Annual Report and Financial Statements 31 October Vanguard FTSE U.K. All Share Index Unit Trust

Transcription

1 Annual Report and Financial Statements 31 October 2015 Vanguard FTSE U.K. All Share Index Unit Trust

2 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 Report of the Manager 2 Statement of the Trustee s Responsibilities 3 Report of the Trustee to the Unitholders 3 Independent Auditors Report 4 Fund Profile 6 Summary of Significant Changes 9 Portfolio Statement 10 Balance Sheet 16 Statement of Total Return 16 Statement of Change in Unitholders Funds 16 Distribution Table 17 Notes to Financial Statements 18 Directory 25 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.

3 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 United Kingdom, 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

4 Vanguard FTSE U.K. All Share Index Unit Trust Report of the Manager Year ended 31 October 2015 The Manager of Vanguard FTSE U.K. All Share Index Unit Trust ( Trust ) is Vanguard Investments UK, Limited. The Trustee is State Street Trustees Limited and the Auditors are PricewaterhouseCoopers LLP. The Trust is a unit trust established under the Trust Deed between the Manager and the Trustee and authorised by the Financial Conduct Authority under Section 243 of the Financial Services and Markets Act The unitholders are not liable for the debts of the Trust. The investment objective of the Trust and the Manager s policy for pursuing that objective are set out in the Fund Profile section of this report and a review of the Trust s investment activities for the relevant period is included within the Portfolio Manager s Commentary. Statement of Manager s Responsibilities in Relation to the Financial Statements of the Trust The Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL) requires the Manager to prepare Financial Statements for each annual and half-yearly accounting period, in accordance with United Kingdom Generally Accepted Accounting Practice, which give a true and fair view of the financial position of the Trust and of its net revenue and the net capital gains on the property of the Trust for the year. In preparing the Financial Statements the Manager is required to: select suitable accounting policies and then apply them consistently; comply with the disclosure requirements of the Statement of Recommended Practice for Authorised Funds issued by the Investment Management Association (now the Investment Association) in October 2010; follow generally accepted accounting principles and applicable accounting standards; prepare the Financial Statements on the basis that the Trust will continue in operation unless it is inappropriate to do so; and keep proper accounting records which enable it to demonstrate that the Financial Statements as prepared comply with the above requirements. The Manager is responsible for the management of the Trust in accordance with its Trust Deed, the Prospectus and the COLL and for taking reasonable steps for the prevention and detection of fraud, error and noncompliance with law or regulations. The Manager s report and the Financial Statements for the year ended 31 October 2015 were signed on 29 February 2016 on behalf of the Manager by: John James, Chief Executive Officer Vanguard Investments UK, Limited 29 February 2016 Richard Wane Director Vanguard Investments UK, Limited 2

5 Statement of the Trustee s Responsibilities in Respect of the Report and Accounts of the Scheme The Trustee is under a duty to take into its custody or under its control all of the property of the scheme and to hold it in trust for the holders of units. Under the rules in the Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL) relating to reports it is also the duty of the Trustee to enquire into the conduct of the Manager in the management of the scheme in each accounting period and to report thereon to unitholders in a report which shall contain the matters prescribed by the rules. A copy of the Trustee s report is set out below. Report of the Trustee to the Unitholders of Vanguard FTSE U.K. All Share Index Unit Trust for the Year 1 November 2014 to 31 October 2015 Having carried out such procedures as we considered necessary to discharge our responsibilities as Trustee of the scheme, it is our opinion, based on the information available to us and the explanations provided, that the Manager has, in all material respects, managed the scheme during the period in accordance with the investment and borrowing powers and restrictions applicable to the scheme, and otherwise in accordance with the provisions of the Trust Deed and the rules in the Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL).. State Street Trustees Limited Edinburgh 29 February

6 Independent Auditors Report to the Unitholders of Vanguard FTSE U.K. All Share Index Unit Trust ( the Trust ) Report on the Financial Statements Our Opinion In our opinion the financial statements, defined below: give a true and fair view of the financial position of the Trust as at 31 October 2015 and of the net revenue and the net capital gains/(losses) of the scheme property of the Trust for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. This opinion is to be read in the context of what we say in the remainder of this report. What we have audited The financial statements of Vanguard FTSE U.K. All Share Index Unit Trust (the Trust ), which are prepared by Vanguard Investments UK, Limited (the Authorised Fund Manager ), comprise: the balance sheet of the Trust as at 31 October 2015; the statement of total return of the Trust for the year then ended; the statement of change in net assets attributable to unitholders of the Trust for the year then ended; the notes to the Trust s financial statements, which include a summary of significant accounting policies and other explanatory information; and the distribution tables. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), the Statement of Recommended Practice Financial Statements of Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for Authorised Funds ), the Collective Investment Schemes sourcebook and the Trust Deed. In applying the financial reporting framework, the Authorised Fund Manager has made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trust s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Financial Statements (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinions on matters prescribed by the Collective Investment Schemes sourcebook In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Fund Manager s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 4

7 Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Authorised Fund Manager s Responsibilities Statement set out on page 2, the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Trust s unitholders as a body in accordance with paragraph of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 29 February

8 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 Trust Trust 31 October 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 Ex-Dividend Date 3 1 November November 2014 Distribution Date 31 December December 2014 Sector Diversification (% of portfolio) FTSE All-Share Trust Index Basic Materials 5.0% 5.1% Consumer Goods Consumer Services Financials Health Care Industrials Oil & Gas Technology Telecommunications Utilities 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. 6

9 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 Since Inception One Year (2 September 2014) Institutional Plus Accumulation Units 2.93% -0.69% Institutional Plus Income Units A Income Units Benchmark 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. 7

10 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 December December December December 2011 A Accumulation Units (28 May 2015) (4 Sep. 2014) (31 Dec. 2013) (19 Dec. 2012) (7 Jul. 2011) Highest Unit Price (24 Aug. 2015) (16 Oct. 2014) (2 Jan. 2013) (1 Jun. 2012) (4 Oct. 2011) Lowest Unit Price Income Dividends Pence Per Unit A Income Units 1 (28 May 2015) (4 Sep. 2014) Highest Unit Price (24 Aug. 2015) (16 Oct. 2014) Lowest Unit Price Income Dividends Pence Per Unit Institutional Plus Accumulation Units 1 (28 May 2015) (4 Sep. 2014) Highest Unit Price (24 Aug. 2015) (16 Oct. 2014) Lowest Unit Price Income Dividends Pence Per Unit (28 May 2015) (4 Sep. 2014) Highest Unit Price (24 Aug. 2015) (16 Oct. 2014) Lowest Unit Price Income Dividends Pence Per Unit NAV History 31 October October 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 Number of Units in Issue 23,076,931 10,929,048 7,886,020 A Income Units 1 Total Net Asset Value 436,636, ,752 Net Asset Value Per Unit 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 Number of Units in Issue 5, Institutional Plus Income Units 1 Total Net Asset Value 114,091, ,690 Net Asset Value Per Unit Number of Units in Issue 1,198,071 1,704 1 Launched 2 September

11 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 9

12 Portfolio Statement As at 31 October 2015 Market % of Value Net Asset Holding ( ) Value Basic Materials 5.00% (2014: 7.47%) Rio Tinto plc 2,477,543 58,432, BHP Billiton plc 4,259,438 44,319, Glencore plc 23,536,471 26,443, Anglo American plc 2,637,644 14,417, Mondi plc 737,080 11,048, Johnson Matthey plc 412,942 10,666, Randgold Resources Ltd. 188,181 8,217, Croda International plc 272,463 7,893, Antofagasta plc 710,238 3,732, Victrex plc 165,183 3,054, Polymetal International plc 523,848 3,009, Fresnillo plc 348,229 2,542, Elementis plc 932,195 2,186, Alent plc 433,550 2,162, Synthomer plc 553,249 1,830, Centamin plc 2,249,794 1,429, Vedanta Resources plc 218,113 1,078, Evraz plc 972, , Petra Diamonds Ltd. 972, , Acacia Mining plc 318, , KAZ Minerals plc 492, , Petropavlovsk plc 6,645, , Aquarius Platinum Ltd. 2,799, , Lonmin plc 1,147, , Zotefoams plc 77, , Hochschild Mining plc 351, , Gem Diamonds Ltd. 230, , Carclo plc 101, , Ferrexpo plc 252,703 85, Kenmare Resources plc 4,308,876 62, Hochschild Mining plc 131,977 34, ,256, Consumer Goods 16.28% (2014: 14.23%) British American Tobacco plc 3,761, ,145, Diageo plc 5,076,325 95,333, Reckitt Benckiser Group plc 1,279,216 81,140, SABMiller plc 1,907,965 76,213, Unilever plc 2,428,022 70,242, Imperial Tobacco Group plc 1,944,092 67,946, Associated British Foods plc 697,558 24,100, Taylor Wimpey plc 6,435,871 12,730, Persimmon plc 614,544 12,247, Barratt Developments plc 1,986,003 12,154, Burberry Group plc 892,484 11,852, GKN plc 3,437,518 9,869, Berkeley Group Holdings plc 252,901 8,388, Bellway plc 244,933 6,358, Coca-Cola HBC AG 397,881 6,159, Tate & Lyle plc 945,271 5,643, Britvic plc 555,551 3,880, Bovis Homes Group plc 272,177 2,789, Crest Nicholson Holdings plc 492,782 2,678, Greencore Group plc 841,130 2,537, Redrow plc 454,824 2,110, PZ Cussons plc 681,572 2,051, Dairy Crest Group plc 296,374 1,908, Cranswick plc 104,069 1,784, Ted Baker plc 51,433 1,556, Devro plc 368,273 1,045, A.G.BARR plc 197,489 1,045, SuperGroup plc 68, , Headlam Group plc 160, , McBride plc 489, , Stock Spirits Group plc 382, , Photo-Me International plc 406, , Premier Foods plc 1,468, , Hilton Food Group plc 96, , MJ Gleeson Group plc 77, , Games Workshop Group plc 67, , Jimmy Choo plc 164, , Anglo-Eastern Plantations plc 34, , Carr s Group plc 130, , Consumer Services 12.59% (2014: 10.26%) Market % of Value Net Asset Holding ( ) Value 675,266, WPP plc 2,600,928 37,921, Compass Group plc 3,313,255 37,042, Tesco plc 16,374,565 30,006, Reed Elsevier plc 2,252,742 26,154, Next plc 296,317 23,646, British Sky Broadcasting Group plc 2,107,440 23,076, International Consolidated Airlines Group SA 3,685,197 21,447, ITV plc 7,521,122 18,975, Whitbread plc 365,447 18,137, Marks & Spencer Group plc 3,316,206 16,995, Kingfisher plc 4,694,024 16,569, Pearson plc 1,640,809 14,135, Carnival plc 365,591 13,219, InterContinental Hotels Group plc 475,233 12,351, TUI Travel plc 946,543 11,434, Dixons Carphone plc 2,008,822 9,264, easyjet plc 497,227 8,691, Informa plc 1,330,885 7,552, J Sainsbury plc 2,839,492 7,527, WM Morrison Supermarkets plc 4,395,353 7,406, Inchcape plc 901,070 7,199, Rightmove plc 185,905 7,133, Booker Group plc 3,288,405 6,119, Merlin Entertainments plc 1,430,911 5,933, William Hill plc 1,772,398 5,620, Auto Trader Group plc 1,421,653 5,530, Betfair Group plc 170,795 5,511, Greene King plc 625,771 5,024, UBM plc 910,841 4,658, B&M European Value Retail SA 1,379,870 4,600, WH Smith plc 234,017 3,987, Thomas Cook Group plc 3,144,584 3,861, Just Eat plc 872,984 3,718, Sports Direct International plc 512,140 3,567, Playtech plc 414,816 3,546,

13 Market % of Value Net Asset Holding ( ) Value AA plc 1,227,696 3,398, Domino s Pizza Group plc 278,084 3,033, Ocado Group plc 803,360 3,027, Moneysupermarket.com Group plc 905,788 3,026, Restaurant Group plc 421,527 3,022, Stagecoach Group plc 856,214 2,960, SSP Group plc 955,846 2,879, Saga plc 1,268,041 2,623, National Express Group plc 866,675 2,594, Greggs plc 207,796 2,462, Dignity plc 100,607 2,442, Firstgroup plc 2,417,256 2,335, Debenhams plc 2,543,168 2,273, Cineworld Group plc 409,890 2,262, Pets at Home Group plc 768,743 2,217, Go-Ahead Group plc 89,540 2,169, Ladbrokes plc 2,028,890 2,140, Marston s plc 1,248,682 2,012, Halfords Group plc 428,072 1,861, Home Retail Group plc 1,629,664 1,830, Dunelm Group plc 192,454 1,822, Mitchells & Butlers plc 486,678 1,726, Card Factory plc 465,866 1,678, Bwin.Party Digital Entertainment plc 1,431,326 1,601, Wizz Air plc 83,822 1,587, Entertainment One Ltd. 681,421 1,497, J D Wetherspoon plc 184,493 1,427, Millennium & Copthorne Hotels plc 288,939 1,391, Pendragon plc 2,940,255 1,301, N Brown Group plc 330,034 1,236, Lookers plc 683,546 1,202, JD Sports Fashion plc 121,699 1,173, Enterprise Inns plc 1,071,954 1,151, Zoopla Property Group plc 471,569 1,144, Poundland Group plc 383,776 1,053, Rank Group plc 342, , Trinity Mirror plc 533, , Darty plc 798, , imprint Group plc 60, , ITE Group plc 549, , Mothercare plc 318, , DFS Furniture plc 226, , Fuller Smith & Turner plc 60, , Euromoney Institutional Investor plc 66, , AO World plc 349, , Punch Taverns plc 431, , Carpetright plc 108, , Holdings plc 306, , Topps Tiles plc 321, , Findel plc 166, , Games Digital plc 175, , UTV Media plc 166, , Flybe Group plc 350, , STV Group plc 66, , Bloomsbury Publishing plc 157, , McColl s Retail Group plc 162, , Centaur Media plc 295, , Huntsworth plc 509, , Sportech plc 305, , Moss Bros Group plc 179, , Johnston Press plc 208, , Laura Ashley Holdings plc 307,250 83, Financials 25.93% (2014: 25.29%) Market % of Value Net Asset Holding ( ) Value 521,910, HSBC Holdings plc 39,353, ,719, Lloyds Banking Group plc 123,284,963 90,799, Barclays plc 33,749,190 78,281, Prudential plc 5,137,603 78,014, Aviva plc 8,139,884 39,543, Legal & General Group plc 11,920,176 31,159, Standard Chartered plc 4,211,942 30,384, Land Securities Group plc 1,584,277 21,213, Old Mutual plc 9,831,316 20,862, Royal Bank of Scotland Group plc 6,533,277 20,743, British Land Co. plc 2,059,964 17,911, Standard Life plc 3,933,287 16,555, London Stock Exchange Group plc 625,636 15,916, Direct Line Insurance Group plc 2,773,826 10,934, Provident Financial plc 296,247 10,276, Hammerson plc 1,589,118 10,106, St James s Place plc 1,040,805 10,028, i Group plc 1,926,090 9,649, RSA Insurance Group plc 2,060,985 8,672, Derwent London plc 202,887 7,872, Aberdeen Asset Management plc 2,004,978 6,951, Segro plc 1,528,204 6,863, Scottish Mortgage Investment Trust plc 2,640,969 6,747, Schroders plc 225,319 6,719, Amlin plc 1,018,684 6,708, Intu Properties plc 1,920,939 6,644, Alliance Trust plc 1,303,926 6,571, Capital & Counties Properties plc 1,475,373 6,558, Admiral Group plc 401,236 6,471, Hargreaves Lansdown plc 441,502 6,375, Great Portland Estates plc 705,816 6,278, Henderson Group plc 2,086,517 5,990, Investec plc 1,038,817 5,625, IG Group Holdings plc 741,885 5,601, Hiscox Ltd. 577,673 5,583, Foreign & Colonial Investment Trust plc 1,262,443 5,481, Shaftesbury plc 578,465 5,437, Man Group plc 3,018,378 5,043, ICAP plc 1,107,607 4,872, RIT Capital Partners plc 302,675 4,764, Close Brothers Group plc 321,831 4,711, HICL Infrastructure Co. Ltd. 2,942,192 4,551, Edinburgh Investment Trust plc 598,025 4,239, Mercantile Investment Trust plc 242,287 4,186, Phoenix Group Holdings plc 478,489 4,091, Jupiter Fund Management plc 872,065 3,931, Beazley plc 1,080,465 3,928, Intermediate Capital Group plc 694,562 3,927, City of London Investment Trust plc 1,004,761 3,869, Witan Investment Trust plc 461,125 3,573, Kennedy Wilson Europe Real Estate plc 269,343 3,218, International Public Partnerships Ltd. 2,381,623 3,138,

14 Market % of Value Net Asset Holding ( ) Value Templeton Emerging Markets Investment Trust plc 737,412 3,134, NB Global Floating Rate Income Fund Ltd. 3,383,397 3,129, UNITE Group plc 462,376 3,074, Lancashire Holdings Ltd. 426,447 3,036, Electra Private Equity plc 78,895 2,927, Finsbury Growth & Income Trust plc 483,625 2,800, Paragon Group of Cos. plc 650,126 2,720, Murray International Trust plc 315,885 2,688, Perpetual Income and Growth Investment Trust plc 640,327 2,644, IP Group plc 1,067,798 2,539, Savills plc 274,899 2,518, Aberforth Smaller Companies Trust plc 218,926 2,506, Bluecrest Allblue Fund Ltd. 1,237,944 2,358, Workspace Group plc 245,695 2,352, Temple Bar Investment Trust plc 213,770 2,308, Monks Investment Trust plc 573,486 2,303, Ashmore Group plc 850,208 2,295, TR Property Investment Trust plc 727,788 2,264, Jardine Lloyd Thompson Group plc 238,705 2,261, Big Yellow Group plc 299,762 2,248, SVG Capital plc 463,702 2,202, Londonmetric Property plc 1,298,378 2,196, Grainger plc 881,139 2,191, Rathbone Brothers plc 96,629 2,179, i Infrastructure plc 1,249,677 2,153, Tritax Big Box REIT plc 1,625,873 2,089, F&C Commercial Property Trust Ltd. 1,449,589 2,065, Polar Capital Technology Trust plc 342,550 2,041, John Laing Infrastructure Fund Ltd. 1,688,896 2,006, BH Macro Ltd. 98,574 1,993, Hansteen Holdings plc 1,605,400 1,992, British Empire Securities and General Trust plc 404,450 1,913, Worldwide Healthcare Trust plc 103,705 1,877, Virgin Money Holdings UK Ltd. 482,532 1,871, Woodford Patient Capital Trust plc 1,804,781 1,867, Tullett Prebon plc 522,821 1,838, International Personal Finance plc 493,340 1,823, JPMorgan American Investment Trust plc 624,013 1,741, ST Modwen Properties plc 395,538 1,739, Fidelity European Values plc 1,017,144 1,701, Fidelity China Special Situations plc 1,161,734 1,563, Countrywide plc 331,942 1,543, Caledonia Investments plc 64,319 1,541, Bankers Investment Trust plc 248,057 1,534, Personal Assets Trust plc 4,337 1,529, Brewin Dolphin Holdings plc 559,642 1,511, GCP Infrastructure Investments Ltd. 1,238,642 1,502, UK Commercial Property Trust Ltd. 1,674,074 1,462, Safestore Holdings plc 448,994 1,461, Market % of Value Net Asset Holding ( ) Value JPMorgan Emerging Markets Investment Trust plc 262,585 1,449, Bank of Georgia Holdings plc 70,747 1,412, Scottish Investment Trust plc 229,247 1,386, Fidelity Special Values plc 693,875 1,372, esure Group plc 513,571 1,358, Jupiter European Opportunities Trust plc 234,680 1,304, Murray Income Trust plc 170,510 1,159, Redefine International plc 2,079,117 1,150, Novae Group plc 132,163 1,147, Law Debenture Corp. plc 218,974 1,139, Genesis Emerging Markets Fund Ltd. 242,093 1,130, Allied Minds plc 233,554 1,100, Helical Bar plc 248,138 1,095, JPMorgan Indian Investment Trust plc 209,203 1,077, Merchants Trust plc 244,710 1,071, JPMorgan Eur Smaller Companies Trust plc 415,625 1,069, P2P Global Investments plc 107,094 1,054, Foxtons Group plc 527,740 1,051, Primary Health Properties plc 240,468 1,037, F&C Global Smaller Companies plc 106,380 1,013, Empiric Student Property plc 923,008 1,008, Chesnara plc 304, , BlackRock World Mining Trust plc 438, , Herald Investment Trust plc 136, , Henderson Smaller Companies Investment Trust plc 147, , Capital & Regional plc 1,352, , Aldermore Group plc 358, , BACIT Ltd. 694, , Edinburgh Dragon Trust plc 358, , Just Retirement Group plc 519, , JPMorgan Mid Cap Investment Trust plc 85, , Arrow Global Group plc 338, , P2P Global Investments plc 85, , BH Global Ltd. 62, , OneSavings Bank plc 206, , TR European Growth Trust plc 134, , JPMorgan Japanese Investment Trust plc 288, , European Investment Trust plc 105, , Schroder Real Estate Investment Trust Ltd. 1,284, , Riverstone Energy Ltd. 93, , Schroder AsiaPacific Fund plc 285, , Graphite Enterprise Trust plc 122, , Lowland Investment Company plc 56, , Impax Environmental Markets plc 457, , Scottish American Investment Co. plc 272, , Standard Life Equity Income Trust plc 149, , Dunedin Income Growth Investment Trust plc 288, , Baillie Gifford Japan Trust plc 145, , Shawbrook Group plc 193, , John Laing Group plc 334, , Blackrock Income Strategies plc 461, ,

15 Market % of Value Net Asset Holding ( ) Value JPMorgan Claverhouse Investment Trust plc 105, , Aberdeen Asian Income Fund Ltd. 375, , F&C UK Real Estate Investment Ltd. 605, , F&C Capital & Income Investment Trust plc 227, , CLS Holdings plc 32, , Montanaro UK Smaller Companies Investment Trust plc 110, , Daejan Holdings plc 8, , Invesco Perpetual UK Smaller Companies Investment Trust plc 142, , Martin Currie Portfolio Investment Trust plc 311, , North Atlantic Smaller Cos. Investment Trust plc 24, , Development Securities plc 225, , LSL Property Services plc 158, , Pacific Assets Trust plc 271, , Scottish Oriental Smaller Companies Trust plc 69, , Henderson EuroTrust plc 59, , Aberdeen Asian Smaller Companies Investment Trust plc 70, , VPC Specialty Lending Investments plc 500, , Keystone Investment Trust plc 27, , Schroder Income Growth Fund plc 188, , JPMorgan Overseas Investment Trust plc 47, , McKay Securities plc 178, , Mucklow A & J Group plc 90, , City Merchants High Yield Trust Ltd. 240, , Invesco Income Growth Trust plc 145, , Schroder UK Mid Cap Fund plc 89, , Advance Developing Markets Fund Ltd. 100, , PureTech Health plc 252, , CQS New City High Yield Fund Ltd. 681, , Schroder UK Growth Fund plc 247, , Aberdeen New Dawn Investment Trust plc 242, , Henderson Global Trust plc 99, , Strategic Equity Capital plc 168, , Fidelity Asian Values plc 160, , Raven Russia Ltd. 849, , JPMorgan Asian Investment Trust plc 165, , Standard Life European Private Equity Trust plc 170, , JPMorgan Chinese Investment Trust plc 208, , JPMorgan Russian Securities plc 108, , Henderson European Focus Trust plc 34, , Schroder Japan Growth Fund plc 216, , INVESCO Asia Trust plc 187, , Henderson High Income Trust plc 181, , Partnership Assurance Group plc 239, , F&C Private Equity Trust plc 140, , Artemis Alpha Trust plc 115, , Brunner Investment Trust plc 54, , Market % of Value Net Asset Holding ( ) Value Real Estate Credit Investments PCC Ltd. 172, , Jupiter US Smaller Companies plc 47, , DW Catalyst Fund Ltd. 24, , Securities Trust of Scotland plc 208, , Pacific Horizon Investment Trust plc 147, , Baring Emerging Europe plc 48, , Asian Total Return Investment Co. plc 127, , Town Centre Securities plc 74, , JPMorgan Japan Smaller Companies Trust plc 97, , Martin Currie Pacific Trust plc 82, , Hansard Global plc 188, , Liontrust Asset Management plc 72, , City of London Investment Group plc 59, , Dexion Absolute Ltd. 101, , Aberdeen New Thai Investment Trust plc 48, , S&U plc 6, , Hansa Trust plc 8,403 62, Gartmore Irish Growth Fund plc 5,084 38, International Public Partnerships Ltd. 297,702 1, Electric and General Investment Trust plc 1 30, Health Care 8.45% (2014: 8.39%) 1,075,324, GlaxoSmithKline plc 9,804, ,757, AstraZeneca plc 2,543, ,551, Shire plc 1,186,057 58,401, Smith & Nephew plc 1,802,795 19,992, Hikma Pharmaceuticals plc 273,784 5,924, BTG plc 770,709 4,254, Indivior plc 1,285,635 2,639, UDG Healthcare plc 505,796 2,403, Spire Healthcare Group plc 581,822 2,179, Dechra Pharmaceuticals plc 196,117 1,901, Al Noor Hospitals Group plc 160,477 1,887, Genus plc 125,347 1,823, Vectura Group plc 889,844 1,554, Consort Medical plc 108,179 1,052, Circassia Pharmaceuticals plc 364,164 1,020, NMC Health plc 126, , Skyepharma plc 231, , Cambian Group plc 181, , Oxford Biomedica plc 4,513, , Industrials 9.87% (2014: 9.54%) 350,614, CRH plc 1,647,823 29,331, BAE Systems plc 6,342,605 27,920, Rolls-Royce Holdings plc 3,706,063 25,479, Experian plc 1,954,097 21,651, Wolseley plc 524,018 19,991, Capita plc 1,330,058 16,944, Bunzl plc 672,434 12,493, Ashtead Group plc 1,016,164 10,161, Babcock International Group plc 1,015,851 9,787, Travis Perkins plc 496,790 9,513, DCC plc 178,203 9,275, Intertek Group plc 324,606 8,517,

16 Market % of Value Net Asset Holding ( ) Value Royal Mail plc 1,848,712 8,232, Rexam plc 1,451,869 7,832, G4S plc 3,158,109 7,658, Smiths Group plc 791,923 7,610, DS Smith plc 1,882,638 7,282, Cobham plc 2,301,511 6,382, Howden Joinery Group plc 1,255,937 5,822, Halma plc 757,640 5,784, Rentokil Initial plc 3,715,696 5,737, Meggitt plc 1,570,852 5,552, Melrose Industries plc 1,997,520 5,315, IMI plc 544,565 5,186, Weir Group plc 422,249 4,505, Essentra plc 534,593 4,501, Spirax-Sarco Engineering plc 147,361 4,478, Aggreko plc 487,341 4,459, Regus plc 1,264,324 4,229, BBA Aviation plc 2,209,763 4,209, Spectris plc 242,963 4,047, Hays plc 2,851,746 4,018, Berendsen plc 358,871 3,678, Balfour Beatty plc 1,398,255 3,483, RPC Group plc 508,078 3,305, Rotork plc 1,723,228 3,229, Michael Page International plc 629,328 3,110, Grafton Group plc 442,686 2,981, WS Atkins plc 212,482 2,928, QinetiQ Group plc 1,254,960 2,811, Ultra Electronics Holdings plc 160,605 2,701, Carillion plc 881,851 2,692, Kier Group plc 191,577 2,638, Mitie Group plc 812,190 2,609, Galliford Try plc 171,286 2,564, Homeserve plc 532,405 2,149, Serco Group plc 2,224,806 2,084, HellermannTyton Group plc 432,240 2,048, Vesuvius plc 564,516 2,017, Electrocomponents plc 954,823 1,958, Senior plc 859,049 1,943, Bodycote plc 376,448 1,938, Interserve plc 317,885 1,769, Morgan Advanced Materials plc 580,764 1,623, Diploma plc 242,716 1,557, SIG plc 1,163,596 1,548, Marshalls plc 426,922 1,479, Renishaw plc 71,229 1,344, Keller Group plc 153,200 1,249, Hill & Smith Holdings plc 180,938 1,233, PayPoint plc 120,315 1,191, Northgate plc 279,253 1,132, RPS Group plc 473,692 1,113, E2V Technologies plc 476,025 1,111, De La Rue plc 236,510 1,095, Polypipe Group plc 341,677 1,076, Clarkson plc 43,761 1,060, Mears Group plc 238, , Ricardo plc 99, , Tyman plc 346, , Xchanging plc 513, , James Fisher & Sons plc 88, , Xaar plc 161, , Connect Group plc 480, , Market % of Value Net Asset Holding ( ) Value Premier Farnell plc 740, , SThree plc 205, , Fenner plc 451, , Costain Group plc 176, , Chemring Group plc 386, , Shanks Group plc 665, , Brammer plc 273, , Stobart Group Ltd. 556, , Oxford Instruments plc 114, , Morgan Sindall Group plc 78, , Avon Rubber plc 48, , Vitec Group plc 81, , Lavendon Group plc 348, , Sanne Group plc 165, , Robert Walters plc 129, , Boot Henry plc 201, , Wincanton plc 220, , John Menzies plc 109, , Low & Bonar plc 658, , British Polythene Industries plc 54, , St Ives plc 209, , Severfield plc 572, , Rolls-Royce Holdings plc 341,186, , TT electronics plc 257, , Speedy Hire plc 1,082, , Dialight plc 59, , Exova Group plc 200, , Charles Taylor plc 109, , Vp plc 38, , Acal plc 111, , Renold plc 411, , Trifast plc 223, , Hogg Robinson Group plc 400, , Braemar Shipping Services plc 50, , Communisis plc 425, , Porvair plc 71, , Tribal Group plc 206, , Norcros plc 89, , Volution Group plc 90, , UK Mail Group plc 31, , Lakehouse plc 122, , Energy Assets Group plc 23, , Goodwin plc 3,393 81, HSS Hire Group plc 134,581 77, ,450, Oil & Gas 11.00% (2014: 13.83%) BP plc 36,814, ,249, Royal Dutch Shell A plc 7,970, ,701, Royal Dutch Shell B plc 4,791,763 81,436, BG Group plc 6,870,554 70,526, Amec Foster Wheeler plc 801,943 5,693, John Wood Group plc 762,239 4,550, Petrofac Ltd. 525,063 4,423, Tullow Oil plc 1,820,883 3,694, Cairn Energy plc 1,226,063 1,839, Ophir Energy plc 1,384,245 1,326, Hunting plc 277, , Soco International plc 450, , Premier Oil plc 1,041, , Lamprell plc 481, , Nostrum Oil & Gas plc 133, , Cape plc 212, ,

17 EnQuest plc 1,738, , XP Power Ltd. 31, , Gulf Marine Services plc 234, , Exillon Energy plc 188, , Technology 1.64 % (2014: 1.37%) 455,981, ARM Holdings plc 2,839,241 29,102, Sage Group plc 2,161,212 11,767, Telecity Group plc 411,640 4,832, Micro Focus International plc 360,089 4,511, AVEVA Group plc 127,804 2,625, Pace plc 666,138 2,482, Laird plc 526,519 1,784, Fidessa Group plc 78,916 1,545, NCC Group plc 453,447 1,251, Imagination Technologies Group plc 485,661 1,074, FDM Group Holdings plc 184,519 1,061, Innovation Group plc 2,588,918 1,022, Spirent Communications plc 1,329, , Sophos Group plc 328, , Computacenter plc 110, , SDL plc 182, , Sepura plc 342, , Servelec Group plc 112, , Kainos Group plc 116, , RM plc 173, , Nanoco Group plc 395, ,780 Telecommunications 5.09% (2014: 4.51%) Market % of Value Net Asset Holding ( ) Value 68,169, Vodafone Group plc 53,618, ,850, BT Group plc 16,867,294 78,281, Inmarsat plc 903,981 8,890, Cable & Wireless Communications plc 5,767,100 4,241, TalkTalk Telecom Group plc 1,062,748 2,688, Telecom Plus plc 125,854 1,322, Kcom Group plc 992, , ,139, Utilities 3.84% (2014: 4.04%) National Grid plc 7,614,163 70,415, SSE plc 1,998,968 30,264, Centrica plc 10,214,302 23,094, United Utilities Group plc 1,375,509 13,590, Severn Trent plc 480,989 10,783, Pennon Group plc 842,138 6,829, Drax Group plc 1,269,226 3,305, Infinis Energy plc 516, , Derivatives 0.00% (2014: 0.03%) 159,223, FTSE 100 Index Futures December 2015 (510) (101,506) 0.00 (101,506) 0.00 Portfolio of Investments 4,134,235, Net Other Assets 12,724, Net Assets Attributable to Shareholders 4,146,959, All holdings are ordinary shares or stock units included on an official stock exchange listing unless otherwise stated. 1 Delisted. Financial Derivative Instrument Risk Exposure Market % of Value Net Asset Holding ( ) Value The exposure obtained through financial derivative instruments and the identity of counterparties as at 31 October 2015 were as follows: Notional Market Value of Value of Exposure Exposure Counterparty ( ) ( ) Morgan Stanley (32,232,000) (101,506) Total (32,232,000) (101,506) 15

18 Balance Sheet As at As at 31 October October October October 2014 Note 1 ( ) ( ) ( ) ( ) Assets Investment Assets 4,134,133,498 1,638,349,197 Debtors 10 25,394,959 8,097,530 Cash and Bank Balances 11 9,544,629 9,989,601 Total Other Assets 34,939,588 18,087,131 Total Assets 4,169,073,086 1,656,436,328 Liabilities Investment Liabilities (101,506) Creditors 12 (1,449,044) (807,509) Distribution Payable on Income Units (20,766,360) (3,180) Total Other Liabilities (22,215,404) (810,689) Total Liabilities (22,113,898) (810,689) Net Assets Attributable to Unitholders 4,146,959,188 1,655,625,639 Statement of Total Return Year Ended Year Ended 31 October October October October 2014 Note 1 ( ) ( ) ( ) ( ) Income Net Capital Gains/(Losses) 4 (52,304,569) (35,577,847) Revenue 6 140,301,787 51,268,518 Expenses 7 (3,015,307) (2,054,865) Finance Costs: Interest 9 (83,007) (24,455) Net Revenue Before Taxation 137,203,473 49,189,198 Taxation 8 (1,039,313) (88,943) Net Revenue After Taxation 136,164,160 49,100,255 Total Return Before Distributions 83,859,591 13,522,408 Finance Costs: Distributions 9 (136,164,160) (49,100,255) Change in Net Assets Attributable to Unitholders From Investment Activities (52,304,569) (35,577,847) Statement of Change in Unitholders Net Assets Year Ended Year Ended 31 October October October October 2014 Note 1 ( ) ( ) ( ) ( ) Opening Net Assets Attributable to Unitholders 1,655,625,639 1,183,572,765 Amounts Received on Issue of Units 937,176, ,236,874 Amounts Received on In-Specie Issue of Units 1,647,525,411 Amounts Paid on Cancellation of Units (168,532,205) (45,204,373) Amounts Paid on In-Specie Cancellation of Units (5,672,189) 2,410,497, ,032,501 Dilution Levy 16 2,699,033 1,070,596 Change in Net Assets Attributable to Unitholders From Investment Activities (52,304,569) (35,577,847) Retained Distribution on Accumulation Units 130,441,583 54,527,624 Closing Net Assets Attributable to Unitholders 4,146,959,188 1,655,625,639 16

19 Distribution Table For the year ended 31 October 2015 Final distribution payable 31 December 2015 Distribution Distribution Net Payable Paid Income Equalisation 31 December December 2014 Pence Per Unit Pence Per Unit Pence Per Unit Pence Per Unit A Accumulation Units Group Group A Income Units Group Group Institutional Plus Accumulation Units Group Group Institutional Plus Income Units Group Group Group 1 Units purchased before 1 November Group 2 Units purchased between 1 November 2014 and 31 October 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. 17

20 Notes to Financial Statements For the year ended 31 October Accounting Policies (a) Basis of Accounting 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 Investment Management Association (now the Investment Association) in October 2010 and UK Generally Accepted Accounting Practice. These policies have remained unchanged and have been consistently applied to all the years presented, unless otherwise stated. The financial statements have been prepared on a going concern basis. The Trust has complied with the European Securities and Markets Authority (ESMA) disclosure guidelines. (b) Recognition of Revenue Dividends on quoted equities and preference stock are recognised when the securities are quoted ex-dividend. Dividends, interest and other revenue receivable include any withholding taxes but exclude any other taxes such as attributable tax credits. Special dividends are treated as either capital or revenue depending on the facts of each particular case. The ordinary element of stock dividends, received in lieu of cash dividends, is treated as revenue on the basis of the market value of shares at the date they are quoted ex-dividend, and forms part of the distribution. In the case of an enhanced stock dividend, the value of the enhancement is treated as capital and does not form part of the distribution. Interest on debt securities and bank and short-term deposits is recognised on an earned basis. In the case of debt securities any difference between acquisition cost and maturity value is recognised as revenue over the life of the security using the effective yield basis of calculating amortisation. (c) Treatment of Expenses The Trust currently has two unit classes, A and Institutional Plus, and Income and Accumulation Units are available in each class. All expenses, other than those relating to the purchase and sale of investments, are included in expenses, in the Statement of Total Return. Stamp duty reserve tax, where payable, is deducted as an expense from the capital of the Trust. The Manager s annual fee is charged to income. The Manager has chosen to cover other expenses in order to reduce the impact that such fees may have on performance. This waiver is entirely voluntary and may be discontinued at any time without notice at the sole discretion of the Manager. (d) Taxation The charge for taxation is based on the net income for the period. UK dividend income is disclosed net of any related tax credit. Overseas dividends are disclosed gross of any foreign tax suffered. Deferred taxation is provided on all timing differences that have originated and not reversed by the Balance Sheet date, other than those differences regarded as permanent. Any liability to deferred tax is provided at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money; a deferred tax asset is only recognised to the extent that it is expected to crystallise. (e) Valuation of Investments The listed investments of the Trust have been valued at the closing bid-market prices ruling on the principal markets on which the stocks are quoted, on the last business day of the accounting period. Market value is defined by the SORP as fair value, which generally is the bid value of each security. To comply with this, quoted investments have been valued at bid-market value at the closing bid-market price on the last business day of the period, net of any accrued interest, which is included in the Balance Sheet as income receivable. For investments in other unit trusts, the fair value is the bid value for that security. Where applicable, unlisted and suspended securities are based on the Manager s assessment of their net realisable value or the last traded price. The Trust is valued daily based on quoted last-traded prices from recognised exchanges or from broker-dealers for non-exchange-trade purposes. (f) Exchange Rates All transactions in foreign currencies are translated into sterling at the exchange rates ruling on the date of such transactions. Foreign currency assets and liabilities at the end of the accounting period are translated at the exchange rates on the last day of the accounting period. Gains or losses arising on the translation are reported as part of the return for the period. (g) Derivatives Derivative transactions are accounted for on a trade-date basis. Where such transactions are used to protect or enhance revenue, the revenue and expenses derived therefrom are included in Revenue or Finance Costs in the Statement of Total Return on an accruals basis. Where such transactions are used to protect or enhance capital, the gains and losses derived therefrom are included in Net Capital Gains/(Losses) in the Statement of Total Return. Any positions open at the period-end are reflected in the Balance Sheet at their market value, either using available market prices or the Manager s assessment of the fair value based on counterparty valuations and appropriate pricing models. Cash held at futures brokers as margin is reflected within Cash and Bank Balances in the Balance Sheet. 18