Distribution Number 18 CAF UK Equitrack Fund Registered Charity Number: 1108291 Annual Manager’s Report and Financial Statements for the year ended 30 April 2014 In association with Contents Page Number Statement on the Constitution and Governance of the Fund Common Investment Funds 2 Investment Responsibilities of the Charity Trustees 2 Corporate Trustee and Custodian 2 Advisory Board 3 Advisory Board Report 4 Corporate Governance 5 Manager’s Statement on Governance 6 Scope of Responsibility 6 System of Internal Controls 6 Risk Framework 6 Corporate Governance 7 Review of Effectiveness 8 Statement of the Manager’s Responsibilities 9 Manager’s Investment Report 10 Corporate Trustees’ Report 14 Portfolio Statement 17 Independent Auditor’s Report 34 Statement of Total Return 36 Statement of Change in Net Assets attributable to Unitholders 36 Balance Sheet 37 Notes to the Financial Statements 38 Distribution Tables 46 Fund Facts 47 Performance Record 48 Constitution and General Information 49 1 Statement on the Constitution and Governance of the Fund The name of this Fund is the Charities Aid Foundation UK Equitrack Fund, known as the CAF UK Equitrack Fund. Common Investment Funds The Charities Aid Foundation (CAF) UK Equitrack Fund (the ‘Fund’) is a Common Investment Fund (CIF) established by the Charity Commission for England and Wales (‘the Commission’), under section 24 of the Charities Act 1993. The Fund is administered for the benefit of the participating charities under a Scheme of the Commission dated January 2005. Any charity, or organisation, regarded as charitable in UK Law, and based in England, Scotland or Wales, can invest in the CAF UK Equitrack Fund. Investment Responsibilities of the Charity Trustees The Charity Commissioner requires the Charity Trustees to invest their assets only in investments authorised under the governing document of their charity or the Trustee Act 2000 if applicable. Trustees are also required to avoid speculation and to invest prudently in order to achieve both income and/or capital growth. Furthermore, Trustees of charities are required to seek professional advice regarding their investments. Corporate Trustee and Custodian The Corporate Trustee of the Fund is National Westminster Bank Plc (‘the Corporate Trustee’). The Corporate Trustee has delegated the function of custodian of the property of the Fund to Northern Trust Global Services Limited (‘the Custodian’). The Custodian is independent from the Manager and Corporate Trustee. 2 Statement on the Constitution and Governance of the Fund continued Advisory Board The purpose of the Advisory Board (‘the Board’) is to oversee the administration and management of the Fund. The Board establishes the investment policy, determines the criteria and methods for evaluating the Fund’s performance and appoints the auditor. In addition, the Board determines the remuneration of both the Corporate Trustee and the Manager of the Fund. The Board issues an annual report on the discharge of its responsibilities. The Board may apply to the Charity Commission for an order to discharge the Corporate Trustee or Manager of the Fund and to appoint a new Corporate Trustee or new Manager of the Fund. The Board meets not less than twice a year. Matters are decided by a majority vote of Board members present and voting. In the event that no decision is reached with a simple majority, the Chairman has the casting vote, whether or not he has previously voted. The Board members comprise the members of the CAF Funds Monitoring Committee (CFMC) which is established to oversee the performance of the fund range offered by CAF Financial Solutions Ltd. The Chairman of the Committee is the Chairman of the CFMC. 3 Statement on the Constitution and Governance of the Fund continued Advisory Board Report The Advisory Board (‘the Board’) of the CAF UK Equitrack Fund submits its report on the discharge of its responsibilities for the year ended 30 April 2014. During the year, the Board: • Met on four occasions; • Reviewed the investment policy; • Reviewed the criteria and methods for evaluating the performance of the Fund; • Re-appointed the auditor and determined the terms of engagement; • Confirmed the remuneration of the Manager of the Fund; No changes to the criteria and methods for evaluating the performance of the Fund and its investment policy have been implemented. No member of the Board has offered investment advice or conducted investment business in relation to the Fund. For and on behalf of the Advisory Board of CAF UK Equitrack Fund 24 June 2014 4 Statement on the Constitution and Governance of the Fund continued Corporate Governance Legal & General (Unit Trust Managers) Limited were appointed Managers of the Fund in accordance with the Scheme constitution. The Manager is authorised and regulated by the Financial Conduct Authority (the ‘FCA’) for the conduct of regulated activities, including the establishment, operation and winding up of unregulated Collective Investment Schemes. The Manager will provide management and administration services on behalf of the Fund. The Manager has delegated the investment management of the assets of the Fund to Legal & General Investment Management Limited (LGIM). The Corporate Trustee has appointed the Manager as Registrar, who, in turn, has delegated responsibility to Legal & General (Portfolio Management Services) Limited. The Investment Manager and Registrar are authorised and regulated by the Financial Conduct Authority and are members of the same group of companies as the Manager. The Manager has delegated the administration of the Fund to Northern Trust Global Services Limited, a subsidiary of Northern Trust Holdings Limited. 5 Statement on the Constitution and Governance of the Fund continued Manager’s Statement On Governance Scope of Responsibility Legal & General (Unit Trust Managers) Limited (UTM) have responsibility for maintaining a sound system of internal controls that support the achievement of the CAF UK Equitrack Fund policies, aims and objectives, whilst safeguarding the assets of unitholders. System of Internal Controls The system of internal controls is designed to manage risk to a reasonable level rather than eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable, not absolute assurance of effectiveness. The system of internal controls is based on an ongoing process designed to identify and prioritise the risks to the achievement of policies, aims and objectives, to evaluate the likelihood of those risks being realised, the impact should they be realised and to manage them efficiently, effectively and compliantly. Risk Framework Legal & General (Unit Trust Managers) Limited (UTM) is part of Legal & General Investment Management Limited (LGIM), a subsidiary firm of the Legal & General Group (L&G) and operates within a group- wide risk management framework. The risk framework seeks to ensure all risks are identified and that appropriate strategies are in place for their management. The framework consists of formal committees, risk management policies, risk assessment and reporting processes and oversight functions. These enable the directors and senior management to debate key risks and draw assurance that risks are being appropriately identified and managed, and that an independent assessment of risk is being performed. Legal & General operates a ‘three lines of defence’ model of risk management and assurance. Business management manage risks, Risk functions and Group level committees oversee and challenge the management of risk and Internal Audit provide independent assurance that risks are effectively managed and that there is appropriate oversight. Risk assessment is carried out on a bottom up and top down basis. On a monthly basis business management carry out a self-assessment of the performance of controls that operate to mitigate risk, which requires approval through the corporate hierarchy. This assessment is carried out using SWORD RMS, an externally provided risk management system. This self-assessment feeds into the Directors Certification process, part of the firms Combined Code on Corporate Governance. The Group Regulatory Risk & Compliance function operates a Conduct Risk Universe carrying out periodic assessments of controls using a conduct risk-based model. In addition, the Internal Audit function operates a similar risk-based universe of periodic reviews and assessments of control. These functions report findings to key committees and these findings are recorded on the risk management system, which ensures that required actions are tracked and evidenced. During the period, no material findings have been contained within the published reports. 6 Statement on the Constitution and Governance of the Fund continued The control assurance model incorporates a self-assessment and independent assurance of the full risk exposure of the firm. This will range from transaction processing to risk management and governance. The bottom up assessments are carried out monthly, with the independent assurance subject to a risk-based approach, with an appropriate frequency agreed by the Audit Committee (for Internal Audits) or the Group Regulatory Risk & Compliance function. On an annual basis, the external auditor assesses and reports on the effectiveness of the firm’s accounting; this is filed with the FCA. Corporate Governance Legal & General (Unit Trust Managers) Limited is a company authorised and regulated by the Financial Conduct Authority (FCA)