it to the Manager, on or before the 15th of the month prior to the Dealing Day, at its administration centre with a cheque payable to Royal London Unit Trust Managers Limited. On acceptance of the application, units will be sold at the relevant sale price, and a contract note confirming the sale price and the number of units sold together with, in appropriate cases, a notice of the applicant s right to cancel, will be issued. An order for the purchase of units will only be deemed to have been accepted by the Manager once it is in receipt of cleared funds for the application. Selling Units To redeem units, investors should provide a written instruction, three months in advance of a monthly Dealing Day, to the Manager at its administration centre with instructions to redeem the relevant number (if known) or value of units. The units will be repurchased at the price calculated at the valuation point on the appropriate Dealing Day. Proceeds of redemption (less, if the proceeds are to be remitted abroad, the cost of such remittance) will be paid no later than the close of business on the fourth business day following receipt of a signed form of renunciation. Cancellation Rights Where a person purchases units the Conduct Of Business Sourcebook (as amended from time to time) may give the investor the right to cancel the relevant purchase within 14 days of receipt of the requisite notice of a right to cancel. The right to cancel does not arise if (a) the investor is not a private customer, (b) the investor is not an execution-only customer, (c) the agreement to purchase is entered into through a direct offer financial promotion, or (d) the agreement is entered into under a customer agreement or during negotiations (which are not ISA related) intended to lead to a client agreement. Accumulation of Income All net income is automatically accumulated within the Trust and reflected in the price of units. UK Taxation This information is based on United Kingdom law and practice known at the date of this document. Unitholders are recommended to consult their professional adviser if they are in any doubt as to their tax position. The sole investment of the Trust is its holding of A Accumulation Shares in the PAIF. In outline, the relevant tax treatment of the PAIF is that it is not liable to tax on capital gains realised on the disposal of its investments. The income generated by its underlying property investment business is exempt from tax in the PAIF, as are any dividends received on underlying equity instruments. Its other income (which will mainly comprise interest) although technically taxable will be distributed as a tax-deductible payment so no tax should in practice be payable on it. The Trust is an authorised scheme and accordingly is not liable to tax on capital gains on the disposal of any of its property, that it shares in the PAIF. The Trust will be deemed to receive the appropriate proportion of the income accumulated on its holding of A Accumulation Shares in the Royal London Property Fund. This will be streamed (for tax purposes only) into up to three parts depending on the nature of the income generated by the PAIF. The property income accumulations stream will be accumulated net of basic rate of tax (20%) withheld by the PAIF, and this will satisfy the corporation tax liability of the Trust. Any dividends received by the PAIF will constitute a separate stream of PAIF dividend accumulations for tax purposes. No further tax will be payable by the Trust on this income, and the remaining income will be PAIF interest accumulations which will be accumulated net of basic rate of income tax (20%) withheld by the PAIF, which will satisfy the Trust s corporation tax liability on it. Corporate unitholders holding accumulation units in the Trust which are within the charge to corporation tax will be treated for tax purposes as receiving income which, depending on the breakdown of the income of the underlying PAIF, may be streamed into two parts (in these cases, the amounts will be indicated on the tax voucher). The income accumulated that represents income other than the PAIF dividend accumulations, should be treated by corporate investors as an annual payment (made after deduction of income tax at the rate of 20%). Unitholders subject to corporation tax on the income allocation may offset the basic rate income tax credit against their tax liability, while corporate investors that are exempt from corporation tax on the income, for example where a life office holds the units as pension business, may reclaim the amount specified on their tax voucher from HMRC. Income allocations representing the PAIF dividend accumulation will not generally be subject to corporation tax when received by a corporate shareholder but the notional tax credit attached cannot be reclaimed from HMRC. For any individual unitholders who are taxpayers, the gross dividend accumulations will be subject to UK income tax. A dividend accumulation is normally treated as being the top slice of income. The tax credit can be used to reduce the tax liability. A unitholder taxable at either the basic rate of tax (10% on dividends) will have no further tax to pay, whilst a unitholder taxable at the higher rate of tax (32.5% on dividends) will be liable to further tax equal to 22.5% of the gross income (equivalent to 25% of the net receipt), and unitholders liable to the additional rate of tax (42.5% on dividends) will be liable to further tax equal to approximately 36% of the gross income. UK resident individuals not liable to tax on all or part of their income allocation are unable to reclaim any part of the notional tax credit. For all income allocations: A tax voucher showing the amount of the income distributed or deemed to be distributed to the unitholders and the notional tax credits and tax deducted will be sent to the unitholders at the time of the distribution. Capital gain: The sale of units by unitholders will constitute a disposal for the purposes of tax on capital gains. For unitholders within the charge to corporation tax, net capital gains on disposal of holdings in the Trust will normally be added to their profits chargeable to corporation tax or exempt from it, depending on the circumstances of each unitholders. Individual unitholders resident or ordinarily resident in the UK will not be liable to tax on their capital gains, unless their chargeable gains from all sources are in excess of the annual exemption. 21

22 GENERAL INFORMATION (CONTINUED) UK Taxation (continued) SDRT: There is no Stamp Duty Reserve Tax (SDRT) payable on issues and redemptions of shares in the Trust. SDRT may be payable in certain circumstances when a unitholder transfers ownership of shares directly to another person. In such cases as permitted by COLL, the Manager reserves the right not to register the transfer of units until an amount to be notified by the Manager and not exceeding the rate of SDRT applied to the value of units transferred has been paid to the Manager. Authorisation The Trust was authorised by the Financial Conduct Authority on 28 May It is an authorised unit trust scheme and is a non-ucits retail scheme operating under Chapter 5 of COLL. The Trust is a feeder fund which has been established to facilitate investment by Bodies Corporate in the Royal London Property Fund. Trust Reports and Prospectus Copies of the latest yearly and half yearly financial statements and copies of the Prospectus may be obtained from Royal London Unit Trust Managers Limited upon request. 22

23 Royal London Asset Management Limited is a marketing group which includes Royal London Unit Trust Managers Limited, authorised and regulated by the Financial Conduct Authority and which manages collective investment schemes, registered in England and Wales number This company is a subsidiary of The Royal London Mutual Insurance Society Limited, registered in England and Wales number Registered office: 55 Gracechurch Street, London EC3V 0RL. SREP RLAM PD 0047