Report and Financial Statements For the year ended 31st December 2020
State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund (formerly State Street UK Equity Tracker Fund) State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Contents Page
Manager's Report* 1
Portfolio Statement* 9
Director's Report to Unitholders* 27
Manager's Statement of Responsibilities 28
Statement of the Depositary’s Responsibilities 29
Report of the Depositary to the Unitholders 29
Independent Auditors’ Report 30
Comparative Table* 33
Financial statements: 34
Statement of Total Return 34
Statement of Change in Net Assets Attributable to Unitholders 34
Balance Sheet 35
Notes to the Financial Statements 36
Distribution Tables 48
Directory* 49
Appendix I – Remuneration Policy (Unaudited) 50
Appendix II – Assessment of Value (Unaudited) 52
* These collectively comprise the Manager’s Report. State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager’s Report For the year ended 31st December 2020
Authorised Status The State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund (the “Fund”) is an Authorised Unit Trust Scheme as defined in section 243 of the Financial Services and Markets Act 2000 and it is a UCITS Retail Scheme within the meaning of the FCA Collective Investment Schemes sourcebook. The unitholders are not liable for the debts of the Fund. The Fund's name was changed to State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund on 18th December 2020 (formerly State Street UK Equity Tracker Fund).
Investment Objective and Policy The objective of the Fund is to replicate, as closely as possible and on a “gross of fees” basis, the return of the United Kingdom equity market as represented by the FTSE All-Share ex Controversies ex CW Index (the “Index”), net of withholding taxes. The Manager will seek to achieve this objective principally by investing in the shares of certain companies included from time to time in the Index considered by the Investment Adviser to reflect accurately the performance of that Index. The Fund may also invest in transferrable securities, money market instruments, warrants, units in collective investment schemes, deposits and derivatives. The Fund may invest in collective investment schemes managed or operated by companies in the same group as the Manager or the Investment Adviser. The Fund will seek to track the performance of the Index whilst seeking to minimise as far as possible the tracking error between the Fund’s performance and that of the Index. The Index includes a negative screen that exclude securities from the Index based on two criteria: 1. Controversial weapons (including chemical & biological weapons, cluster munitions, anti-personnel landmines), and 2. Controversies as defined by the ten principles of the UN Global Compact: Human Rights a) Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and b) Principle 2: make sure that they are not complicit in human rights abuses. Labour c) Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; d) Principle 4: the elimination of all forms of forced and compulsory labour; e) Principle 5: the effective abolition of child labour; and f) Principle 6: the elimination of discrimination in respect of employment and occupation. Environment g) Principle 7: Businesses should support a precautionary approach to environmental challenges; h) Principle 8: undertake initiatives to promote greater environmental responsibility; and i) Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption j) Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. The negative screens will therefore apply when the Schemes invest in shares of companies included in the Index (but not in respect of other investments held by the Scheme from time to time). The Index contains investment trusts (ICB subsector 8985) whose holdings are not screened for the excluded activities contained in the name of the Index.
1 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) For the year ended 31st December 2020
Strategy The Fund is constructed to track, on a gross of fees basis, the performance of the FTSE All-Share ex-Controversies ex-CW Index (the “Index”). The Fund had a benchmark change on 18th December 2020 from FTSE All-Share Index to FTSE All-Share ex-Controversies ex-CW Index. The Fund is managed on a fully replicated basis, and currently has a portfolio of approximately 426 stocks. The emphasis is on maintaining tracking precision, and a combination of stocks is selected to minimise deviation from the index. The Fund is managed to remain neutral on all factors contributing to risk.
Performance The Fund returned -10.16% on a net basis for the 12-month period ended 31 December 2020 (the “Reporting Period”), compared to the Index return of -9.86%. The size of the Fund’s tracking difference for the Reporting Period was -0.30%. The underperformance versus the Index was largely attributable to an accounting difference between Custody and SSGA.
Market Review UK equities fell by 10.43% over the Reporting Period as the ongoing uncertainty related to Brexit was further elevated by the spread of coronavirus COVID-19. The UK formally exited the European Union in January and entered into a transition period. As a part of the policy response to the pandemic, the UK announced a coordinated response with the Bank of England reducing the bank rate by 50 basis points (among other measures) and the UK government put forth a budget with an additional £30 billion in fiscal stimulus. The UK market saw a rebound in April on the back of unprecedented fiscal and monetary support early in the second quarter. UK equities had their strongest three-months performance during Q2 as massive economic stimulus actions and signs that coronavirus outbreak was easing drew buyers into equity markets. According to the Office for National Statistics, the UK economy collapsed by more than 20% in April alone (the first full month of lockdown), which was the sharpest contraction since 1979. According to the Bank of England, the coronavirus pandemic has plunged Britain into its worst recession in 100 years, with the economy on track to shrink by 9.5% this year. The government began to ease lockdown measures and a phased reopening of various industry sectors was confirmed on 24th May. In June, the UK moved to stage 2, as outdoor retail and primary schools with other non-essential retailers begun to reopen. Equities started off the third quarter lagging behind other regions – extending their year-to-date underperformance. Uncertainty and concerns remained in relation to both the second wave of coronavirus COVID-19 infections and further Brexit talks nearing their deadline without any resolution. A number of UK focused areas of the market performed poorly over September following the re-imposition of localised restrictions necessitated by the rising infection rates and fears about their impact on the UK economy. Notwithstanding these new measures, the country’s economic recovery continued as coronavirus COVID-19 restrictions were generally eased. In November, the UK approved the use of vaccine produced by Pfizer/BioNTech as well as one developed by AstraZeneca and Oxford University. The market responded well to the vaccine news and the UK exiting the EU on 31 December, with domestically-focused areas of the market outperforming. By year end, the UK government had extended its strictest restrictions across three-quarters of England, seeking to curb the spread of a new variant of the coronavirus.
Index Activity The Index is subject to a rebalance in March, June, September and December. In March there was one inclusion (Octopus Renewables Infrastructure Trust), three exclusions, one up weight and two down weights. In June there were seven inclusions (the largest being Calisen), nine exclusions, three up weights and six down weights. In September there were three inclusions (the largest being Diversified Gas & Oil), one exclusion, two up weights and one down weight. In December there was one inclusion, no exclusion, one up weight and two down weights.
Figures in USD unless specified otherwise. For Institutional Use Only – Not for Use with the Public.
Sources: Bloomberg, FactSet, J.P. Morgan, Financial Times, Barron’s, Bank of America-Merrill Lynch, Credit Suisse, Citigroup, The Wall Street Journal, MSCI, as of 1 January 2021.
2 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) For the year ended 31st December 2020
Risk and Reward Profile
Risk Disclaimer The risk category above is not a measure of capital loss or gains but of how significant the rises and falls in the Fund’s return have been historically. For example a fund whose return has experienced significant rises and falls will be in a higher risk category, whereas a fund whose return has experienced less significant rises and falls will be in a lower risk category. The lowest category (i.e. category 1) does not mean that a fund is a risk free investment. As the Fund’s risk category has been calculated using historical data, it may not be a reliable indication of the Fund’s future risk profile. The Fund’s risk category shown is not guaranteed and may change in the future.
Why is this Fund in this category? The Fund is in risk category 6 as its return has experienced very high rises and falls historically. The following are material risks relevant to the Fund which are not adequately captured by the risk category. Index Tracking Risk: The Fund's performance may not exactly track the Index. This can result from market fluctuations, changes in the composition of the Index, transaction costs, the costs of making changes to the Fund's portfolio and other Fund expenses. Liquidity Risk: It may be difficult for the Fund to buy or sell certain investments in difficult market conditions. Consequently the price obtained when selling securities may be lower than under normal market conditions. Concentration Risk: A Fund that purchases a limited number of securities, or only securities of a limited number of countries or industries, may experience higher changes in value than a fund that does not limit its investments. Counterparty Risk: The Fund will be subject to credit risk with respect to the counterparties with which it enters into derivatives contracts and other transactions. There is a risk that these institutions may not be able to perform their obligations. This could reduce the value of the Fund's investments. Screening Risk: The Scheme uses a benchmark index where the benchmark index provider screens out certain securities due to considerations relating to (i) controversial weapons and (ii) controversies as defined by the ten principles of the UN Global Compact. The use of a screened benchmark index will cause the Scheme to make different investments than funds that have a similar investment style but that do not take into account these considerations. The use of a screened benchmark index will affect the Scheme's exposure to certain securities, which will impact its investment performance.
Derivatives Usage Derivatives are used in the Fund for efficient portfolio management purposes. The Fund invests in index futures to manage client inflows and outflows and to hedge accrued income. At all times the futures exposure is covered entirely by cash or cash equivalents. As at 31st December 2020, the Fund had a total notional exposure to futures of £1,027,200.
3 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) For the year ended 31st December 2020
Tracking Error The Tracking Error measures the standard deviation of the relative returns. It is the annualised standard deviation of the returns of a fund minus those of its benchmark (relative returns) and not the standard deviation of each fund’s unique returns. The lower the tracking error of a fund, the more the fund resembles its benchmark or the market regarding risk and return characteristics. The size of the Fund’s tracking error for the twelve months ended 31st December 2020 was 0.21% which was within the targeted maximum level of 1%.
Distribution There was a distribution of 3.3368 pence per unit paid on 26th February 2021 (28.2.20: 5.0559).
4 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) As at 31st December 2020
Securities Financing Transactions (SFT) (Unaudited) 1) Global Data
Proportion of securities and commodities on loan as at 31st December 2020 £'000 %
Total lendable assets excluding cash and cash equivalents: 153,970 Securities and commodities on loan 3,805 2.47%
Assets engaged in SFTs and total return swaps as at 31st December 2020 £'000 %
Fund assets under management (AUM) 168,803 Absolute value of assets engaged in: Securities lending 3,805 2.25% 2) Concentration Data
Top 10 Collateral Issuers Name and value of collateral and commodities received as at 31st December 2020 £'000
Telenet 480 Suez 450 UniCredit 364 United States of America Treasury 261 Kingdom of Belgium 218 Republic of France 128 Fiat Chrysler Automobiles 98 Nestle 98 Roche 98 Federal Republic of Germany 96
5 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) As at 31st December 2020
Top 10 Counterparties Name and value of outstanding transactions as at 31st December 2020 £'000
Credit Suisse International 2,236 UBS 555 Credit Suisse (Dublin) 294 Societe Generale 213 Merrill Lynch 163 Morgan Stanley International 89 Barclays Capital Securities 77 JP Morgan Securities 70 Citigroup Global Markets (UK) 44 Deutsche Bank 32
6 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) As at 31st December 2020
3) Aggregate Transaction Data
Type, Quality and Currency of Collateral as at 31st December 2020 Type Quality Currency £'000
Securities lending Equity Traded on recognised exchange Sterling 2 Equity Traded on recognised exchange Australian dollar 74 Equity Traded on recognised exchange Canadian dollar 8 Equity Traded on recognised exchange Chinese yuan 3 Equity Traded on recognised exchange Danish krone 76 Equity Traded on recognised exchange Euro 2,452 Equity Traded on recognised exchange Hong Kong dollar 46 Equity Traded on recognised exchange Japanese yen 56 Equity Traded on recognised exchange Norwegian krone 21 Equity Traded on recognised exchange Singapore dollar 6 Equity Traded on recognised exchange South African rand 8 Equity Traded on recognised exchange Swedish krona 10 Equity Traded on recognised exchange Swiss franc 196 Equity Traded on recognised exchange US dollar 143 Fixed Income Investment Grade Sterling 76 Fixed Income Investment Grade Australian dollar 2 Fixed Income Investment Grade Canadian dollar 20 Fixed Income Investment Grade Euro 560 Fixed Income Investment Grade Swedish krona 7 Fixed Income Investment Grade US dollar 261
Total Collateral held 4,027
Maturity Tenor of Collateral (remaining period to maturity) as at 31st December 2020
One week One to Three Above Less than One day to to one three months to one Open one day one week month months one year year maturity Total Type £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Securities lending - - - 2 202 722 3,101 4,027
- - - 2 202 722 3,101 4,027
7 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Report (continued) As at 31st December 2020
Counterparty details as at 31st December 2020 Country of counterparty Type establishment Settlement and clearing £'000
Securities lending France Tri-party 232 Securities lending Germany Tri-party 33 Securities lending Ireland Tri-party 320 Securities lending Switzerland Tri-party 597 Securities lending United Kingdom Tri-party 2,845
Total collateral held 4,027
Maturity Tenor of SFTs and Total Return Swaps (remaining period to maturity) as at 31st December 2020
One day One week One to Three Above Less than to to one three months to one Open one day one week month months one year year maturity Total Type £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Securities lending ------3,8053,805
------3,8053,805
4) Re-use of Collateral The Fund does not engage in re-use of collateral. 5) Safekeeping of Collateral Received
Names and value of custodians safekeeping collateral as at 31st December 2020 £'000
JP Morgan 2,849 Bank of New York 1,178 Number of custodians safekeeping collateral 2 6) Safekeeping of Collateral Granted The Fund does not borrow stock from counterparties; therefore, no collateral has been granted.
8 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Aerospace & Defence–1.79%(31.12.2019–1.97%) Avon Rubber 2,914 92 0.05 Babcock International 44,085 123 0.07 BAE Systems 281,694 1,377 0.82 Chemring 22,581 65 0.04 Meggitt 68,255 319 0.19 QinetiQ 49,197 157 0.09 Rolls-Royce 654,488 728 0.43 Senior 35,920 32 0.02 Ultra Electronics 6,095 126 0.08
3,019 1.79
Automobiles & Parts–0.10%(31.12.2019–0.05%) AA 55,187 19 0.01 Aston Martin Lagonda Global 5,195 104 0.06 TI Fluid Systems 17,644 43 0.03
166 0.10
Banks–3.98%(31.12.2019–9.67%) Bank of Georgia 3,041 37 0.02 Barclays 1,514,981 2,222 1.32 Close Brothers 13,197 182 0.11 Investec 58,176 109 0.06 Lloyds Banking 6,165,161 2,247 1.33 Metro Bank 14,402 20 0.01 Royal Bank of Scotland 398,220 668 0.40 Standard Chartered 226,529 1,055 0.62 TBC Bank 2,844 36 0.02 Virgin Money 108,622 146 0.09
6,722 3.98
Beverages–3.86%(31.12.2019–3.45%) A.G. Barr 6,420 33 0.02
9 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Beverages–3.86%(31.12.2019–3.45%) (continued) Britvic 23,316 189 0.11 C&C 25,001 57 0.04 Coca-Cola HBC 17,083 406 0.24 Diageo 201,090 5,788 3.43 Stock Spirits 14,917 40 0.02
6,513 3.86
Chemicals–1.00%(31.12.2019–0.75%) Croda International 11,803 778 0.46 Elementis 50,258 58 0.04 Johnson Matthey 16,646 404 0.24 Rhi Magnesita 3,036 106 0.06 Synthomer 29,139 131 0.08 Treatt 4,670 38 0.02 Victrex 7,186 169 0.10
1,684 1.00
Closed End Investments–0.57%(31.12.2019–5.32%) Aberforth Smaller Companies Trust 7,845 98 0.06 Alcentra European Floating Rate Income Fund 411 0 0.00 Alliance Trust 28,180 254 0.15 BlackRock Smaller Companies Trust 3,915 68 0.04 BMO Global Smaller Companies Fund 47,886 70 0.04 Dexion Equity Alternative~ 4,852 - 0.00 European Opportunities Trust 8,609 63 0.04 Gartmore Irish Growth Fund~ 1,683 - 0.00 Herald Investment Trust 5,758 129 0.08 Pantheon International 4,717 118 0.07 Schroder Asia Pacific Fund 17,327 107 0.06 VinaCapital Vietnam Opportunity Fund 13,947 59 0.03
966 0.57
10 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Construction & Materials–1.71%(31.12.2019–1.47%) Balfour Beatty 60,080 162 0.10 CRH 68,792 2,104 1.24 Dialight 2,083 5 0.00 Forterra 17,480 43 0.02 Galliford Try 8,326 10 0.01 Ibstock 31,174 65 0.04 Keller 5,624 39 0.02 Kier 12,854 10 0.01 Marshalls 17,384 130 0.08 Morgan Sindall 3,167 49 0.03 Norcros 6,183 13 0.01 Polypipe 18,801 112 0.07 Ricardo 4,150 14 0.01 Severfield 25,499 18 0.01 SIG 57,025 18 0.01 Tyman 15,484 54 0.03 Volution 14,821 41 0.02
2,887 1.71
Consumer Services–1.42%(31.12.2019–1.59%) Compass 156,190 2,129 1.26 Dignity 4,152 26 0.01 HomeServe 24,097 247 0.15
2,402 1.42
Electricity – 0.90%(31.12.2019 – 0.68%) ContourGlobal 13,901 30 0.02 Drax 34,792 130 0.07 SSE 91,134 1,367 0.81
1,527 0.90
11 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Electronic & Electrical Equipment–1.21%(31.12.2019–0.88%) Halma 33,204 813 0.48 IMI 23,513 274 0.16 Luceco 5,463 14 0.01 Morgan Advanced Materials 22,742 71 0.04 Oxford Instruments 4,651 93 0.06 Porvair 3,216 17 0.01 Renishaw 2,996 173 0.10 Rotork 76,240 242 0.15 Schneider Electric 1 0 0.00 Spectris 10,156 286 0.17 XP Power 1,193 56 0.03
2,039 1.21
Finance & Credit Services–0.22%(31.12.2019–0.22%) Amigo 9,856 1 0.00 Arrow Global 11,302 23 0.01 International Personal Finance 17,137 14 0.01 OSB 32,935 140 0.08 Paragon Banking 22,185 108 0.07 Provident Financial 28,058 86 0.05 S&U 237 5 0.00
377 0.22
Food Producers – 0.79%(31.12.2019 – 0.73%) Anglo-Eastern Plantations 1,478 8 0.01 Associated British Foods 30,470 690 0.41 Bakkavor 11,287 9 0.01 Carr's 6,657 9 0.01 Cranswick 4,547 160 0.10 Devro 13,031 20 0.01 Greencore 35,136 41 0.02 Hilton Food 5,158 57 0.03
12 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Food Producers – 0.79%(31.12.2019 – 0.73%) (continued) Premier Foods 56,822 57 0.03 Tate & Lyle 41,024 277 0.16
1,328 0.79
Gas, Water & Multiutilities – 2.52%(31.12.2019 – 2.25%) Centrica 511,545 238 0.14 National Grid 307,465 2,660 1.57 Pennon 36,822 350 0.21 Severn Trent 20,871 478 0.28 United Utilities 59,799 535 0.32
4,261 2.52
General Industrials–2.38%(31.12.2019–1.95%) Bunzl 29,501 721 0.43 Coats 125,588 84 0.05 DS Smith 111,769 419 0.25 Goodwin 235 7 0.00 Macfarlane 13,004 11 0.01 Melrose Industries 421,699 751 0.44 Mondi 42,468 730 0.43 Smiths 34,742 523 0.31 Smurfit Kappa 22,631 778 0.46
4,024 2.38
Health Care Providers–0.19%(31.12.2019–0.23%) Medica 8,239 10 0.00 Mediclinic International 40,116 113 0.07 Spire Healthcare 22,132 34 0.02 UDG Healthcare 22,005 172 0.10
329 0.19
13 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Household Goods & Home Construction–2.01%(31.12.2019-1.70%) Barratt Developments 88,709 594 0.35 Bellway 10,820 320 0.19 Berkeley 10,226 485 0.29 Countryside Properties 45,249 211 0.12 Crest Nicholson 26,948 88 0.05 Headlam 6,533 24 0.01 McCarthy & Stone 42,862 51 0.03 MJ Gleeson 3,604 28 0.02 Persimmon 27,814 770 0.46 Redrow 19,947 114 0.07 Taylor Wimpey 317,030 526 0.31 Vistry 19,268 181 0.11
3,392 2.01
Industrial Engineering–0.78%(31.12.2019–0.50%) Spirax-Sarco Engineering 6,444 728 0.43 Vesuvius 18,644 100 0.06 Vitec 3,598 33 0.02 Weir 22,704 452 0.27
1,313 0.78
Industrial Materials–0.01%(31.12.2019–0.01%) Zotefoams 3,619 14 0.01
14 0.01
Industrial Metals & Mining–5.30%(31.12.2019–6.20%) Anglo American 107,807 2,614 1.55 Antofagasta 30,336 437 0.26 Bodycote 16,427 123 0.07 Evraz 50,532 238 0.14 Ferrexpo 23,480 66 0.04 Hill & Smith 6,952 98 0.06
14 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Industrial Metals & Mining–5.30%(31.12.2019–6.20%) (continued) KAZ Minerals 19,416 128 0.08 Kenmare Resources 6,235 20 0.01 Rio Tinto 95,173 5,206 3.08 Trifast 10,709 16 0.01
8,946 5.30
Industrial Support Services–5.25%(31.12.2019–4.17%) Aggreko 21,085 132 0.08 Capita 130,616 51 0.03 Clipper Logistics 5,498 32 0.02 Costain 13,146 8 0.00 DCC 8,632 447 0.26 De La Rue 27,377 46 0.03 Diploma 10,646 233 0.14 DWF 7,438 6 0.00 Electrocomponents 39,121 341 0.20 Equiniti 25,275 28 0.02 Essentra 26,282 80 0.05 Euromoney Institutional Investor 9,315 99 0.06 Experian 79,389 2,205 1.31 FDM 9,128 103 0.06 Ferguson 19,705 1,751 1.04 Finablr~ 13,507 - 0.00 G4S 135,675 344 0.20 Grafton 19,062 176 0.10 Hays 135,921 194 0.11 Inchcape 34,300 221 0.13 Intertek 14,142 799 0.47 IWG 62,979 216 0.13 Mears 9,804 15 0.01 Mitie 91,781 38 0.02 Network International 40,612 133 0.08 Pagegroup 27,341 122 0.07 PayPoint 5,108 33 0.02
15 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Industrial Support Services–5.25%(31.12.2019–4.17%) (continued) Rentokil Initial 162,648 829 0.49 Robert Walters 5,384 25 0.01 RPS 17,394 12 0.01 Serco 106,923 128 0.08 SThree 10,044 30 0.02
8,877 5.25
Industrial Transportation–1.25%(31.12.2019–0.79%) Ashtead 39,194 1,347 0.80 Clarkson 1,997 54 0.03 James Fisher & Sons 3,236 31 0.02 John Menzies 5,608 15 0.01 Redde Northgate 19,755 52 0.03 Royal Mail 80,319 271 0.16 Signature Aviation 71,957 278 0.16 Speedy Hire 40,386 29 0.02 Stobart 33,011 9 0.00 Vp 1,263 10 0.01 Wincanton 9,312 24 0.01
2,120 1.25
Investment Banking & Brokerage–5.02%(31.12.2019–3.86%) 3i 83,477 967 0.57 AJ Bell 25,285 110 0.07 Allied Minds 18,216 6 0.00 Ashmore 39,958 172 0.10 Brewin Dolphin 23,333 71 0.04 City of London Investment 1,665 7 0.01 CMC Markets 8,809 34 0.02 Georgia Capital 3,788 20 0.01 Hargreaves Lansdown 31,431 479 0.28 IG 31,849 275 0.16 IntegraFin 22,875 127 0.08
16 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Investment Banking & Brokerage–5.02%(31.12.2019–3.86%) (continued) Intermediate Capital 24,677 426 0.25 IP 88,236 87 0.05 John Laing 43,271 144 0.09 JTC 8,408 47 0.03 Jupiter Fund Management 37,964 107 0.06 Liontrust Asset Management 6,358 83 0.05 London Stock Exchange 27,601 2,486 1.47 M&G 227,840 451 0.27 Man 125,177 173 0.10 Ninety One 35,969 82 0.05 Plus500 8,849 128 0.08 PureTech Health 12,448 50 0.03 Quilter 153,176 235 0.14 Rathbone Brothers 6,021 93 0.06 River & Mercantile 3,849 7 0.00 Sanne 14,725 91 0.05 Schroders 9,787 327 0.19 St. James's Place 46,376 526 0.31 Standard Life Aberdeen 191,033 537 0.32 TP 49,419 118 0.07 XPS Pensions 13,723 18 0.01
8,484 5.02
Leisure Goods – 0.19%(31.12.2019 – 0.09%) Games Workshop 2,857 320 0.19 Photo-Me International 19,257 9 0.00
329 0.19
Life Insurance–3.55%(31.12.2019–3.20%) Aviva 343,315 1,116 0.66 Chesnara 12,060 36 0.02 Just 81,192 57 0.03 Legal & General 519,295 1,382 0.82
17 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Life Insurance–3.55%(31.12.2019–3.20%) (continued) Phoenix 47,437 332 0.20 Prudential 228,624 3,080 1.82
6,003 3.55
Media–3.29%(31.12.2019–3.07%) 4imprint 2,191 56 0.03 Bloomsbury Publishing 6,112 18 0.01 Future 8,520 148 0.09 Hyve 22,666 26 0.02 Informa 131,091 720 0.43 ITV 326,544 349 0.21 Pearson 65,784 447 0.26 Reach 20,942 30 0.02 RELX 162,888 2,920 1.73 STV 2,410 7 0.00 WPP 104,045 832 0.49
5,553 3.29
Medical Equipment & Services–0.85%(31.12.2019–0.81%) ConvaTec 140,235 279 0.16 Smith & Nephew 76,680 1,158 0.69
1,437 0.85
Nonequity Investment Instruments – 0.00%(31.12.2019 – 0.00%) Tapestry Investment~ 4 - 0.00
0.00 0.00
Nonlife Insurance–1.31%(31.12.2019–1.02%) Admiral 18,218 530 0.32 Beazley 52,515 192 0.11 Direct Line Insurance 119,707 382 0.23
18 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Nonlife Insurance–1.31%(31.12.2019–1.02%) (continued) Hiscox 29,366 292 0.17 Lancashire 21,180 153 0.09 RSA Insurance 90,526 613 0.36 Sabre Insurance 18,583 51 0.03
2,213 1.31
Oil, Gas & Coal–8.13%(31.12.2019–11.62%) BP 1,738,667 4,430 2.62 Cairn Energy 60,584 127 0.08 Diversified Gas & Oil 59,516 67 0.04 Energean 7,906 57 0.03 EnQuest 137,278 16 0.01 Hunting 10,845 24 0.01 John Wood 58,389 181 0.11 Petrofac 20,806 29 0.02 Pharos Energy 19,925 4 0.00 Premier Oil 72,291 14 0.01 Royal Dutch Shell 'A' Shares 359,743 4,669 2.76 Royal Dutch Shell 'B' Shares 325,099 4,094 2.42 Tullow Oil 108,919 32 0.02
13,744 8.13
Personal Care, Drug & Grocery–8.09%(31.12.2019–5.28%) Greggs 8,713 156 0.09 J Sainsbury 143,095 323 0.19 McBride 16,010 13 0.01 Ocado 42,549 973 0.58 PZ Cussons 15,156 35 0.02 Reckitt Benckiser 55,290 3,617 2.14 Tesco 847,898 1,962 1.16
19 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Personal Care, Drug & Grocery–8.09%(31.12.2019–5.28%) (continued) Unilever 222,873 6,252 3.70 Wm Morrison Supermarkets 194,437 345 0.20
13,676 8.09
Personal Goods–2.56%(31.12.2019-0.40%) Burberry 35,173 630 0.37 Superdry 5,149 13 0.01 Ted Baker 24,205 28 0.02 Unilever 80,517 3,572 2.11 Watches of Switzerland 13,519 78 0.05
4,321 2.56
Pharmaceuticals & Biotechnology–9.09%(31.12.2019–8.12%) AstraZeneca 115,094 8,429 4.99 Dechra Pharmaceuticals 9,180 317 0.19 Genus 5,702 239 0.14 GlaxoSmithKline 432,133 5,799 3.43 Hikma Pharmaceuticals 14,727 371 0.22 Indivior 80,112 87 0.05 Oxford Biomedica 5,006 52 0.03 Vectura 48,343 60 0.04
15,354 9.09
Precious Metals & Mining–0.56%(31.12.2019–0.30%) Centamin 94,779 117 0.07 Fresnillo 16,162 183 0.11 Hochschild Mining 20,216 42 0.02 Petropavlovsk 265,349 86 0.05 Polymetal International 31,083 524 0.31 St Barbara 1 0 0.00
952 0.56
20 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Real Estate Investment & Services–0.66%(31.12.2019–0.61%) CLS 12,559 28 0.02 Foxtons 19,627 11 0.01 Grainger 58,002 165 0.10 Harworth 13,679 14 0.01 Helical 7,860 29 0.02 Henry Boot 7,721 20 0.01 LSL Property Services 6,625 19 0.01 Palace Capital 3,124 6 0.00 Phoenix Spree Deutschland 6,541 21 0.01 Raven Russia 33,308 9 0.00 Rightmove 75,943 494 0.29 Savills 11,593 111 0.07 Sirius Real Estate 83,659 78 0.05 St Modwen Properties 15,490 62 0.04 U&I 9,686 6 0.00 Urban & Civic 11,028 38 0.02
1,111 0.66
Real Estate Investment Trusts–2.65%(31.12.2019–2.57%) Assura 231,051 178 0.11 Big Yellow 14,134 155 0.09 BMO Commercial Property Trust 41,567 33 0.02 BMO Real Estate Investments 18,676 11 0.01 British Land 81,045 396 0.23 Capital & Counties Properties 64,223 93 0.06 Capital & Regional 2,438 2 0.00 Civitas Social Housing 50,074 53 0.03 Custodian Reit 30,608 27 0.02 Derwent London 8,814 273 0.16 Ediston Property Investment 18,986 13 0.01 Empiric Student Property 45,724 34 0.02 GCP Student Living 35,939 52 0.03 Great Portland Estates 22,205 148 0.09 Impact Healthcare Reit 18,593 20 0.01
21 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Real Estate Investment Trusts–2.65%(31.12.2019–2.57%) (continued) Intu Properties~ 3,033,999 - 0.00 Land Securities 62,456 421 0.25 LondonMetric Property 77,046 177 0.11 LXI REIT 45,673 54 0.03 McKay Securities 7,605 15 0.01 NewRiver REIT 26,908 23 0.01 Picton Property Income 42,500 32 0.02 Primary Health Properties 113,764 174 0.10 RDI REIT 22,664 22 0.01 Regional REIT 31,553 26 0.02 Residential Secure Income 14,352 13 0.01 Safestore 17,933 140 0.08 Schroder Real Estate Investment Trust 45,386 18 0.01 Segro 104,235 988 0.59 Shaftesbury 21,862 124 0.07 Standard Life Investment Property Income Trust 31,722 19 0.01 Target Healthcare REIT 36,108 41 0.02 Triple Point Social Housing Reit 28,906 32 0.02 Tritax Big Box REIT 149,562 251 0.15 UK Commercial Property REIT 56,931 39 0.02 UNITE 27,886 291 0.17 Workspace 11,674 90 0.05
4,478 2.65
Retailers–2.26%(31.12.2019–1.78%) AO World 25,035 103 0.06 B&M European Value Retail 74,618 385 0.23 Card Factory 28,687 12 0.01 DFS Furniture 29,188 64 0.04 Dixons Carphone 88,094 102 0.06 Dunelm 8,580 104 0.06 Frasers 19,704 89 0.05 Halfords 15,431 41 0.02 Howden Joinery 49,952 345 0.20
22 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Retailers–2.26%(31.12.2019–1.78%) (continued) JD Sports Fashion 37,677 324 0.19 Kingfisher 185,042 500 0.30 Lookers 28,210 3 0.00 Marks & Spencer 170,956 233 0.14 Motorpoint 5,795 17 0.01 Next 11,154 790 0.47 Pendragon 103,770 14 0.01 Pets at Home 41,572 173 0.10 Studio Retail 4,903 14 0.01 Topps Tiles 13,677 8 0.00 Travis Perkins 22,120 298 0.18 Vivo Energy 32,501 28 0.02 WH Smith 10,976 166 0.10
3,813 2.26
Software & Computer Services–1.99%(31.12.2019–1.37%) Alfa Financial Software 7,321 10 0.01 Aptitude Software 4,802 21 0.01 Ascential 34,586 133 0.08 Auto Trader 82,693 493 0.29 Avast 48,162 259 0.15 AVEVA 9,908 317 0.19 Computacenter 6,237 153 0.09 Funding Circle 13,189 12 0.01 GoCo 23,606 30 0.02 Just Eat Takeaway.com 10,342 854 0.51 Kainos 4,471 54 0.03 Kin & Carta 13,200 19 0.01 Micro Focus International 28,835 122 0.07 Moneysupermarket.com 45,469 119 0.07 NCC 21,194 53 0.03
23 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Software & Computer Services–1.99%(31.12.2019–1.37%) (continued) Sage 95,624 557 0.33 Softcat 10,848 149 0.09
3,355 1.99
Technology Hardware & Equipment–0.04%(31.12.2019–0.04%) DiscoverIE 7,188 49 0.03 TT Electronics 12,859 26 0.01
75 0.04
Telecommunications Equipment–0.10%(31.12.2019–0.07%) BATM Advanced Communications 26,558 25 0.02 Spirent Communications 52,868 139 0.08
164 0.10
Telecommunications Service Providers–2.45%(31.12.2019–2.44%) Airtel Africa 89,900 68 0.04 BT 762,420 1,008 0.60 Helios Towers 49,719 76 0.04 TalkTalk Telecom 52,876 52 0.03 Telecom Plus 6,616 95 0.06 Vodafone 2,348,391 2,840 1.68
4,139 2.45
Tobacco – 3.96%(31.12.2019 – 3.80%) British American Tobacco 200,104 5,419 3.21 Imperial Brands 82,594 1,268 0.75
6,687 3.96
Travel & Leisure–3.93%(31.12.2019–3.30%) 888 29,132 83 0.05
24 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Travel & Leisure–3.93%(31.12.2019–3.30%) (continued) Carnival 11,569 158 0.09 Cineworld 79,647 51 0.03 Domino's Pizza 41,142 130 0.08 easyJet 28,488 236 0.14 FirstGroup 97,896 72 0.04 Flutter Entertainment 11,206 1,693 1.00 Fuller Smith & Turner 2,719 19 0.01 Gamesys 8,305 95 0.06 Go-Ahead 3,635 36 0.02 GVC 50,821 576 0.34 Gym 11,414 25 0.02 Hollywood Bowl 12,288 25 0.02 Hostelworld 8,660 7 0.00 InterContinental Hotels 15,998 750 0.44 International Consolidated Airlines 326,215 521 0.31 J D Wetherspoon 8,518 95 0.06 Marston's 49,580 38 0.02 Mitchells & Butlers 17,233 41 0.02 National Express 47,172 112 0.07 On the Beach 15,817 59 0.04 Playtech 26,032 105 0.06 PPHE Hotel 1,875 26 0.02 Rank 14,950 21 0.01 Restaurant 42,354 27 0.02 Saga 6,636 17 0.01 SSP 46,192 153 0.09 Stagecoach 35,398 26 0.02 TEN Entertainment 3,046 6 0.00 Trainline 40,404 188 0.11 TUI 38,238 175 0.10 Whitbread 17,672 548 0.32 William Hill 91,711 248 0.15 Wizz Air 5,985 273 0.16
6,635 3.93
25 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Portfolio Statement (continued) As at 31st December 2020
Market Value % of Total Holdings £'000 Net Assets
Waste & Disposal Services–0.05%(31.12.2019–0.03%) Biffa 26,123 60 0.04 Renewi 47,506 20 0.01
80 0.05
Derivatives – (0.01%)(31.12.2019 – 0.00%) FTSE 100 Index Futures March 2021 16 (13) (0.01)
(13) (0.01)
Portfolio of investments^ 165,496 97.96 Net other assets 3,454 2.04
Total net assets 168,950 100.00
All holdings are ordinary shares or common stock unless otherwise stated. Comparative figures shown above in brackets relate to 31 December 2019 and were restated to disclose recently updated Industry Classification Benchmark. ^ Includes derivative liabilities. ~ Delisted. † Goldman Sachs is the counterparty, total notional exposure is £1,027,200 and 0.62% as a percentage of the Fund’s value.
26 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Director's Report to Unitholders For the year ended 31st December 2020
In accordance with the requirements of the Collective Investment Schemes sourcebook of the Financial Conduct Authority’s handbook of rules and guidance we hereby certify the report on behalf of the Directors of State Street Unit Trust Management Limited.
A. Castle – Director, State Street Unit Trust Management Limited
V. Parry – Director, State Street Unit Trust Management Limited
21 April 2021
27 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Manager's Statement of Responsibilities For the year ended 31st December 2020
The Collective Investment Schemes (COLL) sourcebook requires the Manager to prepare financial statements for each accounting period which give a true and fair view of the financial position of the Fund as at the end of the accounting period and of its revenue for the period. In preparing the financial statements the Manager is required to: • select suitable accounting policies and then apply them consistently • comply with the requirements of the Statement of Recommended Practice relating to Authorised Funds issued by the Investment Management Association in May 2014 • comply with the requirements of the COLL • follow generally accepted accounting principles and applicable accounting standards • keep proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements • prepare the financial statements on the going concern basis unless it is inappropriate to presume the Fund will continue in operation • take reasonable steps for the prevention and detection of fraud or other irregularities The Manager is responsible for the management of the Fund in accordance with its Trust Deed, the Prospectus and the COLL.
ASSESSMENT OF VALUE (page 51) In accordance with FCA policy statement PS18/8 Value Assessment and Reporting Requirements, the Manager has performed a detailed assessment of whether the Fund provides value to investors. This assessment has been subject to scrutiny by the directors and the summary of the outcome is included as a report in the annual accounts.
28 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Statement of the Depositary's Responsibilities For the year ended 31st December 2020
Statement of the Depositary’s Responsibilities in respect of the Scheme The Depositary in its capacity as Trustee of State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund must ensure that the Trust is managed in accordance with the Financial Conduct Authority’s Collective Investment Schemes Sourcebook, the Financial Services and Markets Act 2000, as amended, (together “the Regulations”), the Trust Deed and Prospectus (together “the Scheme documents”) as detailed below. The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Trust and its investors. The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Trust in accordance with the Regulations. The Depositary must ensure that: • the Trust’s cash flows are properly monitored and that cash of the Trust is booked in cash accounts in accordance with the Regulations; • the sale, issue, repurchase, redemption and cancellation of units are carried out in accordance with the Regulations; • the value of units of the Trust are calculated in accordance with the Regulations; • any consideration relating to transactions in the Trust’s assets is remitted to the Trust within the usual time limits; • the Trust’s income is applied in accordance with the Regulations; and • the instructions of the Authorised Fund Manager (“the AFM”), which is the UCITS Management Company, are carried out (unless they conflict with the Regulations). The Depositary also has a duty to take reasonable care to ensure that the Trust is managed in accordance with the Regulations and the Scheme documents of the Trust in relation to the investment and borrowing powers applicable to the Trust. Having carried out such procedures as we considered necessary to discharge our responsibilities as Depositary of the Trust it is our opinion, based on the information available and the explanations provided, that the manager has not in all instances managed the Trust during the period in accordance with the Regulations. Specifically, subscription monies had been reversed from the Trust. This resulted in settlement exceeding the regulatory settlement cycle resulting in a breach of COLL6.2.13R. Corrections have been made to ensure no detriment to either the affected Trust or unitholders. In addition, during the course of our reviews we have made a number of recommendations to improve the controls relating to the internal compliance arrangements of the Trust. The Depositary has requested that the Trust takes appropriate remedial action and has been monitoring progress/resolution of the work the Trust has been actively pursuing. This report is given on the basis that no breaches are subsequently advised to us before the distribution date. We therefore reserve the right to amend the report in the light of such circumstances.
Yours sincerely
Depositary HSBC Bank Plc 8 Canada Square London E14 5HQ
21 April 2021
29 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Independent auditors’ report to the Unitholders of State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Report on the audit of the financial statements
Our opinion In our opinion, the financial statements of State Street AUT Screened (ex Controversies and CW) Index Equity Fund (formerly State Street UK Equity Tracker Fund) (the “Trust”): • give a true and fair view of the financial position of the Trust as at 31 December 2020 and of the net revenue and the net capital losses on its scheme property for the year then ended; and • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law), the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. We have audited the financial statements, included within the Report and Financial Statements (the “Annual Report”), which comprise: the Balance Sheet as at 31 December 2020; the Statement of Total Return and the Statement of Change in Net Assets Attributable to Unitholders for the year then ended; the Distribution Tables; and the Notes to the Financial Statements, which include a description of the significant accounting policies.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Conclusions relating to going concern Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Trust’s ability to continue as a going concern for a period of at least twelve months from the date on which the financial statements are authorised for issue. In auditing the financial statements, we have concluded that the Manager’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Trust’s ability to continue as a going concern. Our responsibilities and the responsibilities of the Manager with respect to going concern are described in the relevant sections of this report.
Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Manager is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
30 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Independent auditors’ report to the Unitholders of State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund (continued)
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Manager’s Report In our opinion, the information given in the Manager’s Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of the Manager for the financial statements As explained more fully in the Manager's Statement of Responsibilities, the Manager is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Manager is also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Manager is responsible for assessing the Trust’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to wind up or terminate the Trust, or has no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the Trust/industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of the Collective Investment Schemes sourcebook, and we considered the extent to which non-compliance might have a material effect on the financial statements, in particular those parts of the sourcebook which may directly impact on the determination of amounts and disclosures in the financial statements. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or to increase the net asset value of the Trust. Audit procedures performed included: • Discussions with the Manager, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud; • Reviewing relevant meeting minutes, including those of the Manager’s board of directors; • Identifying and testing journal entries, specifically any journals posted as part of the financial year end close process; and • Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
31 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Independent auditors’ report to the Unitholders of State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund (continued)
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report This report, including the opinions, has been prepared for and only for the Trust’s unitholders as a body in accordance with paragraph 4.5.12 of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Opinion on matter required by the Collective Investment Schemes sourcebook In our opinion, we have obtained all the information and explanations we consider necessary for the purposes of the audit.
Collective Investment Schemes sourcebook exception reporting Under the Collective Investment Schemes sourcebook we are also required to report to you if, in our opinion: • proper accounting records have not been kept; or • the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility.
PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 21 April 2021
32 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Comparative Table For the year ended 31st December 2020 2020 2019 2018 Change in Net Assets Per Unit (£) (£) (£) Opening net asset value per unit 2.7666 2.3268 2.5703 Return before operating charges (0.2762) 0.4437 (0.2397) Operating charges (0.0028) (0.0039) (0.0038) Return after operating charges* (0.2790) 0.4398 (0.2435) Distributions (0.0689) (0.1085) (0.0970) Retained distributions on accumulation units 0.0689 0.1085 0.0970 Closing net asset value per unit 2.4876 2.7666 2.3268 *after direct transaction cost of: 0.0025 0.0034 0.0034 Performance Return after charges (10.08)% 18.90% (9.47)% Other Information Closing net asset value (£'000) 168,950 7,992,099 5,603,311 Closing number of units 67,917,844 2,888,739,589 2,408,189,486 Operating charges 0.12%^ 0.15% 0.15% Direct transaction costs 0.11% 0.13% 0.14% Prices Highest unit price 2.8084 2.8004 2.6809 Lowest unit price 1.8184 2.3158 2.2768
^The Operating charge changed from 15bps to 10bps on 1 May 2020. The above Operating charge percentage represents an average for the year.
General risk factors The value of funds and the revenue from them is not guaranteed and may fall as well as rise. You may get back less than you originally invested. What you get back may depend on: • Investment performance is not guaranteed. Past performance is no guarantee of future performance. There may also be variation in performance between funds with similar investment objectives. • The effect of an initial charge. If you sell your investment after a short period you may not get back what you originally invested, even if the price of your investment has not fallen. • The entire market of a particular asset class or geographical region may fall, having a greater effect on funds heavily invested in that asset class or region. • If you make regular withdrawals from your investment be aware that if the level of withdrawal exceeds the rate of investment growth of the Fund, your capital will be eroded. • Governments may change the tax rules which affect you or the funds in which you have invested. • Inflation will reduce what you could buy in the future, i.e. it will reduce the real value of your investment. • There is no certainty that the investment objective of any fund will actually be achieved.
33 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Statement of Total Return For the year ended 31st December 2020 Year ended Year ended 31.12.20 31.12.19 Note £'000 £'000 £'000 £'000 Income Net capital (losses)/gains 4 (1,710,446) 859,197 Revenue 6 190,444 289,085 Expenses 7 (7,095) (9,973) Interest payable and similar charges 8 (21) (22)
Net revenue before taxation 183,328 279,090 Taxation 9 (1,311) (2,633)
Net revenue after taxation 182,017 276,457
Total return before distributions (1,528,429) 1,135,654 Distributions 10 (182,019) (276,457)
Change in net (liabilities) / assets attributable to unitholders from investment activities (1,710,448) 859,197
Statement of Change in Net Assets Attributable to Unitholders For the year ended 31st December 2020 Year ended Year ended 31.12.20 31.12.19 £’000 £’000 £’000 £’000 Opening net assets 7,992,099 5,603,311 Amounts receivable on issue of units 1,009,820 1,403,466 Amounts payable on cancellation of units (1,149,800) (170,761) Value of inspecie transfers paid (6,099,473) 0
(6,239,453) 1,232,705 Dilution levy 4,692 6,464 Change in unitholders' funds from investment activities (1,710,448) 859,197 Retained distributions on accumulation units 122,060 290,422
Closing net assets 168,950 7,992,099
34 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Balance Sheet As at 31st December 2020 Note 31.12.20 31.12.19 £'000 £'000 Assets Fixed assets: Investments 165,509 7,861,005 Current assets: Debtors 11 2,835 21,972 Cash and bank balances 12 10,164 110,375
Total assets 169,026 7,993,352
Liabilities Investment liabilities 13 - Creditors Other creditors 13 9,545 1,253
Total liabilities 76 1,253
Net assets attributable to unitholders 168,950 7,992,099
35 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements For the year ended 31st December 2020
1. Accounting policies
(a) Basis of accounting The financial statements have been prepared under the historical cost convention by the revaluation of the investments, and in accordance with the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') which comprises the UK Financial Reporting Standard 102 ('FRS 102') and the Statement of Recommended Practice ('SORP') for Authorised Funds issued by the Investment Management Association in May 2014 (as amended in 2017). The financial statements have been prepared on a going concern basis.
(b) Basis of valuation of investments The investments of the Fund have been valued at the closing bid market prices ruling on the principal markets on which the stocks are quoted, on the last business day of the accounting year. Market value is defined by the SORP as fair value which generally is the bid value of each security. Where applicable, unlisted and suspended securities are based on the Manager’s assessment of their net realisable value. Open futures contracts have been valued at fair value and the net gains/(losses) are reflected within Derivative contracts in net capital gains/(losses) on investments.
(c) Exchange rates Foreign currency receipts and payments are translated at the rate applicable on the date of settlement. Foreign currency assets and liabilities are valued at the rates on the last day of the accounting year.
(d) Recognition of revenue Revenue is included in the Statement of Total Return on the following basis: Dividends are recognised when the security is quoted ex-dividend. Special dividends are treated as either capital or revenue depending on the facts of each particular case. Stock lending, deposit interest and interest payable are recorded on an accrual basis. Any income arising from stock lending is treated as revenue on an accruals basis and is disclosed in the notes to the Financial Statements net of directly attributable fees. The value of the collateral must always exceed the value of the stock on loan. The accepted collateral includes cash, equities, certain types of bonds and money market instruments as agreed with the Depositary.
(e) Treatment of expenses Management expenses are charged against the revenue of the Fund on an accruals basis.All other expenses other than bank charges and interest are met by the Manager.
(f) Taxation Provision is made for corporation tax at current rates on the excess of taxable revenue over expenses.
(g) Deferred taxation Deferred tax is provided for on all timing differences that have originated but not reversed by the balance sheet date other than those differences that are regarded as permanent. Any liability to deferred tax is provided at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be offset.
(h) Dilution adjustment In certain circumstances (as detailed in the Prospectus) the ACD may charge a dilution adjustment on the creation or cancellation of shares, which is paid into the capital of the relevant sub-fund on an accruals basis. The adjustment is intended to cover certain dealing charges not included in the mid-market value of the sub-fund used in calculating the share price, which could have a diluting effect on the sub-fund.
36 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
1. Accounting policies (continued)
(i) Returns from derivatives The Fund may enter into permitted derivative contracts such as futures. The positions are undertaken to obtain full market exposure and the returns are included within gains/(losses) on investments in the Statement of Total Return. Any open positions in these types of transactions at the year-end are included in the Balance Sheet at their mark to market value.
2. Distribution policy The policy is to distribute all available revenue, after deduction of those expenses which are chargeable in calculating the distribution. In order to conduct a controlled dividend flow to unitholders, an interim distribution will be made at the Manager’s discretion, up to a maximum of the distributable revenue available for the year. All remaining revenue is distributed in accordance with the COLL. Distributions of revenue are paid six monthly by reference to net revenue arising in the period ended 30th June and 31st December. Any revenue deficit will be borne by the capital account.
(a) Treatment of stock dividends The ordinary element of stock dividends is treated as revenue and forms part of the distribution. In the case of an enhanced stock dividend, the value of the enhancement is treated as capital and does not form part of the distribution.
(b) Expenses Management expenses are charged to revenue.
(c) Equalisation Equalisation takes account of the revenue received on the creation of shares and revenue paid on cancellation of shares and is allocated to the distribution account.
3. Risk management policies In pursuing its investment objectives the Fund holds a number of financial instruments. The Fund’s financial instruments comprise of securities and other investments, cash balances and bank overdrafts, short term fixed deposits, debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, amounts receivable for creations and payable for liquidations and debtors for accrued revenue. The main risks the Fund may face from investing are: (a) market risk, (b) market price risk, (c) foreign currency risk, (d) interest rate risk, (e) liquidity risk, (f) credit risk, (g) use of derivatives and (h) Stock lending risk. The Manager’s policy for managing these risks are summarised below and have been applied throughout the year.
(a) Market risk Market risk is the risk that the fair value or future cash flows of the financial instruments held by the Fund will fluctuate because of changes in underlying valuation factors. It represents the potential loss the Fund might suffer through holding market positions in the face of valuation factor movements. Market risk typically includes market price risk, foreign exchange or currency risk, and interest rate risk.
37 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
3. Risk management policies (continued)
(b) Market price risk Market price risk is the risk that the value of the financial instruments held by the Fund will fluctuate because of changes in market prices. It represents the potential loss the Fund might suffer through changes in market prices of the Fund holdings. The investment manager considers the asset allocation of the portfolio in order to minimize the risk associated with particular countries or industry sectors whilst continuing to follow the investment objectives of the Fund. As an index Fund, the investment objective is to seek to track as closely as reasonably possible the performance of the benchmark index. In order to achieve this objective, the Fund invests primarily in securities held in the equity index benchmark. Market price risk for an index Fund arises from a mismatch in the relative proportion of assets in Fund from their respective proportions in the benchmark. The Fund places limitations on the amount by which a holding may deviate from the proportion benchmark to limit the market risk from mismatched positions. All securities investments present a risk of loss of capital. The investment manager assess the Fund’s market risk volatility to ensure that the effect of utilizing financial derivative instruments is not significant enough to cause disproportionate losses to a Fund’s overall value. The investment manager moderates this risk through careful selection of securities and financial instruments. The investment manager manages this risk through a combination of risk metrics. This includes, but is not restricted to, tracking error volatility, which measures the ex-ante volatility of excess returns of the Fund against its referenced benchmark. The tracking error volatility on the Fund is closely monitored on a regular basis, and is a key consideration when the Fund is rebalanced.
(c) Foreign currency risk Any fluctuations in foreign currency exchange rates between the base currency ("GBP") and the respective foreign currencies may significantly affect the value of the Fund investments and the returns ultimately achieved by the Fund. Local interest rates and monetary policy, as well as other government fiscal and labour policies, also can adversely impact the Fund’s currency values. Based on the Fund mandate, there is no hedging of foreign currency risk exposure. This follows from the investment objective to track the performance of the benchmark, which is also not hedged against changes in foreign exchange rates.
(d) Interest rate risk Interest rate risk is present when the value of investment securities may fluctuate as a result of a change in market interest rates. Explicit interest rate risk occurs when there is a direct relationship between changes in interest rates and changes in the value of investment securities. The Fund invests in only equity and equity-based instruments, the values of which are not directly dependent on interest rates.
(e) Liquidity risk The Fund is exposed to daily cash redemptions of redeemable shares. So the main liability of the Fund is the redemption of any shares that investors wish to sell. Hence the Fund invest the large majority of the assets in investments that are traded in an active market and can ordinarily be readily disposed. However, liquidity risk will occur if an equity issuer becomes credit impaired or if the relevant market becomes illiquid. In such a case, it may not be possible to initiate or liquidate a position at a price that is deemed by the investment manager to be demonstrating fair value. Liquidity risk may be temporary or may last for extended periods.
38 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
3. Risk management policies (continued)
The indexed Fund invests solely in securities which form part of the Benchmark Index. Benchmark Indexes are constructed using index rules requiring securities to have a specified minimum trading volume, which, although not guaranteeing liquidity, provides indication of the liquid nature of the securities underlying the Fund. The Fund is exposed to daily contributions and withdrawals which are managed to ensure that exposure to the Benchmark Indexes are maintained in order to meet the investment objective of the Fund.
(f) Credit risk The Fund invests in only equity and equity-based instruments, which are not credit instruments, and therefore the Fund is not explicitly exposed to credit risk other than revenue index futures. Index futures used for efficient portfolio management are exchange traded and marked to market daily, so counterparty risk is negligible.
(g) Use of derivatives The Fund uses equity index futures only, no other derivatives, for efficient portfolio management—index futures are used to equitize cash holdings from inflows and outflows and also anticipated cash flows (e.g. dividend receivables). As a result the exposure to futures are covered by cash and near cash at all times, and assist in meeting the investment objectives of the Fund.
(h) Stock lending risk Stock lending transactions may involve a risk that a counterparty will wholly or partially fail to honour its contractual obligations. In order to mitigate that risk of counterparty default, the counterparties to these transactions may be required to provide collateral to suitably cover their obligations to the Schemes. In the event of default by the counterparty, it will forfeit its collateral on the transaction. However, there is risk that the collateral, especially where it is in the form of stocks, when realised will not raise sufficient cash to settle the counterparty’s liability to the Schemes. Stock lending transactions may, in the event of a default by the counterparty, result in the stocks lent being recovered late or only in part. This may result in loss for the Lending Schemes.
4. Net capital (losses)/gains The net capital (losses)/gains during the year comprise: 31.12.20 31.12.19 £'000 £'000 Non-derivative securities (1,690,213) 843,717 Derivative contracts (20,956) 15,755 Gains/(losses) on foreign exchange 723 (275) Net capital (losses)/gains (1,710,446) 859,197
39 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
5. Purchases, sales and transaction costs 31.12.20 31.12.19 £'000 £'000 Purchases excluding transaction costs Equities 1,296,790 1,794,998
Total before transaction costs 1,296,790 1,794,998
Commissions Equities 246 358 Derivatives 913
255 371
Taxes Equities 5,752 8,332
5,752 8,332
Total purchases transaction costs 6,007 8,703
Purchases including transaction costs 1,302,797 1,803,701
31.12.20 31.12.19 £'000 £'000 Sales excluding transaction costs Equities 7,313,636 235,318
Total before transaction costs 7,313,636 235,318
Commissions Equities (229) (32) Derivatives (10) (14)
(239) (46)
Taxes Equities (2) -
(2) -
Total sales transaction costs (241) (46)
Sales including transaction costs 7,313,395 235,272
40 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
5. Purchases, sales and transaction costs (continued)
31.12.20 31.12.19 % % Transaction costs as percentage of principal amounts Purchases – Commissions Equities 0.019 0.020 Purchases – Taxes Equities 0.444 0.464 Sales – Commissions Equities 0.003 0.013 Sales – Taxes Equities 0.000 0.000 31.12.20 31.12.19 % % Transaction costs as percentage of average net asset value Commissions 0.009 0.006 Taxes 0.097 0.120
Total 0.106 0.126 The above analysis covers any direct transaction costs suffered by the Fund during the year. However it is important to understand the nature of other transactions costs associated with different investments asset classes and instrument types. Separately identifiable direct transactions costs (commissions, taxes etc.) are attributable to the Fund’s purchase and sale of equity shares. Additionally for equity shares, there is a dealing spread cost (the difference between the buying and selling prices) which will be suffered on purchase and sale transactions. For the Fund’s investment in collective investment scheme holdings there will potentially be dealing spread costs applicable to purchases and sales. However, additionally there are indirect transaction costs suffered in those underlying funds, throughout the holding period for the instruments, which are not separately identifiable and do not form part of the analysis above. During the year the Fund utilised futures derivatives instruments covering different underlying asset classes. The settlements values for opening and closing derivative positions are not comparable to principal values for transactions in direct holding investments and therefore purchase and sale amounts for derivative transactions are not quantified in the analysis above. Transaction costs for derivatives positions will be either suffered as direct costs or form part of the dealing spread for the instruments. Any direct costs are identified in the analysis above. Dealing spread costs suffered by the Fund vary considerably for the different asset/instrument types depending on a number of factors including transaction value and market sentiment. At the balance sheet date the average portfolio dealing spread (difference between bid and offer prices of all investments expressed as a percentage of the offer price value) was 0.00% (31.12.2019: 0.00%).
41 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
6. Revenue 31.12.20 31.12.19 £'000 £'000 UK dividends 163,402 223,367 Overseas dividends 19,309 37,726 Property income distributions 2,053 3,934 Stock dividends 4,318 22,649 Interest distributions from Regulated Collective Investment Schemes 280 232 Bank interest 144 45 Offshore distribution taxable 24 53 Stock lending revenue 946 1,101 Derivatives revenue (32) (22)
Revenue 190,444 289,085
7. Expenses 31.12.20 31.12.19 £'000 £'000 Manager's periodic charge 7,095 9,973 Total expenses 7,095 9,973
The audit fee for the year of £12,317 (exclusive of VAT) is borne by the Manager (31.12.19: £11,405). As permitted by the Trust Deed, the Manager is remunerated out of the property of the Fund. This charge is expressed as an annual percentage of the value of the property of the Fund. The Manager’s periodic charge was 10 basis points for the year ended 31.12.20 (31.12.19: 15 basis points).
8. Interest payable and similar charges 31.12.20 31.12.19 £'000 £'000 Interest payable 21 22 21 22
9. Taxation
(a) Analysis of charge in year: 31.12.20 31.12.19 £'000 £'000 Overseas tax 1,311 2,633 Total current tax 1,311 2,633
Total tax charge (note 9b) 1,311 2,633
42 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
9. Taxation (continued)
(b) Factors affecting total tax charge for the year: 31.12.20 31.12.19 £'000 £'000 Net revenue before taxation 183,328 279,090 Corporation tax of 20% 36,666 55,818 Effects of: Revenue not subject to corporation tax (37,173) (56,438) Movement in excess management expenses 507 620 Overseas tax 1,311 2,633 Total tax charge for year (note 9a) 1,311 2,633
(c) Factors that may affect future tax charges: At the year end, after offset against revenue taxable on receipt, there is a potential deferred tax asset of £4,918,096 (31.12.19: £4,411,480) in relation to surplus management expenses. It is unlikely the Fund would generate sufficient taxable profits in the future to utilise these amounts and therefore no deferred tax asset has been recognised.
10. Distributions The distributions take account of revenue received on the creation of units and income deducted on the cancellation of units, and comprises: 31.12.20 31.12.19 £'000 £'000 Interim 119,794 144,370 Final 2,266 146,052 122,060 290,422 Amounts deducted on cancellation of units 71,843 1,681 Amounts added on issue of units (11,884) (15,646) Net distribution for the year 182,019 276,457
The net distributions of the year is represented by: Net revenue after taxation 182,017 276,457 Movement in income carried forward 2 - Net distribution for the year 182,019 276,457
43 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
11. Debtors 31.12.20 31.12.19 £'000 £'000 Creations awaiting settlement - 124 Sales awaiting settlement - 142 Accrued revenue 417 19,816 Income tax recoverable 138 125 Overseas tax recoverable 2,280 1,765 Total debtors 2,835 21,972
12. Cash and bank balances 31.12.20 31.12.19 £'000 £'000 Cash and bank balances 10,060 105,920 Amounts held at brokers 104 4,455 Total cash and bank balances 10,164 110,375
13. Other creditors 31.12.20 31.12.19 £'000 £'000 Redemptions liability 9,482 0 Purchases awaiting settlement 49 247 Accrued Manager's periodic charge 14 1,006 Total other creditors 9,545 1,253
14. Contingent liabilities and commitments The Fund had no contingent liabilities at year end (31.12.19: £nil).
15. Related party transactions The Manager exercises governance and oversight over the Fund and is a related party by virtue of the Trust Deed constituting the Fund. Amounts paid during the year or due to the Manager at the year end are disclosed under Expenses and Other Creditors in the Notes to the financial statements. At the year end £14,328 (31.12.19: £1,005,975) was due to the Manager in relation to accrued manager’s periodic charges are disclosed in Other Creditors in the Notes to the Financial Statements. Transactions relating to the creation and cancellation of units and the purchases and sales of investments which pass through the Manager, but are not for the benefit of, either related party are disclosed in the Statement of Change in Net Assets Attributable to Unitholders. Amounts due to or from the Fund at the year end in relation to these transactions are disclosed under Debtors and Creditors in the Notes to the Financial Statements.
16. Risk disclosures The Manager’s policy for managing these risks are summarised below and have been applied throughout the year.
44 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
16. Risk disclosures (continued)
(1) Foreign currency risk The Fund’s financial instruments are almost exclusively held in the base currency, sterling. Therefore foreign currency risk is not deemed to be significant. Changes in foreign currency exchange rates would have no material impact to the net asset value of the Fund. Consequently, no sensitivity analysis has been presented.
(a) Market price risk The Fund’s investment portfolio is exposed to market price fluctuations which are monitored by the Manager in pursuance of the investment objective and policy as set out on page 1. Adherence to investment guidelines and to investment and borrowing powers set out in the Trust Deed, the Scheme Particulars and in the Financial Conduct Authority’s Collective Investment Scheme sourcebook (the “COLL sourcebook”) mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the Manager’s Report and Portfolio Statement. If market prices had increased by 10% as at the balance sheet date, the net asset value of the Fund would have increased by £16,550,869 (31.12.19: £786,084,052). If market prices had decreased by 10% as at the balance sheet date, the net asset value of the Fund would have decreased by £16,550,869 (31.12.19: £786,084,052). These calculations assume all other variables remain constant.
(b) Interest rate risk The majority of the Fund’s financial assets are equity shares and other investments which neither pay interest nor have a maturity date. Therefore interest rate risk is not deemed to be significant.
(c) Liquidity risk All of the Fund’s financial assets are considered to be readily realisable in accordance with the market practices of the exchange on which they are traded. In general, the Investment Manager manages the Fund’s cash to ensure it can meet its liabilities. Where investments cannot be realised in time to meet any potential liability, the Fund may borrow up to 10% of its value to ensure settlement. All of the Fund’s financial liabilities are payable on demand or in less than one year, therefore liquidity risk is not significant.
17. Unitholders’ funds 31.12.20 31.12.19 Opening units in issue 2,888,739,589 2,408,189,486 Issues 490,493,653 549,066,300 Cancellations (3,311,315,398) (68,516,197) Closing units in issue 67,917,844 2,888,739,589
45 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
18. Fair value of investments 31.12.20 31.12.19 £'000 £'000 Assets Level 1 – Unadjusted quoted prices in an active market for identical assets accessible at the measurement date 165,506 7,860,318 Level 2 – Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly - - Level 3 – Price inputs are unobservable 3 687 165,509 7,861,005 Liabilities Level 1 - Unadjusted quoted prices in an active market for identical assets accessible at the measurement date 13 - Level 2 – Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly - - Level 3 – Price inputs are unobservable - - 13 - 165,496 7,861,005 There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. The level 3 holdings for the year to 31/12/2020 are Lookers (£2,962), Dexion Equity Alternative (£nil), Gartmore Irish Growth Fund (£nil), Finablr (£nil), Tapestry Investment (£nil) and Intu Properties (£nil). Lookers is suspended from trading pending an investigation into an accounting scandal. The SSGA Valuation Committee (“VC”) is pricing this security at GBP 0.105 which is a 50% cut to the last traded price. Dexion Equity Alternative, Gartmore Irish Growth Fund, Tapestry Investment and Intu Properties are delisted securities will typically be valued at zero by the VC unless there is evidence of residual value. Finablr is suspended from trading. Company operations were recently sold for $1. The VC has fair valued the security at zero. The level 3 holdings for the year to 31/12/2019 are Rolls-Royce Preference Shares (£247,338), Dexion Absolute (£nil), Dexion Equity Alternative (£nil), PureCircle (£439,575), Bioscience Investment Trust (£nil) and Tapestry Investment (£nil).
19. Significant events during the year
Impact of coronavirus COVID-19 An outbreak of a respiratory disease caused by a novel coronavirus (known as COVID-19) first detected in China in December 2019 has resulted in a global pandemic and major disruptions to economies and markets around the world. Beginning in January 2020, global financial markets have experienced and may continue to experience significant volatility resulting from the spread of coronavirus COVID-19. Trading in many instruments has been disrupted along with liquidity for many instruments being greatly reduced for periods of time. Interest rates in major currencies are very low and in some cases yields are negative. Governments and central banks have taken extraordinary and unprecedented actions to support local, global economies and the financial markets. The impact of these measures, and whether they will be effective to mitigate the economic and market disruption, will not be known for some time. The outbreak of coronavirus COVID-19 has also resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty.
46 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Notes to the Financial Statements (continued) For the year ended 31st December 2020
19. Significant events during the year (continued)
Other significant events during the year Brexit has not had any material impact on the Fund. The investors are all UK domiciled and the Fund can continue to be invested in by UK domiciled investors following Brexit. Brexit has not had any other material impact on the Fund. The Fund's name was changed to State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund on 18th December 2020 (formerly State Street UK Equity Tracker Fund). The Operating charge changed from 15bps to 10bps on 1 May 2020. Rebecca Bridger was appointed as a director on 2 April 2020.
20. Post balance sheet events
Impact of coronavirus COVID-19 As of early 2021 local lockdowns continue to be deployed as necessary and the emergence of significant further outbreaks are being seen. While distribution of a vaccine began in early 2021 the pandemic and the measures taken to tackle coronavirus COVID-19 continue to affect economies, equity and debt markets globally, all of which may negatively impact a Sub-Fund’s performance. The Directors of the AUT Manager and the Scheme’s delegates are closely monitoring the developments and the advice relating to the spread of coronavirus COVID-19. State Street Corporation has a robust global business continuity programme that prioritises the health and safety of employees. The continuity programme continues to evolve from supporting staff in work from home arrangements through a comprehensive programme to plan for the return of staff to the office environment. Index error Since the balance sheet date the Manager has become aware of an error made by the index provider concerning the index provided for the Fund, for the period 18 December 2020 to 5 February 2021. The Fund holdings were at all times correctly valued, administered and priced in line with the Fund’s obligations. No pricing error has occurred as a consequence of this event, and there is no impact on the net assets of the Fund at the Balance Sheet date. Investors have been informed of this index provider error.
47 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Distribution Tables For the year ended 31st December 2020
Dividend in pence per unit payable on 31st August 2020 Group 1: Units purchased prior to 1st January 2020 Group 2: Units purchased on or after 1st January 2020 to 30th June 2020 Amount Amount Net paid paid revenue Equalisation 31.08.2020 31.08.2019 pence per pence per pence per pence per unit unit unit unit Accumulation Units Group 1 3.5573 - 3.5573 5.7982 Group 2 1.1314 2.4259 3.5573 5.7982
Corporate Unitholder Information Franked Investment Income 100.00% Unfranked Non Foreign Investment Income 0.00% Unfranked Foreign Investment Income 0.00%
Dividend in pence per unit payable on 26th February 2021 Group 1: Units purchased prior to 1st July 2020 Group 2: Units purchased on or after 1st July 2020 to 31st December 2020 Amount Amount Net payable paid revenue Equalisation 26.02.2021 28.02.2020 pence per pence per pence per pence per unit unit unit unit Accumulation Units Group 1 3.3368 - 3.3368 5.0559 Group 2 1.3522 1.9846 3.3368 5.0559
Corporate Unitholder Information Franked Investment Income 100.00% Unfranked Non Foreign Investment Income 0.00% Unfranked Foreign Investment Income 0.00%
Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of income included in the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable to income tax but must be deducted from the cost of units for capital gains tax purposes.
48 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Directory
THE MANAGER State Street Unit Trust Management Limited 20 Churchill Place London E14 5HJ Regulated by The Financial Conduct Authority
DIRECTORS V. Parry* A. Castle N. Wightman* R. Bridger# * Independent Director #R. Bridger appointed on 2 April 2020
INVESTMENT MANAGER, REGISTRAR & TRANSFER AGENT State Street Global Advisors Limited 20 Churchill Place London E14 5HJ Regulated by The Financial Conduct Authority
INDEPENDENT AUDITORS PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX
DEPOSITARY HSBC Bank plc 8 Canada Square Canary Wharf London E14 5HQ HSBC Bank plc is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority
CONSTITUTION State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund is an authorised unit trust scheme within the meaning of, and governed by section 243 of the Financial Services and Markets Act 2000. The Trust is a ‘wider range’ investment scheme under the Trustee Investments Act 1961.
PROSPECTUS Copies of the Prospectus are available from the Manager upon request. Please remember that the price of units and the income from them can go down as well as up. Past performance is not necessarily a guide to the future. Changes in exchange rates may also affect the value.
49 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Appendix I – Remuneration Policy (Unaudited)
State Street Corporation (“SSC”), and its direct and indirect subsidiaries (together with the SSC hereafter referred to as “State Street”) operate a group-wide compensation strategy including a remuneration policy that applies to all State Street entities globally. As the Management Company, State Street Unit Trust Management Limited does not employ any staff and has delegated certain activities in respect of the investment management and risk management to SSGA Limited (the “Investment Manager”). As a State Street subsidiary, the Investment Manager is fully integrated into State Street’s group-wide compensation strategy and subject to the global and regional governing body structure of State Street to provide appropriate and effective control of the remuneration arrangements (incl. compliance with the relevant remuneration regulations) across the State Street group of affiliated entities. Under its publicly available charter, the Human Resources Committee (“HRC”) of SSC oversees all of State Street’s compensation plans, policies, and programs in which senior executives participate and incentive, retirement, welfare and equity plans in which certain other employees of SSC participate. It also oversees the alignment of the incentive compensation arrangements with the State Street’s financial safety and soundness consistent with applicable related regulatory rules and guidance. The HRC approves the overall allocation of the Incentive Compensation (“IC”) Plan pool. State Street’s CEO allocates IC pools to business units and corporate functions based upon a variety of factors, which may include budget performance, achievement of key goals and other considerations. The final expenditure and overall allocation between current and deferred awards are then reviewed by the HRC prior to payment. State Street also has a separate UK Remuneration Committee (“UK RemCo”) in place with the primary duties: • the oversight of the process for identifying and determining the remuneration of EU Identified Staff (“EUIS”) in the UK; • the oversight of decisions made by those with authority to determine the remuneration of EUIS in the UK; and • holistic oversight of regional remuneration matters, with a view providing a central forum for consideration of issues and thereby enhancing consistency of approach across State Street EMEA. State Street operates an annually reviewed global remuneration policy document (supplemented by any relevant addenda by jurisdiction or regulatory regime), which documents State Street’s existing remuneration framework. This policy is intended to comply with applicable remuneration regulatory requirements including, but not limited to, those contained in the EU CRD IV, UCITS V Directive and AIFMD, and will be interpreted and administered accordingly. State Street’s remuneration policies and practices apply on a global basis to all employees of the State Street group (incl. the Investment Manager). The key principles that align State Street’s remuneration system with the business strategy are as follows: • We emphasize total rewards. • We target the aggregate annual value of our Total Rewards Program to be competitive with our business peers. • We unequivocally support equal pay for work of equal value. • Funding for our Total Rewards Program is subject to affordability and is designed to be flexible based on corporate performance. • We differentiate pay based on performance. • We align employees’ interests with shareholders’ interests. • Our compensation plans are designed to comply with applicable regulations and related guidance, including prohibiting incentives to take excessive risks. Given our process of structured discretion in determining incentive pool funding and individual award decisions, the deferral of incentive compensation, and the availability of ex-ante and ex-post adjustments, such as forfeitures and clawbacks, our compensation system is appropriately risk-sensitive and links current decisions and actions to future risk outcomes.
50 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Appendix I – Remuneration Policy (Unaudited) (continued)
State Street operates a fully flexible, discretionary bonus policy (i.e. the amount of individual variable pay may fluctuate significantly from one year to the next, depending on performance and the other factors described below, and even could be reduced to zero for any given year). The discretionary bonus policy is structured so as to achieve a balance between fixed and variable components, but also includes specific maximum pay ratios where required by local regulations. A number of employees in sales participate in Structured Incentive Plans, which aim to bring the variable compensation granted to plan participants into line with the revenues they generate as well as taking into account non-financial qualitative performance indicators. All such participants receive sufficiently high fixed compensation. Variable compensation is assigned on an individual basis by way of a review of both quantitative and qualitative factors. A proportionality assessment has been conducted to evaluate the risk profile of the UCITS Management Companies within SSGA. This analysis has concluded that the size, nature and complexity of the Management Companies and, where relevant, the funds that they manage, is sufficiently low and UCITS V’s remuneration requirements on the pay-out processes and establishment of a remuneration committee were disapplied. Accordingly, SSGA continues to operate current levels of deferral and stock-based compensation and has not made significant changes to Identified Staff remuneration structures in respect of the Management Companies. Total amount of remuneration paid by the Investment Manager as at 31/12/20201 Fixed remuneration (in £ k) 31,351 Variable remuneration (in £ k) 24,139 Total Remuneration (in £ k) 55,490 Number of beneficiaries 285 Performance fee paid directly by the UCITS n/a
Aggregate amount of remuneration as at 31/12/2020 (in £ k) 48 Senior Management of State Street Unit Trust Management Limited2 Identified Staff of the Investment Manager 34,885 More details regarding State Street’s remuneration approach including (but not limited to) information on the decision-making process to determine the remuneration policy, its basic characteristics and the linkage between pay and performance, are published separately in State Street’s Proxy Statement at www.statestreet.com and the remuneration section of the UK Pillar 3 disclosure of SSGA Ltd. at https://www.ssga.com/library-content/pdfs/global/2019-pillar-3-disclosure-statement.pdf. In light of State Street’s group-wide compensation strategy, the qualitative remuneration information included in the UK Pillar 3 disclosure equally apply to State Street employees outside the UK and the Investment Manager’s employees.
1 Disclosure is based on the remuneration of the entire staff of the investment manager, indicating the number of beneficiaries. 2020 total remuneration data is not available as of 31 December 2020 as variable pay for 2020 will not be delivered before Q1 2021. Fixed remuneration for the performance year and 2019 variable remuneration data has been provided for beneficiaries. 2 Represents remuneration paid to independent directors (Directors who are also employees of the SSC do not receive remuneration in their capacity as board members).
51 State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund
Appendix II – Assessment of Value (Unaudited)
ASSESSMENT OF VALUE In 2019, as part of its Asset Management Market Study, the Financial Conduct Authority (“FCA”) introduced a requirement that UK authorised fund managers (“AFMs”) carry out an annual assessment of whether its funds provide clients with value for money. It is important that the AFM does not look at fund costs in isolation when assessing value, but should take a holistic approach in terms of assessing the level of service being provided to the funds ensuring costs for such services are justified in the context of the overall quality and value that is provided to clients. It is the duty of State Street Unit Trust Management Limited (the "SSUTM") to act in the best interests of its investors. We understand that our core client base within this umbrella are sophisticated, institutional investors for whom we guarantee transparency surrounding fund fee structures and service levels, ensuring investors access the funds at competitive prices. SSUTM always has and will continue to assess value for money for its new and existing funds and exercises discipline over cost management. To help us in our assessment, we engaged a professional services company to provide us with peer review and comparables so we could ensure delivery of value, not only in the context of the fund umbrella, but market-wide. Following the assessment, we can conclude that overall, SSUTM provides value to clients invested in our UK-domiciled funds. However, we do not wish to be complacent and the assessment did highlight certain opportunities for us to improve the value provided to clients even further. Accordingly the result of the assessment led SSUTM to reduce the AMC with effect from 1 May 2020 as detailed in the following pages. We are pleased to present our annual value assessment report.
Details The FCA identified seven non-exhaustive criteria which should be considered by the AFM. The criteria focused on whether charges paid by the Funds are justified in light of value and quality of service delivered. This assessment references services provided directly by the AFM and also those services delegated by the AFM to third parties, such as, but not limited to, investment management, depositary services, custody and settlement, audit, legal, printing services, KIID production and maintenance and other costs as permitted in the fund documentation. These seven criteria are as follows:
1. Quality of Service 2. Performance 3. AFM costs – general 4. Economies of scale 5. Comparable market rates 6. Comparable services 7. Classes of units In conducting its assessment, SSUTM has considered each of the criteria in turn as detailed below and carried out a comprehensive appraisal in order to determine whether value for money is being provided, and where it is not, seek to remedy this.
Quality of Service
Board of Directors The Board of Directors of SSUTM collectively have over 90 years of experience in the asset management industry with a broad range of appropriate skills and expertise. Most recently, progress has been made towards diversity of the Board which now comprises of 50% women.
Investment Manager State Street Global Advisors Limited is the appointed investment manager to the Funds, whose mission is to invest responsibly to enable economic prosperity and social progress. SSGA is an indexing pioneer, which, over the past 40 years, has built a universe of active and index strategies across asset classes to help clients, and those who rely on them, achieve their investment goals. The quality of SSGA’s structures and systems are vital to ensuring a high quality of service, including
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Appendix II – Assessment of Value (Unaudited) (continued)
the processes used to manage the fund's investments. It must be highlighted that SSGA, working in conjunction with SSUTM, is committed to full integration of material ESG factors into day-to-day investment processes. SSGA practices asset stewardship by actively using its voice and voting to engage with portfolio companies on material ESG factors.
Other Service Providers Based on our review of the investment manager and all other service providers to the Funds (Depositary, Custodian, Administrator, Distributor, Auditor and Company Secretary) we believe the Funds’ service providers have provided quality to investors. In particular, SSUTM considered the nature, experience, expertise and commitment to ongoing training of personnel supporting the running of the Funds, noting any reinvestment by such entities into their infrastructure and workforce which directly and indirectly benefit the Funds. This included items such as enhancements to automated processing by the Administrator, improvements to audit quality planning and output by the auditor, and general IT enhancements by all providers to ensure seamless, uninterrupted services, particularly during the most recent period of the pandemic lock-down.
Performance Investors in index funds are generally seeking performance that closely matches the defined benchmark. SSUTM regularly monitors the Funds’ performance and believe the Funds have provided value where the performance of the Funds achieve a close match to the benchmark and also perform well in comparison to other, similar funds, over a range of time periods. The investment objective of the Funds are to track their benchmark on a gross of fees basis. Please note that the assessment asks that this criteria is measured on a net of fees performance return, which allows us to focus on pure performance output. The Funds target investors with a medium to long term investment goal. With the above in mind, the assessment concluded the State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund had been managed in line with its investment objective, however it did suffer underperformance 0.14% over 3 years which was largely attributed to management fees. The three year tracking error was 0.05%, well within its 1% targeted maximum level in normal market conditions.
AFM costs – general The fees paid by the investor should be reasonable in light of the cost of the service the Funds are receiving. This applies not just to management fees but to all fund charges. SSUTM has a transparent approach to charging the Funds. There is one annual management charge (“AMC”) for which we do not charge a performance fee, and SSGA pays the cost of all external services out of the management fee. Effective management of costs is primary to SSUTM. Fund costs will be closely and continuously monitored across all the criteria we rely upon for setting charges and we will not hesitate to cut fees when we find opportunities to pass on reductions in the costs that we incur, as we did as recently as May 2020. This was based on a number of factors, including the growth in assets under management and expense levels: Scheme Old AMC (%) New AMC (%) State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund 0.15 0.10
Economies of Scales As a subsidiary within the State Street group, SSUTM should be able to use the State Street Group’s increasing size to negotiate with providers of services in a more effective manner than a standalone entity, and to spread the costs across more investors. SSUTM considered whether there have been economies of scale in respect of the management of SSGA’s range of funds, whether SSUTM has appropriately benefitted from any such economies of scale, and whether there is potential for realisation of any further economies of scale for these Funds.
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Appendix II – Assessment of Value (Unaudited) (continued)
Currently the fee scales and structures are negotiated having already incorporated any benefit gained from economies of scale. Given the small number and current size of Funds in this product range, SSUTM does not see any ability to immediately benefit from further economies of scale. However, having said this, SSUTM maintains that the AMC charged (which was further lowered in May 2020) confirms that SSUTM has already passed on any cost savings to its underlying investors. SSUTM commits to continuously look for opportunities to pass on savings to its investors.
Comparable market rates SSUTM appointed an external third party service provider to carry out a competitive assessment of all fees, including management fees and ongoing charges of its Funds compared to funds of similar size and with similar objectives. The report highlighted the State Street AUT UK Screened (ex Controversies and CW) Index Equity Fund fees were competitive and ranked second in its peer group.
Comparable services An investor should expect to pay the similar fees as investors in another fund of comparable/similar investment objective and size. Generally, in establishing any fund costs, our main aim is to ensure the outcome is fair to all types of investor in our Funds. It was challenging to conduct a review against comparable services within the State Street Group due to the fact no other funds or segregated mandates were of comparable nature, size or objective. Therefore, SSUTM concluded that the Funds’ services were not deemed to be comparable to any other funds or mandates and therefore a fair comparison could not be drawn.
Classes of units Analysis for this relates to whether investors are in the most appropriate share class and whether any share classes with substantially similar rights were subject to a different fee charging structure. The Fund does only operate a single share class, and therefore no further analysis was undertaken as all investors are charged the same fee – however should further share classes be launched in the future, the AFM will ensure fee charges are appropriately structured in light of this annual review.
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