LLOYDS INVESTMENT FUNDS LIMITED
Annual Report and Audited Financial Statements
For the year ended 30th September 2014
Lloyds Investment Funds Limited
Contents
Company Information 2
Investment Objectives and Policy 3
Directors’ Profiles 4
Report of the Directors 5
Report of the Investment Manager 7
Report of the Custodian to the Members of Lloyds Investment Funds Limited 12
Report of the Independent Auditor 13
Balance Sheets 14
Statements of Comprehensive Income 18
Statements of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares 20
Cash Flow Statements 22
Investment Dealing 26
Investment Portfolios 27
Euro High Income Fund 27
European Fund 30
High Income Fund 32
International Fund 37
North American Fund 40
Sterling Bond Fund 43
UK Fund 46
Investments Purchased and Sold 48
Summary of Material Portfolio Changes 49
Notes to the Financial Statements 53
Distribution Table (Unaudited) 78
Performance Record (Unaudited) 82
Net Asset Value per Share (Unaudited) 85
Notice of Meeting 86
Form of Proxy 87
1 Lloyds Investment Funds Limited
Company Information
Registered Office Investment Manager PO Box 160, 25 New Street, Aberdeen Asset Investments Limited St Helier, (formerly Scottish Widows Investment Partnership Limited), Jersey, JE4 8RG, Bow Bells House, Channel Islands. 1 Bread Street, London, Principal Place of Business EC4M 9HH. PO Box 311, 11 - 12 Esplanade, St Helier, Jersey, JE4 8ZU, Custodian Channel Islands. Capita Trust Company (Jersey) Limited, PO Box 532, 12 Castle Street, Directors St Helier, c/o Registered Office Jersey, JE2 3RT, R. D. Willcox (Chairman) Channel Islands. I. M. J. Hardy B. C. James Secretary N. R. Jeacock-Fewtrell (resigned 05.06.14) Lloyds Corporate Services (Jersey) Limited, B. Lysiak (appointed 05.06.14) PO Box 160, 25 New Street, St Helier, T. J. Herbert Jersey, JE4 8RG, PO Box 87, 22 Grenville Street, St Helier, Channel Islands. Jersey, JE4 8PX, Channel Islands. Independent Auditors Manager and Registrar PricewaterhouseCoopers CI LLP, 37 Esplanade, Lloyds Investment Fund Managers Limited , St Helier, PO Box 160, 25 New Street, Jersey, JE1 4XA, St Helier, Channel Islands. Jersey, JE4 8RG, Channel Islands. Paying Agent Legal Advisers Lloyds Bank International Limited , PO Box 111, Mourant Ozannes, Peveril Buildings, Peveril Square, PO Box 87, 22 Grenville Street, St Helier, Douglas, IM99 1JJ, Jersey, JE4 8PX, Isle of Man. Channel Islands.
2 Lloyds Investment Funds Limited
Investment Objectives and Policy Lloyds Investment Funds Limited ‘the Company’ is an open-ended International Fund investment company registered in Jersey with seven classes, each Objective being an individual ‘Fund’. To seek long term capital appreciation through investment in It is known as an ‘Umbrella’ Fund because it provides its securities world-wide. shareholders with a variety of investment options under the umbrella of a single Company. Investment Policy To be invested primarily in a diversified portfolio of international The overall objective of the Company is to provide investors with a equities and from time to time in securities convertible into equities. managed investment designed to meet the specific objectives laid down for each Fund. The investment objectives and policy of each North American Fund Fund is set out below. Objective Euro High Income Fund To seek long term capital appreciation through investment Objective in North American securities. To maintain a high income through investment in a spread of fixed Investment Policy interest securities denominated predominately in euro. To be invested primarily in a diversified portfolio of North Investment Policy American equities and from time to time in securities convertible into equities. To support the payment of dividends above the level of short term euro interest rates. This policy will result in a gradual reduction in Sterling Bond Fund the capital value of the shares, except when bond prices generally are rising. The Fund will normally hold a relatively wide range of Objective securities in order to keep a low level of exposure to individual bond To provide a regular income from a managed portfolio of sterling issues other than government securities. The Fund may also hold fixed interest securities with a particular emphasis on those a substantial part of its assets in bank deposits and money market securities on which interest is paid gross to non-residents of the instruments from time to time. The Fund is permitted to invest in United Kingdom. securities denominated in currencies other than euro. The current Investment Policy policy of the Directors is that any such investments in non-euro The assets of the Fund are generally invested in a managed portfolio denominated securities should be fully hedged against euro to of sterling fixed interest securities which have been issued by eliminate the effects of any exchange rate movements. governments, local authorities, public utilities and corporations. European Fund If it appears advisable to hold assets having a short term maturity, then the Fund may also place money on bank deposit (subject to Objective certain limitations) or to purchase money market instruments. To seek long term capital appreciation through investment in European securities. Similarly, derivative instruments such as traded options and financial futures may be used to reduce risk. Investment Policy To be invested primarily in a diversified portfolio of European UK Fund (excluding the United Kingdom) equities and from time to time in Objective securities convertible into equities. To seek long term capital appreciation through investment High Income Fund in United Kingdom securities. Objective Investment Policy To seek a high income from a spread of fixed interest securities. To be invested primarily in a diversified portfolio of United Kingdom equities and from time to time in securities convertible into equities. Investment Policy To support the payment of dividends above the level of short term Financial risk sterling interest rates. This policy will result in a gradual reduction in It should be remembered that the price of shares and the income the capital value of the shares, except when bond prices generally from them can go down as well as up and is not guaranteed. are rising. The Fund will normally hold a relatively wide range of Consequently, and particularly in the case of early encashment, you securities in order to keep a low level of exposure to individual bond might not get back the amount originally invested. Dividends are not issues other than government securities. The Fund may also hold guaranteed and may fluctuate in money terms. a substantial part of its assets in bank deposits and money market instruments from time to time. The Fund is permitted to invest in securities denominated in currencies other than sterling. The current policy of the Directors is that any such investments in non-sterling denominated securities should be fully hedged against sterling to eliminate the effects of any exchange rate movements.
3 Lloyds Investment Funds Limited
Directors’ Profiles
Ross Davey Willcox (Chairman) – Head of International Products, Brian Charles James – Head of Investment Operations Jersey, Retail, Customer Products, Lloyds Banking Group. Retail, Lloyds Banking Group. Joined the Lloyds Banking Group in 1977 and has held a number of Joined the Lloyds Banking Group in 1988 and has held a number managerial positions in the UK and Internationally. Was appointed of managerial positions primarily in Financial Control and Risk Managing Director of Lloyds Investment Fund Managers Limited in Management roles. Appointed as a Director in 1997. Current 1999 and is currently Chairman/Director of the International Fund responsibilities include leading a team of specialists delivering Companies. Current responsibilities include the value proposition operational support for a range of offshore investment products of all investment products for International Wealth. A qualified and services. A Chartered Director. Banker, a Fellow of the Securities & Investment Institute and a Aged 53. Chartered Director. Nigel Ross Jeacock-Fewtrell – Transaction Leader, Change and Aged 55. Transformation, Retail, Lloyds Banking Group (resigned 5th June Ian Mark Jeremie Hardy – Senior Product Manager, 2014). International Products, Retail, Lloyds Banking Group. Joined the Lloyds Banking Group in 1985 and held a number of Joined the Lloyds Banking Group in 1981 and held a number of managerial positions in Jersey, UK and Hong Kong. Appointed as a managerial positions before being appointed Managing Director Director in 2002. Responsibilities included delivering strategic change of the Group’s Guernsey based Lloyds Investment Fund Managers to the Group’s international business. Retired from Lloyds Banking Limited in 1997 and a Director of the Company in 2000. Current Group with effect from 16th September 2014. A Chartered Director. responsibilities include provision of technical and regulatory advice Aged 48. on a range of investment products and services. Holder of an Bronislaw Lysiak –Senior Manager Intermediary Sales, upper second class honours degree from the University of Aston in International Private Banking, Lloyds Banking Group (appointed Birmingham in Business Administration and Transport Planning. 5th June 2014). Aged 55. Joined the Lloyds Banking Group in 1993 and has held a number Timothy Joseph Herbert – Consultant, Mourant Ozannes. of managerial positions within a regulated personal customer Jersey born and educated. M.A. in jurisprudence Trinity College environment. Current responsibilities are for sales and distribution Oxford 1982. Member of Middle Temple. Joined Mourant du Feu & of investment products to regulated intermediaries and institutions. Jeune (now Mourant Ozannes) in May 1983. Sworn in as an advocate Holder of an Advanced Financial Planning Certificate in Taxation, of the Royal Court, September 1985. Tim Herbert was a partner of Trust and Investment Planning and Higher National Diploma in Mourant Ozannes from 1987 to 2012. In July 2012 he stepped down Business and Finance. from the partnership and is now retained by Mourant Ozannes as Aged 50. a consultant to the firm. He has extensive experience in corporate and commercial law and mutual funds advice. Holds other external directorships and also acts as Honorary Consul for Finland. Aged 55.
4 Lloyds Investment Funds Limited
Report of the Directors
The Directors have pleasure in submitting their Annual Report Change of name of Scottish Widows together with the Audited Financial Statements for the year ended Investment Partnership 30th September 2014. The Company is domiciled and incorporated On 31st October 2014 Scottish Widows Investment Partnership as a limited liability company in Jersey, Channel Islands, United changed its name to Aberdeen Asset Investments Limited and its Kingdom under the Companies (Jersey) Law 1991 and is listed on registered address is Bow Bells House, 1 Bread Street, London. the Channel Islands Securities Exchange Authority and the Malta Stock Exchange. Cancellation of Recognised Status in the Results United Kingdom The results for the year are set out in the financial statements on Due to the cost and complexity of meeting increasing UK regulatory pages 14 to 77. requirements the Directors have made the decision to cancel the recognition of the Fund in the United Kingdom under section 272 of Distributions the Financial Services and Markets Act 2000. The Fund will continue to Distributions for the year are detailed in Note 5 to the financial be subject to high levels of supervision and remains regulated by the statements. Jersey Financial Services Commission under the Collective Investment Funds (Jersey) Law 1988. The main effect of cancelling the UK Directors recognition will be that the Funds can no longer be promoted in the The Directors of the company who were in office during the year and UK. Existing shareholders should be unaffected and can continue to up to the date of signing the financial statements were: operate their investment in the normal way. Mr R.D. Willcox (appointed 31 July 1998) Prospectus Mr I.M.J. Hardy ( appointed 8 May 2000) Mr T.J. Herbert (appointed 11 February 2005) A revised Prospectus , reflecting the change of name of SWIP and Mr B.C. James (appointed 12 March 1997) the cancellation of recognised status in the UK was issued dated Mr N.R. Jeacock-Fewtrell (appointed 7 November 2002, resigned 5 November 2014. June 2014) Copies of the Prospectus are available, free of charge, on application Mr B. Lysiak (appointed 5 June 2014) to the Manager. Alternatively they can be accessed on our website at Mr N.R. Jeacock-Fewtrell retired from Lloyds Banking Group with http://international.lloydsbank.com/international-investments/ effect from 30th September 2014. funds/ As at 30th September 2014, the Shares held in the Company by the Management and Administration Providers Directors were as follows: The names and addresses of management and administration Mr I. M. J. Hardy Shares providers are stated on page 2. International Fund 4,441.80 Comparatives Tables No Director has a service contract with the Company and no Director The Distribution Table (Unaudited), Performance Record is, or was, materially interested in any service or other contract (Unaudited) and Net Asset Value per Share tables (Unaudited) are entered into by the Company. stated on pages 78 to 85. Mr T.J. Herbert is a consultant to Mourant Ozannes, who are the Directors’ Responsibilities Jersey legal advisers to the Company and the Manager. Mourant Ozannes receives fees in connection with advising the Company and The Directors are responsible for preparing the financial statements the Manager. in accordance with applicable law and International Financial Reporting Standards (IFRS). The Directors are required by the Mr R.D. Willcox, Mr B.C. James and Mr I.M.J. Hardy are Directors of Companies (Jersey) Law 1991 to prepare financial statements Lloyds Investment Fund Managers Limited (the ‘Manager’) which for each financial year which give a true and fair view of the state has a management contract with the Company. Mr N.R. Jeacock- of affairs of the Company for that year and are in accordance Fewtrell resigned as a Director of Lloyds Investment Fund Managers with applicable laws. In preparing these financial statements the with effect from 16th September 2014. Fees earned by the Manager Directors are required to: are disclosed in these financial statements in notes 9 and 10. • select suitable accounting policies and then apply Investment Activities them consistently; The Report of the Investment Manager is set out on pages 7 to 10. • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been Independent Auditors followed subject to any material departures disclosed and PricewaterhouseCoopers CI LLP were re-appointed as Independent explained in the financial statements; and Auditors at the Annual General Meeting held on 19th March 2014 and have indicated their willingness to remain in office.
5 Lloyds Investment Funds Limited
Report of the Directors (continued)
Directors’ Responsibilities (continued) Reporting Funds Regime • prepare the financial statements on the going concern basis HM Revenue & Customs has accepted the entry of the Company unless it is inappropriate to presume that the Company will into the Reporting Funds Regime with effect from 1st October continue in business. 2010 for the purposes of regulation 51 of the Offshore Funds (Tax) Regulations 2009. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial General Information position of the Company and to enable them to ensure that the The Company is an open-ended investment Company with variable financial statements comply with the Companies (Jersey) Law 1991 capital and shareholders are not liable for the debts of the Company. and the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended). The Company holds a certificate as a recognized Securities Fund under the Collective Investment Funds (Recognized Funds) (Rules) They are also responsible for the safeguarding of the assets of (Jersey) Order 2003 (as amended), and holds a permit under Article the Company which includes the appointment of a duly qualified 7 of the Collective Investment Funds (Jersey) Law, 1988. Custodian. The Directors must also ensure that they or their duly appointed agents take reasonable steps for the prevention The Manager maintains an appropriate level of “own funds” to cover and detection of fraud, error and non-compliance with law and the equivalent professional liability risks set out in the Alternative regulations. Investment Fund Managers Directive (“AIFMD”) 2011\61\EU. The Directors confirm that they have complied with the above The Company is listed on the Channel Islands Securities Exchange requirements in preparing the financial statements. Authority (the “CISEA”) and the Malta Stock Exchange. So far as the Directors are aware, there is no relevant audit The market value per Share of the assets of each Fund was as information of which the Company’s Auditors are unaware, and follows: each Director has taken all the steps that he ought to have taken 30th September 1st Oct as Director, in order to make himself aware of any relevant audit 2014 2013 information and to establish that the Company’s Auditors are aware of that information. Euro High Income Fund* 169.20c 162.30c European Fund 742.10p 788.90p Market Conditions High Income Fund 87.54p 86.43p Some of the assets held within certain Funds can be affected by International Fund 434.10p 414.60p market conditions and this may affect the share price of those North American Fund 1,481.00p 1,315.00p Funds. The Directors would like to remind shareholders that investment in the Funds should be considered as a long term Sterling Bond Fund 146.80p 142.00p commitment, as the price of shares may rise and fall in the short UK Fund 697.10p 704.70p term in response to changing market conditions. * Prices are in euro cents The latest prices can be viewed on our website. Information Exchange http://international.lloydsbank.com/international-investments/ Jersey has entered into a number of information exchange funds/prices/ agreements with the authorities of other jurisdictions. These include requirements set out under The European Union Savings Website Tax Directive (EUSD), Foreign Account Tax Compliance Act (FATCA) The Directors have selected Lloyds Bank International Limited’s in the United States of America and UK Crown Dependencies Inter website as the host website for the Company’s financial statements Governmental Agreements. and believe this selection to be a reasonable one; the work carried out by the Auditors does not involve consideration of these matters Shareholders should be aware that information on their investment and, accordingly, the Auditors accept no responsibility for any may be shared with the relevant authorities, and may be passed changes that may have occurred to the financial statements since to the tax authorities in their country of residence, citizenship they were initially presented on the website. or residence for tax purposes. For the avoidance of doubt this information may include (but not be limited to) details of Information published on the internet is accessible in many shareholder names, addresses, unique identifiers (such as tax or countries. Legislation in Jersey governing the preparation and national insurance numbers), amount of investment, redemption or dissemination of financial statements may differ from legislation sale proceeds and dividend payments. in other jurisdictions. Financial Risk Management By order of the Board Lloyds Corporate Services (Jersey) Limited The Directors have taken into consideration the financial risk Secretary management of the Company, this has been disclosed in Note 19 of 11th December 2014 the financial statements.
6 Lloyds Investment Funds Limited
Report of the Investment Manager
Euro High Income Fund Outlook Performance Looking ahead, a more volatile period is likely as a number of The Fund produced a return of 7.51% for the year ended 30th negative factors influence investor sentiment. Geopolitical issues, September 2014, compared to a return of 11.90% in the iBOXX Euro weaker economic data, the impending Asset Quality Review in the Corporates 5 years + index. European banking sector and uncertainty surrounding the next steps for central banks are all potential sources of volatility. A low Background and Strategy inflation environment and benign growth are generally supportive Corporate bonds have delivered strong positive returns over the for corporate bonds but downside risks are building slightly. year, partly due to a continued narrowing of yield spreads over European Fund government bonds and a continued downward trend in underlying government bond yields. Performance In the first six months of the year, a rise in underlying sovereign The Fund produced a return of -5.21% for the year ended 30th yields meant any gains were due to the narrowing of yield spreads, September 2014, compared to a median return of 4.43% in the and overall returns were only marginally positive. High-yielding Lipper Hindsight European excluding UK sector and 5.26% in the bonds were strongly positive and higher beta instruments such as FTSE Europe ex UK index. subordinated bank debt and corporate hybrids also delivered healthy Background and Strategy returns. In an environment of low yield and loose policy, investors European equities rose in the year under review. Initial concerns have been increasingly forced into lower quality areas of the market over the US Federal Reserve’s taper of quantitative easing gave in a hunt for income and returns. For much of the year these areas, way to hope that economic recovery in America was becoming such as subordinated financials and higher yield corporate bonds, more sustainable. Also lifting market sentiment were an increase generated better returns than investment grade bonds. in mergers and acquisitions and hopes that the European Central As the year progressed, there was a notable increase in risk aversion. Bank’s (ECB’s) unorthodox policies would revive the Eurozone A number of factors have contributed to this: worries over Chinese economy. However, the gains were capped by a slew of worries, economic slowdown, concerns over the future path of central bank including fears over a Chinese economic slowdown, geopolitical monetary policy, and geopolitical concerns surrounding Ukraine and tensions in Ukraine and the Middle East, Russia’s retaliatory the Middle East. Investment grade credit had only a muted response sanctions to Western embargoes and contagion fears triggered by to the resultant sell-off in risk assets. Towards the end of the year Portugal’s second largest lender Banco Espirito Santo. higher risk areas of the market such as, low-rated investment grade The year proved a transition for the Fund in light of Aberdeen’s and high yield corporate bonds performed poorly and the most acquisition of Scottish Widows. . As the change occurred only negative returns came from low-rated bonds in the high yield space. towards the period end, performance for the whole period does not Early on, the Fund was positioned with a long position in credit entirely reflect Aberdeen’s investment approach. The change of and overweight in higher beta areas of the market. Trading in the management resulted in a realignment of the portfolio to conform three months to December was low as the Investment Manager to the Aberdeen model. This necessitated a certain level of turnover was satisfied with the position. The Investment Manager reduced of the fund’s underlying holdings. exposure to Telecom Italia, acknowledging that the company faced Continental had a positive impact over the review period, the a number of challenges, meanwhile, participating in attractive new German-based automotive industry supplier, best known for its tyres deals from Unitymedia and Volkswagen. At the start of the year the division, had strong sales growth over 2013 and is benefitting from Investment Manager favoured corporate hybrid bonds in a bid to its market leading technology for lowering CO2 emissions. The entire generate income and returns, while these performed strongly within holding was sold in June as part of the transition to Aberdeen. DNB, the fund, however by early 2014 felt that valuations had become the Norwegian financial services group added over the period also stretched, and some profits were taken. being sold in June. The holding in Vopak added significantly, it is a Between April and June, bonds issued by banks and insurers transporter and storer of chemicals, having previously been weak performed strongly as yield-hungry investors continued to demand after announcing softer demand for oil and gas storage. paper. Improving balance sheets and further evidence of capital The largest negative contribution has come from Fugro, a stock raising provided further support for this sector. The Funds exposure added in June, it is a data service provider to the oil and gas in this sector continues to be focused on institutions domiciled in the industry. The share price suffered from weakening near-term UK, US and Scandinavia. demand amid lower spending on oil and gas exploration and project In the final three months of the year, the Fund retained a short delays although internal initiatives are underway which should duration position versus the index. This will reduce volatility in capital help mitigate. values while continuing to meet the need for income generation. Allocation to credit markets is made on the basis of stock selection, to meet the Fund’s yield requirements.
7 Lloyds Investment Funds Limited
Report of the Investment Manager (continued)
Outlook in Met Life and subordinated bonds from Lloyds Banking Group. European equities could turn more volatile in the months ahead. The Fund also participated in a new deal from Intu, a UK property A key headwind is stalling global growth, with the International company, and a new US real estate issue from Healthcare REIT. Early Monetary Fund’s (‘the IMF’s’) warning of a Eurozone relapse into on, the Investment Manager favoured corporate hybrid bonds in a recession. Both Germany and France appear to be faltering. The bid to generate income and returns, while these performed strongly ECB have cut interest rates further and announced a programme within the Fund, however early 2014 felt that valuations had become of asset-backed security purchases although this is likely to take stretched, and some profits were taken. time to have an impact. Global stock markets were riled, with the Between April and June, bonds issued by banks and insurers falls exacerbated by outflows from European equity portfolios. performed strongly as yield-hungry investors continued to demand While France and Italy are considering fiscal loosening, Germany paper. Improving balance sheets and further evidence of capital has defended the need for restrictive credit conditions, even raising provided further support for this sector. The Funds exposure though austerity seems to be impeding a meaningful recovery. in this sector continues to be focused on institutions domiciled in Meanwhile, the falling oil price is both a boon and a bane. While it the UK, US and Scandinavia. Moving towards the end of the year, may help mitigate a slower growth backdrop, oil producers, such as the Fund retained a short duration position versus the index for the Russia, already encumbered by a raft of Western embargoes over High Income Bond Fund. This will reduce volatility in capital values the Ukraine crisis, are likely to feel the heat the most. Against this while continuing to meet the requirement for income generation. more challenging backdrop however, the Investment Manager is Allocation to credit markets is made on the basis of stock selection, confident that its investment process has provided the Fund with to meet the Fund’s yield requirement. a portfolio of holdings with the wherewithal to emerge from the turbulence stronger than before. Outlook Looking ahead, a more volatile period is likely as a number of High Income Fund negative factors influence investor sentiment. Geopolitical issues, Performance weaker economic data, the impending Asset Quality Review in the The Fund produced a return of 6.42% for the year ended 30th European banking sector and uncertainty surrounding the next September 2014, compared to a return of 7.82% in the iBoxx Non Gilt steps for central banks are all potential sources of volatility. A low ex Sovereign All Maturities index and comfortably outperformed the inflation environment and benign growth is generally supportive peer group median. for corporate bonds but downside risks are building slightly. Higher yields are still the greatest risk for bond market returns. Accordingly, Background and Strategy the Fund will maintain a low duration position. Corporate bonds have delivered strong positive returns over the year, partly due to a continued narrowing of yield spreads over International Fund government bonds and a continued downward trend in underlying Performance government bond yields. The Fund produced a return of 4.30% for the year ended 30th In the first six months of the year, a rise in underlying sovereign September 2014, compared to a median return of 8.19% in the yields meant any gains were due to the narrowing of yield spreads, Lipper Hindsight International Equity sector and a 12.68% sterling and overall returns were only marginally positive. High-yielding return by the MSCI World index. bonds were strongly positive and higher beta instruments such as subordinated bank debt and corporate hybrids also delivered healthy Background And Strategy returns. In an environment of low yield and loose policy, investors Global equities rallied during the year under review, largely thanks have been increasingly forced into lower quality areas of the market to improved economic data in the US as well as loose monetary in a hunt for income and returns. For much of the year these areas, policy in the developed world. Notably, the US Federal Reserve’s such as subordinated financials and higher yield corporate bonds, commitment to keep interest rates low for a longer period, as well generated better returns than investment grade bonds. as the European Central Bank’s unexpected rate cuts and fresh stimulus measures reassured investors. In Japan, the yen’s weakness As the year progressed, there was a notable increase in risk aversion. and expectations of further economic stimulus lifted equity markets. A number of factors have contributed to this: worries over Chinese However, doubts over the efficacy of Prime Minister Abe’s ‘third economic slowdown, concerns over the future path of central bank arrow’ stimulus measures as well as the impact of the consumption monetary policy, and geopolitical concerns surrounding Ukraine and tax hike that was implemented in April pared gains. Towards the the Middle East. Investment grade credit had only a muted response end of the period, the prospect of rising US interest rates unsettled to the resultant sell-off in risk assets. Towards the end of the year investors, while worsening tensions in Ukraine, escalating military higher risk areas of the market such as, low-rated investment grade activity in the Middle East and generally weak manufacturing and and high yield corporate bonds performed poorly and the most services data in Europe and China dented sentiment. negative returns came from low-rated bonds in the high yield space. The year proved a transition for the Fund in light of Aberdeen’s During the year the Investment Manager reduced exposure to acquisition of Scottish Widows. . As the change occurred only Telecom Italia, as they believed the company faced a number of towards the period end, performance for the whole period does not challenges. The Fund took profits on sales of some of its holdings entirely reflect Aberdeen’s investment approach. The change of
8 Lloyds Investment Funds Limited
Report of the Investment Manager (continued) management resulted in a realignment of the portfolio to conform Investor optimism was buoyed by generally positive corporate to the Aberdeen model. This necessitated a certain level of turnover earnings reports and a steady improvement in economic data. of the fund’s underlying holdings. This offset geopolitical concerns in Ukraine and the Middle East and, towards the end of the period, worries over slowing economic The two strongest stocks over the review period were McKesson and growth in Europe and Asia. Shire, both from the same sector. McKesson Corp, a North American health and technology services company, was held through most Markets were volatile early on in the period, amid speculation over of the period, the share price gained momentum as it bid for the Federal Reserve’s (‘the Fed’) possible tapering of monetary and eventually agreed a deal to buy Celesio. The European drug stimulus and the change in command at the central bank, as Janet distributor now gives McKesson a more global business. The stock Yellen succeeded Ben Bernanke in February. The Fed kicked off its was sold in the transition to Aberdeen gives good positive attribution tapering in January 2014, reducing its $85 billion-per-month asset over the 12 month period. Shire, the British rare disease specialist purchase programme in $10 billion increments through to the end of pharmaceutical, has benefitted from other mergers in the industry the reporting period. It is expected to cease asset purchases through and was itself stalked by several others before fending off a bid by this programme completely by the end of October 2014. Meanwhile, US firm AbbVie. The stock was bought at the end of 2013 being the the Fed anticipated it would be “a considerable time” before it raised favoured stock in a strong industry. its target for short-term interest rates. Teradata was amongst the worst performers in the portfolio, starting The US economy had its ups and downs over the year in review. at a 2.5% position at the start of the period, the ‘big data’ service Fourth-quarter 2013 Gross Domestic Product (‘GDP’) rose by 2.6%, provider saw new competitive threats and lack of spending from mainly on improved consumer spending and imports. However, the existing clients hit its share price. It was sold down in early 2014 and severe winter in the first quarter hit consumer spending, which led to then sold in its entirety as part of the transition to Aberdeen. The a 2.1% contraction in economic growth. Nevertheless, the recovery non-holding in Apple detracted as its sales continue to grow beyond regained traction in the second quarter, with GDP growing by 4.6% analysts’ expectations and continued innovations see it remain a top on robust business investment, exports and government spending. consumer brand. Elsewhere, the labour market was largely upbeat. Payrolls increased by more than two million, while the unemployment rate fell. Outlook However, less positively, the labour force participation rate dropped Looking ahead, the anticipated end to US quantitative easing in to its lowest level in more than 36 years. October and higher interest rates in 2015 could lead to liquidity The year proved a transition for the Fund in light of Aberdeen’s flowing towards developed markets. Confidence in the global acquisition of Scottish Widows. . As the change occurred only recovery has improved somewhat, in view of the pick-up in US towards the period end, performance for the whole period does not economic activity. Encouragingly, recent data point to continued entirely reflect Aberdeen’s investment approach. The change of expansion in the US in the second half of 2014 and beyond. The management resulted in a realignment of the portfolio to conform picture is less rosy elsewhere in the developed world, the Eurozone to the Aberdeen model. This necessitated a certain level of turnover continues to lag and faces sizeable headwinds in the form of high of the fund’s underlying holdings. debt and unemployment levels, while the Investment Manager remain cautious about Japan, as the recovery in household Delta airlines has been owned through most of the period, it has consumption has been slower than expected. Upcoming data aggressive expansion plans on the West Coast of America and has releases will be crucial to Prime Minister Abe’s decision to been ordering larger, more efficient and more profitable aircraft. implement the sales tax hike next year. Prospects for emerging This will allow it to expand its higher margin international routes. economies remain mixed as well, with latest market developments The initial position was added to in November but sold as part of highlighting sensitivities to US policy. At the corporate level, efforts the transition to Aberdeen in June adding significantly over the full to boost margins through cost cuts and reorganisation are being period covered here. McKesson Corp, a North American health and seen, although this has yet to translate into a broader trend of technology services company, was held through most of the period, improving profitability. the share price gained momentum as it bid for and eventually North American Fund agreed a deal to buy Celesio. The European drug distributor now gives McKesson a more global business. The stock was sold in the Performance transition to Aberdeen gives good positive attribution over the 12 The Fund produced a return of 11.69% for the year ended 30th month period. September 2014, compared to a median return of 15.65% in the Teradata was amongst the worst performers in the portfolio, Lipper Hindsight North American Offshore sector and 19.61% in the starting at a 2.5% position at the start of the period, the ‘big data’ S&P 500 (sterling) index. service provider saw new competitive threats and lack of spending Background and Strategy from existing clients hit its share price. It was sold down in early 2014 and then sold in its entirety as part of the transition to Aberdeen. US equities climbed over the year with the S&P 500 Index hitting new LKQ Corp, a retailer of aftermarket and refurbished parts for vehicle highs. All sectors saw positive returns, led by information technology repairs, has been a long term hold which was sold as part of the and healthcare. Despite posting double-digit gains, consumer transition to Aberdeen. It has performed well in 2013 but its share discretionary and energy were the most notable laggards.
9 Lloyds Investment Funds Limited
Report of the Investment Manager (continued) price suffered over the period as the US economy has grown and Early on, the Fund increased exposure to the financial sector via American consumers look to buy newer cars, there was also a purchases of bonds issued by Mellon Bank and Axa. The Fund also design patent complaint filed by Chrysler in late 2013. The non- purchased a new hybrid issue from BG Energy, financed by the sale holding in Apple detracted as its sales continue to grow beyond of senior bonds from the same issuer. analysts’ expectations and continued innovations see it remain a top Between April and June, bonds issued by banks and insurers consumer brand. performed strongly. Improving balance sheets and further evidence Outlook of capital raising provided further support for this sector, and the Recently, markets have been influenced by geopolitical tensions and Investment Manager focused exposure on institutions domiciled in macroeconomic issues. The employment rate is steadily improving, the UK, US and Scandinavia. As at 30 September, the Fund remains but wage growth continues to lag. Meanwhile, the housing market overweight financials versus non financials. The Investment remains relatively sluggish, despite sustained low interest rates. Manager believe spreads still have room to move tighter, with After such a strong run-up, equity markets remain susceptible to balance sheet repair still ongoing, there is better value available profit-taking, particularly in the event of heightened geopolitical risk, in financials. disappointing economic data, or lack lustre company earnings at a Outlook time of waning central bank monetary accommodation. Without either a material correction or a meaningful pickup in growth, A more volatile period is likely as a number of negative factors the Investment Manager does not foresee valuations improving influence investor sentiment. Geopolitical issues, weaker economic significantly. As such, they expect share prices to increasingly reflect data, the impending Asset Quality Review in the European banking underlying operating profits, with returns supported by dividends sector and uncertainty surrounding the next steps for central banks and buybacks. are all potential sources of volatility. A low inflation environment and benign growth is generally supportive for corporate bonds but Sterling Bond Fund downside risks are building slightly. Performance UK Fund The Fund produced a return of 6.30% for the year ended 30th September 2014, compared to a peer group median return of 5.95% Performance and 7.82% in the iBoxx Non Gilt ex Sovereign All Maturities Index. The Fund produced a return of -0.97% for the year ended 30th September 2014, compared to a median return of 5.18% in the Background and Strategy Lipper Hindsight UK Offshore Funds sector and 6.09% in the FTSE All Corporate bonds outperformed government bonds during the Share index. Corporate bonds have delivered strong positive returns over the year, partly due to a continued narrowing of yield spreads over Background and Strategy government bonds and a continued downward trend in underlying Most UK equities rose in the year under review. Initial concerns over government bond yields. the US Federal Reserve’s taper of quantitative easing gave way to hope that economic recovery in America was becoming more In the first six months of the year, a rise in underlying sovereign sustainable. Also buoying sentiment were upbeat GDP growth in yields meant any gains were due to the narrowing of yield spreads, Britain, Scotland’s decision to stay in the Union and hopes that and overall returns were only marginally positive. High-yielding the European Central Bank’s unorthodox policies would revive the bonds were strongly positive and higher beta instruments such as Eurozone economy. Earlier, the market was also lifted by an increase subordinated bank debt and corporate hybrids also delivered healthy in mergers and acquisitions. However, the gains were capped by returns. In an environment of low yield and loose policy, investors a slew of worries, including fears of Chinese economic slowdown, have been increasingly forced into lower quality areas of the market geopolitical tensions in Ukraine and the Middle East, Russia’s in a hunt for income and returns. For much of the year these areas, retaliatory sanctions to Western embargoes and contagion fears such as subordinated financials and higher yield corporate bonds, triggered by Portugal’s second largest lender Banco Espirito Santo. generated better returns than investment grade bonds. At home in the UK, unemployment dipped to a four-year low and As the year progressed, there was a notable increase in risk aversion. triggered worries of an imminent increase in borrowing costs. A number of factors have contributed to this: worries over Chinese The year proved a transition for the Fund in light of Aberdeen’s economic slowdown, concerns over the future path of central bank acquisition of Scottish Widows. . As the change occurred only monetary policy, and geopolitical concerns surrounding Ukraine and towards the period end, performance for the whole period does not the Middle East. Investment grade credit had only a muted response entirely reflect Aberdeen’s investment approach. The change of to the resultant sell-off in risk assets. Towards the end of the year management resulted in a realignment of the portfolio to conform higher risk areas of the market such as, low-rated investment grade to the Aberdeen model. This necessitated a certain level of turnover and high yield corporate bonds performed poorly and the most of the fund’s underlying holdings. negative returns came from low-rated bonds in the high yield space.
10 Lloyds Investment Funds Limited
Report of the Investment Manager (continued)
The largest positive movement of the review period came from Whitbread , it is the owner of the Costa and Premier Inn brands amongst others. The business has grown strongly in recent years and is benefitting from cross-brand selling and supply chain savings. Whilst still in the portfolio, exposure was halved in June, taking a decent profit. Shire, the British rare disease specialist pharmaceutical, has benefitted from other mergers in the industry and was itself stalked by several others before fending off a bid by US firm AbbVie. The stock was bought at the end of 2013 being the favoured stock in a strong industry, the share price benefited from the speculation prior to being sold entirely in June. The publisher, Pearson, was purchased in June, the stock rebounded in September having previously cautioned on near term growth in its US higher education business. With expectations cyclical pressures will soon ease, the company is progressing its restructuring as it accelerates its shift towards digital services and fast-growing economies. The worst performers over the period were a number of UK-listed but Indian-based energy producers. Although well-placed to benefit from the future energy demands, continued headwinds from political wrangling and corporate governance issues are holding the firms back and depressing share prices. Outlook UK equities could turn more volatile in the months ahead. A key headwind is stalling global growth. The IMF’s warning of a Eurozone relapse into recession. In September 2014, global stock markets were roiled by the gloomy prospect, with the falls exacerbated by outflows from European equity portfolios. By contrast, by the IMF’s reckoning, economic growth in Britain is likely to surpass the rest of the G7. Subsequently, the economy is expected to decelerate when the Bank of England raises interest rates sometime next year. Against this more challenging backdrop however, the Investment Manager is confident that its investment process has provided the Fund with a portfolio of holdings with the wherewithal to emerge from the turbulence stronger than before.
Aberdeen Assets Investments Limited 11th December 2014
11 Lloyds Investment Funds Limited
Report of the Custodian to the Members of Lloyds Investment Funds Limited
Statement of Custodian’s Responsibilities. The Custodian is required under the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended) (the ‘Rules’) to ensure that, inter alia, it: • satisfies itself that the sale, issue, redemption, cancellation and valuation of shares in the Company are carried out in accordance with the Rules; and • takes into its custody all the assets of the Company and holds them in trust for the shareholders in accordance with the Rules; and • enquires into the conduct of the Company in each annual accounting year and reports thereon to shareholders in a report, which shall contain the matters prescribed by the Rules. The Custodian’s Report is included in this Annual Report. Report of the Custodian to the Members of Lloyds Investment Funds Limited In accordance with Article 2.06 of the Rules, Capita Trust Company (Jersey) Limited, has acted throughout the year as independent Custodian to the Company. In accordance with Article 7.08 of the Rules we confirm, in our capacity as the Custodian, that we have enquired into the conduct of the Company for the year ended 30th September 2014 and in our opinion, to the best of our knowledge having made such enquiry, the affairs of the Company have been conducted in all material respects for the year then ended: • in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Memorandum and Articles of Association, by prospectuses and by all Orders for the time being in force under Article 11 of the Collective Investment Funds (Jersey) Law 1988 (as amended) (‘the Law’); and • otherwise in accordance with the provisions of the Memorandum and Articles of Association and the Law. Capita Trust Company (Jersey) Limited, Custodian, 12 Castle Street, St Helier, Jersey, JE2 3RT Channel Islands 11th December 2014
12 Lloyds Investment Funds Limited
Report of the Independent Auditors to the Members of Lloyds Investment Funds Limited Report on the financial statements Report on other legal and regulatory requirements We have audited the accompanying financial statements of Lloyds We read the other information contained in the Annual Report Investment Funds Limited (“the Company”) which comprise and consider the implications for our report if we become aware of the balance sheet at 30 September 2014 and the statement of any apparent misstatements or material inconsistencies with the comprehensive income, statement of changes in net assets financial statements. The other information comprises the table of attributable to holders of participating redeemable preference contents, the company information, the investment objectives and shares, cash flow statement and the investment portfolios for the policy, the director’s profiles, the report of the directors, report of year then ended and a summary of significant accounting policies the manager, the report of the custodian to the members of Lloyds and other explanatory information. Investment Funds Limited, the notice of meeting and the form of proxy. Respective responsibilities of directors and auditors In our opinion the information given in the report of the directors is The directors are responsible for the preparation of financial consistent with the financial statements. This report, including the statements that give a true and fair view in accordance with opinion, has been prepared for and only for the Company’s members International Financial Reporting Standards and with the as a body in accordance with Article 113A of the Companies (Jersey) requirements of Jersey law. The directors are also responsible for Law 1991 and for no other purpose. We do not, in giving this opinion, such internal control as they determine is necessary to enable the accept or assume responsibility for any other purpose or to any other preparation of financial statements that are free from material person to whom this report is shown or into whose hands it may misstatement, whether due to fraud or error. ome save where expressly agreed by our prior consent in writing. Auditors’ responsibilities Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in Rebecca Brewer accordance with International Standards on Auditing. Those For and on behalf of PricewaterhouseCoopers CI LLP Standards require that we comply with ethical requirements and Chartered Accountants and Recognized Auditor plan and perform the audit to obtain reasonable assurance whether Jersey, Channel Islands the financial statements are free from material misstatement. 11th December 2014 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion The maintenance and integrity of the Lloyds Investment Funds Limited In our opinion, the financial statements give a true and fair view (http://international.lloydsbank.com/international-investments/funds/ of the financial position of the Company as of 30 September 2014, uk/) website is the responsibility of the directors; the work carried out by the and of its financial performance and its cash flows for the year auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have then ended in accordance with International Financial Reporting occurred to the financial statements since they were initially presented on Standards and have been properly prepared in accordance with the website. the requirements of the Companies (Jersey) Law 1991 and the Legislation in Jersey governing the preparation and dissemination of Collective Investment Funds (Recognised Funds)(Rules)(Jersey) financial statements may differ from legislation in other jurisdictions. Order 2003 (as amended).
13 Lloyds Investment Funds Limited
Balance Sheet
As at 30th September 2014
Notes Company Capital Growth Euro High Income European Fund Fund Fund (Closed 05.07.13) £ £ € £ Assets 1,657,739 — 945,674 272,998 Cash and cash equivalents Creations receivable 80,800 — 30,879 —
Investment sales receivable 2,530,765 — — —
Financial assets at fair value through profit 406,884,642 — 13,208,495 13,997,680
Other accrued income & pre paid expenses 4 8,844,015 — 256,475 —
Total Assets 419,997,961 — 14,441,523 14,270,678 Equity 1,000 — — — Ordinary share capital Total Equity 1,000 — — — Bank overdraft 903,139 — — —
Cancellation payable 27,458 — — 27,458
Investment purchases payable 818,593 — — —
Proposed distributions 5 2,036,574 — 132,848 —
Accrued expenses 6 634,609 — 27,659 46,693
Nominal shares 14 804,962 — — —
Total Liabilities* 5,225,335 — 160,507 74,151 Net assets attributable to holders of participating redeemable 17 414,771,626 — 14,281,016 14,196,527 preference shares Total Liabilities and Equity 419,997,961 — 14,441,523 14,270,678 * Excluding net assets attributable to holders of participating redeemable preference shares
The financial statements on pages 14 to 77 were approved by the Board of Directors on 11th December 2014 and are signed on their behalf by: R. D. Willcox } Directors B. C. James The notes on pages 53 to 77 form an integral part of these financial statements.
14 Lloyds Investment Funds Limited
Balance Sheet
As at 30th September 2014
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Assets — 186,704 85,586 125,708 249,864 Cash and cash equivalents Creations receivable — 8,465 2,962 — 45,312
Investment sales receivable 2,530,765 — — — —
Financial assets at fair value through profit 309,861,025 24,092,799 9,261,322 22,199,280 17,180,335
Other accrued income & pre paid expenses 7,266,371 49,845 11,223 482,016 28,750
Total Assets 319,658,161 24,337,813 9,361,093 22,807,004 17,504,261 Equity — — — — — Ordinary share capital Total Equity — — — — — Bank overdraft 903,139 — — — —
Cancellation payable — — — — —
Investment purchases payable 719,360 — — 99,233 —
Proposed distributions 1,431,253 — — 238,964 262,840
Accrued expenses 390,175 58,800 31,761 38,950 46,677
Nominal shares — — — — —
Total Liabilities* 3,443,927 58,800 31,761 377,147 309,517 Net assets attributable to holders of participating redeemable 316,214,234 24,279,013 9,329,332 22,429,857 17,194,744 preference shares Total Liabilities and Equity 319,658,161 24,337,813 9,361,093 22,807,004 17,504,261 * Excluding net assets attributable to holders of participating redeemable preference shares
The notes on pages 53 to 77 form an integral part of these financial statements.
15 Lloyds Investment Funds Limited
Balance Sheet (continued)
As at 30th September 2013
Notes Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Assets 4,887,328 — 421,238 462,428 Cash and cash equivalents Creations receivable 23,694 — — 9,003
Investment sales receivable 1,600,313 — — — Financial assets at fair value through 418,637,685 — 12,620,386 16,015,368 profit or loss Other accrued income & pre paid expenses 4 9,484,352 — 264,488 —
Total Assets 434,633,372 — 13,306,112 16,486,799 Equity 1,000 — — — Ordinary share capital Total Equity 1,000 — — — Bank overdraft — — — —
Cancellation payable 108,273 — 26,272 —
Investment purchases payable 1,412,988 — — —
Proposed distributions 5 2,229,652 — 149,686 —
Accrued expenses 6 710,006 — 34,793 48,552
Nominal shares 14 644,056 — — —
Total Liabilities* 5,104,975 — 210,751 48,552 Net assets attributable to holders of participating redeemable 17 429,527,397 — 13,095,361 16,438,247 preference shares Total Liabilities and Equity 434,633,372 — 13,306,112 16,486,799 * Excluding net assets attributable to holders of participating redeemable preference shares
The notes on pages 53 to 77 form an integral part of these financial statements.
16 Lloyds Investment Funds Limited
Balance Sheet (continued)
As at 30th September 2013
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Assets 2,431,945 550,762 229,594 721,041 138,496 Cash and cash equivalents Creations receivable — 2,705 11,271 — 716
Investment sales receivable — 6,990 — — 1,593,323 Financial assets at fair value through 316,043,000 25,126,664 8,352,326 22,195,464 20,327,051 profit or loss Other accrued income & pre paid expenses 8,032,831 15,791 1,533 501,276 66,183
Total Assets 326,507,776 25,702,912 8,594,724 23,417,781 22,125,769 Equity — — — — — Ordinary share capital Total Equity — — — — — Bank overdraft — — — — —
Cancellation payable 66,067 20,186 — — —
Investment purchases payable — 55,391 19,732 — 1,337,865
Proposed distributions 1,507,105 — — 261,197 335,889
Accrued expenses 436,331 66,548 27,190 43,519 58,704
Nominal shares — — — — —
Total Liabilities* 2,009,503 142,125 46,922 304,716 1,732,458 Net assets attributable to holders of participating redeemable 324,498,273 25,560,787 8,547,802 23,113,065 20,393,311 preference shares Total Liabilities and Equity 326,507,776 25,702,912 8,594,724 23,417,781 22,125,769 * Excluding net assets attributable to holders of participating redeemable preference shares
The notes on pages 53 to 77 form an integral part of these financial statements.
17 Lloyds Investment Funds Limited
Statement of Comprehensive Income
For the year ended 30th September 2014 Notes Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Operating Profit/ (Loss) Net gains/ (losses) on financial assets at fair 7 12,446,273 — 752,107 (578,324) value through profit or loss Investment income 18,973,468 — 454,001 369,310
Other income 8 17,787 — 6 369
Operating expenses 9 (5,214,235) — (167,133) (324,243)
Operating profit/ (loss) 26,223,293 — 1,038,981 (532,888) Finance Costs Distributions to holders of participating 5 (19,486,448) — (551,347) — redeemable preference shares Total finance costs (19,486,448) — (551,347) —
Profit/(loss) before tax 6,736,846 — 487,634 (532,888) Withholding tax on dividends 18 (216,460) — (3,150) (100,504) and other investment income Increase/(decrease) in net assets attributable to holders of participating redeemable 6,520,386 — 484,484 (633,392) preference shares from operations
For the year ended 30th September 2013
Notes Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Operating Profit Net gains on financial assets at fair value 7 19,738,852 1,510,474 358,703 3,357,618 through profit or loss Investment income 18,473,338 325,057 559,782 413,443
Other income 8 11,713 1,817 — 362
Operating expenses 9 (5,573,901) (235,368) (159,760) (334,094)
Operating profit 32,650,002 1,601,980 758,725 3,437,329 Finance Costs Distributions to holders of participating 5 (20,221,771) — (600,616) — redeemable preference shares Total finance costs (20,221,771) — (600,616) —
Profit/(loss) before tax 12,428,231 1,601,980 158,109 3,437,329 Withholding tax on dividends 18 (359,810) (19,602) (6,988) (108,589) and other investment income Increase/(decrease) in net assets attributable to holders of participating redeemable 12,068,421 1,582,378 151,121 3,328,740 preference shares from operations
The notes on pages 53 to 77 form an integral part of these financial statements.
18 Lloyds Investment Funds Limited
Statement of Comprehensive Income
For the year ended 30th September 2014
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Operating Profit/ (Loss) Net gains/ (losses) on financial assets at fair 9,557,641 1,330,032 1,083,263 666,329 (225,362) value through profit or loss Investment income 15,893,066 449,755 123,350 1,129,350 638,790
Other income 15,347 718 146 263 939
Operating expenses (3,303,761) (524,539) (195,804) (259,947) (469,788)
Operating profit/ (loss) 22,162,293 1,255,966 1,010,955 1,535,995 (55,421) Finance Costs Distributions to holders of participating (17,864,012) — — (912,794) (262,840) redeemable preference shares Total finance costs (17,864,012) — — (912,794) (262,840)
Profit/(loss) before tax 4,298,281 1,255,966 1,010,955 623,201 (318,261) Withholding tax on dividends (788) (72,635) (31,746) — (8,221) and other investment income Increase/(decrease) in net assets attributable to holders of participating redeemable 4,297,493 1,183,331 979,209 623,201 (326,482) preference shares from operations
For the year ended 30th September 2013 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Operating Profit Net gains on financial assets at fair value 5,066,147 5,097,805 1,542,503 50,239 2,813,967 through profit or loss Investment income 14,914,074 415,563 91,759 1,103,751 741,365
Other income 8,227 420 35 335 517
Operating expenses (3,424,348) (539,410) (190,378) (267,492) (449,152)
Operating profit 16,564,100 4,974,378 1,443,919 886,833 3,106,697 Finance Costs Distributions to holders of participating (18,419,659) — — (965,588) (335,889) redeemable preference shares Total finance costs (18,419,659) — — (965,588) (335,889)
Profit/(loss) before tax (1,855,559) 4,974,378 1,443,919 (78,755) 2,770,808 Withholding tax on dividends (110,563) (79,832) (26,397) (8,613) (368) and other investment income Increase/(decrease) in net assets attributable to holders of participating redeemable (1,966,122) 4,894,546 1,417,522 (87,368) 2,770,440 preference shares from operations
The notes on pages 53 to 77 form an integral part of these financial statements.
19 Lloyds Investment Funds Limited
Statement of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares
For the year ended 30th September 2014
Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Net assets attributable to holders of participating redeemable preference 429,527,397 — 13,095,361 16,438,247 shares as at 1st October 2013 Creation of participating redeemable 12,849,792 — 1,851,804 443,084 preference shares issued Redemption of participating redeemable (33,349,744) — (1,150,633) (2,051,412) preference shares
Dilution levies 15,169 — — —
Net (decrease)/increase from (20,484,783) — 701,171 (1,608,328) share transactions Increase/ decrease in net assets attributable to holders of participating redeemable 6,520,385 — 484,484 (633,392) preference shares from operations Movement in currency translation (791,373) — — — Net assets attributable to holders of participating redeemable preference 414,771,626 — 14,281,016 14,196,527 shares as at 30th September 2014
For the year ended 30th September 2013
Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Net assets attributable to holders of participating redeemable preference 438,315,675 13,426,521 12,366,572 14,180,105 shares as at 1st October 2012 Creation of participating redeemable 20,363,886 318,615 1,226,942 489,242 preference shares issued Redemption of participating redeemable (41,717,612) (15,327,515) (649,274) (1,559,840) preference shares
Dilution levies — — — —
Net (decrease)/increase from (21,353,726) (15,008,900) 577,668 (1,070,598) share transactions Increase/(decrease) in net assets attributable to holders of participating redeemable 12,068,421 1,582,378 151,121 3,328,740 preference shares from operations Movement in currency translation 497,027 — — — Net assets attributable to holders of participating redeemable preference 429,527,397 — 13,095,361 16,438,247 shares as at 30th September 2013
The notes on pages 53 to 77 form an integral part of these financial statements.
20 Lloyds Investment Funds Limited
Statement of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares
For the year ended 30th September 2014
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Net assets attributable to holders of participating redeemable preference 324,498,273 25,560,787 8,547,802 23,113,065 20,393,311 shares as at 1st October 2013 Creation of participating redeemable 8,229,418 763,431 481,049 732,959 756,911 preference shares issued Redemption of participating redeemable (20,826,119) (3,228,536) (678,728) (2,039,368) (3,628,996) preference shares
Dilution levies 15,169 — — — —
Net (decrease)/increase from (12,581,532) (2,465,105) (197,679) (1,306,409) (2,872,085) share transactions Increase/ decrease in net assets attributable to holders of participating redeemable 4,297,493 1,183,331 979,209 623,201 (326,482) preference shares from operations Movement in currency translation — — — — — Net assets attributable to holders of participating redeemable preference 316,214,234 24,279,013 9,329,332 22,429,857 17,194,744 shares as at 30th September 2014
For the year ended 30th September 2013
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Net assets attributable to holders of participating redeemable preference 326,651,897 22,236,590 8,633,780 23,372,673 19,947,687 shares as at 1st October 2012 Creation of participating redeemable 15,708,224 542,908 336,248 1,358,993 601,302 preference shares issued Redemption of participating redeemable (15,895,726) (2,113,252) (1,839,748) (1,531,232) (2,926,118) preference shares
Dilution levies — — — — —
Net (decrease)/increase from (187,502) (1,570,344) (1,503,500) (172,239) (2,324,816) share transactions Increase/(decrease) in net assets attributable to holders of participating redeemable (1,966,122) 4,894,546 1,417,522 (87,368) 2,770,440 preference shares from operations Movement in currency translation — — — — — Net assets attributable to holders of participating redeemable preference 324,498,273 25,560,792 8,547,802 23,113,066 20,393,311 shares as at 30th Septmber 2013
The notes on pages 53 to 77 form an integral part of these financial statements.
21 Lloyds Investment Funds Limited
Cash Flow Statement
For the year ended 30th September 2014
Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Cash flows from operating activities Purchases of financial assets and (144,462,372) — (2,468,125) (15,195,782) settlement of financial liabilities Receipts from sale of investments 163,980,274 — 2,497,917 16,657,991
Investment income received 22,015,344 — 596,159 268,806
Bank interest received 17,787 — 6 369
Interest paid (4,156) — (5) (100)
Operating expenses paid (5,279,222) — (168,793) (326,003) Net cash inflow 36,267,655 — 457,159 1,405,281 from operating activities Cash flows from financing activities Distributions paid to holders of participating (19,673,650) — (568,185) — redeemable preference shares issued Proceeds received from issue of participating redeemable 12,857,204 — 1,820,926 452,088 preference shares Payments on redemption of participating redeemable (33,470,707) — (1,176,905) (2,023,954) preference shares Tax (7,809) — (8,619) —
Dilution levies 15,173 — — — Net cash inflow/ (outflow) (40,279,789) — 67,217 (1,571,866) from financing activities Net increase/ (decrease) (4,012,134) — 524,376 (166,585) in cash and cash equivalents Cash and cash equivalents 4,887,328 — 421,238 462,428 as at 1st October 2013 Exchange (losses)/gains on (77,185) — 60 (22,845) cash and cash equivalents Movement in currency (43,409) — — — translation Cash and cash equivalents 754,600 — 945,674 272,998 as at 30th September 2014
The notes on pages 53 to 77 form an integral part of these financial statements.
22 Lloyds Investment Funds Limited
Cash Flow Statement
For the year ended 30th September 2014
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Cash flows from operating activities Purchases of financial assets and (61,929,210) (30,992,945) (11,508,210) (3,198,645) (19,626,949) settlement of financial liabilities Receipts from sale of investments 73,549,412 33,350,748 11,666,124 3,908,422 22,812,676
Investment income received 18,967,334 343,066 81,913 1,200,569 668,002
Bank interest received 15,347 718 146 263 939
Interest paid (718) (673) (26) (986) (1,649)
Operating expenses paid (3,349,199) (531,614) (191,207) (263,530) (480,165) Net cash inflow 27,252,966 2,169,300 48,740 1,646,093 3,372,854 from operating activities Cash flows from financing activities Distributions paid to holders of participating (17,939,868) — — (935,027) (335,889) redeemable preference shares issued Proceeds received from issue of participating redeemable 8,229,418 757,668 489,360 732,959 712,314 preference shares Payments on redemption of participating redeemable (20,892,186) (3,248,722) (678,728) (2,039,368) (3,628,996) preference shares Tax (788) — — — — Dilution levies 15,173 — — — — Net cash inflow/ (outflow) (30,588,251) (2,491,054) (189,368) (2,241,436) (3,252,571) from financing activities Net increase/ (decrease) (3,335,285) (321,754) (140,628) (595,343) 120,283 in cash and cash equivalents Cash and cash equivalents 2,431,945 550,762 229,594 721,041 138,496 as at 1st October 2013 Exchange (losses)/gains on 201 (42,304) (3,380) 10 (8,915) cash and cash equivalents Movement in currency — — — — — translation Cash and cash equivalents (903,139) 186,704 85,586 125,708 249,864 as at 30th September 2014
The notes on pages 53 to 77 form an integral part of these financial statements.
23 Lloyds Investment Funds Limited
Cash Flow Statement (continued)
For the year ended 30th September 2013
Company Capital Growth Euro High European Fund Income Fund (Closed 05.07.13) Fund £ £ € £ Cash flows from operating activities Purchases of financial assets and (109,524,328) (6,055,122) (2,963,740) (6,034,483) settlement of financial liabilities Receipts from sale of investments 133,761,461 19,776,890 2,528,988 7,626,357
Investment income received 21,330,591 54,598 632,348 304,854
Other income received 1,081,249 343,192 — —
Bank interest received 11,713 1,817 — 362
Interest paid (1,805) (696) (1) (99)
Operating expenses paid (5,579,888) (265,944) (154,833) (327,847) Net cash inflow 41,078,993 13,854,735 42,762 1,569,144 from operating activities Cash flows from financing activities Distributions paid to holders of participating (20,454,537) (143,557) (592,961) (56,328) redeemable preference shares issued Proceeds received from issue of participating redeemable 20,416,221 332,846 1,226,942 480,239 preference shares Payments on redemption of participating redeemable (41,754,632) (15,327,515) (623,002) (1,576,993) preference shares Tax (960) — (1,147) —
Dilution Levies — — — — Net cash (outflow)/inflow (41,793,908) (15,138,226) 9,832 (1,153,082) from financing activities Net (decrease)/increase (714,915) (1,283,491) 52,594 416,062 in cash and cash equivalents Cash and cash equivalents 5,643,653 1,295,756 368,685 52,851 as at 1st October 2012 Exchange (losses) on (56,354) (12,265) (41) (6,485) cash and cash equivalents Movement in currency 14,944 — — — translation Cash and cash equivalents 4,887,328 — 421,238 462,428 as at 30th September 2013
The notes on pages 53 to 77 form an integral part of these financial statements.
24 Lloyds Investment Funds Limited
Cash Flow Statement (continued)
For the year ended 30th September 2013
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Cash flows from operating activities Purchases of financial assets and (52,554,857) (20,136,166) (7,022,852) (4,678,196) (10,563,123) settlement of financial liabilities Receipts from sale of investments 55,219,230 21,884,687 8,757,784 5,359,844 13,020,863
Investment income received 19,002,433 353,237 71,344 1,270,547 (255,458)
Other income received — — — — 738,057
Bank interest received 8,227 420 35 335 517
Interest paid (159) (319) (225) (89) (217)
Operating expenses paid (3,419,965) (535,618) (186,596) (266,296) (448,105) Net cash inflow 18,254,909 1,566,241 1,619,490 1,686,145 2,492,534 from operating activities Cash flows from financing activities Distributions paid to holders of participating (18,608,935) — — (962,548) (187,085) redeemable preference shares issued Proceeds received from issue of participating redeemable 15,708,223 549,534 332,712 1,357,274 628,906 preference shares Payments on redemption of participating redeemable (15,958,753) (2,093,066) (1,839,748) (1,511,222) (2,926,118) preference shares Tax — — — — —
Dilution Levies — — — — — Net cash (outflow) (18,859,465) (1,543,532) (1,507,036) (1,116,496) (2,484,297) from financing activities Net (decrease)/increase (604,556) 22,709 112,454 569,649 8,237 in cash and cash equivalents Cash and cash equivalents 3,036,979 551,671 129,383 151,394 131,471 as at 1st October 2012 Exchange (losses) on (478) (23,618) (12,243) (2) (1,212) cash and cash equivalents Movement in currency — — — — — translation Cash and cash equivalents 2,431,945 550,762 229,594 721,041 138,496 as at 30th September 2013
The notes on pages 53 to 77 form an integral part of these financial statements.
25 Lloyds Investment Funds Limited
Investment Dealing For the year ended 30th September 2014 During the year transactions representing more than 10% of the aggregate value of the transactions in the property of the Funds were carried out with the following counterparties: Euro High Income Fund Goldman Sachs Royal Bank of Scotland
European Fund Salomon Smith Barney
High Income Fund Deutsche Bank AG J.P. Morgan Lloyds Banking Group
International Fund Salomon Smith Barney
North American Fund Credit Suisse Sanford C. BerNstein & Co
Sterling Bond Fund Citibank London J.P. Morgan Morgan Stanley
UK Fund UBS
26 Lloyds Investment Funds Limited
Investment Portfolios For the year ended 30th September 2014 Euro High Income Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 € € Asia 1.62% (1.71%) Hutchinson Whampoa 3.75% (Perp) 120,000 120,000 122,452 0.86 113,438 Hutchison Whampoa 4.625% 2016 100,000 100,000 108,011 0.76 109,435
Australia and New Zealand 4.83% (4.64%) Australia and New Zealand Capital Trust III FRN 2053 150,000 150,000 149,170 1.04 143,145 Commonwealth Bank of Australia 4.375% 2020 100,000 100,000 119,448 0.84 113,167 National Australia Bank FRN 2023 95,000 95,000 112,779 0.79 111,793 Origin Energy Finance 2.875% 2019 100,000 100,000 108,153 0.76 100,042 Santos Finance FRN 2070 55,000 105,000 118,990 0.83 59,884 Westpac Securities 3.875% 2017 75,000 75,000 81,485 0.57 81,297
Central America 2.40% (3.04%) America Movil 3.259% 2023 100,000 100,000 113,169 0.79 99,489 America Movil 4.75% 2022 50,000 50,000 61,917 0.43 56,335 Pemex Project Funding Master Trust 5.5% 2025 50,000 50,000 62,736 0.44 56,876 Petrobras Global Finance 3.25% 2019 100,000 100,000 105,566 0.74 100,325 Votorantim Cimentos 5.25% 2017 80,000 — — — 85,054
Europe 52.49% (52.68%) ABN Amro Bank 4.125% 2022 130,000 130,000 157,862 1.11 143,372 ABN Amro Bank 6.375% 2021 100,000 100,000 124,133 0.87 111,443 Achmea 6% 2043 FRN 100,000 100,000 113,026 0.79 103,875 Allianz 3.75% PERP — 100,000 98,135 0.69 — Anheuser-Busch InBev 8.625% 2017 60,000 60,000 71,260 0.50 74,696 Arcellormittal 9.375% 2016 100,000 50,000 57,425 0.40 119,050 Assicurazioni Generali 5.125% 2024 70,000 — — — 74,845 Atlantia 5.875% 2024 100,000 — — — 120,098 Banque Federative Credit Mutuel 4.375% 2016 100,000 100,000 106,760 0.75 108,550 BNP Paribas 7.781% (Perp) FRN 100,000 100,000 118,100 0.83 111,050 Bundesrepublic Deutschland 2.75% 2016 — 83,000 86,545 0.61 — Bundesrepublic Deutschland 3.75% 2017 — 123,000 133,619 0.94 — Bundesrepublic Deutschland 3.75% 2019 97,000 200,000 231,604 1.62 111,829 Bundesrepublic Deutschland 6.25% 2024 117,000 517,000 770,337 5.39 166,278 Caixa Bank 5.125% 2016 100,000 100,000 107,587 0.75 107,886 Casino Guichard FRN PERP — 100,000 102,100 0.71 — CHN Industrial 6.25% 2018 — 100,000 112,786 0.79 — Cloverie FRN 2039 100,000 100,000 123,086 0.86 119,869 Deutsche Bank 5.125% 2017 200,000 200,000 226,742 1.59 229,051 Deutsche Telekom Intl Finance 6.625% 2018 63,000 63,000 76,178 0.53 77,031 Deutsche Telekom Intl Finance 7.5% 2033 150,000 150,000 255,278 1.79 221,686 DONG Energy 5.5% FRN 6,559 6,559 6,753 0.05 6,811 EDF 4.5% 2040 100,000 100,000 132,544 0.93 110,398 EDF 4.625% 2030 150,000 150,000 196,130 1.37 168,917 EDF 5.375% (Perp) FRN 100,000 100,000 112,842 0.79 102,469 EDF 6.25% 2021 150,000 150,000 197,728 1.38 189,801 Enel 5.625% 2027 170,000 — — — 178,973 ENI 3.625% 2029 — — — — — E.ON International Finance 5.75% 2020 130,000 130,000 163,939 1.15 161,073 FGA Capital 2.625% 2019 — 100,000 102,668 0.72 — Fiat Industrial Finance Europe 6.25% 2018 100,000 — — — 110,383 Fiat Finance and Trade 6.875% 2015 100,000 100,000 102,000 0.71 105,001 Finmeccanica 5.25% 2022 92,000 — — — 93,196 Gas Natural Capital Markets 6.375% 2019 150,000 150,000 187,802 1.32 175,893 Gaz Capital 6.605% 2018 125,000 — — — 142,188
27 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 Euro High Income Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 € € Europe (continued) GDF Suez 3.875% PERP — 100,000 102,786 0.72 — GDF Suez 5.95% 2111 — 70,000 109,129 0.76 — GDF Suez 6.875% 2019 100,000 — — — 126,516 GE Capital European Funding 6% 2019 50,000 50,000 61,419 0.43 60,102 GE Capital European Funding 6.025% 2038 202,000 202,000 316,779 2.22 267,724 GE Capital Trust 4.625% 2066 FRN — 170,000 177,744 1.24 — Glencore Finance 7.125% 2015 100,000 100,000 103,740 0.73 109,010 Heidelberg Cement 8.5% 2019 70,000 70,000 90,972 0.64 85,827 Iberdrola Finanzas 7.5% 2015 50,000 — — — 56,541 ING Bank 6.125% FRN 2023 75,000 75,000 86,155 0.60 82,238 ING Groep 4.75% 2017 105,000 105,000 116,803 0.82 116,626 Intesa Sanpaolo 4.125% 2016 100,000 — — — 103,151 Intesa Sanpaolo 4.75% 2017 100,000 — — — 104,996 La Poste 2.75% 2024 200,000 200,000 224,813 1.57 200,042 Orange SA 5.625% 2018 50,000 — — — 58,682 Orange SA 8.125% 2033 150,000 150,000 253,808 1.78 224,098 Orange SA GRN Perp — 100,000 104,964 0.73 — Pirelli & Co 5.125% 2016 100,000 — — — 105,430 Repsol International Finance 4.875% 2019 100,000 100,000 116,574 0.82 109,785 Rhodia 7% 2018 50,000 — — — 53,598 RWE Finance 6.5% 2021 250,000 250,000 335,455 2.35 319,487 Siemens FRN 2066 115,000 115,000 124,156 0.87 123,266 Telecom Italia 8.25% 2016 152,000 — — — 169,010 Telefonica Europe 5.875% 2033 48,000 48,000 66,710 0.47 52,012 Unitymedia Hessen 8.125% 2017 100,000 100,000 111,563 0.78 105,150 Vattenfall 6.25% 2021 120,000 120,000 157,620 1.10 152,588 Veolia Environment 6.125% 2033 175,000 175,000 260,800 1.83 215,452 Volkswagon 5.375% 2018 50,000 50,000 52,781 0.37 58,713 Volkswagon FRN Perp — 130,000 139,350 0.98 — Wind Acquisition Finance 7.375% 2018 100,000 — — — 104,135 Xstrata Finance Dubai 2.625% 2018 100,000 100,000 105,884 0.74 100,043 Ziggo Finance 6.125% 2017 85,000 — — — 87,125
United Kingdom 19.56% (20.80%) Aviva FRN 2038 50,000 50,000 57,822 0.40 54,921 Aviva FRN (Perp) 110,000 110,000 113,068 0.79 113,231 Barclays Bank 6% 2018 70,000 70,000 80,331 0.56 78,125 BG Energy Capital 6.5% FRN 2072 100,000 100,000 112,351 0.79 110,047 British American Tobacco 2.375% 2023 100,000 100,000 107,183 0.75 98,112 British Telecom 6.5% 2015 60,000 60,000 62,847 0.44 66,003 Clerical Medical Finance 4.25% FRN (Perp) 150,000 150,000 151,125 1.06 145,500 Global Switch 5.5% 2018 100,000 100,000 115,763 0.81 112,827 HBOS 4.375% FRN 2019 160,000 160,000 160,620 1.12 154,800 Heathrow Funding 4.6% 2020 175,000 175,000 197,599 1.38 196,440 HSBC 6% 2019 200,000 200,000 242,162 1.70 230,781 Imperial Tobacco 8.375% 2016 107,000 107,000 118,481 0.83 124,870 National Grid 5% 2018 175,000 175,000 203,312 1.42 202,963 Nationwide 6.75% 2020 150,000 150,000 186,658 1.31 170,465 NGG Finance 4.25% FRN 2076 100,000 100,000 106,346 0.74 98,598 Royal Bank of Scotland 5.375% 2019 150,000 150,000 180,458 1.26 173,825 Royal Bank of Scotland 6.934% 2018 180,000 180,000 206,838 1.45 196,621 Scottish and Southern Energy 5.025% FRN (Perp) 100,000 100,000 103,099 0.72 103,453 Standard Chartered 5.875% 2017 100,000 100,000 113,690 0.80 112,091 Standard Life 5.314% FRN (Perp) 60,000 60,000 60,450 0.42 60,482 Vodafone 6.25% 2016 108,000 108,000 116,201 0.81 121,268
28 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 Euro High Income Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 € € United States 11.59% (13.49%) American International 6.797% 2017 100,000 100,000 118,075 0.83 118,292 Bank of America 4.75% 2017 50,000 50,000 55,252 0.39 55,327 Bank of America 7% 2016 100,000 100,000 111,227 0.78 115,137 Bank of America 1.061% FRN 2018 150,000 150,000 148,457 1.04 142,527 Citigroup 7.375% 2019 150,000 150,000 196,369 1.38 191,777 DIRECTV Holdings 2.75% 2023 — 100,000 107,755 0.75 — GE Capital Funding 4.625% 2066 170,000 — — — 169,652 Goldman Sachs 4.5% 2016 150,000 150,000 159,975 1.12 162,029 Goldman Sachs 4.5% 2017 100,000 — — — 109,289 JP Morgan Chase 2.75% 2022 120,000 120,000 131,719 0.92 121,038 Lehman Brothers Holdings FRN 2019 150,000 150,000 765 0.01 15 MetLife Global Funding 2.375% 2019 100,000 100,000 107,786 0.75 102,315 Morgan Stanley 5.375% 2020 300,000 300,000 369,450 2.59 347,278 National Capital Instruments FRN (Perp) 150,000 150,000 146,411 1.03 132,948
Total Value of Investments 13,208,495 92.49 12,620,386 Other Assets 1,233,028 8.63 685,726 Total Assets 14,441,523 101.12 13,306,112 Liabilities (160,507) (1.12) (210,751) Total Net Assets 14,281,016 100.00 13,095,361
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased €2,468,125 €2,864,342 Proceeds from investments sold €2,497,917 €2,528,988
29 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 European Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Austria 3.47% (3.80%) Andritz 10,316 — — — 371,781 OMV 8,299 — — — 252,524 Vienna Insurance Group — 17,600 491,925 3.47 —
Denmark 4.26% (0%) Novo Nordisk — 20,500 605,049 4.26 —
Finland 0% (2.81%) Sampo 17,382 — — — 461,438
France 17.20% (23.73%) Air Liquide — 2,900 218,232 1.54 — Arkema 6,293 — — — 431,978 AXA 25,108 — — — 361,173 BNP Paribas 14,241 — — — 594,867 Bureau Veritas International 12,512 — — — 240,360 Casino Guichard-Perrachon — 6,900 458,512 3.23 — Dassault Systèmes — 9,000 356,641 2.51 — Essilor International 2,988 4,600 311,733 2.20 198,293 GDF SUEZ — 18,600 287,801 2.03 — Kering 3,661 — — — 502,307 L'Oréal — 3,700 362,475 2.55 — Publicis Groupe 8,913 — — — 437,402 Safran 10,907 — — — 412,402 Schneider Electric 6,628 9,400 445,298 3.14 347,253 SCOR 18,515 — — — 373,240
Germany 11.53% (18.54%) Bayer 9,687 — — — 707,250 BMW 6,362 — — — 423,100 Continental 4,453 — — — 468,809 Fresenius Medical Care 8,453 — — — 339,716 Fuchs Petrolub — 10,300 242,783 1.71 — Hugo Boss 5,117 — — — 404,674 KION Group — 8,500 195,387 1.38 — LEG Immobilien 8,550 — — — 301,342 Linde — 4,900 577,962 4.07 — MTU Aero Engines — 11,800 619,749 4.37 — SAP 8,831 — — — 404,451
Ireland 0% (2.84%) Glanbia 39,323 — — — 318,067 Ryanair Holdings 4,800 — — — 149,870
Italy 2.97% (4.06%) Eni 22,572 28,700 421,885 2.97 318,186 Prysmian 23,051 — — — 348,630
30 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 European Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Netherlands 11.30% (6.97%) DSM Koninklijke 9,098 — — — 424,586 Furgo — 19,500 364,101 2.56 — ING Groep 54,895 — — — 382,006 Randstad Holdings 9,877 — — — 339,660 Royal Dutch Shell — 15,700 370,923 2.61 — Unilever — 20,600 506,071 3.56 — Vopak — 10,968 365,016 2.57 —
Norway 4.49% (2.83%) DNB ASA 48,682 — — — 464,637 Kongsberg Gruppen — 45,000 637,473 4.49 —
Spain 2.52% (2.19%) Amadeus IT Holdings 16,620 15,500 357,562 2.52 360,731
Sweden 16.39% (6.40%) Assa Abloy — 12,300 392,231 2.76 — Atlas Copco — 34,400 551,503 3.88 — Ericsson — 42,600 333,828 2.35 — Hexagon 18,426 — — — 344,446 Nordea Bank — 54,600 438,844 3.09 — Swedbank — 10,600 307,996 2.17 — Swedish Match 14,217 15,200 304,431 2.14 310,699 Volvo 42,787 — — — 395,796
Switzerland 24.47% (23.26%) Givaudan — 230 226,808 1.60 — Holcim — 8,800 395,830 2.79 — Julius Baer Group 17,792 — — — 510,863 Nestle 'R' 12,648 11,700 530,428 3.74 546,604 Novartis ‘R’ — 5,700 331,825 2.34 — Roche Holdings 5,848 3,500 639,558 4.51 968,935 Schindler — 5,200 435,236 3.07 — Syngenta 1,787 1,787 351,170 2.47 446,139 The Swatch Group 1,413 1,100 322,437 2.27 558,958 UBS 'R' 35,277 — — — 446,511 Zurich Insurance Group 2,179 1,300 238,977 1.68 345,684
Total Value of Investments 13,997,680 98.60 16,015,368 Other Assets 272,998 1.92 471,431 Total Assets 14,270,678 100.52 16,486,799 Liabilities (74,151) (0.52) (48,552) Total Net Assets 14,196,527 100.00 16,438,247
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased £ 15,195,782 £6,034,482 Proceeds from investments sold £16,657,991 £7,453,491
31 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 High Income Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ UK Government 3.95% (2.69%) Treasury 1.75% 2022 2,686,000 209,000 202,205 0.06 2,522,374 Treasury 4% 2016 1,440,000 — — — 1,575,101 Treasury 4.5% 2019 777,000 9,838,000 11,037,036 3.49 892,478 Treasury 4.5% 2042 1,234,000 514,000 657,935 0.21 1,466,140 Treasury 5% 2018 — 550,000 616,446 0.19 — Treasury 6% 2028 1,645,000 — — — 2,227,659
UK Corporate 61.24% (59.23%) AA Bond 9.5% 2043 800,000 800,000 878,000 0.28 856,000 Anglian Water Services Financing 4.5% 2026 1,000,000 1,000,000 1,034,300 0.33 985,570 Anglian Water Osprey Financing 7% 2018 600,000 600,000 649,411 0.21 647,562 Anglian Water Group 12.375% 2014 1,000,000 — — — 1,027,780 Annington Finance No 4 8.07% 2023 1,500,000 1,500,000 1,942,811 0.61 1,855,106 Annington Finance No 4 2023 FRN 2,000,000 2,000,000 2,056,620 0.65 2,131,484 Arkle Master Issuer 4.681% 2060 1,200,000 1,200,000 1,274,711 0.40 1,315,477 Aspire Defence Finance 4.674% 2040 1,643,000 1,643,000 1,754,126 0.55 1,661,254 Autolink Concessionaires M6 2022 FRN 1,500,000 1,500,000 1,227,319 0.39 1,344,685 Aviva (Perp) FRN 1,200,000 1,200,000 1,243,250 0.39 1,168,500 Aviva 2041 FRN 600,000 1,000,000 1,042,617 0.33 648,735 BAE Systems 10.75% 2014 1,600,000 600,000 667,154 0.21 1,764,088 Barclays Bank 5.75% 2026 1,750,000 1,600,000 1,628,000 0.51 1,853,178 Barclays Bank 9.5% 2021 1,697,000 1,750,000 1,932,203 0.61 2,154,440 Barclays Bank 10% 2021 2,673,000 1,697,000 2,202,365 0.70 3,474,258 Barclays Bank 2049 FRN (Perp) 500,000 3,360,000 4,426,800 1.40 668,000 BG Energy Capital 5.125% 2025 1,340,000 500,000 647,917 0.20 1,481,980 BG Energy Capital 2072 FRN 2,500,000 264,000 300,179 0.09 2,700,000 BL Superstores 5.27% 2030 750,000 3,617,000 3,921,580 1.24 813,689 British American Tobacco 6% 2022 700,000 750,000 780,804 0.25 836,175 British American Tobacco 6.375% 2019 2,040,000 700,000 833,667 0.26 2,469,455 British Telecommunications 6.375% 2037 2,306,000 2,040,000 2,410,950 0.76 2,838,785 British Telecommunications 6.625% 2017 2,750,000 2,306,000 2,971,447 0.94 3,185,061 Broadgate Financing 4.821% 2036 1,340,000 — — — 1,441,005 Canary Wharf II 6.455% 2030 1,380,000 1,340,000 1,527,561 0.48 1,390,180 Centrica 6.375% 2022 2,500,000 1,380,000 508,669 0.16 3,024,520 Centrica 7% 2018 2,400,000 2,500,000 3,003,445 0.95 2,907,583 City of Greenwich & Lewisham Rail Link 9.375% 2020 600,000 2,400,000 2,823,206 0.89 385,492 Close Brothers 6.5% 2017 900,000 600,000 360,170 0.11 956,184 Clydesdale Bank 4.625% 2026 2,050,000 900,000 984,152 0.31 2,203,166 Co-Operative Group 5.625% 2020 — 2,050,000 2,323,640 0.73 — Delamare Finance 5.5457% 2029 1,690,000 2,300,000 2,501,250 0.79 1,865,792 Dignity Finance 8.151% 2031 1,400,000 — — — 1,900,636 Dwr Cymru Finance 6.907% 2021 1,900,000 1,400,000 2,089,006 0.66 2,348,961 Eastern Power Networks 8.5% 2025 1,500,000 1,900,000 2,343,211 0.74 2,096,517 Electricity North Western 8.785% 2026 1,452,000 3,530,000 4,992,758 1.58 2,115,433 First Hydro 9% 2021 1,550,000 1,903,000 2,053,716 0.65 2,035,228 Friends Life Group 8.25% 2022 1,300,000 1,550,000 2,067,034 0.65 1,410,708 Gatwick Funding Limited 2028 FRN — 1,300,000 1,488,395 0.47 — GHQB LTD 12.625%2015 — 1,550,000 1,637,581 0.52 — GlaxoSmithKline Capital 6.375% 2039 957,000 957,000 1,314,212 0.42 1,255,888 Great Rolling Stock 6.25% 2031 1,000,000 1,000,000 1,217,004 0.38 1,200,946 HBOS (Perp) FRN 1,940,000 1,940,000 2,212,939 0.70 1,944,637 HBOS 12% (Perp) 2,000,000 2,000,000 2,496,140 — 2,356,400 HBOS 13.625% (Perp) 300,000 — — 0.79 457,110 HBOS (Perp) FRN 449,000 — — — 452,206
32 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 High Income Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ UK Corporate (continued) Heathrow Funding 4.625% 2048 — 2,650,000 2,778,395 0.88 — Heathrow Funding 5.225% 2025 2,932,000 — — — 3,252,383 Heathrow Funding 5.875% 2043 1,000,000 — — — 1,180,575 Heathrow Funding 6.45% 2033 1,000,000 1,000,000 1,290,421 0.41 1,237,449 Heathrow Funding 6.75% 2028 900,000 900,000 1,157,653 0.37 1,140,721 Housing Association Funding 8.25% 2027 1,500,000 1,500,000 1,419,398 0.45 1,468,707 HSBC Bank G/R 2023 — 3,000,000 3,185,118 1.01 — HSBC Bank 4.75% 2020 FRN 400,000 — — — 417,093 HSBC Holdings 6% 2040 3,550,000 3,550,000 4,114,446 1.30 3,958,381 HSBC Holdings 6.5% 2024 1,650,000 1,100,000 1,377,834 0.44 2,021,790 Hutchison Whampoa Finance UK 5.625% 2017 1,850,000 1,850,000 2,046,211 0.65 2,093,588 Imperial Tobacco 8.125% 2024 850,000 850,000 1,131,372 0.36 1,115,232 Imperial Tobacco 9% 2022 1,200,000 1,200,000 1,613,034 0.51 1,624,376 Integrated Accommodation Service 6.48% 2029 1,951,000 1,951,000 1,870,748 0.59 1,908,499 InterContinental Hotels 3.875% 2022 2,109,000 — — — 2,119,509 Intu Metrocentre 4.125% 2028 — 760,000 786,257 0.25 — Jaguar Land Rover Automotive 5% 2022 — 1,500,000 1,511,250 0.48 — Jaguar Land Rover Automotive 8.125% 2018 1,000,000 — — — 1,089,000 Juturna 5.0636% 2033 — 1,452,000 2,132,901 0.67 — Land Securities FRN 2026 467,000 467,000 550,597 0.17 534,199 Lloyds Banking Group 2020 FRN 2,757,000 — — — 2,867,280 Lloyds Banking Group 7.5% 2024 458,000 — — — 590,254 Lloyds Banking Group 9.625% 2023 2,300,000 2,300,000 3,121,744 0.99 3,023,465 Lloyds Banking Group 2021 FRN 1,014,000 — — — 1,210,463 Lloyds Banking Group 2049 FRN (Perp) 692,000 692,000 994,750 0.31 954,960 Marstons Issuer 2035 FRN 2,712,000 2,712,000 2,576,400 0.81 2,318,760 Manchester Airport 4.125% 2024 — 1,000,000 1,041,994 0.33 — Manchester Airport 4.75% 2034 — 2,030,000 2,198,535 0.70 — Motability Operations Group 3.75% 2026 — 1,000,000 1,029,577 0.33 — Motability Operations Group 6.625% 2019 1,500,000 1,500,000 1,795,716 0.57 1,836,989 National Grid Electricity Transmission 6.5% 2028 2,600,000 2,600,000 3,365,817 1.06 3,270,756 National Grid Gas 8.75% 2025 1,380,000 1,380,000 2,020,898 0.64 2,011,347 National Westminster Bank 6.5% 2021 1,180,000 — — — 1,245,149 National Westminster Bank (Perp) FRN 1,650,000 1,650,000 1,634,325 0.52 1,278,750 Nationwide Building Society 5.625% 2019 1,450,000 1,450,000 1,652,336 0.52 1,659,695 NIE Finance 6.375% 2026 — 1,000,000 1,242,277 0.39 — NGG Finance 2073 FRN 1,590,000 1,590,000 1,662,561 0.53 1,574,100 Northern Powergrid Yorkshire 9.25% 2020 3,032,000 3,032,000 3,934,250 1.24 4,020,083 Northumberland Services 6.875% 2023 2,250,000 2,250,000 2,807,492 0.89 2,805,255 Pennon Group (Perp) FRN 1,800,000 — — — 1,863,000 PICTS 5.218% 2039 1,000,000 1,000,000 987,855 0.31 862,179 Places For People Homes 5.875% 2031 1,500,000 1,500,000 1,759,788 0.56 1,667,340 Porterbrook Rail Finance 5.5% 2019 1,500,000 — — — 1,675,956 Prudential Corporation 2039 FRN 1,420,000 1,420,000 1,879,246 0.59 1,945,864 QBE Capital Funding 2041 FRN 700,000 700,000 784,366 0.25 749,032 Royal Bank of Scotland 6.625% 2018 1,200,000 1,200,000 1,381,752 0.44 1,409,458 RSA Insurance Group 2039 FRN 1,300,000 1,300,000 1,575,928 0.50 1,603,230 Santander UK FRN (Perp) 440,000 440,000 461,769 0.15 407,000 Santander UK 10.0625% (Perp) 3,000,000 3,000,000 3,705,873 1.17 3,405,120 Scottish & Southern Energy 5.875% 2022 1,090,000 — — — 1,293,767 Scottish & Southern Energy (Perp) FRN 1,655,000 1,655,000 1,694,511 0.54 1,701,064 Scottish Power 6.375% (Step) 2041 1,000,000 1,000,000 1,317,790 0.42 1,193,310 Scottish Power 8.375% 2017 900,000 900,000 1,032,099 0.33 1,071,532 Severn Trent 6% 2018 760,000 — — — 871,720
33 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 High Income Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ UK Corporate (continued) Severn Trent 6.25% 2029 1,250,000 1,250,000 1,574,246 0.50 1,535,910 Society of Lloyds (Perp) FRN 1,189,000 1,189,000 1,292,781 0.41 1,257,368 Southern Gas Networks 4.875% 2029 2,850,000 2,850,000 3,180,113 1.01 3,044,125 Southern Water Services 6.125% 2019 1,447,000 1,447,000 1,650,949 0.52 1,676,730 Southern Water Greensands Financing 8.5% 2019 938,000 938,000 1,043,337 0.33 1,020,075 Standard Chartered 7.75% 2018 1,350,000 1,350,000 1,557,780 0.49 1,592,756 Standard Chartered (Perp) FRN 1,500,000 1,500,000 1,616,564 0.51 1,616,250 Standard Chartered (Perp) FRN — 850,000 997,211 0.32 — Standard Life Finance (Perp) FRN 2,140,000 2,140,000 2,383,425 0.75 2,306,903 Streaming SIMD Extensions (SSE) 5% 2018 — 1,500,000 1,657,017 0.52 — Streaming SIMD Extensions (SSE) 6.125% 2038 — 1,020,000 1,326,608 0.42 — Telereal Securitisation 4.9741% 2033 854,000 — — — 783,728 Telereal Securitisation 5.3887% 2033 13,000 13,000 11,627 0.00 11,969 Telereal Securitisation 6.1645% 2031 1,130,000 1,130,000 1,302,769 0.41 1,275,054 Tesco 6.125% 2022 2,400,000 2,400,000 2,633,770 0.83 2,797,363 Tesco Property 6.0517% 2039 1,150,000 1,150,000 1,198,227 0.38 1,238,633 Tesco Property Finance 2039 263,000 263,000 315,412 0.10 326,183 Thames Water Kemble Finance 7.75% 2019 1,800,000 1,800,000 1,959,170 0.62 1,957,320 Thames Water Utilities Finance 5.125% 2037 1,986,000 1,986,000 2,228,437 0.70 2,160,941 Thames Water Utilities (Cayman) Finance 2025 FRN 2,600,000 2,600,000 2,775,669 0.88 2,838,368 The Housing Finance Corporation Funding No.2 6.35% 2041 1,080,000 1,080,000 1,490,657 0.47 1,363,375 UBS AG (London Branch) 6.625% 2018 2,010,000 2,010,000 2,314,847 0.73 2,379,719 UBS AG (Jersey) 8.75% 2025 2,724,000 2,724,000 3,899,793 1.23 3,692,848 Virgin Media Secured Finance 7% 2018 1,160,000 — — — 1,209,300 Vodaphone Group 8.125% 2018 1,000,000 1,000,000 1,224,110 0.39 1,269,412 Wales & West Financial 5.125% 2016 1,450,000 — — — 1,598,690 Western Power Distribution West Mildlands 5.75% 2032 1,300,000 1,300,000 1,564,869 0.49 1,498,944 WM Morrisons Supermarket 4.75% 2029 — 500,000 496,466 0.16 — WW Grainger PLC 5% 2020 — 750,000 772,463 0.24 — Yorkshire Water Services Odsal Finance 6.5876% 2023 842,000 842,000 1,035,939 0.33 1,030,430 Zurich Finance UK (Perp) FRN 1,600,000 1,600,000 1,820,000 0.58 1,735,616
Overseas Borrowers 32.77% (35.46%) Aegon 6.125% 2031 1,102,000 1,102,000 1,379,058 0.44 1,269,030 America Movil SAB 2073 FRN 2,500,000 3,240,000 3,465,789 1.10 2,478,125 Anheuser Busch 9.75% 2024 1,000,000 1,000,000 1,508,523 0.48 1,532,350 AIG SunAmerica Institutional Funding 5% 2018 2,554,000 — — — 2,854,621 AIG SunAmerica Institutional Funding 5.375% 2016 2,504,000 2,504,000 2,685,107 0.85 2,756,558 AT&T 4.25% 2043 — 2,277,000 2,195,943 0.69 — AT&T 7% 2040 1,550,000 — — — 2,014,419 Australia & New Zealand Banking Group 2018 FRN 1,710,000 — — — 1,716,977 AXA 7.125% 2020 1,100,000 1,100,000 1,302,089 0.41 1,298,015 AXA (Perp) FRN 2,492,000 2,492,000 2,596,041 0.82 2,536,420 AXA (Perp) FRN 1,030,000 1,030,000 1,116,254 0.35 1,017,640 Bank of America 7% 2028 2,700,000 2,700,000 3,585,743 1.13 3,428,833 Bank of America Merrill Lynch 7.75% 2018 2,350,000 2,350,000 2,766,500 0.87 2,846,891 BNP Paribas (Perp) FRN 1,550,000 500,000 553,750 0.18 1,555,813 BNP Paribas (Perp) FRN — 1,200,000 1,251,900 0.40 — Cie de Saint Gobain 5.625% 2016 1,450,000 1,450,000 1,571,775 0.50 1,596,975 Citigroup 6.8% 2038 2,791,000 2,791,000 3,877,475 1.23 3,660,586
34 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 High Income Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Overseas Borrowers (continued) Citigroup 7.625% 2018 422,000 422,000 496,624 0.16 512,308 Credit Foncier 10.25% 2014 1,115,000 — — — 1,169,560 Deutsche Telekom Intl Finance 7.375% 2019 1,666,000 — — — 2,090,903 DIRECTV Holdings 4.375% 2029 — 2,000,000 2,029,476 0.64 — E.ON International Finance 5.825% 2037 1,100,000 1,100,000 1,348,267 0.43 1,313,123 EDF 5.5% 2041 2,500,000 2,200,000 2,592,339 0.82 2,725,415 EDF 5.875% 2031 1,178,000 1,178,000 1,431,751 0.45 1,341,939 EDF 6% 2014 — 700,000 870,743 0.28 — EDF (Perp) FRN 2,300,000 1,500,000 1,593,375 0.50 2,317,250 EDF 6.125% 2034 50,000 50,000 62,534 0.02 58,689 Enel 6.25% 2019 2,350,000 — — — 2,581,729 Enel 2075 FRN 1,230,000 — — — 1,236,150 European Coal and Steel 6.875% 2019 1,700,000 1,700,000 1,968,495 0.62 2,075,751 Euro Loan Conduit 5.0636% 2033 1,903,000 — — — 1,979,960 FirstGroup 8.75% 2021 1,000,000 1,000,000 1,265,448 0.40 1,238,924 Freshwater Finance 5.182% 2035 858,000 858,000 972,804 0.31 883,062 GDF Suez 6.125% 2021 800,000 800,000 954,234 0.30 960,862 GE Capital UK Funding 5.125% 2023 5,898,000 4,998,000 5,731,417 1.81 6,506,573 GE Capital UK Funding 8% 2039 1,500,000 1,500,000 2,416,893 0.76 2,187,915 General Electric Capital Corp 2066 FRN 309,000 — — — 314,895 General Electric Capital Corp 6.25% 2017 2,514,000 2,514,000 2,850,413 0.90 2,911,883 GHQB 12.625% 2015 500,000 500,000 523,540 0.17 572,990 General Electric Capital Corp 2067 FRN 1,900,000 1,900,000 2,081,258 0.66 1,993,290 Glencore Finance 6.5% 2019 1,050,000 1,050,000 1,199,315 0.38 1,180,704 Goldman Sachs 7.125% 2025 850,000 850,000 1,104,794 0.35 1,074,352 Goldman Sachs 7.25% 2028 1,157,000 1,157,000 1,552,980 0.49 1,486,472 Health Care REIT — 700,000 745,866 0.24 — Highbury Finance 7.017% 2023 1,550,000 1,550,000 1,524,556 0.48 1,568,774 Holcim Finance 8.75% 2017 1,450,000 1,450,000 1,688,492 0.53 1,758,412 Hydro-Quebec 12.625% 2015 1,900,000 1,900,000 1,991,561 0.63 2,192,790 JP Morgan Chase 2017 FRN 1,050,000 — — — 1,001,406 Kingdom of Belgium 9.375% 2020 1,000,000 1,000,000 1,343,166 0.42 1,363,180 Koninklijke KPN 5% 2026 700,000 700,000 747,713 0.24 729,876 Koninklijke KPN 2073 FRN 600,000 — — — 612,000 Lafarge 10% 2017 1,500,000 — — — 1,788,630 MetLife Global Funding 3.5% 2026 1,000,000 — — — 974,875 MetLife 5.25% 2020 1,238,000 1,238,000 1,392,398 0.44 1,392,756 Morgan Stanley 5.75% 2017 950,000 950,000 1,033,135 0.33 1,052,044 Muenchener Rueckversicherungs 2028 FRN 500,000 2,000,000 2,300,708 0.73 592,570 Orange SA 7.25% 2020 550,000 550,000 677,905 0.21 681,799 Orange SA FRN Perp — 725,000 718,613 0.23 — Orange SA 8% 2017 2,000,000 2,000,000 2,363,284 0.75 2,456,296 Orange SA FRN Perp — 2,002,000 2,025,844 0.64 — Petrobras 5.375% 2029 1,500,000 1,500,000 1,418,813 0.45 1,346,250 RWE Finance 6.25% 2030 1,200,000 1,200,000 1,465,588 0.46 1,404,572 RWE Finance 6.5% 2021 700,000 700,000 831,548 0.26 837,202 Santander International Debt 3.16% 2015 1,500,000 — — — 1,513,620 SLM Student Loan 2038 FRN 1,350,000 1,350,000 1,083,375 0.34 1,076,625 Societe Generale (Perp) FRN 3,671,000 3,067,000 3,488,740 1.10 3,902,677 Swiss Reinsurance Co via ELM BV (Perp) FRN 1,850,000 1,850,000 2,014,558 0.64 1,938,800
35 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 High Income Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Overseas Borrowers (continued) Telecom Italia 7.375% 2017 1,750,000 — — — 1,902,658 Telefonica Emisione 5.445% 2029 2,750,000 2,750,000 3,055,327 0.97 2,612,948 Time Warner Cable 5.25% 2042 — 1,104,000 1,243,195 0.39 — Time Warner Cable 5.75% 2031 1,525,000 — — — 1,421,006 United Mexican States 5.625% 2014 — 1,710,000 1,741,351 0.55 — Vattenfall 6.875% 2039 1,976,000 1,976,000 2,796,915 0.88 2,683,108 Wal-Mart Stores 5.25% 2035 2,483,000 2,483,000 3,032,245 0.96 2,880,178
Total Value of Investments 309,861,025 97.96 316,043,000 Other current assets 9,797,136 3.13 10,464,776 Total net assets 319,658,161 101.09 326,507,776 Liabilities (3,443,927) (1.09) (2,009,503) Total Net Assets 316,214,234 100.00 324,498,273
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased £ 62,648,570 £50,710,266 Proceeds from investments sold £76,080,177 £53,362,654
36 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 International Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Australia 0% (1.24%) Treasury Wine Estates 124,112 — — — 316,674
Austria 0% (1.04%) OMV 8,705 — — — 264,878
Brazil 5.74% (0.00%) Banco Bradesco — 74,521 655,274 2.70 — Petroleo Brasileiro — 28,300 260,193 1.07 — Vale — 80,100 479,024 1.97 —
Canada 4.19% (2.06%) Canadian National Railway — 12,200 535,859 2.21 — PotashCorp — 22,500 481,309 1.98 — Suncor Energy 23,487 — — — 526,463
China 1.43% (0.00%) PetroChina — 438,000 346,722 1.43 —
France 1.33% (0.00%) Schneider Electric — 6,800 322,130 1.33 —
Germany 0% (4.49%) Bayer 9,060 — — — 661,473 Fresenius Medical Care 12,103 — — — 486,406
Hong Kong 2.80% (0.00%) AIA Group — 126,800 404,925 1.67 — Swire Pacific — 34,500 274,336 1.13 —
India 0% (1.08%) ICICI Bank 14,320 — — — 275,357
Ireland 0% (2.25%) Ryanair Holdings 18,369 — — — 573,534
Italy 1.90% (0.00%) ENI — 31,316 460,339 1.90 —
Japan 7.34% (11.45%) Daito Trust Construction — 3,800 276,722 1.14 — FANUC — 3,700 411,858 1.70 — Japan Tobacco 20,300 18,200 364,907 1.50 452,466 Kansai Paint 31,000 — — — 255,213 Mitsubishi Estate 25,000 — — — 457,319 ORIX 70,800 — — — 714,044 Shin-Etsu Chemical — 18,100 728,246 3.00 — Sumitomo Mitsui Financial Group 12,900 — — — 387,041 Toyota Motor 16,700 — — — 662,087
Luxembourg 3.18% (0.00%) Tenaris — 27,500 772,422 3.18 —
Mexico 2.10% (0.00%) Fomento Economico Mexicano — 9,000 510,832 2.10 —
37 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 International Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Netherlands 0% (2.94%) ING Groep 45,673 — — — 317,831 Randstad 12,641 — — — 434,711
Singapore 1.00% (0%) City Developments — 52,000 242,086 1.00 —
South Africa 1.61% (0%) MTN Group — 30,100 391,349 1.61 —
South Korea 2.17% (0%) Samsung — 1,000 525,510 2.17 —
Spain 1.65% (1.59%) Amadeus IT Holding 18,676 — — — 405,355
Sweden 5.15% (1.93%) Atlas Copco — 29,200 517,361 2.13 — Ericsson — 48,500 380,062 1.57 — Nordea Bank — 43,700 351,236 1.45 — Volvo 53,441 — — — 494,350
Switzerland 11.83% (9.52%) Nestle ‘R’ — 11,000 498,693 2.05 — Novartis ‘R’ — 12,800 745,152 3.07 — Pentair 13,794 — — — 559,255 Roche Holdings 5,002 5,700 1,041,566 4.29 828,764 Swatch Group 1,029 — — — 407,055 UBS 'R' 50,526 — — — 639,522 Zurich Insurance Group — 3,200 588,250 2.42 —
Taiwan 3.06% (0%) Taiwan Semiconductor Manufacturing — 59,800 743,650 3.06 —
United Kingdom 15.67% (10.48%) BAE Systems 134,106 — — — 615,681 BNP Billiton — 27,000 462,983 1.91 — British American Tabacco — 20,600 717,395 2.96 — BT Group 217,875 — — — 750,579 Centrica — 115,900 356,682 1.47 — HSBC — 81,600 510,857 2.10 — ITV 377,506 — — — 654,218 Johnson Matthey 9,490 — — — 265,720 Rolls-Royce Holdings — 23,600 227,681 0.94 — Royal Dutch Shell — 30,100 733,462 3.02 — Standard Chartered — 47,714 544,059 2.24 — Travis Perkins 24,128 — — — 391,115 Vodafone Group — 122,688 250,750 1.03 —
38 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 International Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ United States 28.74% (48.25%) American Express 15,661 — — — 735,363 American International Group 20,922 — — — 636,284 Ansys 8,038 — — — 430,255 Ashland 8,979 — — — 507,632 Baxter International — 10,200 451,407 1.86 — Beacon Roofing Supply 24,640 — — — 564,501 Chevron — 4,900 360,635 1.49 — Citigroup 16,187 — — — 489,677 Comcast — 12,200 404,835 1.67 — Cooper Companies 9,734 — — — 786,286 CVS Healthcare — 15,300 751,197 3.10 — Danaher 11,551 — — — 499,485 EOG Resources — 9,400 574,240 2.37 — F5 Networks 4,569 — — — 245,331 Google 1,643 — — — 890,787 Halliburton 12,960 — — — 387,966 Harley-Davidson 12,546 — — — 501,824 Hexcel 31,776 — — — 763,033 Johnson & Johnson — 11,400 749,721 3.09 — Keycorp 104,019 — — — 730,669 LKQ 30,073 — — — 587,203 Marathon Petroleum 8,848 — — — 355,607 McKesson 10,299 — — — 824,022 Mead Johnson Nutrition 7,519 25,000 590,553 2.43 350,030 Oracle — 10,900 626,003 2.58 — Pepsico — 14,300 736,589 3.03 — Philip Morris International — 4,700 374,052 1.54 — Praxair — 10,000 627,425 2.59 — Rayonier 13,264 — — — 457,977 Solarwinds 16,630 — — — 367,840 Solera Holdings 9,725 — — — 319,284 Teredata 17,946 — — — 627,521 Tripadvisor 5,774 — — — 270,976 United Technologies — 7,200 468,978 1.93 — Visa — 2,000 263,282 1.08 —
Total Value of Investments 24,092,799 99.26 25,126,664 Other Assets 236,161 0.97 576,248 Total Assets 24,328,960 100.23 25,702,912 Liabilities (58,800) (0.23) (142,125) Total Net Assets 24,270,160 100.00 25,560,787
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased £ 30,937,554 £20,051,395 Proceeds from investments sold £33,343,758 £21,779,233
39 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 North American Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Chemicals 5.88% (18.57%) Ashland 3,190 — — — 180,348 Clean Harbors 2,912 — — — 103,681 Core Laboratories 1,703 — — — 178,458 Ecolab 3,064 — — — 186,025 International Flavors & Fragrances — 2,300 136,044 1.46 — Marathon Petroleum 3,251 — — — 130,660 McKesson 4,489 — — — 359,164 Pentair 7,051 — — — 285,871 Perrigo 2,134 — — — 163,306 PotashCorp — 8,520 181,710 1.95 — Praxair — 2,900 230,798 2.47 —
Consumer Goods 40.37% (18.47%) BorgWarner — 5,400 175,259 1.88 — Canadian National Railway — 5,000 218,827 2.35 — Costco Wholesale — 3,500 270,572 2.90 — CVS Healthcare — 6,100 299,497 3.21 — Deere & Company — 2,600 131,471 1.41 — Emerson Electric — 5,800 223,911 2.40 — General Motors 6,786 — — — 152,704 Gilead Sciences — 3,100 203,566 2.18 — Harley Davidson 6,114 4,100 269,637 2.89 244,552 Johnson & Johnson — 6,500 226,156 2.42 — Kraft Foods Group 7,840 — — — 256,530 Lorillard 2,400 — — — 67,182 Macy's Inc 6,889 — — — 185,506 Mead Johnson Nutrition 2,729 2,600 180,468 1.93 127,043 O'Reilly Automotive 2,714 — — — 212,881 Penske Automotive 9,249 — — — 241,729 Pepsico — 3,400 195,267 2.09 — Pfizer — 13,100 238,986 2.56 — Philip Morris International — 4,800 247,247 2.65 — PVH Corporation — 2,300 171,782 1.84 — Target — 6,100 235,869 2.53 — TJX Companies — 7,000 255,513 2.74 — United Technologies — 3,400 221,462 2.37 — WhiteWave Foods 7,249 — — — 89,951
Energy 10.96% (4.58%) Apache Corporation — 3,200 185,301 1.99 — Chevron — 3,000 220,797 2.37 — ConocoPhillips — 3,700 174,701 1.87 — EOG Resources — 2,000 122,179 1.31 — Exxon Mobil 1,850 — — — 99,473 Halliburton 6,780 — — — 202,964 National Oilwell Varco — 4,000 187,756 2.01 — Schlumberger — 2,100 131,759 1.41 — Suncor Energy 3,993 — — — 89,503
40 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 North American Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Financials 14.91% (17.70%) American Express 5,269 3,600 194,384 2.08 247,406 American International 9,517 — — — 289,433 Aon 2,386 — — — 110,794 Charles Schwab — 8,800 159,509 1.71 — Citigroup 7,870 — — — 238,077 Equifax — 3,200 147,540 1.58 — Intercontinental Exchange — 2,020 243,057 2.62 — Keycorp 43,323 — — — 304,317 Prudential Financial 3,611 — — — 175,209 Royal Bank of Canada — 5,300 234,166 2.51 — Suntrust Banks 7,321 — — — 147,707 Visa — 1,500 197,462 2.12 — Wells Fargo — 6,700 214,393 2.30 —
Information Technology 14.29% (13.54%) Ansys 2,507 — — — 134,194 Cisco Systems — 6,300 97,872 1.05 — Cognizant Technology Solutions — 7,100 196,097 2.10 — EMC — 13,400 241,897 2.60 — F5 Networks 1,867 — — — 100,248 Google 870 — — — 471,689 Oracle — 9,100 214,961 2.30 — Qualcomm — 4,900 226,011 2.42 — Solarwinds 6,677 — — — 147,689 Solera Holdings 3,410 4,600 159,893 1.71 111,767 TELUS — 9,300 196,477 2.11 — Teradata 5,476 — — — 191,480
Services 12.88% (24.85%) Aetna — 3,800 189,877 2.04 — Aflac — 2,200 79,056 0.85 — Alliance Data Systems — 800 122,538 1.31 — Baxter International — 6,010 265,976 2.86 — Beacon Roofing Supply 8,458 — — — 193,772 Comcast — 7,400 245,556 2.63 — Cooper Cosmetics 2,677 — — — 216,241 Danaher 1,869 — — — 80,819 Delta Airlines 9,593 — — — 139,935 Hexcel 11,812 — — — 283,640 LKQ 13,921 — — — 271,820 Masco 939 — — — 12,268 Quest Diagnostics — 3,300 123,540 1.32 — Rayonier 5,047 — — — 174,262 Rock Tenn 2,805 — — — 181,046 Starwood Hotels & Resorts Worldwide — 3,400 174,525 1.87 —
41 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 North American Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Services (continued) Thermo Fischer Scientific 2,129 — — — 122,538 Tripadvisor 2,002 — — — 93,954 UnitedHealth Group 5,721 — — — 254,892 WW Grainger 610 — — — 99,598
Total Value of Investments 9,261,322 99.28 8,352,326 Other Assets 99,789 1.07 242,398 Total Assets 9,361,111 100.35 8,594,724 Liabilities (32,644) (0.35) (46,922) Total Net Assets 9,328,467 100.00 8,547,802
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased £ 11,488,478 £7,014,941
Proceeds from investments sold £11,666,124 £8,505,703
42 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 Sterling Bond Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ UK Government 2.52% (2.24%) Treasury 4% 2016 183,000 — — — 200,169 Treasury 4.25% 2055 64,000 64,000 82,748 0.37 74,887 Treasury 4.75% 2038 113,000 199,000 259,771 1.16 138,582 Treasury 5% 2025 86,000 180,000 222,655 0.99 104,579
UK Corporate 60.10% (56.76%) AA Bond G/R 2043 140,000 140,000 148,233 0.66 144,121 Abbey National 5.25% 2029 137,000 137,000 168,109 0.75 157,695 Amlin FRN 6.5% 2026 150,000 150,000 157,024 0.70 152,625 Annington Finance 8.07% 2023 120,000 120,000 155,425 0.69 148,408 Arqiva FNG — 120,000 123,245 0.55 — Autolink 8.39% 2022 300,000 300,000 245,464 1.09 268,937 Aviva FRN 2058 225,000 225,000 263,058 1.17 239,037 Bank of Scotland 6.375% 2019 125,000 125,000 139,350 0.62 135,240 Bank of Scotland 10.5% 2018 100,000 100,000 122,764 0.55 124,649 Barclays Bank 10% 2021 225,000 225,000 296,438 1.32 292,446 BG Energy Capital 5.125% 2025 120,000 100,000 113,155 0.50 132,715 BG Energy Capital 6.5% 2072 FRN 100,000 220,000 238,526 1.06 108,000 BL Superstores 4.482% 2030 290,000 270,828 296,196 1.32 311,389 BP Capital Markets 4.325% 2018 100,000 — — — 109,740 British American Tobacco 6% 2022 200,000 100,000 119,095 0.53 238,907 British Telecom 6.375% 2037 201,000 201,000 259,003 1.15 247,440 British Telecom 6.625% 2017 50,000 — — — 57,910 BUPA Finance 7.5% 2016 50,000 50,000 54,899 0.24 57,152 Canary Wharf Finance 5.952% 2035 150,000 150,000 173,242 0.77 183,936 Centrica 6.375% 2022 225,000 225,000 270,310 1.21 272,207 Close Brothers 6.5% 2017 100,000 100,000 109,350 0.49 106,243 Clydesdale Bank 4.625% 2026 FRN 100,000 100,000 113,348 0.51 107,472 Coventry Building Society 4.625% 2018 170,000 170,000 185,596 0.83 188,712 Dignity Finance 8.151% 2031 100,000 100,000 149,215 0.67 135,760 Eastern Power Networks 5.75% 2024 250,000 250,000 293,609 1.31 287,746 Everyone Everywhere Finance 4.375% 2019 100,000 100,000 105,434 0.47 103,656 First Group 8.75% 2021 90,000 90,000 113,890 0.51 111,503 Friends Life Group 8.25% 2022 100,000 100,000 114,492 0.51 108,516 G4S 7.75% 2019 50,000 50,000 59,559 0.27 59,866 Gatwick Funding Ltd 6.125% 2026 100,000 100,000 121,743 0.54 117,879 Great Rolling Stock 6.5% 2031 100,000 100,000 121,700 0.54 120,095 Hutchinson Whampoa Finance UK 5.625% 2026 100,000 100,000 118,943 0.53 114,632 Heathrow Funding 6.45% 2033 200,000 200,000 258,084 1.15 247,490 Heathrow Funding 6.75% 2028 150,000 150,000 192,942 0.86 190,120 Heathrow Funding 7.125% 2024 100,000 100,000 123,981 0.55 119,322 HSBC FRN 2023 300,000 300,000 318,512 1.42 320,335 HSBC 6% 2040 — 65,000 75,335 0.34 — HSBC 6.375% FRN 2022 200,000 200,000 220,534 0.98 222,707 HSBC 6.5% 2024 200,000 200,000 250,515 1.12 245,065 HSBC 8.208% FRN (Perp) 120,000 120,000 125,340 0.56 129,841 Imperial Tobacco 8.125% 2024 150,000 150,000 199,654 0.89 196,806 Imperial Tobacco 9% 2022 60,000 200,000 268,839 1.20 81,219 Integrated Accommodation Service 6.48% 2029 225,000 225,000 215,745 0.96 220,099 Inter-Continental Hotels 3.875% 2022 110,000 110,000 112,485 0.50 110,548 Lloyds Banking Group 6% 2029 100,000 100,000 130,972 0.58 124,062 Lloyds Banking Group 6.5% 2040 155,000 155,000 206,478 0.92 192,340 Marks & Spencer 4.75% 2025 112,000 112,000 117,932 0.53 112,773 Meadowhall 4.988% 2037 150,000 150,000 141,559 0.63 138,216
43 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 Sterling Bond Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ UK Corporate (continued) Mitchells FRN 2032 — 150,000 60,000 0.27 — Mitchells & Butler 5.965% 2025 550,000 550,000 310,723 1.39 349,046 Motability 3.75% 2026 — 100,000 102,958 0.46 — Motability 4.375% 2027 100,000 100,000 108,011 0.48 104,097 National Grid Gas 8.75% 2025 100,000 100,000 146,442 0.65 145,750 Nationwide 5.625% 2019 170,000 170,000 193,722 0.86 194,585 NGG Finance FRN 2073 120,000 120,000 125,476 0.56 118,800 Northumbrian Water 5.125% 2042 100,000 100,000 114,043 0.51 108,633 Permanent Master 4.805% 2017 147,000 147,000 157,108 0.70 161,014 Places for People Homes 5.875% 2031 150,000 150,000 175,979 0.78 166,734 Prudential Banking 11.375 2039 FRN 100,000 100,000 132,341 0.59 137,033 QBE Capital Funding 7.5% 2041 FRN 100,000 100,000 112,052 0.50 107,005 RMPA Services 5.337% 2038 180,000 180,000 175,850 0.78 169,486 Rolls-Royce Holdings 3.375% 2026 130,000 — — — 126,380 Royal Bank of Scotland 5.125% 2024 200,000 200,000 235,657 1.05 227,605 Royal Bank of Scotland 6.875% 2025 200,000 200,000 252,506 1.13 243,508 Royal Sun Alliance 8.5% FRN (Perp) 100,000 100,000 101,098 0.45 105,063 Santander UK 7.5% FRN 100,000 100,000 104,948 0.47 92,500 Santander UK 9.625% 2023 FRN 125,000 125,000 152,619 0.68 144,776 Scottish and Southern Energy 5.453% FRN (Perp) 150,000 150,000 153,581 0.68 154,175 Severn Trent 6.25% 2029 170,000 170,000 214,097 0.95 208,884 Society of Lloyds 7.421% FRN (Perp) 114,000 114,000 123,950 0.55 120,555 Southern Electric 5.5% 2032 270,000 270,000 321,099 1.43 311,354 Southern Gas Networks 4.875% 2020 250,000 250,000 276,342 1.23 277,058 Southern Water 5% 2021 180,000 180,000 198,378 0.88 197,193 Sovereign Housing 4.768% 2043 100,000 100,000 115,608 0.52 106,609 Standard Chartered Bank 7.75% FRN (Perp) 100,000 100,000 117,319 0.52 112,516 Standard Life Finance 6.75% FRN (Perp) 220,000 220,000 245,025 1.09 237,158 Telereal Securitisation 6.1645% 2031 150,000 150,000 172,934 0.77 169,255 Tesco 5% 2023 217,000 217,000 221,143 0.99 232,519 Tesco Property Finance 5.8006% 2040 275,000 275,000 289,568 1.29 298,856 United Utilities 5% 2035 120,000 120,000 134,701 0.60 128,589 Wales & West Utilities 5.125% 2016 50,000 — — — 55,127 Western Power Distribution West Midlands 5.75% 2032 150,000 — — — 172,955 Western Power Distribution West Midlands 5.75% 2040 100,000 100,000 123,349 0.55 116,933 Yorkshire Building Society 4.75% 2018 100,000 100,000 109,544 0.49 110,397
Overseas Borrowers 36.34% (37.03%) AIG SunAmerica 5% 2018 201,000 — — — 224,659 AIG SunAmerica 5.375% 2016 112,000 — — — 123,297 America Movil SAB 4.948% 2033 150,000 150,000 164,828 0.73 150,648 AT&T 4.25% 2043 — 125,000 120,550 0.54 — AT&T 5.5% 2027 100,000 100,000 116,202 0.52 110,770 Atlantia Spa 6.25% 2022 — — — — — Axa 6.686% Perp — 225,000 243,842 1.09 — Bank of America 7% 2028 150,000 150,000 199,208 0.89 190,491 Bank of America Merrill Lynch 7.75% 2018 200,000 200,000 235,447 1.05 242,289 BHP Billiton Finance 3.25% 2024 100,000 100,000 98,578 0.44 94,478 Bouygues 5.5% 2026 100,000 — — — 107,223 Citigroup 4.5% 2031 270,000 270,000 268,145 1.20 250,606 Citigroup 6.8% 2038 85,000 85,000 118,089 0.53 111,483 Commonwealth Bank of Australia 3% 2026 175,000 175,000 173,376 0.77 162,365 Deutsche Telekom Intl Finance GRN 2030 115,000 115,000 163,082 0.73 157,313 Direct TV Holdings 5.2% 2033 — 130,000 142,483 0.64 — DONG Energy 4.875% 2032 100,000 100,000 108,974 0.49 101,993 DONG Energy 5.75% 2040 100,000 100,000 122,353 0.55 113,537 EDF 5.5% 2041 100,000 100,000 117,834 0.53 109,017
44 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 Sterling Bond Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Overseas Borrowers (continued) EDF 6% FRN 200,000 200,000 212,450 0.95 201,500 EDF 6.125% 2034 250,000 250,000 312,668 1.39 293,443 ELM FRN (Perp) 150,000 150,000 163,343 0.73 157,200 Enel Societa Per Azioni 5.75% 2040 100,000 — — — 88,460 Enel Societa Per Azioni 6.25% 2019 163,000 — — — 179,073 European Investment Bank 4.5% 2044 — 150,000 186,505 0.83 — General Electric Cap. Corp. 5.875% 2033 140,000 140,000 177,162 0.79 162,588 General Electric Cap. Corp. 6.75% 2018 125,000 — — — 148,145 General Electric Cap. Corp. 8% 2039 210,000 210,000 338,365 1.51 306,308 General Electric Cap. Corp. 2067 6.5% FRN 180,000 317,000 347,241 1.55 188,838 Glencore Finance 6.5% 2019 150,000 150,000 171,331 0.76 168,672 Holcim Finance 8.75% 2017 100,000 — — — 121,270 Iberdrola Finanzas 7.375% 2024 150,000 150,000 192,437 0.86 177,020 ING Groep 6.875% 2023 FRN 126,000 126,000 140,231 0.63 139,189 Koninklijke KPN 5% 2026 100,000 100,000 106,816 0.48 104,268 Linde Finance 8.125% 2068 125,000 125,000 137,718 0.61 141,354 Mellon Capital FRN 2066 — 150,000 157,833 0.70 — MetLife 5.25% 2020 189,000 189,000 212,571 0.95 212,626 National Capital Trust FRN (Perp) 220,000 220,000 231,000 1.03 223,303 Nordea Bank Finland FRN (Perp) 200,000 — — — 204,272 Orange SA 5.25% 2025 315,000 165,000 186,776 0.83 339,978 Orange SA 5.375% 2050 — 150,000 169,262 0.75 — Orange SA FRN Perp — 102,000 103,215 0.46 — Petrobras 5.375% 2029 100,000 100,000 94,588 0.42 89,750 Rabobank Capital FRN (Perp) 156,000 156,000 164,679 0.73 155,727 RWE Finance 5.5% 2022 150,000 150,000 170,778 0.76 169,635 RWE Finance 6.125% 2039 100,000 100,000 124,077 0.55 117,021 Siemens 6.125% FRN 2066 150,000 150,000 159,590 0.71 162,551 SLM Student Loan 5.45% 2038 190,000 190,000 152,475 0.68 151,525 Svenska Handelsbanken 2.75% 2022 150,000 150,000 148,514 0.66 142,607 TDC 5.625% 2023 100,000 — — — 111,538 Telecom Italia 6.375% 2019 50,000 — — — 51,539 Telecom Italia 7.375% 2017 100,000 — — — 108,723 Telefonica Emisiones 5.289% 2022 150,000 150,000 167,121 0.75 150,933 Telefonica Emisiones 5.445% 2029 100,000 100,000 111,103 0.50 95,016 Thames Water Utilties Cayman 4.375% 2034 100,000 100,000 102,783 0.46 99,049 Thames Water Utilties Cayman 5.375% 2025 FRN 140,000 140,000 149,459 0.67 152,835 Time Warner Cable 5.25% 2042 — 110,000 123,869 0.55 — Time Warner Cable 5.75% 2031 150,000 — — — 139,771 UBS AG (Jersey) 5.25% 2021 FRN 150,000 — — — 159,671 UBS AG (London) 6.625% 2018 140,000 140,000 161,233 0.72 165,752 United Mexico Sts 5.625% 2014 — 100,000 101,833 0.45 — Vattenfall 6.875% 2039 194,000 194,000 274,596 1.22 263,423 Volkswagen Financial Services SVS 1.75% 2017 75,000 — — — 74,779
Total value of Investments 22,199,280 98.96 22,195,464 Other assets 607,724 2.71 1,222,317 Total assets 22,807,004 101.67 23,417,781 Liabilities (377,147) (1.67) (304,716) Total Net assets 22,429,857 100.00 23,113,065
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased £ 3,297,878 £4,584,067 Proceeds from investments sold £3,908,422 £5,252,603
45 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 UK Fund
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Basic Resources 4.56% (5.01%) Croda International — 24,900 510,948 2.97 — Melrose Industries 139,153 — — — 408,654 Rio Tinto 20,503 9,000 272,858 1.59 614,782
Consumer Goods 29.63% (25.59%) Associated British Foods — 10,000 267,850 1.56 — AstraZeneca 20,902 10,900 484,151 2.82 672,626 Booker Group 113,635 — — — 150,794 British American Tobacco 16,464 21,500 748,738 4.35 539,114 Burberry Group 19,349 — — — 312,099 Cobham — 188,000 547,362 3.18 — Diageo 28,367 — — — 555,710 Dunelm Group 18,677 — — — 170,988 GKN 79,311 109,000 347,983 2.02 273,623 GlaxoSmithKline 67,409 37,500 530,063 3.08 1,052,592 Persimmon — 32,000 426,720 2.48 — Rolls-Royce Holdings 12,424 76,000 733,211 4.26 137,782 SABMiller 2,166 — — — 68,229 Shire 28,043 — — — 694,906 Sports Direct International 29,573 — — — 208,342 Tesco 105,529 139,000 258,721 1.50 382,859 Unilever — 29,000 749,505 4.36 —
Energy 24.27% (17.9%) BG Group 71,250 53,000 604,068 3.51 842,888 BHP Billiton — 36,000 617,310 3.59 — BP 50,661 80,000 362,744 2.11 221,237 Centrica 28,817 205,000 630,888 3.67 105,384 Drax Group 60,775 — — — 410,231 Indus Gas 52,517 52,517 179,871 1.05 470,027 John Wood Group — 82,500 626,794 3.65 — KSK Power Ventur 123,969 31,668 29,610 0.17 254,136 National Grid 40,800 — — — 300,084 Royal Dutch Shell 'A' 28,289 28,500 672,244 3.91 576,954 Royal Dutch Shell 'B' 21,901 — — — 470,214 Weir Group — 18,000 450,270 2.62 —
Financials 15.59% (20.90%) Aviva 78,264 — — — 310,395 Barclays 302,969 — — — 798,929 Barclays (Nil Paid Rights) 75,742 — — — 59,457 Hammerson 60,294 — — — 304,183 HSBC Holdings 183,390 109,000 682,395 3.97 1,233,114 Intermediate Capital 48,740 — — — 214,456 Prudential 51,228 60,500 832,631 4.84 588,610 Resolution 58,802 — — — 187,284 RSA Insurance Group 218,990 — — — 264,978 Schroders — 10,000 239,050 1.39 — Schroders — 12,500 236,813 1.38 — Standard Chartered Bank — 60,500 689,851 4.01 — Tullett Prebon 86,588 — — — 297,603
46 Lloyds Investment Funds Limited
Investment Portfolios (continued) For the year ended 30th September 2014 UK Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.13 30.09.14 30.09.14 Assets 30.09.13 £ £ Information Technology 0% (1.13%) ARM Holdings 23,235 — — — 231,072
Materials 1.64% (4.76%) Berkeley Group Holdings 14,368 — — — 293,682 Johnson Matthey 13,029 — — — 364,221 Meggitt 56,712 — — — 311,064 Sprix-Sarco Engineering — 10,000 282,650 1.64 —
Services 24.22% (24.39%) Aggreko — 17,000 263,245 1.53 — American Leisure (Suspended) 416,667 416,667 — 0.00 — BAE Systems 141,601 — — — 650,090 BT Group 189,008 — — — 651,133 Compass Group 12,560 56,470 562,865 3.27 106,006 EasyJet 26,279 — — — 330,853 Experian — 57,000 560,453 3.26 — Grainger 134,000 — — — 231,418 IEnergizer 65,446 — — — 210,736 Inchcape — 47,000 302,798 1.76 — IMI 17,443 — — — 251,702 Inmarsat — 51,500 360,886 2.10 — ITV 269,145 — — — 466,428 Northgate 16,488 — — — 71,063 Pearson — 52,000 645,060 3.75 — Reed Elsevier 27,935 — — — 231,162 Sage Group — 171,000 625,005 3.63 — Smith and Nephew 19,255 — — — 147,590 Ultra Electronics — 15,000 265,800 1.55 — Vodafone Group 296,076 143,000 292,263 1.70 643,077 Whitbread 11,522 6,900 286,661 1.67 344,393 William Hill 40,647 — — — 165,880 WPP 37,567 — — — 472,217
Total Value of Investments 17,180,335 99.90 20,327,051 Other Assets 323,926 1.90 1,798,718 Total Assets 17,504,261 101.80 22,125,769 Liabilities (309,517) (1.80) (1,732,458) Total Net Assets 17,194,744 100.00 20,393,311
For the year For the year ended ended 30.09.14 30.09.13 Cost of investments purchased £ 18,289,084 £10,500 ,079 Proceeds from investments sold £21,219,353 £13,020,863
47 Lloyds Investment Funds Limited
Investments Purchased and Sold For the year ended 30th September 2014
This schedule refers to investments both purchased and sold during the year and as a result do not appear on the portfolio listings.
Nominal Nominal Euro High Income North American Fund Allianz FRN Perp 100,000 AvalonBay Communities 2,886 ENI 3.625% 2029 100,000 Dephi Automotive 5,970 Morgan Stanley 2.375% 2021 100,000 Garmin 5,344 UBS AG FRN 2026 100,000 GNC Holdings ‘A’ 5,035 European Fund Google ‘C’ 908 Aryzta 7,312 Mednax 5,610 Delta Lloyd Group 20,704 Middleby 976 Fresenius 4,746 Sterling Bond Fund Henkel Preference 6,031 Atlantia Spa 6.25% 2022 54,000 KBC Group 10,323 Treasury 5% 2018 194,000 Swedbank ‘A’ 19,923 Treasury 4.5% 2019 142,000 High Income Fund UK Fund ENEL FRN 2076 570,000 Compass Group ‘B’ 60,000 Treasury 1.75% 2017 1,519,000 Genel Energy 36,426 Treasury 4.25% 2046 211,000 IMI 14,366 Treasury 5% 2025 1,524,000 IMI ‘B’ 10,333 International Fund Legal & General 312,038 AvalonBay Communities 6,572 Lloyds Banking Group 480,456 Caltex Australia 57,.211 Melrose Industries 117,744 Continental 6,077 Next 6,846 Garmin 7,510 Rolls Royce ‘C’ 1,068,464 Globla Logistic Properties 244,000 Travis Perkins 11,565 Google ‘C’ 1,283 LEG Immobilien 15,926 Lorrilard 17,077 Mednax 12,843 Middleby 3,562 Naver 1,030 Pentair 13,794 Shire 20,596
48 Lloyds Investment Funds Limited
Summary of Material Portfolio Changes For the year ended 30th September 2014 This schedule refers to securities purchased and sold during the year which had a value of greater than 2% of the net asset value of each Fund. The Directors consider that the disclosure of the 20 largest purchases and sales is sufficient to reflect the nature of the operating activity of the Company. Euro High Income Fund Purchases Cost € Sales Proceeds €
Bundesrepublic Deutschland 6.25% 2024 608,214 Enel 5.625% 2027 220,501 Bundesrepublic Deutschland 3.75% 2019 259,331 Gaz Capital 6.605% 2018 138,034 Volkswagon FRN Perp 137,032 Atlantia 5.875% 2024 135,829 Bundesrepublic Deutschland 3.75% 2017 136,994 GDF Suez 6.875% 2019 129,920 Pirelli & Co 5.125% 2016 107,887 Telecom Italia 8.25% 2016 123,517 Casino Guichard FRN PERP 105,988 Intesa Sanpaolo 4.75% 2017 114,724 DIRECTV Holdings 2.75% 2023 104,054 Goldman Sachs 4.5% 2017 109,727 Unitymedia Hessen 8.125% 2017 100,000 ENI 3.625% 2029 109,703 Allianze FRN Prep 99,741 Intesa Sanpaolo 4.125% 2016 109,671 Morgan Stanley 2.375% 2021 99,618 Pirelli & Co 5.125% 2016 107,760 FGA Capital 2.625% 2019 99,502 Pirelli & Co 5.125% 2016 107,693 UBS FRN 2026 99,407 Wind Acquisition Finance 7.375% 2018 105,625 ENI 3.625% 2029 99,374 UBS FRN 2026 103,910 Orange SA GRN Perp 99,052 Morgan Stanley 2.375% 2021 100,136 GDF Suez 3.875% Perp 98,986 Finmeccanica 5.25% 2022 98,870 GDF Suez 5.95% 2111 98,660 Votorantim Cimentos 5.25% 2017 90,739 Bundesrepublic Deutschland 2.75% 2016 89,607 Ziggo Finance 6.125% 2017 87,604 Santos Finance FRN 2070 58,131 Assicurazioni Generali 5.125% 2024 86,095 Volkswagon 5.375% 2018 52,547 Bundesrepublic Deutschland 3.75% 2019 77,509 Arcellormittal 9.375% 2016 62,645
European Fund Purchases Cost £ Sales Proceeds £ Schindler 648,061 Continental 606,782 Furgo 642,174 Bayer 582,716 MTU Aero Engines AG 641,288 Sampo 517,439 Kongsberg Gruppen 630,772 BNP Paribas 509,480 Casino Guichard-Perrachon 607,204 UBS 'R' 462,468 Novo Nordisk 606,097 ING Groep 451,788 Atlas Copco 544,637 Glanbia 449,401 Unilever 535,534 Safran 417,454 Assa Abloy 464,379 Fresenius 414,814 Nordea Bank 462,530 Henkel Preference 408,387 Holcim 450,430 Roche Holdings 407,715 Vienna Insurance Group 390,328 Aryzta 404,657 Royal Dutch Shell 381,475 DNB ASA 401,873 Dassault Systèmes 380,897 SAP 401,666 L'Oréal 378,644 DSM Koninklijke 384,144 Ericsson 310,613 Arkema 366,848 GDF SUEZ 309,875 Zurich Insurance Group 365,816 Swedish Match 309,243 Axa 355,821 Essilor International 308,386 Andritz 355,159 Svenska Handelsbanken 307,195 Hexagon 345,791
49 Lloyds Investment Funds Limited
Summary of Material Portfolio Changes (continued) For the year ended 30th September 2014
High Income Fund Purchases Cost £ Sales Proceeds £ Treasury 4.5% 2019 6,794,878 British Telecom 6.5% 2015 3,279,123 HSBC Bank G/R 2023 4,297,721 Lloyds Banking Group 2020 FRN 2,976,257 Treasury 5% 2018 2,842,249 AIG SunAmerica Institutional Funding 5% 2018 2,841,590 Eastern Power Networks 8.5% 2025 2,841,154 Enel 2075 FRN 2,827,913 Co-Operative Group 5.625% 2020 2,514,667 InterContinental Hotels 3.875% 2022 2,196,194 Treasury 4.5% 2019 2,251,120 Deutsche Telekom Intl Finance 7.375% 2019 2,102,189 Treasury 4.5% 2019 2,098,262 Pennon Group (Perp) FRN 1,918,782 AT&T 4.25% 2043 1,991,764 Lafarge 10% 2017 1,889,177 Muenchener Rueckversicherungs 2028 FRN 1,875,814 Delamare Finance 5.5457% 2029 1,829,828 Streaming SIMD Extensions (SSE) 5% 2018 1,723,107 Australia & New Zealand Banking Group 2018 FRN 1,710,000 Heathrow Funding 4.625% 2048 1,707,064 AT&T 7% 2040 1,698,326 DIRECTV Holdings 4.375% 2029 1,700,882 Heathrow Funding 5.225% 2025 1,687,557 Manchester Airport 4.75% 2034 1,604,099 Porterbrook Rail Finance 5.5% 2019 1,684,053 Treasury 1.75% 2017 1,553,208 Heathrow Funding 5.225% 2025 1,605,754 United Mexico STS 5.625% 2014 1,467,510 Wales & West Financial 5.125% 2016 1,601,068 Orange SA FRN Perp 1,410,965 Treasury 4% 2016 1,553,337 Streaming SIMD Extensions (SSE) 6.125% 2038 1,346,044 Santander International Debt 3.16% 2015 1,538,072 NIE Finance 6.375% 2026 1,209,573 Treasury 5% 2018 1,516,492 Aviva (Perp) G/R 1,104,586 Treasury 4.5% 2042 1,479,554 Standard Chartered (Perp) FRN 1,036,581 Treasury 1.75% 2017 1,439,454
International Fund Purchases Cost £ Sales Proceeds £ British American Tabacco 890,778 BT Group 790,074 Royal Dutch Shell 771,371 Shire 772,309 Philip Morris International 762,864 Keycorp 763,740 Banco Bradesco 762,491 Suncor Energy 726,535 CVS Healthcare 758,950 McKesson 708,698 Johnson & Johnson 758,344 Caltex Australia 693,417 Taiwan Semiconductor Manufacturing 756,488 ORIX 671,735 Tenaris 754,639 Lorillard 642,828 Novartis ‘R’ 752,247 Continental 618,652 Shin-Etsu Chemical 657,070 American Express 614,034 ENI 642,408 Pentair 604,146 Pepsico 637,634 Hexcel 597,118 Zurich Insurance Group 631,802 Bayer 592,896 EOG Resources 631,584 Toyota Motor 578,577 Schlumberger 629,018 UBS 'R' 574,159 Oracle 625,120 Cooper Companies 560,894 Samsung 597,960 AvalonBay Communities 543,763 BNP Billiton 518,218 American International Group 537,096 Vale 513,144 Halliburton 520,302 Fomento Economico Mexicano 507,540 Middleby 511,042
50 Lloyds Investment Funds Limited
Summary of Material Portfolio Changes (continued) For the year ended 30th September 2014
North American Fund Purchases Cost £ Sales Proceeds £ CVS Healthcare 272,329 Keycorp 359,504 Wells Fargo 256,444 Pentair 312,878 Pepsico 251,682 Google 296,269 Costco Wholesale 251,282 Halliburton 293,919 Philip Morris International 249,788 UnitedHealth Group 293,580 Johnson & Johnson 247,949 Google 'C' 291,614 Canadian National Railway 230,412 Delta Airlines 290,270 Royal Bank of Canada 229,307 McKesson 283,017 Qualcomm 228,550 Suntrust Banks 262,755 Comcast 228,088 Hexcel 240,934 Emerson Electric 227,685 Solarwinds 239,847 Pfizer 227,408 Delphi Automotive 238,721 EMC 227,224 American International 237,541 Aflac 225,909 Avalonbay Communities 237,539 TJX Companies 225,151 Aon 220,161 Chevron 225,114 O'Reilly Automotive 215,804 Dephi Automotive 221,747 Lorillard 212,943 Baxter International 208,991 Suncor Energy 212,815 United Technologies 206,442 Cooper Cosmetics 206,224 Intercontinental Exchange 205,619 American Express 203,640
Sterling Bond Fund Purchases Cost £ Sales Proceeds £ Treasury 4.75% 2038 236,685 AIG SunAmerica Institutional Funding 5% 2018 223,633 Treasury 5% 2018 223,963 Enel Societa Per Azioni 6.25% 2019 198,389 Imperial Tobacco 9% 2022 193,522 Western Power Distribution West Midlands 5.75% 2032 177,777 Axa 6.686% Perp 185,655 Orange SA 5.25% 2025 170,148 European Investment Bank 4.5% 2044 179,091 UBS AG (Jersey) 5.25% 2021 FRN 165,410 Orange SA 5.375% 2050 167,820 Rolls-Royce Holdings3.375% 2026 126,559 Treasury Gilt 4.5% 2019 163,425 AIG SunAmerica 5.375% 2016 124,679 Mellon Capital FRN 2066 150,950 British American Tobacco 6% 2022 124,429 BG Energy Capital 6.5% 2072 FRN 132,181 Bouygues 5.5% 2026 119,889 DIRECTV Holdings 5.2% 2033 129,481 Holcim Finance 8.75% 2017 119,086 Time Warner Cable 5.25% 2042 123,656 TDC 5.625% 2023 116,372 Treasury 5% 2025 123,342 Treasury 5% 2018 116,023 Arqiva FNG 122,853 AT&T 5.5% 2027 114,104 Mitchells FRN 2032 115,931 Telecom Italia 7.375% 2017 112,559 AT&T 5.5% 2027 115,467 BP Capital Markets 4.325% 2018 110,373 AT&T 4.25% 2043 113,134 Treasury 5% 2025 105,602 BG Energy Capital 5.00% 2036 111,562 Enel Societa Per Azioni 5.75% 2040 103,801 Treasury 4.75% 2038 103,625 Treasury 4% 2016 100,969 Orange SA FRN Perp 101,208 Treasury 4% 2016 99,912 Motability 3.75% 2026 99,369 Treasury Gilt 4.5% 2019 98,411
51 Lloyds Investment Funds Limited
Summary of Material Portfolio Changes (continued) For the year ended 30th September 2014
UK Fund Purchases Cost £ Sales Proceeds £ BHP Billiton 704,954 Shire 981,545 Sage Group 703,243 WPP 873,298 Croda International 591,196 Vodafone Group 660,822 Unilever 581,211 GlaxoSmithKline 555,281 Rolls-Royce Holdings 478,084 BT Group 492,144 Pearson 409,625 Diageo 464,129 Standard Chartered Bank 388,096 Royal Dutch Shell 'B' 413,517 Compass Group 352,940 Legal and General 410,942 Rolls-Royce Holdings 349,071 Meggitt 388,623 Persimmon 333,040 ITV 374,032 Next 328,833 Barclays 361,019 British American Tobacco 318,376 Drax Group 352,440 Tesco 317,499 Lloyds Banking Group 325,258 Experian 315,475 Rio Tinto 323,201 Lloyds Banking Group 313,618 Berkeley Group Holdings 314,931 Vodafone Group 312,309 Melrose Industries 302,815 Cobham 311,187 HSBC Holdings 299,968 Centrica 306,331 Legal and General 293,662 Melrose Industries 302,815 National Grid 285,867 Pearson 300,533 BAE Systems 282,084
52 Lloyds Investment Funds Limited
Notes to the Financial Statements For the year ended 30th September 2014 1. The Company materiality and significant judgements and estimates, are discussed The Company is domiciled and incorporated as a limited liability in the following notes. See Note 3 for further details on what are company in Jersey, Channel Islands, United Kingdom under the considered to be the critical accounting estimates and judgements. Companies (Jersey) Law 1991 and is listed on the Channel Islands 3. Summary of Significant Accounting Policies Securities Exchange Authority and the Malta Stock Exchange. Full details of the Company, Investment Objectives and Policy and The principal accounting policies applied in the preparation of these Report of the Directors are stated on pages 2 to 6. financial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated 2. Basis of Presentation in the following text: The financial statements have been prepared in accordance with The Directors also monitor new standards and ensure that International Financial Reporting Standards (‘IFRS’) on the going they are applied when relevant. concern basis. The following standards, amendments and interpretations have The policies set out below have been consistently applied to all been published and are mandatory for the Company’s accounting periods presented. periods beginning on or after 1st October 2013: The financial statements have been prepared under the historical • IFRS 9, ‘Financial Instruments’ (effective from 1st January 2018). cost convention, as modified by the revaluation of investments, held • IFRS 10, ‘Consolidated financial statements’ (amendment) at fair value through the profit or loss and in accordance with the (effective from 1st January 2014). Companies (Jersey) Law 1991 and with the Collective Investment • IFRS 13 ‘Fair value measurement’ (effective from 1st January Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as 2013). amended). Jersey is not part of the United Kingdom (‘UK’) and the Company is not regulated by the Financial Conduct Authority (‘FCA’) • IAS 32 (amendment) ‘Financial instruments: Presentation’, on or the Prudential Regulation Authority (‘PRA’) of the UK. offsetting financial assets and financial liabilities (effective from 1st January 2014) The capital of the Company comprises various classes of Shares • IAS 36 (amendment), ‘Impairment of assets’ (effective from 1st each relating to a separate Fund consisting of securities, cash, January 2015). other assets and liabilities. These financial statements present the balance sheets, statements of comprehensive income, statements • IAS 39 (amendment), ‘Financial instruments: Recognition and of changes in net assets attributable to holders of participating measurement’, on novation of derivatives and hedge accounting redeemable preference shares, cash flow statements, Investment (effective from 1st January 2014). Portfolios, notes to the financial statements, distribution tables There are no other standards, interpretations or amendments to (unaudited) and performance records (unaudited). At the balance existing standards that are not yet effective that would be expected sheet date there were seven Funds in existence; Euro High Income to have a significant impact on the Company. Fund, European Fund, High Income Fund, International Fund, North Functional currency and presentational currency American Fund, Sterling Bond Fund and UK Fund. The Directors may from time to time create further classes (Funds). Items included in the Company’s financial statements are measured using the currency of the primary economic environment in which The net assets attributable to holders of participating redeemable it operates (the ‘functional currency’). The Directors have preference shares are classified as financial liabilities and therefore, adopted sterling as the functional and presentational currency in the opinion of the Directors, the Capital of the Company is only for consolidation purposes which reflects the Company’s primary represented by the Founders Shares and Nominal Shares. Details of economic environment in which financial assets are invested and the Founders Shares and Nominal Shares are disclosed in Notes 3 and regulatory environment of the majority of investors, being UK based. 14. The Company has adopted sterling as its presentational and Where assets of an individual Fund are insufficient to meet the functional currency for European Fund, High Income Fund, Funds liabilities, then any liabilities that remain undischarged will International Fund, North American Fund, Sterling Bond Fund revert to the Company as a whole and be allocated amongst the and UK Fund as the majority of Shares in each Fund have been other Funds. subscribed for in sterling and all non dealing related fees and expenses are paid in sterling. Critical accounting estimates and judgements The Company makes assumptions and estimates that affect the The Company has adopted euro as its presentational and functional reported amounts of assets and liabilities within the next financial currency for the Euro High Income Fund as the Shares in the Fund year. Estimates and judgements are continually evaluated and have been subscribed for in euros and the majority of non dealing are based on historical experience and other factors, including related fees and expenses are paid in euro. expectations of future events that are believed to be reasonable under the circumstances. The accounting policies deemed critical to the Company’s results and financial position, based upon
53 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 3. Summary of Significant Accounting Policies (continued) (c) Measurement Share premium and share capital currency translation Financial assets and financial liabilities at fair value through profit or Share premium and share capital transactions are translated into loss are initially recognised at fair value, and transaction costs for all sterling at the exchange rate ruling at the time of the transaction. financial assets and financial liabilities carried at fair value through profit or loss are expensed in the statement of comprehensive The aggregated balance of net assets attributable to holders of income as incurred. Subsequent to initial recognition, all financial participating redeemable preference Shares is translated at the date assets and financial liabilities at fair value through profit or loss are of transaction. measured at fair value. Segmental reporting Gains and losses arising from changes in the fair value of financial The Company, at the balance sheet date is organised into seven assets or financial liabilities at fair value through profit or loss are business segments, each focussing on achieving returns by investing recognised in the statement of comprehensive income in the period in a range of investments as described in the Investment Objectives in which they arise. and Policy on page 3. Revenue recognition The Company issues Shares which are allocated to the Fund selected by the investor. A separate account is maintained for each Fund, Investment income from Fund investments is recognised in the to which proceeds of issue, the income arising from those proceeds statement of comprehensive income on an ex-dividend basis when and expenses are allocated. Upon redemption shareholders are the right to payment is established for equities. When a Fund holds entitled to their proportion of the net assets held in the Fund in derivatives with offsetting market risks, it uses bid-market prices as a which their Shares have been designated. basis for establishing fair values for the offsetting risk positions and applies this bid-market price to the net open position as appropriate. A balance sheet, statement of comprehensive income, statement of changes in net assets attributable to holders of participating Bank interest is recognised in the statement of comprehensive redeemable preference shares and cash flow statement have been income on a time proportionate basis using the Effective Interest prepared for each Fund as well as for the Company as a whole. Rate (‘EIR’) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts Foreign currency translation throughout the expected life of the financial asset or liability, or, Assets and liabilities denominated in currencies other than the when appropriate, a shorter period, to the net carrying amount of the functional currency of the Fund are translated at the rate of financial asset or financial liability. exchange ruling at the balance sheet date. The currency profits Fair value estimation or losses arising on translation, together with currency profits or losses realised during the year, are recognised in the statement of The fair value of financial instruments traded in active markets (such comprehensive income. as publicly traded derivatives and trading securities) is based on quoted market prices at the balance sheet date. The quoted market The rate of exchange to sterling from euro ruling at 30th September price used for financial assets and financial liabilities held by the Fund 2014 used for the conversion of balance sheet items was 1.2834 is the current mid-market price as required by IFRS 13 financial assets and the average rate for the period used for the conversion of the and financial liabilities at fair value at close of business on the last statement of comprehensive income was 1.2275. business day of the accounting period. Financial assets and financial liabilities at fair value through Cash and cash equivalents profit or loss Cash and cash equivalents include cash in hand and deposits held at (a) Classification call with banks. The Company classifies its investments in debt and equity securities as financial assets at fair value through profit or loss. Financial assets Share capital and financial liabilities are designated by the Board of Directors as (i) The Founders Shares have been subscribed for by the fair value through profit or loss at inception. Manager and are non-participating. The holders thereof are entitled only to income arising on the assets represented by Financial assets and financial liabilities designated at fair value the Founders Shares. These Shares are classified as Ordinary through profit or loss at inception are those that are managed and Share capital in the balance sheet. their performance evaluated on a fair value basis in accordance with the Company’s documented investment strategy. (ii) Unclassified Shares may be issued as either participating (b) Recognition redeemable preference shares (‘Participating Shares’) or Purchases and sales are recognised on the trade date (the date on Nominal Shares. Participating Shares are redeemable at the which the Company commits to purchase or sell the asset). shareholder’s option and are classified as financial liabilities. Participating Shares are carried at the redemption amount that is payable if the holder exercises the right to redeem Shares at the balance sheet date.
54 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 3. Summary of Significant Accounting Policies (continued)
Participating Shares are issued and redeemed at the holder’s option at prices based on each Fund’s net asset value per Share at the time of issue or redemption. Each Fund’s net asset value per Share is calculated by dividing the net assets attributable to the holders of participating redeemable preference shares with the total number of Participating Shares in issue. In accordance with the provisions of the Company’s regulations, investments are valued based on the latest traded market price for the purpose of determining the net asset value per Share for subscriptions and redemptions. The Shares are divided into Funds according to the type of investment in which the proceeds of the issue of Shares in each Fund are invested. A separate portfolio of investments is maintained for each Fund. Each holder of a Participating Share is entitled on a poll, to one vote for each Participating Share held. Participating Shares have a right to dividends declared. If any dividends are paid, different amounts of dividends may be payable in respect of different Funds.
(iii) Nominal Shares have been accounted for in accordance with the Companies (Jersey) Law 1991 and corresponding amounts have been included in debtors and financial liabilities.
A Nominal Share will be created when a Participating Share is cancelled. A Nominal Share will be cancelled when a Participating Share is created until the number of Nominal Shares falls to zero.
(iv) Both issued Nominal and Participating Shares have a nominal value of £ 0.01 per Share.
Details of the Company’s Share capital transactions are shown in Note 14.
Share premium The premium on issues and redemptions of Participating Shares is accounted for within the Share premium account which forms part of the net assets attributable to holders of participating redeemable preference Shares. Details are shown in Notes 15 and 17. Distributions payable to holders of participating redeemable preference shares Distributions to holders of Participating Shares are recognised and classified as finance costs when they are ratified by the Directors. Accrued income and expenses Accrued income and expenses are recognised initially at fair value and subsequently stated at amortised cost using the EIR.
55 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 4. Other Accrued Income and Other Debtors Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund £ £ € £ Year ended 30th September 2014 Accrued Income 8,038,053 — 256,475 — Nominal Shares 804,962 — — — Founders Shares 1,000 — — — Total Other Accrued Income and Other Debtors 8,844,015 — 256,475 —
Year ended 30th September 2013 Accrued Income 8,839,296 — 264,488 — Nominal Shares 644,056 — — — Founders Shares 1,000 — — — Total Other Accrued Income and Other Debtors 9,484,352 — 264,488 —
5. Distributions The distributions take account of income received on the creation of shares and income deducted on the cancellation of shares.
Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund Year ended 30th September 2014 £ £ € £ 31st October 2013 1,506,847 — — — 30th November 2013 1,504,970 — — — 31st December 2013 1,854,145 — 141,372 — 31st January 2014 1,504,395 — — — 28th February 2014 1,498,979 — — — 31st March 2014 1,837,731 — 144,869 — 30th April 2014 1,493,311 — — — 31st May 2014 1,486,142 — — — 30th June 2014 1,813,143 — 132,258 — 31st July 2014 1,475,975 — — — 31st August 2014 1,474,236 — — — 30th September 2014 2,036,574 — 132,848 — 19,486,448 — 551,347 — Income paid on cancellation of shares 39,862 — 11,087 — Income received on creation of shares (110,683) — (6,654) — Net distributions for the year 19,415,627 — 555,780 — Fees charged to capital* (3,054,500) — (129,664) — Net distributions after taxation 16,361,127 — 426,116 —
* Details can be found in Note 10.
56 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 4. Other Accrued Income and Other Debtors High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ Year ended 30th September 2014 Accrued Income 7,266,371 49,845 11,223 482,016 28,750 Nominal Shares — — — — — Founders Shares — — — — — Total Other Accrued Income and Other Debtors 7,266,371 49,845 11,223 482,016 28,750
Year ended 30th September 2013 Accrued Income 8,032,831 15,791 1,533 501,276 66,183 Nominal Shares — — — — — Founders Shares — — — — — Total Other Accrued Income and Other Debtors 8,032,831 15,791 1,533 501,276 66,183
5. Distributions The distributions take account of income received on the creation of shares and income deducted on the cancellation of shares.
High Sterling Income Bond UK Fund Fund Fund Year ended 30th September 2014 £ £ £ 31st October 2013 1,506,847 — — 30th November 2013 1,504,970 — — 31st December 2013 1,506,667 229,863 — 31st January 2014 1,504,395 — — 28th February 2014 1,498,979 — — 31st March 2014 1,497,335 220,630 — 30th April 2014 1,493,311 — — 31st May 2014 1,486,142 — — 30th June 2014 1,483,902 223,337 — 31st July 2014 1,475,975 — — 31st August 2014 1,474,236 — — 30th September 2014 1,431,253 238,964 262,840 17,864,012 912,794 262,840 Income paid on cancellation of shares 20,701 4,161 5,968 Income received on creation of shares (53,152) (11,739) (40,372) Net distributions for the year 17,831,561 905,216 228,436 Fees charged to capital* (2,948,870) — — Net distributions after taxation 14,882,691 905,216 228,436
* Details can be found in Note 10.
57 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 5. Distributions (continued) Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund Year ended 30th September 2013 £ £ € £ 31st October 2012 1,696,805 — — — 30th November 2012 1,543,514 — — — 31st December 2012 1,897,193 — 145,564 — 31st January 2013 1,510,913 — — — 28th February 2013 1,509,091 — — — 31st March 2013 1,865,091 — 153,197 — 30th April 2013 1,503,422 — — — 31st May 2013 1,539,132 — — — 30th June 2013 1,903,839 — 152,169 — 31st July 2013 1,513,330 — — — 31st August 2013 1,509,789 — — — 30th September 2013 2,229,652 — 149,686 — 20,221,771 — 600,616 — Income paid on cancellation of shares 229,192 126,596 3,282 1,506 Income received on creation of shares (71,838) (1,753) (7,258) (367) Net distributions for the year 20,379,125 124,843 596,640 1,139 Fees charged to capital* (311,721) — (23,486) — Net distributions after taxation 20,067,404 124,843 573,154 1,139
* Details can be found in Note 10. 6. Accrued Expenses and Other Creditors
Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund
£ £ € £
Year ended 30th September 2014 Due to Manager 468,619 — 16,607 29,242 Due to Custodian 24,804 — 1,243 1,806 Other Creditors 141,186 — 9,809 15,645 Total Accrued Expenses and Other Creditors 634,609 — 27,659 46,693
Year ended 30th September 2013 Due to Manager 472,423 — 15,115 32,374 Due to Custodian 24,610 — 1,118 1,975 Other Creditors 212,975 — 18,560 14,203 Total Accrued Expenses and Other Creditors 710,008 — 34,793 48,552
58 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 5. Distributions (continued) High Sterling Income Bond UK Fund Fund Fund Year ended 30th September 2013 £ £ £ 31st October 2012 1,696,806 — — 30th November 2012 1,543,514 — — 31st December 2012 1,540,010 238,838 — 31st January 2013 1,510,913 — — 28th February 2013 1,509,091 — — 31st March 2013 1,503,487 232,082 — 30th April 2013 1,503,422 — — 31st May 2013 1,539,132 — — 30th June 2013 1,543,060 233,471 — 31st July 2013 1,513,330 — — 31st August 2013 1,509,789 — — 30th September 2013 1,507,105 261,197 335,889 18,419,659 965,588 335,889 Income paid on cancellation of shares 34,472 5,482 58,390 Income received on creation of shares (42,711) (9,117) (11,818) Net distributions for the year 18,411,420 961,953 382,461 Fees charged to capital* (292,072) — — Net distributions after taxation 18,119,348 961,953 382,461
* Details can be found in Note 10.
6. Accrued Expenses and Other Creditors
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
£ £ £ £ £ Year ended 30th September 2014 Due to Manager 301,355 47,106 19,202 24,702 34,072 Due to Custodian 14,870 2,401 1,250 1,711 1,797 Other Creditors 73,950 9,293 11,309 12,537 10,808 Total Accrued Expenses and Other Creditors 390,175 58,800 31,761 38,950 46,677
Year ended 30th September 2013 Due to Manager 298,902 48,604 18,162 23,075 38,636 Due to Custodian 14,520 2,386 1,104 1,680 2,008 Other Creditors 122,909 15,558 7,924 18,764 18,060 Total Accrued Expenses and Other Creditors 436,331 66,548 27,190 43,519 58,704
59 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 7. Net gain/(loss) on financial assets at fair value through profit or loss The net gains/ losses on investments during the year comprise:
Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund £ £ € £ Year ended 30th September 2014 Proceeds from sales of investments 164,910,726 — 2,497,917 16,657,991 during the year Original cost of investments sold (147,928,952) — (2,411,893) (13,639,120) during the year Gains realised on investments sold 16,981,774 — 86,024 3,018,871 during the year Realised foreign exchange gains/ (losses) (117,996) — 4 (8,390)
Net realised gains for the year 16,863,778 — 86,028 3,010,481
Net unrealised gains/(losses) for the year (4,417,505) — 666,079 (3,588,805)
Net gains/(losses) on investments 12,446,273 — 752,107 (578,324)
Year ended 30th September 2013 Proceeds from sales of investments 131,209,197 19,718,844 2,528,988 7,453,491 during the year Original cost of investments sold (116,351,815) (16,993,765) (2,352,988) (5,292,581) during the year Gains realised on investments sold 14,857,382 2,725,079 176,000 2,160,910 during the year Realised foreign exchange (losses)/gains (118,966) (35,863) — (68,939)
Net realised gains/(losses) for the year 14,738,416 2,689,216 176,000 2,091,971
Net unrealised gains/(losses) for the year 5,000,436 (1,178,742) 182,702 1,265,647
Net gains on investments 19,738,852 1,510,474 358,702 3,357,618
60 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 7. Net gain/(loss) on financial assets at fair value through profit or loss The net gains/ (losses) on investments during the year comprise:
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ Year ended 30th September 2014 Proceeds from sales of investments 76,080,177 33,343,758 11,666,124 3,908,422 21,219,353 during the year Original cost of investments sold (71,468,190) (28,597,968) (9,719,873) (3,698,148) (18,840,830) during the year Gains realised on investments sold 4,611,987 4,745,790 1,946,251 210,274 2,378,523 during the year Realised foreign exchange gains/ (losses) (1,696) (100,608) (4,691) (130) (2,484)
Net realised gains for the year 4,610,291 4,645,182 1,941,560 210,144 2,376,039
Net unrealised gains/(losses) for the year 4,947,350 (3,315,150) (858,297) 456,185 (2,601,401)
Net gains/(losses) on investments 9,557,641 1,330,032 1,083,263 666,329 (225,362)
Year ended 30th September 2013 Proceeds from sales of investments 53,362,654 21,779,233 8,505,703 5,252,603 13,020,863 during the year Original cost of investments sold (51,280,231) (18,109,836) (7,095,654) (4,880,795) (10,730,392) during the year Gains realised on investments sold 2,082,423 3,669,397 1,410,049 371,808 2,290,471 during the year Realised foreign exchange (losses)/gains 623 7,039 (21,072) 194 (948)
Net realised gains/(losses) for the year 2,083,046 3,676,436 1,388,977 372,002 2,289,523
Net unrealised gains/(losses) for the year 2,983,101 1,421,369 153,526 (321,762) 524,444 Net gains on investments 5,066,147 5,097,805 1,542,503 50,240 2,813,967
61 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 8. Other Income Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund £ £ € £ Year ended 30th September 2014 Bank interest 17,787 — 6 369 Other income 17,787 — 6 369
Year ended 30th September 2013 Bank interest 11,713 1,817 — 362 Other income 11,713 1,817 — 362
Capital Euro High European 9. Operating Expenses. Note Company Growth Fund Income Fund (Closed 05.07.13) Fund Year ended 30th September 2014 £ £ € £ Payable to the Manager: Annual management fees 10 4,199,142 — 118,863 236,933 Registrar fees 10 215,506 — 10,801 20,508 Payable to the Custodian: Custodian fees 11 288,368 — 13,584 22,244 Safe custody fees 11 81,392 — 2,779 5,565 Other expenses: Administration expenses 194,803 — 19,148 11,122 Broker commission, dealing charges 210,039 — 258 25,671 and stamp duty Audit fee 24,985 — 1,700 2,200 Total expenses 5,214,235 — 167,133 324,243 Total Expense Ratio 1.23% 2.04%
Year ended 30th September 2013 Payable to the Manager:
Annual management fees 10 4,428,269 162,224 114,595 238,124 Registrar fees 10 239,163 6,280 10,389 22,655 Payable to the Custodian:
Custodian fees 11 307,683 15,429 13,097 22,357 Safe custody fees 11 91,250 4,022 4,217 6,522 Other expenses:
Administration expenses 199,930 6,936 14,108 8,790 Broker commission, dealing charges and stamp duty 278,967 39,077 1,754 33,646 Audit fee 28,639 1,400 1,600 2,000 Total expenses 5,573,901 235,368 159,760 334,094 Total Expense Ratio 1.23% 2.12%
* The Total Expense Ratio, represents the management fee and all other operating expenses (broken down above), expressed as a percentage of the average daily net asset values during the Year.
62 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 8. Other Income (continued) High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ Year ended 30th September 2014 Bank interest 15,347 718 146 263 939 Other income 15,347 718 146 263 939
Year ended 30th September 2013 Bank interest 8,227 420 35 335 517 Other income 8,227 420 35 335 517
High North Sterling 9. Operating Expenses. Income International American Bond UK Fund Fund Fund Fund Fund Year ended 30th September 2014 £ £ £ £ £ Payable to the Manager: Annual management fees 2,839,994 384,570 136,399 199,211 305,205
Registrar fees 108,876 28,716 13,332 14,686 20,589 Payable to the Custodian: Custodian fees 171,035 27,961 13,640 19,575 22,847
Safe custody fees 57,230 6,295 3,280 4,848 1,910
Other expenses: Administration expenses 109,106 14,406 13,150 18,435 12,985 Broker commission, dealing charges 2,520 61,191 14,603 992 104,852 and stamp duty Audit fee 15,000 1,400 1,400 2,200 1,400
Total expenses 3,303,761 524,539 195,804 259,947 469,788
1.02% 2.04% 2.16% 1.14% 2.29%
Year ended 30th September 2013 Payable to the Manager:
Annual management fees 2,922,737 369,702 126,852 205,373 307,384
Registrar fees 116,261 31,707 14,390 15,747 23,431 Payable to the Custodian:
Custodian fees 175,811 27,057 12,685 20,271 23,116 Safe custody fees 58,167 7,208 3,035 5,344 3,424 Other expenses:
Administration expenses 133,086 8,946 6,576 16,933 6,860 Broker commission, dealing charges and stamp duty 3,286 93,390 25,440 1,724 80,937 Audit fee 15,000 1,400 1,400 2,100 4,000 Total expenses 3,424,348 539,410 190,378 267,492 449,152 1.03% 2.20% 2.26% 1.14% 2.19%
* The Total Expense Ratio, represents the management fee and all other operating expenses (broken down above), expressed as a percentage of the average daily net asset values during the Year.
63 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 10. Related Party Transactions (a) Management and Registrar fees Parties are considered to be related if one party has the ability to The Manager, which is related to the Company by virtue of a control the other party or exercise influence over the party in making Management Agreement, is entitled to a daily fee equal at the financial or operating decisions. The following are considered by the annual rate set out below by reference to the net assets of each Directors of the Company to be related parties: Fund calculated daily and paid monthly by the Company. • The Manager in accordance with the Management Agreement. Euro High Income Fund 0.875% • The Investment Manager in accordance with the Investment European Fund 1.500% Management Agreement. High Income Fund 0.875% The fees received by the Manager are set out in Note 9. The Investment Manager is paid by the Manager. Details of amounts International Fund 1.500% due to the Manager at the end of the year are shown in Note 6. North American Fund 1.500% All investor share transactions in the company are facilitated Sterling Bond Fund 0.875% through the manager, the aggregate values of which are set out in the statement of changes in net assets attributable to holders of UK Fund 1.500% participating redeemable preference shares on pages 20 and 21. The Directors and the Manager may agree a higher fee for any Fund At the period end the Manager held Participating Shares in the subject to a maximum annual rate of 1.5% of the mid market value of Company as follows: net assets of the Fund. If such a higher fee is agreed, shareholders of the relevant Fund will be given at least three months written notice 30th 30th before it comes into effect. September September The Manager, in its capacity as Registrar, is entitled to a fee payable 2014 2013 by the Company of £12.00 for each shareholding which appears on Capital Growth Fund the Share Register on the last business day of each annual and half — — (Closed 05.07.13) yearly accounting period. The Manager and the Company may agree a higher fee. Euro High Income Fund 7,975.44 7,979.37 Details of amounts due to the Manager at the end of the year are European Fund 2,631.44 2,671.55 shown in Note 6. High Income Fund 7,455.68 7,005.37 (b) Fees charged to capital International Fund 2,963.75 3,014.13 In order to maximise the income available for distribution to North American Fund 2,676.95 2,742.33 shareholders, the Directors, in consultation with the Custodian, Sterling Bond Fund 4,956.05 5,490.75 have agreed to charge the Management and Registrar fees for UK Fund 2,713.32 2,909.29 High Income Fund and Euro High Income Fund only, to the capital of these Funds. 31,372.63 31,812.79 (c) Directors’ Fees Directors who are employees of the Lloyds Banking Group do not receive Directors’ fees. All other Directors currently receive a fee of £5,000 per annum (2013: £5,000 per annum).
64 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 11. Custodian 12. Controlling Party The fees received by the Custodian are set out in Note 9. Details of In the opinion of the Directors, there is no ultimate controlling party amounts due to the Custodian at the end of the year are shown in of the Company as defined by International Accounting Standards Note 6. (IAS) 24 Related Party Disclosures. The Custodian is entitled to an annual fee payable monthly by the 13. Equalisation Company, in respect of each Fund, at the rates set out in the table The price of a Share includes an equalisation payment calculated below by reference to the net asset value of each Fund calculated on by dividing the net undistributed income of the Fund by the number a mid-market basis and subject to a minimum overall fee of £20,000 of Shares in issue at the time when the prices are calculated. per annum for the Company as a whole. The payment of the first distribution after the issue of a Share The Custodian is entitled to reimbursement by each Fund of its includes an amount of equalisation calculated by averaging the expenses in connection with its duties as Custodian and to make amounts received by way of equalisation during the period to which transaction charges to cover the cost of effecting settlement of the distribution relates. stock and cash.
Custodian Fee Rates Sterling Funds paid in £ NAV of each Fund Up to £10m £10m to £25m £25m Plus % % % European Fund 0.150 0.125 0.100 High Income Fund 0.100 0.075 0.050 International Fund 0.125 0.100 0.075 North American Fund 0.150 0.125 0.100 Sterling Bond Fund 0.100 0.075 0.050 UK Fund 0.125 0.100 0.075
Euro Fund paid in € NAV of each Fund Up to €15m €15m to €40m €40m to Plus % % % Euro High Income Fund 0.100 0.075 0.050
65 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 14. Share Capital
30th September 30th September 2014 2013
£ £ Authorised share Capital: 1,000 Founders Shares of £1 1,000 1,000 750,000,000 Unclassified Shares of 1p 7,500,000 7,500,000 7,501,000 7,501,000 Issued Share Capital: Founders Shares 1,000 1,000
Nominal shares: Balance brought forward 644,056 559,643 Creations 275,583 284,243 Redemptions (114,677) (199,830) Balance carried forward 804,962 644,056
Participating Shares: Balance brought forward 4,129,998 4,214,405 Creations 114,677 199,836 Redemptions (275,583) (284,243) Balance carried forward 3,969,092 4,129,998 Total Share Capital 4,774,054 4,774,054
Fund Shares £ Shares £ Capital Growth (closed 05.07.13) — — — — European 1,903,673 19,037 2,103,073 21,030 High Income 362,342,611 3,623,426 376,776,611 3,767,768 International 5,590,367 55,904 6,155,467 61,556 North American 631,998 6,320 645,548 6,456 Sterling Bond 15,417,043 154,170 16,324,793 163,248 UK 2,512,803 25,128 2,903,103 29,030 Total Sterling Funds 388,398,495 3,883,985 404,908,595 4,049,088
Fund Shares € Shares € Euro High Income 8,510,164 129,361 8,091,144 125,171
Shares £ Shares £
Total Company (Sterling equivalent) 396,908,659 3,969,092 412,999,709 4,129,998
66 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 15. Share Premium
30th September 30th September 2014 2013 Fund £ £ Capital Growth (closed 05.07.13) — — European — — High Income 363,481,875 375,901,785 International 11,545,927 14,005,384 North American — — Sterling Bond 23,884,404 25,174,158 UK — — Total Sterling Funds 398,912,206 415,081,327
Fund € € Euro High Income 14,565,811 13,873,262 Total Euro Funds 14,565,811 13,873,262
Total Company (Sterling equivalent) 408,869,960 424,487,278
£ £ Balance brought forward 424,487,278 423,060,508 Premium on creations 12,753,513 20,113,090 Premium on redemptions (33,008,463) (41,225,207) Transfer from capital reserve 4,637,632 22,538,887 Balance carried forward 408,869,960 424,487,278
67 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014
16. Capital Reserves Capital Growth Euro High Note Company Fund ** Income European (Closed 05.07.13) Fund Fund
£ £ € £ Net realised gains/(losses) 25,418,061 — (416,041) 14,690,497 on investments b/fwd Transfers to share premium b/fwd (7,083,379) — — (1,067,960) Net realised gains for the year 7 16,863,778 — 86,028 3,010,481 Net realised gains/(losses) 35,198,460 — (330,013) 16,633,018 on investments c/fwd Net unrealised movement on investment b/fwd 35,499,182 — 928,310 3,584,301 Net unrealised movement in the year 7 (4,417,504) — 666,079 (3,588,805) Net unrealised movement on investment c/fwd 31,081,678 — 1,594,389 (4,504) Total realised/unrealised movement 66,280,138 — 1,264,376 16,628,514 Fees charged to Capital b/fwd* (30,109,329) — (924,523) — Net movement in the year (3,054,499) — (129,664) — Fees charged to Capital c/fwd* (33,163,828) — (1,054,187) — Transfer to share premium in year (4,637,632) — — (1,606,312) Broker charges reserves b/fwd (4,351,082) — — (768,058) Broker charges in the year (209,829) — (258) (25,671) Broker charges reserves c/fwd (4,560,911) — (258) (793,729) As at 30th September 2014 23,917,767 — 209,931 14,228,473 * Details of the fees can be found in Note 10. Under the Reporting Fund Regime, broker commission, dealing charges and stamp duty are not allowable expenses. The Directors have, therefore, transferred these expenses from the Net undistributed income reserve to a separate broker charges reserve. ** Capital growth reserves have been excluded from brought forward values with all realised gains incorporated into redemption values.
17. Net assets attributable to holders of participating redeemable preference shares
Capital Euro High Notes Company Growth Fund Income European (Closed 05.07.13) Fund Fund Year ended 30th September 2014 £ £ € £ Share capital 14 3,969,092 — 129,361 19,037 Share premium 15 408,869,960 — 14,565,811 — Capital reserves 16 23,917,767 — 209,931 14,228,473 Dilution levies 219,025 — 30,773 5,272 Net undistributed income* (24,285,357) — (654,860) (56,255) Movement in currency translation 2,081,139 — — — As at 30th September 2014 414,771,626 — 14,281,016 14,196,527
Year ended 30th September 2013 Share capital 14 4,129,998 — 125,171 21,030 Share premium 15 424,487,278 — 13,873,262 — Capital reserves 19,373,456 — (412,254) 16,438,780 Dilution levies 205,604 — 30,773 5,272 Net undistributed income* (21,585,481) — (521,591) (26,835) Movement in currency translation 2,916,542 — — — As at 30th September 2013 429,527,397 — 13,095,361 16,438,247
* The distributions detailed in Note 5 have been declared by the Directors using a dividend policy based on the ‘Accruals’ method of accounting for income on debt instruments, as opposed to the Effective Interest Rate (‘EIR’) method of accounting for investment income which is the basis used for recognition of income on debt instruments as explained in the accounting policies. Future distributions will continue to be made on the basis of the existing distribution policy. Equity Fund distributions were declared net of broker fees for 2014. Undistributed income under the accruals method as at 30th September 2014 amounts to £(1,407,838) (30th September 2013 amounts to £81,712).
68 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014
16. Capital Reserves (continued) High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
£ £ £ £ £ Net realised gains/(losses) (29,518,969) 9,264,269 11,767,860 (2,430,565) 22,723,901 on investments b/fwd Transfers to share premium b/fwd — — (3,740,681) — (2,274,738) Net realised gains for the year 4,610,291 4,645,182 1,941,560 210,144 2,376,039 Net realised gains/(losses) (24,908,678) 13,909,451 9,968,739 (2,220,421) 22,825,202 on investments c/fwd Net unrealised movement on investment b/fwd 22,154,696 3,307,035 1,295,448 1,781,990 2,358,147 Net unrealised movement in the year 4,947,350 (3,315,150) (858,297) 456,185 (2,601,401) Net unrealised movement on investment c/fwd 27,102,046 (8,115) 437,151 2,238,175 (243,254) Total realised/unrealised movement 2,193,368 13,901,336 10,405,890 17,754 22,581,948 Fees charged to Capital b/fwd* (29,351,214) — — — — Net movement in the year (2,948,870) — — — — Fees charged to Capital c/fwd* (32,300,084) — — — — Transfer to share premium in year — — (197,542) — (2,833,778) Broker charges reserves b/fwd — (716,951) (183,159) — (2,485,543) Broker charges in the year (2,520) (61,191) (14,603) (992) (104,852) Broker charges reserves c/fwd (2,520) (778,142) (197,762) (992) (2,590,395) As at 30th September 2014 (30,109,236) 13,123,194 10,010,586 16,762 17,157,775
17. Net assets attributable to holders of participating redeemable preference shares (continued)
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund Year ended 30th September 2014 £ £ £ £ £ Share capital 3,623,426 55,904 6,320 154,170 25,128 Share premium 363,481,875 11,545,927 — 23,884,404 — Capital reserves (30,109,236) 13,123,194 10,010,586 16,762 17,157,775 Dilution levies 142,047 — 7,857 33,086 6,784 Net undistributed income* (20,923,878) (446,012) (695,431) (1,658,565) 5,057 Movement in currency translation — — — — — As at 30th September 2014 316,214,234 24,279,013 9,329,332 22,429,857 17,194,744
Year ended 30th September 2013 Share capital 3,767,768 61,556 6,456 163,248 29,030 Share premium 375,901,785 14,005,384 — 25,174,158 — Capital reserves (36,715,485) 11,854,353 9,139,468 (648,575) 20,321,767 Dilution levies 126,876 — 7,857 33,086 6,784 Net undistributed income* (18,582,667) (360,506) (605,979) (1,608,852) 35,730 Movement in currency translation — — — — — As at 30th September 2013 324,498,273 25,560,787 8,547,802 23,113,065 20,393,311
69 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 18. Taxation • Hedging instruments, such as forward exchange contracts and In accordance with International Accounting Standard (IAS) 12 traded options which a Fund may enter into, for the purpose of Income Taxes, investment income is shown gross of withholding tax. managing the risks arising from the Fund’s investment activities. The withholding tax suffered is recorded on the taxation line as set Market risk out below: All securities investments present a risk of loss of capital. 30th September 30th September The Manager moderates this risk through a careful selection 2014 2013 of investments within specified limits. The maximum risk resulting from investments is determined by the fair value Foreign tax on income £216,460 £359,810 for the year of those investments. The Company is liable to be charged at a tax rate of 0% under The overall market position and therefore the risk exposure for Schedule D under the Income Tax (Jersey) Law 1961, as amended each Fund are governed by the Prospectus, the Collective (the ‘Income Tax Law’) in respect of: Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended) and the investment objectives for each Fund. (i) the income or profits of any trade carried on by the Company in These positions are monitored on a daily basis by the Manager Jersey or elsewhere, and are reviewed on a quarterly basis by the Board of Directors. (ii) any interest of money, whether yearly or otherwise, or other The investments are principally equities, fixed interest securities annual payment paid to the Company, whether such payment is and bank deposits, dependent on each Fund’s investment policy. made within or outside of Jersey, The value of these is not fixed (other than bank deposits) and may (iii) dividends and other distributions of a company regarded as go down as well as up. This may be the result of a specific factor resident in Jersey paid to the Company, affecting the value of an individual stock or be caused by general market factors (such as interest rates, government policy or the (iv) income arising to the Company from securities outside health of the underlying economy) which could affect the entire of Jersey and portfolio of a Fund. (v) any other income of the Company that is not derived from the The year end portfolios of each Fund are detailed on pages 27 to 45. ownership or disposal of land in Jersey. The Manager controls this risk on a Fund by Fund basis and It is not expected that the Company will be in receipt of income monitors the movements in the equities, bonds and interest rates charged to tax under any Schedule under Income Tax Law other against the relevant equity and bond indices and market interest than Schedule D. As such the Company is no longer subject to the rates respectively. payment of tax in Jersey. The Manager considers that a reasonably possible movement in the 19. Financial risk management market risk components would be equivalent to a 5% movement in Strategy in using financial instruments equity and bond indices and a 1% movement in market interest rates. The Company’s activities expose it to a variety of financial risks: The table on the following page summarises, for each of the Funds, market risk (including currency risk, fair value interest rate risk, cash the impact of increases/ (decreases) in the equity and bond flow interest rate risk and price risk), liquidity risk, counter-party indices, and market interest rates on the net asset value as at 30th risk, capital risk and certain other risks. The Company’s overall September 2014. The analysis is based on the assumption that the risk management programme focuses on the unpredictability of equity and bond indices increase/(decrease) by 5%, and market financial markets and seeks to minimise potential adverse effects interest rates increase/(decrease) by 1%, with all other variables on the Company’s financial performance. Each Fund is able to use held constant. The analysis also assumes that the movement in the derivative financial instruments to moderate certain risk exposures. portfolios of each Fund has perfect positive correlation with the There were no such exposures as at 30th September 2014. equity and bond indices and market interest rates. Each Fund’s investment objectives and policy are stated on page 3. To achieve these objectives the Company’s assets and liabilities comprise financial instruments held in accordance with each Fund’s investment objectives and policy. These may include: • Investments including equity and non-equity Shares, fixed income securities and floating rate securities • Cash, liquid resources and short term debtors and creditors that arise directly from the investment activities
70 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014
19. Financial risk management (continued) Value Equities Bonds Cash End of Fund (base 5% Movement 5% Movement 1% Movement Year currency) in equity index in bond index in interest rate
30.09.14 Euro High Income 14,281,016 — 660,425 9,457 30.09.13 Euro High Income 13,095,361 — 631,039 4,212
30.09.14 European 14,196,527 699,884 — 2,730 30.09.13 European 16,438,247 800,768 — 4,624
30.09.14 High Income 316,214,234 — 15,493,051 — 30.09.13 High Income 324,498,273 — 15,802,150 24,319
30.09.14 International 24,279,013 1,204,640 — 1,867 30.09.13 International 25,560,787 1,256,333 — 5,508
30.09.14 North American 9,329,332 463,066 — 856 30.09.13 North American 8,547,802 417,616 — 2,296
30.09.14 Sterling Bond 22,429,857 — 1,109,964 1,257 30.09.13 Sterling Bond 23,113,065 — 1,109,773 7,210
30.09.14 UK 17,194,744 859,017 — 2,499 30.09.13 UK 20,393,311 1,016,353 — 1,385
Interest rate risk Each Fund receives income from its various investments. For the Sterling Bond Fund, Euro High Income Fund and High Income Fund, the income is received from investments in bonds and loan stock. In accordance with the Funds policy, the Manager monitors the Fund’s overall interest rate sensitivity on a daily basis, and the Board of Directors reviews it on a quarterly basis. The interest bearing financial assets and liabilities held in the Funds expose them to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on their financial position and cash flows. The table overleaf summarises the effect of interest rate risks on each Fund. It includes the Fund’s assets and trading liabilities at fair values, categorised by the earlier of contractual re-pricing or maturity dates. Other than those financial instruments identified in the table, each Fund has no significant exposure to interest rate risks. The income received by each Fund is primarily fixed in nature and shown in the table on the next page. Income is derived from the securities held in the portfolio of each Fund which may be varied from time to time in accordance with its investment objectives and policy.
71 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014
19. Financial risk management (continued) The interest rate profile of each Fund’s financial assets at 30th September 2014 was:
Fixed rate Floating rate interest interest Interest Interest Fund Currency Total securities securities Free Assets Free Liablities 000s 000s 000s 000s 000s Euro High Income Euro 14,281 10,578 3,607 256 161 High Income Sterling 316,214 201,041 111,351 7,266 3,444 Sterling Bond Sterling 22,430 15,375 6,950 482 377
Weighted average Weighted average period for which effective Fund Currency Weighted average the rate is interest rate % coupon rate % fixed (years) Euro High Income Euro 4.46 1.82 18.38 High Income Sterling 5.78 3.65 20.90 Sterling Bond Sterling 5.34 3.78 21.29
The interest rate profile of each Fund’s financial assets at 30th September 2013 was:
Fixed rate Floating rate interest interest Interest Interest Fund Currency Total securities securities Free Assets Free Liablities 000s 000s 000s 000s 000s Euro High Income Euro 13,095 10,540 2,502 264 211 High Income Sterling 324,498 247,241 71,234 8,033 2,010 Sterling Bond Sterling 23,113 17,671 5,246 501 305
Weighted average Weighted average Fund Currency Weighted average period for which effective coupon rate % the rate is interest rate % fixed (years) Euro High Income Euro 6.06 2.86 22.86 Sterling 5.69 3.20 18.09 US$ 4.29 2.48 15.19 High Income Sterling 5.96 4.00 22.78 Sterling Bond Sterling 5.28 3.88 19.62
72 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 19. Financial risk management (continued) Foreign currency risk The Euro High Income Fund is denominated in euro. All of the other In respect of foreign currency exposure, derivative instruments will Funds are denominated in sterling. A portion of the underlying only be utilised where a forward exchange or currency option is used financial assets of the Funds may be denominated in currencies for the purpose of reduction of foreign currency risk, in order other than the base currency with the effect that the balance to hedge this exposure back to the base currency of the Fund. sheet and each Fund’s total return can be significantly affected by The Company is not currently involved in currency hedging currency movements. An investment in a currency other than the transactions. In accordance with the Company’s policy, shareholders’ own base currency will be subject to the movement the Manager monitors each Fund’s currency position on a daily of foreign exchange rates, which may cause additional favourable or basis, and the Board of Directors reviews it on a quarterly basis. unfavourable changes in value. With the exceptions of the Sterling Bond Fund and the UK Fund, each Fund may purchase securities denominated in a currency other than its base currency, and hence take a position in other currencies.
As at 30th September 2014 the Funds had the following currency exposures:
Foreign Foreign Fund Currency Currency Fund Currency Currency Assets £ 000’s Assets £ 000’s
Euro High Income Sterling 1 International Australian Dollar — US Dollar — Canadian Dollar 1,019 European Euro 6,991 Euro 799 Danish Krone 605 Hong Kong Dollar 1,109 Norwegian Krona 637 Japanese Yen 1,782 Swedish Krona 2,329 Korean Won 526 Swiss Franc 3,472 Singapore Dollar 242 US Dollar — South African Rand 391 North American Canadian Dollar 432 Swedish Krona 1,249 Euro 7 Swiss Franc 2,874 US Dollar 7,341 US Dollar 10,412 Sterling Bond US Dollar — UK Euro 3 US Dollar —
As at 30th September 2013 the Funds had the following currency exposures:
Foreign Foreign Fund Currency Currency Fund Currency Currency Assets £ 000’s Assets £ 000’s Euro High Income Sterling 1 International Australian Dollar 317 US Dollar — Canadian Dollar 531 European Euro 10,526 Euro 1,923 Danish Krone — Hong Kong Dollar 14 Norwegian Krona 606 Japanese Yen 2,928 Swedish Krona 1,124 Korean Won — Swiss Franc 3,830 Norwegian Krona — US Dollar 163 Singapore Dollar — North American Canadian Dollar 90 South African Rand — Euro 2 Swedish Krona — US Dollar 8,303 Swiss Franc 1,876 Sterling Bond US Dollar 1 US Dollar 13,810 UK Euro 7 US Dollar 1
73 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 19. Financial Risk Management (continued) each morning at 10am and represented in the Fund’s daily share prices; the appropriate quoted market price for financial liabilities Credit risk is the current asking price. When the Company holds derivatives The Company takes on exposure to credit risk, which is the risk with offsetting market risks, it uses mid-market prices as a basis for that a counter-party will be unable to pay amounts in full when establishing fair values for the offsetting risk positions and applies due. Impairment provisions would be provided for losses that have this bid or asking price to the net open position, as appropriate. If a been incurred by the balance sheet date. As at 30th September significant movement in fair value occurs subsequent to the close 2014 no impairment provisions were required and there was no of trading on the period end date, valuation techniques will be money overdue. applied to determine the fair value. There has been no significant The Company’s main credit risk exposure arises through movements in the fair value of any holdings since the year end date. investments in debt securities at the Fund level. If any of the A financial instrument is regarded as quoted in an active market if Funds hold any interest bearing instruments, at least 90% of these quoted prices are readily and regularly available from an exchange, instruments must have a credit rating of ‘Investment Grade’ as dealer, broker, industry group, pricing service, or regulatory agency, provided by Moodys Investor Services Limited, Standard and Poors and those prices represent actual and regularly occurring market or Fitch Ratings Limited. These instruments could include inter alia transactions at an arm’s length basis. money market instruments, bonds, gilts, corporate bonds etc. The Company adopted the amendment to IFRS 13, effective 1 In accordance with each Fund’s policy, the Manager monitors the January 2013. This requires the Company to classify fair value Fund’s credit position on a daily basis, and the Board of Directors measurements using a fair value hierarchy that reflects the reviews it on a quarterly basis. significance of the inputs used in making the measurements. The Certain transactions that the Funds enter into expose them to the fair value hierarchy has the following levels: risk that the counter-party will not deliver the investment (purchase) • Quoted prices (unadjusted) in active markets for identical assets or cash (sale) after the Fund has fulfilled its responsibilities. It or liabilities (level 1). is the policy of the Manager to buy and sell investments only • Inputs other than quoted prices included within level 1 that are through approved brokers, or directly with the Fund Manager. observable for the asset or liability, either directly (that is, as Credit risk exposure is balanced by the regulatory obligation of the prices) or indirectly (that is, derived from prices) (level 2). counter parties. • Inputs for the asset or liability that are not based on observable The risk to Shareholders is that we will not have enough cash to market data (that is, unobservable inputs) (level 3). cover redemptions. To counter this risk each Fund’s cash is managed The level in the fair value hierarchy within which the fair value to meet its liabilities. Where investments cannot be realised in time measurement is categorised in its entirety is determined on the to meet any redemptions of Participating Shares, each Fund may basis of the lowest level input that is significant to the fair value borrow up to 10% of its value to ensure settlement of its liabilities. measurement in its entirety. For this purpose, the significance of an No such borrowings have arisen during the year. input is assessed against the fair value measurement in its entirety. Capital risk If a fair value measurement uses observable inputs that require Where the objective of the underlying Fund seeks to provide high significant adjustment based on unobservable inputs, that or good levels of income, the investment policy which supports this measurement is a level 3 measurement. Assessing the significance may result in a gradual reduction in the capital value of the underlying of a particular input to the fair value measurement in its entirety Fund’s Shares, except where bond prices are generally rising. requires judgement, considering factors specific to the asset Capital risk management or liability. The net assets attributable to holders of participating redeemable The determination of what constitutes ‘observable’, requires preference shares are classified as financial liabilities and therefore, significant judgement by the Directors. The Directors consider in the opinion of the Directors, the capital of the Company is only observable data to be that market data that is readily available, represented by the Founders Shares and Nominal Shares. Details regularly distributed or updated, reliable and verifiable, not of Management Shares and Nominal Shares are shown in note proprietary, and provided by independent sources that are actively 3. Due to the nature and requirement for Founders’ Shares and involved in the relevant market. Nominal Shares the Directors have decided that no active capital risk There have been no transfers between levels. The financial assets management is required. at fair value through profit or loss of the Company are all quoted in Fair value estimation active markets and therefore fall under level 1 as defined above. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the year end date. The quoted market price used for financial assets held by the Company is the current mid price, these are updated
74 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 19. Financial Risk Management (continued) Derivatives Liquidity risk Derivatives will only be used where they accord with existing The Company is exposed to daily cash redemptions of Participating investment objectives and policy. They may not be used for the Shares which are redeemed on demand at the holder’s option. purpose of reducing risk independently of investment strategy in It therefore invests all of its assets in investments that are traded in respect of the underlying physical assets or for merely speculative an active market and can be readily disposed of, as such each Fund’s purposes. Derivatives will only be used for efficient portfolio financial assets are considered to be readily realisable for cash. The management. Derivatives may not be used for the purpose of Manager manages each Fund’s cash to meet its liabilities. Where gearing or leveraging or for purposes of producing, enhancing or investments cannot be realised in time to meet any redemptions of generating income. No derivative can be traded on an Over The Participating Shares, each Fund may borrow up to 10% of its value to Counter basis, and no uncovered positions are allowed. ensure settlement of its liabilities. No such borrowings have arisen during the year. The underlying Funds may hold the following derivatives: In accordance with the Company’s policy, the Manager monitors (a) Futures each Fund’s liquidity position on a daily basis, and the Board of Futures are contractual obligations to buy or sell financial Directors review it on a quarterly basis. instruments on a future date at a specified price established in an organised market. The futures contracts are collateralised by cash The table on the following pages analyses the Company’s financial or marketable securities. Changes in the futures contracts value are liabilities into relevant maturity groups based on the remaining settled daily with the exchange. Interest rate futures are contractual period at the balance sheet date to the contractual maturity date. obligations to receive or pay a net amount based on changes in Cross fund liability interest rates at a future date at a specified price, established in an Shareholders should be aware that in the event of the Company organised financial market. Futures are settled on a net basis. being unable to meet liabilities attributable to any particular Fund (b) Options or share class out of the assets attributable to such Fund or share An option is a contractual arrangement under which the seller class, the excess liabilities may have to be met out of the assets (writer) grants the purchaser (holder) the right, but not the attributable to the other Funds or share classes. obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of securities or a financial instrument at a predetermined price. The seller receives a premium from the purchaser in consideration for the assumption of future securities prices. Where options are held by the underlying Funds, they are exchange-traded. The Funds are exposed to credit risk on purchased options only to the extent of their carrying amount, which is their fair value. Options are settled on a gross basis. The notional amounts of certain types of financial instrument provide a basis for comparison with instruments recognised on the balance sheet, but they do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and do not therefore indicate the Company’s exposure to credit or market price risks. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are favourable or unfavourable, and thus the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
75 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 19. Financial Risk Management (continued) Year ended 30th September 2014 Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund £ £ € £ Share Capital — 415,577,589 14,281,016 14,196,527 (less than 1 month) — Cancellation payable 27,458 — — 27,458 (less than 1 month) Investment purchase payable 818,592 — — — (less than 1 month) Proposed dividend (less than 1 month) 1,431,253 — — — (1 month to 3 months) 605,321 — 132,848 — Other liabilities (less than 1 month) 1,396,562 — 17,850 31,048 (1 month to 3 months) 141,186 — 9,809 15,645 — Total financial liabilities 419,997,961 14,441,523 14,270,678 —
Year ended 30th September 2013 Capital Euro High Company Growth Fund Income European (Closed 05.07.13) Fund Fund £ £ € £ Share Capital 430,172,453 — 13,095,361 16,438,247 (less than 1 month) Cancellation payable 108,273 — 26,272 — (less than 1 month) Investment purchase payable 1,412,988 — — — (less than 1 month) Proposed dividend (less than 1 month) 1,507,105 — — — (1 month to 3 months) 722,547 — 149,686 — Other liabilities (less than 1 month) 629,596 — 20,676 35,977 (1 month to 3 months) 80,410 — 14,117 12,575 Total financial liabilities 434,633,372 — 13,306,112 16,486,799
76 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30th September 2014 19. Financial Risk Management (continued) Year ended 30th September 2014 High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
£ £ £ £ £ Share Capital 316,214,234 24,279,013 9,329,332 22,429,857 17,194,744 (less than 1 month) Cancellation payable — — — — — (less than 1 month) Investment purchase payable 719,360 — — 99,233 — (less than 1 month) Proposed dividend (less than 1 month) 1,431,253 — — — — (1 month to 3 months) — — — 238,964 262,840 Other liabilities (less than 1 month) 1,219,364 49,507 20,452 26,413 35,869 (1 month to 3 months) 73,950 9,293 11,309 12,537 10,808 Total financial liabilities 319,658,161 24,337,813 9,361,093 22,807,004 17,504,261
Year ended 30th September 2013 High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ Share Capital 324,498,273 25,560,787 8,547,802 23,113,065 20,393,311 (less than 1 month) Cancellation payable 66,067 20,186 — — — (less than 1 month) Investment purchase payable — 55,391 19,732 — 1,337,865 (less than 1 month) Proposed dividend (less than 1 month) 1,507,105 — — — — (1 month to 3 months) — — — 261,197 335,889 Other liabilities (less than 1 month) 424,354 50,803 19,957 25,963 55,212 (1 month to 3 months) 11,977 15,745 7,233 17,556 3,492 Total financial liabilities 326,507,776 25,702,912 8,594,724 23,417,781 22,125,769
20. Post Balance Sheet Event. With effect from 5th December 2014, the Investment Manager has sub-delegated its investment management duties to Aberdeen Asset Management Incorporated, a United States regulated subsidiary of Aberdeen Asset Management PLC, in respect of the North American Fund.
77 Lloyds Investment Funds Limited
Distribution Table - (Unaudited) For the year ended 30th September 2014
Euro High Income Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (cents) (cents) 1st Quarter Group 1 1.740 — 1.74 1.84 Group 2 0.806 0.934 1.74 1.84 2nd Quarter Group 1 1.780 — 1.78 1.95 Group 2 0.882 0.898 1.78 1.95 3rd Quarter Group 1 1.600 — 1.60 1.91 Group 2 0.814 0.786 1.60 1.91 4th Quarter Group 1 1.630 — 1.63 1.85 Group 2 0.429 1.201 1.63 1.85 1st Quarter Group 1 : Shares purchased prior to 1st October 2013 Group 2 : Shares purchased between 1st October 2013 and 31st December 2013 2nd Quarter Group 1 : Shares purchased prior to 1st January 2014 Group 2 : Shares purchased between 1st January 2014 and 31st March 2014 3rd Quarter Group 1 : Shares purchased prior to 1st April 2014 Group 2 : Shares purchased between 1st April 2014 and 30th June 2014 4th Quarter Group 1 : Shares purchased prior to 1st July 2014 Group 2 : Shares purchased between 1st June 2014 and 30th September 2014
78 Lloyds Investment Funds Limited
Distribution Table - (Unaudited) For the year ended 30th September 2014
High Income Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 31st October 2013 Group 1 0.40 — 0.40 0.45 Group 2 0.130 0.270 0.40 0.45 30th November 2013 Group 1 0.40 — 0.40 0.41 Group 2 0.195 0.205 0.40 0.41 31st December 2013 Group 1 0.40 — 0.40 0.41 Group 2 0.210 0.190 0.40 0.41 31st January 2014 Group 1 0.40 — 0.40 0.40 Group 2 0.194 0.206 0.40 0.40 28th February 2014 Group 1 0.40 — 0.40 0.40 Group 2 0.155 0.245 0.40 0.40 31st March 2014 Group 1 0.40 — 0.40 0.40 Group 2 0.181 0.219 0.40 0.40 30th April 2014 Group 1 0.40 — 0.40 0.40 Group 2 0.187 0.213 0.40 0.40 31st May 2014 Group 1 0.40 — 0.40 0.41 Group 2 0.157 0.243 0.40 0.41 30th June 2014 Group 1 0.40 — 0.40 0.41 Group 2 0.262 0.138 0.40 0.41 31st July 2014 Group 1 0.40 — 0.40 0.40 Group 2 0.210 0.190 0.40 0.40 31st August 2014 Group 1 0.40 — 0.40 0.40 Group 2 0.153 0.247 0.40 0.40 30th September 2014 Group 1 0.395 — 0.395 0.40 Group 2 0.185 0.210 0.395 0.40
31st October 2013 Group 1 : Shares purchased prior to 1st October 2013 Group 2 : Shares purchased between 1st October 2013 and 31st October 2013 30th November 2013 Group 1 : Shares purchased prior to 1st November 2013 Group 2 : Shares purchased between 1st November 2013 and 30th November 2013 31st December 2013 Group 1 : Shares purchased prior to 1st December 2013 Group 2 : Shares purchased between 1st December 2013 and 31st December 2013 31st January 2014 Group 1 : Shares purchased prior to 1st January 2014 Group 2 : Shares purchased between 1st January 2014 and 31st January 2014 28th February 2014 Group 1 : Shares purchased prior to 1st February 2014 Group 2 : Shares purchased between 1st February 2014 and 28th February 2014 31st March 2014 Group 1 : Shares purchased prior to 1st March 2014 Group 2 : Shares purchased between 1st March 2014 and 31st March 2014
79 Lloyds Investment Funds Limited
Distribution Table - (Unaudited) (continued) For the year ended 30th September 2014
30th April 2014 Group 1 : Shares purchased prior to 1st April 2014 Group 2 : Shares purchased between 1st April 2014 and 30th April 2014 31st May 2014 Group 1 : Shares purchased prior to 1st May 2014 Group 2 : Shares purchased between 1st May 2014 and 31st May 2014 30th June 2014 Group 1 : Shares purchased prior to 1st June 2014 Group 2 : Shares purchased between 1st June 2014 and 30th June 2014 31st July 2014 Group 1 : Shares purchased prior to 1st July2014 Group 2 : Shares purchased between 1st July 2014 and 31st July 2014 31st August 2014 Group 1 : Shares purchased prior to 1st August 2014 Group 2 : Shares purchased between 1st August 2014 and 31st August 2014 30th September 2014 Group 1 : Shares purchased prior to 1st September 2014 Group 2 : Shares purchased between 1st September 2014 and 30th September 2014
Sterling Bond Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 1st Quarter Group 1 1.44 — 1.44 1.46 Group 2 0.813 0.627 1.44 1.46 2nd Quarter Group 1 1.39 — 1.39 1.43 Group 2 0.70 0.69 1.39 1.43 3rd Quarter Group 1 1.44 — 1.44 1.44 Group 2 0.464 0.976 1.44 1.44 4th Quarter Group 1 1.55 — 1.55 1.60 Group 2 0.594 0.956 1.55 1.60 1st Quarter Group 1 : Shares purchased prior to 1st October 2013 Group 2 : Shares purchased between 1st October 2013 and 31st December 2013 2nd Quarter Group 1 : Shares purchased prior to 1st January 2014 Group 2 : Shares purchased between 1st January 2014 and 31st March 2014 3rd Quarter Group 1 : Shares purchased prior to 1st April 2014 Group 2 : Shares purchased between 1st April 2014 and 30th June 2014 4th Quarter Group 1 : Shares purchased prior to 1st July 2014 Group 2 : Shares purchased between 1st June 2014 and 30th September 2014
80 Lloyds Investment Funds Limited
Distribution Table - (Unaudited) (continued) For the year ended 30th September 2014
UK Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 30th September 2014 Group 1 10.46 — 10.46 11.57 Group 2 4.528 5.932 10.46 11.57 30th September 2014 Group 1 : Shares purchased prior to 1st October 2013 Group 2 : Shares purchased between 1st October 2013 and 30th September 2014
81 Lloyds Investment Funds Limited
Performance Record - (Unaudited) For the year ended 30th September 2014
Capital Growth Fund (Closed 05.07.13) Shares in the Fund were first offered to the public in January 1995 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £ 2004 148.20 127.20 1.40 9.48 2005 175.90 139.10 2.40 16.87 2006 188.11 162.00 2.80 19.68 2007 194.90 177.10 xd 2.75 19.33 2008 188.20 119.80 xd 2.85 20.03 2009 164.30 115.00 2.15 15.11 2010 182.20 153.10 1.39 9.77 2011 188.20 153.40 0.91 6.39 2012 185.00 167.70 1.94 13.60 2013 214.10 187.00 — —
Euro High Income Fund Shares in the Fund were first offered to the public in October 2006 at an offer price of 178.90 cents per share.
Income per €1,000 Highest Lowest Income Invested at Launch Calendar Year Offer Price Bid Price per Share 02/10/06 c c c € 2006 181.80 178.10 2.11 11.79 2007 179.50 162.20 8.41 47.01 2008 162.60 xd 132.00 7.72 43.21 2009 156.20 120.90 7.55 42.20 2010 163.70 153.20 xd 7.52 41.98 2011 156.60 140.60 7.73 32.03 2012 167.40 144.60 7.71 43.07 2013 169.10 161.70 7.45 41.64 30.09.14 169.60 161.70 5.01 28.00
European Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £ 2004 464.80 366.00 0.20 0.48 2005 578.10 428.40 1.70 4.09 2006 661.58 512.20 0.38 0.91 2007 770.40 635.40 0.93 2.24 2008 774.30 445.00 xd 6.50 15.63 2009 656.20 xd 411.00 4.60 11.06 2010 667.80 545.00 0.98 2.36 2011 738.70 522.20 3.80 9.14 2012 682.50 559.60 2.51 6.01 2013 826.90 682.80 — — 30.09.14 832.20 722.60 — —
82 Lloyds Investment Funds Limited
Performance Record - (Unaudited) For the year ended 30th September 2014
High Income Fund Shares in the Fund were first offered to the public in June 1995 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £
2004 107.50 97.00 6.560 62.06 2005 108.50 99.84 6.255 59.18 2006 110.00 xd 97.27 5.960 56.39 2007 97.26 89.79 xd 5.790 54.78 2008 91.61 xd 76.09 xd 5.700 53.93 2009 83.53 69.03 xd 5.595 52.93 2010 88.28 82.15 5.400 51.09 2011 85.30 79.70 3.885 36.75 2012 89.19 81.20 5.245 49.62 2013 91.66 85.23 4.820 45.60 30.09.14 88.40 85.55 3.995 37.80
International Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £ 2004 287.50 245.00 — — 2005 339.00 258.90 0.33 1.19 2006 358.32 291.20 2.90 10.46 2007 346.40 305.00 0.98 3.53 2008 347.90 228.40 xd — — 2009 312.20 222.80 1.35 4.87 2010 341.30 284.30 1.48 5.34 2011 354.70 278.60 — — 2012 348.40 309.50 — — 2013 439.80 354.30 — — 30.09.14 455.10 414.00 — —
North American Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £ 2004 852.50 709.90 — — 2005 966.40 745.90 — — 2006 960.10 805.90 — — 2007 947.50 839.90 — — 2008 915.90 637.60 xd — — 2009 887.30 609.80 — — 2010 1,016.00 837.20 1.27 1.53 2011 1,048.00 823.00 — — 2012 1,140.00 1,001.00 — — 2013 1,429.00 1,153.00 — — 30.09.14 1,528.00 1,356.00 — —
83 Lloyds Investment Funds Limited
Performance Record - (Unaudited) (continued) For the year ended 30th September 2014
Sterling Bond Fund Shares in the Fund were first offered to the public in July 2001 at an offer price of 148.6p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £ 2004 160.10 143.60 6.92 44.62 2005 163.60 148.20 6.69 43.13 2006 163.80 147.60 6.43 41.46 2007 148.20 138.60 xd 6.52 42.04 2008 142.70 xd 116.80 xd 6.78 43.71 2009 130.50 107.60 xd 6.95 44.81 2010 139.00 127.40 6.54 42.17 2011 136.80 128.60 6.41 41.33 2012 147.00 131.20 6.27 40.43 2013 151.60 140.10 5.91 38.10 30.09.14 147.90 140.20 4.38 28.24
UK Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/03 Calendar Year p p p £ 2004 471.80 398.90 6.40 14.47 2005 587.00 444.00 9.50 21.48 2006 659.58 554.40 12.00 27.14 2007 720.40 616.00 xd 6.75 15.26 2008 692.40 391.60 11.80 26.68 2009 572.30 368.90 8.50 19.22 2010 640.00 522.70 6.87 15.54 2011 663.00 527.20 4.68 10.58 2012 637.30 564.00 5.75 13.01 2013 747.60 642.10 11.57 26.16 30.09.14 765.70 696.40 10.46 23.65
84 Lloyds Investment Funds Limited
Net Asset Value per Share - (Unaudited) For the year ended 30th September 2014
Net Asset Value of Fund Net Asset Value per Share No. of Shares in Issue
Capital Growth Fund (closed 05.07.13) 30.09.11 £12,511,764 158.18p 7,909,929 30.09.12 £13,426,522 180.51p 7,438,179
Euro High Income Fund 30.09.11 €11,887,645 143.74c 8,270,144 30.09.12 €12,366,572 159.77c 7,740,094 30.09.13 €13,095,361 161.53c 8,091,144 30.09.14 €14,281,016 167.81c 8,510,164
European Fund 30.09.11 £15,556,220 552.86p 2,813,762 30.09.12 £14,180,105 629.37p 2,253,072 30.09.13 £16,438,247 782.06p 2,103,073 30.09.14 £14,196,527 745.74p 1,903,673
High Income Fund 30.09.11 £305,411,273 79.95p 382,003,662 30.09.12 £326,851,897 86.70p 376,973,667 30.09.13 £324,498,273 86.11p 376,776,611 30.09.14 £316,214,234 87.27p 362,342,611
International Fund 30.09.11 £21,191,129 288.49p 7,345,567 30.09.12 £23,236,590 354.16p 6,561,017 30.09.13 £25,560,787 414.97p 6,155,467 30.09.14 £24,279,013 434.30 p 5,590,367
North American Fund 30.09.11 £11,046,595 922.13p 1,197,947 30.09.12 £8,633,780 1,109.53p 778,147 30.09.13 £8,547,802 1,325.86p 645,548 30.09.14 £9,329,332 1,476.17 p 631,998
Sterling Bond Fund 30.09.11 £25,784,346 128.77p 20,023,743 30.09.12 £23,372,673 142.14p 16,443,143 30.09.13 £23,113,065 141.58p 16,324,793 30.09.14 £22,429,857 145.49p 15,417,043
UK Fund 30.09.11 £31,229,582 548.49p 5,693,753 30.09.12 £19,947,687 513.09p 3,253,653 30.09.13 £20,393,311 702.49p 2,903,103 30.09.14 £17,194,744 684.29p 2,512,803
85 Lloyds Investment Funds Limited Notice of Meeting
Notice is hereby given that the 31st Annual General Meeting of NOTES: Lloyds Investment Funds Limited will be held at: A Member entitled to attend and vote at this Meeting may appoint 11-12 Esplanade, St. Helier, Jersey, on Wednesday 18th March 2015 one or more Proxies to attend and, on a poll, vote instead of him. A at 9.00 a.m. for the following purposes: Proxy need not be a Member of the Company. To be valid, completed Agenda proxy forms must be deposited at the Company’s principal place of business not less than 48 hours before the appointed time for Ordinary Business holding the meeting, or any adjournment thereof. 1. To appoint the Chairman of the meeting. In the case of joint holders the vote of the senior shall be accepted to 2. To read the convening notice. the exclusion of the votes of the other joint holder(s). 3. RESOLUTION 1. The quorum requirement is two members present in person or by To receive and if deemed appropriate, adopt the Annual Report and proxy. If a quorum is not present, the meeting shall stand adjourned Audited Financial Statements of the Company for the year ended to Wednesday 25th March 2015 at 9.00 a.m. at the same venue and 30th September 2014. at such adjourned meeting the shareholder’s present in person or by proxy shall be the quorum. 4. RESOLUTION 2. By Order of the Board To consider, and if deemed appropriate, re-elect Ross Davey Willcox Lloyds Corporate Services (Jersey) Limited, as a Director of the Company. Secretary, 5. RESOLUTION 3. PO Box 160, 25 New Street, St. Helier, Jersey JE4 8RG, To consider, and if deemed appropriate, re-elect Ian Mark Jeremie Channel Islands. Hardy as a Director of the Company. 11th December 2014 6. RESOLUTION 4. To consider, and if deemed appropriate, re-elect Timothy Joseph Herbert as a Director of the Company. 7. RESOLUTION 5. To consider, and if deemed appropriate, re-elect Brian Charles James as a Director of the Company. 8. RESOLUTION 6. To consider, and if deemed appropriate, re-elect Bronislaw Lysiak as a Director of the Company. 9. RESOLUTION 7. To re-appoint PricewaterhouseCoopers CI LLP as Auditors of the Company for the ensuing year and to authorise the Directors to agree their remuneration. 10. RESOLUTION 8. To fix the remuneration of each of the Directors at a maximum of £5,000 per annum.
86 Lloyds Investment Funds Limited Lloyds Investment Funds Limited Form of Proxy
BLOCK LETTERS PLEASE. FULL NAME(S)...... ADDRESS...... I/We being a Member(s) of the above named Company hereby appoint the Chairman of the Meeting ...... (see Note 1.) as my/our proxy to attend and vote for me/us on my/our behalf at the 31st Annual General Meeting of the Company to be held on Wednesday 18th March 2015 at 9.00 a.m. and at any adjournment thereof. I/We direct my/our proxy to vote on the resolutions as follows: Ordinary Resolutions: FOR AGAINST 1. To receive and if deemed appropriate, adopt the Annual Report and Audited Financial Statements of the Company for the year ended 30th September 2014. 2. To consider, and if deemed appropriate, re-elect Ross Davey Willcox as a Director of the Company. 3. To consider, and if deemed appropriate, re-elect Ian Mark Jeremie Hardy as a Director of the Company. 4. To consider, and if deemed appropriate, re-elect Timothy Joseph Herbert as a Director of the Company. 5. To consider, and if deemed appropriate, re-elect Brian Charles James as a Director of the Company. 6. To consider, and if deemed appropriate, re-elect Bronislaw Lysiak as a Director of the Company. 7. To re-appoint PricewaterhouseCoopers CI LLP as Auditors and to authorise the Directors to agree their remuneration. 8. To fix the remuneration of each of the Directors at a maximum of £5,000 per annum. NOTES: 1. If you wish to appoint another person to be your proxy instead of the Chairman of the Meeting, you should delete the words “the Chairman of the Meeting”, and write the name of your proxy in the space provided and initial the alteration. 2. Except as otherwise indicated by you, the proxy will vote, or abstain from voting, at the meeting or any adjournment thereof as the proxy thinks fit. 3. In the case of a corporation, the form of proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised in writing. 4. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members. 5. To be valid, forms of proxy must reach the principal place of business of the Company, P.O. Box 311, 11-12 Esplanade, St. Helier, Jersey JE4 8ZU, Channel Islands, not later than 48 hours before the time appointed for the meeting (or any adjourned meeting). Any power of attorney or other authority under which the form of proxy is signed must be sent with the form of proxy.
Signature ...... Date ......
87 For more information please go to http://international.lloydsbank.com/ international-investments/funds or call us on 01543 845 555