LLOYDS INVESTMENT FUNDS LIMITED
Annual Report and Audited Financial Statements
For the year ended 30 September 2018
Lloyds Investment Funds Limited
Contents
Company Information 2
Investment Objectives and Policy 3
Directors’ Profiles 4
Report of the Directors 5
Report of the Investment Manager 8
Report of the Custodian to the Members of Lloyds Investment Funds Limited 13
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited 14
Statements of Financial Position 20
Statements of Comprehensive Income 24
Statements of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares 26
Cash Flow Statements 28
Investment Portfolio - Investment Dealing 32
Investment Portfolio - Euro High Income Fund 33
Investment Portfolio - European Fund 36
Investment Portfolio - High Income Fund 38
Investment Portfolio - International Fund 43
Investment Portfolio - North American Fund 45
Investment Portfolio - Sterling Bond Fund 47
Investment Portfolio - UK Fund 50
Investment Portfolio - Investments Purchased and Sold 52
Investment Portfolio - Summary of Material Portfolio Changes 53
Notes to the Financial Statements 57
Change in Net Asset Value per Share 92
Performance Record 94
Distribution Tables 97
Notice of Meeting 100
Form of Proxy 101
1 Lloyds Investment Funds Limited
Company Information
Registered Office Investment Manager 11-12 Esplanade, Aberdeen Asset Investments Limited St. Helier, Bow Bells House, Jersey, JE2 3QA, 1 Bread Street, Channel Islands. London, EC4M 9HH. Principal Place of Business PO Box 311, 11 - 12 Esplanade, Custodian St Helier, Link Corporate Services (Jersey) Limited Jersey, JE4 8ZU, PO Box 532, 12 Castle Street, Channel Islands. St Helier, Jersey, JE2 3RT, Directors Channel Islands. c/o Registered Office R. D. Willcox (Chairman) Secretary I. M. J. Hardy Lloyds Corporate Services (Jersey) Limited B. C. James PO Box 160, 11 - 12 Esplanade, B. Lysiak St Helier, Jersey, JE4 8ZU, T. J. Herbert Channel Islands. PO Box 87, 22 Grenville Street, St Helier, Independent Auditor Jersey, JE4 8PX, PricewaterhouseCoopers CI LLP Channel Islands. 37 Esplanade, St Helier, Manager and Registrar Jersey, JE1 4XA, Lloyds Investment Fund Managers Limited Channel Islands. PO Box 160, 11 - 12 Esplanade, St Helier, Jersey, JE4 8ZU, Channel Islands. Legal Advisers Mourant Ozannes PO Box 87, 22 Grenville Street, St Helier, Jersey, JE4 8PX, Channel Islands.
2 Lloyds Investment Funds Limited
Investment Objectives and Policy
Lloyds Investment Funds Limited (‘the Company’) is an open-ended Sterling Bond Fund investment company registered in Jersey which as at year end Objective has three classes, each being an individual ‘Fund’. The investment objectives of closed Funds has not been presented. To provide a regular income from a managed portfolio of sterling fixed interest securities with a particular emphasis on those It is known as an ‘Umbrella’ Fund because it provides its securities on which interest is paid gross to non-residents of the shareholders with a variety of investment options under the United Kingdom. umbrella of a single Company. Investment Policy The overall objective of the Company is to provide investors with a The assets of the Fund are generally invested in a managed managed investment designed to meet the specific objectives laid portfolio of sterling fixed interest securities which have been issued down for each Fund. The investment objectives and policy of each by governments, local authorities, public utilities and corporations. Fund is set out below. If it appears advisable to hold assets having a short term maturity, Euro High Income Fund then the Fund may also place money on bank deposit (subject to certain limitations) or to purchase money market instruments. Objective Similarly, derivative instruments such as traded options To maintain a high income through investment in a spread of fixed and financial futures may be used to reduce risk. interest securities denominated predominately in euro. Investment Policy To support the payment of dividends above the level of short term euro interest rates. This policy will result in a gradual reduction in the capital value of the shares, except when bond prices generally are rising. The Fund will normally hold a relatively wide range of securities in order to keep a low level of exposure to individual bond issues other than government securities. The Fund may also hold a substantial part of its assets in bank deposits and money market instruments from time to time. The Fund is permitted to invest in securities denominated in currencies other than euro. The current policy of the Directors is that any such investments in non-euro denominated securities should be fully hedged against euro to eliminate the effects of any exchange rate movements. High Income Fund Objective To seek a high income from a spread of fixed interest securities. Investment Policy To support the payment of dividends above the level of short term sterling interest rates. This policy will result in a gradual reduction in the capital value of the shares, except when bond prices generally are rising. The Fund will normally hold a relatively wide range of securities in order to keep a low level of exposure to individual bond issues other than government securities. The Fund may also hold a substantial part of its assets in bank deposits and money market instruments from time to time. The Fund is permitted to invest in securities denominated in currencies other than sterling. The current policy of the Directors is that any such investments in non-sterling denominated securities should be fully hedged against sterling to eliminate the effects of any exchange rate movements.
3 Lloyds Investment Funds Limited
Directors’ Profiles
Ross Davey Willcox (Chairman) – Head of Products, Islands & Brian Charles James – Head of Investment Operations Jersey, Gibraltar, Lloyds Banking Group. Investment Operations, Islands & Gibraltar, Lloyds Banking Group. Joined the Lloyds Banking Group in 1977 and held a number of Joined the Lloyds Banking Group in 1988 and has held a number managerial positions in the UK and Internationally. Was appointed of managerial positions primarily in Financial Control and Risk Managing Director of Lloyds Investment Fund Managers Limited in Management roles before being appointed as a Director of the 1999 and is currently Chairman/Director of the Jersey based Fund Jersey based Fund Management Company and as a Director of the Management Company. Current responsibilities include the value Company in 1997. Current responsibilities include leading a team proposition of all investment products for International Wealth. A of specialists delivering operational support for a range of offshore qualified Banker, a Fellow of the Securities & Investment Institute investment products and services. A Chartered Director and Fellow and a Chartered Director. of the Institute of Directors. Also, a qualified member of the Aged 59. International Compliance Association. Aged 57. Ian Mark Jeremie Hardy – Senior Manager, Products, Islands & Gibraltar, Lloyds Banking Group. Bronislaw Lysiak – Senior Manager, Regulated Investments, Islands Joined the Lloyds Banking Group in 1981 and held a number of & Gibraltar, Lloyds Banking Group. managerial positions before being appointed a Director of Lloyds Joined the Lloyds Banking Group in 1993 and has held a number Investment Fund Managers Limited in 2000 and a Director of the of managerial positions within a regulated personal customer Company in 2000. Current responsibilities include provision of environment. Current responsibilities are for sales and distribution technical and regulatory advice on a range of investment products of investment products to regulated intermediaries and institutions. and services. Holder of an upper second class honours degree from Holder of an Advanced Financial Planning Certificate in Taxation, the University of Aston in Birmingham in Business Administration Trust and Investment Planning and Higher National Diploma in and Transport Planning. Business and Finance. Aged 59. Aged 54. Timothy Joseph Herbert – Consultant, Mourant Ozannes, Jersey. Jersey born and educated. M.A. in jurisprudence Trinity College Oxford 1982. Member of Middle Temple. Joined Mourant du Feu & Jeune (now Mourant Ozannes) in May 1983. Sworn in as an advocate of the Royal Court, September 1985. Tim Herbert was a partner of Mourant Ozannes from 1987 to 2012. In July 2012 he stepped down from the partnership and is now retained by Mourant Ozannes as a consultant to the firm. He has extensive experience in corporate and commercial law and mutual funds advice. Holds other external directorships and also acts as Honorary Consul for Finland. Aged 59.
4 Lloyds Investment Funds Limited
Report of the Directors
The Directors have pleasure in submitting their Annual Report Following the merger, liabilities were settled and the final residual together with the Audited Financial Statements For the year ended assets transferred to Lloyds Multi Strategy Fund - Growth Strategy 30 September 2018. The Company is domiciled and incorporated as on 22 August 2018, at which point the fund had no assets and a Limited Company in Jersey, Channel Islands under the Companies no liabilities. (Jersey) Law 1991 and is listed on The International Stock Exchange Going Concern and a secondary listing on the Malta Stock Exchange. Full details of The Financial Statements of the Company and Euro High Income, the Company are stated on pages 2 to 7. High Income and Sterling Bond Funds have been prepared in Results accordance with International Financial Reporting Standards The results for the year are set out in the Financial Statements on (‘IFRS’) on the going concern basis. The Financial Statements of the pages 20 to 91. closed classes, being European, International, North American and Distributions UK Funds have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) on the liquidation basis. As a Distributions for the year are detailed in Note 5 to the financial result of this the Directors confirm there are no additional impacts statements. to the presentaion and disclosures of these Financial Statements. Directors All liabilities in respect of the closed classes have been paid. The The Directors of the Company who were in office during the year Directors have a reasonable expectation that the Lloyds Investment and up to the date of signing the financial statements were: Funds Limited together with the remaining Funds Euro High Mr I.M.J. Hardy (appointed 8 May 2000) Income, High Income and Sterling Bond will continue as a going Mr T.J. Herbert (appointed 11 February 2005) concern for the foreseeable future. Mr B.C. James (appointed 12 March 1997) Investment Activities Mr B. Lysiak (appointed 5 June 2014) The Report of the Investment Manager is set out on pages 8 to 12. Mr R.D. Willcox (appointed 31 July 1998) Independent Auditor As at 30 September 2018, no Director had a beneficial interest in PricewaterhouseCoopers CI LLP were re-appointed as Independent the Company. Auditor at the Annual General Meeting held on 22 February 2018 As at 30 September 2018 there were no amounts receivable or and have indicated a willingness to remain in office. payable in respect of the above holding. Prospectus No Director has a service contract with the Company and no Copies of the Prospectus dated May 2018 are available, free of Director is, or was, materially interested in any service or other charge, on application to the Manager. Alternatively it can be contract entered into by the Company. accessed on our website at Mr T.J. Herbert is a consultant to Mourant Ozannes, who are the http://international.lloydsbank.com/products-and-services/ Jersey legal advisers to the Company and the Manager. Mourant investments/funds/ Ozannes receives fees in connection with advising the Company and the Manager. These are disclosed in Note 10. Changes made to the Prospectus include the following: Mr B.C. James, Mr I.M.J. Hardy and Mr R.D. Willcox (Chairman) • Removal of references to European Fund, International Fund, are Directors of Lloyds Investment Fund Managers Limited (the North American Fund and UK Fund following the share exchange as ‘Manager’) which has a management contract with the Company. approved by shareholders in these funds. Fees earned by the Manager are disclosed in these financial • Reduction in the initial charge to 2% on High Income Fund, Euro statements in Note 9. High Income Fund and Sterling Bond Fund. Closure of Fund Classes • Increase in the minimum subsequent investment to £1,000 (from £500) for High Income Fund and Sterling Bond Fund. The Euro High Shareholders were advised in a letter dated 8 March 2018 of a Income remains the same at €1,000. proposal to exchange the shares in Lloyds Investment Funds Limited - UK Fund, North American Fund, European Fund and International • Revised wording in the Data Protection Notice detailing how the Fund (the ‘Equity Funds’), with shares in Lloyds Multi Strategy Fund Manager processes personal information under the General Data Limited - Growth Strategy (the ‘Growth Strategy’). This vote was Protection Regulations. The marketing consent clause has been approved by the shareholders on 17 April 2018. removed on the application form. The merger of the Equity Funds with Lloyds Multi Strategy Fund • Change of name of the Custodian. - Growth Strategy took place on the 27 April 2018 (referred to in • Change of registered address of the Manager and the Company this report as ‘Closed 27 April 2018’) and shareholders will have from 1 July 2018. received an equivalent value of Growth Fund shares for each of • Removal of the Paying Agent as a separate contracting party the previous Equity Fund shareholdings. A transaction statement, as there is no longer any distinctions between the functions reflecting these changes in shareholding(s), has been sent to performed by the Principal Bankers and the Paying Agent. all shareholders. The Equity Funds were cancelled from their official listing on The International Stock Exchange and from their secondary listing on the Malta Stock Exchange on 11 May 2018.
5 Lloyds Investment Funds Limited
Report of the Directors (continued)
Management and Administration Providers Market Conditions The names and addresses of management and administration Assets held within certain Funds can be affected by market providers are stated on page 2. conditions and this may affect the share price of those Funds. The Directors would like to remind shareholders that investment in the Comparatives Tables Funds should be considered as a long term commitment, as the The Change in Net Asset Value per Share, Performance Records and price of shares may rise and fall in the short term in response to Distribution Tables are stated on pages 92 to 99. changing market conditions. Directors’ Responsibilities Information Exchange The Directors are responsible for preparing the Financial Jersey has entered into a number of Information Exchange Statements in accordance with applicable law and International Agreements with the authorities of other jurisdictions. Financial Reporting Standards (IFRS). The Directors have also chosen to adopt areas of the Statement of Recommended Practice Shareholders should be aware that information on their investment ‘Financial Statements of UK Authorised Funds’ issued in May 2014 may be shared with the relevant authorities, and may be passed by the IMA (Investment Management Association) where this to the tax authorities in their country of residence, citizenship does not conflict with other reporting requirements. As a result or residence for tax purposes. For the avoidance of doubt there are some minor presentational changes to the accounts but this information may include (but not be limited to) details of no change to the measurement of numbers. There have been no shareholder names, addresses, unique identifiers (such as tax or changes to the financial position or financial performance of the national insurance numbers), amount of investment, redemption or Fund as a result of the above. sale proceeds and dividend payments. The Directors are required by the Companies (Jersey) Law 1991 to Financial Risk Management prepare Financial Statements for each financial year which give a The Directors have taken into consideration the financial risk true and fair view of the state of affairs of the Company for that management of the Company, this has been disclosed in Note 19 of year and are in accordance with applicable laws. In preparing these the financial statements. financial statements the Directors are required to: • select suitable accounting policies and then apply Reporting Funds Regime them consistently; HM Revenue & Customs have accepted the entry of the Company into the Reporting Funds Regime for the purposes of regulation 51 • make judgements and estimates that are reasonable and prudent; of the Offshore Funds (Tax) Regulations 2009. • state whether applicable accounting standards have been followed subject to any material departures disclosed and UK Ring-fencing and Lloyds Investment Fund Managers explained in the financial statements; and Limited (the Manager) • prepare the Financial Statements on the going concern basis Following the financial crisis, legislation was passed in the UK to unless it is inappropriate to presume that the Company will strengthen the financial system, this is known as “ring-fencing”. continue in business. To comply with these requirements, Lloyds Banking Group is separating its activities into ring-fenced banks and a non-ring- The Directors are responsible for keeping proper accounting fenced bank. Lloyds Bank plc, will be a ring-fenced bank and records which disclose with reasonable accuracy at any time the will not be permitted to operate a branch or subsidiary outside financial position of the Company and to enable them to ensure the European Economic Area (EEA). Lloyds Banking Group is that the financial statements comply with the Companies (Jersey) transferring ownership of its Crown Dependency subsidiaries, Law 1991 and the Collective Investment Funds (Recognized Funds) including the Manager, to Lloyds Bank Corporate Markets plc, the (Rules) (Jersey) Order 2003 (as amended). new non-ring-fenced bank. These transfers will not affect your They are also responsible for the safeguarding of the assets of position and the protection you have as a shareholder in the Lloyds the Company which includes the appointment of a duly qualified Investment Funds Limited. The Manager remains a member of Custodian. The Directors must also ensure that they or their Lloyds Banking Group and these transfers took place 1 July 2018. duly appointed agents take reasonable steps for the prevention and detection of fraud, error and non-compliance with law and Share Exchange regulations. The Directors confirm that they have complied with the Shareholders of the Lloyds Gilt Fund Ltd and Lloydstrust Gilt Fund above requirements in preparing the financial statements. Ltd were advised in a letter dated 24 September 2018 to exchange their shares for shares in Lloyds Investment Funds Ltd – Sterling So far as the Directors are aware, there is no relevant audit Bond. The merger of Lloyds Gilt Fund Ltd and Lloydstrust Gilt Fund information of which the Company and Funds Auditor’s is unaware, Ltd with Lloyds Investment Funds Ltd – Sterling Bond took place on 9 and each Director has taken all the steps that he ought to have November 2018. As a result the NAV of the Lloyds Investment Funds taken as Director, in order to make himself aware of any relevant Ltd – Sterling Bond increased by £93,982,636. audit information and to establish that the Company’s Auditor is aware of that information.
6 Lloyds Investment Funds Limited
Report of the Directors (continued)
General Information Average Portfolio Dealing Spread The Company is an open-ended investment Company with The average portfolio dealing spread percentage, including the variable capital and shareholders are not liable for the debts of the effect of foreign exchange as at the statement of financial position Company. date is as follows: The Company holds a certificate as a recognized Securities Fund 30 September 30 September under the Collective Investment Funds (Recognized Funds) (Rules) 2018 2017 (Jersey) Order 2003 (as amended), and holds a permit under Article 7 of the Collective Investment Funds (Jersey) Law, 1988. Sterling Denominated Funds % % The Manager has the benefit of professional indemnity and European Fund N/A 0.08 directors’ and officers’ liabilities insurance coverage. High Income Fund 0.79 0.90 The Manager also maintains an appropriate level of ‘own funds’ to International Fund N/A 0.06 cover the equivalent professional liability risks set out in Alternative North American Fund N/A 0.02 Investment Fund Managers Directive (AIFMD). Sterling Bond Fund 0.73 0.86 The Company is listed on The International Stock Exchange and a UK Fund N/A 0.08 secondary listing on the Malta Stock Exchange. The market value per Share of the assets of each Fund was as Euro Denominated Funds follows: Euro High Income Fund 0.43 0.50 Sterling Denominated Funds 30 September 1 October The spread on the statement of financial position date is 2018 2017 representative of the typical spread throughout the year. European, International, North American and UK Fund classes closed 27 (pence) (pence) April 2018. European Fund N/A 1,003.00XD High Income Fund 83.95 88.12XD Website International Fund N/A 547.60XD The Directors have selected Lloyds Bank International Limited’s North American Fund N/A 2,151.00XD website as the host website for the Company’s Financial Statements and believe this selection to be a reasonable one; the work carried Sterling Bond Fund 149.10 153.90XD out by the Auditor does not involve consideration of these matters UK Fund N/A 769.20XD and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the Financial Statements since Euro Denominated Funds they were initially presented on the website. (Euro cents) (Euro cents) Information published on the internet is accessible in many Euro High Income Fund 154.60 160.40XD countries. Legislation in Jersey governing the preparation and dissemination of Financial Statements may differ from legislation The latest prices can be viewed on our website. in other jurisdictions. http://international.lloydsbank.com/products-and-services/ investments/international-funds/fund-prices/
By order of the Board Lloyds Corporate Services (Jersey) Limited Secretary 12 December 2018
7 Lloyds Investment Funds Limited
Report of the Investment Manager
Euro High Income Fund The Fund generated a strong positive return in the closing months of 2017, helped by the positive credit market tone. Although the Performance return was marginally behind benchmark, reflecting yield curve The Fund produced a return of -1.29% over the year ended 30 positioning, the fund’s running yield remained comfortably above September 2018, compared to a return of -0.18% in the iBOXX Euro benchmark. Corporate hybrid bonds were bought from Danone and Corporates 5 years + index. Iberdrola as issuance from this asset class returned. Long-dated Background and Strategy bonds from AT&T and Vodafone were also purchased reflecting very steep curves for these issuers. Low yielding, short-dated bonds Credit markets performed strongly over the final three months of were sold against this following strong performance. 2017, but experienced volatility in the first three months of 2018, with spreads widening marginally Between October and December, The Fund generated a negative return in the first three months strong global economic growth and cautious central bank policy of 2018 as yields rose and spreads widened. However, the fund’s exits supported risk assets, and Euro investment grade spreads return was ahead of benchmark, due largely to being short of finished 2017 approaching multi-year tights. Bonds issued by interest rate risk in the early part of the quarter. Hybrid bonds were financial institutions were strong as sector fundamentals improved, bought from Telefonica – a company on an improving trend. Jaguar with valuations appearing attractive relative to European non- Land Rover bonds were sold. SES hybrid bonds were also sold, in financial bonds whose spreads have been suppressed by European the expectation that the satellite market would deteriorate. Moving Central Bank (ECB) purchases. into springtime, the fund generated a negative return between April and June as spreads continued the widening seen towards Moving into 2018, spreads tightened significantly in January due the end of March. The Fund underperformed its benchmark due to central bank buying, solid corporate earnings and Europe’s to a short duration position as bund yields fell. Bonds issued by economic renaissance. February marked a reversal in sentiment, the Mexican national oil company Pemex were bought as well as with investors pricing in the end of monetary stimulus. That said, Teva bonds – a high yield pharmaceutical company trading at cheap the euro market performed better than its sterling and US dollar valuations in our view. General Electric bonds were sold, given the counterparts, with spreads widening only marginally. However, expectation of ongoing challenges at the company. March brought significant spread widening as economic data weakened and new corporate supply surged, creating a weak In the final three months of the review period, the Fund generated technical environment. Having outperformed in previous months, a positive return relative to benchmark, helped by asset allocation, subordinated insurance bonds underperformed in the sell-off the back up in government bond yields and strong stock selection. owing to their greater market sensitivity. Government bond yields, A short duration position has been maintained for some time too, were volatile as investors reacted to more hawkish ECB on expectation of higher government bond yields. Ten-year guidance and subsequent weaker economic data. German bund yields were 17 basis points higher over the quarter. Bonds issued by Teva Pharmaceutical were among the strongest In the springtime, European politics and increased fears of a performers over the quarter following FDA approval of its new material trade war between the US and its major trading partners migraine drug. Allocations to subordinated bank paper also began to cause concerns. The Italian political situation was one added value. of the main drivers of the volatility, with two populist parties attempting to form an effective coalition throughout the period. In As at 30 September 2018, the Fund continues to be long of credit this situation Italian-domiciled corporate bonds underperformed risk and to run a short duration position. Towards the end of materially and other areas of the European Union, such as Portugal the quarter the sterling market investment grade market lagged and Spain, were weak in sympathy. Sector wise both banks and other markets as Brexit concerns increased. This continues to be insurers were among the weakest while safe haven sectors were monitored. As with much of 2018 to date, politics is likely to play a stronger performers. Credit markets were materially calmer over material part in investment outcomes over the coming period. the summer months, and spreads tightened modestly in both investment grade and high yield markets. Government bond yields rose , however, led by US Treasuries as higher inflation and tighter monetary policy were priced in. Developed markets materially outperformed emerging markets which were particularly affected by weakness in Turkey and Argentina. Both investment grade and high yield markets were supported by fundamental data and levels of new issuance, which were below expected levels in both asset classes. The bout of volatility seen in August was primarily focused on emerging markets and foreign exchange with a stronger dollar and idiosyncratic issues in both Turkey and Argentina exerting a negative impact.
8 Lloyds Investment Funds Limited
Report of the Investment Manager (continued)
European Fund (Closed 27.04.18) High Income Fund Performance Performance The Fund produced a return of -0.08% over the period ended 27 The Fund produced a return of -0.70% over the year ended 30 April 2018, compared to a return of -4.18% in the Lipper Hindsight September 2018, compared to a return of -0.31% in the iBOXX Non European excluding UK Equity sector. Gilt ex Sovereign All Maturities index. Background and Strategy Background and Strategy European equities fell in the half year under review. Initially, stocks Credit markets performed strongly over the final three months of rose amid a benign economic backdrop and optimism about US 2017, but experienced volatility in the first three months of 2018, tax reforms. However, the upbeat sentiment soon gave way to the with spreads widening marginally Between October and December, return of volatility that had been absent for much of 2017. Among strong global economic growth and cautious central bank policy the raft of worries were rising US interest rates amid growing exits supported risk assets, and Euro investment grade spreads inflationary pressure, escalating trade tensions, especially between finished 2017 approaching multi-year tights. Bonds issued by the US and China, and a tech sell-off triggered by the spectre of financial institutions were strong as sector fundamentals improved, more stringent regulatory scrutiny in the wake of Facebook’s data with valuations appearing attractive relative to European non- leak. Sentiment was also dampened by mixed economic data that financial bonds whose spreads have been suppressed by European pointed to a slower, albeit still healthy, pace of expansion. Central Bank (ECB) purchases. For the half year to the end of March, the portfolio rose by 1.47% Moving into 2018, spreads tightened significantly in January due in sterling terms, outperforming the benchmark’s fall of 4.31%. to central bank buying, solid corporate earnings and Europe’s Positive stock selection outweighed negative asset allocation. economic renaissance. February marked a reversal in sentiment, Contributing to performance was Schoeller Bleckmann, whose with investors pricing in the end of monetary stimulus. That said, shares rose on the back of improving conditions in US shale the euro market performed better than its sterling and US dollar production markets, which should stimulate demand for its counterparts, with spreads widening only marginally. However, specialist products. Also benefiting the fund was Edenred after it March brought significant spread widening as economic data posted an encouraging set of full year results and a healthy growth weakened and new corporate supply surged, creating a weak outlook. Meanwhile, Kongsberg Gruppen had a good start to 2018, technical environment. Having outperformed in previous months, with improving order growth in its defence business and signs that subordinated insurance bonds underperformed in the sell-off the cycle for the marine segment was starting to turn in its favour. owing to their greater market sensitivity. Government bond yields, It also clinched a long term deal in Qatar that could be worth up to too, were volatile as investors reacted to more hawkish European 15 billion Norwegian krone over eight years. Central Bank guidance and subsequent weaker economic data. Conversely, detracting from performance was Bayer, which In the springtime, European politics and increased fears of a was hampered by a fairly uninspiring operational performance material trade war between the US and its major trading partners alongside uncertainty over the implications of regulatory approval began to cause concerns. The Italian political situation was one in key jurisdictions. Also costing the fund was Grandvision, of the main drivers of the volatility, with two populist parties which reported fourth quarter results that disappointed some attempting to form an effective coalition throughout the period. In investors, as growth levels remained subdued. Finally, Svenska this situation Italian-domiciled corporate bonds underperformed Handeslbanken’s earnings were pressured by falling interest rates, materially and other areas of the European Union, such as Portugal concerns over the Swedish housing market, as well as fears over the and Spain, were weak in sympathy. Sector-wise both banks and impact of regulatory changes. insurers were among the weakest while safe haven sectors were stronger performers. Credit markets were materially calmer over the summer months, and spreads tightened modestly in both investment grade and high yield markets. Government bond yields rose, however, led by US Treasuries as higher inflation and tighter monetary policy were priced in. Developed markets materially outperformed emerging markets which were particularly affected by weakness in Turkey and Argentina. Both investment grade and high yield markets were supported by fundamental data and levels of new issuance, which were below expected levels in both asset classes. The bout of volatility seen in August was primarily focused on emerging markets and foreign exchange with a stronger dollar and idiosyncratic issues in both Turkey and Argentina exerting a negative impact. In the three months to end-December, although both asset allocation and security selection were strong, yield curve movements adversely affected returns. Financials led the performance, with spreads tightening most prominently in insurance, while spreads widened slightly in utilities and industrials.
9 Lloyds Investment Funds Limited
Report of the Investment Manager (continued)
High Income Fund (continued) International Fund (Closed 27.04.18) Background and Strategy (continued) Performance Total return versus benchmark was helped by strong asset The Fund produced a return of -2.21% over the period ended 27 allocation; financials performance was strong, with underweight April 2018, compared to a return of -1.02% in the LipperHindsight senior and overweight LT2 and UT2 positions producing strong Global Equity sector. positive returns. In insurance, an underweight in seniors and Background and Strategy an overweight subordinated debt was positive. The Fund was underweight industrials; as spreads widened, this resulted in Global equities ended flat in sterling terms over the six months positive returns relative to benchmark. The Fund was shorter under review. At first, stocks were buoyed by optimism over duration than benchmark. Utilities were weak, and our overweight earnings on the back of an ongoing global growth recovery. In the cost performance; water utilities are under pressure following US, corporate tax reforms bolstered sentiment, and Jay Powell’s greater regulatory focus on the sector. The Fund benefited from appointment as the Federal Reserve chair suggested continuity strong security selection within financials. Airports - particularly in the gradual tightening of monetary policy. European central Heathrow bonds - were weak following new issuance between bankers appeared similarly hawkish, inching closer towards November and December. ending quantitative easing and raising interest rates as continental economic activity picked up. Chinese shares rose on mostly resilient In the first three months of 2018, the fund modestly growth, heralded in the widely watched National Congress, and a underperformed its index benchmark, helped by a short duration sharp rise in internet stocks. President Xi Jinping consolidated his position but hindered by long exposure to lower quality credit. power, as Beijing abolished the two term presidency limit, allowing Bonds issued by banks and insurers underperformed the market him to remain at the helm indefinitely. Oil prices were steady, as a whole, and HSBC and Citigroup were amongst the under- with Brent crude briefly trading above US$70 a barrel. However, performers. An overweight position in bonds issued by Dignity volatility staged a comeback towards period end, on fears that Finance, the UK funeral home operator, underperformed materially rising inflation could prompt more aggressive interest rate rises. following a profit warning. An allocation to AAA floating rate securitizations benefited performance for the Fund in a rising yield At the stock level, Sysmex was a key contributor to relative environment. Moving into springtime, lower quality areas of the performance. It rose as conviction grew in its clinical testing market were the poorest performers; financials fared badly, as did devices, most notably in Europe, Middle East, Africa and Asia. issuers domiciled in Italy. That more “risk-off” tone meant the Fund Taiwan Semiconductor Manufacturing outperformed after underperformed its index benchmark in the three months to June. reporting better profit margins. Management expects growth rates Bonds issued by banks and insurers underperformed the market as to improve further this year. Similarly, M&T Bank enjoyed a solid a whole and detracted from returns. Once again, allocations to AAA run up in its share price after posting positive 2017 earnings. floating rate securitizations benefited the fund. Conversely, the lack of exposure to Amazon proved costly, as it The Fund outperformed its index benchmark in the final three was buoyed by news of its healthcare partnership with Berkshire months to the review period, benefiting both from its short Hathaway and JP Morgan focusing on employee benefits. duration position and good stock selection. As lower quality Elsewhere, Check Point Software posted outstanding results but its credit outperformed the fund’s long position in sectors such as share price fell because of teething issues with its enlarged sales banks and insurers benefited performance. Strong performing force, which could dampen growth. Pharmaceutical Roche was stocks included floating rate instruments which were purchased in hampered by decelerating growth in its three main cancer drugs, anticipation of a rising yield environment as well as fixed rate bonds and faced increasing competition from biosimilars. Encouragingly, from issuers such as Prudential plc and Citigroup. new product launches could potentially counterbalance this. As at 30 September the Fund was overweight in higher beta (lower The recent tech induced sell off was a timely reminder that quality) corporate bonds relative to its index benchmark. The fund’s volatility remains a feature in stockmarkets. Fears of an impending shorter duration position has been reduced following the rise in crash may be overblown, considering macroeconomic indicators yields this year. This is partly in recognition of Brexit risks. Bonds continue to point to better growth and corporate earnings have issued by financial institutions remain favoured and continue to largely been on the up. offer attractive yields relative to similar rated corporates. Both banks and insurers tend to benefit from the higher government bond yields which we continue to expect.
10 Lloyds Investment Funds Limited
Report of the Investment Manager (continued)
North American Fund (Closed 27.04.18) Sterling Bond Fund Performance Performance The Fund produced a return of -1.54% over the period ended 27 The Fund produced a return of -0.94% over the year ended 30 April 2018, compared to a return of 0.29% in the Lipper Hindsight September 2018, compared to a return of -0.07% in the iBoxx Non North American Equity sector. Gilt ex Sovereign All Maturities Index. Background and Strategy Background and Strategy Major North American equity market indices rose modestly Credit markets performed strongly over the final three months of amid several periods of volatility during the six-month period 2017, but experienced volatility in the first three months of 2018, ended 27 April 2018. Investors’ optimism regarding generally with spreads widening marginally Between October and December, positive economic data and corporate earnings reports partially strong global economic growth and cautious central bank policy counterbalance concerns about higher inflation and rising interest exits supported risk assets, and Euro investment grade spreads rates. US large-cap stocks, as represented by the broader-market finished 2017 approaching multi-year tights. Bonds issued by S&P 500 Index, returned 1.22% in sterling terms for the reporting financial institutions were strong as sector fundamentals improved, period. The more cyclical consumer discretionary and information with valuations appearing attractive relative to European non technology sectors posted gains and were the strongest financial bonds whose spreads have been suppressed by European performers within the S&P 500 Index for the period. In contrast, Central Bank (ECB) purchases. the relatively higher dividend-paying telecommunication services Moving into 2018, spreads tightened significantly in January due and utilities sectors recorded negative returns and were the to central bank buying, solid corporate earnings and Europe’s primary market laggards, as US Treasury yields moved higher during economic renaissance. February marked a reversal in sentiment, the period, most notably in the short and intermediate segments. with investors pricing in the end of monetary stimulus. That said, The Federal Reserve raised its benchmark interest rate in two the euro market performed better than its sterling and US dollar increments of 25 basis points to a range of 1.50% to 1.75% following counterparts, with spreads widening only marginally. However, its meetings in December 2017 and March 2018. US GDP grew by March brought significant spread widening as economic data 2.9% and 2.6% in the third and fourth quarters of 2017, respectively. weakened and new corporate supply surged, creating a weak The modest deceleration in the growth rate for the fourth quarter technical environment. Having outperformed in previous months, was attributable to a decline in private inventory and an increase in subordinated insurance bonds underperformed in the sell-off imports, which offset upturns in consumer spending and exports. owing to their greater market sensitivity. Government bond yields, The Fund’s performance relative to the benchmark S&P 500 Index too, were volatile as investors reacted to more hawkish European for the six-month reporting period was enhanced primarily by an Central Bank guidance and subsequent weaker economic data. overweight allocation to the utilities sector and stock selection In the springtime, European politics and increased fears of a in consumer staples. The largest contributors among individual material trade war between the US and its major trading partners holdings were cosmetics maker Estee Lauder Companies as well began to cause concerns. The Italian political situation was one as the lack of exposure to conglomerate General Electric. Estee of the main drivers of the volatility, with two populist parties Lauder saw double digit, year over year revenue growth for the first attempting to form an effective coalition throughout the period. In two quarters of its 2018 fiscal year, benefiting most notably from this situation Italian-domiciled corporate bonds underperformed strength in its skincare and makeup segments, and in the Europe, materially and other areas of the European Union, such as Portugal Middle East and Africa region. General Electric was hampered by and Spain, were weak in sympathy. Sector-wise both banks and its significant exposure to the relatively weak performing energy insurers were among the weakest while safe haven sectors were sector over the reporting period. Conversely, both stock selection stronger performers. and an underweight to the information technology sector weighed on Fund performance for the period. The primary individual stock Credit markets were materially calmer over the summer months, detractors included energy services company TransCanada Corp. and spreads tightened modestly in both investment grade and and retail drugstore operator and pharmacy benefit manager CVS high yield markets. Government bond yields rose, however, led by Health. US Treasuries as higher inflation and tighter monetary policy were priced in. Developed markets materially outperformed emerging markets which were particularly affected by weakness in Turkey and Argentina. Both investment grade and high yield markets were supported by fundamental data and levels of new issuance, which were below expected levels in both asset classes. The bout of volatility seen in August was primarily focused on emerging markets and foreign exchange with a stronger dollar and idiosyncratic issues in both Turkey and Argentina exerting a negative impact.
11 Lloyds Investment Funds Limited
Report of the Investment Manager (continued)
Sterling Bond Fund (continued) UK Fund (Closed 27.04.18) Background and Strategy (continued) Performance The Fund outperformed its benchmark from October through The Fund produced a return of -3.22% over the period ended 27 to December as a result of strong asset allocation and good April 2018, compared to a return of -2.29% in the Lipper security selection. Ten year gilt yields fell over the quarter, with Hindsight UK Offshore Funds sector. less prominent declines in five year and two-year maturities. Background and Strategy Performance was hindered somewhat by negative effects in the yield curve. Overweight positions were held in the long end in UK equities fell in the half year under review. Initially, stocks rose 10-year and 30-year in anticipation that the curve would flatten, on the back of sterling weakness and resilient economic data. but it steepened instead. Despite being underweight in corporates, However, that upbeat sentiment soon gave way to the return of strong asset allocation and security selection - particularly in volatility that had been absent for much of 2017. In economic news, financials - meant the fund outperformed. The Fund was longer fourth quarter GDP expanded by more than expected, led by both duration than benchmark, which was positive. The Fund was manufacturing and services, but full year growth for 2017 was the overweight relative to benchmark in utilities and financials, and slowest in five years. In February data, the manufacturing sector underweight in industrials. Financials outperformed, and the expanded at the slowest in eight months despite improving demand underweight industrials added to returns. Meanwhile, utilities and job creation. Consumption fell, hampered by inclement marginally underperformed. weather, even though wage growth finally turned a corner, accelerating in the three months to January as the jobless rate fell In the first three months of 2018, performance was helped by a to its lowest since 1975. The Bank of England’s quarterly inflation short duration position but hindered by long exposure to lower report signalled that rates may be expected to rise earlier and to quality credit. Bonds issued by banks and insurers underperformed a greater extent as it attempted to deal with the effects of better the market as a whole and detracted from returns. HSBC and global growth on UK inflation. For the half year to end-March, Citigroup were amongst the under-performers. An allocation to the portfolio fell by 2.82% in sterling terms, underperforming the AAA floating rate securitizations benefited performance for the benchmark’s fall of 2.25%. Negative asset allocation outweighed fund in an environment of rising yields. positive stock selection. Moving into springtime, lower quality areas of the market were the Detracting from fund performance was funeral company Dignity, poorest performers. Financials fared badly, as did issuers domiciled which issued a profit warning and a new pricing strategy in an in Italy. The more risk-off tone to markets meant the fund modestly attempt to stem market-share declines precipitated by fierce underperformed its index benchmark. Bonds issued by banks and competition in its core market. Also costing the fund was Inmarsat, insurers underperformed the market as a whole and detracted which disappointed investors with its plans to cut its dividend, from returns, although within these sectors issues from Standard recognising the need for significant ongoing investment in the Life Aberdeen and Lloyds Banking Group both added value. Yield business, which together with the existing dividend could have curve positioning detracted from returns, notably an overweight in compromised the balance sheet, particularly given the lack of long-dated bonds. In the final three months of the review period, visibility around the Ligado payments. Last, Ultra Electronics also the fund continued to modestly under-perform its benchmark detracted as its shares suffered from disappointing organic growth index despite some positive contributions from stock selection. and worries over contract wins and execution. Prudential plc, the UK insurer was one of the top performers. Both duration and asset allocation were modestly negative contributors. Mitigating the poor performance was Croda, which did well with its third-quarter update highlighting healthy growth in its personal The fund remains only very modestly overweight in lower quality care division and continued high margins from its array of speciality bonds relative to its index, although the intention is to increase chemicals. Also benefiting the fund was Aveva, which contributed exposure as opportunities arise. Bonds issued by financial positively after it exceeded prior revenue expectations on the back institutions remain favoured and continue to offer relatively of a good performance in Asia and clinched a significant global attractive yields relative to similar rated corporates. Duration is contract. Finally, Abcam released a robust set of results, led by its now broadly neutral. recombinant antibodies and immunoassays segments; its balance sheet remains sound; and management upgraded its outlook.
This report is solely for information purposes and is not intended to be and should not be construed as an offer or recommendation to buy and sell investments, nor shall it form the basis or part of any contract to be relied upon in any way.
Aberdeen Asset Investments Limited 12 December 2018
12 Lloyds Investment Funds Limited
Report of the Custodian to the Members of Lloyds Investment Funds Limited
Statement of Custodian’s Responsibilities. The Custodian is required under the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended) (the ‘Rules’) to ensure that, inter alia, it: • satisfies itself that the sale, issue, redemption, cancellation and valuation of shares in the Company are carried out in accordance with the Rules; and • takes into its custody all the assets of the Company and holds them in trust for the shareholders in accordance with the Rules; and • enquires into the conduct of the Company in each annual accounting year and reports thereon to shareholders in a report, which shall contain the matters prescribed by the Rules. The Custodian’s Report is included in this Annual Report. Report of the Custodian to the Members of Lloyds Investment Funds Limited In accordance with Article 2.06 of the Rules, Link Corporate Services (Jersey) Limited, has acted throughout the year as independent Custodian to the Company. In accordance with Article 7.08 of the Rules we confirm, in our capacity as the Custodian, that we have enquired into the conduct of the Company for the year ended 30 September 2018 and in our opinion, to the best of our knowledge having made such enquiry, the affairs of the Company have been conducted in all material respects for the year then ended: • in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Memorandum and Articles of Association, by prospectuses and by all Orders for the time being in force under Article 11 of the Collective Investment Funds (Jersey) Law 1988 (as amended) (‘the Law’); and • otherwise in accordance with the provisions of the Memorandum and Articles of Association and the Law.
Link Corporate Services (Jersey) Limited, Custodian, 12 Castle Street, St Helier, Jersey, JE2 3RT Channel Islands 12 December 2018
13 Lloyds Investment Funds Limited
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited
Report on the audit of the financial statements
Our opinion In our opinion, the financial statements give a true and fair view of the financial position of Lloyds Investment Funds Limited (the “Company”) and the separate financial statements of each Fund listed below (the “Funds”), (together “the financial statements”) for the periods then ended as listed below, and of their financial performance and their cash flows for the periods then ended as listed below in accordance with International Financial Reporting Standards (“IFRS”) and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991 and the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003.
What we have audited The financial statements of the Company and each Fund listed below; • Company — 30 September 2018 • Euro High Income Fund — 30 September 2018 • European Fund — 27 April 2018 • High Income Fund — 30 September 2018 • International Fund — 27 April 2018 • North American Fund — 27 April 2018 • Sterling Bond Fund — 30 September 2018 • UK Fund — 27 April 2018 The financial statements comprises: • the statement of financial position as at the periods ended as listed above; • the statement of comprehensive income for the periods ended as listed above; • the statement of changes in net assets attributable to holders of participating redeemable preference shares for the periods ended as listed above; • the cash flow statements for the periods ended as listed above; • the investment portfolios of the funds as at the periods ended listed above; and • the notes to the financial statements, which include a summary of significant accounting policies.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s 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 are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) and with SEC Independence Rules. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
Emphasis of Matter – Going Concern We draw attention to Note 2 to these financial statements, which refers to the shareholder approval during the period on the merger which occurred on 27 April 2018 of the European Fund, International Fund, North American Fund and UK Fund with the Growth Strategy Fund of Lloyds Multi Strategy Fund Limited, an entity that is not reflected in these financial statements. The merger occurred through the transfer on 27 April 2018 of all investor interests and attributable assets and liabilities into the Growth Strategy Fund of Lloyds Multi Strategy Fund Limited. Subsequent to 27 April 2018 the European Fund, International Fund, North American Fund and UK Fund have been liquidated and as such the financial statements of these Funds have been prepared using a liquidation basis of accounting. Our opinion is not modified in respect of this matter.
14 Lloyds Investment Funds Limited
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited (continued) Our audit approach Overview Materiality • Overall materiality was 1% of net assets attributable to holders of participating redeemable preference shares of the Company and Funds respectively. Audit scope Materiality • Our audit work was performed solely in Jersey, which is where the Company and Funds are incorporated. • We have audited the financial statements which have been prepared by Lloyds Investment Fund Audit Managers Limited (the “Manager”). Scope • We tailored the scope of our audit taking into account the types of investments within the Company and Funds in addition to, the accounting processes and controls.
Key Audit • Our audit scope included the Funds which have merged with the Growth Strategy Fund of Matters Lloyds Multi Strategy Fund Limited on 27 April 2018 as listed above. Key audit matters • Valuation of financial assets at fair value through profit or loss.
Audit scope As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Company and Funds, the accounting processes and controls, and the industry in which they operate.
15 Lloyds Investment Funds Limited
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited (continued)
Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Company and Fund materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Overall materiality Company £2,552k (2017: £1,799k) Euro High Income Fund €131k (2017: €73k) European Fund £141k (2017: £74k) High Income Fund £2,261k (2017: £1,321k) International Fund £198k (2017: £112k) North American Fund £101k (2017: £54k) Sterling Bond Fund £175k (2017: £98k) UK Fund £147k (2017: £76k) 1% of net assets attributable to holders of participating redeemable How we determined it preference shares. Rationale for the materiality benchmark We believe that net assets are the most appropriate benchmark because this is the key metric of interest to members and users of the financial statements. It is also a generally accepted measure used for companies in this industry. We have revised the percentage of net assets attributable to holder of participating redeemable preference shares used during the period to align with industry standard of entities with similar investment portfolios and based on our risk assessment and knowledge of the users and regulatory requirements. For the European Fund, International Fund, North American Fund and UK Fund which transferred their investor interests, assets and liabilities to the Growth Strategy Fund of Lloyds Multi Strategy Fund Limited on 27 April 2018, the net assets attributable to the holders of participating redeemable preference shares immediately before the transfer on 27 April 2018 have been used as the benchmark amount as we believe this to more appropriately reflect the interests of the users of the financial statements.
We agreed with the International Funds Auditor Liaison Committee that we would report to them misstatements identified during our audit above 10% of overall materiality for the Company and Funds as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
16 Lloyds Investment Funds Limited
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited (continued)
Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Emphasis of Matter – Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.
Key audit matter How our audit addressed the Key audit matter Valuation of financial assets at fair value through profit or loss Our audit procedures included understanding and evaluating the The Company and Fund’s financial assets are valued at key controls around the valuation performed by the Manager. £248,532,133 and represent the majority of the net assets This included controls over the review and approval of the daily attributable to holders of participating redeemable preference net asset valuation (“NAV”) reports. We selected a sample shares as at the periods listed above. of NAV reports and tested that pricing data recorded within the Company and Fund’s accounting system was reviewed for Refer to further information on the investment portfolios variances in excess of a reasonable defined threshold, with any included in the financial statements on pages 32 - 56 and Note 19 variances investigated. This enabled us to determine whether the (Financial Risk Management). valuation controls throughout the period could be reasonably The fair value of the Company and Fund’s financial assets is based relied upon. on quoted market prices as at the Statement of Financial Position date. The quoted market price used for these financial assets We assessed the accounting policy for the valuation of financial held by the Company and Funds are the current mid-market price assets at fair value through profit or loss for compliance with at the close of business on the last business day of the accounting IFRS; performed testing to ensure that the investment valuation period, as required by IFRS 13 (Fair Value Measurement). had been accounted for in accordance with the stated accounting policy and determined that the accounting policy complied with Whilst the valuation of these financial assets is not considered accounting standards and had been consistently applied. complex, nor does it involve significant judgements and estimates to be made by the directors, the market value is material to the In addition to this, we compared the investment prices Company and Funds. A misstatement due to fraud or error could used by the Manager at period ends to the prices obtained potentially be material to the financial statements as a whole. from an independent pricing source for reasonableness. No As a result, whilst we have not concluded it to be a significant misstatements were identified by our testing which required audit risk, we consider the valuation of financial assets at fair reporting to the directors. value through profit or loss to be an area of focus in our audit and accordingly a key audit matter.
Other information The directors are responsible for the other information. The other information comprises all the information included in the Annual Report and Audited Financial Statements but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above 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, 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 in this regard.
17 Lloyds Investment Funds Limited
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited (continued)
Responsibilities of the directors for the financial statements The directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards, the requirements of Jersey law and for such internal control as the directors 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 directors are responsible for assessing the Company and Funds ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company and Funds or to cease operations, or have no realistic alternative but to do so.
Auditor’s 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 auditor’s 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 will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and Funds internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and Funds ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. For the Company, Euro High Income Fund and Sterling Bond Fund, future events or conditions may cause them to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
18 Lloyds Investment Funds Limited
Independent Auditor’s Report to the Members of Lloyds Investment Funds Limited (continued)
Report on other legal and regulatory requirements Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; • proper accounting records have not been kept; or • the financial statements are not in agreement with the accounting records. We have no exceptions to report arising from this responsibility. This report, including the opinion, has been prepared for and only for the members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving this opinion, 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.
Trudy Dillon-Nugent For and on behalf of PricewaterhouseCoopers CI LLP Chartered Accountants Jersey, Channel Islands 12 December 2018
19 Lloyds Investment Funds Limited
Statements of Financial Position
As at 30 September 2018
Note Company Euro High Income European Fund Fund
Assets £ € £
(Closed 27 April 2018)
Current Assets Cash and cash equivalents 4,308,313 569,308 — Creations receivable — — —
Investment sales receivable 543,356 — — Financial assets at fair value through 248,532,133 12,465,417 — profit or loss Other accrued income and other debtors 4 6,644,754 237,225 —
Total Assets 260,028,556 13,271,950 — Equity Ordinary share capital 1,000 — — Total Equity 1,000 — — Current Liabilities Cancellation payable 223,517 — — Investment purchases payable 1,333,857 — —
Distribution payable 5 1,034,454 102,565 —
Accrued expenses and other creditors 6 336,783 29,814 —
Nominal shares 14 1,870,535 — —
Total Liabilities* 4,799,146 132,379 — Net assets attributable to holders of participating redeemable 17 255,228,410 13,139,571 — preference shares Total Liabilities and Equity 260,028,556 13,271,950 — * Excluding net assets attributable to holders of participating redeemable preference shares
The financial statements on pages 20 to 91 were approved by the Board of Directors on 12 December 2018 and are signed on their behalf by: B. C. James } Directors B. Lysiak The notes on pages 57 to 91 form an integral part of these financial statements.
20 Lloyds Investment Funds Limited
Statements of Financial Position
As at 30 September 2018
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund
Assets £ £ £ £ £
(Closed 27 April (Closed 27 April (Closed 27 April 2018) 2018) 2018) Current Assets Cash and cash equivalents 3,177,154 — — 624,071 — Creations receivable — — — — —
Investment sales receivable 543,356 — — — — Financial assets at fair value through profit 220,731,676 — — 16,697,387 — or loss Other accrued income and other debtors 4,277,567 — — 284,353 —
Total Assets 228,729,753 — — 17,605,811 — Equity Ordinary share capital — — — — — Total Equity — — — — — Current Liabilities Cancellation payable 223,517 — — — — Investment purchases payable 1,333,857 — — — —
Distribution payable 837,064 — — 106,034 —
Accrued expenses and other creditors 281,176 — — 29,051 —
Nominal shares — — — — —
Total Liabilities* 2,675,614 — — 135,085 — Net assets attributable to holders of participating redeemable 226,054,139 — — 17,470,726 — preference shares Total Liabilities and Equity 228,729,753 — — 17,605,811 —
* Excluding net assets attributable to holders of participating redeemable preference shares
The notes on pages 57 to 91 form an integral part of these financial statements.
21 Lloyds Investment Funds Limited
Statements of Financial Position (continued)
As at 30 September 2017
Note Company Euro High European Income Fund Fund
Assets £ € £
Current Assets Cash and cash equivalents 14,122,181 345,417 110,631 Creations receivable 9,319 — 5,517
Investment sales receivable 76,131 — — Financial assets at fair value through 343,105,522 14,122,590 14,836,846 profit or loss Other accrued income and other debtors 4 7,028,946 262,772 —
Total Assets 364,342,099 14,730,779 14,952,994 Equity Ordinary share capital 1,000 — — Total Equity 1,000 — — Current Liabilities Cancellation payable 113,712 — — Investment purchases payable 922,965 — —
Distribution payable 5 1,554,126 112,683 128,767
Accrued expenses and other creditors 6 508,122 28,018 38,680
Nominal shares 14 1,477,791 — —
Total Liabilities* 4,576,716 140,701 167,447 Net assets attributable to holders of participating redeemable 17 359,764,383 14,590,078 14,785,547 preference shares Total Liabilities and Equity 364,342,099 14,730,779 14,952,994
* Excluding net assets attributable to holders of participating redeemable preference shares
The notes on pages 57 to 91 form an integral part of these financial statements.
22 Lloyds Investment Funds Limited
Statements of Financial Position (continued)
As at 30 September 2017
High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund
Assets £ £ £ £ £
Current Assets Cash and cash equivalents 12,317,595 271,777 335,833 679,741 102,245 Creations receivable — 3,802 — — —
Investment sales receivable — 22,219 23,690 — 30,222 Financial assets at fair value through profit 249,097,124 22,070,752 10,466,153 18,803,180 15,387,560 or loss Other accrued income and other debtors 4,874,465 28,260 11,753 367,472 36,667
Total Assets 266,289,184 22,396,810 10,837,429 19,850,393 15,556,694 Equity Ordinary share capital — — — — — Total Equity — — — — — Current Liabilities Cancellation payable 72,858 — 10,680 — 30,174 Investment purchases payable 792,055 — — 99,755 31,155
Distribution payable 989,114 — — 139,871 197,085
Accrued expenses and other creditors 286,698 55,868 29,009 34,333 38,846
Nominal shares — — — — — Total Liabilities* 2,140,725 55,868 39,689 273,959 297,260 Net assets attributable to holders of participating redeemable 264,148,459 22,340,942 10,797,740 19,576,434 15,259,434 preference shares Total Liabilities and Equity 266,289,184 22,396,810 10,837,429 19,850,393 15,556,694
* Excluding net assets attributable to holders of participating redeemable preference shares
The notes on pages 57 to 91 form an integral part of these financial statements.
23 Lloyds Investment Funds Limited
Statement of Comprehensive Income
For the year ended 30 September 2018 Notes Company Euro High European Income Fund Fund £ € £ (Closed 27 April 2018) Operating Profit Net (loss)/ gain on financial assets at fair value 7 (9,524,273) (293,524) 243,119 through profit or loss Investment income 11,656,276 315,027 128,796
Other income 8 13,726 177 48
Total operating expenses 9 (3,726,544) (180,521) (179,128)
Operating (loss) / profit (1,580,815) (158,841) 192,835 Finance Costs Distributions to holders of participating 5 (12,110,199) (427,358) — redeemable preference shares Total finance costs (12,110,199) (427,358) —
(Loss)/ profit before tax (13,691,014) (586,199) 192,835 Withholding tax on dividends 18 (108,533) — (36,646) and other investment income (Decrease)/ increase in net assets attributable to holders of participating redeemable (13,799,547) (586,199) 156,189 preference shares from operations
For the year ended 30 September 2017 Notes Company Euro High European Income Fund Fund £ € £ Operating Profit Net (loss)/ gain on financial assets at fair value 7 (2,369,348) (513,613) 1,957,408 through profit or loss Investment income 14,654,068 530,127 397,758
Other income 8 1,972 — 3
Total operating expenses 9 (4,471,227) (189,892) (295,962)
Operating profit 7,815,465 (173,378) 2,059,207 Finance Costs Distributions to holders of participating 5 (14,239,829) (447,734) (128,767) redeemable preference shares Total finance costs (14,239,829) (447,734) (128,767)
(Loss)/profit before tax (6,424,364) (621,112) 1,930,440 Withholding tax on dividends 18 (234,747) — (100,250) and other investment income (Decrease)/ increase in net assets attributable to holders of participating redeemable (6,659,111) (621,112) 1,830,190 preference shares from operations
The notes on pages 57 to 91 form an integral part of these financial statements.
24 Lloyds Investment Funds Limited
Statement of Comprehensive Income
For the year ended 30 September 2018 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ (Closed 27 (Closed 27 (Closed 27 April 2018) April 2018) April 2018) Operating Profit Net (loss)/ gain on financial assets at fair value (8,840,640) (119,346) 309,680 (577,267) (280,545) through profit or loss Investment income 9,914,425 252,762 97,204 623,829 360,992
Other income 11,179 11 27 1,784 521
Total operating expenses (2,610,588) (241,134) (125,466) (219,284) (191,487)
Operating (loss) / profit (1,525,624) (107,707) 281,445 (170,938) (110,519) Finance Costs Distributions to holders of participating (11,061,762) — — (511,451) (158,845) redeemable preference shares Total finance costs (11,061,762) — — (511,451) (158,845)
(Loss)/ profit before tax (12,587,386) (107,707) 281,445 (682,389) (269,364) Withholding tax on dividends — (46,264) (25,623) — — and other investment income (Decrease)/ increase in net assets attributable to holders of participating redeemable (12,587,386) (153,971) 255,822 (682,389) (269,364) preference shares from operations
For the year ended 30 September 2017 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Operating Profit Net (loss)/ gain on financial assets at fair value (8,091,347) 2,275,002 1,319,463 (507,310) 1,124,729 through profit or loss Investment income 11,907,444 532,588 199,162 664,380 491,062
Other income 1,938 15 14 — 2
Total operating expenses (2,817,514) (425,775) (209,930) (243,936) (312,738)
Operating profit 1,000,521 2,381,830 1,308,709 (86,866) 1,303,055 Finance Costs Distributions to holders of participating (12,901,372) — — (624,360) (197,085) redeemable preference shares Total finance costs (12,901,372) — — (624,360) (197,085)
(Loss)/profit before tax (11,900,851) 2,381,830 1,308,709 (711,226) 1,105,970 Withholding tax on dividends — (82,766) (51,731) — — and other investment income (Decrease)/ increase in net assets attributable to holders of participating redeemable (11,900,851) 2,299,064 1,256,978 (711,226) 1,105,970 preference shares from operations
The notes on pages 57 to 91 form an integral part of these financial statements.
25 Lloyds Investment Funds Limited
Statement of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares
For the year ended 30 September 2018 Company Euro High European Income Fund Fund £ € £ (Closed 27 April 2018) Net assets attributable to holders of participating redeemable preference 359,764,383 14,590,078 14,785,547 shares as at 1 October 2017 Creation of participating redeemable preference 8,097,038 487,356 127,113 shares Redemption of participating redeemable preference (98,980,124) (1,351,664) (15,068,849) shares Dilution levies 25,867 — — Net decrease from (90,857,219) (864,308) (14,941,736) share transactions (Decrease) / increase in net assets attributable to holders of participating redeemable preference (13,799,547) (586,199) 156,189 shares from operations Movement in currency translation 120,793 — — Net assets attributable to holders of participating redeemable preference 255,228,410 13,139,571 — shares as at 30 September 2018
For the year ended 30 September 2017 Company Euro High European Income Fund Fund £ € £
Net assets attributable to holders of participating redeemable preference 384,026,828 15,681,083 14,448,885 shares as at 1 October 2016 Creation of participating redeemable preference 11,538,060 923,611 67,362 shares Redemption of participating redeemable preference (29,376,229) (1,393,504) (1,560,890) shares Dilution levies 19,216 — — Net decrease from (17,818,953) (469,893) (1,493,528) share transactions (Decrease) / increase in net assets attributable to holders of participating redeemable preference (6,659,111) (621,112) 1,830,190 shares from operations Movement in currency translation 215,619 — — Net assets attributable to holders of participating redeemable preference 359,764,383 14,590,078 14,785,547 shares as at 30 September 2017
The notes on pages 57 to 91 form an integral part of these financial statements.
26 Lloyds Investment Funds Limited
Statement of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares
For the year ended 30 September 2018 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ (Closed 27 (Closed 27 (Closed 27 April 2018) April 2018) April 2018) Net assets attributable to holders of participating redeemable preference 264,148,459 22,340,942 10,797,740 19,576,434 15,259,434 shares as at 1 October 2017 Creation of participating redeemable 5,883,625 97,755 15,620 919,661 627,431 preference shares Redemption of participating redeemable (31,416,426) (22,284,726) (11,069,182) (2,342,980) (15,617,501) preference shares Dilution levies 25,867 — — — — Net decrease from (25,506,934) (22,186,971) (11,053,562) (1,423,319) (14,990,070) share transactions (Decrease) / increase in net assets attributable to holders of participating redeemable (12,587,386) (153,971) 255,822 (682,389) (269,364) preference shares from operations Movement in currency translation — — — — — Net assets attributable to holders of participating redeemable preference 226,054,139 — — 17,470,726 — shares as at 30 September 2018
For the year ended 30 September 2017 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Net assets attributable to holders of participating redeemable preference 287,111,918 21,491,694 10,083,060 22,115,791 15,209,356 shares as at 1 October 2016 Creation of participating redeemable 7,554,047 610,021 337,649 1,240,002 920,480 preference shares Redemption of participating redeemable (18,635,871) (2,059,837) (879,947) (3,068,133) (1,976,372) preference shares Dilution levies 19,216 — — — — Net decrease from (11,062,608) (1,449,816) (542,298) (1,828,131) (1,055,892) share transactions (Decrease) / increase in net assets attributable to holders of participating redeemable (11,900,851) 2,299,064 1,256,978 (711,226) 1,105,970 preference shares from operations Movement in currency translation — — — — — Net assets attributable to holders of participating redeemable preference 264,148,459 22,340,942 10,797,740 19,576,434 15,259,434 shares as at 30 September 2017
The notes on pages 57 to 91 form an integral part of these financial statements.
27 Lloyds Investment Funds Limited
Cash Flow Statement
For the year ended 30 September 2018 Company Euro High European Income Fund Fund £ € £ (Closed 27 April 2018) Cash flows from operating activities Purchases of financial assets and (83,305,313) (2,633,817) (3,119,525) settlement of financial liabilities Receipts from sale of investments 166,433,102 3,832,966 18,239,347
Investment income received 14,239,814 505,059 92,150
Unclaimed distribution over 10 years old 10,399 192 —
Bank interest received 3,341 — 48
Interest paid (17,161) (557) (6,891)
Operating expenses paid (3,881,003) (178,168) (210,917)
Net cash inflow from operating activities 93,483,179 1,525,675 14,994,212 Cash flows from financing activities Distributions paid to holders of participating (12,630,226) (437,476) (128,767) redeemable preference shares issued Proceeds received from issue of participating redeemable 8,111,012 487,356 132,630 preference shares Payments on redemption of participating redeemable (98,883,803) (1,351,664) (15,068,849) preference shares* Dilution levies 25,867 — — Net cash outflow (103,377,150) (1,301,784) (15,064,986) from financing activities Net (decrease)/ increase (9,893,971) 223,891 (70,774) in cash and cash equivalents Cash and cash equivalents 14,122,181 345,417 110,631 as at 1 October 2017 Exchange gains / (losses) on 75,140 — (39,857) cash and cash equivalents Movement in currency 4,963 — — translation Cash and cash equivalents 4,308,313 569,308 — as at 30 September 2018
*Payments on redemption of participating redeemable preference shares includes values in respect of the transfer of funds to Lloyds Multistrategy Fund Limited as a result of the merger. The transfer values are as follows: (European Fund: £14,051,052, International Fund: £19,846,456, North American Fund: £10,062,010 and UK Fund: £14,683,045)
The notes on pages 57 to 91 form an integral part of these financial statements.
28 Lloyds Investment Funds Limited
Cash Flow Statement
For the year ended 30 September 2018 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ (Closed 27 (Closed 27 (Closed 27 April 2018) April 2018) April 2018) Cash flows from operating activities Purchases of financial assets and (64,404,550) (1,827,921) (2,510,613) (4,780,627) (4,335,589) settlement of financial liabilities Receipts from sale of investments 82,279,564 23,671,217 13,324,463 6,090,122 19,442,676
Investment income received 12,159,563 234,758 83,334 826,224 397,659
Unclaimed distribution over 10 years old 8,555 — — 1,674 —
Bank interest received 2,624 11 27 110 521
Interest paid (166) (926) (3,381) (33) (5,272)
Operating expenses paid (2,615,944) (296,076) (151,094) (224,533) (225,061)
Net cash inflow from operating activities 27,429,646 21,781,063 10,742,736 1,912,937 15,274,934 Cash flows from financing activities Distributions paid to holders of participating (11,213,812) — — (545,288) (355,930) redeemable preference shares issued Proceeds received from issue of participating redeemable 5,883,625 101,557 15,620 919,661 627,431 preference shares Payments on redemption of participating redeemable (31,265,767) (22,284,726) (11,079,862) (2,342,980) (15,647,675) preference shares* 25,867 — — — — Net cash outflow (36,570,087) (22,183,169) (11,064,242) (1,968,607) (15,376,174) from financing activities Net (decrease)/ increase (9,140,441) (402,106) (321,506) (55,670) (101,240) in cash and cash equivalents Cash and cash equivalents 12,317,595 271,777 335,833 679,741 102,245 as at 1 October 2017 Exchange gains / (losses) on — 130,329 (14,327) — (1,005) cash and cash equivalents Movement in currency — — — — — translation Cash and cash equivalents 3,177,154 — — 624,071 — as at 30 September 2018
*Payments on redemption of participating redeemable preference shares includes values in respect of the transfer of funds to Lloyds Multistrategy Fund Limited as a result of the merger. The transfer values are as follows: (European Fund: £14,051,052, International Fund: £19,846,456, North American Fund: £10,062,010 and UK Fund: £14,683,045)
The notes on pages 57 to 91 form an integral part of these financial statements.
29 Lloyds Investment Funds Limited
Cash Flow Statement (continued)
For the year ended 30 September 2017 Company Euro High European Income Fund Fund £ € £ Cash flows from operating activities Purchases of financial assets and (67,868,660) (2,246,057) (2,648,557) settlement of financial liabilities Receipts from sale of investments 95,043,679 2,889,779 4,133,930
Investment income received 16,326,954 483,610 297,508
Unclaimed distributions over 10 years old — — —
Bank interest received 1,972 — 3
Interest paid (367) (165) (167)
Operating expenses paid (4,490,787) (186,808) (292,950)
Net cash inflow from operating activities 39,012,791 940,359 1,489,767 Cash flows from financing activities Distributions paid to holders of participating (14,310,023) (441,031) — redeemable preference shares issued Proceeds received from issue of participating redeemable 11,552,582 923,611 67,482 preference shares Payments on redemption of participating redeemable (29,550,567) (1,403,536) (1,560,890) preference shares Tax — — —
Dilution levies 19,216 — — Net cash outflow (32,288,792) (920,956) (1,493,408) from financing activities Net increase/(decrease) 6,723,999 19,403 (3,641) in cash and cash equivalents Cash and cash equivalents 7,398,978 326,014 117,349 as at 1 October 2016 Exchange (losses) / gains on (6,215) — (3,077) cash and cash equivalents Movement in currency 5,419 — — translation Cash and cash equivalents 14,122,181 345,417 110,631 as at 30 September 2017
The notes on pages 57 to 91 form an integral part of these financial statements.
30 Lloyds Investment Funds Limited
Cash Flow Statement (continued)
For the year ended 30 September 2017 High International North Sterling UK Income Fund American Bond Fund Fund Fund Fund £ £ £ £ £ Cash flows from operating activities Purchases of financial assets and (46,667,410) (2,267,286) (2,505,444) (8,259,056) (3,564,873) settlement of financial liabilities Receipts from sale of investments 66,765,621 3,643,566 3,315,551 10,219,960 4,448,416
Investment income received 13,636,651 443,068 144,423 910,974 473,166
Unclaimed distributions over 10 years old — — — — —
Bank interest received 1,938 15 14 — 2
Interest paid (44) — (2) (2) (8)
Operating expenses paid (2,857,673) (418,020) (206,132) (242,416) (310,910)
Net cash inflow from operating activities 30,879,083 1,401,343 748,410 2,629,460 1,045,793 Cash flows from financing activities Distributions paid to holders of participating (13,035,938) — — (678,978) (211,024) redeemable preference shares issued Proceeds received from issue of participating redeemable 7,554,047 607,926 358,296 1,240,002 920,480 preference shares Payments on redemption of participating redeemable (18,801,152) (2,077,147) (871,144) (3,068,133) (1,949,797) preference shares Tax — — — — —
Dilution levies 19,216 — — — — Net cash outflow (24,263,827) (1,469,221) (512,848) (2,507,109) (1,240,341) from financing activities Net increase/(decrease) 6,615,256 (67,878) 235,562 122,351 (194,548) in cash and cash equivalents Cash and cash equivalents 5,702,339 331,269 111,655 557,390 296,933 as at 1 October 2016 Exchange (losses) / gains on — 8,386 (11,384) — (140) cash and cash equivalents Movement in currency — — — — — translation Cash and cash equivalents 12,317,595 271,777 335,833 679,741 102,245 as at 30 September 2017
The notes on pages 57 to 91 form an integral part of these financial statements.
31 Lloyds Investment Funds Limited
Investment Portfolio - Investment Dealing For the year ended 30 September 2018
During the year transactions representing more than 10% of the aggregate value of the transactions in the property of the Funds were carried out with the following counterparties:
European Fund (Closed 27.04.18) CS First Boston Liquidnet
High Income Fund JP Morgan
International Fund (Closed 27.04.18) Instinet
North American Fund (Closed 27.04.18) CS First Boston
Sterling Bond Fund JP Morgan
UK Fund (Closed 27.04.18) Instinet Liquidnet
32 Lloyds Investment Funds Limited
Investment Portfolio As at 30 September 2018 Euro High Income Fund Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 € € Asia and Middle East 0.76% (1.32%) Bank of Tokyo Mitsubishi 0.875% 2022 200,000 — — — 203,644 DP World Ltd 2.375% 2026 — 100,000 99,653 0.76 —
Australia and New Zealand 2.38% (2.00%) APT Pipelines 1.375% 2022 100,000 — — — 103,576 APT Pipelines 2% 2027 100,000 100,000 100,419 0.76 103,072 Ausnet Services 1.5% 2027 100,000 100,000 101,192 0.77 102,940 Telstra 3.75% 2022 — 100,000 112,095 0.85 —
Central America 1.66% (0.68%) America Movil 4.75% 2022 — 100,000 115,672 0.88 — America Movil 5.13% 2073 135,000 — — — 140,706 Petroleo Mexicano 4.75% 2029 — 100,000 102,037 0.78 —
Europe 65.66% (62.98%) ABN Amro Bank 2.88% 2028 100,000 100,000 106,401 0.81 107,942 ABN Amro Bank 4.125% 2022 130,000 130,000 147,281 1.12 152,400 AG Insurance 3.5% FRN 2047 200,000 — — — 214,266 Allianz Financial 5.75% 2041 200,000 200,000 226,371 1.72 235,503 Anheuser Busch 2.75% 2036 200,000 200,000 208,049 1.58 218,475 ATF Netherlands BV 2.125% 2023 100,000 100,000 103,635 0.79 104,132 AXA 3.875% FRN (Perp) 100,000 100,000 105,002 0.80 110,994 Banque Federative Credit Mutuel 3% 2024 100,000 100,000 106,645 0.81 109,714 Bayer Capital 2.125% 2029 — 100,000 101,027 0.77 — Bayer AG 3% FRN 2075 100,000 — — — 104,896 BBVA 3.5% 2024 — 100,000 101,445 0.77 — BNP Paribas 4.032% FRN (Perp) 100,000 100,000 105,375 0.80 108,796 BNP Paribas 7.781% FRN (Perp) 100,000 — — — 105,675 BNP Paribas 2.63% 2027 100,000 100,000 104,706 0.80 106,953 BNP Paribas 2.875% 2022 — 90,000 98,636 0.75 — BNP Paribas 4.5% 2023 250,000 250,000 293,309 2.23 305,478 Bundesrepublic Deutschland 0.5% 2026 — 75,000 76,719 0.58 — Bundesrepublic Deutschland 5.5% 2031 100,000 100,000 158,446 1.21 161,121 CNP Assurances 4.25% 2045 100,000 100,000 109,938 0.84 112,182 Cooperatieve Rabobank 4.75% 2022 300,000 300,000 348,893 2.66 362,698 Credit Agricole .875% 2022 100,000 — — — 102,613 Credit Agricole 4.5% 2025 100,000 100,000 107,170 0.82 110,581 Credit Agricole 5.125% 2023 200,000 200,000 241,793 1.84 252,149 CRH Finance 1.75% 2021 150,000 — — — 158,225 CRH Finance 5% 2019 200,000 — — — 213,491 Danica Pension 4.375% 2045 100,000 — — — 113,958 Danone 1.75% FRN — 100,000 98,098 0.75 — Deutsche Annington 4% FRN (Perp) 100,000 100,000 106,391 0.81 109,031 Deutsche Annington 0.875% 2020 100,000 — — — 102,077 Deutsche Telekom Intl Finance 6.625% 2018 100,000 — — — 103,526 Deutsche Telekom Intl Finance 7.5% 2033 150,000 150,000 249,270 1.90 258,438 EDF 4.5% 2040 100,000 100,000 129,758 0.99 130,444 EDF 4.625% 2030 150,000 150,000 191,342 1.46 195,949 EDF 6.25% 2021 150,000 150,000 171,842 1.31 180,766 Engie 5.95% 2111 70,000 40,000 68,817 0.52 120,105 Engie 6.375% 2021 100,000 100,000 114,775 0.87 121,120 Gas Natural Capital Markets 6.375% 2019 150,000 150,000 157,657 1.20 167,086 GE Capital European Funding 6% 2019 50,000 50,000 50,898 0.39 53,972 GE Capital European Funding 6.025% 2038 202,000 100,000 150,896 1.15 333,994 Grand City Properties 1.375% 2026 100,000 100,000 95,459 0.73 98,846 Groupe BPCE 2.75% 2026 100,000 100,000 104,503 0.80 106,188
33 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 Euro High Income Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 € € Europe (coninued) Heidelberg Cement 2.25% 2024 50,000 50,000 52,942 0.40 53,793 Heidelberg Cement 8.5% 2019 100,000 100,000 109,228 0.83 117,717 Hemsö Fastighets 1% 2026 100,000 — — — 96,466 Iberdrola 1.88% FRN — 100,000 96,817 0.74 — Iberdrola 5.625% 2018 200,000 — — — 207,085 Innogy Finance 5.75% 2033 100,000 100,000 143,001 1.09 149,674 KFW Bankengruppe 4.675% 2023 570,000 570,000 682,384 5.19 711,073 KPN 6.125% (Perp) 100,000 — — — 105,266 Merlin Properties 1.875% 2026 100,000 100,000 97,294 0.74 99,860 Metrovacesa SA 2.375% 2022 100,000 100,000 105,188 0.80 106,772 NN Group 1.375 (Perp) — 100,000 105,865 0.81 — Nordea Bank 3.25% 2022 — 200,000 221,817 1.69 — Orange 8.125% 2033 170,000 170,000 295,300 2.25 315,747 Orsted 6.25% 2013 — 25,000 29,074 0.22 — Renault 1% 2025 — 107,000 101,812 0.77 — RTE Reseau de Transport d'Electricite 3.875 2022 — 100,000 113,423 0.86 — Santander UK 1.125% 2023 108,000 — — — 108,640 SES 5.63% (Perp) 100,000 — — — 111,938 Societe Generale SA 2.625% 2025 100,000 100,000 103,873 0.79 106,548 TDF Infrastructure 2.875% 2022 100,000 100,000 107,373 0.82 108,693 Telefonica 3% FRN — 100,000 95,564 0.73 — Telefonica 5% FRN — 100,000 105,313 0.80 — TenneT Holdings 3% FRN — 100,000 101,147 0.77 — Teva Pharmaceutical Finance 1.125% 2024 — 100,000 89,136 0.68 — Total 2.625% FRN (Perp) 159,000 159,000 162,652 1.24 161,345 Unibail Rodamco 2% 2016 300,000 300,000 294,038 2.24 308,786 Unibail Rodamco 2.875% (Perp) — 100,000 98,215 0.75 — Unitymedia 3.5% 2027 — 100,000 105,948 0.81 — Unitymedia Hessen 8.125% 2017 100,000 100,000 113,438 0.86 113,546 Valeo 3.25% 2024 100,000 100,000 111,633 0.85 116,117 Vesteda Finance 2.5% 2022 100,000 100,000 105,812 0.81 108,156 Volkswagen International Finance 4.625% FRN (Perp) 130,000 130,000 134,993 1.03 139,290 Volkswagen International Finance 1.875% 2027 100,000 100,000 98,894 0.75 100,395 Volkswagen International Finance 2.7% FRN (Perp) 100,000 100,000 99,979 0.76 99,736
United Kingdom 13.83% (18.42%) Aviva 3.375% FRN 2045 100,000 100,000 101,040 0.77 105,690 Aviva 6.125% FRN 2043 100,000 100,000 116,749 0.89 122,133 Aviva 6.875% FRN 2038 100,000 — — — 104,245 Barclays Bank 6.625% 2022 100,000 100,000 116,617 0.89 123,378 BG Energy Capital 6.5% FRN 2072 100,000 — — — 101,490 British Telecom 1.75% 2026 137,000 137,000 138,315 1.05 140,602 Channel Link Enterprises Inc 2.706% 2050 100,000 100,000 102,287 0.78 103,309 EE Finance 3.25% 2018 200,000 — — — 205,531 HBOS 4.5% FRN 2030 100,000 100,000 111,132 0.85 117,407 Heathrow Funding 4.6% FRN 2020 250,000 — — — 254,463 Jaguar Land Rover Automotive 2.2% 2024 200,000 — — — 202,056 National Grid 5% 2018 175,000 — — — 181,766 Nationwide Building Society 1.25% 2025 100,000 100,000 101,629 0.77 101,814 Nationwide Building Society 4.13% 2023 200,000 — — — 203,647 Nationwide 6.75% 2020 100,000 100,000 111,473 0.85 117,716 Pentair Finance ZERO 2019 150,000 — — — 156,434 Royal Bank of Scotland 2.5% 2023 90,000 100,000 96,008 0.73 101,324 Royal Bank of Scotland 5.375% 2019 150,000 150,000 157,939 1.20 166,099 SSE Plc 2.375% FRN (Perp) 200,000 200,000 202,897 1.54 205,834 Total Capital 5.125% 2024 200,000 200,000 250,254 1.90 259,075 United Utilities Water 4.25% 2020 200,000 200,000 211,395 1.61 219,848
34 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 Euro High Income Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 € € United States 10.61% (11.76%) AT&T 3.15% 2036 — 100,000 100,033 0.76 — AT&T 3.375% 2034 200,000 200,000 210,992 1.61 214,828 Goldman Sachs 2% 2023 200,000 200,000 209,043 1.59 211,767 JP Morgan Chase 2.75% 2022 120,000 120,000 130,670 0.99 133,159 Lehman Brothers Holdings FRN 2019 150,000 150,000 390 0.00 1,515 MetLife Global Funding 2.375% 2019 100,000 100,000 102,566 0.78 105,093 Microsoft 3.125% 2028 — 100,000 119,343 0.91 — Thermo Fisher Scientific 1.375% 2028 100,000 — — — 96,175 Verizon Communications 1.875% 2029 — 100,000 99,465 0.76 — Verizon Communications 3.25% 2026 185,000 185,000 209,920 1.60 211,827 Vodafone Group 2.875% 2037 — 100,000 100,227 0.76 — Wal-Mart Stores 2.55% 2026 — 100,000 111,265 0.85 —
Total Value of Investments 12,465,417 94.90 14,122,590 Other Assets 806,533 6.14 608,189 Total Assets 13,271,950 101.04 14,730,779 Liabilities (132,379) (1.04) (140,701) Total Net Assets 13,139,571 100.00 14,590,078
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased €2,633,817 €2,246,057 Proceeds from investments sold €3,832,966 €2,889,779
35 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 European Fund (Closed 27.04.18) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Austria 0.00% (4.05%) Schoeller-Bleckmann 6,400 — — — 379,861 Vienna Insurance Group A 14,800 — — — 325,629
Denmark 0.00% (4.33%) Novo Nordisk 20,700 — — — 738,498 Novozymes 8,100 — — — 310,653
France 0.00% (13.87%) Dassault Systèmes 4,400 — — — 331,347 Edenred 17,565 — — — 355,548 Essilor International 3,000 — — — 276,963 Grandvision 19,500 — — — 367,397 L'Oreal 2,000 — — — 316,988
Germany 0.00% (13.13%) Bayer 4,700 — — — 477,900 Fuchs Petrolub Pref 7,000 — — — 309,076 Henkel 4,850 — — — 439,957 Linde 2,080 — — — 322,478 MTU Aero Engines AG 2,820 — — — 335,200
Italy 0.00% (0.95%) Amplifon 40,900 — — — 463,634 Brunello Cucinelli 10,400 — — — 240,367
Netherlands 0.00% (11.63%) Furgo 24,400 — — — 257,244 Heineken 6,600 — — — 486,204 Unilever 17,100 — — — 753,672
Norway 0.00% (2.55%) Kongsberg Gruppen 23,900 — — — 292,038
Spain 0.00% (3.09%) Amadeus IT Holdings 9,900 — — — 479,603
Sweden 0.00% (14.79%) Assa Abloy B 18,500 — — — 314,387 Atlas Copco B 13,000 — — — 374,294 Nordea Bank 31,500 — — — 317,416 Svenska Handelsbanken 29,500 — — — 330,801 Swedish Match 11,050 — — — 288,131
36 Lloyds Investment Funds Limited
Investment Portfolio (continued)) As at 30 September 2018 European Fund (Closed 27.04.18) (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Switzerland 0.00% (30.00%) Burckhardt Compression 1,400 — — — 326,381 Givaudan 115 — — — 186,573 Holcim 6,600 — — — 287,902 Nestle 11,600 — — — 724,497 Novartis 4,900 — — — 312,832 Partners Group Holding 587 — — — 296,982 Roche Holdings 2,150 — — — 409,346 Schindler 1,900 — — — 312,934 SGS 178 — — — 318,606 The Swatch Group B 975 — — — 302,467 The Swatch Group R 2,700 — — — 160,417 Tecan 'R' 2,000 — — — 308,605 Temenos Group 4,550 — — — 346,219 UBS Group 40,600 — — — 517,469 VZ Holding 590 — — — 140,330
Total Value of Investments — — 14,836,846 Other Assets — — 116,148 Total Assets — — 14,952,994 Liabilities — — (167,447) Total Net Assets — — 14,785,547
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased £3,119,525 £2,625,110 Proceeds from investments sold £18,239,347 £3,962,474
37 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 High Income Fund Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ UK Government Bonds 2.46% (0.66%) Treasury 1.75% 2022 — 440,000 451,814 0.20 — Treasury 1.75% 2037 207,000 — — — 201,059 Treasury 3.5% 2068 120,000 120,000 187,536 0.08 190,986 Treasury 4.25% 2027 2,507,000 — — — 3,190,032 Treasury 4.25% 2036 510,000 — — — 701,760 Treasury 4.25% 2040 — 1,300,000 1,851,785 0.82 — Treasury 4.25% 2049 239,000 — — — 374,991 Treasury 4.5% 2034 — 1,155,000 1,587,432 0.70 — Treasury 4.75% 2038 — 1,000,000 1,483,100 0.66 —
UK Corporate Bonds 67.73% (67.40%) Anglian Water (Osprey) Financing 4.5% 2026 1,000,000 1,000,000 1,081,065 0.48 1,136,470 Anglian Water (Osprey) Financing 5% 2023 600,000 600,000 615,861 0.27 651,330 Annington Finance 3.685% 2034 690,000 690,000 695,413 0.31 712,363 Annington Finance 3.935% 2047 750,000 750,000 765,975 0.34 798,889 Aspire Defence Finance A 4.674% 2040 1,643,000 1,643,000 1,797,621 0.80 1,914,785 Assura Financing 3% 2028 — 335,000 335,007 0.15 — Autolink Concessionaires 8.39% 2022 1,500,000 1,500,000 670,191 0.30 809,893 Aviva 4.375% FRN 2049 317,000 317,000 298,457 0.13 325,473 Aviva 5.125% FRN 2050 1,200,000 1,200,000 1,186,044 0.52 1,303,180 Aviva 6.125% FRN (Perp) 2,200,000 1,760,000 1,913,111 0.85 2,491,104 Aviva 6.625% FRN 2041 1,600,000 — — — 1,828,006 Aviva 6.875% FRN 2058 500,000 200,000 235,058 0.10 662,374 Barclays Bank 2.375% 2023 794,000 794,000 778,926 0.34 792,055 Barclays Bank 3.25% 2033 — 1,320,000 1,193,841 0.53 — Barclays Bank 9.5% 2021 1,697,000 1,697,000 2,000,497 0.88 2,133,562 Barclays Bank 10% 2021 1,860,000 1,860,000 2,200,745 0.97 2,350,331 Barclays Bank 14% FRN (Perp) 500,000 — — — 592,000 BG Energy Capital 2072 FRN 3,617,000 — — — 3,664,130 BHP Billiton Finance 4.3% 2042 900,000 900,000 1,107,098 0.49 1,110,456 BL Superstores 5.27% 2030 750,000 750,000 200,057 0.09 330,073 BP Capital Markets 2.274% 2026 — 1,290,000 1,291,458 0.57 — British American Tobacco 6% 2022 700,000 700,000 799,725 0.35 834,016 British American Tobacco 6.375% 2019 1,240,000 1,240,000 1,311,174 0.58 1,377,496 Broadgate Financing 4.821% 2036 1,340,000 1,340,000 1,697,898 0.75 1,749,270 Bromford Housing 3.125% 2048 — 550,000 540,078 0.24 — BUPA Finance 2% 2024 280,000 280,000 276,629 0.12 277,932 BUPA Finance 5% 2026 900,000 900,000 968,204 0.43 907,646 Canary Wharf II 6.455% 2030 1,510,000 1,510,000 422,793 0.19 468,984 Catalyst Housing 3.125% 2047 — 532,000 515,758 0.23 — Circle Anglia Social Housing 7.25% 2038 — 400,000 641,984 0.28 — Centrica 6.375% 2022 1,500,000 — — — 1,810,421 Centrica 7% 2018 2,400,000 — — — 2,537,081 Channel Link Enterprises Inc 3.043% FRN 2050 450,000 450,000 441,459 0.20 451,193 Channel Link Enterprises Inc 3.848% 2050 150,000 150,000 156,608 0.07 159,632 City of Greenwich & Lewisham Rail Link 9.375% 2020 600,000 600,000 120,622 0.05 176,151 Clydesdale Bank 4.625% 2026 2,050,000 2,050,000 2,431,040 1.08 2,493,083 Co-operative Group 5.625% 2020 1,000,000 655,000 775,251 0.34 1,230,380 Connect Plus M25 2.607% 2039 — 713,000 704,711 0.31 — Coventry Building Society 2050 1,677,000 1,677,000 1,049,301 0.46 1,248,433 CRH Finance 4.125% 2029 430,000 430,000 477,267 0.21 488,371 CYBG Plc 4% 2026 — 923,000 918,200 0.41 — CYBG Plc 5% 2026 653,000 1,095,000 1,122,660 0.50 673,622 Daily Mail and General 6.375% 2027 1,300,000 1,300,000 1,492,595 0.66 1,536,522 Dignity Finance 4.6956% 2049 1,000,000 1,000,000 938,065 0.41 1,236,687 DS Smith Plc 2.875% 2029 330,000 330,000 316,145 0.14 322,255 Dwr Cymru Finance 6.907% 2021 1,900,000 1,900,000 2,154,135 0.95 2,275,864
38 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 High Income Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ UK Corporate Bonds (continued) Eastern Power Networks 8.5% 2025 3,530,000 3,530,000 4,772,242 2.11 5,096,508 EE Finance 4.375% 2019 600,000 — — — 628,578 Electricity North Western 8.785% 2026 1,452,000 1,452,000 2,070,596 0.92 2,198,004 EMH Treasury Plc 4.5% 2044 800,000 800,000 953,952 0.42 1,002,720 E.ON International Finance 6.375% 2032 600,000 600,000 808,050 0.36 844,324 EUR LN Conduit 5.0636% 2033 1,903,000 1,903,000 1,943,546 0.86 2,038,695 Eversholt Funding 3.529% 2042 — 490,000 464,736 0.21 — First Hydro 9% 2021 1,550,000 1,550,000 1,859,163 0.82 1,969,849 Friends Life Group 8.25% 2022 — 650,000 774,651 0.34 — Gatwick Funding 2.625% 2048 710,000 710,000 606,802 0.27 645,088 Gatwick Funding 4.625% FRN 2036 1,550,000 — — — 1,886,000 Gemgarto 2015 ZERO 2047 466,000 466,000 1,959 — 50,831 GlaxoSmithKline 6.375% 2039 557,000 557,000 851,356 0.38 878,606 Great Rolling Stock 6.25% 2031 1,000,000 1,000,000 1,105,627 0.49 1,190,276 HBOS 7.281% FRN (Perp) 1,940,000 — — — 2,516,723 HBOS 12% (Perp) 2,000,000 2,000,000 2,550,000 1.13 2,670,100 Heathrow Funding 4.625% 2048 2,100,000 1,500,000 1,825,721 0.81 2,701,041 Heathrow Funding 6.45% 2033 1,000,000 1,000,000 1,371,114 0.61 1,424,859 Heathrow Funding 6.75% 2028 900,000 900,000 1,170,556 0.52 1,219,673 Housing Association Funding 8.25% 2027 1,500,000 1,500,000 802,735 0.36 1,215,796 HSBC Bank GRN 2023 2,900,000 — — — 2,950,765 HSBC Bank 5.862% (Perp) 402,000 402,000 420,221 0.19 440,894 HSBC Holdings 5.875% (Perp) — 754,000 759,655 0.34 — HSBC Holdings 6% 2040 3,550,000 1,850,000 2,309,011 1.02 4,778,218 HSBC Holdings 6.5% 2024 700,000 700,000 837,985 0.37 888,689 Hutchison Whampoa Finance UK 5.625% 2017 1,850,000 — — — 1,862,589 Imperial Tobacco 8.125% 2024 850,000 850,000 1,080,560 0.48 1,140,658 Imperial Tobacco 9% 2022 1,200,000 1,200,000 1,467,469 0.65 1,560,678 Informa Plc 3.125% 2026 — 1,068,000 1,068,913 0.47 — InterContinental Hotels 3.75% 2025 1,700,000 1,700,000 1,794,321 0.79 1,855,786 Integrated Accommodation Service 6.48% 2029 1,951,000 1,951,000 1,457,805 0.64 1,613,169 Intu Metrocentre 4.125% 2028 760,000 760,000 805,822 0.36 835,682 Jaguar Land Rover Automotive 5% 2022 1,500,000 — — — 1,647,293 Land Securities GRN 2031 125,000 125,000 123,859 0.05 126,790 Land Securities 1.974% 2026 400,000 400,000 398,160 0.18 403,010 Lloyds Bank 9.625% 2023 1,500,000 1,500,000 1,916,258 0.85 2,040,504 Lloyds Bank 13% FRN (Perp) 692,000 692,000 878,909 0.39 951,569 Lloyds of London 4.75% 2024 646,000 646,000 682,850 0.30 717,049 L&Q Housing Trust 2.625% 2028 — 1,425,000 1,410,672 0.62 — L&Q Housing Trust 4.625% 2033 500,000 500,000 598,793 0.26 627,954 L&Q Housing Trust 5.5% 2040 500,000 500,000 671,682 0.30 711,421 Lloyds Bank 2.25% 2024 — 966,000 928,355 0.41 — London Wall ZERO 2048 400,000 — — — 377,090 Longstone Finance 4.896% 2036 65,000 65,000 72,864 0.03 73,141 Marstons Issuer 5.641% FRN 2035 2,712,000 — — — 2,576,400 Manchester Airport 4.125% 2024 1,000,000 1,000,000 1,102,407 0.49 1,127,051 Manchester Airport 4.75% 2034 2,030,000 530,000 637,114 0.28 2,544,298 Motability 3.625% 2036 360,000 360,000 402,419 0.18 409,655 Motability 3.75% 2026 1,000,000 — — — 1,140,765 Motability 6.625% 2019 573,000 — — — 644,296 National Grid Gas 2.75% 2046 1,500,000 1,500,000 1,322,610 0.59 1,421,033 National Grid Gas 2.625% 2038 1,500,000 1,500,000 1,346,400 0.60 1,419,788 Nationwide Building Society 5.625% 2019 1,450,000 — — — 1,578,554 NewRiver REIT 3.5% 2028 — 826,000 800,064 0.35 — NIE Finance 6.375% 2026 1,000,000 1,000,000 1,266,668 0.56 1,329,787 NGG Finance 5.625% FRN 2073 1,590,000 1,590,000 1,743,939 0.77 1,804,650 Northern Powergrid Yorkshire 9.25% 2020 3,032,000 3,032,000 3,331,498 1.47 3,582,993
39 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 High Income Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ UK Corporate Bonds (continued) Paragon Mortgages 0 2050 — 1,141,000 1,132,657 0.50 — Paragon Treasury 3.625% 2047 600,000 600,000 625,747 0.28 656,514 PCL Funding FRN 2023 — 1,052,000 1,049,843 0.46 — Peabody Capital 3.25% 20148 — 526,000 508,776 0.23 — Pension Insurance Corp 5.625 2030 — 587,000 566,135 0.25 — Places For People Homes 5.875% 2031 789,000 — — — 981,583 Premiertel Plc 6.175% 2032 1,100,000 1,100,000 1,153,310 0.51 960,044 Prudential 5% FRN 2055 2,100,000 1,900,000 1,996,277 0.88 2,246,929 Prudential 5.625% 2051 — 711,000 722,554 0.32 — Prudential Corporation 11.375% 2039 1,420,000 1,420,000 1,510,113 0.67 1,647,798 QBE Insurance 6.115% 2042 787,000 787,000 841,500 0.37 877,552 Quadgas Finance 3.375% 2029 — 1,422,000 1,413,617 0.63 — RL Finance 6.125% 2028 600,000 600,000 640,285 0.28 691,273 RMAC ZERO 2045 — 1,000,000 994,467 0.44 — Rolls-Royce 3.375% 2026 500,000 — — — 543,034 Royal Bank of Scotland 2.875% 2026 — 1,380,000 1,345,679 0.60 — Royal Bank of Scotland 6.625% 2018 1,200,000 — — — 1,263,034 Santander UK 3.625% 2026 908,000 908,000 931,717 0.41 972,250 Santander UK 10.0625% (Perp) 500,000 500,000 828,905 0.37 797,500 Scottish Power 6.5% FRN 2041 1,000,000 1,000,000 1,452,660 0.64 1,465,320 Segro Plc 2.875% 2037 — 1,010,000 948,213 0.42 — Segro Plc 6.75% 2021 800,000 — — — 972,192 Severn Trent 6.25% 2029 1,550,000 1,550,000 2,028,659 0.90 2,162,027 Severn Utilities 2.75% 2031 500,000 500,000 486,898 0.22 513,758 Shaftesbury Carnaby 2.487% 2031 — 1,000,000 934,240 0.41 — Southern Gas Networks 4.875% 2029 2,550,000 2,550,000 3,034,979 1.34 3,192,863 Southern Gas Networks 6.375% 2040 300,000 300,000 442,455 0.20 473,573 Southern Water Services 6.125% 2019 1,447,000 1,447,000 1,480,259 0.65 1,554,579 Southern Water Greensands Financing 8.5% 2019 938,000 938,000 972,678 0.43 1,044,510 SP Distribution Plc 5.875% 2026 305,000 305,000 375,386 0.17 391,526 SSE Plc 3.875% FRN (Perp) 2,350,000 2,350,000 2,380,733 1.05 2,439,399 Stagecoach Group 4% 2025 1,555,000 1,555,000 1,607,150 0.71 1,681,339 Standard Chartered 5.125% 2034 — 1,262,000 1,340,330 0.59 — Standard Chartered 7.75% 2018 1,350,000 — — — 1,394,759 Standard Chartered 7.75% FRN (Perp) 850,000 — — — 998,538 Standard Life Finance 6.75% FRN (Perp) 2,140,000 1,070,000 1,432,463 0.63 2,604,560 Telereal Securitisation 5.3887% 2033 13,000 13,000 9,331 — 10,147 Thames Water 2.375% 2023 570,000 570,000 554,234 0.25 565,791 Thames Water 2.625% 2032 300,000 300,000 281,112 0.12 292,197 Thames Water 2.875% 2027 430,000 430,000 411,123 0.18 422,297 Thames Water 5.125% 2037 1,486,000 1,486,000 1,839,192 0.81 1,954,621 Thames Water 5.75% 2030 740,000 740,000 817,403 0.36 851,864 Thames Water 5.875% 2022 800,000 800,000 842,432 0.37 893,960 Thames Water 6.75% 2028 800,000 800,000 1,063,311 0.47 1,119,557 Thames Water 7.75% 2019 1,000,000 1,000,000 1,032,220 0.46 1,099,050 Thames Water 7.738% 2058 240,000 240,000 438,253 0.19 495,481 THFC Funding No.2 6.35% 2041 1,080,000 1,080,000 1,560,505 0.69 1,636,425 Total Capital 1.75% 2025 — 1,054,000 1,038,396 0.46 — Tritax 2.625% 2026 — 432,000 425,079 0.19 — Tritax 3.125% 2031 — 1,170,000 1,141,908 0.51 — UBS AG London 6.625% 2018 944,000 — — — 973,363
40 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 High Income Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ UK Corporate Bonds (continued) Unite (USAF) 3.374% 2028 — 425,000 451,004 0.20 — University of Cambridge 2.35% 2078 — 273,000 254,667 0.11 — UPP Bond Series 1 4.9023% 2040 1,100,000 1,100,000 1,239,583 0.55 1,286,071 Verizon Communications 3.125% 2035 180,000 180,000 172,174 0.08 172,854 Verizon Communications 3.375% 2036 — 390,000 382,929 0.17 — Vicinity Centres 3.375% 2026 520,000 520,000 538,793 0.24 555,680 Virgin Media 4.875% 2027 250,000 400,000 394,984 0.17 258,063 Virgin Media 5% 2027 830,000 680,000 679,803 0.30 857,863 Virgin Media 6.25% 2029 300,000 300,000 315,147 0.14 325,710 Western Power 3.625% 2023 1,000,000 1,000,000 1,044,903 0.46 1,077,540 Western Power 5.75% 2032 1,300,000 1,300,000 1,673,653 0.74 1,770,623 Westfield Holdings 2.625% 2029 — 530,000 514,855 0.23 — Yorkshire Water Services 6.5876% 2023 842,000 842,000 1,005,457 0.44 1,049,994 Zurich Finance 6.625% FRN (Perp) 800,000 800,000 897,644 0.40 951,415
Overseas Borrowers 27.45% (28.69%) ABN Amro Bank 1% 2020 400,000 400,000 396,982 0.18 398,660 America Movil 4.375% 2041 — 500,000 573,165 0.25 — Anheuser Busch 2.85% 2037 — 1,471,000 1,385,439 0.61 — APT Pipelines 3.5% 2030 920,000 1,670,000 1,718,488 0.76 957,206 Aroundtown SA 3.25% 2027 — 945,000 921,748 0.41 — AT&T 4.25% 2043 2,027,000 1,277,000 1,323,640 0.59 2,122,431 AT&T 4.375% 2029 1,000,000 1,000,000 1,083,300 0.48 1,110,475 AT&T 4.875% 2044 1,300,000 1,300,000 1,469,956 0.65 1,490,238 AXA 6.686% FRN (Perp) 1,030,000 1,030,000 1,177,977 0.52 1,228,705 AXA 5.453% FRN (Perp) 2,492,000 2,123,000 2,257,414 1.00 2,816,999 Bank of America 2.3% 2025 1,000,000 1,000,000 981,765 0.43 1,001,480 Bank of America 7% 2028 2,700,000 2,700,000 3,635,099 1.61 3,786,410 Bank of Nova Scotia 1.25% 2022 400,000 400,000 391,840 0.17 395,588 Chorus Ltd 6.75% 2020 1,200,000 — — — 1,352,909 Citigroup 6.8% 2038 2,291,000 1,691,000 2,525,481 1.12 3,631,948 Commonwealth Bank of Australia 1.125% 2021 1,370,000 1,370,000 1,354,834 0.60 1,364,013 Cooperatieve Rabobank 4.625% 2029 1,500,000 1,500,000 1,642,256 0.73 1,705,523 Cooperatieve Rabobank 5.375% 2060 500,000 500,000 740,857 0.33 862,153 Cooperatieve Rabobank 6.6% (Perp) 500,000 — — — 681,018 Deutsche Bank 1.875% 2020 — 1,000,000 995,665 0.44 — E.ON International Finance 5.825% 2037 2,100,000 2,100,000 2,804,319 1.24 2,976,842 EDF 5.125% 2050 1,600,000 650,000 801,706 0.35 2,055,995 EDF 5.5% 2037 — 100,000 123,470 0.05 — EDF 5.5% 2041 1,700,000 1,000,000 1,257,951 0.56 2,226,714 EDF 5.875% 2031 1,178,000 1,178,000 1,508,098 0.67 1,556,738 EDF 6% 2014 700,000 700,000 904,078 0.40 994,113 EDF 6% FRN (Perp) 1,500,000 — — — 1,599,413 EDF 6.125% 2034 — 700,000 927,816 0.41 — EDF 6.25% 2028 — 400,000 513,630 0.23 — Enel 5.75% 2037 1,300,000 1,300,000 1,606,470 0.71 1,745,978 ESB Finance 6.5% 2020 1,100,000 — — — 1,236,913 Feldspar Zero 2045 1,155,000 1,155,000 721,579 0.32 952,873 First Group 8.75% 2021 3,061,000 2,509,000 2,875,003 1.27 3,775,364 Freshwater Finance 5.182% 2035 858,000 858,000 1,116,662 0.49 1,137,856 GE Capital UK Funding 8% 2039 1,500,000 — — — 2,741,897
41 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 High Income Fund (continued)
Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ Overseas Borrowers (continued) General Motors Financial 2.25% 2024 — 1,500,000 1,442,153 0.64 — Goldman Sachs 7.125% 2025 850,000 850,000 1,076,577 0.48 1,131,391 Goldman Sachs 7.25% 2028 577,000 577,000 770,697 0.34 802,563 Health Care REIT 700,000 700,000 785,238 0.35 813,471 MetLife Global Funding 2.625% 2022 — 1,250,000 1,298,096 0.57 — Muenchener Rueckversicherungs 7.625% FRN 2028 2,000,000 — — — 2,091,190 Orange 5.625% 2034 — 1,000,000 1,296,949 0.57 — Orange 5.75% FRN (Perp) 625,000 — — — 698,188 Orange 5.875% FRN (Perp) 2,002,000 2,002,000 2,157,968 0.95 2,232,230 Orange 8.125% 2028 — 1,300,000 1,896,397 0.84 — RWE Finance 6.125% 2039 1,450,000 1,450,000 1,998,739 0.88 2,122,119 RWE Finance 6.25% 2030 700,000 — — — 954,960 RWE Finance 6.5% 2021 700,000 700,000 783,781 0.35 820,731 SLM Student Loan 5.45% 2038 1,000,000 1,000,000 943,577 0.42 910,295 Societe Generale 8.875% FRN (Perp) 1,665,000 — — — 1,753,711 Swedbank AB 1.25% 2021 880,000 880,000 874,922 0.39 878,658 Time Warner Cable 5.25% 2042 600,000 600,000 659,211 0.29 681,588 United Mexico STS 5.625% 2014 310,000 310,000 319,591 0.14 335,276 Verizon Communications 4.75% 2034 900,000 — — — 1,051,216 Vodafone Group 3% 2056 — 900,000 760,662 0.34 — Vodafone Group 3.375% 2049 — 362,000 332,604 0.15 — Vodafone Group 4.875% 2078 — 626,000 623,596 0.28 — Volkswagen International Finance 1.875% 2021 — 600,000 598,014 0.26 — Volkswagen International Finance 2.25% 2025 858,000 858,000 833,435 0.37 845,482 Wal-Mart Stores 5.25% 2035 1,450,000 811,000 1,118,570 0.49 2,022,289 Wells Fargo & Co 4.875% 2035 — 500,000 574,942 0.25 — Westpac Bank 1% 2022 1,200,000 1,200,000 1,177,434 0.52 1,183,272
Total Value of Investments 220,731,676 97.64 249,097,124 Other Assets 7,998,077 3.54 17,192,060 Total Assets 228,729,753 101.18 266,289,184 Liabilities (2,675,614) (1.18) (2,140,725) Total Net Assets 226,054,139 100.00 264,148,459
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased £64,946,352 £47,459,465 Proceeds from investments sold £82,822,920 £66,765,621
42 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 International Fund (Closed 27.04.18) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Brazil 0.00% (2.47%) Banco Bradesco 66,821 — — — 551,591
Canada 0.00% (1.72%) Potash Corp. of Saskatchewan 26,800 — — — 383,576
Germany 0.00% (4.24%) Fresenius Medical Care 6,300 — — — 459,763 Henkel 4,800 — — — 487,021
Hong Kong 0.00% (5.75%) AIA Group 79,600 — — — 437,340 Jardine Matheson 8,300 — — — 391,724 MTR 61,500 — — — 267,469 Swire Pacific 26,000 — — — 188,006
India 0.00% (1.19%) HDFC Bank Ltd 3,700 — — — 265,714
Ireland 0.00% (1.74%) Experian 26,000 — — — 389,610
Israel 0.00% (2.09%) Check Point Software Technologies 5,500 — — — 467,315
Japan 0.00% (11.27%) Daito Trust Construction 3,000 — — — 407,223 FANUC 2,300 — — — 346,928 Japan Tobacco 17,100 — — — 417,471 Keyence 1,100 — — — 435,199 Shin-Etsu Chemical 8,200 — — — 546,086 Sysmex 7,700 — — — 365,822
Luxembourg 0.00% (1.19%) Tenaris 12,600 — — — 265,918
Mexico 0.00% (2.14%) Fomento Economico Mexicano 6,700 — — — 477,038
Singapore 0.00% (0.35%) City Developments 12,700 — — — 78,944
South Africa 0.00% (1.09%) MTN Group 35,400 — — — 243,316
South Korea 0.00% (1.98%) Samsung 330 — — — 443,355
Sweden 0.00% (1.55%) Atlas Copco A 11,000 — — — 346,292
Switzerland 0.00% (8.61%) Nestle 7,200 — — — 449,688 Novartis 10,900 — — — 695,892 Roche Holdings 4,100 — — — 780,614
Thailand 0.00% (1.78%) Kasikornbank 83,100 — — — 398,376
43 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 International Fund (Closed 27.04.18) (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Taiwan 0.00% (3.07%) Taiwan Semiconductor Manufacturing 24,500 — — — 685,978
UK 0.00% (14.77%) Amdocs 7,200 — — — 345,068 BHP Billiton Finance 17,900 — — — 235,340 British American Tobacco 8,982 — — — 419,729 Diageo 9,000 — — — 220,793 Rolls Royce Holdings 43,034 — — — 381,604 Royal Dutch Shell 14,300 — — — 328,078 Standard Chartered 49,524 — — — 367,245 Vodafone Group 268,600 — — — 560,703 Whitbread 11,728 — — — 441,618
USA 0.00% (31.78%) Cognizant Technology Solutions 7,100 — — — 383,802 Comcast 14,200 — — — 407,113 CVS Healthcare 6,950 — — — 421,227 EOG Resources 10,500 — — — 757,066 Intercontinental Exchange 7,500 — — — 384,070 Johnson & Johnson 3,500 — — — 339,122 M&T Bank 6,100 — — — 732,145 Oracle 18,400 — — — 662,751 Pepsico 5,250 — — — 435,899 Perrigo 7,600 — — — 479,486 Philip Morris International 2,600 — — — 215,137 Praxair 4,700 — — — 489,495 Schlumberger 7,000 — — — 363,891 TJX Companies 6,400 — — — 351,639 Visa 8,600 — — — 674,462
Total Value of Investments — — 22,070,752 Other Assets — — 326,058 Total Assets — — 22,396,810 Liabilities — — (55,868) Total Net Assets — — 22,340,942
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased £1,827,921 £2,267,286 Proceeds from investments sold £23,648,998 £3,665,785
44 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 North American Fund (Closed 27.04.18) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Chemicals 0.00% (7.97%) International Flavors & Fragrances 1,954 — — — 208,129 Potash Corp. of Saskatchewan 13,819 — — — 198,224 Praxair 2,634 — — — 274,326
Consumer Goods 0.00% (37.48%) BorgWarner 7,194 — — — 274,725 Canadian National Railway Co. 2,726 — — — 168,327 Casey's General Stores 2,779 — — — 226,676 Costco Wholesale 1,600 — — — 195,920 CVS Healthcare 3,476 — — — 210,674 Deere & Company 1,749 — — — 163,702 Estée Lauder 3,330 — — — 267,648 Gilead Sciences 3,393 — — — 204,860 Johnson & Johnson 1,629 — — — 157,837 Molson Coors Brewing Company 3,442 — — — 209,434 Monsato 1,786 — — — 159,437 Pepsico 2,404 — — — 199,600 Pfizer 8,367 — — — 222,544 Philip Morris International 2,950 — — — 244,098 PVH Corporation 2,491 — — — 234,024 TJX Companies 3,371 — — — 185,215 Verisk Analytics CL A 3,210 — — — 199,026
Energy 0.00% (11.63%) ConocoPhillips 6,439 — — — 240,182 Ecolab 1,580 — — — 151,464 EOG Resources 3,182 — — — 229,427 Schlumberger 4,084 — — — 212,305 Texas Instruments 4,246 — — — 283,705 Transcanada 5,576 — — — 204,909
Financials 0.00% (23.73%) AIG 4,902 — — — 224,356 American Express 3,755 — — — 253,095 Charles Schwab 8,353 — — — 272,290 Equifax 1,992 — — — 157,353 Intercontinental Exchange 6,722 — — — 344,229 M&T Bank 1,609 — — — 193,118 Moodys 1,609 — — — 166,926 Regions Financial Corporation 19,788 — — — 224,554 Royal Bank of Canada 3,970 — — — 228,371 Visa 5,163 — — — 404,913
Information Technology 0.00% (8.11%) CDW Corporation 4,573 — — — 224,994 Cognizant Technology Solutions 4,763 — — — 257,471 Oracle 9,715 — — — 349,925 Rockwell Automation 1,331 — — — 176,756 TELUS 7,940 — — — 212,472
45 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 North American Fund (Closed 27.04.18) (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Services 0.00% (10.02%) Alphabet Inc 449 — — — 325,816 Aetna 2,323 — — — 275,309 Baxter International 4,706 — — — 220,086 Comcast 8,820 — — — 252,869 Lockheed Martin 756 — — — 174,832
Total Value of Investments — — 10,466,153 Other Assets — — 371,276 Total Assets — — 10,837,429 Liabilities — — (39,689) Total Net Assets — — 10,797,740
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased £2,510,613 £2,475,715 Proceeds from investments sold £13,300,773 £3,316,743
46 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 Sterling Bond Fund Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ UK Government 5% (2.90%) Treasury 2.25% 2023 — 340,000 357,714 2.05 — Treasury 3.75% 2019 — 350,000 359,590 2.06 — Treasury 4% 2060 59,000 — — — 98,312 Treasury 4.25% 2055 — 40,000 65,916 0.38 — Treasury 4.5% 2034 — 65,000 89,336 0.51 — Treasury 4.5% 2042 75,000 — — — 113,224
UK Corporate 61.23% (66.14%) Alba FRN 2039 100,000 100,000 66,916 0.38 72,491 Anglian Water 6.293% 2030 — 40,000 53,791 0.31 — Annington Finance 2.646% 2025 100,000 100,000 98,586 0.56 100,765 Annington Finance 3.935% 2047 100,000 100,000 102,130 0.58 106,519 Aspire Defence Finance B 4.674% 2040 204,000 150,000 164,116 0.94 237,746 Autolink Concessionaires 8.39% 2022 300,000 300,000 134,038 0.77 161,979 Aviva 6.625% FRN 2041 100,000 100,000 109,161 0.62 114,250 Aviva 6.875% FRN 2058 100,000 100,000 117,529 0.67 132,475 Barclays Bank 2.375% 2023 100,000 100,000 98,102 0.56 99,755 Barclays Bank 3.25% 2033 — 100,000 90,443 0.52 — Barclays Bank 6.75% FRN 2023 100,000 — — — 101,533 Barclays Bank 9.5% 2021 69,000 — — — 86,751 Barclays Bank 10% 2021 200,000 — — — 252,724 BAT International Finance 2.25% 2052 100,000 100,000 72,841 0.42 79,587 BAT International Finance 4% 2026 170,000 170,000 183,174 1.05 189,556 BP Capital Markets 2.274% 2026 — 100,000 100,113 0.57 — BUPA Finance 5% 2026 100,000 100,000 107,578 0.62 100,850 Canary Wharf Finance 5.952% 2035 150,000 150,000 211,010 1.21 213,070 Catalyst Housing 3.125% 2047 — 100,000 96,947 0.55 — Centrica 6.375% 2022 225,000 — — — 271,563 Channel Link Enterprises Inc 3.043% FRN 2050 100,000 100,000 98,102 0.56 100,265 Circle Anglia Social Housing 7.25% 2038 — 50,000 80,248 0.46 — Clydesdale Bank 4.625% 2026 100,000 100,000 118,587 0.68 121,614 Connect Plus M25 2.607% 2039 — 100,000 98,837 0.57 — CRH Finance 4.125% 2029 100,000 100,000 110,992 0.64 113,575 CYBG Plc 4% 2026 — 100,000 99,480 0.57 — Daily Mail and General 6.375% 2027 100,000 — — — 118,194 Eastern Power Networks 5.75% 2024 169,000 169,000 198,045 1.13 207,040 EMH Treasury Plc 4.5% 2044 100,000 100,000 119,244 0.68 125,340 FCE Bank Plc 2.727% 2022 100,000 — — — 103,209 Fidelity National Info Services 1.7% 2022 — 110,000 108,583 0.62 — First Group 6.875% 2024 85,000 — — — 108,484 First Group 8.75% 2021 90,000 90,000 103,129 0.59 111,004 Funding II FRN 2020 100,000 100,000 100,266 0.57 100,782 Gatwick Funding 6.125% 2026 100,000 100,000 122,953 0.70 127,884 Gatwick Funding 6.5% 2043 100,000 — — — 156,165 Gemgarto 2015 ZERO 2047 100,000 100,000 420 0.00 10,908 GlaxoSmithKline 5.25% 2042 100,000 100,000 139,027 0.80 143,344 Great Rolling Stock 6.25% 2020 204,000 204,000 220,263 1.26 230,244 Great Rolling Stock 6.25% 2031 100,000 100,000 110,563 0.63 119,028 Hutchison Whampoa Finance UK 5.625% 2026 50,000 50,000 61,275 0.35 63,965 Heathrow Funding 5.875% 2043 115,000 115,000 160,122 0.92 167,561 Heathrow Funding 6% 2020 100,000 — — — 111,105 Heathrow Funding 6.45% 2033 200,000 200,000 274,223 1.57 284,972 HSBC Bank GRN 2023 150,000 — — — 152,626 HSBC Bank 5.375% 2033 150,000 150,000 179,648 1.03 193,365 HSBC Bank 6.375% FRN 2022 200,000 — — — 200,488 HSBC Holdings 2.26% 2026 — 100,000 95,252 0.55 — HSBC Holdings 6% 2040 115,000 115,000 143,533 0.82 154,787 HSBC Holdings 6.5% 2024 200,000 200,000 239,424 1.37 253,911 Imperial Tobacco 8.125% 2024 150,000 — — — 201,293
47 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 Sterling Bond Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ UK Corporate (continued) Integrated Accommodation Service 6.48% 2029 152,000 — — — 125,680 InterContinental Hotels 2.125% 2026 — 100,000 94,067 0.54 — InterContinental Hotels 3.875% 2022 110,000 110,000 117,898 0.67 120,447 Land Securities 2.75% 2059 — 100,000 94,065 0.54 — Lloyds of London 4.75% 2024 100,000 100,000 105,704 0.61 110,998 Lloyds Bank 5.75% 2025 100,000 100,000 105,598 0.60 109,665 Lloyds Bank 6% 2029 100,000 100,000 134,880 0.77 139,713 Lloyds Bank 7.625% 2025 370,000 370,000 467,091 2.67 495,375 L&Q Housing Trust 2.75% 2057 100,000 100,000 87,309 0.50 97,526 Manchester Airport 4.75% 2034 100,000 100,000 120,210 0.69 125,335 Marks & Spencer 4.75% 2025 112,000 112,000 121,232 0.69 124,702 Meadowhall 4.988% 2037 300,000 300,000 260,002 1.49 277,766 National Grid Gas 2.625% 2038 100,000 100,000 89,760 0.51 94,653 National Grid Gas 2.75% 2046 100,000 100,000 88,174 0.50 94,736 NGG Finance 5.625% FRN 2073 120,000 120,000 131,618 0.75 136,200 NIE Finance 6.375% 2026 200,000 200,000 253,334 1.45 265,957 Northumbrian Water 5.125% 2042 100,000 100,000 129,357 0.74 139,574 Notting Hill 3.25% 2048 — 100,000 95,820 0.55 — Orbit Capital 3.5% 2045 100,000 100,000 101,584 0.58 106,689 PCL Funding FRN 2023 — 100,000 99,795 0.57 — Prudential 5.7% 2063 110,000 110,000 124,971 0.72 124,891 QBE Insurance 6.115% 2042 112,000 112,000 119,756 0.69 124,887 Quadgas Finance 3.375% 2029 — 100,000 99,411 0.57 — RL Finance 6.125% 2028 100,000 100,000 106,714 0.61 115,212 Royal Bank of Scotland 2.875% 2026 — 100,000 97,513 0.56 — Royal Sun Alliance 5.125% 2045 100,000 100,000 105,366 0.60 111,553 Santander UK 9.625% FRN 2023 125,000 125,000 126,426 0.72 136,106 Scottish Amicable Finance 8.5% 123,000 — — — 130,658 Segro Plc 2.875% 2037 — 100,000 93,883 0.54 — Segro Plc 6.75% 2021 200,000 — — — 243,048 Severn Trent 6.25% 2029 170,000 170,000 222,498 1.27 237,126 Southern Gas Networks 6.375% 2040 100,000 100,000 147,485 0.84 157,858 Southern Water 5% 2021 180,000 180,000 194,842 1.12 202,745 SSE Plc 6.25% 2038 90,000 — — — 135,336 SSE Plc 3.875% FRN (Perp) 200,000 200,000 202,616 1.16 207,608 Standard Chartered 5.125% 2034 100,000 100,000 106,207 0.61 109,425 Standard Life Finance 6.75% FRN (Perp) 100,000 50,000 66,938 0.38 121,708 Swan Housing Capital Plc 3.625% 2048 100,000 100,000 102,005 0.58 108,289 Thames Water 3.5% 2028 100,000 — — — 108,344 Thames Water 7.738% 2058 100,000 100,000 182,606 1.05 206,451 THFC Funding No.2 6.35% 2041 80,000 80,000 115,593 0.66 121,217 Total Capital 1.25% 2024 85,000 85,000 81,991 0.47 82,615 Trafford Centre Finance 6.5% 2033 200,000 200,000 224,036 1.28 241,315 Tritax 3.125% 2031 — 100,000 97,599 0.56 — United Utilities 5% 2035 120,000 120,000 152,719 0.87 160,041 UPP Bond Series 1 4.9023% 2040 150,000 150,000 169,034 0.97 175,373 Western Power 3.625% 2023 100,000 100,000 104,490 0.60 107,754 Western Power 5.75% 2040 100,000 50,000 68,358 0.39 145,692 Yorkshire Building Society 3.5% 2026 100,000 100,000 102,451 0.59 106,565
Overseas Borrowers 29.33% (27.73%) America Movil 4.948% 2033 150,000 150,000 180,404 1.03 183,249 Anheuser Busch 2.85% 2037 — 77,000 72,521 0.42 — Apple Incorporated 3.05% 2029 — 100,000 107,655 0.62 — APT Pipelines 3.5% 2030 200,000 100,000 102,904 0.59 208,088 Aroundtown SA 3.25% 2027 — 100,000 97,540 0.56 — AT&T 4.25% 2043 135,000 135,000 139,931 0.80 141,356 AT&T 4.875% 2044 100,000 100,000 113,074 0.65 114,634
48 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 Sterling Bond Fund (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 30.09.18 30.09.18 Assets 30.09.17 £ £ Overseas Borrowers (continued) AT&T 7% 2040 50,000 — — — 72,606 AXA 5.453% FRN (Perp) 100,000 100,000 106,331 0.61 113,042 AXA 6.686% FRN (Perp) 100,000 100,000 114,367 0.65 119,292 Bank of America 2.3% 2025 173,000 173,000 169,845 0.97 173,256 BHP Billiton Finance 4.3% 2042 100,000 — — — 123,384 BMW Finance 1.6675% 2047 40,000 — — — 41,696 Chorus Ltd 6.75% 2020 100,000 — — — 112,742 Citigroup 4.5% 2031 170,000 170,000 185,599 1.06 198,331 Commonwealth Bank of Australia 1.125% 2021 105,000 105,000 103,838 0.59 104,541 Cooperatieve Rabobank 4.625% 2029 130,000 130,000 142,329 0.81 147,812 Cooperatieve Rabobank 6.6% (Perp) 80,000 — — — 108,963 Credit Suisse Group 2.125% FRN 2025 100,000 100,000 95,532 0.55 98,687 Deutsche Bank 1.75% 2021 — 100,000 97,700 0.56 — E.ON International Finance 6.375% 2032 200,000 200,000 269,350 1.54 281,441 EDF 5.125% 2050 50,000 — — — 64,250 EDF 5.5% 2041 100,000 100,000 125,795 0.72 130,983 EDF 6% 2014 100,000 100,000 129,154 0.74 142,016 EDF 6.125% 2034 100,000 100,000 132,545 0.76 135,455 EDF 6.875% 2022 250,000 250,000 301,706 1.73 316,001 Engie 5% 2060 — 50,000 72,808 0.42 — European Investment Bank 6% 2028 530,000 100,000 138,138 0.79 754,929 General Electric Capital Corp 5.875% 2033 110,000 — — — 156,745 General Motors Financial 2.25% 2024 120,000 120,000 115,372 0.66 117,077 Groupe BPCE 5.25% 2029 100,000 100,000 113,671 0.65 117,642 MetLife Global Funding 2.625% 2022 100,000 — — — 105,392 National Capital Trust 5.62% FRN (Perp) 150,000 150,000 151,824 0.87 157,549 New York Life 1.75% 2022 — 100,000 100,553 0.58 — Orange 5.375% 2050 100,000 50,000 67,254 0.38 143,260 Precise Mortgage Funding FRN 2055 — 100,000 95,703 0.55 — Precise Mortgage Funding 1.6675% 2047 100,000 100,000 4,948 0.03 13,316 Rabobank Capital FRN (Perp) 110,000 110,000 114,078 0.65 118,722 RWE Finance 6.125% 2039 150,000 100,000 137,844 0.79 219,530 Scentre Management 2.375% 2022 100,000 100,000 101,928 0.58 103,534 SLM Student Loan 5.45% 2038 190,000 190,000 179,280 1.03 172,956 Stagecoach Group 4% 2025 100,000 100,000 103,354 0.59 108,125 Telefonica Emisione 5.289% 2022 150,000 150,000 169,122 0.97 174,545 Verizon Communications 3.375% 2036 — 100,000 98,187 0.56 — Verizon Communications 4.75% 2034 100,000 — — — 116,802 Vicinity Centres 3.375% 2026 100,000 100,000 103,614 0.59 106,862 Vodafone Group 3.375% 2049 — 100,000 91,880 0.53 — Volkswagen International Finance 2.25% 2025 64,000 64,000 62,168 0.36 63,066 Welltower Incorporated 4.8% 2028 100,000 100,000 112,177 0.64 116,210 Westpac Bank 1% 2022 100,000 100,000 98,120 0.56 98,606 Westpac Bank 2.625% 2022 100,000 100,000 102,991 0.59 105,351
Total Value of Investments 16,697,387 95.56 18,803,180 Other Assets 908,424 5.20 1,047,213 Total Assets 17,605,811 100.76 19,850,393 Liabilities (135,085) (0.76) (273,959) Total Net Assets 17,470,726 100.00 19,576,434
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased £4,680,872 £8,358,811 Proceeds from investments sold £6,090,122 £10,219,960
49 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 UK Fund (Closed 27.04.18) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Basic Resources 0.00% (1.91%) Rio Tinto 8,500 — — — 295,269
Chemicals 0.00% (4.77%) Croda International 14,000 — — — 530,740
Consumer Goods 0.00% (24.81%) Associated British Foods 10,000 — — — 319,150 AstraZeneca 9,300 — — — 460,769 British American Tobacco 12,300 — — — 574,779 Diageo 21,500 — — — 527,449 GlaxoSmithKline 27,600 — — — 410,895 Imperial Brands 8,800 — — — 280,170 Rolls Royce Holdings 52,300 — — — 463,770 Unilever 16,900 — — — 730,080
Energy 0.00% (11.96%) BHP Billiton Finance 25,000 — — — 328,688 John Wood Group 37,200 — — — 253,053 Royal Dutch Shell 15,700 — — — 360,197 Weir Group 18,000 — — — 353,790
Financials 0.00% (15.09%) Capita 2,665 — — — 15,064 Euromoney Institutional Investor Plc 31,500 — — — 367,763 Prudential 37,100 — — — 662,606 Schroders Non-Voting 14,000 — — — 339,780 Standard Chartered 51,000 — — — 378,191
Information Technology 0.00% (2.56%) Aveva Group 16,000 — — — 389,360 — Materials 0.00% (3.77%) Essentra Plc 47,300 — — — 261,214 Spirax-Sarco Engineering 6,200 — — — 342,240
50 Lloyds Investment Funds Limited
Investment Portfolio (continued) As at 30 September 2018 UK Fund (Closed 27.04.18) (continued) Market % of Market Holding Holding Value Total Net Value 30.09.17 27.04.18 27.04.18 Assets 30.09.17 £ £ Services 0.00% (35.03%) Abcam 33,100 — — — 337,289 Aggreko 24,700 — — — 231,995 BBA Aviation 109,500 — — — 326,858 BTG Plc 52,754 — — — 356,485 Bunzl 14,500 — — — 328,933 Compass Group 40,400 — — — 639,936 Dignity 13,300 — — — 306,565 Experian 29,500 — — — 442,058 Genus 4,011 — — — 84,111 Inchcape 38,000 — — — 327,845 Inmarsat 44,000 — — — 283,030 InterContinental Hotels Group Plc 4,638 — — — 183,085 Intertek Group 9,300 — — — 463,419 Just Eat 50,500 — — — 337,719 Pearson 39,500 — — — 241,839 Rotork 143,000 — — — 372,301 RPC Group 36,900 — — — 365,402 Sage Group 67,400 — — — 470,621 Ultra Electronics 17,574 — — — 315,453 Whitbread 8,700 — — — 327,599
Total Value of Investments — — 15,387,560 Other Assets — — 169,134 Total Assets — — 15,556,694 Liabilities — — (297,260) Total Net Assets — — 15,259,434
For the year For the year ended ended 30.09.18 30.09.17 Cost of investments purchased £4,304,434 £3,547,870 Proceeds from investments sold £19,412,454 £4,478,638
51 Lloyds Investment Funds Limited
Investment Portfolio - Investments Puchased and Sold For the year ended 30 September 2018 This schedule refers to investments both purchased and sold during the year and as a result do not appear on the portfolio listings.
Nominal European Fund (Closed 27.04.18) Sterling Bond Fund Davide Campari Milano 54,100 ABN Amro Bank 1.375 2022 100,000 Deutsche Boerse 4,600 DWR Cymru Financing 1.5 2036 100,000 Hannover Ruck 3,350 Santander UK 3.875% 2029 140,000 ING Groep 22,800 Treasury 6% 2028 231,000 Kerry Group A 4,200 Treasury 4% 2022 90,000 LInde 2,080 Vodafone Group 5.9% 2032 80,000 Nemetschek 4,950 VAT Group 3,150 Sterling Bond Fund Burberry Group 19,500 High Income Fund Dechra Pharmaceuticals 12,065 AA Bond Co 2043 500,000 Fevertree Drinks 11,000 Close Brothers 2.75% 2023 489,000 London Stock Exchange Group 7,800 Deutsche Bank 900,000 RELX 31,000 GE Capital Funding 5.875% 2033 1,200,000 Rentokil Initial 115,700 LIberty Living Finance 2.625% 2024 335,000 Rightmove 6,700 London Wall 0 2048 1,320,000 Rolls Royce Holdings 2,405,800 Tower Bridge Funding FRN 2018 1,511,000 Smart Metering Systems 37,475 Treasury 1.5% 2026 400,000 UBS AG London 1.25% 2020
International Fund (Closed 27.04.18) Alphabet A 260 Infineon Technologies 10,900 Oversea Chinese Banking 34,000 Rolls Royce Holdings 1,979,564 Yum China Holdings 11,600
North American Fund (Closed 27.04.18) Amazon.com 404 Cerner 4,764 First Republic Bank 2,325 Hologic 5,788 Microsoft 5,720 Nextera Energy 1,358 Nutrien 6,486 PRA Health Services 2,581 Snap-On 1,930 Starbucks 5,059
52 Lloyds Investment Funds Limited
Investment Portfolio - Summary of Material Portfolio Changes For the year ended 30 September 2018 This schedule refers to securities purchased and sold during the year which had a value of greater than 2% of the net asset value of each Fund. The Directors consider that where applicable the disclosure of the 20 largest purchases and sales is sufficient to reflect the nature of the operating activity of the Funds. Euro High Income Fund Purchases Cost £ Sales Proceeds £ Nordea Bank 3.25% 2022 229,291 Heathrow Funding 4.6% FRN 2020 250,000 Microsoft 3.125% 2028 122,372 CRH Finance 5% 2019 210,332 America Movil 4.75% 2022 121,557 AG Insurance 3.5% FRN 2047 201,845 RTE Reseau de Transport d'Electricite 3.875 2022 118,234 Nationwide Building Society 4.13% 2023 200,000 Telstra 3.75% 2022 117,167 Iberdrola 5.625% 2018 200,000 Wal-Mart Stores 2.55% 2026 112,877 EE Finance 3.25% 2018 200,000 Telefonica 5% FRN 112,739 National Grid 5% 2018 175,000 NN Group 1.375 (Perp) 108,200 CRH Finance 1.75% 2021 159,097 Unitymedia 3.5% 2027 106,983 Pentair Finance ZERO 2019 157,141 Renault 1% 2025 106,047 GE Capital European Funding 6.025% 2038 154,169 TenneT Holdings 3% FRN 105,473 America Movil 5.13% 2073 135,000 AT&T 3.15% 2036 105,023 Danica Pension 4.375% 2045 116,456 BBVA 3.5% 2024 102,957 Santander UK 1.125% 2023 109,779 Bayer Capital 2.125% 2029 101,037 SES 5.63% (Perp) 108,212 Danone 1.75% FRN 100,000 APT Pipelines 1.375% 2022 104,872 Iberdrola 1.88% FRN 100,000 Credit Agricole .875% 2022 103,691 Telefonica 3% FRN 100,000 Bank of Tokyo Mitsubishi 0.875% 2022 103,132 Unibail Rodamco 2.875% (Perp) 100,000 Bank of Tokyo Mitsubishi 0.875% 2022 103,104 Petroleo Mexicano 4.75% 2029 99,434 Deutsche Annington 0.875% 2020 102,726 DP World Ltd 2.375% 2026 99,089 Bayer AG 3% FRN 2075 102,128
European Fund (Closed 27.04.18) Purchases Cost £ Sales Proceeds £ ING Groep 311,191 Novo Nordisk 664,462 Deutsche Boerse 296,103 Unilever 659,090 Kerry Group 'A' 294,960 Nestle 619,544 Hannover Ruck 169,450 Henkel 538,232 L'Oreal 141,400 Amplifon 521,765 Deutsche Boerse 137,339 Amadeus IT Holdings 471,338 VAT Group 135,052 L'Oreal 466,385 SGS 120,177 Temenos Group 464,113 Henkel 115,493 Edenred 458,991 VAT Group 100,315 Heineken 457,014 Davide Campari Milano 92,175 Tecan 'R' 456,926 Davide Campari Milano 89,122 Deutsche Boerse 448,324 Temenos Group 81,100 SGS 429,078 Edenred 74,862 Nemetschek 416,027 Davide Campari Milano 66,007 UBS Group 404,130 Hannover Ruck 65,242 Bayer 395,608 Hannover Ruck 62,474 Dassault Systèmes 339,380 Nemetschek 58,900 Swedish Match 338,431 Tecan 'R' 57,059 VAT Group 332,067 Nemetschek 56,878 Grandvision 318,088
53 Lloyds Investment Funds Limited
Investment Portfolio - Summary of Material Portfolio Changes (continued) For the year ended 30 September 2018
High Income Fund Purchases Cost £ Sales Proceeds £ Treasury 4.25% 2027 2,844,089 BG Energy Capital 2072 FRN 3,617,000 Treasury 4.75% 2038 2,184,067 Treasury 4.25% 2027 3,342,485 Orange 8.125% 2028 2,085,467 HSBC Bank GRN 2023 2,900,000 Treasury 4.25% 2040 1,861,284 Marstons Issuer 5.641% FRN 2035 2,517,746 Treasury 4.75% 2038 1,828,005 GE Capital UK Funding 8% 2039 2,166,740 General Electric Capital Corp 5.875% 2033 1,743,916 HSBC Holdings 6% 2040 2,156,339 Standard Chartered 5.125% 2034 1,731,219 Muenchener Rueckversicherungs 7.625% FRN 2028 2,000,000 Treasury 4.5% 2034 1,712,566 Treasury 4.25% 2027 1,910,062 Tower Bridge FRN 2018 1,511,000 Centrica 6.375% 2022 1,888,112 Quadgas Finance 3.375% 2029 1,414,293 Gatwick Funding 4.625% FRN 2036 1,853,659 L&Q Housing Trust 2.625% 2028 1,406,817 Hutchison Whampoa Finance UK 5.625% 2017 1,850,000 Orange 5.625% 2034 1,392,343 Manchester Airport 4.75% 2034 1,849,190 Royal Bank of Scotland 2.875% 2026 1,371,458 Aviva 6.625% FRN 2041 1,848,509 MetLife Global Funding 2.625% 2022 1,332,262 Societe Generale 8.875% FRN (Perp) 1,665,000 London Wall ZERO 2023 1,320,000 General Electric Capital Corp 5.875% 2033 1,619,874 BP Capital Markets 2.274% 2026 1,290,000 Nationwide Building Society 5.625% 2019 1,590,655 UBS AG 1.25% 2020 1,259,584 Standard Chartered 7.75% 2018 1,350,000 Paragon Mortgages 0 2050 1,141,000 London Wall ZERO 2023 1,324,413 Informa Plc 3.125% 2026 1,067,850 Chorus Ltd 6.75% 2020 1,322,108 PCL Funding FRN 2023 1,052,000 UBS AG 1.25% 2020 1,264,091
International Fund (Closed 27.04.18) Purchases Cost £ Sales Proceeds £ Alphabet Inc 214,305 Visa 663,360 Infineon Technologies 118,717 M&T Bank 640,367 Schlumberger 107,133 Novartis 598,832 British American Tobacco 98,968 Oracle 563,682 Diageo 76,501 Henkel 529,103 Infineon Technologies 75,509 EOG Resources 524,839 Oversea-Chinese Banking 71,924 Banco Bradesco 523,242 Samsung 67,472 Samsung 515,316 Yum China Holdings 58,051 Vodafone Group 508,861 Schlumberger 55,890 Whitbread 488,247 British American Tobacco 53,511 British American Tobacco 483,968 Henkel 45,505 Taiwan Semiconductor Manufacturing 467,603 Yum China Holdings 44,779 Schlumberger 449,023 Samsung 44,381 Check Point Software Technologies 430,573 Oversea-Chinese Banking 42,773 AIA Group 424,227 Henkel 41,793 Fresenius Medical Care 412,084 Diageo 39,865 Keyence 409,293 Yum China Holdings 35,914 Roche Holdings 402,235 Yum China Holdings 34,613 Sysmex 399,152 Yum China Holdings 34,269 Fomento Economico Mexicano 397,896
54 Lloyds Investment Funds Limited
Investment Portfolio - Summary of Material Portfolio Changes (continued) For the year ended 30 September 2018
North American Fund (Closed 27.04.18) Purchases Cost £ Sales Proceeds £ Microsoft 332,503 Microsoft 391,457 Amazon.com 331,575 Amazon.com 375,244 Starbucks 221,195 Visa 370,516 Snap-On 168,636 Intercontinental Exchange 311,969 Cerner 163,190 Alphabet Inc 293,642 Nextera Energy 157,718 TJX Companies 271,696 Hologic 150,583 Charles Schwab 270,619 PRA Health Sciences 146,969 Costco Wholesale 263,855 First Republic Bank 88,366 BorgWarner 249,249 TJX Companies 87,937 Regions Financial Corporation 247,791 Costco Wholesale 72,732 Oracle 245,875 First Republic Bank 69,791 Texas Instruments 243,017 Ecolab 64,744 Praxair 239,487 Cerner 62,214 American Express 227,730 Snap-On 59,294 EOG Resources 222,188 Microsoft 44,201 Verisk Analytics CL A 221,059 Nutrien 30,639 ConocoPhillips 220,150 Transcanada 28,562 Comcast 219,122 Philip Morris International 27,323 Baxter International 214,506 Comcast 25,549 Ecolab 214,271
Sterling Bond Fund Purchases Cost £ Sales Proceeds £ Treasury 3.75% 2019 478,873 European Investment Bank 6% 2028 446,452 Treasury 2.25% 2023 358,529 Centrica 6.375% 2022 283,217 Santander UK 3.875% 2029 164,586 Segro Plc 6.75% 2021 249,581 Treasury 4.5% 2034 155,574 Treasury 4.5% 2034 200,129 Treasury 4.5% 2034 142,799 HSBC Bank 6.375% FRN 2022 200,000 Treasury 6% 2028 121,390 Imperial Tobacco 8.125% 2024 196,556 Treasury 4.5% 2042 119,653 Treasury 4.5% 2042 195,076 Fidelity National Info Services 1.7% 2022 110,456 Treasury 6% 2028 173,116 Apple Incorporated 3.05% 2029 109,049 Treasury 6% 2028 160,235 Treasury 6% 2028 108,797 Santander UK 3.875% 2029 156,940 Vodafone Group 5.9% 2032 107,600 Barclays Bank 10% 2021 152,583 Treasury 6% 2028 107,059 Gatwick Funding 6.5% 2043 151,815 Treasury 4% 2022 102,724 HSBC Bank GRN 2023 150,000 New York Life 1.75% 2022 100,826 General Electric Capital Corp 5.875% 2033 148,488 Tritax 3.125% 2031 100,040 SSE Plc 6.25% 2038 130,197 HSBC Holdings 2.26% 2026 100,000 Integrated Accommodation Service 6.48% 2029 125,827 PCL Funding FRN 2023 100,000 BHP Billiton Finance 4.3% 2042 123,249 Precise Mortgage Funding FRN 2055 100,000 Scottish Amicable Finance 8.5% 123,000 BP Capital Markets 2.274% 2026 100,000 Verizon Communications 4.75% 2034 122,306 Connect Plus M25 2.607% 2039 100,000 Daily Mail and General 6.375% 2027 121,885
55 Lloyds Investment Funds Limited
Investment Portfolio - Summary of Material Portfolio Changes (continued) For the year ended 30 September 2018
UK Fund (Closed 27.04.18) Purchases Cost £ Sales Proceeds £ British American Tobacco 202,154 Unilever 714,290 Fevertree Drinks 158,858 British American Tobacco 694,010 RELX Group 144,122 Prudential 646,574 RELX Group 139,474 Diageo 566,876 Dechra Pharmaceuticals 136,108 Compass Group 554,900 RELX Group 123,502 Aveva Group 503,692 Aveva Group 118,886 Croda International 486,852 Burberry Group 110,490 RELX Group 477,524 Dignity 108,492 Bunzl 474,170 London Stock Exchange Group 107,819 Experian 466,024 Smart Metering Systems 106,667 Intertek Group 460,986 London Stock Exchange Group 103,872 InterContinental Hotels Group Plc 447,442 Weir Group 100,050 Rolls Royce Holdings 435,277 InterContinental Hotels Group Plc 87,005 Sage Group 363,651 Rentokil Initial 86,663 Weir Group 361,272 Rightmove 85,232 Just Eat 351,293 Genus 85,231 Genus 350,217 British American Tobacco 80,279 Rotork 348,884 Fevertree Drinks 77,442 Spirax-Sarco Engineering 348,518 Burberry Group 72,774 BTG Plc 344,365
56 Lloyds Investment Funds Limited
Notes to the Financial Statements For the year ended 30 September 2018 1. The Company The net assets attributable to holders of participating redeemable The Company is domiciled and incorporated as a limited company preference shares are classified as financial liabilities and therefore, in Jersey, Channel Islands under the Companies (Jersey) Law 1991 in the opinion of the Directors, the Capital of the Company is only and is listed on The International Stock Exchange and a secondary represented by the Founders Shares. Details of Founders Shares are listing on the Malta Stock Exchange. Full details of the Company, disclosed in Notes 3 and 14. Investment Objectives and Policy and Report of the Directors are Where assets of an individual Fund are insufficient to meet the stated on pages 2 to 7. Funds liabilities, then any liabilities that remain undischarged will revert to the Company as a whole and be allocated amongst the 2. Basis of Presentation other Funds. 2.1 Basis of preparation 2.2 Significant accounting estimates and judgements The Financial Statements of the Company and the Funds have been The Company makes assumptions and estimates that affect the prepared in accordance with International Financial Reporting reported amounts of assets and liabilities at the statement of Standards (‘IFRS’). The following remaining funds are prepared on financial position date. Estimates and judgements are continually the going concern basis: evaluated and are based on historical experience and other factors, • Euro High Income Fund • Sterling Bond Fund including expectations of future events that are believed to be • High Income Fund reasonable under the circumstances. The accounting policies deemed significant to the Company’s results and financial position, As set out in the Report of the Directors the following funds merged based upon materiality and significant judgements and estimates, with the Multi Strategy Fund Limited - Growth Strategy on 27 are discussed in the following notes. See Note 3 for further details April 2018 and are closed (“Closed Funds”) and as such have been on what are considered to be the significant accounting estimates prepared on a liquidation basis of accounting: and judgments. • European Fund • North American Fund 2.3 Going concern • International Fund • UK Fund The Financial Statements of the Company and remaining Funds The Directors have also chosen to adopt areas of the Statement have been prepared in accordance with IFRS on the going of Recommended Practice ‘Financial Statements of UK Authorised concern basis. The Financial Statements of the closed Funds have Funds’ issued in May 2014 by the IMA (Investment Management been prepared in accordance with IFRS on the liquidation basis. Association) where this does not conflict with other reporting The Directors confirm there are no additional impacts to the requirements. As a result there are some minor presentational measurement and presentaion of these Financial Statements. The changes to the accounts but no change to the measurement of Directors have a reasonable expectation that the Lloyds Investment numbers. There have been no changes to the financial position or Funds Limited together with the remaining Funds Euro High financial performance of the Fund as a result of the above. Income, High Income and Sterling Bond will continue as a going The policies set out below have been consistently applied to all concern for the foreseeable future. years presented. The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation 3. Summary of Significant Accounting Policies of investments, held at fair value through the profit or loss and in The principal accounting policies applied in the preparation of these accordance with the Companies (Jersey) Law 1991 and with the financial statements are set out below. These policies have been Collective Investment Funds (Recognized Funds) (Rules) (Jersey) applied consistently to all years presented, unless otherwise stated Order 2003 (as amended). Jersey is not part of the United Kingdom in the following text: (‘UK’) and the Company is not regulated by the Financial Conduct The Directors also monitor new standards and ensure that they are Authority (‘FCA’) or the Prudential Regulation Authority (‘PRA’) of applied where relevant. the UK. 3.1 Standards, amendments and interpretations effective for the The capital of the Company comprises various classes of Shares current year each relating to a separate Fund consisting of securities, cash, The following new standards, amendments and interpretations have other assets and liabilities. These financial statements present the been adopted in these financial statements. statements of financial position, statements of comprehensive Amendments to IAS 7, IAS 12 and IFRS 12: The Company has applied income, statements of changes in net assets attributable to the amendments to IAS 7, IAS 12 and IFRS 12 for the first time in the holders of participating redeemable preference shares, cash current year. flow statements, investment portfolios and notes to the financial statements. At the statement of financial position date the following 3.2 The following New and revised standards, amendments and funds were in existence: Euro High Income Fund, High Income Fund, interpretations have been published but are not yet effective: and Sterling Bond Fund. (2017: seven classes in existence Euro High • IAS 19, ‘Employee benefits’ (effective from 1 January 2019) Income, European Fund, High Income, International Fund, North • IAS 28, ‘Investments in associates and joint ventures’ (effective American Fund, Sterling Bond Fund and UK Fund). The Directors from 1 January 2019) may from time to time create further classes (Funds). • IAS 40, ‘Investment property’ (effective from 1 January 2019) • IFRIC 22, ‘Foreign currency transactions and advance consideration’ (effective from 1 January 2018)
57 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 3. Summary of Significant Accounting Policies Foreign currency translation (continued) Assets and liabilities denominated in currencies other than the 3.2 The following New and revised standards, amendments and functional currency of the Fund are translated at the rate of interpretations have been published but are not yet effective exchange ruling at the statement of financial position date. The (continued): currency profits or losses arising on translation, together with • IFRIC 23, ‘Uncertainty over income tax treatments’ (effective from currency profits or losses realised during the year, are recognised in 1 January 2019) the statement of comprehensive income. • IFRS 2, ‘Share based payments’ (effective from 1 January 2018). The rate of exchange to Sterling from Euro ruling at 30 September 2018 used for the conversion of statement of financial position • IFRS 9, ‘Financial Instruments’ (effective from 1 January 2019). items was 1.1227 and the average rate for the year used for the • IFRS 15, ‘Revenue from contracts with customers’ (effective 1 January 2018). conversion of the statement of comprehensive income was 1.1321. • IFRS 16, ‘Leases’ (effective 1 January 2019). Financial assets and financial liabilities at fair value through profit • IFRS 17, ‘Insurance contracts’ (effective from 1 January 2021). or loss There are no other standards, interpretations or amendments to (a) Classification existing standards that are not yet effective that would be expected The Company classifies its investments in debt and equity securities to have a significant impact on the Company. as financial assets at fair value through profit or loss. These financial Functional currency and presentational currency assets and financial liabilities are designated by the Board of Directors as fair value through profit or loss at inception. Items included in the Company’s Financial Statements are measured using the currency of the primary economic environment in which Financial assets and financial liabilities designated at fair value it operates (the ‘functional currency’). The Directors have through profit or loss at inception are those that are managed and adopted sterling as the functional and presentational currency their performance evaluated on a fair value basis in accordance with which reflects the Company’s primary economic environment in the Company’s documented investment strategy. which financial assets are invested and the regulatory environment (b) Recognition of the majority of investors, being UK based. Purchases and sales are recognised on the trade date (the date on The Company has adopted sterling as its presentational and which the Company commits to purchase or sell the asset). functional currency for High Income Fund and Sterling Bond Fund (c) Measurement as the majority of Shares in each Fund have been subscribed for Financial assets and financial liabilities at fair value through profit or in sterling and all non dealing related fees and expenses are paid loss are initially recognised at fair value, and transaction costs for all in sterling. financial assets and financial liabilities carried at fair value through The Company has adopted euro as its presentational and functional profit or loss are expensed in the statement of comprehensive currency for the Euro High Income Fund as the Shares in the Fund income as incurred. Subsequent to initial recognition, all financial have been subscribed for in Euros and the majority of non dealing assets and financial liabilities at fair value through profit or loss are related fees and expenses are paid in euro. measured at fair value. Share premium and share capital currency translation Gains and losses arising from changes in the fair value of financial Share premium and share capital transactions are translated into assets or financial liabilities at fair value through profit or loss are sterling at the exchange rate ruling at the time of the transaction. recognised in the statement of comprehensive income in the year in The aggregated balance of net assets attributable to holders of which they arise. participating redeemable preference Shares is translated at the Revenue recognition appropriate month end exchange rate. Investment income is recognised in the statement of comprehensive Segmental reporting income on an ex-dividend basis when the right to receive payment is The Company, at the statement of financial position date is established or on a time proportionate basis for all debt instruments organised into three business segments, each focusing on achieving using the Effective Interest Rate method (‘EIR’). This is a method of returns by investing in a range of investments as described in the calculating the amortised cost of a financial asset or financial liability Investment Objectives and Policy on page 3. and of allocating the interest income or interest expense over the relevant year. The Company issues Shares which are allocated to the Fund selected by the investor. A separate account is maintained for each Fund, to Bank interest is recognised in the statement of comprehensive which proceeds of issue, the income arising from those proceeds income on a time proportionate basis using the EIR method. The and expenses are allocated. Upon redemption shareholders are effective interest rate is the rate that exactly discounts estimated entitled to their proportion of the net assets held in the Fund in future cash payments or receipts throughout the expected life of which their Shares have been designated. A statement of financial the financial asset or liability, or, when appropriate, a shorter period, position, statement of comprehensive income, statement of changes to the net carrying amount of the financial asset or financial liability. in net assets attributable to holders of participating redeemable preference shares and cash flow statement have been prepared for each Fund as well as for the Company as a whole.
58 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 3. Summary of Significant Accounting Policies (iii) Nominal Shares have been accounted for in accordance with (continued) the Companies (Jersey) Law 1991 and corresponding amounts have been included in debtors and financial liabilities. A Transaction Costs Nominal Share will be created when a Participating Share The purchase and sale of financial assets at fair value through profit is cancelled. A Nominal Share will be cancelled when a and loss are subject to transaction costs, which include broker Participating Share is created until the number of Nominal commission, dealing charges and stamp duty. Transaction costs for Shares falls to zero. the year are set out in Note 9. (iv) Both issued Nominal and Participating Shares have a nominal Fair value estimation value of £ 0.01 per Share. The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on Details of the Company’s Share capital transactions are shown in quoted market prices at the statement of financial position date. Note 14. The quoted market price used for financial assets and financial Share premium liabilities held by the Fund is the current mid-market price as The premium on issues and redemptions of Participating Shares is required by IFRS 13 financial assets and financial liabilities at fair accounted for within the Share premium account which forms part value at close of business on the last business day of the accounting of the net assets attributable to holders of participating redeemable year. preference Shares. Details are shown in Notes 15 and 17. Cash and cash equivalents Distributions payable to holders of participating redeemable Cash and cash equivalents include cash in hand and deposits held at preference shares call with banks. Distributions to holders of Participating Shares are recognised as finance costs when they are ratified by the Directors. Share capital Equity Funds (i) The Founders Shares have been subscribed for by the Distributions are calculated on an annual basis. A distributable Manager and are ‘non-participating’. The holders thereof are amount includes both investment income (including ordinary stock entitled only to income arising on the assets represented by dividends) and bank interest received. Revenue expenses deducted the Founders Shares. These Shares are classified as Ordinary include management fees, custodian fees, registrar fee and Share capital in the statement of financial position. management expenses. Transaction charges are in the first instance (ii) Unclassified Shares may be issued as either participating charged against revenue but then fully offset against capital and redeemable preference shares (‘Participating Shares’) or therefore do not form part of the distributable amount. This charge Nominal Shares. Participating Shares are redeemable at the against capital effectively reduces the capital reserves of the fund. shareholder’s option and are classified as financial liabilities. Transaction charges are set out in note 9. Participating Shares are carried at the redemption amount Fixed Interest Funds that is payable if the holder exercises the right to redeem In respect of High Income Fund distributions are calculated on Shares at the statement of financial position date. a monthly basis and in respect of Euro High Income Fund and Participating Shares are issued and redeemed at the holder’s Sterling Bond Fund distributions are calculated on a quarterly option at prices based on each Fund’s net asset value per basis. A distributable amount includes both investment income Share at the time of issue or redemption. Each Fund’s net and bank interest received. Revenue expenses deducted include asset value per Share is calculated by dividing the net assets management fees, custodian fees, registrar fee and management attributable to the holders of participating redeemable expenses. Transaction charges are in the first instance charged preference shares with the total number of Participating against revenue but then fully offset against capital and therefore Shares in issue. In accordance with the provisions of the do not form part of the distributable amount. In respect of High Company’s regulations, investments are valued based on the Income Fund and Euro High Income Fund the management fees latest traded market price for the purpose of determining and registrar fees are fully offset against capital. This charge against the net asset value per Share for subscriptions and capital effectively reduces the capital reserves of the fund. All redemptions. The Shares are divided into Funds according expenses are set out in note 9. to the type of investment in which the proceeds of the issue Accrued income and expenses of Shares in each Fund are invested. A separate portfolio of Accrued income and expenses are recognised initially at fair value investments is maintained for each Fund. and subsequently stated at amortised cost using the EIR. Each holder of a Participating Share is entitled on a poll, to As at 30 September 2018 the Fund held no commitments in respect one vote for each Participating Share held. Participating of an obligation resulting from the occurrence of one or more future Shares have a right to dividends declared. If any dividends events not wholly within the Fund’s control. are paid, different amounts of dividends may be payable in respect of different Funds.
59 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 4. Other Accrued Income and Other Debtors Euro High Company Income European Fund Fund £ € £ (Closed 27 April 2018) Year ended 30 September 2018 Accrued Income 4,773,219 237,225 — Founders Shares 1,000 — — Nominal Shares 1,870,535 — — Total other accrued income and other debtors 6,644,754 237,225 —
Year ended 30 September 2017 Accrued Income 5,550,155 262,772 — Founders Shares 1,000 — — Nominal Shares 1,477,791 — — Total other accrued income and other debtors 7,028,946 262,772 — 5. Distributions The distributions take account of income received on the creation of shares and income deducted on the cancellation of shares, and comprise:
Euro High Company Income Fund £ €
Year ended 30 September 2018 31 October 2017 988,435 — 30 November 2017 984,542 — 31 December 2017 1,187,634 108,932 31 January 2018 940,620 — 28 February 2018 930,574 — 31 March 2018 1,310,066 106,775 30 April 2018 934,918 — 31 May 2018 925,854 — 30 June 2018 1,146,859 109,086 31 July 2018 880,375 — 31 August 2018 845,868 — 30 September 2018 1,034,454 102,565
Total distributions 12,110,199 427,358 Income paid on cancellation of shares 74,884 4,043 Income received on creation of shares (20,410) (2,184) Net distributions for the year 12,164,673 429,217 Fees charged to capital* (2,400,297) (133,823) Net distributions after taxation 9,764,376 295,394
* Details can be found in Notes 9 and 10.
60 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 4. Other Accrued Income and Other Debtors High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ (Closed 27 April (Closed 27 April (Closed 27 April 2018) 2018) 2018) Year ended 30 September 2018 Accrued Income 4,277,567 — — 284,353 — Founders Shares — — — — — Nominal Shares — — — — — Total other accrued income and other debtors 4,277,567 — — 284,353 —
Year ended 30 September 2017 Accrued Income 4,874,465 28,260 11,753 367,472 36,667 Founders Shares — — — — — Nominal Shares — — — — — Total other accrued income and other debtors 4,874,465 28,260 11,753 367,472 36,667 5. Distributions The distributions take account of income received on the creation of shares and income deducted on the cancellation of shares, and comprise:
High Sterling Income Bond UK Fund Fund Fund £ £ £ (Closed 27 April 2018) Year ended 30 September 2018 31 October 2017 988,435 — — 30 November 2017 984,542 — — 31 December 2017 950,011 140,923 — 31 January 2018 940,620 — — 28 February 2018 930,574 — — 31 March 2018 925,051 132,557 158,845 30 April 2018 934,918 — — 31 May 2018 925,854 — — 30 June 2018 918,450 131,937 — 31 July 2018 880,375 — — 31 August 2018 845,868 — — 30 September 2018 837,064 106,034 —
Total distributions 11,061,762 511,451 158,845 Income paid on cancellation of shares 62,047 9,266 — Income received on creation of shares (15,686) (2,795) — Net distributions for the year 11,108,123 517,922 158,845 Fees charged to capital* (2,250,242) (2,080) (29,767) Net distributions after taxation 8,857,881 515,842 129,078
* Details can be found in Notes 9 and 10.
61 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
5. Distributions (continued) Euro High Company Income European Fund Fund Year ended 30 September 2017 £ € € 31 October 2016 1,125,570 — — 30 November 2016 1,120,819 — — 31 December 2016 1,389,399 109,050 — 31 January 2017 1,120,852 — — 28 February 2017 1,087,789 — — 31 March 2017 1,348,955 113,384 — 30 April 2017 1,063,259 — — 31 May 2017 1,060,318 — — 30 June 2017 1,296,599 112,617 — 31 July 2017 1,052,795 — — 31 August 2017 1,019,348 — — 30 September 2017 1,554,126 112,683 128,767
Total distributions 14,239,829 447,734 128,767 Income paid on cancellation of shares (50,769) (5,638) (521) Income received on creation of shares 27,818 4,245 18 Net distributions for the year 14,216,878 446,341 128,264 Fees charged to capital* (2,634,687) (141,907) (11,742) Net distributions after taxation 11,582,191 304,434 116,522
* Details can be found in Notes 9 and 10.
6. Accrued Expenses and Other Creditors
Euro High Company Income European Fund Fund
£ € £ (Closed 27 April 2018) Year ended 30 September 2018 Due to Manager 222,637 14,643 — Due to Custodian 11,587 1,011 — Other Creditors 102,559 14,160 — Total accrued expenses and other creditors 336,783 29,814 —
Year ended 30 September 2017 Due to Manager 361,173 17,413 26,001 Due to Custodian 28,644 1,178 1,682 Other Creditors 118,305 9,427 10,997 Total accrued expenses and other creditors 508,122 28,018 38,680
62 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
5. Distributions (continued) High Sterling Income Bond UK Fund Fund Fund Year ended 30 September 2017 £ £ £ 31 October 2016 1,125,570 — — 30 November 2016 1,120,819 — — 31 December 2016 1,119,485 176,828 — 31 January 2017 1,120,852 — — 28 February 2017 1,087,789 — — 31 March 2017 1,087,232 164,739 — 30 April 2017 1,063,259 — — 31 May 2017 1,060,318 — — 30 June 2017 1,054,791 142,921 — 31 July 2017 1,052,795 — — 31 August 2017 1,019,348 — — 30 September 2017 989,114 139,872 197,085
Total distributions 12,901,372 624,360 197,085 Income paid on cancellation of shares (26,952) (18,352) (34) Income received on creation of shares 17,326 6,713 64 Net distributions for the year 12,891,746 612,721 197,115 Fees charged to capital* (2,474,785) (2,140) (22,437) Net distributions after taxation 10,416,961 610,581 174,678
* Details can be found in Notes 9 and 10.
6. Accrued Expenses and Other Creditors
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
£ £ £ £ £
(Closed 27 April (Closed 27 April (Closed 27 April 2018) 2018) 2018) Year ended 30 September 2018 Due to Manager 192,676 — — 16,918 — Due to Custodian 9,471 — — 1,215 — Other Creditors 79,029 — — 10,918 — Total accrued expenses and other creditors 281,176 — — 29,051 —
Year ended 30 September 2017 Due to Manager 228,701 26,771 18,261 19,668 26,428 Due to Custodian 11,300 10,544 1,264 1,393 1,423 Other Creditors 46,697 18,553 9,484 13,272 10,995 Total accrued expenses and other creditors 286,698 55,868 29,009 34,333 38,846
63 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 7. Net (loss)/gain on financial assets at fair value through profit or loss The net (loss)/gain on investments during the year comprise: Euro High Company Income European Fund Fund £ € £ (Closed 27 April 2018) Year ended 30 September 2018 Proceeds from sales of investments 166,900,327 3,832,966 18,239,347 during the year Original cost of investments sold (149,478,270) (3,804,460) (14,802,949) during the year Realised foreign exchange gains 467,282 — 176,307
Realised foreign exchange losses (206,278) — (122,988)
Gains realised during the year 17,683,061 28,506 3,489,717 Realised gains on investments sold during the 23,366,190 155,205 4,171,610 year Realised losses on investments sold during the (5,944,133) (126,699) (735,212) year Movement in unrealised gains for the year (12,356,812) (188,683) —
Movement in unrealised losses for the year (14,850,522) (133,347) (3,246,598)
Net (losses)/ gains on investments (9,524,273) (293,524) 243,119
Year ended 30 September 2017 Proceeds from sales of investments 94,925,856 2,889,779 3,962,474 during the year Original cost of investments sold (86,047,939) (2,826,170) (3,335,204) during the year Realised foreign exchange gains 98,279 — 37,999
Realised foreign exchange losses (166,689) — (83,532)
Gains/(losses) realised during the year 8,809,507 63,609 581,737 Realised gains on investments sold during the 11,939,918 93,633 893,824 year Realised losses on investments sold during the (3,062,001) (30,024) (266,554) year Movement in unrealised gains for the year 41,757,771 731,871 3,811,089
Movement in unrealised losses for the year (52,936,626) (1,309,093) (2,435,418)
Net (losses)/ gains on investments (2,369,348) (513,613) 1,957,408
64 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 7. Net (loss)/gain on financial assets at fair value through profit or loss The net (loss)/gain on investments during the year comprise: High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ (Closed 27 April (Closed 27 April (Closed 27 April 2018) 2018) 2018) Year ended 30 September 2018 Proceeds from sales of investments 82,822,920 23,648,998 13,300,773 6,090,122 19,412,454 during the year Original cost of investments sold (78,175,995) (19,710,618) (10,190,278) (5,832,661) (17,405,235) during the year Realised foreign exchange gains — 244,589 44,403 — 1,983
Realised foreign exchange losses — (45,579) (35,768) — (1,943)
Gains realised during the year 4,646,925 4,137,390 3,119,130 257,461 2,007,259 Realised gains on investments sold during the 6,953,484 4,872,059 3,454,864 418,924 3,358,154 year Realised losses on investments sold during the (2,306,560) (933,678) (344,369) (161,463) (1,350,935) year Movement in unrealised gains for the year (11,609,513) — — (580,633) — Movement in unrealised losses for the year (1,878,052) (4,256,736) (2,809,450) (254,095) (2,287,804)
Net (losses)/ gains on investments (8,840,640) (119,346) 309,680 (577,267) (280,545)
Year ended 30 September 2017 Proceeds from sales of investments 66,765,621 3,665,785 3,316,743 10,219,960 4,478,638 during the year Original cost of investments sold (61,215,971) (2,543,110) (2,296,582) (9,037,074) (5,158,758) during the year Realised foreign exchange gains — 42,358 17,916 — 6
Realised foreign exchange losses — (51,331) (31,255) — (571)
Gains/(losses) realised during the year 5,549,650 1,113,702 1,006,822 1,182,886 (680,685) Realised gains on investments sold during the 6,896,650 1,169,115 1,020,161 1,231,484 647,141 year Realised losses on investments sold during the (1,347,000) (46,440) — (48,598) (1,327,261) year Movement in unrealised gains for the year 24,528,753 5,095,197 2,955,744 1,541,871 3,187,749
Movement in unrealised losses for the year (38,169,750) (3,933,897) (2,643,103) (3,232,067) (1,382,335)
Net (losses)/ gains on investments (8,091,347) 2,275,002 1,319,463 (507,310) 1,124,729
65 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 8. Other Income Euro High Company Income European Fund Fund £ € £ (Closed 27 April 2018) Year ended 30 September 2018 Bank interest 3,341 — 48 Unclaimed distributions over 10 years old 10,385 177 — Total other income 13,726 177 48
Year ended 30 September 2017 Bank interest 1,972 — 3 Unclaimed distributions over 10 years old — — — Total other income 1,972 — 3
9. Operating Expenses Euro High Note Company Income European Fund Fund £ € £ (Closed 27 April Year ended 30 September 2018 2018) Payable to the Manager:
Annual management fees 10 2,975,524 120,449 127,045
Registrar fees 10 126,298 9,674 6,869
Payable to the Custodian:
Custodian fees 11 206,536 13,766 12,010
Safe custody fees 11 57,989 3,806 3,054
Other expenses:
Administration expenses* 248,788 28,126 11,307 Broker commission, dealing charges 88,125 3,700 17,943 and stamp duty Audit fee 23,284 1,000 900
Total expenses 3,726,544 180,521 179,128
Total Expense Ratio** 1.28% 1.09%
Total Cost Ratio*** 0.03% 0.12%
* The Administration expenses includes £5,000 of Director fees (see note 10). ** The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year. *** The Total Cost Ratio represents the dealing and broker charges only, expressed as an annualised percentage of the average daily net asset values during the year.
66 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 8. Other Income High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ (Closed 27 April (Closed 27 April (Closed 27 April 2018) 2018) 2018) Year ended 30 September 2018 Bank interest 2,624 11 27 110 521 Unclaimed distributions over 10 years old 8,555 — — 1,674 — Total other income 11,179 11 27 1,784 521
Year ended 30 September 2017 Bank interest 1,938 15 14 — 2 Unclaimed distributions over 10 years old — — — — — Total other income 1,938 15 14 — 2
9. Operating Expenses High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ (Closed 27 April (Closed 27 April (Closed 27 April Year ended 30 September 2018 2018) 2018) 2018) Payable to the Manager:
Annual management fees 2,166,653 188,576 92,334 163,971 130,551
Registrar fees 78,729 10,312 4,658 10,190 6,995
Payable to the Custodian:
Custodian fees 132,535 14,010 9,131 16,548 10,142
Safe custody fees 41,245 3,600 1,801 3,938 989
Other expenses:
Administration expenses* 169,566 3,395 6,376 21,257 12,043 Broker commission, dealing charges 4,860 19,741 10,466 2,080 29,767 and stamp duty Audit fee 17,000 1,500 700 1,300 1,000
Total expenses 2,610,588 241,134 125,466 219,284 191,487
Total Expense Ratio** 1.05% 1.01% 1.07% 1.16% 1.07%
Total Cost Ratio*** 0.00% 0.09% 0.10% 0.01% 0.20%
* The Administration expenses includes £5,000 of Director fees (see note 10). ** The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year. *** The Total Cost Ratio represents the dealing and broker charges only, expressed as an annualised percentage of the average daily net asset values during the year.
67 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 9. Operating Expenses (continued) A detailed view of transaction costs is shown below. Euro High Company Income European Fund Fund £ € £ (Closed 27 April Year ended 30 September 2018 2018) Purchases Transaction costs by asset class
Equities Deal charges 4,937 — 2,220
As a percentage of purchase cost 0.17% — 0.07%
Commission 6,098 — 1,308
As a percentage of purchase cost 0.21% — 0.04%
Treasury Gilts* Deal charges 500 — —
As a percentage of purchase cost 0.02% 0.00% —
Bonds* Deal charges 4,228 1,820 —
As a percentage of purchase cost 0.14% 0.07% —
Cost of investments purchased before 83,710,107 2,633,817 3,118,217 transaction costs Cost of investments purchased after 83,718,463 2,635,637 3,119,129 transaction costs
Sale Transaction costs by asset class
Equities Deal charges 13,205 — 6,031
As a percentage of sale cost 0.07% — 0.03%
Commission 23,490 — 4,633
As a percentage of sale cost 0.13% — 0.03%
Treasury Gilts* Deal charges 560 — —
As a percentage of sale cost 0.00% — —
Bonds* Deal charges 4,921 1,880 —
As a percentage of sale cost 0.06% 0.05% —
Proceeds from investments sold before 165,836,612 2,635,637 18,238,039 transaction costs Proceeds from investments sold after 165,831,717 2,633,817 18,233,316 transaction costs
* There is no commission paid on Treasury Gilts or Bonds.
68 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 9. Operating Expenses (continued) A detailed view of transaction costs is shown below. High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ (Closed 27 April (Closed 27 April (Closed 27 April Year ended 30 September 2018 2018) 2018) 2018) Purchases Transaction costs by asset class
Equities Deal charges — 1,029 450 — 1,238
As a percentage of purchase cost — 0.06% 0.02% — 0.03%
Commission — 836 1,903 — 2,051
As a percentage of purchase cost — 0.05% 0.08% — 0.05%
Treasury Gilts* Deal charges 280 — — 220 —
As a percentage of purchase cost 0.00% — — 0.02% —
Bonds* Deal charges 1,860 — — 760 —
As a percentage of purchase cost 0.01% — — 0.07% —
Cost of investments purchased before 64,946,352 1,827,085 2,508,710 4,680,872 4,302,383 transaction costs Cost of investments purchased after 64,948,492 1,828,114 2,509,160 4,681,852 4,303,621 transaction costs
Sale Transaction costs by asset class
Equities Deal charges — 3,024 1,800 — 2,350
As a percentage of sale cost — 0.01% 0.01% — 0.01%
Commission — 7,416 5,472 — 5,969
As a percentage of sale cost — 0.03% 0.04% — 0.03%
Treasury Gilts* Deal charges 400 — — 160 —
As a percentage of sale cost 0.00% — — 0.00% —
Bonds* Deal charges 2,320 — — 940 —
As a percentage of sale cost 0.00% — — 0.02% —
Proceeds from investments sold before 82,822,920 23,648,162 13,298,870 6,090,122 19,410,403 transaction costs Proceeds from investments sold after 82,825,640 23,645,974 13,298,973 6,091,222 19,410,104 transaction costs
* There is no commission paid on Treasury Gilts or Bonds.
69 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
9. Operating Expenses (continued)
Euro High Note Company Income European Fund Fund
Year ended 30 September 2017 £ € £
Payable to the Manager:
Annual management fees 10 3,630,771 129,142 220,460
Registrar fees 10 166,136 11,905 15,908
Payable to the Custodian:
Custodian fees 11 255,446 14,727 20,865
Safe custody fees 11 74,036 3,504 5,688
Other expenses:
Administration expenses* 242,972 27,754 19,499 Broker commission, dealing charges 56,724 860 11,742 and stamp duty Audit fee 45,142 2,000 1,800
Total expenses 4,471,227 189,892 295,962
Total Expense Ratio** 1.27% 1.94%
Total Cost Ratio *** 0.01% 0.08%
* The Administration expenses includes £5,000 of Director fees (see note 10). ** The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year. *** The Total Cost Ratio represents the dealing and broker charges only, expressed as an annualised percentage of the average daily net asset values during the year.
70 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
9. Operating Expenses (continued)
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
Year ended 30 September 2017 £ £ £ £ £
Payable to the Manager:
Annual management fees 2,388,013 333,756 159,952 181,509 234,615
Registrar fees 83,052 20,964 10,284 10,648 14,912
Payable to the Custodian:
Custodian fees 145,023 24,744 15,822 18,033 18,134
Safe custody fees 47,992 7,160 3,540 4,552 2,052
Other expenses:
Administration expenses* 116,714 25,589 13,858 24,554 18,588 Broker commission, dealing charges 3,720 10,762 5,174 2,140 22,437 and stamp duty Audit fee 33,000 2,800 1,300 2,500 2,000
Total expenses 2,817,514 425,775 209,930 243,936 312,738
Total Expense Ratio** 1.03% 1.87% 1.92% 1.16% 1.86%
Total Cost Ratio *** 0.00% 0.05% 0.05% 0.01% 0.14%
* The Administration expenses includes £5,000 of Director fees (see note 10). ** The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year. *** The Total Cost Ratio represents the dealing and broker charges only, expressed as an annualised percentage of the average daily net asset values during the year.
71 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
9. Operating Expenses (continued)
Euro High Company Income European Fund Fund £ € £ Year ended 30 September 2017 Purchases Transaction costs by asset class
Equities Deal charges 7,488 — 3,774
As a percentage of purchase cost 0.39% — 0.14%
Commission 6,167 — 1,561
As a percentage of purchase cost 0.36% — 0.06%
Treasury Gilts* Deal charges 500 — —
As a percentage of purchase cost 0.02% — —
Bonds* Deal charges 1,141 300 —
As a percentage of purchase cost 0.06% 0.01% —
Cost of investments purchased before 35,326,678 1,801,396 2,623,549 transaction costs Cost of investments purchased after 35,333,965 1,801,696 2,625,761 transaction costs
Sale Transaction costs by asset class
Equities Deal charges 9,671 — 4,921
As a percentage of sale poceeds 0.29% — 0.12%
Commission 8,138 — 1,872
As a percentage of sale poceeds 0.29% — 0.05%
Treasury Gilts* Deal charges 140 — —
As a percentage of sale poceeds 0.00% — —
Bonds* Deal charges 1,803 440 —
As a percentage of sale poceeds 0.02% 0.02% —
Proceeds from investments sold before 41,334,116 1,801,696 3,960,913 transaction costs Proceeds from investments sold after 41,332,171 1,801,396 3,957,553 transaction costs
* There is no commission paid on Treasury Gilts or Bonds.
72 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
9. Operating Expenses (continued)
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ Year ended 30 September 2017 Purchases Transaction costs by asset class
Equities Deal charges — 1,554 735 — 1,425
As a percentage of purchase cost — 0.18% 0.03% — 0.04%
Commission — 1,849 1,130 — 1,628
As a percentage of purchase cost — 0.21% 0.05% — 0.05%
Treasury Gilts* Deal charges 260 — — 240 —
As a percentage of purchase cost 0.00% — — 0.02% —
Bonds* Deal charges 340 — — 540 —
As a percentage of purchase cost 0.01% — — 0.04% —
Cost of investments purchased before 20,976,734 882,666 2,474,585 3,254,151 3,546,242 transaction costs Cost of investments purchased after 20,977,334 884,220 2,475,320 3,254,651 3,547,667 transaction costs
Sale Transaction costs by asset class
Equities Deal charges — 1,617 1,245 — 1,888
As a percentage of sale poceeds — 0.09% 0.04% — 0.04%
Commission — 2,646 2,080 — 1,541
As a percentage of sale poceeds — 0.15% 0.06% — 0.03%
Treasury Gilts* Deal charges 40 — — 100 —
As a percentage of sale poceeds 0.00% — — 0.00% —
Bonds* Deal charges 1,060 — — 360 —
As a percentage of sale poceeds 0.00% — — 0.01% —
Proceeds from investments sold before 22,661,313 1,797,698 3,315,613 3,552,556 4,477,010 transaction costs Proceeds from investments sold after 22,662,413 1,797,930 3,315,498 3,553,276 4,476,751 transaction costs
* There is no commission paid on Treasury Gilts or Bonds.
73 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
10. Related Party Transactions (a) Management and Registrar fees Parties are considered to be related if one party has the ability The Manager of the Company, Lloyds Investment Fund Managers to control the other party or exercise influence over the party Limited, is part of the Lloyds Bank Group of companies. The in making financial or operating decisions. The following are Manager is entitled to a daily fee equal at the annual rate set out considered by the Directors of the Company to be related parties: below by reference to the net assets of each Fund calculated daily • The Manager, Lloyds Investment Fund Managers Limited. and paid monthly by the Company. • The Investment Manager, Aberdeen Asset Investments Euro High Income Fund 0.875% Limited. High Income Fund 0.875% Key management personnel. • Sterling Bond Fund 0.875% The fees received by the Manager are set out in Note 9. The Investment Manager is paid by the Manager. Details of amounts The Directors and the Manager may agree a higher fee for any Fund due to the Manager at the end of the year are shown in Note 6. subject to a maximum annual rate of 1.5% of the mid market value All investor share transactions in the Company are facilitated of net assets of the Fund. If such a higher fee is agreed, shareholders through the Manager, the aggregate values of which are set out in of the relevant Fund will be given at least three months written the statement of changes in net assets attributable to holders of notice before it comes into effect. participating redeemable preference shares on pages 26 to 29. Following the redemption of all shares in the closed Fund classes At the year end the Manager held Participating Shares in the on 27 April 2018 no further management fees or expenses were Company as follows: incurred in respect of the closed classes. The Manager, in its capacity as Registrar, is entitled to a fee payable 30 September 30 September by the Company of £12.00 for each shareholding which appears on 2018 2017 the Share Register on the last business day of each annual and half yearly accounting year. The Manager and the Company may agree a Euro High Income Fund 7,874 7,883 higher fee. European Fund — 2,666 Details of amounts due to the Manager at the year end are shown in Note 6. High Income Fund 7,016 6,988 (b) Fees charged to capital International Fund — 2,920 In order to maximise the income available for distribution to North American Fund — 2,679 shareholders, the Directors, in consultation with the Custodian, Sterling Bond Fund 4,924 4,917 have agreed to charge the Management and Registrar fees for High Income Fund and Euro High Income Fund only, to the capital UK Fund — 2,776 of these Funds. 19,814 30,829 (c) Key management personnel The following Directors of the Company at 30 September 2018 are employees of Lloyds Banking Group: I.M.J. Hardy, B.C. James, B. Lysiak and R.D. Willcox. T.J. Herbert is a consultant to Mourant Ozannes, who are the Jersey legal advisers to the Company and the Manager. I.M.J.Hardy, B.C. James and R.D. Willcox are Directors of the Manager, Lloyds Investment Fund Managers Limited. (d) Directors’ Fees Directors who are employees of the Lloyds Banking Group do not receive Directors’ fees. All other Directors receive a fee of £5,000 per annum (2017: £5,000 per annum).
74 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
11. Custodian The fees received by the Custodian are set out in Note 9. Details of amounts due to the Custodian at the year end are shown in Note 6. The Custodian is entitled to an annual fee payable monthly by the Company, in respect of each Fund, at the rates set out in the table below by reference to the net asset value of each Fund calculated on a mid-market basis and subject to a minimum overall fee of £20,000 per annum for the Company as a whole. The Custodian is entitled to reimbursement by each Fund of its expenses in connection with its duties as Custodian and to make transaction charges to cover the cost of effecting settlement of stock and cash.
Custodian Fee Rates Sterling Funds paid in £ NAV of each Fund Up to £10m £10m to £25m £25m Plus % % % High Income Fund 0.100 0.075 0.050 Sterling Bond Fund 0.100 0.075 0.050
Euro Fund paid in € NAV of each Fund Up to €15m €15m to €40m €40m Plus % % % Euro High Income Fund 0.100 0.075 0.050
Following the redemption of all shares in the closed Fund classes on 27 April 2018 no further management fees or expenses were incurred in respect of the closed classes. 12. Controlling Party In the opinion of the Directors, there is no ultimate controlling party of the Company as defined by International Accounting Standards (IAS) 24 Related Party Disclosures. 13. Equalisation The price of a participating share includes an equalisation payment calculated by dividing the net undistributed income of the Fund by the number of Shares in issue at the time when the prices are calculated. The payment of the first distribution after the issue of a Share includes an amount of equalisation calculated by averaging the amounts received by way of equalisation during the year to which the distribution relates.
75 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
14. Share Capital
30 September 30 September 2018 2017 Authorised share Capital: £ £ 1,000 Founders Shares of £1 1,000 1,000
750,000,000 Unclassified Shares of 1p 7,500,000 7,500,000
7,501,000 7,501,000 Issued Share Capital: Founders Shares 1,000 1,000
Nominal shares: Balance brought forward 1,477,791 1,333,160
Creations 471,238 245,716
Redemptions (78,494) (101,085)
Balance carried forward 1,870,535 1,477,791
Participating Shares: Balance brought forward 3,296,263 3,440,894
Creations 78,494 101,085
Redemptions (471,238) (245,716)
Balance carried forward 2,903,519 3,296,263
Fund Shares £ Shares £ European (Closed 27.04.18) — — 1,483,673 14,836
High Income 270,022,634 2,700,226 299,731,464 2,997,317
International (Closed 27.04.18) — — 4,110,547 41,107
North American (Closed 27.04.18) — — 505,348 5,054
Sterling Bond 11,781,645 117,816 12,715,595 127,156
UK (Closed 27.04.18) — — 1,991,766 19,918
Total Sterling Funds 281,804,279 2,818,042 320,538,393 3,205,388
Fund Shares € Shares € Euro High Income 8,547,064 129,731 9,087,364 135,134
Shares £ Shares £ Total Company (Sterling equivalent) 290,351,343 2,903,519 329,625,757 3,296,263
76 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
15. Share Premium
30 September 30 September 2018 2017
Fund £ £ European (Closed 27.04.18) — — High Income 283,862,846 309,052,198 International (Closed 27.04.18) — 4,892,742 North American (Closed 27.04.18) — — Sterling Bond 17,477,682 18,885,190 UK (Closed 27.04.18) — — Total Sterling Funds 301,340,528 332,830,130
Fund € € Euro High Income 14,700,251 15,557,297
£ £
Total Company (Sterling equivalent) 311,267,441 343,511,670
£ £ Balance brought forward 343,511,670 358,098,319
Premium on creations 8,003,162 11,418,531
Premium on redemptions (98,446,073) (29,093,245)
Transfer from capital reserve 58,198,682 3,088,065
Balance carried forward 311,267,441 343,511,670
77 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
16. Capital Reserves
Euro High Note Company Income European Fund Fund
£ € £ (closed 27 April 2018) Net realised gains/(losses) on investments b/fwd 47,595,831 158,440 13,909,027
Transfers to share premium b/fwd (3,088,065) — (1,491,458)
Net realised gains for the year 7 17,683,062 28,506 3,489,717
Net realised gains/(losses) on investments c/fwd 62,190,828 186,946 15,907,286
Net unrealised movement on investment b/fwd 38,461,671 866,062 3,246,598
Net unrealised movement in the year 7 (27,207,334) (322,030) (3,246,598)
Net unrealised movement on investment c/fwd 11,254,337 544,032 —
Total realised/unrealised movement 73,445,165 730,978 15,907,286
Distributions unclaimed over 10 years old b/fwd 11,639 210 218
Net movement in the year 8,303 177 (218)
Distributions unclaimed over 10 years old c/fwd 19,942 387 —
Fees charged to Capital b/fwd* (45,955,777) (1,507,663) (829,730)
Net movement in the year 2,161,410 (133,823) 829,730
Fees charged to Capital c/fwd* (43,794,367) (1,641,486) —
Transfer to share premium in year 15 (58,198,682) — (14,926,900)
Transfer from Dilution levy reserve 19,913 — 5,272
Transfer to revenue reserve in year (5,827,529) — (985,658)
As at 30 September 2018 (34,335,558) (910,121) —
* Details of the fees can be found in Note 10. Under the Reporting Fund Regime, broker commission, dealing charges and stamp duty are not allowable expenses. The Directors have therefore, transferred these expenses from the Net undistributed income reserve to a separate broker charges reserve.
78 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
16. Capital Reserves
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
£ £ £ £ £ (closed 27 (closed 27 (closed 27 April 2018) April 2018) April 2018) Net realised gains/(losses) on investments b/fwd (8,440,181) 14,214,253 9,564,105 1,627,518 16,653,482
Transfers to share premium b/fwd — — (542,033) — (1,054,574)
Net realised gains for the year 4,646,925 4,137,390 3,119,130 257,461 2,007,259
Net realised gains/(losses) on investments c/fwd (3,793,256) 18,351,643 12,141,202 1,884,979 17,606,167
Net unrealised movement on investment b/fwd 24,422,635 4,256,736 2,809,450 725,622 2,287,803
Net unrealised movement in the year (13,487,565) (4,256,736) (2,809,450) (834,728) (2,287,803)
Net unrealised movement on investment c/fwd 10,935,070 — — (109,106) —
Total realised/unrealised movement 7,141,814 18,351,643 12,141,202 1,775,873 17,606,167
Distributions unclaimed over 10 years old b/fwd 5,557 777 — 3,831 1,092
Net movement in the year 8,559 (777) — 1,675 (1,092)
Distributions unclaimed over 10 years old c/fwd 14,116 — — 5,506 —
Fees charged to Capital b/fwd* (40,188,810) (832,798) (214,357) (10,996) (2,655,055)
Net movement in the year (2,250,242) 832,798 214,357 (2,080) 2,655,055
Fees charged to Capital c/fwd* (42,439,052) — — (13,076) —
Transfer to share premium in year — (17,253,122) (11,048,508) — (14,970,152)
Transfer from Dilution levy reserve — — 7,857 — 6,784
Transfer to revenue reserve in year — (1,098,521) (1,100,551) — (2,642,799)
As at 30 September 2018 (35,283,122) — — 1,768,303 —
* Details of the fees can be found in Note 10. Under the Reporting Fund Regime, broker commission, dealing charges and stamp duty are not allowable expenses. The Directors have therefore, transferred these expenses from the Net undistributed income reserve to a separate broker charges reserve.
79 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
17. Net assets attributable to holders of participating redeemable preference shares
Euro High Note Company Income European Fund Fund £ € £ (closed 27 Year ended 30 September 2018 April 2018) Share capital 14 2,903,519 129,731 —
Share premium 15 311,267,441 14,700,251 —
Capital reserves 16 (34,335,558) (910,121) —
Dilution levies 316,956 30,772 —
Undistributed income* (28,130,854) (811,062) —
Movement in currency translation 3,206,906 — —
As at 30 September 2018 255,228,410 13,139,571 —
Year ended 30 September 2017 Share capital 14 3,296,263 135,134 14,836
Share premium 15 343,511,670 15,557,297 —
Capital reserves 16 37,025,297 (482,951) 14,834,655
Dilution levies 310,707 30,772 5,272
Undistributed income* (27,452,158) (650,174) (69,216)
Movement in currency translation 3,072,604 — —
As at 30 September 2017 359,764,383 14,590,078 14,785,547
* The distributions detailed in Note 5 have been declared by the Directors using a dividend policy based on the accruals method of accounting for income on debt instruments, as opposed to the EIR method of accounting for investment income which is the basis used for recognition of income on debt instruments as explained in the accounting policies. Future distributions will continue to be made on the basis of the existing distribution policy. Equity Fund distributions were declared net of broker fees. Undistributed income under the accruals method as at 30 September 2018 amounts to £102,158 (30 September 2017 amounts to (£1,041,138)).
80 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
17. Net assets attributable to holders of participating redeemable preference shares
High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund £ £ £ £ £ (closed 27 (closed 27 (closed 27 Year ended 30 September 2018 April 2018) April 2018) April 2018) Share capital 2,700,226 — — 117,816 —
Share premium 283,862,846 — — 17,477,682 —
Capital reserves (35,283,122) — — 1,768,303 —
Dilution levies 218,071 — — 71,476 —
Undistributed income* (25,443,882) — — (1,964,551) —
Movement in currency translation — — — — —
As at 30 September 2018 226,054,139 — — 17,470,726 —
Year ended 30 September 2017 Share capital 2,997,317 41,107 5,054 127,156 19,918
Share premium 309,052,198 4,892,742 — 18,885,190 —
Capital reserves (24,200,799) 17,638,968 11,617,165 2,345,975 15,232,748
Dilution levies 192,204 — 7,857 71,476 6,784
Undistributed income* (23,892,461) (231,875) (832,336) (1,853,363) (16)
Movement in currency translation — — — — —
As at 30 September 2017 264,148,459 22,340,942 10,797,740 19,576,434 15,259,434
* The distributions detailed in Note 5 have been declared by the Directors using a dividend policy based on the accruals method of accounting for income on debt instruments, as opposed to the EIR method of accounting for investment income which is the basis used for recognition of income on debt instruments as explained in the accounting policies. Future distributions will continue to be made on the basis of the existing distribution policy. Equity Fund distributions were declared net of broker fees. Undistributed income under the accruals method as at 30 September 2018 amounts to £102,158 (30 September 2017 amounts to (£1,041,138)).
81 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 18. Taxation These may include: In accordance with International Accounting Standard (IAS) 12 • Investments including non-equity Shares, bonds and floating rate Income Taxes, investment income is shown gross of withholding securities tax. • Cash, liquid resources and short term debtors and creditors that The withholding tax suffered is recorded on the taxation line as set arise directly from the investment activities out below: • Hedging instruments, such as forward exchange contracts and 3 0 S e p t e m b e r 30 September traded options which a Fund may enter into, for the purpose of 2018 2017 managing the risks arising from the Fund’s investment activities. Foreign tax on income £108,533 £234,747 Market risk for the year All securities investments present a risk of loss of capital. The Company is liable to be charged at a tax rate of 0% under The Manager moderates this risk through a careful selection Schedule D under the Income Tax (Jersey) Law 1961, as amended of investments within specified limits. The maximum risk (the ‘Income Tax Law’) in respect of: resulting from investments is determined by the fair value (i) the income or profits of any trade carried on by the Company in of those investments. Jersey or elsewhere, The overall market position and therefore the risk exposure for (ii) any interest of money, whether yearly or otherwise, or other each Fund are governed by the Prospectus, the Collective annual payment paid to the Company, whether such payment is Investment Funds (Recognized Funds) (Rules) (Jersey) Order made within or outside of Jersey, 2003 (as amended) and the investment objectives for each Fund. (iii) dividends and other distributions of a company regarded as These positions are monitored on a daily basis by the Manager resident in Jersey paid to the Company, and are reviewed on a quarterly basis by the Board of Directors. (iv) income arising to the Company from securities outside The investments are principally bonds and cash, dependent on each of Jersey and Fund’s investment policy. The value of these is not fixed and may (v) any other income of the Company that is not derived from the go down as well as up. This may be the result of a specific factor ownership or disposal of land in Jersey. affecting the value of an individual stock or be caused by general market factors (such as interest rates, government policy or the It is not expected that the Company will be in receipt of income health of the underlying economy) which could affect the entire charged to tax under any Schedule under Income Tax Law other portfolio of a Fund. than Schedule D. As such the Company is no longer subject to the payment of tax in Jersey. The period end portfolios of each Fund are detailed on pages 33 to 51. Jersey resident individuals should note that any income received from the Fund(s) will be paid gross and will be taxable under The Manager controls this risk on a Fund by Fund basis and Schedule D Case III (D3) of the Income Tax (Jersey) Law 1961, monitors the movements in the bonds and interest rates against as amended. the relevant bond indices and market interest rates respectively. 19. Financial risk management The Manager considers that a reasonably possible movement in the market risk components would be equivalent to a 5% movement in Strategy in using financial instruments bond indices and a 1% movement in market interest rates. The Company’s activities expose it to a variety of financial risks: The table on the following page summarises, for each of the Funds, market risk (including currency risk, fair value interest rate risk, cash the impact of increases / (decreases) in the bond indices, and flow interest rate risk and price risk), liquidity risk, counter-party market interest rates on the net asset value as at 30 September risk, capital risk and certain other risks. The Company’s overall 2018. The analysis is based on the assumption that the bond indices risk management programme focuses on the unpredictability of increase / (decrease) by 5%, and market interest rates increase / financial markets and seeks to minimise potential adverse effects (decrease) by 1%, with all other variables held constant. The analysis on the Company’s financial performance. Each Fund is able to use also assumes that the movement in the portfolios of each Fund has derivative financial instruments to moderate certain risk exposures. perfect positive correlation with the equity and bond indices and There were no such exposures as at 30 September 2018. market interest rates. Each Fund’s investment objectives and policy are stated on page 3. To achieve these objectives the Company’s assets and liabilities comprise financial instruments held in accordance with each Fund’s investment objectives and policy.
82 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
19. Financial risk management (continued) Market risk (continued)
Value Equities Bonds Cash End of Fund (base 5% Movement 5% Movement 1% Movement period/year currency) in equity index in bond index in interest rate
30.09.18 Euro High Income 13,139,571 — 623,271 5,693 30.09.17 Euro High Income 14,590,078 — 706,130 3,454
27.04.18 European — — — — 30.09.17 European 14,785,547 741,842 — 1,106
30.09.18 High Income 226,054,139 — 11,036,584 31,772 30.09.17 High Income 264,148,459 — 12,454,856 123,176
27.04.18 International — — — — 30.09.17 International 22,340,942 1,103,538 — 2,718
27.04.18 North American — — — — 30.09.17 North American 10,797,740 523,308 — 3,358
30.09.18 Sterling Bond 17,470,726 — 834,869 6,241 30.09.17 Sterling Bond 19,576,434 — 940,159 6,797
27.04.18 UK — — — — 30.09.17 UK 15,259,434 769,378 — 1,022
Interest rate risk Each Fund receives income from its various investments. For the Sterling Bond Fund, Euro High Income Fund and High Income Fund, the income is received from investments in bonds and loan stock. In accordance with the Funds policy, the Manager monitors the Fund’s overall interest rate sensitivity on a daily basis, and the Board of Directors reviews it on a quarterly basis. The interest bearing financial assets and liabilities held in the Funds expose them to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on their financial position and cash flows. The table overleaf summarises the effect of interest rate risks on each Fund. It includes the Fund’s assets and trading liabilities at fair values, categorised by the earlier of contractual re-pricing or maturity dates. Other than those financial instruments identified in the table, each Fund has no significant exposure to interest rate risks. The income received by each Fund is primarily fixed in nature and shown in the table on the next page. Income is derived from the securities held in the portfolio of each Fund which may be varied from time to time in accordance with its investment objectives and policy.
83 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018
19. Financial risk management (continued) Interest rate risk (continued) The interest rate profile of each Fund’s financial assets at 30 September 2018 was:
Fixed rate Floating rate interest interest Interest Interest Fund Currency Total securities securities Free Assets Free Liabilities 000’s 000’s 000’s 000’s 000’s Euro High Income Euro 13,140 10,722 1,743 807 132 High Income Sterling 226,054 199,232 21,500 7,998 2,676 Sterling Bond Sterling 17,471 14,900 1,797 908 134
Weighted average Weighted average period for which effective Fund Currency Weighted average the rate is interest rate % coupon rate % fixed (years) Euro High Income Euro 3.95 1.70 19.09 High Income Sterling 5.46 3.23 18.38 Sterling Bond Sterling 4.72 3.05 17.13
The interest rate profile of each Fund’s financial assets at 30 September 2017 was:
Fixed rate Floating rate interest interest Interest Interest Fund Currency Total securities securities Free Assets Free Liabilities 000’s 000’s 000’s 000’s 000’s Euro High Income Euro 14,590 11,956 2,167 608 141 High Income Sterling 264,148 204,918 44,179 17,192 2,141 Sterling Bond Sterling 19,576 16,772 2,031 1,047 274
Weighted average Weighted average period for which effective Fund Currency Weighted average the rate is interest rate % coupon rate % fixed (years) Euro High Income Euro 4.14 1.60 17.25 High Income Sterling 6.01 3.16 21.69 Sterling Bond Sterling 5.41 2.83 18.28
84 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 19. Financial risk management (continued) Foreign currency risk The Euro High Income Fund is denominated in euro. All of the other With the exceptions of the Sterling Bond Fund, each Fund may Funds are denominated in sterling. A portion of the underlying purchase securities denominated in a currency other than its base financial assets of the Funds may be denominated in currencies currency, and hence take a position in other currencies. other than the base currency with the effect that the statement of The Company is not currently involved in currency hedging financial position and each Fund’s total return can be significantly transactions. In accordance with the Company’s policy, affected by currency movements. An investment in a currency the Manager monitors each Fund’s currency position on a daily other than the shareholders’ own base currency will be subject basis, and the Board of Directors reviews it on a quarterly basis. to the movement of foreign exchange rates, which may cause additional favourable or unfavourable changes in value. In respect of foreign currency exposure, derivative instruments will only be utilised where a forward exchange or currency option is used for the purpose of reduction of foreign currency risk, in order to hedge this exposure back to the base currency of the Fund.
As at 30 September 2018 the Funds had the following currency exposures:
Foreign Foreign Fund Currency Currency Fund Currency Currency Assets £ 000’s Assets £ 000’s
Euro High Income Sterling — International Euro — European Euro — Hong Kong Dollar — Danish Krone — Japanese Yen — Norwegian Krona — Korean Won — Swedish Krona — Singapore Dollar — Swiss Franc — South African Rand — US Dollar — Swedish Krona — North American Canadian Dollar — Swiss Franc — Euro — US Dollar — US Dollar — Canadian Dollar — UK Euro — US Dollar —
As at 30 September 2017 the Funds had the following currency exposures:
Foreign Foreign Fund Currency Currency Fund Currency Currency Assets £ 000’s Assets £ 000’s Euro High Income Sterling — International Euro 947 European Euro 6,924 Hong Kong Dollar 893 Danish Krone 1,049 Japanese Yen 2,519 Norwegian Krona 292 Korean Won 443 Swedish Krona 1,625 Singapore Dollar 79 Swiss Franc 4,952 South African Rand 243 US Dollar — Swedish Krona 346 North American Canadian Dollar 646 Swiss Franc 1,926 Euro — US Dollar 10,555 US Dollar 9,842 Canadian Dollar 384 UK Euro 1 US Dollar 3
85 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 19. Financial risk management (continued) Capital risk Credit risk Where the objective of the underlying Fund seeks to provide The Company takes on exposure to credit risk, which is the risk high or good levels of income, the investment policy which that a counter-party will be unable to pay amounts in full when supports this may result in a gradual reduction in the capital value due. Impairment provisions would be provided for losses that have of the underlying Fund’s Shares, except where bond prices are been incurred by the statement of financial position date. As at 30 generally rising. September 2018 no impairment provisions were required and there Capital risk management was no money overdue. The net assets attributable to holders of participating redeemable The Company’s main credit risk exposure arises through investments preference shares are classified as financial liabilities and therefore, in debt securities at the Fund level. If any of the Funds hold any in the opinion of the Directors, the capital of the Company is only interest bearing instruments, at least 90% of these instruments represented by the Founders Shares. Details of the Founders Shares must have a credit rating of ‘Investment Grade’ as provided by are shown in notes 3 and 14. Moodys Investor Services Limited, Standard and Poors or Fitch Due to the nature and requirement of the Founders’ Shares the Ratings Limited. These instruments could include inter alia money Directors have decided that no active capital risk management market instruments, bonds, gilts, corporate bonds etc. is required. In accordance with each Fund’s policy, the Manager monitors the Fair value estimation Fund’s credit position on a daily basis, and the Board of Directors The fair value of financial assets and liabilities traded in active reviews it on a quarterly basis. markets (such as publicly traded derivatives and trading securities) Certain transactions that the Funds enter into expose them to the are based on quoted market prices at the close of trading on the risk that the counter-party will not deliver the investment (purchase) year end date. The quoted market price used for financial assets or cash (sale) after the Fund has fulfilled its responsibilities. It is held by the Company is the current mid price, these are updated the policy of the Manager to buy and sell investments only through each morning at 10am and represented in the Fund’s daily share approved brokers. Credit risk exposure is balanced by the regulatory prices; the appropriate quoted market price for financial liabilities obligation of the counter parties. is the current asking price. When the Company holds derivatives The risk to Shareholders is that we will not have enough cash to with offsetting market risks, it uses mid-market prices as a basis for cover redemptions. To counter this risk each Fund’s cash is managed establishing fair values for the offsetting risk positions and applies to meet its liabilities. Where investments cannot be realised in time this bid or asking price to the net open position, as appropriate. If a to meet any redemptions of Participating Shares, each Fund may significant movement in fair value occurs subsequent to the close of borrow up to 10% of its value to ensure settlement of its liabilities. trading on the year end date, valuation techniques will be applied No such borrowings have arisen during the year. to determine the fair value. With the exception of the effect of the class closures detailed in the Report of the Directors, there has been The Custodian has also entered into a sub-custodian agreement no significant movements in the fair value of any holdings since the with State Street Bank and Trust Company, London Branch. Under year end date. the terms of that sub-custodian agreement, the Sub-Custodian will hold certain assets of the Company on behalf of the Custodian. The A financial instrument is regarded as quoted in an active market if assets of the Company will be held in compliance with applicable quoted prices are readily and regularly available from an exchange, laws and specific provisions as agreed in the sub-custodian dealer, broker, industry group, pricing service, or regulatory agency, agreement between the Custodian and the Sub-Custodian. These and those prices represent actual and regularly occurring market will include requirements designed to protect the Company’s transactions at an arm’s length basis. assets in the event of the insolvency or bankruptcy, but they do not IFRS 13 states the Company to classify fair value measurements guarantee this effect. using a fair value hierarchy that reflects the significance of the Cash balances held with the Sub-Custodian will not be segregated inputs used in making the measurements. The fair value hierarchy from the Sub-Custodian’s own accounts or held on trust for the has the following levels: Custodian. This exposes investors to risk if the Sub-Custodian • Quoted prices (unadjusted) in active markets for identical assets becomes insolvent, since the Custodian (who has entered into or liabilities (level 1). the contract with the Sub-Custodian) will rank as an unsecured • Inputs other than quoted prices included within level 1 that are creditor along with all other deposit holders in respect of any observable for the asset or liability, either directly (that is, as claim. Accordingly, there is no guarantee that the Custodian would prices) or indirectly (that is, derived from prices) (level 2). ever be able to recover monies held in such cash accounts on the • Inputs for the asset or liability that are not based on observable Company’s behalf. market data (that is, unobservable inputs) (level 3).
86 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 19. Financial risk management (continued) The determination of what constitutes ‘observable’, requires significant judgement by the Directors. The Directors consider Fair value estimation (continued) observable data to be that market data that is readily available, The level in the fair value hierarchy within which the fair value regularly distributed or updated, reliable and verifiable, not measurement is categorised in its entirety is determined on the proprietary, and provided by independent sources that are actively basis of the lowest level input that is significant to the fair value involved in the relevant market. All other assets held by the measurement in its entirety. For this purpose, the significance of an Company at fair value through profit or loss are all quoted in active input is assessed against the fair value measurement in its entirety. markets and therefore fall under level 1 as defined above. The fair If a fair value measurement uses observable inputs that require value hierarchy table is shown below. significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
Financial assets at fair value through profit and loss
30 September 2018 Level 1 Level 2 Level 3 Totals Fund £ £ £ £ European Fund (closed 27 April 2018) — — — — High Income Fund 220,731,676 — — 220,731,676 International Fund (closed 27 April 2018) — — — — North American Fund (closed 27 April 2018) — — — — Sterling Bond Fund 16,697,387 — — 16,697,387 UK Fund (closed 27 April 2018) — — — —
Level 1 Level 2 Level 3 Totals Fund € € € € Euro High Income Fund 12,465,417 — — 12,465,417
30 September 2017 Level 1 Level 2 Level 3 Totals Fund £ £ £ £ European Fund 14,836,846 — — 14,836,846 High Income Fund 249,097,124 — — 249,097,124 International Fund 22,070,752 — — 22,070,752 North American Fund 10,466,153 — — 10,466,153 Sterling Bond Fund 18,803,180 — — 18,803,180 UK Fund 15,387,560 — — 15,387,560
Level 1 Level 2 Level 3 Totals Fund € € € € Euro High Income Fund 14,122,590 — — 14,122,590
87 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 19. Financial risk management (continued) The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are Fair value estimation (continued) favourable or unfavourable, and thus the aggregate fair values of Derivatives derivative financial assets and liabilities can fluctuate significantly Derivatives will only be used where they accord with existing from time to time. investment objectives and policy. They may not be used for the During the year the Company did not enter into any derivative purpose of reducing risk independently of investment strategy in contracts. respect of the underlying physical assets or for merely speculative purposes. Derivatives will only be used for efficient portfolio Liquidity risk management. Derivatives may not be used for the purpose of The Company is exposed to daily cash redemptions of Participating gearing or leveraging or for purposes of producing, enhancing or Shares which are redeemed on demand at the holder’s option. generating income. No derivative can be traded on an “Over The It therefore invests all of its assets in investments that are traded in Counter” basis, and no uncovered positions are allowed. an active market and can be readily disposed of. From time to time The underlying Funds may hold the following derivatives: assets held could become illiquid due to in-active trading. At 30 September 2018 the percentage of the assets within the (a) Futures portfolios which are subject to special arrangements arising from Futures are contractual obligations to buy or sell financial their illiquid nature is 0% (2017: 0%). As such each Fund’s financial instruments on a future date at a specified price established in an assets are considered to be readily realisable for cash. organised market. The futures contracts are collateralised by cash The Manager manages each Fund’s cash to meet its liabilities. or marketable securities. Changes in the futures contracts value are Where investments cannot be realised in time to meet any settled daily with the exchange. Interest rate futures are contractual redemptions of Participating Shares, each Fund may borrow up obligations to receive or pay a net amount based on changes in to 10% of its value to ensure settlement of its liabilities. No such interest rates at a future date at a specified price, established in an borrowings have arisen during the year. organised financial market. Futures are settled on a net basis. In accordance with the Company’s policy, the Manager monitors (b) Options each Fund’s liquidity position on a daily basis, and the Board of An option is a contractual arrangement under which the seller Directors review it on a quarterly basis. (writer) grants the purchaser (holder) the right, but not the The table on the following pages analyses the Company’s financial obligation, either to buy (a call option) or sell (a put option) at or by liabilities into relevant maturity groups based on the remaining a set date or during a set period, a specific amount of securities or a period at the statement of financial position date to the contractual financial instrument at a predetermined price. maturity date. The seller receives a premium from the purchaser in consideration Cross fund liability for the assumption of future securities prices. Where options are held by the underlying Funds, they are exchange-traded. The Funds Shareholders should be aware that in the event of the Company are exposed to credit risk on purchased options only to the extent of being unable to meet liabilities attributable to any particular Fund their carrying amount, which is their fair value. Options are settled or share class out of the assets attributable to such Fund or share on a gross basis. class, the excess liabilities may have to be met out of the assets attributable to the other Funds or share classes. The notional amounts of certain types of financial instrument provide a basis for comparison with instruments recognised on the statements of financial position, but they do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and do not therefore indicate the Company’s exposure to credit or market price risks. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market interest rates or foreign exchange rates relative to their terms.
88 Lloyds Investment Funds Limited
89 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 19. Financial risk management (continued) Liquidity risk (continued) Euro High Company Income European Fund Fund
Year ended 30 September 2018 £ € £ (closed 27 April 2018) Share Capital
(less than 1 month) 257,099,946 13,139,571 —
Cancellation payable
(less than 1 month) 223,517 — —
Investment purchase payable
(less than 1 month) 1,333,857 — —
Proposed dividend
(less than 1 month) 837,064 — —
(1 month to 3 months) 197,389 102,565 —
Accrued expenses
(less than 1 month) 73,643 8,089 —
(1 month to 3 months) 263,140 21,725 —
Total financial liabilities 260,028,556 13,271,950 —
Year ended 30 September 2017 Share Capital
(less than 1 month) 361,243,174 14,590,078 14,785,547
Cancellation payable
(less than 1 month) 113,712 — —
Investment purchase payable
(less than 1 month) 922,965 — —
Proposed dividend
(less than 1 month) 989,114 — —
(1 month to 3 months) 565,012 112,683 128,767
Accrued expenses
(less than 1 month) 201,319 9,645 27,683
(1 month to 3 months) 306,803 18,373 10,997
Total financial liabilities 364,342,099 14,730,779 14,952,994
None of the Alternative Investment Fund’s assets are subject to special arrangments arising from their illiquid nature in accordance with Article 23(4)(a) of Directive 2011/61/EU.
90 Lloyds Investment Funds Limited
Notes to the Financial Statements (continued) For the year ended 30 September 2018 19. Financial risk management (continued) Liquidity risk (continued) High North Sterling Income International American Bond UK Fund Fund Fund Fund Fund
Year ended 30 September 2018 £ £ £ £ £ (closed 27 April (closed 27 April (closed 27 April 2018) 2018) 2018) Share Capital
(less than 1 month) 226,054,139 — — 17,470,726 —
Cancellation payable
(less than 1 month) 223,517 — — — —
Investment purchase payable
(less than 1 month) 1,333,857 — — — —
Proposed dividend
(less than 1 month) 837,064 — — — —
(1 month to 3 months) — — — 106,034 —
Accrued expenses
(less than 1 month) 59,460 — — 6,978 —
(1 month to 3 months) 221,716 — — 22,073 —
Total financial liabilities 228,729,753 — — 17,605,811 —
Year ended 30 September 2017 Share Capital
(less than 1 month) 264,148,459 22,340,942 10,797,740 19,576,434 15,259,434
Cancellation payable
(less than 1 month) 72,858 — 10,680 — 30,174
Investment purchase payable
(less than 1 month) 792,055 — — 99,755 31,155
Proposed dividend
(less than 1 month) 989,114 — — — —
(1 month to 3 months) — — — 139,871 197,085
Accrued expenses
(less than 1 month) 71,565 37,315 19,525 8,881 27,851
(1 month to 3 months) 215,133 18,553 9,484 25,452 10,995
Total financial liabilities 266,289,184 22,396,810 10,837,429 19,850,393 15,556,694
None of the Alternative Investment Fund’s assets are subject to special arrangments arising from their illiquid nature in accordance with Article 23(4)(a) of Directive 2011/61/EU.
20. Events after year end date Shareholders of the Lloyds Gilt Fund Limited and Lloydstrust Gilt Fund Limited were advised in a letter dated 24 September 2018 to exchange their shares for shares in Lloyds Investment Funds Limited – Sterling Bond. The merger of Lloyds Gilt Fund Limited and Lloydstrust Gilt Fund Limited with Lloyds Investment Funds Limited – Sterling Bond took place on 9 November 2018. As a result the NAV of the Lloyds Investment Funds Ltd – Sterling Bond increased by £93,982,636.
91 Lloyds Investment Funds Limited
Change in Net Asset Value per Share For the year ended 30 September 2018
Number of Shares in Opening net asset value Return before operating Year/period Net Asset Value of Fund Issue per share charges
Euro High Income Fund 30.09.16 €15,681,083 9,378,764 159.22 13.31 30.09.17 €14,590,078 9,087,364 167.49 (1.91) 30.09.18 €13,139,571 8,547,064 160.55 (1.86)
European Fund 30.09.16 £14,448,885 1,640,323 707.85 177.61 30.09.17 £14,785,547 1,483,673 871.23 132.03 27.04.18 — — 996.55 —
High Income Fund 30.09.16 £287,111,918 312,132,511 85.57 11.15 30.09.17 £264,148,459 299,731,464 92.50 0.33 30.09.18 £226,054,139 270,022,634 88.13 (0.56)
International Fund 30.09.16 £21,491,694 4,386,747 378.43 116.40 30.09.17 £22,340,942 4,110,547 489.38 55.93 27.04.18 — — 543.50 —
North American Fund 30.09.16 £10,083,060 531,848 1,479.64 435.53 30.09.17 £10,797,740 505,348 1,882.32 248.74 27.04.18 — — 2,136.69 —
Sterling Bond Fund 30.09.16 £22,115,791 13,892,095 144.86 28.92 30.09.17 £19,576,434 12,715,595 160.28 (0.68) 30.09.18 £17,470,726 11,781,645 153.96 (1.45)
UK Fund 30.09.16 £15,209,356 2,126,616 631.86 98.87 30.09.17 £15,259,434 1,991,766 709.44 65.42 27.04.18 — — 766.13 —
92 Lloyds Investment Funds Limited
Change in Net Asset Value per Share (continued) For the year ended 30 September 2018
Appreciation / Return after operating Closing net asset value Retained income per Operating charges Distributions on shares (Depreciation) on charges per share share capital assets
(2.09) 11.23 (4.80) 1.84 167.49 0.01 (2.09) (4.00) (4.93) 1.99 160.55 0.03 (2.11) (3.97) (5.00) 1.99 153.57 0.08
(15.73) 161.88 — 1.50 871.23 2.85 (19.95) 112.09 (8.68) 21.91 996.55 (4.67) — — — — — —
(0.92) 10.22 (4.57) 1.28 92.50 — (0.94) (0.61) (4.30) 0.54 88.13 0.02 (0.97) (1.53) (4.10) 0.54 83.04 0.06
(8.70) 107.69 — 3.26 489.38 (5.29) (10.36) 45.57 — 8.55 543.50 (5.64) — — — — — —
(34.97) 400.56 — 2.12 1,882.32 (145.72) (41.54) 207.19 — 47.18 2,136.69 (164.71) — — — — — —
(2.31) 26.61 (0.07) (11.12) 160.28 — (1.92) (2.60) (0.05) (3.67) 153.96 0.18 (1.86) (3.31) (0.04) (3.67) 146.94 0.26
(14.13) 84.74 (9.92) 2.76 709.44 (0.18) (15.70) 49.72 (9.89) 16.86 766.13 — — — — — — —
93 Lloyds Investment Funds Limited
Performance Record For the year ended 30 September 2018
Euro High Income Fund Shares in the Fund were first offered to the public in October 2006 at an offer price of 178.90 cents per share.
Highest Lowest Income Income per €1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year c c c €
2009 156.20 120.90 7.55 56.68 2010 163.70 153.20 xd 7.51 56.38 2011 156.60 140.60 5.73 43.02 2012 167.40 144.60 7.71 57.85 2013 169.10 161.70 7.45 55.93 2014 170.30 161.70 6.51 48.87 2015 173.50 159.70 4.94 37.09 2016 163.90 158.10 4.70 35.29 2017 163.00 159.90 4.96 28.00 30.09.18 160.80 154.40 4.94 31.89
European Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year p p p £
2009 656.20 xd 411.00 4.60 8.23 2010 667.80 545.00 0.98 1.75 2011 738.70 522.20 3.80 6.80 2012 682.50 559.60 2.50 4.48 2013 826.90 682.80 — — 2014 832.20 695.70 — — 2015 850.30 698.30 — — 2016 772.50 687.00 — — 2017 1,035.00 885.80 8.68 13.55 27.04.18 1,055.00 972.90 — —
High Income Fund Shares in the Fund were first offered to the public in June 1995 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year p p p £
2009 83.53 69.03 xd 5.60 71.60 2010 88.28 82.15 5.40 69.11 2011 85.30 79.70 3.89 49.72 2012 89.19 81.20 5.25 67.12 2013 91.66 85.23 4.82 61.68 2014 89.56 85.55 4.78 61.17 2015 92.53 85.86 4.59 58.68 2016 86.21 83.74 4.37 55.93 2017 90.65 87.58 3.13 37.99 30.09.18 88.86 83.68 3.87 46.97
94 Lloyds Investment Funds Limited
Performance Record (continued) For the year ended 30 September 2018
International Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share.
Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year p p p £
2009 312.20 222.80 1.35 5.03 2010 341.30 284.30 1.48 5.52 2011 354.70 278.60 — — 2012 348.40 309.50 — — 2013 439.80 354.30 — — 2014 455.10 412.50 — — 2015 469.40 369.70 — — 2016 419.40 368.90 — — 2017 567.30 503.00 — — 27.04.18 581.50 523.50 — —
North American Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year p p p £
2009 887.30 609.80 — — 2010 1,016.00 837.20 1.27 1.65 2011 1,048.00 823.00 — — 2012 1,140.00 1,001.00 — — 2013 1,429.00 1,153.00 — — 2014 1,617.00 1,356.00 — — 2015 1,734.00 1,418.00 — — 2016 1,641.00 1,432.00 — — 2017 2,257.00 2,018.00 — — 27.04.18 2,312.00 2,063.00 — —
Sterling Bond Fund Shares in the Fund were first offered to the public in July 2001 at an offer price of 148.6p per share. Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year p p p £
2009 130.50 107.60 xd 6.95 56.55 2010 139.00 127.40 6.54 53.21 2011 136.80 128.60 6.41 52.16 2012 147.00 131.20 6.27 51.02 2013 151.60 140.10 5.91 48.09 2014 151.30 140.20 5.78 47.03 2015 156.80 144.70 5.40 43.94 2016 147.50 142.20 5.50 44.75 2017 158.90 150.90 4.50 34.91 30.09.18 156.10 148.60 4.30 33.36
95 Lloyds Investment Funds Limited
Performance Record (continued) For the year ended 30 September 2018
UK Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share.
Highest Lowest Income Income per £1,000 Offer Price Bid Price per Share Invested at 31/12/08 Calendar Year p p p £
2009 572.30 368.90 8.50 18.76 2010 640.00 522.70 6.87 15.16 2011 663.00 527.20 4.68 10.33 2012 637.30 564.00 5.75 12.69 2013 747.60 642.10 11.57 25.53 2014 765.70 643.90 10.46 23.08 2015 763.70 629.20 8.80 19.41 2016 649.40 569.90 9.92 21.90 2017 806.00 721.30 9.90 17.36 27.04.18 799.00 720.60 8.10 14.21
96 Lloyds Investment Funds Limited
Distribution Tables For the year ended 30 September 2018
Euro High Income Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (cents) (cents) 1st Quarter Group 1 1.230 — 1.230 1.190 Group 2 0.556 0.674 1.230 1.190 2nd Quarter Group 1 1.230 — 1.230 1.270 Group 2 0.472 0.758 1.230 1.270 3rd Quarter Group 1 1.270 — 1.270 1.230 Group 2 0.607 0.663 1.270 1.230 4th Quarter Group 1 1.200 — 1.210 1.240 Group 2 0.936 0.264 1.210 1.240
1st Quarter Group 1 : Shares purchased prior to 1 October 2017 Group 2 : Shares purchased between 1 October 2017 and 31 December 2017 2nd Quarter Group 1 : Shares purchased prior to 1 January 2018 Group 2 : Shares purchased between 1 January 2018 and 31 March 2018 3rd Quarter Group 1 : Shares purchased prior to 1 April 2018 Group 2 : Shares purchased between 1 April 2018 and 30 June 2018 4th Quarter Group 1 : Shares purchased prior to 1 July 2018 Group 2 : Shares purchased between 1 July 2018 and 30 September 2018
High Income Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 31 October 2017 Group 1 0.330 — 0.330 0.360 Group 2 0.138 0.192 0.330 0.360 30 November 2017 Group 1 0.330 — 0.330 0.360 Group 2 0.158 0.172 0.330 0.360 31 December 2017 Group 1 0.320 — 0.320 0.360 Group 2 0.238 0.082 0.320 0.360 31 January 2018 Group 1 0.320 — 0.320 0.350 Group 2 0.188 0.132 0.320 0.350 28 February 2018 Group 1 0.320 — 0.320 0.350 Group 2 0.209 0.111 0.320 0.350 31 March 2018 Group 1 0.320 — 0.320 0.350 Group 2 0.214 0.106 0.320 0.350
97 Lloyds Investment Funds Limited
Distribution Tables (continued) For the year ended 30 September 2018
High Income Fund (continued) Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 30 April 2018 Group 1 0.330 — 0.330 0.350 Group 2 0.326 0.004 0.330 0.350 31 May 2018 Group 1 0.330 — 0.330 0.350 Group 2 0.126 0.204 0.330 0.350 30 June 2018 Group 1 0.330 — 0.330 0.350 Group 2 0.222 0.108 0.330 0.350 31 July 2018 Group 1 0.320 — 0.320 0.350 Group 2 0.257 0.063 0.320 0.350 31 August 2018 Group 1 0.310 — 0.310 0.340 Group 2 0.169 0.141 0.310 0.340 30 September 2018 Group 1 0.310 — 0.310 0.330 Group 2 0.136 0.174 0.310 0.330
31 October 2017 Group 1 : Shares purchased prior to 1 October 2017 Group 2 : Shares purchased between 1 October 2017 and 31 October 2017 30 November 2017 Group 1 : Shares purchased prior to 1 November 2017 Group 2 : Shares purchased between 1 November 2017 and 30 November 2017 31 December 2017 Group 1 : Shares purchased prior to 1 December 2017 Group 2 : Shares purchased between 1 December 2017 and 31 December 2017 31 January 2018 Group 1 : Shares purchased prior to 1 January 2018 Group 2 : Shares purchased between 1 January 2018 and 31 January 2018 28 February 2018 Group 1 : Shares purchased prior to 1 February 2018 Group 2 : Shares purchased between 1 February 2018 and 28 February 2018 31 March 2018 Group 1 : Shares purchased prior to 1 March 2018 Group 2 : Shares purchased between 1 March 2018 and 31 March 2018 30 April 2018 Group 1 : Shares purchased prior to 1 April 2018 Group 2 : Shares purchased between 1 April 2018 and 30 April 2018 31 May 2018 Group 1 : Shares purchased prior to 1 May 2018 Group 2 : Shares purchased between 1 May 2018 and 31 May 2018 30 June 2018 Group 1 : Shares purchased prior to 1 June 2018 Group 2 : Shares purchased between 1 June 2018 and 30 June 2018 31 July 2018 Group 1 : Shares purchased prior to 1 July 2018 Group 2 : Shares purchased between 1 July 2018 and 31 July 2018 31 August 2018 Group 1 : Shares purchased prior to 1 August 2018 Group 2 : Shares purchased between 1 August 2018 and 31 August 2018 30 September 2018 Group 1 : Shares purchased prior to 1 September 2018 Group 2 : Shares purchased between 1 September 2018 and 30 September 2018
98 Lloyds Investment Funds Limited
Distribution Tables (continued) For the year ended 30 September 2018
Sterling Bond Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 1st Quarter Group 1 1.100 — 1.100 1.300 Group 2 0.522 0.578 1.100 1.300 2nd Quarter Group 1 1.100 — 1.100 1.200 Group 2 0.600 0.500 1.100 1.200 3rd Quarter Group 1 1.100 — 1.100 1.100 Group 2 0.376 0.724 1.100 1.100 4th Quarter Group 1 0.900 — 0.900 1.100 Group 2 0.449 0.451 0.900 1.100
1st Quarter Group 1 : Shares purchased prior to 1 October 2017 Group 2 : Shares purchased between 1 October 2017 and 31 December 2017 2nd Quarter Group 1 : Shares purchased prior to 1 January 2018 Group 2 : Shares purchased between 1 January 2018 and 31 March 2018 3rd Quarter Group 1 : Shares purchased prior to 1 April 2018 Group 2 : Shares purchased between 1 April 2018 and 30 June 2018 2nd Quarter Group 1 : Shares purchased prior to 1 July 2018 Group 2 : Shares purchased between 1 July 2018 and 30 September 2018
UK Fund Gross Equalisation Distribution paid Distribution paid income payable current year prior year (pence) (pence) 31 March 2018 Group 1 8.100 — 9.895 9.895 Group 2 — — 9.895 9.895
31 March 2018 Group 1 : Shares purchased prior to 1 October 2017 Group 2 : Shares purchased between 1 October 2017 and 30 September 2018
99 Lloyds Investment Funds Limited
Notice of Meeting
Notice is hereby given that the 35th Annual General Meeting of NOTES: Lloyds Investment Funds Limited will be held at: A Member entitled to attend and vote at this Meeting may appoint 11-12 Esplanade, St. Helier, Jersey, on Tuesday, 26 February 2019 at one or more Proxies to attend and, on a poll, vote instead of him. A 9.00 a.m. for the following purposes: Proxy need not be a Member of the Company. To be valid, Agenda completed proxy forms must be deposited at the Company’s principal place of business not less than 48 hours before the Ordinary Business appointed time for holding the meeting, or any adjournment 1. To appoint the Chairman of the meeting. thereof. 2. To read the convening notice. In the case of joint holders the vote of the senior shall be accepted to the exclusion of the votes of the other joint holder(s). 3. RESOLUTION 1. To receive and if deemed appropriate, adopt the Annual Report The quorum requirement is two members present in person or by and Audited Financial Statements of the Company for the year proxy. If a quorum is not present, the meeting shall stand ended 30 September 2018. adjourned to Tuesday, 5 March 2019 at 9.00 a.m. at the same venue and at such adjourned meeting the shareholder’s present in person 4. RESOLUTION 2. or by proxy shall be the quorum. To consider, and if deemed appropriate, re-elect Ross Davey Willcox as a Director of the Company.
By Order of the Board 5. RESOLUTION 3. Lloyds Corporate Services (Jersey) Limited, To consider, and if deemed appropriate, re-elect Ian Mark Secretary, Jeremie Hardy as a Director of the Company. 11-12 Esplanade, St. Helier, 6. RESOLUTION 4. Jersey JE2 3QA, To consider, and if deemed appropriate, re-elect Timothy Joseph Channel Islands. Herbert as a Director of the Company. 12 December 2018
7. RESOLUTION 5. To consider, and if deemed appropriate, re-elect Brian Charles James as a Director of the Company.
8. RESOLUTION 6. To consider, and if deemed appropriate, re-elect Bronislaw Lysiak as a Director of the Company.
9. RESOLUTION 7. To re-appoint PricewaterhouseCoopers CI LLP as Auditor of the Company for the ensuing year and to authorise the Directors to agree their remuneration.
10. RESOLUTION 8. To fix the remuneration of each of the Directors at a maximum of £5,000 per annum.
100 Lloyds Investment Funds Limited
Form of Proxy
BLOCK LETTERS PLEASE. FULL NAME(S)...... ADDRESS...... I/We being a Member(s) of the above named Company hereby appoint the Chairman of the Meeting ...... (see Note 1.) as my/our proxy to attend and vote for me/us on my/our behalf at the 35th Annual General Meeting of the Company to be held on Tuesday, 26 February 2019 at 9.00 a.m. and at any adjournment thereof. I/We direct my/our proxy to vote on the resolutions as follows:
Ordinary Resolutions: FOR AGAINST 1. To receive and if deemed appropriate, adopt the Annual Report and Audited Financial Statements of the Company for the year ended 30 September 2018
2. To consider, and if deemed appropriate, re-elect Ross Davey Willcox as a Director of the Company.
3. To consider, and if deemed appropriate, re-elect Ian Mark Jeremie Hardy as a Director of the Company.
4. To consider, and if deemed appropriate, re-elect Timothy Joseph Herbert as a Director of the Company.
5. To consider, and if deemed appropriate, re-elect Brian Charles James as a Director of the Company.
6. To consider, and if deemed appropriate, re-elect Bronislaw Lysiak as a Director of the Company.
7. To re-appoint PricewaterhouseCoopers CI LLP as Auditor and to authorise the Directors to agree their remuneration.
8. To fix the remuneration of each of the Directors at a maximum of £5,000 per annum.
NOTES:
1. If you wish to appoint another person to be your proxy instead of the Chairman of the Meeting, you should delete the words “the Chairman of the Meeting”, and write the name of your proxy in the space provided and initial the alteration.
2. Except as otherwise indicated by you, the proxy will vote, or abstain from voting, at the meeting or any adjournment thereof as the proxy thinks fit.
3. In the case of a corporation, the form of proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised in writing. 4. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members. 5. To be valid, forms of proxy must reach the principal place of business of the Company, P.O. Box 311, 11-12 Esplanade, St. Helier, Jersey JE4 8ZU, Channel Islands, not later than 48 hours before the time appointed for the meeting (or any adjourned meeting). Any power of attorney or other authority under which the form of proxy is signed must be sent with the form of proxy
Signature ...... Date ......
101 For more information please go to international.lloydsbank.com/products-and- services/investments/funds or call us on 01534 845 555