The Virgin Bond, Gilt and UK Share Fund Interim Report and Financial Statements
Contents Page Manager s report Management and professional services 1 Manager s investment report 2 Net asset value and operating charges 4 Portfolio statement 5 Purchases and sales of investments 6 Statement of total return 7 Statement of change in net assets attributable to unitholders 7 Balance sheet 8 Notes to the financial statements 9 Distribution table 10 Directors statement 11
Management and professional services Manager and registrar Virgin Money Unit Trust Managers Limited Directors: JA. Gadhia Jubilee House M. Martin Gosforth P. Bole Newcastle upon Tyne C. Keogh NE3 4PL G. Moreno Telephone 03456 10 20 30* Compliance Officer: G. Lyall Secretary: K. Marshall Authorised and regulated by the Financial Conduct Authority. Investment advisers State Street Global Advisors Limited 20 Churchill Place Canary Wharf London E14 5HJ Authorised and regulated by the Financial Conduct Authority. Trustee Citibank Europe plc Citigroup Centre Canada Square Canary Wharf London E14 5LB Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Independent auditors PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX * Calls to 03 numbers cost the same as calls to 01 or 02 numbers and they are included in inclusive minutes and discount schemes in the same way. Calls may be monitored and recorded. 1
Manager s investment report Investment objective, policy and strategy The objective of the Virgin Bond, Gilt and UK Share Fund ( the Fund or the Trust ) is to provide long term capital growth, by investing predominantly in passive collective investment schemes (including exchange traded funds). These schemes are managed by Virgin Money Unit Trust Managers Limited ( the Manager ) or by other fund managers and they provide the Trust with exposure to a range of asset classes. The Manager intends to pursue a strategy of investing typically around 50% of the Scheme Property of the Trust in passively managed collective investment schemes which invest in fixed income investments (bonds and gilts) and typically around 50% of the Scheme Property of the Trust in passively managed collective investment schemes which invest in UK equities. The Manager s policy is to rebalance the assets of the Trust on a quarterly basis so as to maintain the desired asset allocation. Subject to the investment objective and policy, the Trust may also invest directly or indirectly into transferable securities, money market instruments, bonds, equities and deposits to the extent permitted for UCITS 1 schemes. The Trust may also invest in derivatives and forward transactions for the purposes of efficient portfolio management only. The Virgin Bond, Gilt and UK Share Fund Invests in (via securities set out on page 5) c. 50% in Bonds and Gilts c. 50% in UK Shares Trust status The Fund is an authorised unit trust scheme under S243 of the Financial Services and Markets Act 2000 and is categorised as a UCITS scheme under the Collective Investment Schemes Sourcebook (COLL). Financial instruments In pursuing its investment objective set out above, the Fund holds a number of financial instruments. The Fund s financial instruments comprise securities and other investments, cash balances and debtors and creditors that arise directly from its operations. Unit Trust schemes are not permitted by the Regulations 2 to enter into a transaction if its purpose could reasonably be regarded as speculative. The Fund s use of financial instruments satisfies these requirements and no speculative trading in financial instruments is undertaken. The Fund invests predominantly in collective investment schemes, as shown in the Portfolio statement on page 5. Management fees for the collective investment schemes in which the Fund invests are met by the Manager out of the operating charges set out on page 4. Risk and reward profile The Fund s Synthetic Risk and Reward Indicator (SRRI) is 4 on a scale of 1 (lower) to 7 (higher) as it invests in a mixture of gilt-edged securities and corporate bonds which typically provide moderate rewards but carry a lower level of risk, and company shares which typically provide higher rewards but carry a higher level of risk. For further information, please refer to the Fund s Key Investor Information Document (KIID). Distribution The interim distribution for the six month period ended 31 January 2018 will be 0.524p per unit payable on 29 March 2018. Fund performance For the six months to 31 January 2018, the value of each unit increased by 0.37% 3 from 108.02p to 108.42p. 1. Authorised in accordance with the Undertakings in Collective Investments in Transferable Securities (UCITS) Directive. 2. The Regulations derive from UK and EU financial services legislation including the Financial Services and Markets Act 2000, the UCITS Directive and Financial Conduct Authority (FCA) rules, principally COLL. 3. Based on net asset value. 2
Manager s investment report (continued) Markets overview for the six month period ended 31 January 2018 UK shares finished the period ahead of where they started with the UK stock market reaching a new historic high during the 6 months. The UK stock market did however fall at the end of the period due to increased expectations that interest rates may increase sooner and by more than had been expected. Bond and gilt prices finished behind where they started due to an increased demand for shares for much of the period and interest rate expectations. The global economy remained relatively strong: Unemployment was at its lowest level in the Eurozone for nine years, its lowest in the US for 17 years and near historically low levels in the UK. UK Gross Domestic Product (GDP a measure of economic growth) has grown each quarter for the last 20 quarters. The Eurozone grew at its fastest pace in a decade in 2017. US GDP growth reached its highest level since the first quarter of 2015. The Bank of England raised the base rate in November 2017, for the first time in ten years, to 0.5%. Stock market performance was positive: The FTSE All-Share Index set a record high due to a significant increase in the price of oil and the strength of stock markets globally, while the historically weak pound helped large exporting companies. However, at the end of the period, a number of factors - including a rise in the value of the pound and concerns around the economic impact of the UK withdrawing from the EU - led to the UK stock market dropping back to finish 1.63% ahead of where it started the period. US stock markets rose on the back of the promised stimulus from President Trump and the significant rise of some very large technology companies such as Amazon, Facebook, Apple, Netflix and Google. Bond markets (including UK Government bonds known as gilts) finished the reporting period marginally behind where they started as a higher demand for stock market investments, alongside interest rate increases, depressed the demand for bond and gilts. Fund performance: Gains made by UK stocks were partially offset by the lower demand for bonds and gilts, resulting in the Fund generating a positive return of 0.37% for the six months. 3
Net asset value and operating charges The Virgin Bond, Gilt and UK Share Fund Income units were first offered on 18 February 2015 at an offer price of 100.00p per unit. 31 January 2018 31 July 2017 Closing net asset value ( ) 28,617,876 24,782,708 Closing number of units 26,396,461 22,941,750 Closing net asset value per unit (p) 108.42 108.02 Operating charges (%) 4 1.00 1.00 4. The operating charges are the total expenses paid by the Fund in the period against its net asset value and include a calculation based on the underlying funds. 4
Portfolio statement As at 31 January 2018 (unaudited) Security Holdings Market Value 000 % of Net Assets COLLECTIVE INVESTMENT SCHEMES Bonds and Gilts 50.01% (2017: 50.15% 5 ) 14,310 50.01 SPDR Barclays 1-5 Year Gilt UCITS ETF 73,627 3,738 13.06 SPDR Barclays UK Gilt UCITS ETF 93,660 5,267 18.41 Virgin Income Trust 6 4,147,556 5,305 18.54 UK Shares 49.97% (2017: 50.40% 5 ) 14,301 49.97 SPDR FTSE UK All Share UCITS ETF 74,383 3,702 12.94 SSgA UK Equity Tracker Fund 2,091,239 5,312 18.56 Virgin UK Index Tracking Trust 6 1,901,837 5,287 18.47 Portfolio of investments 28,611 99.98 Net other assets 0.02% (2017: (0.55)% 5 ) 7 0.02 Net assets 28,618 100.00 5. Comparative figures shown in brackets relate to percentage of total net assets at 31 July 2017. 6. The Manager of these Funds is Virgin Money Unit Trust Managers Limited. 5
Purchases and sales of investments Cost Purchases 000 Virgin Income Trust 7 1,017 SPDR Barclays UK Gilt UCITS ETF 915 Virgin UK Index Tracking Trust 7 865 SSgA UK Equity Tracker Fund 720 SPDR Barclays 1-5 Year Gilt UCITS ETF 673 SPDR FTSE UK All Share UCITS ETF 494 Total for the period 4,684 Proceeds Sales 000 Virgin UK Index Tracking Trust 7 280 SSgA UK Equity Tracker Fund 248 Virgin Income Trust 7 209 SPDR FTSE UK All Share UCITS ETF 148 SPDR Barclays UK Gilt UCITS ETF 136 SPDR Barclays 1-5 Year Gilt UCITS ETF 108 Total for the period 1,129 7. The Manager of these Funds is Virgin Money Unit Trust Managers Limited. 6
Statement of total return Income 31/01/2018 31/01/2017 000 000 000 000 Net capital gains 85 114 Revenue 206 133 Expenses (82) (47) Net revenue before taxation 124 86 Taxation Net revenue after taxation 124 86 Total return before distributions 209 200 Distributions (124) (86) Change in net assets attributable to unitholders from investment activities 85 114 Statement of change in net assets attributable to unitholders 31/01/2018 31/01/2017 000 000 000 000 Opening net assets attributable to unitholders 24,783 13,479 Amounts receivable on issue of units 4,596 4,475 Amounts payable on cancellation of units (846) (171) Change in net assets attributable to unitholders from investment activities 3,750 4,304 85 114 Closing net assets attributable to unitholders 28,618 17,897 Comparative information is provided for the Statement of change in net assets attributable to unitholders. Since this information is for the prior interim period, the net assets at the end of that period do not correspond to the net assets at the start of the current period. 7
Balance sheet As at 31 January 2018 (unaudited) 000 31/01/2018 000 000 31/07/2017 000 Assets Fixed assets Investments 28,611 24,919 Current assets Debtors 103 Cash and bank balances 103 80 Total current assets 206 80 Total assets 28,817 24,999 Liabilities Creditors Distribution payable (138) (123) Other creditors (61) (93) Total liabilities (199) (216) Net assets attributable to unitholders 28,618 24,783 Notes to the interim financial statements are on page 9. 8
Notes to the financial statements Accounting policies Basis of accounting The interim financial statements have been prepared on the same basis as the audited financial statements for the year ended 31 July 2017. They have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with Financial Reporting Standard (FRS) 102 and the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the Investment Management Association (now known as the Investment Association) in May 2014 (the 2014 SORP). Under the SORP guidelines adopted by the Fund, complete notes to the financial statements are not disclosed for the interim accounts. Complete notes to the financial statements will be available in the year end accounts. 9
Distribution table Distribution in pence per unit Interim distribution payable 29 March 2018 Group 1 Units purchased prior to 1 August 2017 Group 2 Units purchased from 1 August 2017 to 31 January 2018 inclusive Distribution payable 29/03/18 (p) Distribution paid 31/03/17 (p) Revenue (p) Equalisation (p) Group 1 0.524 0.524 0.597 Group 2 0.132 0.392 0.524 0.597 Equalisation Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of income included in the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable to income tax but must be deducted from the cost of units for capital gains tax purposes. 10
Directors statement We approve the Interim Report and Financial Statements of the Virgin Bond, Gilt and UK Share Fund for the six month period ended 31 January 2018 on behalf of Virgin Money Unit Trust Managers Limited in accordance with the requirements of the Collective Investment Schemes Sourcebook. Peter Bole Director Marian Martin Director 28 March 2018 11
Virgin Money Unit Trust Managers Limited Authorised and regulated by the Financial Conduct Authority. Registered office: Jubilee House, Gosforth, Newcastle upon Tyne NE3 4PL. Registered in England no. 3000482 VM14036 03.18