Legal & General European Trust Interim Manager s Report for the period ended 28 January 2011 (Unaudited)
Contents Page Number Manager s Investment Report 2 Authorised Status 4 Directors Statement 4 Portfolio Statement 5 Statement of Total Return 7 Statement of Change in Net Assets attributable to Unitholders 7 Balance Sheet 8 Notes to the Financial Statements 9 Trust Facts 10 Performance Record 11 General Information 13 1
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 13.1%. This compares to a rise of 13.9% in the FTSE Europe (excluding UK) Index in sterling terms (Source: Bloomberg). 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. Market/Economic Review European equity markets rose strongly during the period under review, driven by the provision of plentiful liquidity to financial systems by central banks around the world. The combination of strong emerging markets demand and nascent developed world economic recovery led the investors to the recognition that equities represent good value, especially relative to other asset classes. A constant in the background, however, was the threat of government debt restructuring in the peripheral countries of Europe and its likely impact on the European Union as a whole. Within markets 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, especially the German, car manufacturers. The Trust benefited here from its holding in the German car parts company, Continental. Also strong were the basic materials companies, with the European steel manufacturers performing well. In this sector the Trust has a holding in ArcelorMittal, which performed well during the period under review. The only sector to post a capital decline during the six months was the banking sector, in spite of a strong start to 2011. Fears over the acceleration of defaults, whether corporate or government, and the need to bolster capital bases from fragile levels were the main factors contributing to this performance. The Trust has comparatively low exposure to banks and no exposure at all to the banks of countries such as Spain, Portugal, Greece or Ireland. 2
Manager s Investment Report continued Trust Review 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 seabed and will benefit from the rising oil price and the desire of multinational oil companies to find new reserves of oil. Another addition was 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. To accommodate these new positions we have trimmed holdings in the pharmaceutical sector, where we believe that nearer term growth prospects are less attractive. Outlook The themes we expect to be prevailing in European markets during 2011 include the ongoing tension caused by countries with high debt, set against a backdrop of improving economic growth in the core of Europe, 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 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 L&G European Trust retains its pro-cyclical bias, with little exposure to peripheral European countries and relatively modest exposure to the banking sector, to balance the risks to markets and with expectations of further solid growth. 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 the Union itself is under threat, and that the stronger core countries remain firmly behind their neighbours. Legal & General Investment Management Limited (Investment Adviser) 10 February 2011 Note from the Manager The next accounting date of 28 July 2011 will be moved to 4 August 2011, as allowed by the Collective Investment Schemes sourcebook. This change will apply to the next accounting date only and will revert to the usual date of 28 July 2012 and thereafter. The income allocation date, or pay date, for any distribution at this accounting date will be made as usual on 28 September 2011. 3
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 17 March 2011 4
Portfolio Statement Portfolio Statement as at 28 January 2011 All investments are in ordinary shares unless otherwise stated. The percentages in brackets show the equivalent country holdings at 28 July 2010. Holding/ Market % of Nominal Value Net Value Investment Assets CONTINENTAL EUROPE 99.12% (96.97%) Belgium 0.00% (4.13%) Denmark 2.11% (0.00%) 450 AP Moller-Maersk 2,812,157 2.11 France 24.64% (23.23%) 154,834 Alstrom 5,536,343 4.15 63,125 Groupe Danone 2,396,390 1.79 53,000 Michelin 2,479,457 1.86 89,047 Pernod Ricard 5,421,929 4.06 60,850 Sanofi-Aventis 2,590,290 1.94 75,000 Société Générale 3,172,276 2.38 153,416 Total 5,696,499 4.27 302,837 Vivendi 5,594,929 4.19 32,888,113 24.64 Germany 26.54% (27.35%) 66,000 Allianz 5,761,217 4.32 105,175 BASF 5,169,552 3.88 50,000 Bayer 2,339,110 1.75 100,866 Continental 5,202,863 3.90 124,700 HeidelbergCement 5,235,753 3.92 130,423 Metro 5,832,872 4.37 1,300,000 Sky Deutschland 3,324,820 2.49 141,870 Symrise 2,553,206 1.91 35,419,393 26.54 Ireland 5.90% (0.00%) 1,547,150 Ryanair 4,838,160 3.63 400,000 Smurfit Kappa 3,033,562 2.27 7,871,722 5.90 Italy 2.02% (0.00%) 300,000 ERG 2,696,289 2.02 Luxembourg 4.27% (3.90%) 11,512 Aperam 298,947 0.22 230,246 ArcelorMittal 5,401,580 4.05 5,700,527 4.27 Netherlands 6.26% (7.83%) 118,400 CSM 2,469,039 1.85 796,076 ING Groep 5,883,018 4.41 8,352,057 6.26 Norway 1.95% (4.06%) 270,000 Petroleum Geo-Services 2,600,050 1.95 Spain 4.28% (4.02%) 358,000 Telefonica 5,713,272 4.28 5
Portfolio Statement Holding/ Market % of Nominal Value Net Value Investment Assets Sweden 5.22% (6.74%) 1,185,000 Swedish Orphan Biovitrum 4,255,772 3.19 245,000 Volvo (B) 2,713,576 2.03 6,969,348 5.22 Switzerland 15.93% (15.71%) 188,200 Credit Suisse Group 5,423,010 4.06 140,000 Meyer Burger Technology 2,739,735 2.06 170,000 Nestlé 5,850,226 4.38 27,000 Roche Holding 2,596,957 1.95 18,130 Swatch Group (B) 4,642,514 3.48 21,252,442 15.93 Portfolio of investments 132,275,370 99.12 Net other assets 1,180,241 0.88 Net assets 133,455,611 100.00% Total purchases for the period: 72,076,748. Total sales for the period: 72,470,669. 6
Financial Statements Statement of Total Return for the period ended 28 January 2011 28/01/11 28/01/10 Income Net capital gains 16,844,415 6,341,629 Revenue 543,180 230,178 Expenses (1,064,771) (772,478) Finance costs: Interest (780) (867) Net expense before taxation (522,371) (543,167) Taxation (75,276) (111,128) Net expense after taxation for the period (597,647) (654,295) Total return before distributions 16,246,768 5,687,334 Finance costs: Distributions (60) Change in net assets attributable to Unitholders from investment activities 16,246,708 5,687,334 Statement of Change in Net Assets attributable to Unitholders for the period ended 28 January 2011 28/01/11 28/01/10 Opening net assets attributable to Unitholders 119,459,832 81,281,031 Amounts received on creation of units 198,574 1,461,083 Amounts paid on cancellation of units (2,449,261) (881,773) (2,250,687) 579,310 Stamp Duty Reserve Tax (265) Change in net assets attributable to Unitholders from investment activities 16,246,708 5,687,334 Unclaimed distributions 23 182 Closing net assets attributable to Unitholders 133,455,611 87,547,857 The difference between the opening net assets and the comparative closing net assets is the movement in the second half of the year. 7
Financial Statements continued Balance Sheet as at 28 January 2011 28/01/11 28/07/10 ASSETS Investment assets 132,275,370 115,842,142 Debtors 224,003 1,924,961 Cash and bank balances 1,865,752 2,434,600 Total other assets 2,089,755 4,359,561 Total assets 134,365,125 120,201,703 LIABILITIES Investment liabilities Creditors (264,014) (194,565) Bank overdrafts (645,500) (62,054) Distribution payable on distribution units (485,252) Total other liabilities (909,514) (741,871) Total liabilities (909,514) (741,871) Net assets attributable to Unitholders 133,455,611 119,459,832 8
Notes to the Financial Statements (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 ). Previously the financial statements were prepared in accordance with the Statement of Recommended Practice for Authorised Funds issued by the IMA in November 2008. There has been no impact on the financial statements or on disclosure for the period. 9
Trust Facts Distribution Information The policy is to distribute, on an annual basis, all available revenue, after deduction of those expenses which are chargeable in calculating the distribution. This being the case, there is no interim distribution. Total Expense Ratios 28 Jan 11 28 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. 10
Performance Record Net Asset Values Net Asset Net Asset Number Of Accounting Value Of Value Per Units Date Trust Unit In Issue 28 Jul 08 E-Class Distribution Units 93,522,379 233.07p 40,126,312 Accumulation Units 2,230,026 245.18p 909,559 R-Class Distribution Units 273,503 233.07p 117,348 Accumulation Units 1,301,522 245.18p 530,851 28 Jul 09 E-Class Distribution Units 78,060,204 204.73p 38,128,507 Accumulation Units 1,695,234 219.01p 774,047 R-Class Distribution Units 252,329 204.73p 123,250 Accumulation Units 1,273,264 219.01p 581,375 28 Jul 10 E-Class Distribution Units 82,894,739 217.78p 38,063,932 Accumulation Units 1,661,644 234.32p 709,126 R-Class Distribution Units 298,939 217.78p 137,268 Accumulation Units 34,604,510 234.32p 14,767,882 28 Jan 11 E-Class Distribution Units 94,154,620 247.71p 38,010,706 Accumulation Units 1,821,128 266.53p 683,280 R-Class Distribution Units 392,368 247.71p 158,401 Accumulation Units 37,087,495 266.53p 13,915,076 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. 11
Performance Record continued Unit Price Range and Net Revenue E-Class Units Highest Lowest Net Year Offer Bid Revenue Distribution Units 2006 252.10p 210.00p 0.9678p 2007 286.40p 244.50p 4.4146p 2008 272.60p 151.80p 2.7984p 2009 254.00p 150.60p 3.4758p 2010 249.50p 201.10p 1.2702p 2011 (1) 248.80p 228.80p Accumulation Units 2006 257.70p 213.70p 0.9849p 2007 295.20p 253.70p 4.5118p 2008 283.40p 159.70p 2.9089p 2009 271.70p 158.50p 3.6564p 2010 266.90p 215.10p 1.3588p 2011 (1) 267.70p 246.20p R-Class Units Highest Lowest Net Year Offer Bid Revenue Distribution Units 2006 264.70p 210.00p 0.9678p 2007 300.70p 244.50p 4.4146p 2008 286.20p 151.80p 2.7984p 2009 266.70p 150.60p 3.4758p 2010 262.00p 201.10p 1.2702p 2011 (1) 261.20p 228.80p Accumulation Units 2006 270.60p 213.70p 0.9849p 2007 309.90p 253.70p 4.5118p 2008 297.60p 159.70p 2.9089p 2009 285.30p 158.50p 3.6564p 2010 280.30p 215.10p 1.3588p 2011 (1) 281.10p 246.20p (1) The above tables show highest offer and lowest bid prices to 28 January 2011. 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. 12
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 www.legalandgeneral.com/investments/daily-prices.html 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 www.legalandgeneral.com. 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 0370 050 0955. 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. *Please see Significant Changes section on page 14. 13
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 0370 050 0955, 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 0370 050 0955. Call charges will vary. We may record and monitor calls. Significant Changes Change to annual accounting date The next accounting date of 28 July 2011 will be moved to 4 August 2011, as allowed by the Collective Investment Schemes sourcebook. This change will apply to the next accounting date only and will revert to the usual date of 28 July 2012 and thereafter. The income allocation date, or pay date, for any distribution at this accounting date will be made as usual on 28 September 2011.. 14
General Information continued Manager Legal & General (Unit Trust Managers) Limited Registered in England No. 01009418 Registered office: One Coleman Street, London EC2R 5AA Telephone: 0370 050 3350 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 Customer Services P.O. Box 6080 Wolverhampton WV1 9RB Authorised and regulated by the Financial Services Authority Dealing: 0370 050 0956 Enquiries: 0370 050 0955 Registration: 0370 050 0955 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 Hay s Galleria 1 Hay s Lane London SE1 2RD Investment Adviser Legal & General Investment Management Limited One Coleman Street London EC2R 5AA Authorised and regulated by the Financial Services Authority 15
Authorised and regulated by the Financial Services Authority Legal & General (Unit Trust Managers) Limited Registered in England No. 01009418 Registered office: One Coleman Street, London EC2R 5AA www.legalandgeneral.com