Distribution Number 37 Legal & General Mixed Investment Fund Interim Manager s Report for the period ended 31 March 2014 (Unaudited)
Contents Page Number Manager s Investment Report 2 Authorised Status 5 Directors Statement 5 Portfolio Statement 6 Statement of Total Return 8 Statement of Change in Net Assets attributable to Unitholders 8 Balance Sheet 9 Notes to the Financial Statements 10 Fund Facts 11 Risk and Reward Profile 12 Performance Record 13 General Information 16 1
Manager s Investment Report Investment Objective and Policy The Fund aims to provide longterm growth of both capital and income. The Fund will invest between 40 85% in a broad range of UK and overseas companies' shares with the balance predominantly in fixed interest securities. Exposure to these asset classes will be achieved generally through investment in collective investment schemes but may also be achieved by investing directly in assets. At times the Fund may be fully invested in collective investment schemes only or directly invested only. The collective investment schemes invested in may include those managed or operated by Legal & General. The Fund may also invest in other transferable securities, other collective investment schemes, money market instruments, deposits, cash and near cash. The Fund will use derivatives for efficient portfolio management purposes only. Manager s Investment Report During the period under review, the Fund s AClass accumulation units rose by 1.30%, as its equity and fixedincome investments rose in value. The Fund underperformed its peer group as funds within the Investment Management Association Mixed Investment Sector delivered a mean (average) return of 3.73% (Source: Lipper Hindsight). Past performance is not a guide to future performance. The value of investments and any 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 Developed equity markets were stronger over the period from September to March, as the outlook for economic growth in most regions remained broadly positive, but not too strong to unsettle interest rate markets or increase concerns about higher inflation. Economic data in the US was distorted in early 2014 due to the severe winter weather experienced, but the overall trend is still generally improving. There was evidence of stronger growth in the UK with the buoyant housing market supporting retail sales and stronger business confidence flowing through to the jobs market, the unemployment rate fell to 6.9% in February. Over the two quarters to March 2014, UK equities gained 4.8%, Europe excluding the UK gained 9.0%, while US shares gained 9.2% (all equity market returns are FTSE Total Return, in GBP, source: Bloomberg). AsiaPacific equities were down slightly. Japanese equities fell 5.9% in GBP terms, mainly as a result of currency movements. Good returns were seen on Listed Infrastructure, while the Listed Real Estate sector produced smaller gains. Yields on major bond markets (which move inversely to price) were broadly unchanged over the period. Both the Bank of England and the US Federal Reserve have continued to downplay the chances of an imminent start to interest rate hikes. 2
Manager s Investment Report continued The stronger UK outlook supported the Pound against other major currencies; the Pound rose from 1.62 to 1.67 against the US Dollar, and from 158.9 to 171.9 versus the Japanese Yen (Source: Bloomberg). Corporate bonds posted small positive returns as the yield spread between these bonds and comparable government bonds continued to narrow. Emerging market debt (issued in US Dollars) also performed well as the yield spread narrowed against safer US securities. Both emerging market equities and bonds (issued in Emerging markets by governments), were generally weaker. This was driven by a number of factors, including concerns about China s growth, a number of defaults in Chinese loan trusts and concerns that some Emerging markets (such as Turkey) were overly reliant on foreign investor inflows. Fund Review The major positive contribution to Fund performance came from the allocation to UK, US and European equities. Other positive contributions came from the Fund s allocation to High Yield and investment grade bonds, as well as the allocation to Listed Infrastructure. Negative contributions were made from the allocation to Japanese equities, emerging market equities and emerging market debt (issued in emerging markets). The management of the Fund was transitioned to Legal and General Investment Management in early October 2013. From late December 2013 the Fund s equity allocation has been increased (by approximately 10%) and the allocation to bonds reduced. This reflects two factors. The first is our confidence in a sustainable recovery in many developed economies, which we expect to result in continued outperformance of equities over bonds. We also believe that a strategy more aware of the asset allocation in comparable funds (the same IMA category) aids performance comparisons and is better aligned to client s expectations. The largest increase in allocation was to UK equities, whose allocation was increased from a low of 9% to approximately 15% at the end of March. The largest decrease was to UK indexlinked gilts, whose allocation was lowered from a high of approximately 7% to 2% at the end of March. Other changes include a small reduction in the allocation to investment grade credit, and a lower allocation to Commodities to reduce the exposure to a significant slowdown in Chinese growth. Through the period, a 2% position was held in Australian ten year bonds to also act as a hedge against the risk of weaker Chinese growth, which would likely also impact the economies of commodity exporters such as Australia. Outlook The Mixed Investment Fund is currently positioned to take advantage of our expectation for higher equity markets over 2014. We see better value in European and Japanese equities compared to US equities over the shortterm. Over the mediumterm we see Emerging market 3
Manager s Investment Report continued equities as offering better value compared to developed market equities and expect to see relative returns start to favour emerging markets going forward. We believe that market participants are currently underestimating the pace of interest rate hikes that will ultimately be required as both the US and UK economies continue to grow. Because of this we have limited direct exposure to US or UK government bonds within the Fund. Emerging market debt looks reasonably attractive compared to investment grade credit, where the lower yields (in comparison to government bonds) do not offer attractive compensation for potential risks. We are also looking for ways to position the Fund to take advantage of any moves by the European Central Bank to commence Quantitative Easing (the policy was followed by the Bank of England following the 2008 credit crisis) or other unconventional policy measures. To this end, we have reduced our currency exposure to the Euro and increased the allocation to the Norwegian Krone and to Pound Sterling. Legal & General Investment Management Limited (Investment Adviser) 24 April 2014 4
Authorised Status Authorised Status This Fund 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 FCA Collective Investment Schemes sourcebook. Directors Statement We hereby certify that this Manager s Report has been prepared in accordance with the requirements of the FCA Collective Investment Schemes sourcebook. A. J. C. Craven S. D. Thomas (Director) (Director) Legal & General (Unit Trust Managers) Limited 19 May 2014 5
Portfolio Statement Portfolio Statement as at 31 March 2014 All investments are in distribution units or ordinary shares unless otherwise stated. The percentages in brackets show the equivalent sector holdings at 30 September 2013. Holding/ Market % of Nominal Value Net Value Investment Assets Government Stocks & Corporate Bonds 0.00% (19.38%) Equities 0.00% (69.83%) 7,440 Acquisition 1234 372 11,251 NBNK Investments Rights 175,000 William Ransom & Son Holdings 372 Funds Invested in Shares 48.43% (0.00%) 40,802,655 Legal & General UK Index Trust (L Class) 58,878,230 12.80 16,116,826 Legal & General European Index Trust (I Class) 36,875,297 8.01 107,563,261 Legal & General Global Emerging Markets Index Fund (L Class) 44,627,997 9.70 69,096,795 Legal & General Japan Index Trust (I Class) 22,712,117 4.94 22,451,400 Legal & General Pacific Index Trust (I Class) 17,988,062 3.91 18,244,649 Legal & General US Index Trust (I Class) 41,743,756 9.07 222,825,459 48.43 Funds invested in Fixed Interest Securities 26.30% (0.00%) 11,292,165 Legal & General All Stocks Index Link Gilt Index Trust (I Class) 9,274,255 2.02 36,081,294 Legal & General Emerging Government Bond (US$) Index Fund (L Class) 15,796,390 3.43 9,085,511 Legal & General Global Inflation Linked Bond Index Fund (L Class) 4,591,817 1.00 59,312,264 Legal & General High Income Trust (I Class) 30,711,890 6.67 36,047,457 Legal & General Sterling Corporate Bond Index (L Class) 17,663,254 3.84 40,584,732 LGIM Global Corporate Bond Fund (B Class) Accumulation 42,993,355 9.34 121,030,961 26.30 Equity Investment Instruments 12.20% (0.08%) 2,210,387 ishares Developed Markets Property Yield UCITS ETF 29,884,432 6.49 1,454,320 ishares Global Infrastructure UCITS ETF 21,669,368 4.71 84,579 LGIM Commodity Composite Source ETF Accumulation 4,594,331 1.00 56,148,131 12.20 Nonequity Investment Instruments 12.67% (0.00%) 565,155 ishares Emerging Markets Local Government Bond UCITS ETF 28,071,249 6.10 6
Portfolio Statement Holding/ Market % of Nominal Value Net Value Investment Assets Nonequity Investment Instruments (cont.) 30,234,233 LGIM Sterling Liquidity Fund 30,234,233 6.57 58,305,482 12.67 FUTURES 0.09% (0.01%) 32 EUR/CHF Currency Future June 2014 2,720 361 Euro STOXX 50 Future June 2014 294,803 0.07 140 FTSE 100 Future June 2014 10,405 67 OSE TOPIX Future June 2014 13,390 81 EMINI S&P 500 Future June 2014 94,395 0.02 415,713 0.09 FORWARD CURRENCY CONTRACTS 0.00% (0.03%) Portfolio of investments 458,726,118 99.69 Net other assets 1,415,894 0.31 Total net assets 460,142,012 100.00% These are unlisted securities and have been valued at the Manager s best assessment of their fair value. Total purchases for the period: 710,512,933. Total sales for the period: 673,031,780. 7
Financial Statements Statement of Total Return for the period ended 31 March 2014 31/03/14 31/03/13 Income Net capital gains 5,620,054 48,423,794 Revenue 3,538,899 6,564,088 Expenses (3,660,346) (3,693,549) Finance costs: Interest (2,213) (32,592) Net (expense)/revenue before taxation (123,660) 2,837,947 Taxation (1,062) (180,916) Net (expense)/revenue after taxation for the period (124,722) 2,657,031 Total return before distributions 5,495,332 51,080,825 Finance costs: Distributions (25,840) (2,657,031) Change in net assets attributable to Unitholders from investment activities 5,469,492 48,423,794 Statement of Change in Net Assets attributable to Unitholders for the period ended 31 March 2014 31/03/14 31/03/13 Opening net assets attributable to Unitholders 465,505,770 438,208,562 Amounts received on creation of units 4,141,282 1,624,858 Amounts paid on cancellation of units (14,997,780) (14,492,450) (10,856,498) (12,867,592) Stamp Duty Reserve Tax (4,730) (10,689) Change in net assets attributable to Unitholders from investment activities 5,469,492 48,423,794 Retained distribution on accumulation units 27,978 2,611,109 Closing net assets attributable to Unitholders 460,142,012 476,365,184 The difference between the opening net assets and the comparative closing net assets is the movement in the second half of the year. 8
Financial Statements continued Balance Sheet as at 31 March 2014 31/03/14 30/09/13 ASSETS Investment assets 458,726,118 415,869,503 Debtors 1,423,118 41,353,630 Cash and bank balances 76,271 21,428,684 Amounts held at futures clearing houses and brokers 2,125,185 1,738,350 Total other assets 3,624,574 64,520,664 Total assets 462,350,692 480,390,167 LIABILITIES Investment liabilities (20,568) Creditors (1,359,100) (2,132,296) Bank overdrafts (849,532) (12,717,317) Distribution payable on distribution units (48) (14,216) Total other liabilities (2,208,680) (14,863,829) Total liabilities (2,208,680) (14,884,397) Net assets attributable to Unitholders 460,142,012 465,505,770 9
Notes to the Financial Statements 1. Accounting Policies The accounting policies applied are consistent with the most recent annual Financial Statements. (a) Basis of accounting The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and in accordance with UK Generally Accepted Accounting Practice and the Statement of Recommended Practice for Authorised Funds issued by the IMA in October 2010. 10
Fund Facts Distribution Information AClass A shortfall for the AClass arose because the expenses exceeded the revenue of the AClass. This being the case, there is no interim distribution for the AClass. RClass A shortfall for the RClass arose because the expenses exceeded the revenue of the RClass. This being the case, there is no interim distribution for the RClass. IClass The distribution payable on 31 May 2014 is 1.0329p net per unit for distribution units and 1.3496p net per unit for accumulation units. FClass The distribution payable on 31 May 2014 is 0.4510p net per unit for accumulation units. Ongoing Charges Figures 31 Mar 14 30 Sep 13 AClass 1.69% 1.68% RClass 1.69% 1.68% IClass 0.35% 0.79% FClass 1.19% 1.18% The Ongoing Charges Figure (OCF) is the ratio of the Fund s total discloseable costs (excluding overdraft interest) and all costs suffered through holdings in underlying Collective Investment Schemes, to the average net assets of the Fund. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a fund and is calculated based on the last period s figures. 11
Risk and Reward Profile Lower risk Higher risk Potentially lower rewards Potentially higher rewards 1 2 3 4 5 6 7 This risk and reward profile is based on historical data which may not be a reliable indication of the Fund s risk and reward category in the future. The category is based on the rate at which the value of the Fund has moved up and down in the past. This Fund is in category five because it invests, sometimes through other funds, in a variety of investments. A mixture of higher risk investments and lower risk investments has a balancing effect. Company shares and subinvestment grade bonds generally provide higher rewards and higher risks whereas investment grade bonds generally provide lower rewards and lower risks. The Fund s category is not guaranteed to remain the same and may change over time. Even a fund in the lowest category is not a risk free investment. 12
Performance Record Net Asset Values Net Asset Net Asset Number Of Accounting Value Of Value Per Units Date Fund Unit In Issue 30 Sep 11 AClass Distribution Units 1,352,790 141.21p 957,997 Accumulation Units 411,780,606 175.70p 234,370,049 RClass Accumulation Units 3,407,765 175.70p 1,939,572 30 Sep 12 AClass Distribution Units 1,317,110 155.37p 847,700 Accumulation Units 433,412,235 198.29p 218,569,658 RClass Accumulation Units 3,479,217 198.29p 1,754,568 30 Sep 13 AClass Distribution Units 1,576,057 171.90p 916,861 Accumulation Units 458,411,876 222.55p 205,985,433 RClass Accumulation Units 3,488,536 222.54p 1,567,578 IClass* Distribution Units 1,097 172.21p 637 Accumulation Units 2,027,107 224.51p 902,897 FClass** Accumulation Units 1,097 223.88p 490 31 Mar 14 AClass Distribution Units 1,608,261 173.94p 924,589 Accumulation Units 450,439,693 225.19p 200,023,597 RClass Accumulation Units 3,340,429 225.19p 1,483,389 IClass* Distribution Units 8,135 174.16p 4,671 Accumulation Units 4,744,381 228.89p 2,072,738 FClass** Accumulation Units 1,113 227.14p 490 * IClass units launched on 31 October 2012. ** FClass units launched on 19 December 2012. Past performance is not a guide to future performance. The price of units and any 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. 13
Performance Record continued Unit Price Range and Net Revenue AClass Units Highest Lowest Net Year Price Price Revenue Distribution Units 2009 141.70p 101.00p 2.3004p 2010 157.70p 134.80p 1.9237p 2011 160.20p 137.20p 2.2406p 2012 160.40p 145.50p 2.4912p 2013 180.60p 161.10p 2.5041p 2014 (2) 174.20p 168.00p Accumulation Units 2009 173.10p 121.10p 2.7732p 2010 195.20p 165.50p 2.3574p 2011 199.40p 172.40p 2.7825p 2012 204.40p 183.90p 3.1402p 2013 231.80p 205.20p 3.2071p 2014 (2) 225.50p 217.40p RClass Units Highest Lowest Net Year Price Price Revenue Accumulation Units 2009 (1) 173.10p 121.10p 2.7732p 2010 195.20p 165.50p 2.3574p 2011 199.40p 172.40p 2.7825p 2012 204.40p 183.90p 3.1402p 2013 231.80p 205.20p 3.2071p 2014 (2) 225.50p 217.40p (1) From 23 February 2009. (2) The above tables show the highest and lowest prices to 31 March 2014 and the net revenue per unit to 31 May 2014. Past performance is not a guide to future performance. The price of units and any 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. 14
Performance Record continued Unit Price Range and Net Revenue IClass Units* Highest Lowest Net Year Price Price Revenue Distribution Units 2012 (1) 160.80p 154.50p 2013 181.10p 161.40p 4.2542p 2014 (3) 175.50p 168.90p 1.0329p Accumulation Units 2012 (1) 204.70p 196.70p 2013 233.10p 205.60p 5.4505p 2014 (3) 229.30p 220.60p 1.3496p FClass Units** Highest Lowest Net Year Price Price Revenue Accumulation Units 2012 (2) 204.50p 203.40p 2013 232.50p 205.30p 4.7509p 2014 (3) 227.50p 219.20p 0.4510p * IClass units launched on 31 October 2012. ** FClass units launched on 19 December 2012. (1) The above table shows the highest and lowest prices from 31 October 2012 to 31 December 2012. (2) The above table shows the highest and lowest prices from 19 December 2012 to 31 December 2012. (3) The above tables show the highest and lowest prices to 31 March 2014 and the net revenue per unit to 31 May 2014. Past performance is not a guide to future performance. The price of units and any 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. 15
General Information Constitution Launch date: 2 January 1996 Period end dates for distributions: 31 March, 30 September Distribution dates: 31 May, 30 November Minimum initial lump sum investment: AClass 20 RClass 20 IClass 1,000,000 FClass 20 Valuation point: 12 noon* (3pm with effect from 9 June 2014) Management charge: AClass 1.50% RClass 1.50% IClass** 0.30% (0.75% prior to 1 October 2013) FClass 1.00% Initial charges: AClass Nil RClass 5.00% IClass Nil FClass Nil * With effect from 9 June 2014 see Significant Changes on page 17. ** With effect from 1 October 2013 see Significant Changes on page 17. Pricing and Dealing The prices are published on the internet at www.legalandgeneral.com/investments/fundinformation/dailyfundprices 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 Fund 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 Fund. 16
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 Investment Objective The current investment objective is shown on page 2. Prior to 23 September 2013 the investment objective was: The Fund aims to provide longterm growth of both capital and income by investing in a broad range of UK and overseas companies' shares and in fixed interest securities. Change to Investment Adviser With effect from 1 October 2013, the Investment Adviser of the Fund changed from Aviva Investors Global Services Limited to Legal & General Investment Management Limited. Change to Annual Management Charge With effect from 1 October 2013, the annual management charge fee for IClass units has been reduced from 0.75% to 0.30%. Change of Scheme Name With effect from 9 June 2014, the Legal & General Mixed Investment Fund will be changing its name to the Legal & General Mixed Investment 4085% Fund. Change of Valuation Point With effect from 9 June 2014, the valuation point will be changing from noon to 3pm. 17
General Information continued Authorised Fund Manager Legal & General (Unit Trust Managers) Limited Registered in England and Wales No. 01009418 Registered office: One Coleman Street, London EC2R 5AA Telephone: 0370 050 3350 Authorised and regulated by the Financial Conduct Authority Directors of the Manager A. J. C. Craven S. R. Pistell S. D. Thomas M. J. Zinkula (appointed 24 January 2014) Secretary D. Gilbert Registrar Legal & General (Portfolio Management Services) Limited P.O. Box 6080 Wolverhampton WV1 9RB Authorised and regulated by the Financial Conduct Authority Dealing: 0370 050 0956 Enquiries: 0370 050 0955 Registration: 0370 050 0955 Call charges will vary. We may record and monitor calls. Trustee National Westminster Bank Plc Trustee and Depositary Services 135 Bishopsgate London EC2M 3UR Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Independent Auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT Investment Adviser Legal & General Investment Management Limited One Coleman Street, London EC2R 5AA Authorised and regulated by the Financial Conduct Authority 18
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Authorised and regulated by the Financial Conduct Authority Legal & General (Unit Trust Managers) Limited Registered in England and Wales No. 01009418 Registered office: One Coleman Street, London EC2R 5AA www.legalandgeneral.com