Legal & General Multi Manager Balanced Trust Annual Manager s Short Report for the year ended 15 January 2011 Distribution Number 6
Investment Objective and Policy The investment objective is to achieve long-term capital growth, whilst at the same time safeguarding against excessive risks. The Trust aims to invest in a wide range of Collective Investment Schemes and will pursue an active asset allocation policy across all countries, currencies and sector representations. The Trust may also invest directly in transferable securities, money market instruments, near cash, cash and deposits. Risk Profile Market Risk Market risk arises mainly from uncertainty about future prices. The Manager adheres to the investment guidelines and in this way, monitors and controls the exposure to risk from any type of security, sector or issuer. Credit Risk This Trust is invested in Collective Investment Schemes which may directly invest in financial securities such as bonds. With these investments, there is a risk of suffering loss due to a party not meeting its financial obligations. Currency Risk This Trust is invested in Collective Investment Schemes that invest in overseas financial securities. The performance of the Trust may therefore be affected by changes in exchange rates, through its holdings in these funds. Interest Rate Risk This Trust is invested in interest distributing funds. The performance of the Trust may therefore be affected by changes in interest rates, through its holdings in these funds. Trust Facts Period End Dates for Distributions: 15 January, 15 July Distribution Dates: 15 March, 15 September Total Expense Ratio: 15 January 11 15 January 10 R-Class Trust expenses 2.01% 1.79% Performance fees 0.53% 0.57% Total 2.54% 2.36% The Total Expense Ratio (TER) is the ratio of the Trust s operating costs (excluding overdraft and transaction charges) and all costs suffered through holdings in underlying Collective Investment Schemes, to the average net assets of the Trust. The TER represents an annualised figure. 1
Trust Performance Net Asset Net Asset Number of Accounting Value of Value Per Units Date Trust Unit In Issue 15 January 09 R Class Distribution Units 845,320 41.03p 2,060,402 Accumulation Units 2,177,681 41.03p 5,307,930 15 January 10 R Class Distribution Units 1,352,457 53.84p 2,511,846 Accumulation Units 9,158,674 54.54p 16,792,181 15 January 11 R Class Distribution Units 300,190 60.30p 497,868 Accumulation Units 18,776,570 61.32p 30,623,065 Past performance is not a guide to future performance. The price of units and income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. Distribution Information R-Class The distribution payable on 15 March 2011 is 0.1133p net per unit for distribution units and 0.1152p net per unit for accumulation units. 2
Portfolio Information The top 10 holdings and their associated weighting for the current and preceding year were: Holding Top 10 Holdings at 15 January 2011 Percentage of Net Asset Value First State Asia Pacific Leaders B Acc 12.21% Invesco Perpetual Income Fund 9.91% M&G Recovery Fund A Acc 9.49% M&G Optimal Income A 7.96% GLG Alpha Select UCITS III E 6.32% Ignis Hexam Global Emerging Markets I Acc 6.21% Schroder UK Alpha A Acc 5.24% Investec Global Gold A Acc 5.22% Guinness Global Energy A Inc 5.15% CF Neptune China B Acc 4.60% Top 10 Holdings at 15 January 2010 Percentage of Holding Net Asset Value First State Asia Pacific Leaders B Acc 12.54% M&G Recovery Fund A Acc 10.46% Invesco Perpetual Income Fund 10.25% Jupiter Financial Opportunities Fund 8.83% Lazard Emerging Markets Fund 7.26% M&G Optimal Income A 6.20% New Star European Growth I Acc 6.09% Investec American Fund A Acc 6.01% Invesco Perpetual Global Bond Fund 4.31% Investec Emerging Markets Debt Fund 3.94% 3
Trust Holdings as at 15 January 2011 70% 60% 54% 50% 40% 30% 31% 20% 10% 8% 7% 0% in overseas shares in UK shares in UK fixed interest securities Trust Holdings as at 15 January 2010 in overseas fixed interest securities 70% 60% 57% 50% 40% 30% 26% 20% 10% 8% 8% 0% in overseas shares in UK shares in overseas fixed interest securities in UK fixed interest securities 1% Net other assets 4
Unit Price Range and Net Revenue R-Class Highest Lowest Offer Bid Net Year Price Price Revenue Distribution Units 2008 (1) 54.78p 35.67p - 2009 55.94p 36.82p 0.5282p 2010 63.37p 51.24p 0.2166p 2011 (2) 63.87p 60.01p 0.1133p Accumulation Units 2008 (1) 54.78p 35.67p - 2009 56.67p 37.13p 0.5298p 2010 64.44p 51.98p 0.2196p 2011 (2) 64.95p 61.03p 0.1152p (1) The Trust s units were launched on 25 April 2008. (2) The above table shows highest offer and lowest bid prices to 15 January 2011 and net revenue per unit to 15 March 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. 5
Manager s Investment Report During the year under review, the bid price of the Trust s accumulation During the year under review, the bid price of the Trust s accumulation units increased by 12.3%, compared to the IMA Balanced Managed sector median return, on a Total Return basis, of 10.4%. This placed the Trust in the first quartile (21st percentile) of the sector rankings. (Source: Lipper, bid to bid, net income reinvested, in sterling terms, no initial charge). Over the period since launch (25 April 2008) to 15 January 2011 the bid price of the Trust s accumulation units increased by 22.7%, compared to the IMA Balanced Managed sector median return, on a Total Return basis, of 10.8%. This placed the Trust in the first quartile (5th percentile) of the sector rankings. (Source: Lipper, bid to bid, net income reinvested, in sterling terms, no initial charge). 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 The year was a volatile one for financial markets, with investors continuing to be concerned about the contagion effects of the escalating European sovereign (government) debt crisis and the potential for a double dip back into recession. All in all, however, the aggressive fiscal and monetary policy easing enacted in the world s major economies (including the delivery of the second round of Quantitative Easing by the US Federal Reserve in November 2010) instigated the process of a global recovery, and equity markets rallied hard to finish the year in distinctly positive form. The environment eventually served to benefit risk assets, while a meltdown in Developed Market government bond yields during the year did eventually reverse itself towards the end of December 2010. Commodities put in a strong performance for the year, with Gold in particular benefiting from the environment and rising more than 20% over the period, and Oil ending the year almost 10% ahead at more than $90 a barrel. Elsewhere, the MSCI AC World Index rose just over 15% in sterling terms over the period and the FTSE All Share Index by a similar amount. Trust Review The Trust s outperformance during the year was driven by fund selection. Key outperformers included Henderson European Growth, First State Asia Pacific Leaders, Investec Global Gold, First State Latin America, Neptune Russia and Greater Russia, and CF Neptune China. Investec American and Jupiter International Financials lagged. 6
Manager s Investment Report continued Turning to asset allocation, the overall bias to equities added value, most notably our overweight positions to Asia Pacific (ex Japan) and Emerging Markets. The Trust also gained from the above-average exposure to the Energy sector, but the positions in Financials proved detrimental. The weighting to local currency Emerging Market Debt within the fixed income element of the portfolio also added value. Activity over the period included the introduction of new holdings in GLG Alpha Select, Veritas Global Equity Income and Investec Global Gold, together with the disposal of holdings in CF Morant Wright Japan, River & Mercantile UK Equity Unconstrained and M&G Strategic Corporate Bond. Elsewhere, we also switched our holdings in Jupiter Financial Opportunities into Jupiter International Financials and sold our holding in Lazard Emerging Markets, due to it closing to all new monies for capacity reasons, and reinvested the proceeds into the Ignis Hexam Global Emerging Markets Fund. Outlook Looking forward, we remain cautiously optimistic in our investment strategy and hence biased to risk assets, based on a view that economic and financial trends will continue to show overall signs of improvement over the next 12 months certainly recent, more upbeat, economic data and the extra US fiscal stimulus supports such a view. The key fundamentals for equities valuation, earnings outlook and liquidity still look favourable to reasonable. That said, we expect problems to surface throughout the year given the still fragile backdrop and thus currently see volatility remaining high, with the market likely to continue oscillating between risk-on rally periods and risk-off retrenchment ones. When one stops to consider the pain inflicted by the financial crisis that began in late 2007, then it should come as no surprise that the healing process will take place over a number of years, rather than months, and there is still much work to be done. Part of the life-support surgery to date has involved massive government and central bank interventions, at times unprecedented and unorthodox, which have introduced major dislocations and distortions into the economic and financial landscape. This has taken us into uncharted territory and is causing much uncertainty and anxiety over what will come to pass when such stimulus is ultimately removed and normality is restored. Legal & General (Unit Trust Managers) Limited (Investment Adviser) 11 February 2011 7
Manager s Report and Accounts Copies of the most recent Interim and Annual Long Form Manager s Report are available free of charge by telephoning 0370 050 0955 or by writing to the Manager. Call charges will vary. We may record and monitor calls. Significant changes Calculation of Unit Prices From 7 June 2010, the way we price units in this Trust changed. Each day, two unit prices are calculated: The Creation Price - based on the price of buying all the Trust s assets plus any costs involved, and; The Cancellation Price - based on the price of selling all the Trust s assets less any costs involved. The difference between these two prices is known as the spread. Prior to 7 June 2010, we based our daily dealing price on either the creation or cancellation price, depending on the volume of overall transactions in the Trust for that valuation point. Generally, we would use the creation price if we were selling more units to clients than we were buying back and the cancellation price if we were buying back more units from clients than we were selling. This price would then become the published bid price - we would then add any applicable initial charge to arrive at the published offer price. From 7 June 2010, we have based the price of selling units to clients on the creation price and refer to this as the offer price (creation price plus any initial charge). The price at which we will buy back clients units is based on the cancellation price and is referred to as the bid price. This means that there is a difference between the selling (offer) and buying (bid) prices for units, being the spread plus any initial charge. Both the bid and offer prices are published on our website www.legalandgeneral.com/utprices. 8
Other Information The information in this report is designed to enable unitholders to understand how the Trust has performed during the period under review and how it is invested at the period end. Further information on the activities and performance of the Trust can be obtained by telephoning 0370 050 0955 or by writing to the Manager. Call charges will vary. We may record and monitor calls. 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 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 9
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 Q0031077