legal & general sterling income fund annual 15.10 · long-term preservation of capital in...

Distribution Number 216

Legal & General Sterling Income Fund

Final Manager's Reportfor the period ended15 October 2019

Contents

Page Number

1

Manager's Investment Report* 2

Authorised Status* 4

Directors’ Statement 4

Statement of the Manager's Responsibilities 5

Statement of the Trustee’s Responsibilities 6

Report of the Trustee 7

Portfolio Statement* 8

Independent Auditor’s Report 15

Statement of Total Return 18

Statement of Change in Net Assets attributable to Unitholders 18

Balance Sheet 19

Notes to the Financial Statements 20

Distribution Tables 34

Fund Information* 46

Risk and Reward Profile (unaudited)* 56

General Information (unaudited)* 57

* These collectively comprise the Authorised Fund Manager’s Report.

2

Manager's Investment Report

Investment Objective and PolicyIn line with the updated rules and guidance for the asset management industry published by the Financial Conduct Authority (FCA) in February 2019, we have clarified the Investment Objectives and Policies for our UK regulated funds.

The revised Investment Objective and Policy came into effect on 7 August 2019. The previous and revised Investment Objective and Policy are set out below.

Prior to 7 August 2019The objective of the Fund is to produce a high level of income consistent with long-term preservation of capital in Sterling terms. It is intended that the Fund will predominantly invest in interest-bearing securities issued by governments, other public issuers and companies worldwide.

From 7 August 2019The objective of the Fund is to provide income consistent with preservation of capital.

The Fund is actively managed and will invest at least 80% in investment grade bonds (corporate and government) from UK and overseas issuers. These are bonds with a credit rating from a nationally recognised statistical rating organisation (NRSRO) or non-rated bonds that are deemed equivalent by the Manager. The Fund may hold up to 20% in sub-investment grade bonds. Non-Sterling currency is hedged to Sterling and interest rate risk exposure is also hedged.

The Fund may also invest in cash, permitted deposits, money market instruments (such as treasury bills), collective investment schemes, including those which are operated by the Manager or an associate of the Manager and securities with bond features such as contingent convertible bonds.

The Fund may only hold derivatives for the purpose of Efficient Portfolio Management.

Manager's Investment ReportDuring the period under review, the published price of the Fund’s R-Class accumulation units rose by 4.29%.

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 ReviewBond markets outperformed equities over the last 12 months, as a marked rise in equity market volatility during the fourth quarter of 2018, and more recently in May and August, highlighted the ‘safe haven’ appeal of major government bond markets. Since the turn of the year, the major central banks have loosened monetary policy, underpinning government bonds. In the UK, although inflationary pressures have remained subdued, index-linked gilts outperformed conventional securities benefiting from their longer average maturities as gilt yields fell. The weakness of Sterling, given ongoing uncertainty over the outcome of Brexit negotiations, enhanced returns from international bond markets.

3

Over the last 12 months, global economic indicators have highlighted a synchronised slowdown although activity continues to expand. The closely-watched global manufacturing Purchasing Manager’s Index (PMI) fell back to its lowest level for three and a half years in February. This was partly a result of the US-China trade dispute, but also reflective of a slowdown in the Chinese economy. Worldwide, inflationary pressures have remained subdued by historical standards. Having risen to its highest level in four years in early October 2018, the oil price (Brent crude) declined sharply to just over $50 per barrel in December – its lowest level for 15 months, driven by increased levels of supply, notably US inventories, before rallying during the opening quarter of 2019.

In the UK, economic and political uncertainty has heightened over the last 12 months, with precariousness as to the outcome of Brexit negotiations and the implications for future trade with the EU. The risk of a disorderly Brexit increased with the new Prime Minister emphasising the desire to leave the EU ‘come what may’ by the end of October. The UK economy shrank during the second quarter for the first time in almost seven years, as stockpiling activity slowed and Brexit uncertainty intensified against a backdrop of weaker global growth.

Fund ReviewThe Fund delivered a positive return over the review period. The portfolio deliberately runs a shorter duration than the wider corporate bond market given its dual objectives of delivering income and maintaining capital.

The market volatility seen at the end of 2018 weighed on the performance of the Fund at first. However, as markets recovered in early 2019, corporate bonds were more in demand and Fund positioning helped deliver positive performance. Recently, the Fund’s smaller position in UK insurers including Prudential and Scottish Widows was beneficial for performance as uncertainty surrounding the terms and timing of the UK’s departure from the EU weighed on investments exposed to the UK economy.

We have moved the Fund to a more defensive position recently, reducing exposure in auto manufacturers and UK banks. We also maintained our relatively smaller position in the commercial real estate sector. The Fund has a comparatively larger position in those companies which typically perform better in periods of market stress, such as utilities companies.

OutlookLooking ahead, the next few weeks could be important for both the US/China trade war, as well as Brexit. The outcome of both will go a long way to determine risk of recession. In addition, third quarter earnings season will begin soon, and are expected to show a divergence between companies exposed to the global manufacturing and trade slowdown and those more insulated by the strong US consumer. Any sign that manufacturing weakness is spreading would be taken very badly by investors. On the positive side, talk of fiscal support appears to be gaining momentum, and could be a key market support going forward given monetary policy is close to exhaustion. However, downside economic risks appear more immediate and still argue for a cautious global credit portfolio stance.

Legal & General Investment Management Limited(Investment Adviser) 21 October 2019

Manager's Investment Report continued

Authorised Status

4

Authorised StatusThis 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’ StatementWe 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 L. W. Toms(Director) (Director)

Legal & General (Unit Trust Managers) Limited5 November 2019

5

Statement of Responsibilities

Statement of the Manager's ResponsibilitiesThe Collective Investment Schemes sourcebook published by the FCA, ("the COLL Rules") require the Manager to prepare financial statements for each annual accounting period which give a true and fair view of the financial position of the Fund and of the net income and net gains or losses on the property of the Fund for the period.

In preparing the financial statements, the Manager is responsible for:

• selecting suitable accounting policies and then applying them consistently;

• making judgements and estimates that are reasonable and prudent;

• following UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland;

• complying with the disclosure requirements of the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Management Association in May 2014;

• keeping proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements;

• assessing the Fund's ability to continue as a going concern, disclosing, as applicable, matters related to going concern;

• using the going concern basis of accounting unless they either intend to liquidate the Fund or to cease operations, or have no realistic alternative but to do so;

• such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and

• taking reasonable steps for the prevention and detection of fraud and irregularities.

The Manager is responsible for the management of the Fund in accordance with its Trust Deed, the Prospectus and the COLL Rules.

6

Statement of the Trustee's ResponsibilitiesThe Depositary in its capacity as Trustee of Legal & General Sterling Income Fund must ensure that the Fund is managed in accordance with the Financial Conduct Authority’s Collective Investment Schemes Sourcebook, the Financial Services and Markets Act 2000, as amended, (together “the Regulations”), the Trust Deed and Prospectus (together “the Scheme documents”) as detailed below.

The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Fund and its investors.

The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Fund in accordance with the Regulations.

The Depositary must ensure that:

• the Fund's cash flows are properly monitored and that cash of the Fund is booked in cash accounts in accordance with the Regulations;

• the sale, issue, repurchase, redemption and cancellation of units are carried out in accordance with the Regulations;

• the value of units of the Fund are calculated in accordance with the Regulations;

• any consideration relating to transactions in the Fund’s assets is remitted to the Fund within the usual time limits;

• the Fund’s income is applied in accordance with the Regulations; and

• the instructions of the Authorised Fund Manager (“the AFM”), which is the UCITS Management Company, are carried out (unless they conflict with the Regulations).

Statement of Responsibilities continued

7

Report of the Trustee

Report of the Trustee to the Unitholders of the Legal & General Sterling Income Fund ("the Fund") for the period ended 15 October 2019The Depositary also has a duty to take reasonable care to ensure that the Fund is managed in accordance with the Regulations and the Scheme documents of the Fund in relation to the investment and borrowing powers applicable to the Fund.

Having carried out such procedures as we considered necessary to discharge our responsibilities as Depositary of the Fund, it is our opinion, based on the information available to us and the explanations provided, that, in all material respects the Fund, acting through the AFM:

(i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Fund’s units and the application of the Fund’s income in accordance with the Regulations and the Scheme documents of the Fund; and

(ii) has observed the investment and borrowing powers and restrictions applicable to the Fund in accordance with the Regulations and the Scheme documents of the Fund.

Northern Trust Global Services SE UK BranchUK Trustee and Depositary Services5 November 2019

Portfolio Statement

8

Portfolio Statement as at 15 October 2019All investments are in investment grade securities or collective investment schemes unless otherwise stated. The percentages in brackets show the equivalent holdings at 12 October 2018.

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestCOLLECTIVE INVESTMENT SCHEMES — 8.77% (9.31%) Test Test

82,582,996 Legal & General High Income Trust 'R' Inc1 38,211,152 8.77

DEBT SECURITIES — 89.29% (88.52%)NORTH AMERICA — 16.74% (14.19%) United States — 12.95% (9.58%)

GBP3,400,000 AT&T 2.9% 04/12/2026 3,589,067 0.82GBP2,350,000 AT&T 5.5% 15/03/2027 2,895,383 0.67EUR2,137,000 Bank of America 1.776% 04/05/2027 2,014,714 0.46

GBP100,000 Bank of America 7% 31/07/2028 141,514 0.03GBP1,833,000 Citigroup 2.75% 24/01/2024 1,916,013 0.44GBP1,722,000 Digital Stout 2.75% 19/07/2024 1,792,960 0.41

GBP274,000 Digital Stout 4.25% 17/01/2025 305,530 0.07GBP2,384,000 Fidelity National Information

Services 2.602% 21/05/2025 2,486,083 0.57GBP3,308,000 Fiserv 2.25% 01/07/2025 3,383,886 0.78GBP1,246,621 General Electric 6.44% 15/11/2022 1,312,729 0.30GBP3,582,000 General Motors Financial 2.35%

03/09/2025 3,519,845 0.81GBP798,000 Goldman Sachs 7.25% 10/04/2028 1,111,909 0.26

GBP6,686,000 Juneau Investments 5.9% 22/02/20212 6,900,340 1.58

GBP2,500,000 Metropolitan Life Global Funding I 1.625% 09/06/2022 2,521,428 0.58

GBP1,740,000 New York Life Global Funding 1.75% 15/12/2022 1,770,154 0.41

GBP4,298,000 New York Life Global Funding 1.625% 15/12/2023 4,366,407 1.00

GBP2,514,000 Verizon Communications 2.5% 08/04/2031 2,623,047 0.60

GBP2,133,000 Wells Fargo 2.125% 22/04/2022 2,175,191 0.50GBP2,059,000 Wells Fargo 1.375% 30/06/2022 2,060,997 0.47GBP2,627,000 Wells Fargo 2.125% 20/12/2023 2,693,474 0.62GBP1,395,000 Wells Fargo 2% 28/07/2025 1,413,311 0.33GBP5,193,000 Wells Fargo 2.5% 02/05/2029 5,418,324 1.24

56,412,306 12.95

Canada — 0.00% (0.49%)

Cayman Islands — 3.02% (3.33%) GBP2,862,000 Thames Water Utilities Cayman

Finance 2.375% 03/05/2023 2,870,474 0.66GBP3,770,000 Thames Water Utilities Cayman

Finance 1.875% 24/01/2024 3,811,150 0.87

Portfolio Statement continued

9

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestCayman Islands — (cont.) Test TestGBP5,954,000 Thames Water Utilities Cayman

Finance 5.75% 13/09/2030 6,474,266 1.49

13,155,890 3.02

Mexico — 0.77% (0.79%) GBP2,764,000 America Movil 5% 27/10/2026 3,351,240 0.77

UNITED KINGDOM — 50.12% (48.17%)

GBP1,531,000 Anglian Water Services Financing 1.625% 10/08/2025 1,539,457 0.35



GBP715,000 Anglian Water Services Financing 6.625% 15/01/2029 1,004,200 0.23


GBP815,000 Anglian Water Services Financing 6.293% 30/07/2030 1,158,351 0.27

GBP4,735,000 Annington Funding 2.646% 12/07/2025 4,849,308 1.11

GBP727,200 Arqiva Financing 4.882% 31/12/2032 832,683 0.19GBP115,000 Arqiva Financing 5.34% 30/12/2037 140,588 0.03

GBP3,493,161 Aspire Defence Finance 4.674% 31/03/2040 4,610,891 1.06

GBP1,810,000 Aviva 6.125% 14/11/2036 2,145,665 0.49GBP3,538,000 Aviva 6.625% 03/06/2041 3,806,541 0.87

GBP683,000 Aviva 4.375% 12/09/2049 727,491 0.17GBP2,261,000 Aviva 5.902% Open Maturity 2,313,681 0.53GBP5,490,000 Aviva 6.125% Open Maturity 5,909,985 1.36

GBP500,000 Bank of Scotland 7.281% Open Maturity 615,256 0.14

GBP1,940,000 Barclays Bank 9.5% 07/08/2021 2,199,203 0.51GBP1,855,000 Barclays Bank 2.375% 06/10/2023 1,867,825 0.43GBP4,131,000 BAT International Finance 4%

04/09/2026 4,538,259 1.04GBP4,987,000 Brit Insurance 6.625% 09/12/20302 5,043,104 1.16GBP1,200,000 British Telecommunications 5.75%

07/12/2028 1,529,902 0.35GBP717,000 British Telecommunications 3.125%

21/11/2031 758,002 0.17GBP1,630,000 Broadgate Financing 4.999%

05/10/2033 2,007,666 0.46GBP668,054 Canary Wharf Finance II 6.455%

22/10/2033 841,132 0.19GBP3,000,000 Cheltenham & Gloucester 11.75%

Open Maturity 6,119,580 1.41GBP3,791,000 Coventry Building Society 1.5%

23/01/2023 3,790,727 0.87GBP3,462,000 Coventry Building Society 6.875%

Open Maturity 3,639,427 0.84GBP74,000 CYBG 3.125% 22/06/2025 71,902 0.02

GBP4,795,000 CYBG 5% 09/02/2026 4,754,861 1.09


10

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestUNITED KINGDOM — (cont.) Test TestGBP357,000 CYBG 3.375% 24/04/2026 346,298 0.08

GBP1,894,000 CYBG 4% 25/09/2026 1,902,534 0.44GBP1,000,000 Eastern Power Networks 8.5%

31/03/2025 1,336,542 0.31GBP1,000,000 FirstGroup 8.75% 08/04/2021 1,093,733 0.25GBP1,236,000 Friends Life 8.25% 21/04/2022 1,439,551 0.33

GBP396,000 Greene King Finance 5.702% 15/12/2034 351,255 0.08

GBP575,718 Greene King Finance 4.064% 15/03/2035 635,920 0.15

GBP165,000 Hammerson 3.5% 27/10/2025 164,571 0.04GBP54,000 Hammerson 6% 23/02/2026 60,998 0.01

GBP1,700,000 Heathrow Finance 5.75% 03/03/20253 1,869,524 0.43

GBP1,700,000 HSBC 2.175% 27/06/2023 1,724,235 0.40GBP718,000 HSBC 6.5% 07/07/2023 838,946 0.19

GBP2,948,000 HSBC 2.256% 13/11/2026 2,988,653 0.69GBP98,000 HSBC 5.75% 20/12/2027 120,965 0.03

GBP4,723,000 HSBC 3% 22/07/2028 5,012,539 1.15GBP400,000 HSBC 6.75% 11/09/2028 529,010 0.12

GBP4,401,000 Imperial Brands Finance 5.5% 28/09/2026 5,219,727 1.20

GBP661,123 Juturna European Loan Conduit No 16 5.064% 10/08/2033 840,063 0.19

GBP1,685,000 Land Securities Capital Markets 1.974% 08/02/2026 1,721,666 0.40

GBP680,000 Land Securities Capital Markets 2.375% 29/03/2029 713,864 0.16

GBP435,000 Leeds Building Society 3.75% 25/04/2029 438,302 0.10

GBP8,715,000 Lloyds Bank 5.125% 07/03/2025 10,510,499 2.41GBP641,000 Lloyds Bank 7.625% 22/04/2025 815,493 0.19

GBP5,564,000 Logicor 2019-1 UK 1.875% 17/11/2026 5,541,521 1.27

GBP175,000 Marston's Issuer 5.158% 15/10/2027 157,764 0.04GBP2,415,000 Marston's Issuer 5.177% 15/07/2032 2,648,581 0.61GBP2,937,000 Marston's Issuer 5.641% 15/07/20353 2,447,910 0.56

GBP384,336 Mitchells & Butlers Finance 5.965% 15/12/2023 409,718 0.09

GBP478,736 Mitchells & Butlers Finance 6.013% 15/12/2030 545,601 0.13

GBP2,069,000 Motability Operations Group 1.75% 03/07/2029 2,078,170 0.48

GBP2,842,000 National Grid Electricity Transmission 1.375% 16/09/2026 2,822,177 0.65

GBP4,554,000 National Westminster Bank 7.125% Open Maturity 5,080,442 1.17

GBP3,250,000 Nationwide Building Society 5.769% Open Maturity 3,384,625 0.78

GBP1,200,000 Nationwide Building Society 7.25% Open Maturity 1,293,000 0.30

GBP528,000 Next Group 3% 26/08/2025 543,810 0.13


11

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestUNITED KINGDOM — (cont.) Test TestGBP5,475,000 NGG Finance 5.625% 18/06/2073 6,118,313 1.41GBP6,788,000 Northumbrian Water Finance

2.375% 05/10/2027 7,064,258 1.62GBP1,158,208 Pacific Quay Finance 5.565%

25/07/2034 1,499,457 0.34GBP507,000 Provident Financial 7% 04/06/2023 510,904 0.12GBP749,000 Prudential 6.125% 19/12/2031 1,005,686 0.23

GBP2,800,000 Quadgas Finance 3.375% 17/09/2029 2,884,392 0.66

GBP761,000 Quilter 4.478% 28/02/2028 780,025 0.18GBP949,000 RL Finance Bonds 6.125%

30/11/2043 1,065,139 0.24GBP8,168,000 Rothesay Life 3.375% 12/07/2026 7,970,579 1.83

USD964,000 Royal Bank of Scotland Group 4.269% 22/03/2025 801,469 0.18

GBP3,454,000 RSA Insurance Group 5.125% 10/10/2045 3,839,632 0.88

GBP1,705,000 Santander UK 5.75% 02/03/2026 2,199,893 0.51GBP3,000,000 Santander UK 10.063% Open

Maturity 4,804,320 1.10GBP3,180,000 Scottish Widows 5.5% 16/06/2023 3,541,184 0.81GBP9,239,000 SSE 3.875% Open Maturity 9,281,721 2.13GBP2,690,000 SSE 3.625% 16/09/2077 2,703,020 0.62GBP3,914,599 Telereal Securitisation 5.389%

10/12/2033 4,773,983 1.10GBP1,530,770 Telereal Securitisation 5.948%

10/12/2033 1,906,145 0.44GBP260,000 Thames Water Utilities Finance 4%

19/06/2025 289,421 0.07GBP348,000 United Kingdom Gilt 4.25%

07/06/2032 494,793 0.11GBP2,276,000 United Utilities Water Finance 2.625%

12/02/2031 2,478,678 0.57GBP5,370,000 Western Power Distribution West

Midlands 6% 09/05/2025 6,567,564 1.51GBP461,000 Wrekin Housing 2.5% 22/10/2048 451,006 0.10GBP657,000 Yorkshire Building Society 3.5%

21/04/2026 702,824 0.16GBP3,733,000 Yorkshire Water Services Bradford

Finance 3.75% 22/03/2046 3,884,459 0.89GBP989,000 Zurich Finance UK 6.625% Open

Maturity 1,109,586 0.25

218,254,456 50.12

IRELAND — 0.75% (0.80%) GBP1,845,000 GE Capital UK Funding Unlimited

5.125% 24/05/2023 2,026,419 0.46GBP938,000 GE Capital UK Funding Unlimited

5.875% 18/01/2033 1,173,219 0.27GBP6,000,000 Lambay Capital Securities 6.25%

Open Maturity4 75,960 0.02

3,275,598 0.75


12

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestCHANNEL ISLANDS — 3.32% (3.40%) Test TestGBP110,000 AA Bond 6.269% 02/07/2043 113,111 0.03GBP104,000 AA Bond 4.875% 31/07/2043 102,905 0.02

GBP2,000,000 Bank of Scotland Capital Funding 7.754% Open Maturity 2,185,000 0.50

GBP3,843,000 CPUK Finance 3.588% 28/02/2042 4,128,362 0.95GBP747,000 CPUK Finance 7.239% 28/02/2042 903,712 0.21

GBP4,118,000 HSBC Bank Capital Funding Sterling 1 5.844% Open Maturity 5,483,867 1.26

GBP1,500,000 HSBC Bank Capital Funding Sterling 2 5.862% Open Maturity 1,523,490 0.35

14,440,447 3.32

ISLE OF MAN — 0.00% (0.22%)

CONTINENTAL EUROPE — 16.97% (20.86%) Belgium — 0.49% (0.00%)

GBP2,136,000 Euroclear Bank 1.25% 30/09/2024 2,125,525 0.49

France — 8.12% (9.45%) GBP900,000 AXA 5.453% Open Maturity 1,007,334 0.23

GBP1,000,000 Banque Federative du Credit Mutuel 1.875% 13/12/2022 1,017,238 0.23

GBP400,000 Banque Federative du Credit Mutuel 2.25% 18/12/2023 413,394 0.10

GBP1,375,000 BNP Paribas 3.375% 23/01/2026 1,484,566 0.34GBP2,000,000 Credit Agricole 7.5% Open Maturity 2,387,500 0.55GBP5,350,000 Credit Agricole 8.125% Open

Maturity 5,361,556 1.23GBP6,700,000 Electricite de France 6% Open

Maturity 7,253,983 1.67GBP410,000 Orange 5.75% Open Maturity 453,050 0.10

GBP4,585,000 Orange 5.875% Open Maturity 4,968,205 1.14GBP3,393,000 Sodexo 1.75% 26/06/2028 3,486,053 0.80GBP1,875,000 Total Capital International 2.25%

09/06/2022 1,934,393 0.44GBP1,852,000 Total Capital International 1.75%

07/07/2025 1,891,766 0.44GBP2,400,000 Total Capital International 1.66%

22/07/2026 2,443,440 0.56GBP1,200,000 Vinci 2.25% 15/03/2027 1,263,794 0.29

35,366,272 8.12

Germany — 2.59% (1.09%) GBP2,306,000 Deutsche Bahn Finance 1.875%

13/02/2026 2,396,003 0.55GBP3,600,000 Henkel AG & Co 1% 30/09/2022 3,594,103 0.83GBP5,300,000 Henkel AG & Co 1.25% 30/09/2026 5,259,932 1.21

11,250,038 2.59

Italy — 0.51% (0.28%) GBP2,086,000 Autostrade per l'Italia 6.25%

09/06/2022 2,234,502 0.51


13

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestLuxembourg — 0.52% (0.22%) Test TestGBP2,291,000 CK Hutchison Group Telecom

Finance 2% 17/10/2027 2,236,841 0.51GBP33,003 Silver Arrow Compartment Si '1uk A'

0.857% 20/07/20232 33,003 0.01

2,269,844 0.52

Netherlands — 2.95% (5.34%) GBP1,980,000 Cooperatieve Rabobank 2.25%

23/03/2022 2,038,759 0.47GBP750,000 Cooperatieve Rabobank 4%

19/09/2022 812,771 0.19GBP250,000 E.ON International Finance 6.75%

27/01/2039 399,308 0.09GBP6,000,000 innogy Finance 6.25% 03/06/2030 8,192,040 1.88GBP1,400,000 Volkswagen Financial Services

2.125% 27/06/2024 1,409,187 0.32

12,852,065 2.95

Russia — 0.52% (0.62%) GBP2,094,000 Gazprom OAO Via Gaz Capital

4.25% 06/04/2024 2,262,971 0.52

Spain — 0.57% (0.78%) GBP2,500,000 Banco Santander 1.375%

31/07/2024 2,480,078 0.57

Sweden — 0.00% (1.69%)

Switzerland — 0.70% (1.39%) GBP1,310,000 Credit Suisse Group 2.125%

12/09/2025 1,320,939 0.30GBP1,281,000 UBS 8.75% 18/12/2025 1,737,015 0.40

3,057,954 0.70

ASIA — 0.00% (0.53%) South Korea — 0.00% (0.53%)

SUPRANATIONAL — 0.98% (0.00%) GBP2,975,000 European Investment Bank 6%

07/12/2028 4,276,714 0.98

PACIFIC BASIN — 0.41% (0.35%) Australia — 0.41% (0.35%)

GBP1,630,000 QBE Insurance Group 6.115% 24/05/2042 1,775,347 0.41

FORWARD CURRENCY CONTRACTS — 0.02% (0.02%)

USD(1,184,800) GBP957,953

Sold US Dollars for Sterling (Expires 15/01/2020)1 24,069 0.01

EUR(2,896,530) GBP2,589,758

Sold Euro for Sterling (Expires 15/01/2020)1 58,662 0.01

82,731 0.02

FUTURES CONTRACTS — 0.24% (0.24%)

(14) Euro-Bobl Future Expiry December 2019 24,631 0.01


14

Holding/ Nominal

Value Investment

Market Value

£

% of Net

Assets

TestFUTURES CONTRACTS — (cont.) Test Test(10) Euro-Bund Future Expiry December

2019 36,929 0.01(532) Long Gilt Future Expiry December

2019 842,957 0.19(11) Ultra 10 Year US Treasury Notes

Future Expiry December 2019 31,526 0.01(36) US 10 Year Treasury Notes Future

Expiry December 2019 60,489 0.01(17) US 5 Year Treasury Notes Future

Expiry December 2019 16,382 —(4) US Treasury Long Bond Future Expiry

December 2019 19,866 0.01

1,032,780 0.24

Portfolio of investments 428,167,910 98.32

Net other assets 7,316,467 1.68

Total net assets £435,484,377 100.00%

1 Unlisted securities are valued at the Manager’s best assessment of their fair and reasonable value.

2 These are unrated fixed interest securities and represent 2.75% of the net assets of the Fund.

3 These are sub-investment grade fixed interest securities and represent 0.99% of the net assets of the Fund.

4 Defaulted securities are valued at the Manager’s best assessment of their fair and reasonable value.

Total purchases for the period: £246,081,223.

Total sales for the period: £319,412,358.

Independent Auditor’s Report

15

Independent auditor's report to the Unitholders of Legal & General Sterling Income Fund ('the Fund')OpinionWe have audited the financial statements of the Fund for the period ended 15 October 2019 which comprise the Statement of Total Return, the Statement of Changes in Net Assets Attributable to Unitholders, the Balance Sheet, the Related Notes and Distribution Tables for the Fund and the accounting policies set out on pages 20 to 21.

In our opinion, the financial statements:

• give a true and fair view, in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, of the financial position of the Fund as at 15 October 2019 and of the net revenue and the net capital gains on the property of the Fund for the period then ended; and

• have been properly prepared in accordance with the Trust Deed, the Statement of Recommended Practice relating to UK Authorised Funds, and the COLL Rules.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Fund in accordance with, UK ethical requirements including the FRC Ethical Standard.

We have received all the information and explanations which we consider necessary for the purposes of our audit and we believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

The impact of uncertainties due to the UK exiting the European Union on our audit Uncertainties related to the effects of Brexit are relevant to understanding our audit of the financial statements. All audits assess and challenge the reasonableness of estimates made by the Manager and related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the Fund’s future prospects and performance.

Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. We applied a standardised firm-wide approach in response to that uncertainty when assessing the Fund’s future prospects and performance. However, no audit should be expected to predict the unknowable factors or all possible future implications for a fund and this is particularly the case in relation to Brexit.

Going concernThe Manager has prepared the financial statements on the going concern basis as they do not intend to liquidate the Fund to cease their operations, and as they have concluded that the Fund’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

Independent Auditor’s Report continued

16

We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements. In our evaluation of the Manager’s conclusions, we considered the inherent risks to the Fund’s business model, including the impact of Brexit, and analysed how those risks might affect the Fund’s financial resources or ability to continue operations over the going concern period. We have nothing to report in these respects.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Fund will continue in operation.

Other informationThe Manager (Legal & General (Unit Trust Managers) Limited) is responsible for the other information presented in the Annual Manager's Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:

• we have not identified material misstatements in the other information; and

• in our opinion the information given in Manager's Report for the financial period is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where under the COLL Rules we are required to report to you if, in our opinion:

• proper accounting records for the Fund have not been kept; or

• the financial statements are not in agreement with the accounting records.

Manager's responsibilitiesAs explained more fully in their statement set out on page 5, the Manager is responsible for: the preparation of financial statements that give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Fund or to cease operations, or have no realistic alternative but to do so.

Independent Auditor’s Report continued

17

Auditor's responsibilitiesOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe our responsibilitiesThis report is made solely to the Fund’s unitholders, as a body, in accordance with Rule 4.5.12 of the Collective Investment Schemes sourcebook (‘the COLL Rules’) issued by the Financial Conduct Authority under section 247 of the Financial Services and Markets Act 2000. Our audit work has been undertaken so that we might state to the Fund’s unitholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the Fund’s unitholders as a body, for our audit work, for this report, or for the opinions we have formed.

Jatin Patelfor and on behalf of KPMG LLP, Statutory AuditorChartered Accountants15 Canada Square,London E14 5GL5 November 2019

Financial Statements

18

Statement of Total Returnfor the period ended 15 October 2019

13/10/18 to 15/10/19

16/10/17 to 12/10/181

Notes £ £ £ £

Income

Net capital gains/(losses) 3 7,344,820 (18,110,990)

Revenue 4 18,472,179 21,113,541

Expenses 5 (4,636,979) (5,332,839)

Interest payable and similar charges 7 (199,989) (657,481)

Net revenue before taxation 13,635,211 15,123,221

Taxation 6 — —

Net revenue after taxation for the period 13,635,211 15,123,221

Total return before distributions 20,980,031 (2,987,769)

Distributions 7 (13,635,211) (15,123,221)

Change in net assets attributable to Unitholders from investment activities £7,344,820 £(18,110,990)

Statement of Change in Net Assets attributable to Unitholders for the period ended 15 October 2019

13/10/18 to 15/10/19

16/10/17 to 12/10/181

£ £ £ £

Opening net assets attributable to Unitholders 499,599,238 570,136,868

Amounts received on issue of units 13,219,344 17,427,047

Amounts paid on cancellation of units (93,038,127) (79,238,582)

(79,818,783) (61,811,535)

Change in net assets attributable to Unitholders from investment activities 7,344,820 (18,110,990)

Retained distributions on accumulation units 8,345,012 9,366,863

Unclaimed distributions 14,090 18,032

Closing net assets attributable to Unitholders £435,484,377 £499,599,238

1 The Fund’s final accounting date, usually 15 October, was moved to12 October 2018 in order to facilitate the closure of A-Class.

Financial Statements continued

19

Balance Sheet as at 15 October 2019

15/10/19 12/10/181

Notes £ £

ASSETS

Fixed assets:

Investments 428,167,910 490,068,149

Current assets:

Debtors 8 7,176,021 8,627,235

Cash and bank balances 9 28,022,372 20,867,465

Total assets 463,366,303 519,562,849

LIABILITIES

Investment liabilities — (30,710)

Creditors:

Bank overdrafts 9 (17,375,378) (18,088,946)

Distributions payable (305,614) (376,973)

Other creditors 10 (10,200,934) (1,466,982)

Total liabilities (27,881,926) (19,963,611)

Net assets attributable to Unitholders £435,484,377 £499,599,238

1 The Fund’s final accounting date, usually 15 October, was moved to12 October 2018 in order to facilitate the closure of A-Class.

Notes to the Financial Statements

20

1. Statement of ComplianceThe Financial Statements have been prepared in compliance with UK Financial Reporting Standard 102 (FRS 102) and in accordance with the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Management Association in May 2014 (2014 SORP).

2.SummaryofSignificantAccountingPolicies (a) Basis of Preparation

The Financial Statements have been prepared on a going concern basis, under the historical cost convention as modified by the revaluation of certain financial assets and liabilities measured at fair value through profit or loss.

The principal accounting policies which have been applied consistently are set out below.

(b) Functional and Presentation Currency The functional and presentation currency of the Fund is Sterling.

(c) Recognition of RevenueBond revenue is accounted for on an effective yield basis, calculated with reference to the purchase price. If the Manager believes that future commitments will not be met due to the bond issuer showing signs of financial distress, revenue accruals will be discounted. Any resultant revenue from these issues will then be treated on a receipts basis.

Revenue from distribution and accumulation units in Collective Investment Schemes is recognised when the distribution is quoted ex-dividend.

Equalisation on distributions received from Collective Investment Schemes is treated as capital property of the Fund.

Rebates received from underlying Collective Investment Schemes are treated as revenue or capital depending on the treatment of the Manager’s fees in the underlying Fund.

Revenue from derivative instruments is treated in accordance with note 2(i).

All other revenue is recognised on an accruals basis.

(d) Treatment of ExpensesAll expenses (other than those relating to the purchase and sale of investments) are charged against revenue on an accruals basis.

(e) Distribution PolicyThe policy is to distribute all available revenue, after deduction of those expenses which are chargeable in calculating the distribution. In order to conduct a controlled dividend flow, interim distributions will be at the Manager’s discretion, up to a maximum of the distributable revenue for the period. All remaining revenue is distributed in accordance with the COLL.

Fund management fees are deducted from revenue for the purpose of calculating the distribution.

Distributions which have remained unclaimed by Unitholders for over six years are credited to the capital property of the Fund.

Notes to the Financial Statements continued

21

(f) Basis of Valuation of InvestmentsAll investments are valued at their fair value as at 12 noon on 15 October 2019, being the last working day of the accounting period. The fair value for non-derivative securities is bid market price, excluding any accrued interest. The fair value for units in Collective Investment Schemes is the cancellation price or bid price for dual priced funds and single price for single priced funds. The fair value for derivative instruments is the cost of closing out the contract on the last working day of the accounting period.

Where values cannot be readily determined, the securities are valued at the Manager’s best assessment of their fair and reasonable value.

(g) TaxationProvision is made for taxation at current rates on the excess of investment revenue over expenses.

Deferred tax is provided for on all timing differences that have originated but not reversed by the balance sheet date, other than those differences that are regarded as permanent. Any liability to deferred tax is provided for at the average rate of tax expected to apply.

Comp

(h) Foreign ExchangeTransactions in foreign currencies are translated at the rate of exchange ruling on the date of the transaction. Where applicable, assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange ruling at 12 noon on 15 October 2019, being the last working day of the accounting period.

(i) Derivative InstrumentsThe Fund may make use of financial derivative instruments for Efficient Portfolio Management (EPM) purposes. EPM aims to reduce risk, reduce costs, or generate additional capital or income for the Fund with an acceptably low level of risk. These aims allow for tactical asset allocation, which is a temporary switch in investment exposure through the use of derivatives rather than trading the underlying securities.

Derivative instruments held within the Fund have been accounted for and taxed in accordance with the Statement of Recommended Practice for Authorised Funds (IA SORP 2014). Returns on derivative transactions have been treated as either revenue or capital depending on the motives and circumstances on acquisition.

2.SummaryofSignificantAccountingPoliciescontinued


22

3. Net capital gains/(losses)

13/10/18 to 15/10/19

16/10/17 to 12/10/18

£ £

The net capital gains/(losses) during the period comprise: 7,344,820 (18,110,990)

Non-derivative securities 13,854,193 (19,417,751)

Derivative securities (6,314,361) 688,133

Forward currency contracts (114,780) 370,008

Currency (losses)/gains (80,232) 248,620

Net capital gains/(losses) 7,344,820 (18,110,990)

4. Revenue

13/10/18 to 15/10/19

16/10/17 to 12/10/18

£ £

Bond interest 15,850,458 18,081,184

Interest distributions 2,128,238 2,491,095

Management fee rebates 473,176 524,863

Bank interest 20,307 16,399

18,472,179 21,113,541Space – –

5. Expenses

13/10/18 to 15/10/19

16/10/17 to 12/10/18

£ £

Payable to the Manager, associates of the Manager and agents of either of them:

Fund management fees 4,636,979 5,332,839

Total expenses 4,636,979 5,332,839

Audit fees of £11,330 plus VAT on Audit fees of £2,266 have been borne by the Manager out of its fund management fee. In the prior period, the total audit fee was £11,000 plus VAT of £2,200.


23

6. Taxation (a) Analysis of taxation charge in period

13/10/18 to 15/10/19

16/10/17 to 12/10/18

£ £

Corporation tax — —

Current tax [note 6(b)] — —

Deferred tax [note 6(c)] — —

Total taxation — —

(b) Factors affecting taxation charge for the periodThe current tax charge excludes capital gains and losses for the reason that Authorised Unit Trusts are not subject to Corporation Tax on these items. Current tax differs from taxation assessed on net revenue before taxation as follows:

Net revenue before taxation 13,635,211 15,123,221

Net revenue before taxation multiplied by the applicable rate of Corporation tax of 20% (2018: 20%) 2,727,042 3,024,644

Effects of:

Interest distributions deductible for tax purposes (2,727,042) (3,024,644)

Current tax — —

(c) Provision for deferred taxThere is no deferred tax provision in the current or preceding period.


24

7. DistributionsThe distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units and comprise:

13/10/18 to 15/10/19

16/10/17 to 12/10/18

£ £

1st interim distribution 1,365,226 1,260,817

2nd interim distribution 1,479,150 1,441,662

3rd interim distribution 1,153,427 1,241,566

4th interim distribution 1,103,959 1,067,949

5th interim distribution 806,032 1,273,125







Final distribution 784,084 993,022

13,526,233 15,086,887

Add: Revenue deducted on cancellation of units 126,549 122,110

Less: Revenue received on creation of units (17,571) (85,776)

Distributions for the period 13,635,211 15,123,221

Interest payable and similar charges

Bank overdraft interest 4,639 1,263

Futures expense 195,350 651,705

Credit default swap expense — 4,513

13,835,200 15,780,702

8. Debtors

15/10/19 12/10/18

£ £

Accrued revenue 5,554,636 8,004,783

Amounts receivable for creation of units 39,999 27,992

Management fee rebates 54,122 56,838

Sales awaiting settlement 1,527,264 537,622

7,176,021 8,627,235


25

9. Net uninvested cash

15/10/19 12/10/18

£ £

Amounts held at futures clearing houses and brokers 899,995 285,504

Cash and bank balances 27,122,377 20,581,961

Amounts due to futures clearing houses and brokers — (88,630)

Bank overdrafts (17,375,378) (18,000,316)

Net uninvested cash 10,646,994 2,778,519

10. Other creditors

15/10/19 12/10/18

£ £

Accrued expenses 211,099 204,675

Amounts payable for cancellation of units 1,719,010 780,772

Purchases awaiting settlement 8,270,825 481,535

10,200,934 1,466,982

11. Contingent liabilities and outstanding commitmentsThere were no contingent liabilities or outstanding commitments at the balance sheet date (12 October 2018: same).


26

12. Financial Instruments and Associated RisksThe investments of a Fund in financial securities and derivatives are subject to normal market fluctuations and other risks inherent in investing in such instruments. Legal & General (Unit Trust Managers) Limited (UTM) is the Authorised Fund Manager and has responsibility for ensuring appropriate risk management processes are implemented for each Unit Trust.

The UTM Board has delegated the risk oversight function to the Fund Manager Oversight Committee (FMOC), a committee of the Legal & General Investment Management (Holdings) Limited (LGIMH) Board that meets monthly. The primary objective of the FMOC is to ensure proper oversight of the investment management activities and associated services performed by LGIM, its delegates and other Fund Managers, under the Investment Management Agreement (IMA), on behalf of UTM in its capacity as Authorised Fund Manager. The committee consists of senior members of LGIMH and members of the UTM Board. Other senior staff members are also in attendance, as required by the agenda.

Each Fund has Investment Guidelines, an Investment Objective and Investment Restrictions, against which the fund manager will operate. These are set out in Schedule 1 of the IMA between LGIM and UTM. The Schedule is maintained by each fund manager, reviewed by the LGIM Operational Risk and Compliance Teams and approved senior members of LGIMH on behalf of the UTM board. The Schedule provides the detail needed to determine the risk profile for each fund. Fund managers are not permitted to invest into any new instruments without first gaining approval from UTM.

The Investment Objective and Policy of this Fund is detailed on page 2.

(a) Market Risk arising from other price riskMarket Risk arises mainly from uncertainty about future prices. It represents the potential loss the Fund may suffer through holding market positions in the face of market movements.

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar instruments traded in the market.

The assets held by the Fund can be seen in the Portfolio Statement starting on page 8. Movements in the prices of these investments result in movements in the performance of the Fund. The Manager adheres to the investment guidelines established in the Trust Deed, the Prospectus, the COLL and the Fund’s IOG, and in this way, monitors and controls the exposure to risk from any type of security, sector or issuer.

At 15 October 2019, if the price of the investments held by the Fund increased or decreased by 5%, with all other variables remaining constant, then the net assets attributable to unitholders would increase or decrease by approximately £21,408,396 (12 October 2018: £24,501,872).


27

(b) Interest Rate RiskInterest Rate Risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates.

The Fund is exposed to interest rate risk through its holdings in debt securities. The market value of debt securities and any floating rate payments from debt securities held (and interest rate swaps) may fluctuate as a result of changes in interest rates. This risk is managed by the active monitoring and adjustment of the investments held by the Fund, in line with the stated investment objective and policy of the Fund.

At 15 October 2019, if interest rates on the Fund increased or decreased by 1 basis point, with all other variables remaining constant, then the net assets attributable to unitholders would increase or decrease by approximately £152,419 (12 October 2018: £197,210). This represents the Manager's best estimate of a reasonable possible shift in interest rates, having regard to historical volatility of those rates.

The interest rate profile of the Fund's net assets and liabilities at the balance sheet date was:

15/10/19Total £'000

Floating rate

£'000

Fixed rate

£'000

No interest

£'000Portfolio 428,168 130,222* 258,619 39,327Other assets 35,198 28,022† — 7,176Other liabilities (27,882) (17,375)† — (10,507)Total 435,484 140,869 258,619 35,996

12/10/18Total £'000

Floating rate

£'000

Fixed rate

£'000

No interest

£'000Portfolio 490,038 161,415* 280,821 47,802Other assets 29,494 20,867† — 8,627Other liabilities (19,933) (18,089)† — (1,844)Total 499,599 164,193 280,821 54,585

* The Fund’s floating rate investments earn interest which is variable, based on LIBOR or its overseas equivalent.

† The Fund’s floating rate other assets and liabilities are represented by its bank balances and overdraft facilities. Cash is deposited, and overdraft facilities utilised, on normal commercial terms and earn or bear interest based on LIBOR.

12. Financial Instruments and Associated Risks continued


28

Fixed Rate Financial Assets

Weighted average Interest rate

%

Weighted average Period for which Rateisfixed

YearsCurrency 15/10/19 12/10/18 15/10/19 12/10/18

Euro – 3.67 – 7.47Sterling 2.07 2.72 8.28 8.58

The bonds shown in the Portfolio Statement with open maturity dates are assumed to mature on 31 December 2049 for the purpose of calculating the weighted average period for which the rate is fixed.

(c) Foreign Currency RiskForeign Currency Risk is the risk of movements in the value of financial instruments as a result of fluctuations in exchange rates. This risk may be managed by the use of forward currency contracts or currency futures as necessary.

Forward currency contracts were utilised during the current period and the preceding period.

At 15 October 2019, if the value of Sterling increased or decreased by 1% against all currencies, with all other variables remaining constant, then the net assets attributable to unitholders would increase or decrease by approximately £156 (12 October 2018: £2,935).

The direct foreign currency profile of the Fund's net assets at the balance sheet date was:

Net foreign currency assets

15/10/19 Currency

Monetary exposures

£'000

Non-monetary exposures

£'000Total £'000

Euro (2,221) 2,076 (145)US Dollar (801) 930 129

Net foreign currency assets

12/10/18 Currency

Monetary exposures

£'000

Non-monetary exposures

£'000Total £'000

Euro (11,996) 12,129 133US Dollar 60 101 161

12. Financial Instruments and Associated Risks continued (b) Interest Rate Risk continued


29

( d) Credit RiskCredit Risk is the risk of suffering financial loss as a result of a counterparty to a financial transaction being unable to fulfil their financial obligations as they fall due.

Bonds or other debt securities involve credit risk to the issuer which may be evidenced by the issuer’s credit rating. Securities which are subordinated and/or have a lower credit rating are generally considered to have a higher credit risk and a greater possibility of default than more highly rated securities.

The Fund's investments in bonds expose it to the default risk of the bond issuer with regards interest payments and principal repayments. Bond holdings with low credit ratings (sub-investment grade) or those that are not rated by a reputable credit rating agency (unrated) are disclosed in the Portfolio Statement on pages 8 to 14.

As this Fund invests in Collective Investment Schemes, there is credit risk in respect of the assets held by these Schemes.

This risk is managed by appraising the credit profile of financial instruments and issuers in line with the Fund's investment objective and policy.

(e) Liquidity RiskLiquidity Risk relates to the capacity to meet liabilities as they fall due. The primary source of this risk to the Fund is the liability to Unitholders for any cancellation of units.

The Fund can also be exposed to liquidity risk through its commitments under derivative contracts, whereby additional margin payments or collateral payments may need to be posted with the counterparty or clearing house.

This risk is minimised by holding a large proportion of readily realisable assets, cash balances and via access to overdraft facilities.

(f) Derivative Risk - Sensitivity AnalysisDerivative Risk arises from uncertainty about future market movements. This risk is managed by the policies shown within Market risk.

At the balance sheet date the Fund made use of the following derivatives:

Futures (excluding Currency Futures)Futures are used to adjust the duration and interest rate risk of the Fund in a cost effective manner. The effect of these instruments was to decrease the exposure of the Fund by £80,789,546 (12 October 2018: decrease the exposure by £73,394,548), representing 18.55% of the net asset value (12 October 2018: 14.69%).

This results in an effective equity exposure at the period end of 79.77% (12 October 2018: 112.77%) of net assets, which means that the gains or losses of the Fund will be 0.7977 (12 October 2018: 1.1277) times the gains or losses if the Fund was fully invested in equities.



30

(g) Fair ValueThe fair value of a financial instrument is the amount for which it could be exchanged between knowledgeable, willing parties in an arm’s length transaction. There is no material difference between the value of the financial assets and liabilities, as shown in the financial statements, and their fair value.

The Statement of Recommended Practice for Financial Statements of UK Authorised Funds issued by the Investment Management Association in May 2014 requires the classification of the Fund’s financial instruments held at the period end into a 3 tiered fair value hierarchy. The 3 tiers of the hierarchy and the classification of the Fund’s financial instruments as at the balance sheet date were:

15/10/19 Basis of Valuation

Assets £

Liabilities £

Level 1 - Quoted Prices 1,527,573 —Level 2 - Observable Market Data 426,640,337 —Level 3 - Unobservable Data — —

Total 428,167,910 —

12/10/18 Basis of Valuation

Assets £

Liabilities £

Level 1 - Quoted Prices 1,651,958 —Level 2 - Observable Market Data 488,323,971 (30,710)Level 3 - Unobservable Data 92,220 —

Total 490,068,149 (30,710)

Level 1The unadjusted quoted price in an active market for assets or liabilities that the entity can access at the measurement date.

Level 2Valuation techniques using observable inputs other than quoted prices within Level 1.

Level 3Valuation techniques using unobservable inputs.



31

(h) Financial Derivative Instruments and CollateralDuring the period the Fund made use of 'Over the Counter' (OTC) Derivative Instruments. These types of transactions introduce Counterparty Risk, where a counterparty may fail to meet its financial commitments.

In order to reduce this risk, collateral may be held by the Fund. The counterparties to these transactions and any collateral held by the Fund at the balance sheet date is shown below:

Global exposure and collateral

Counterparty

Derivative Groups: Forward

Currency Contracts

Gain/(Loss) Position

Merrill Lynch 2,522,755 58,662NatWest 936,823 24,069

Total 3,459,578 82,731

No collateral was held or delivered at the balance sheet date in the current period.

The Fund also holds exchange traded derivatives which have minimal Counterparty Risk exposure.

13. Portfolio transaction costsAs the Fund mainly invests in assets that are not subject to commissions or taxes, there are no transaction costs (12 October 2018: same).

Total purchases for the period: £246,081,223(12 October 2018: £216,918,699)

Total sales for the period: £319,412,358(12 October 2018: £257,238,972)



32

14. Unit classesA list of unit classes in issue and the fund management fee on each unit class can be found on page 57. The net asset value per unit of each unit class and the number of units in each class are given in the comparative tables on pages 47 to 55. The distributions per unit class are given in the distribution tables on pages 34 to 45. All classes have the same rights on winding up.

R-Class Distribution AccumulationOpening Units 137,623,549 133,250,949

Units issued 759,125 129,752

Units cancelled (18,030,704) (24,698,874)

Units converted — —

Closing Units 120,351,970 108,681,827

F-Class Distribution AccumulationOpening Units 67,765 633

Units issued — 20,344

Units cancelled (22,910) (20,526)


Closing Units 44,855 451

I-Class Distribution AccumulationOpening Units 51,964,145 34,994,616

Units issued 3,167,868 752,524

Units cancelled (8,192,834) (10,243,317)


Closing Units 46,939,179 25,503,823

L-Class AccumulationOpening Units —

Units issued 14,758,504

Units cancelled (320,108)

Units converted —

Closing Units 14,438,396


33

15. Ultimate controlling party and related party transactionsThe Manager is regarded as a related party to the Fund because it provides key management personnel services to the Fund. The ultimate controlling party of the Manager is Legal & General Group Plc. Subsidiaries of Legal & General Group Plc are also considered related parties to the Fund.

Legal & General (Unit Trust Managers) Limited acts as the principal on all the transactions of the units in the Fund. The aggregated monies received through creations or paid on cancellations are disclosed in the statement of change in net assets attributable to unitholders.

Equalisation amounts relating to creations and cancellations of units are shown within note 7. Fees received by the Authorised Fund Manager from the Fund plus any rebates paid by the Authorised Fund Manager to the Fund are shown within notes 3, 4 and 5 as applicable. Any outstanding fees, amounts outstanding on creations or cancellations of units in the Fund, or rebates receivable by the Fund from the Manager are shown within notes 8 and 10 as applicable.

At the period end, the Manager and its associates held 1.69% (1.81% as at 12 October 2018) of the Fund's units in issue.

16. Post balance sheet market movementsAs at the close of business on the balance sheet date the Net Asset Value per R-Class accumulation unit was 191.74p. The Net Asset Value per R-Class accumulation unit for the Fund as at 12 noon on 4 November 2019 was 193.40p. This represents an increase of 0.87% from the period end value.

Distribution Tables

34

Distribution Tables for the period ended 15 October 2019Group 1: units purchased prior to a distribution period.

Group 2: units purchased during a distribution period.

Equalisation is the average amount of revenue included in the purchase price of all Group 2 units and is refunded to the holders of these units as a return of capital. As capital it is not liable to Income Tax but must be deducted from the cost of units for Capital Gains Tax purposes.

Period1st Interim Interest distribution in pence per unit 13/10/18 to 15/11/18 R-Class Distribution DistributionDistribution Units Revenue Equalisation 13/12/18 13/12/17Group 1 0.2590 — 0.2590 0.2147Group 2 0.1950 0.0640 0.2590 0.2147R-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/12/18 13/12/17Group 1 0.4828 — 0.4828 0.3881Group 2 0.1897 0.2931 0.4828 0.3881A-Class Distribution DistributionDistribution Units Revenue Equalisation N/A 13/12/17Group 1 — — — 0.2148Group 2 — — — 0.2148A-Class Distribution DistributionAccumulation Units Revenue Equalisation N/A 13/12/17Group 1 — — — 0.3891Group 2 — — — 0.3891F-Class Distribution DistributionDistribution Units Revenue Equalisation 13/12/18 13/12/17Group 1 0.2973 — 0.2973 0.2568Group 2 — 0.2973 0.2973 0.2568F-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/12/18 13/12/17Group 1 0.5746 — 0.5746 0.4262Group 2 — 0.5746 0.5746 0.4262I-Class Distribution DistributionDistribution Units Revenue Equalisation 13/12/18 13/12/17Group 1 0.3175 — 0.3175 0.2771Group 2 0.1241 0.1934 0.3175 0.2771I-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/12/18 13/12/17Group 1 0.6185 — 0.6185 0.5218Group 2 0.1944 0.4241 0.6185 0.5218

–

–

Distribution Tables continued

35

Period2nd Interim Interest distribution in pence per unit 16/11/18 to 15/12/18 R-Class Distribution DistributionDistribution Units Revenue Equalisation 13/01/19 13/01/18Group 1 0.2848 — 0.2848 0.2485Group 2 0.1259 0.1589 0.2848 0.2485R-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/01/19 13/01/18Group 1 0.5303 — 0.5303 0.4512Group 2 0.2914 0.2389 0.5303 0.4512A-Class Distribution DistributionDistribution Units Revenue Equalisation N/A 13/01/18Group 1 — — — 0.2485Group 2 — — — 0.2485A-Class Distribution DistributionAccumulation Units Revenue Equalisation N/A 13/01/18Group 1 — — — 0.4512Group 2 — — — 0.4512F-Class Distribution DistributionDistribution Units Revenue Equalisation 13/01/19 13/01/18Group 1 0.3275 — 0.3275 0.2912Group 2 — 0.3275 0.3275 0.2912F-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/01/19 13/01/18Group 1 0.6150 — 0.6150 0.5913Group 2 — 0.6150 0.6150 0.5913I-Class Distribution DistributionDistribution Units Revenue Equalisation 13/01/19 13/01/18Group 1 0.3467 — 0.3467 0.3116Group 2 0.1644 0.1823 0.3467 0.3116I-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/01/19 13/01/18Group 1 0.6771 — 0.6771 0.5887Group 2 0.2923 0.3848 0.6771 0.5887

–

–


36

Period3rd Interim Interest distribution in pence per unit 16/12/18 to 15/01/19 R-Class Distribution DistributionDistribution Units Revenue Equalisation 13/02/19 13/02/18Group 1 0.2222 — 0.2222 0.2127Group 2 0.0290 0.1932 0.2222 0.2127R-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/02/19 13/02/18Group 1 0.4155 — 0.4155 0.3870Group 2 0.1855 0.2300 0.4155 0.3870A-Class Distribution DistributionDistribution Units Revenue Equalisation N/A 13/02/18Group 1 — — — 0.2127Group 2 — — — 0.2127A-Class Distribution DistributionAccumulation Units Revenue Equalisation N/A 13/02/18Group 1 — — — 0.3870Group 2 — — — 0.3870F-Class Distribution DistributionDistribution Units Revenue Equalisation 13/02/19 13/02/18Group 1 0.2619 — 0.2619 0.2557Group 2 — 0.2619 0.2619 0.2557F-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/02/19 13/02/18Group 1 0.5055 — 0.5055 0.4802Group 2 — 0.5055 0.5055 0.4802I-Class Distribution DistributionDistribution Units Revenue Equalisation 13/02/19 13/02/18Group 1 0.2807 — 0.2807 0.2761Group 2 0.1195 0.1612 0.2807 0.2761I-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/02/19 13/02/18Group 1 0.5503 — 0.5503 0.5232Group 2 0.3274 0.2229 0.5503 0.5232

–

–


37

Period4th Interim Interest distribution in pence per unit 16/01/19 to 15/02/19 R-Class Distribution DistributionDistribution Units Revenue Equalisation 13/03/19 13/03/18Group 1 0.2158 — 0.2158 0.1830Group 2 0.1660 0.0498 0.2158 0.1830R-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/03/19 13/03/18Group 1 0.4047 — 0.4047 0.3337Group 2 0.2472 0.1575 0.4047 0.3337A-Class Distribution DistributionDistribution Units Revenue Equalisation N/A 13/03/18Group 1 — — — 0.1830Group 2 — — — 0.1830A-Class Distribution DistributionAccumulation Units Revenue Equalisation N/A 13/03/18Group 1 — — — 0.3338Group 2 — — — 0.3338F-Class Distribution DistributionDistribution Units Revenue Equalisation 13/03/19 13/03/18Group 1 0.2586 — 0.2586 0.2252Group 2 — 0.2586 0.2586 0.2252F-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/03/19 13/03/18Group 1 0.4966 — 0.4966 0.4233Group 2 — 0.4966 0.4966 0.4233I-Class Distribution DistributionDistribution Units Revenue Equalisation 13/03/19 13/03/18Group 1 0.2787 — 0.2787 0.2453Group 2 0.1274 0.1513 0.2787 0.2453I-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/03/19 13/03/18Group 1 0.5479 — 0.5479 0.4660Group 2 0.3227 0.2252 0.5479 0.4660

–

–


38


–

–


39


–

–


40

Period7th Interim Interest distribution in pence per unit 16/04/19 to 15/05/19 R-Class Distribution DistributionDistribution Units Revenue Equalisation 13/06/19 13/06/18Group 1 0.2359 — 0.2359 0.2249Group 2 0.2062 0.0297 0.2359 0.2249R-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/06/19 13/06/18Group 1 0.4451 — 0.4451 0.4126Group 2 0.2742 0.1709 0.4451 0.4126A-Class Distribution DistributionDistribution Units Revenue Equalisation N/A 13/06/18Group 1 — — — 0.2251Group 2 — — — 0.2251A-Class Distribution DistributionAccumulation Units Revenue Equalisation N/A 13/06/18Group 1 — — — 0.4127Group 2 — — — 0.4127F-Class Distribution DistributionDistribution Units Revenue Equalisation 13/06/19 13/06/18Group 1 0.2745 — 0.2745 0.2556Group 2 — 0.2745 0.2745 0.2556F-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/06/19 13/06/18Group 1 0.5371 — 0.5371 0.4890Group 2 — 0.5371 0.5371 0.4890I-Class Distribution DistributionDistribution Units Revenue Equalisation 13/06/19 13/06/18Group 1 0.2947 — 0.2947 0.2699Group 2 0.1320 0.1627 0.2947 0.2699I-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/06/19 13/06/18Group 1 0.5841 — 0.5841 0.5168Group 2 0.2662 0.3179 0.5841 0.5168L-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/06/19 N/AGroup 1 0.1173 — 0.1173 —Group 2 — 0.1173 0.1173 —

–

–


41


–

–


42


–

–


43


–

–


44


–

–


45

PeriodFinal Interest distribution in pence per unit 16/09/19 to 15/10/19 R-Class Distribution DistributionDistribution Units Revenue Equalisation 13/11/19 13/11/18Group 1 0.1651 — 0.1651 0.1828Group 2 0.0778 0.0873 0.1651 0.1828R-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/11/19 13/11/18Group 1 0.3155 — 0.3155 0.3393Group 2 0.1098 0.2057 0.3155 0.3393A-Class Distribution DistributionDistribution Units Revenue Equalisation N/A 13/11/18Group 1 — — — 0.1828Group 2 — — — 0.1828A-Class Distribution DistributionAccumulation Units Revenue Equalisation N/A 13/11/18Group 1 — — — 0.3393Group 2 — — — 0.3393F-Class Distribution DistributionDistribution Units Revenue Equalisation 13/11/19 13/11/18Group 1 0.2074 — 0.2074 0.2223Group 2 — 0.2074 0.2074 0.2223F-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/11/19 13/11/18Group 1 0.4101 — 0.4101 0.4296Group 2 — 0.4101 0.4101 0.4296I-Class Distribution DistributionDistribution Units Revenue Equalisation 13/11/19 13/11/18Group 1 0.2273 — 0.2273 0.2410Group 2 0.1035 0.1238 0.2273 0.2410I-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/11/19 13/11/18Group 1 0.4572 — 0.4572 0.4682Group 2 0.1373 0.3199 0.4572 0.4682L-Class Distribution DistributionAccumulation Units Revenue Equalisation 13/11/19 N/AGroup 1 0.1310 — 0.1310 —Group 2 — 0.1310 0.1310 —

–

–

In the above tables, a distribution pay date of N/A denotes that the class was not in existence as at the applicable XD date, and therefore no distribution was made. Please refer to the comparative tables on pages 47 to 55 for the launch date or closure of these classes.

46

Fund Information

The Comparative Tables on pages 47 to 55 give the performance of each active unit class in the Fund.

The ‘Return after charges’ disclosed in the Comparative Tables is calculated as the return after operating charges per unit divided by the opening net asset value per unit. It differs from the Fund's performance disclosed in the Manager's report, which is calculated based on the latest published price.

47

Comparative Tables

R-Class Distribution Units Change in Net Asset Value per Unit

Accounting Period ending 13/10/18 to 15/10/19

(pence per unit)

16/10/17 to 12/10/181

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)

Opening net asset value per unit 98.73 102.20 101.08

Return before operating charges* 5.45 0.39 5.18 Operating charges (calculated on average price) (1.16) (1.17) (1.34)

Return after operating charges* 4.29 (0.78) 3.84

Distributions on income units^ (2.72) (2.69) (2.72)

Closing net asset value per unit 100.30 98.73 102.20

* after direct transaction costs of: — — —

Performance

Return after charges 4.35% (0.76)% 3.80%

Other Information

Closing net asset value (£) 120,707,068 39,502,694 51,424,709 Closing number of units 120,351,970 40,010,895 50,318,195 Operating charges† 1.16% 1.16% 1.32% Direct transaction costs 0.00% 0.00% 0.00%

Prices

Highest unit price 101.30p 103.30p 103.20p Lowest unit price 97.57p 99.17p 99.62p

1 The Fund’s final accounting date, usually 15 October, was moved to 12 October 2018 in order to facilitate the closure of A-Class.

^ Distributions on income units are shown gross of taxation.† Operating charges, otherwise known as the OCF is the ratio of the Fund's total disclosable

costs (excluding overdraft interest) 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. Included within the OCF are synthetic costs which include the OCF of the underlying funds weighted on the basis of their investment proportion.


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.Comparative Tables Start

Fund Information continued

48

.

R-Class Accumulation Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)




Distributions^ (5.12) (4.94) (4.85) Retained distributions on accumulation units^ 5.12 4.94 4.55



Performance


Other Information


Prices



^ Distributions are shown gross of taxation. The amounts shown for 'Retained distributions on accumulation units' are net of 20% income tax, except for distributions made from April 2017 onwards, which are paid on a gross basis.

† Operating charges, otherwise known as the OCF is the ratio of the Fund's total disclosable costs (excluding overdraft interest) 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. Included within the OCF are synthetic costs which include the OCF of the underlying funds weighted on the basis of their investment proportion.





Comparative Tables continued

49

.

A-Class Distribution Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181,2

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)

Opening net asset value per unit — 102.20 101.08

Return before operating charges* — 0.40 5.18 Operating charges (calculated on average price) — (1.17) (1.31)

Return after operating charges* — (0.77) 3.87

Distributions on income units^ — (2.70) (2.75)

Closing net asset value per unit — 98.73 102.20


Performance

Return after charges — (0.75)% 3.83%

Other Information

Closing net asset value (£) — 96,372,820 111,555,979 Closing number of units — 97,612,654 109,152,547 Operating charges† — 1.16% 1.29% Direct transaction costs — 0.00% 0.00%

Prices

Highest unit price — 103.30p 103.20p Lowest unit price — 99.17p 99.62p


2 A-Class units were moved into R-Class units on 12 October 2018. Value shown is the closing net asset value at this date.








50

.

A-Class Accumulation Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181,2

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)

Opening net asset value per unit — 185.15 178.55

Return before operating charges* — 0.64 9.24 Operating charges (calculated on average price) — (2.13) (2.34)

Return after operating charges* — (1.49) 6.90

Distributions^ — (4.94) (4.91) Retained distributions on accumulation units^ — 4.94 4.61

Closing net asset value per unit — 183.66 185.15


Performance

Return after charges — (0.80)% 3.86%

Other Information

Closing net asset value (£) — 196,639,881 230,180,282 Closing number of units — 107,065,795 124,319,431 Operating charges† — 1.16% 1.29% Direct transaction costs — 0.00% 0.00%

Prices

Highest unit price — 187.90p 185.90p Lowest unit price — 184.20p 176.20p


2 A-Class units were moved into R-Class units on 12 October 2018. Value shown is the closing net asset value at this date.








51

.

F-Class Distribution Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)







Performance


Other Information

Closing net asset value (£) 45,129 67,083 69,406 Closing number of units 44,855 67,765 67,765 Operating charges† 0.66% 0.66% 0.66% Direct transaction costs 0.00% 0.00% 0.00%

Prices










52

.

F-Class Accumulation Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)







Performance


Other Information

Closing net asset value (£) 902 1,207 3,203 Closing number of units 451 633 1,676 Operating charges† 0.66% 0.66% 0.66% Direct transaction costs 0.00% 0.00% 0.00%

Prices




† Operating charges, otherwise known as the OCF is the ratio of the Fund's total disclosable costs (excluding overdraft interest) 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. Included within the OCF are synthetic costs which include the OCF of the underlying funds weighted on the basis of their investment proportion.






53

.

I-Class Distribution Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)







Performance


Other Information


Prices










54

.

I-Class Accumulation Units Change in Net Asset Value per Unit


(pence per unit)

16/10/17 to 12/10/181

(pence per unit)

16/10/16 to 15/10/17

(pence per unit)







Performance


Other Information


Prices










55

.

L-Class Accumulation Units Change in Net Asset Value per Unit


(pence per unit)

Opening net asset value per unit 50.00

Return before operating charges* 1.09 Operating charges (calculated on average price) (0.01)

Return after operating charges* 1.08

Distributions^ (0.91) Retained distributions on accumulation units^ 0.91

Closing net asset value per unit 51.08

* after direct transaction costs of: —

Performance

Return after charges 2.16%

Other Information

Closing net asset value (£) 7,375,630 Closing number of units 14,438,396 Operating charges† 0.04% Direct transaction costs 0.00%

Prices

Highest unit price 51.33p Lowest unit price 49.88p

1 L-Class Accumulation units launched on 25 April 2019.^ Distributions are shown gross of taxation. The amounts shown for 'Retained distributions on

accumulation units' are net of 20% income tax, except for distributions made from April 2017 onwards, which are paid on a gross basis.




Exchange rate changes may cause the value of any overseas investments to rise or fall.Comparative Tables End



56

RiskandRewardProfile(unaudited)

*

1 2 3 4 5 6 7

Lower risk Higher risk

Potentially lower rewards Potentially higher rewards

• The Risk and Reward Indicator table demonstrates where the Fund ranks in terms of its potential risk and reward. The higher the rank the greater the potential reward but the greater the risk of losing money. It is not guaranteed to remain the same and may change over time. It is based on historical data and may not be a reliable indication of the future risk profile of the Fund. The shaded area in the table above shows the Fund’s ranking on the Risk and Reward Indicator.

• The Fund is in category three because it invests in company or government bonds which are sensitive to changes in interest rates, inflation and credit. This can be driven by political and economic changes and other significant events and may cause the value to go up and down. Bonds that are closer to their maturity date tend to be more stable in value. Bonds are generally considered to be higher risk investments than cash, but lower risk than company shares.

• Even a fund in the lowest category is not a risk free investment.

General Information (unaudited)

57

*

ConstitutionLaunch date: 15 October 2001

Period end dates for distributions: 15 of each month15 October (Final)

Distribution dates: 13 of each month13 November (Final)

Minimum initial lump sum investment: R-Class £20

F-Class* £20I-Class £1,000,000L-Class** £100,000

Valuation point: 12 noon

Fund management fees: R-Class Annual 1.16%F-Class* Annual 0.66%I-Class Annual 0.42%L-Class** Annual 0.04%

Initial charges: Nil for all existing unit classes

* Class F units are only available to:

(i) investors who have received advice from authorised intermediaries, platforms or other distributors in relation to their investment in units in the Fund; and

(ii) distributors who the Manager reasonably considers will adequately bear the costs of marketing to and acquiring investors at no or limited cost to the Manager, and to whom the Manager has confirmed that such distributor or investor meets the criteria for investment in such units.

** Class L units are only available to other Legal & General funds and/or companies which have entered into an agreement with the Manager or an affiliate of the Manager

Pricing and DealingThe prices are published on the internet at www.legalandgeneral.com/investments/fund-information/daily-fund-prices 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 UnitsUnits may be bought on any business day from the Manager or through a financial adviser by 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.

General Information (unaudited) continued

58

Prospectus and Manager’s 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 on0370 050 0955.

Call charges will vary. We may record and monitor calls.

EU Savings Directive The Fund has been reviewed against the requirements of the Directive 2003/48/EC on Taxation of savings in the form of interest payments (ESD), following the HM Revenue & Customs debt investment reporting guidance notes.

Under the Directive, information is collected about the payment of distributions to residents in certain other countries and is reported to HM Revenue & Customs to be exchanged with Tax authorities in those countries.

The Fund falls within the 25% debt investment reporting threshold. This means that details of all distributions and redemption proceeds paid to non UK investors will be reported by Legal & General (Unit Trust Managers) Limited to HM Revenue & Customs to be exchanged with the relevant Tax authorities.


59

Remuneration DisclosureIn accordance with the Undertakings for collective investment in transferable securities (UCITs) Directive, often referred to as the UCITs V Directive, the Legal & General Sterling Income Fund, as a UCITs Scheme, is required to disclose the aggregate remuneration paid by the UCITs Manager and by the UCITs Scheme to Identified Staff, together with the number of beneficiaries, and, where relevant, performance fees paid by the UCITs Scheme. The aggregate amount of remuneration must be broken down by category of employees or other staff members and be split into fixed and variable remuneration.

The following provides information on the remuneration of persons whose professional activities have a material impact on the management company and the funds managed by it as at 31 December 2018:

HeadcountFixed Remuneration

(£’000)Variable Remuneration

(£’000)

Remuneration related to this Fund

(Pro-rated) (£'000)

36 7,644 13,053 232

HeadcountFixed Remuneration

(£,000)Variable Remuneration

(£’000)

Remuneration related to this Fund

(Pro-rated) (£'000)

52 6,639 6,906 40

Controlled FunctionsAs at 31 December 2018, Legal & General Unit Trust Managers Limited (UTM) engaged the services of seven employees of Legal & General Investment Management (Holdings) Limited (LGIMH), plus a further one employee of Legal & General Resources (LGR) to act as Directors. In addition, there was one non-executive Director. UTM also engaged the services of a further 24 LGIMH employees and a further three L&G Resources (LGR) employees to act in a variety of Controlled Functions, including Chief Compliance Officer, Money Laundering Reporting Officer, Client Asset Oversight, Systems and Controls Functions, Significant Management Functions and Customer Functions. These employees were also engaged by other companies in the L&G Group. The aggregate remuneration received by these individuals, for all their services across the L&G Group, is disclosed in the table above. We have pro-rated the remuneration figures by the Net Asset Value of the UCITS Funds as a percentage of the total assets under management of UTM.

Material Risk TakersAs at 31 December 2018, UTM engaged the services of Legal & General Investment Management’s Fixed Income Fund Management team, which consists of 52 investment professionals located in our London Office. The team includes a variety of Fund Managers, Analysts and Support Staff, with the Fund Managers empowered to take discretionary investment management decisions on behalf of the Fund. The team is also engaged in managing other Legal & General UTM Funds/Schemes and is also engaged by other companies in the L&G Group. The aggregate remuneration received by the members of the team, for all their services across the L&G Group, is disclosed in the table above. We have pro-rated the remuneration figures by the Net Asset Value of the UCITS Funds as a percentage of the total assets under management of the Legal & General Investment Management’s Fixed Income Fund Management team.


60

SignificantChangesChange in Investment Objective and PolicyIn line with the updated rules and guidance for the asset management industry published by the Financial Conduct Authority (FCA) in February 2019, we have clarified the Investment Objectives and Policies for our UK regulated funds.

The revised Investment Objective and Policy came into effect on 7 August 2019. The previous and revised Investment Objective and Policy are set out on page 2.

New Unit Class: L-ClassL-Class accumulation units were launched on 25 April 2019.

Publication of Short Report DiscontinuedWith effect from 20 September 2019, the Short Report for this Fund will no longer be issued.


61

Authorised Fund ManagerLegal & General (Unit Trust Managers) LimitedRegistered in England and Wales No. 01009418Registered office:One Coleman Street,London EC2R 5AATelephone: 0370 050 3350Authorised and regulated by the Financial Conduct Authority

Directors of the ManagerR. M. Bartley (resigned 31 December 2018)E. Cowhey* (appointed 9 October 2019)A. J. C. CravenS. Hynes H. MorrisseyH. SolomonS. D. Thomas (resigned 17 October 2018) L. W. TomsA. R. Toutounchi*M. J. Zinkula (resigned 15 July 2019)*Non-executive Director

SecretaryJ. McCarthy

RegistrarLegal & General (Unit Trust Managers) LimitedP.O. Box 6080,Wolverhampton WV1 9RBAuthorised and regulated by the Financial Conduct Authority

Dealing: 0370 050 0956Enquiries: 0370 050 0955Registration: 0370 050 0955Call charges will vary. We may record and monitor calls.

Trustee Northern Trust Global Services SE UK BranchTrustee and Depositary Services50 Bank Street,Canary Wharf,London E14 5NT

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority

Independent AuditorsKPMG LLP 15 Canada Square,London E14 5GL

Investment AdviserLegal & General Investment Management LimitedOne Coleman Street,London EC2R 5AAAuthorised and regulated by the Financial Conduct Authority

Authorised and regulated by the Financial Conduct AuthorityLegal & General(Unit Trust Managers) LimitedRegistered in England and Wales No. 01009418Registered office:One Coleman Street,London EC2R 5AAwww.legalandgeneral.com

legal & general sterling income fund annual 15.10 · long-term preservation of capital in...

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