Annual Short Report 31 October 2015 Vanguard FTSE U.K. All Share Index Unit Trust
Vanguard s Principles for Investing Success We want to give you the best chance of investment success. These principles, grounded in Vanguard s research and experience, can put you on the right path. Goals. Create clear, appropriate investment goals. Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost. Discipline. Maintain perspective and long-term discipline. A single theme unites these principles: Focus on the things you can control. We believe there is no wiser course for any investor. Contents Chairman s Letter 1 Fund Profile 2 Portfolio Manager s Commentary 3 Summary of Significant Changes 5 Distribution Table 6 Directory 7 About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Chairman s Letter Dear Unitholder, The fiscal year ended 31 October 2015 was a volatile one for the world s equity markets. Domestic and international markets struggled late in the period. Although results varied dramatically among countries, stocks of developed economies generally held up better than those of emergingmarket economies. Uncertainty about when the US Federal Reserve might begin raising interest rates weighed on sentiment at times, but a host of other factors also contributed to the bumpy ride. They included twists and turns in Greek debt negotiations, mounting signs of a marked slowdown in China and disinflationary pressures from the drop in the price of oil and other commodities. Despite the concerns, further monetary easing by many central banks helped push stock indices in a number of countries to all-time highs by spring. But volatility followed, leaving UK and US stocks little changed in the final six months of the period. The end result was modest gains for both markets. The fundamentals of the British economy remained healthy overall, with output expanding, unemployment edging lower and wages rising. However, the prospect of a weaker global economy dampened enthusiasm for stocks toward the end of the period, and the drop in commodities prices hurt energy and mining stocks in particular. The economic picture in Europe was mixed. After initially posting gains, European stocks retreated in the second half of the period, with weakness in the automobile segment contributing to the industrial sector s placing among the laggards, alongside energy and materials. Europe as a whole ended the period in positive territory, but results among countries varied widely. Ireland notched the best result, while Greece lost the most. The largest markets Germany, France and Switzerland registered gains that were reduced modestly by the weakened euro. In the United States, the economy accelerated modestly after almost grinding to a halt at the beginning of 2015, and the unemployment rate fell to a seven-year low in August. Inflation, however, remained well below the Fed s 2% target, and stock valuations concerned investors at times. After skidding in August and September, US stocks staged a robust rally in October as the Fed kept its short-term interest rates at historical lows. (In mid-december, weeks after the close of the reporting period, the Fed raised its target for those rates to 0.25% 0.5%.) Corporate earnings, although lower than in recent years, mostly exceeded expectations. Notably, the strength of the US dollar helped results for UK investors when US returns were translated back into pounds. In the Pacific region, the drop in commodities, triggered by weakened demand from China and the strong US dollar, hindered results for some countries. Australia, a big exporter of commodities, declined substantially. However, strong returns in Japan, the world s third-largest economy, more than offset these losses. Declining commodities prices also weighed heavily on emerging-market countries. In China, weaker-than-expected manufacturing data, a surprising devaluation of the country s currency and a sharp correction in the stock market sparked concern about policymakers ability to engineer a soft landing for the economy. Knock-on effects were felt across the globe but especially among China s biggest trading partners and commodity-oriented emerging markets. Several of the other bigger emerging economies, including Taiwan, India and South Korea, posted losses. Brazil, which relies heavily on commodity exports to China, was hit particularly hard, with its market declining nearly 50%. Global bond market returns were generally positive when calculated in local currencies as investors favored safe-haven assets during periods of stock market volatility. Bond prices were also supported by continued aggressive monetary stimulus by several key central banks. In the, gilt yields, which fell in the first six months of the period, recovered a bit but still ended lower. The same was true for inflation-linked gilts as inflation remained dormant. The European Central Bank s decision to step up quantitative easing in the euro zone further stimulated demand from income-hungry investors. As always, thank you for your confidence in Vanguard Investments UK, Limited. Yours faithfully, F. William McNabb III Chairman The Vanguard Group, Inc. 29 February 2016 1
FTSE U.K. All Share Index Unit Trust Fund Profile As at 31 October 2015 Investment Objective Vanguard FTSE U.K. All Share Index Unit Trust seeks to track the performance of the FTSE All-Share Index. Investment Strategy The Trust employs an indexing investment strategy designed to achieve a result consistent with the performance of the Index by investing in a representative sample of the securities that make up the Index. Risk Profile The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. Investments in smaller companies may be more volatile than investments in well-established blue chip companies. The Trust may invest in derivatives for efficient portfolio management or hedging purposes. The risks associated with the use of derivatives are different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments for efficient portfolio management or hedging purposes. There is no assurance that any derivative strategy used by the Trust will succeed and the Trust may suffer a substantial loss as a result. Portfolio Characteristics FTSE All-Share Trust Index Number of Stocks 558 643 Trust Trust 31 October 2015 31 October 2014 Ongoing Charges Figure 1 A Accumulation Units 0.08% 0.08% A Income Units 0.08% 0.08% Institutional Plus Accumulation Units 0.05% 0.05% Institutional Plus Income Units 0.05% 0.05% Synthetic Risk and Reward Indicator 2 5 5 Ex-Dividend Date 3 1 November 2015 1 November 2014 Distribution Date 31 December 2015 31 December 2014 Sector Diversification (% of portfolio) FTSE All-Share Trust Index Basic Materials 5.0% 5.1% Consumer Goods 16.4 16.4 Consumer Services 12.6 12.6 Financials 25.9 25.7 Health Care 8.5 8.5 Industrials 9.9 9.8 Oil & Gas 11.0 11.1 Technology 1.7 1.7 Telecommunications 5.1 5.2 Utilities 3.9 3.9 Ten Largest Holdings 4 (% of total net assets) Royal Dutch Shell plc Integrated Oil & Gas 5.2% HSBC Holdings plc Banks 4.8 British American Tobacco plc Tobacco 3.5 BP plc Integrated Oil & Gas 3.4 GlaxoSmithKline plc Pharmaceuticals 3.3 Vodafone Group plc Mobile Telecommunications 2.8 AstraZeneca plc Pharmaceuticals 2.5 Diageo plc Distillers & Vintners 2.3 Lloyds Banking Group plc Banks 2.2 Reckitt Benckiser Group plc Nondurable Household Products 2.0 Top Ten 32.0% 1 The Ongoing Charges Figure (OCF) is the ratio of the Trust s total discloseable costs (excluding overdraft interest) to the average net assets of the Trust. 2 The Synthetic Risk and Reward Indicator (SRRI) measures the volatility of the Trust. The risk and reward category (which may range from 1 to 7) is calculated using historical data and may not be a reliable indicator of the Trust s future risk profile. The risk and reward category may shift over time and is not a target or guarantee. The lowest category (i.e. category 1) does not mean risk free. The Trust appears in the higher risk category on the risk and reward indicator. This is because the Trust invests primarily in shares whose values tend to have higher price fluctuations. 3 If the ex-dividend date does not fall on a business day, the effective date will be the first business day following the end of the financial period. 4 The holdings listed exclude any temporary cash investments and equity index products. 2
FTSE U.K. All Share Index Unit Trust Commentary On behalf of Vanguard Asset Management, Limited 1 For the 12 months ended 31 October 2015, Vanguard FTSE U.K. All Share Index Unit Trust s A unit class returned 2.91% for both Accumulation and Income Units. The Institutional Plus unit class returned 2.93% for Accumulation Units and 2.94% for Income Units. The Trust s target Index returned 2.99%. The tracking difference was 0.08 percentage point for both A unit classes, 0.06 percentage point for the Institutional Plus Accumulation Units and 0.05 percentage point for the Institutional Plus Income Units. 2 UK stocks registered solid returns overall as the economy continued to expand and consumer confidence improved. Inflation remained low, and wages and property prices rose. Seven of the ten industry sectors represented in the Trust advanced. Technology (+20%), the smallest sector, led the way, followed by consumer staples (+19%) and consumer goods (+18%). Basic materials ( 32%) retreated the most. Oil & gas ( 16%) and utilities ( 2%) also posted negative returns. FTSE U.K. All Share Index Unit Trust Benchmark: FTSE All-Share Index Total Returns Average Annual Total Returns Periods Ended 31 October 2015 Since inception One Year Five Years (4 December 2009) A Accumulation Units 2.91% 7.04% 7.81% Benchmark 2.99 7.13 7.92 Since Inception One Year (2 September 2014) Institutional Plus Accumulation Units 2.93% -0.69% Institutional Plus Income Units 2.94-0.68 A Income Units 2.91-0.70 Benchmark 2.99-0.64 Past performance is not a reliable indicator of future results. Sources: The Vanguard Group, Inc., and FTSE. Basis of performance: NAV to NAV with net income reinvested. The Trust s Institutional Plus Accumulation, Institutional Plus Income and A Income Units launched 2 September 2014; therefore, five-year performance data are not available. 1 The Vanguard Group, Inc., as investment manager for FTSE U.K. All Share Index Unit Trust, sub-delegates the management of the Trust to Vanguard Asset Management, Limited. 2 In tracking the performance of the Index, the Trust attempts to select those securities that will create the representative sample that tracks the performance of the Index as closely as possible. The tracking difference between the Trust return and the Index return over a stated period of time can be attributed to a number of factors, including, without limitation, small differences in weightings; trading activity; transaction costs; and differences in the valuation and withholding tax treatment between the Trust and the Index vendor. 3
FTSE U.K. All Share Index Unit Trust Price History Vanguard FTSE U.K. 1 January 2015 to 1 January 2014 to 1 January 2013 to 1 January 2012 to 1 January 2011 to All Share Index Unit Trust 31 October 2015 31 December 2014 31 December 2013 31 December 2012 31 December 2011 A Accumulation Units (28 May 2015) (4 Sep. 2014) (31 Dec. 2013) (19 Dec. 2012) (7 Jul. 2011) Highest Unit Price 168.87 158.28 151.80 126.82 121.80 (24 Aug. 2015) (16 Oct. 2014) (2 Jan. 2013) (1 Jun. 2012) (4 Oct. 2011) Lowest Unit Price 144.66 142.90 128.38 108.97 99.60 Income Dividends Pence Per Unit 565.1671 498.9237 475.9953 443.6489 357.5855 A Income Units 1 (28 May 2015) (4 Sep. 2014) Highest Unit Price 107.10 100.70 (24 Aug. 2015) (16 Oct. 2014) Lowest Unit Price 91.74 90.91 Income Dividends Pence Per Unit 358.4637 31.0085 Institutional Plus Accumulation Units 1 (28 May 2015) (4 Sep. 2014) Highest Unit Price 107.45 100.70 (24 Aug. 2015) (16 Oct. 2014) Lowest Unit Price 92.05 90.91 Income Dividends Pence Per Unit 362.5929 31.2248 (28 May 2015) (4 Sep. 2014) Highest Unit Price 107.11 100.70 (24 Aug. 2015) (16 Oct. 2014) Lowest Unit Price 91.76 90.91 Income Dividends Pence Per Unit 361.5106 31.2851 NAV History 31 October 2015 31 October 2014 31 October 2013 A Accumulation Units Total Net Asset Value 3,595,729,182 1,654,637,400 1,183,572,765 Net Asset Value Per Unit 155.81 151.40 150.08 Number of Units in Issue 23,076,931 10,929,048 7,886,020 A Income Units 1 Total Net Asset Value 436,636,864 819,752 Net Asset Value Per Unit 95.23 96.02 Number of Units in Issue 4,584,901 8,537 Institutional Plus Accumulation Units 1 Total Net Asset Value 502,078 4,797 Net Asset Value Per Unit 99.15 95.94 Number of Units in Issue 5,064 50 Institutional Plus Income Units 1 Total Net Asset Value 114,091,064 163,690 Net Asset Value Per Unit 95.23 96.06 Number of Units in Issue 1,198,071 1,704 1 Launched 2 September 2014. 4
FTSE U.K. All Share Index Unit Trust Summary of Significant Changes For the year ended 31 October 2015 Largest Purchases Cost ( ) HSBC Holdings plc 153,274,488 Royal Dutch Shell A plc 104,237,093 BP plc 97,982,564 GlaxoSmithKline plc 84,407,631 British American Tobacco plc 81,456,009 Total 521,357,785 Total Purchases for the Year 2,633,027,684 Largest Sales Proceeds ( ) Catlin Group 7,226,187 HSBC Holdings plc 5,297,544 South32 Ltd. 4,511,215 CSR plc 3,107,943 Synergy Health plc 2,832,608 Total 22,975,497 Total Sales for the Year 76,333,478 5
FTSE U.K. All Share Index Unit Trust Distribution Table For the year ended 31 October 2015 Final distribution payable 31 December 2015 Distribution Distribution Net Payable Paid Income Equalisation 31 December 2015 31 December 2014 Pence Per Unit Pence Per Unit Pence Per Unit Pence Per Unit A Accumulation Units Group 1 565.1671 565.1671 498.9237 Group 2 301.2786 263.8885 565.1671 498.9237 A Income Units Group 1 358.4637 358.4637 31.0085 Group 2 179.7053 178.7584 358.4637 31.0085 Institutional Plus Accumulation Units Group 1 362.5929 362.5929 31.2248 Group 2 28.2877 334.3052 362.5929 31.2248 Institutional Plus Income Units Group 1 361.5106 361.5106 31.2851 Group 2 178.3496 183.1610 361.5106 31.2851 Group 1 Units purchased before 1 November 2014. Group 2 Units purchased between 1 November 2014 and 31 October 2015. Note: 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 shares for capital gains tax purposes. 6
Directory Manager Vanguard Investments UK, Limited 4th Floor, The Walbrook Building, 25 Walbrook London EC4N 8AF Authorised Corporate Director Vanguard Investments UK, Limited 4th Floor, The Walbrook Building, 25 Walbrook London EC4N 8AF Administrator and Registrar International Financial Data Services (UK) Limited IFDS House St. Nicholas Lane Basildon Essex SS15 5FS Investment Adviser The Vanguard Group, Inc. P.O. Box 2600 Valley Forge, PA 19482 USA Trustee State Street Trustees Limited 525 Ferry Road Edinburgh EH5 2AW Independent Auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT The Vanguard FTSE U.K. All Share Index Unit Trust Annual Report and Financial Statements is available upon request. 7
Vanguard Investments UK, Limited 4th Floor, The Walbrook Building 25 Walbrook London EC4N 8AF Connect with Vanguard > vanguard.co.uk This report is intended for the Trust s unitholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current Trust Prospectus. All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted. London Stock Exchange Group companies include FTSE International Limited ( FTSE ), Frank Russell Company ( Russell ), MTS Next Limited ( MTS ), and FTSE TMX Global Debt Capital Markets Inc. ( FTSE TMX ). All rights reserved. FTSE, Russell, MTS, FTSE TMX and FTSE Russell and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under licence. All information is provided for information purposes only. No responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of its licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indexes or the fitness or suitability of the Indexes for any particular purpose to which they might be put. The Industry Classification Benchmark ( ICB ) is owned by FTSE. FTSE does not accept any liability to any person for any loss or damage arising out of any error or omission in the ICB. Vanguard Investments UK, Limited, only gives information on products and services and does not give investment advice based on individual circumstances. The Key Investor Information Document ( KIID ) and the Prospectus for this Trust is available in local languages from Vanguard Investments UK, Limited, via our website vanguard.co.uk. Issued by Vanguard Investments UK, Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. 2016 Vanguard Investments UK, Limited. All rights reserved. QIUTS 022016