the local authorities’ property fund annual …

THE LOCAL AUTHORITIES’

PROPERTY FUND

ANNUAL REPORT AND

FINANCIAL STATEMENTS

Year ended 31 March 2021

THE LOCAL AUTHORITIES’ PROPERTY FUND

Annual Report and Financial Statements02 31 March 2021

CONTENTS

Structure of the Fund* 03

Report of the Trustee 06

Report of the Investment Manager* 07

Independent Auditors’ Report 14

Report of the Valuers 18

Summary r isk indicator 19

Comparative table 20

Portfolio analysis 21

Portfolio statement* 23

Ownership of the Fund 23

Property portfolio* 24

Statement of total return^ 45

Statement of change in net assets attr ibutable to Unitholders^ 45

Balance sheet^ 46

Cash flow statement^ 47

Notes to the financial statements^ 48

Distr ibution table^ 60

Statement of Trustee and Manager responsibilities 61

Statement of Depositary responsibilities and Report of the Depositary 62

AIFMD disclosures (Unaudited) 63

Trustee and Manager* 64 *Collectively, these comprise the Manager’s Report. ^Audited. References to “CCLA” refer to the CCLA Group, comprising CCLA Investment Management Limited and CCLA Fund Managers Limited.

Disability Discrimination Act 1995 Extracts from the Annual Report and Financial Statements are available in large print and audio formats.

Structure and management The Local Authorities’ Property Fund (the “Fund”) is established under a Scheme approved by HM Treasury under Section 11 of the Trustee Investments Act 1961 together with the Trust Deed dated 6 April 1972 as amended by a Supplemental Trust Deed dated 13 September 1978 together with the Trust Deed dated 6 April 1972 as amended by supplemental Trust Deeds dated 13 September 1978, 21 April 2016 and 23 September 2019 (the ‘Scheme’). The Local Authorities’ Mutual Investment Trust (the “Trustee”) is a company limited by guarantee. It does not have share capital and acts as the Trustee and Operator of the Fund. The Trustee is controlled by members and officers of a council appointed by the Local Government Association, the Convention of Scottish Local Authorities, the Northern Ireland Local Government Officers’ Superannuation Committee, The Welsh Local Government Association and Unitholders represented by the Trustee. The Members of the Council meet regularly to receive reports and monitor the progress of the Fund. The Fund is an open-ended, unregulated collective investment scheme. It is classified as an Alternative Investment Fund under the Alternative Investment Fund Managers Directive (“AIFMD”). It is domiciled in the United Kingdom and subject to appropriate UK laws and regulations.

CCLA Fund Managers Limited (“CCLA FM”), an authorised full-scope UK Alternative Investment Fund Manager (“AIFM”), has been appointed by the Trustee as the Manager of the Fund. The Manager has appointed CCLA Investment Management Limited (“CCLA IM”) as the Investment Manager of the Fund under an Investment Management Agreement dated 22 July 2014. The Manager has delegated to the Investment Manager the fund management, administration and secretarial functions of the Fund. CCLA FM is a wholly owned subsidiary of CCLA IM. The Trustee has delegated to CCLA IM the registrar functions of the Fund under a Registrar Agreement dated 1 October 1998. CCLA FM and CCLA IM are both authorised and regulated by the Financial Conduct Authority (“FCA”). As at 31 March 2021 the Trustee owns 13.42% of the ordinary share capital of CCLA IM. HSBC Bank plc, an AIFMD authorised Depositary, has been appointed in accordance with the AIFMD requirements as the Depositary of the Fund. The primary functions of the Depositary are cash flow monitoring, safekeeping of assets and oversight of operational functions.



STRUCTURE OF THE FUND

for the year ended 31 March 2021

Investment objectives The Fund provides facilities exclusively for local authorities and other public sector organisations to invest in commercial and industrial property on a collective basis so as to obtain a spread of risk with constant expert property management. The Fund aims to provide investors with a high level of income and long-term capital appreciation. Investment policy The Fund’s powers of investment are not restricted either to particular types of property or, subject to the consent of HM Treasury, to specific parts of the world. However, it is the present policy to confine investment to commercial and industrial properties and property pooled funds within the United Kingdom. A suitable spread is maintained between different types of property and geographic location. Overriding importance is attached to location, standard of construction and to covenant quality of the tenants. The portfolio is kept under constant review with the object of disposing of any property if appropriate returns have not been achieved or if future growth prospects diminish unacceptably. Properties are regularly inspected to ensure that the tenants comply with maintenance and other contractual obligations. Finance may be provided for suitable property developments.

Any proposed amendment to the investment objective or policy of the Fund must be approved by HM Treasury and sanctioned by a special resolution of the Trustee. Benchmark The performance benchmark for the Fund is the MSCI/AREF UK Other Balanced Quarterly Property Fund Index calculated on a net asset value basis, after all expenses. The benchmark covers the investment performance of 22 property funds valued at £21.70bn as at 31 March 2021, ranging in size from £114.7m to £2.99bn. A MSCI Direct Property Benchmark is also used to review and monitor the performance of the Fund’s property portfolio. This provides an appropriate and durable index for measuring the performance of the Fund’s property assets and details can be supplied on application to the Manager. Eligible contributors Units of the Fund can only be issued to and owned by local authorities in the United Kingdom which are entitled to receive distributions from the Fund gross of tax.





Monthly subscription dates Investment in the Fund may be made by a local authority on any month end valuation date. Withdrawals from the Fund may be made by a local authority on any month end valuation date. The Fund may, however, at its discretion, defer the processing of any application or withdrawal for a period, as it may deem fit, to allow time for the purchase or sale of properties to utilise funds, meet the withdrawals or to protect the interest of the Unitholders in the Fund, if required. Borrowing powers The Trustee believes that the management of a property portfolio is facilitated by the exercise of a limited power to borrow and the Scheme provides for borrowings of up to 25% of the value of the Fund. These facilities can also be used to accommodate timing differences between the availability of funds for investment and the making of suitable property purchases. Currently the Fund has no borrowing facilities available. The Fund does not use any financial instruments or derivatives for the purpose of interest rate hedging or for any other purpose.





We have pleasure in presenting our annual report of the Fund to the Unitholders of the Fund. Responsibilities of the Trustee The Trustee is responsible for approving the Fund’s property investment strategy, monitoring diversification, suitability and risk, reviewing the performance of the Fund and approving its distribution payments. In addition, we have monitored the administration, expenses and property valuations of the Fund. The Trustee meets four times in each calendar year to undertake the responsibilities detailed above. Controls and risk management CCLA FM has a risk management framework which provides a methodology for the assessment, mitigation and reporting of risk, ensuring a high quality of risk management and control is maintained for all funds under the Manager’s control. The effectiveness of risks and controls is assessed by the directors of the Manager, with the help of the Risk and compliance function, on a continuing basis. TheTrustee receives and considers relevant operational risk information from the Manager.

Compliance with Trust Deed and Management Agreement Following our regular meetings and consideration of the reports and papers we have received, we are satisfied that the Manager, to whom we have delegated the administration and management of the Fund, has complied with the terms of the Scheme and the Management Agreement. R Kemp CBE Chairman of The Local Authorities’ Mutual Investment Trust 30 July 2021



REPORT OF THE TRUSTEE


Performance The Fund’s total return for the year, after all expenses, was +3.8%. By comparison, the Fund’s Benchmark, the MSCI/AREF UK Other Balanced Property Funds Index, recorded a total return of +2.5%. Capital valuations fell in the early part of the period as valuers struggled to understand what impact the pandemic would have on markets, the economy and business tenants. The pace of decline then accelerated as the challenges of lock-down and continued uncertainty eroded sentiment, transaction volumes fell away and investor inertia set in. The weakness was most severe in a retail sector already damaged by ongoing structural change. Gradually, as the uneven impact of the crisis became evident, so sub-sector performance diverged, resulting in a substantial dispersion of returns by the end of the year. Retail was the weakest performer, whilst distribution assets remained in strong demand and outperformed. Transaction volumes fell to historic low levels and one outcome of

this was an early increase in valuer caution. Valuation weakness was greatest in the second quarter of 2020, but a stabilisation of values was followed by two quarters of recovery, with the result that the decline in capital values was relatively modest given the scale of the challenges faced. The Fund’s Unit price declined from 295.74p in March 2020 to 293.63p by the year end, a decline of only -0.7%. As a result, the contribution from income was sufficient to deliver a positive total return for the period, and at a level comfortably higher than that achieved in the Fund’s year 2019/20. Income payments to Unitholders totalled 12.51p, producing an attractive and above average income yield of +4.3%. The MSCI Benchmark income distribution yield declined to just +3.3%, and the MSCI UK All Property Fund Index yields +2.0%. The Fund’s performance record compared to the Benchmark over longer term periods to 31 March 2021 is also shown in the table below.



REPORT OF THE INVESTMENT MANAGER


Total return against benchmark to 31 March 2021 (after expenses) 1 year 3 years 5 years 10 years % % % %

Performance against market indices (after expenses)

The Local Authorities’ Property Fund 3.75 3.45 4.59 7.47 MSCI/AREF UK Other Balanced Quarterly Property Fund Index 2.46 2.73 4.60 6.77

Source: MSCI

Past performance is not a reliable indicator of future results.

In these polarised conditions, the Fund’s relative underweight allocation to the retail sector, with no shopping centres holdings, has again supported performance. Another important contribution has come from the overweight exposure to the industrial and warehouse sub-sector, which is a direct beneficiary of the structural changes affecting retail. Offices have demonstrated a degree of resilience, with relative weakness emerging in the latter part of the year as concerns for future occupational requirements increased. The performance of the alternative other property assets was initially disappointing given the direct impact of lock-down on the hospitality and leisure sectors. However, the sector soon stabilised, reflecting the expectation that the impact would be short term. Active management positions made a positive contribution, spectacularly in the case of some assets in the industrial sub-sector. Some early-stage projects and less secure income streams were treated with caution by the valuer to reflect a perceived reduction in investor risk appetites and the drag on returns from capital expenditure. Stock specific risk is therefore currently high, on both the downside and the upside, one positive of this is that a good deal of potential value has yet to be reflected in the Fund’s valuation. Dealing in the Fund’s Units was suspended at the end of March 2020 due to material valuation uncertainty and for the protection of all Unitholders. As a result, during that period no new investor capital was accepted. Despite the uncertainty, and reflecting a stable local authority Unitholder base, no significant redemption

requests were received when dealings began again in September 2020. A net inflow of investor capital has been received since trading resumed, with no redemption requests outstanding at the year end. A relatively modest overall inflow for the year at £5.7m partly offset the portfolio’s capital valuation decline and capital expenditure on asset projects. Overall, the Fund’s NAV ended the year at £1.19bn compared to £1.15bn at the half-year and £1.20bn twelve months ago, illustrating the swing in valuation movements during the year. Investor in-flows have supported Fund liquidity, increasing to 4.5% by the year end, compared to 2.6% at the half year and 3.5% at the start of the period. A further £5.3m of new money has been received after the year-end. Market review The year began with some optimism of reduced political uncertainty and a revival in economic activity that would feed through to the sector, increasing transactional activity and ending a run of valuation declines dating back to Q4 2018. However, the Coronavirus global pandemic, and the measures taken by the UK Government to contain it, frustrated those hopes. Instead, lock-down produced a range of impacts that was damaging for the economy and property markets. The impact on retail, hospitality and leisure sectors was severe and immediate, meaning the prospects for rents, indeed for the continued viability of many tenants, became increasingly uncertain as business revenues and cash-flow dried up. Working from home helped to minimise the short-term impact on offices,





but also raised concerns for future space requirements. In contrast, sectors that remained operational during the lock-down, such as industrial/warehousing, have displayed resilience, whilst others have benefited, such as supermarkets and logistics. In this environment, markets were initially unable to operate effectively, uncertainty caused capital values to fall and an historic collapse in transaction volumes was recorded. A reduced risk appetite encouraged a flight to prime quality assets and those with long and secure income streams. The result was a wide dispersion of returns between sectors, investment grades and even regions The scale of rent payment delinquency was unprecedented, reflecting uncertain tenant incomes but also the UK Government’s policy of protecting tenants from landlord enforcement action. Normally reliable income flows became a challenge to collect. Many tenants did not pay the initial March tranche, and some have continued to ignore their lease obligations, not paying rent for a whole year. Securing income streams required a pro-active approach from managers, engaging tenants to understand the scale of their financial difficulties and if needed, agreeing relief packages. Valuations too were less reliable in the period. Valuers became increasingly cautious, increasing yields and applying reduced rental values during the months of greatest uncertainty. That these responses may have been an over- reaction is reflected in the improved capital performance and positive total returns that emerged at the end of the year and into Q1 2021. This improvement was supported by a recovery in transaction

volumes which returned to long term average levels from a Q2 2020 historic low point. Within the sector, the dominant contribution to the improvement came from the growing strength of industrial warehouse markets, which was entirely responsible for the property sectors return to capital growth overall. Unsurprisingly, transaction volumes have slipped in recent months as the UK returned to lockdown conditions, although the overall impact has been less severe this time around. In this environment void rates were expected to rise, and the MSCI Monthly Index investment vacancy rate increased to 9.8% compared to 8.2% twelve months ago and the total reversionary potential from void assets rose to 18.6%, indicating significant development vacancy. The highest void rate is in offices where the total reversionary potential is over 34%. This reflects the trend to shorter leases, greater tenant instability and asset obsolescence. MSCI Monthly Capital Indices recovered in the second half of the year and ended the twelve-month period to 31 March 2021 -2.9% lower. Since November 2020, capital movements have been positive, reversing a trend to lower values which had lasted for two years. This improvement, together with the contribution from income, was sufficient to produce a positive total return for the 12-month period. Within the sector, retail values dropped by -12.4% but retail warehouse property showed early signs of recovery. Industrial asset values increased by +8.7%. Sentiment and yield expansion was a factor but so too was income, retail rental values declined by -8.1% whilst industrial rents increased by +2.7%.









Activity The size of the capital cash holding increased over the course of the period, ending the year at £54m compared to £42m twelve months ago and accounting for 4.5% of the portfolio. There was one new purchase, a retail warehouse located in the successful Birstall Shopping Park on the M62 near Leeds. A relatively small lot at £5.5m, this investment offers a long and secure income stream for 10 years in a retail sub-sector with relatively resilient income flows. The tenant is CDS (Superstores International) Ltd, t/a The Range. A low starting rent provides scope for rental value growth and a high initial yield of 7.3% will underpin an attractive total return. There was one sale, a 185,000 sq. ft industrial warehouse in Warrington, located close to the inter-section of the M6 and M56 motorways. Following the expiry of the old lease, terms were immediately agreed with a new tenant, Hermes Parcelnet Ltd, at a rent 60% higher than the external valuers estimated rental value. Given the age of the unit and considering the potential cost of future improvements and the current strength of the investment market, it was considered an optimum time to exit on attractive terms. A sale price was achieved at £19.7m compared to the valuation at the start of the year of £8.25m, making a strong contribution to the performance of the Fund. Managing property and engaging with markets during a lockdown naturally would present some practical difficulties, however despite the challenges the Fund’s property management and investment activities continued to function well.

Some of the portfolio’s largest lettings were achieved, including the whole of the 42,000 sq. ft refurbished office building at Arlington Square West, Bracknell. This was taken by Eli Lilly and Company Ltd, at the highest rent achieved in this Thames Valley town for 20 years. In addition to the successful Warrington letting, also in the industrial warehouse sector at St Neots, Cambridgeshire, Hotel Chocolat completed a new 5-year lease of a 222,000 sq. ft unit, expanding into accommodation previously occupied by Cath Kidston. Several other important lettings, lease renewals and rent reviews have been concluded, which together have helped to control voids and protect the Fund’s income streams. Strong lettings were achieved on office holdings in Dartford and Crawley, whilst a notable rent review for the office property on Edinburgh Park, let to Sainsburys Bank plc, achieved a new higher rent of £1.51m. Major asset management projects, including the Fund’s most valuable asset at Beckton, London E6, and at Arlington Square West, Bracknell, continue to make progress. As a result of the letting successes, the investment vacancy rate ended the period at 9.7% compared to 10.9% as at March 2020. The development void rate remains at just 0.5%. In a difficult environment there has been a strong management focus on rent collection and protecting income streams, requiring a re-allocation of resources to engage with and support tenants, and maintaining good landlord and tenant relationships. However, a firm approach has also been appropriate to protect





the interests of the Fund’s Unitholders. Positively, the Fund has consistently achieved rent collection rates of c.93%. The collection of rent since the March 2021 Quarter Day is also on track to match this level. As tenants struggle financially, so covenant strength weakens and inevitably Administration and CVA activity is on the increase. The Fund is not immune from this, and the most significant of these involved the Travelodge Hotels CVA. However, and reflecting the quality of the hotel assets held, a positive outcome was achieved, with all arrears paid and no impact on the future income. Other arrears have been slowly recovered too and some delinquency is focused on a group of large, well-financed tenants that refuse to pay, rather than can’t pay. This approach has been encouraged by the UK Government’s Moratorium limiting landlord enforcement action against non-paying tenants, which has been extended to the end of June 2021. The collection of rents therefore remains a challenging exercise industry wide but is now largely confined to the retail, leisure, and hospitality sectors. Given some tenants have now not paid any rent for a full year, there is a risk that some arrears will never be received, threatening future income payments. That said, payments to date remain high and attractive and the Fund reports one of the highest income distribution yields in the Benchmark. Strategy The strategy adopted in managing the Local Authorities’ Property Fund is asset focused. This investment approach is appropriate given the imperfect nature of property as an investment

asset class and reflects its long-term performance characteristics, which are driven by income. In turn, this is consistent with the Fund’s performance objectives and the income needs of the Unitholders. A bottom-up investment process supports this strategy; holding higher yielding assets with shorter unexpired term leases helps to deliver an above average income whilst maintaining asset quality without the need to use gearing to boost returns. A pro-active approach to asset management is vital, helping to protect value and income, whilst keeping risk under control. An attractive range of investment management opportunities lie within the portfolio, backed by high quality property assets. Active management adds value to the portfolio and can support performance when market prospects are limited. A dynamic portfolio structure means the Fund is well placed to navigate short term sector and asset challenges, and to reflect lasting change in the sector outlook. The portfolio has above index weightings in industrial and office assets and has a very low exposure to a difficult retail sector. Reflecting the maturity of the investment cycle and the persistent uncertain backdrop for traditional sub-sectors, where the institutional quality of retail is challenged and the prospects for office assets is under review, the alternative other group of property types have become more attractive, offering a range of benefits including enhanced portfolio diversification, a lengthening lease expiry profile and greater income resilience and growth prospects. As a result, the allocation of capital to this group of assets has been increasing.





The issue of new Units and redemptions For half of the period, from March to September 2020, dealing in the Fund’s Units was suspended. During this period, the external valuation provided by the External Valuer, which is used to price the Fund’s Units, was received with a material valuation uncertainty caution. As a result, no new investor capital was received. Market conditions improved during the second half of 2020 providing greater valuation visibility and leading Knight Frank to remove the material valuation uncertainty clause on the 30 September, meaning that dealing in the Fund’s Units could be recommenced. Since allowing dealing once more, the flow of new capital has been positive. No redemption requests were outstanding at the year end, reflecting the continuing attraction of property investment and the Fund for many local authorities in the UK. Outlook A tumultuous year for the UK real estate sector is likely to leave a longer-term legacy beyond the shorter-term damage to the economy and property market arising immediately from the pandemic. Existing trends have been amplified and accelerated, and new ones have emerged. The uneven impact produced severe difficulties for the retail sector, sustained support for industrial assets, and concerns for the prospects in the office sector. From an economic perspective, there is hope as social mobility returns that activity should rebound quickly, and although the recent period of lockdown would have pushed back recovery, the successful vaccine roll out in the UK is encouraging. Other

non-trivial challenges exist, including progress with Brexit and the impact on important parts of the UK economy, highly relevant to many office occupiers and UK markets. Within the property sector, the recovery in transaction activity should consolidate but with volume remaining relatively subdued as investors focus on more immediate management issues to protect income and value. Those investors wishing to add to sector weightings will find highly competitive markets, with good quality assets in short supply and yields contracting for income secure stock. Returns are expected to improve steadily, but modestly and driven by income. Looking further ahead sentiment is likely to remain fragile, with capital growth modest and variable, whilst income risk will remain a concern given weaker prospects in some sectors such as retail and offices. Valuer caution is therefore likely to persist, and with investors focused on a narrow band of assets, the divergence of returns at the sub-fund level is expected to continue. Polarisation at the portfolio level and stock specific risk at the asset level will be elevated, increasing volatility. Portfolio structure will therefore also remain influential as off – benchmark and alternative exposures are increased and allocations to traditional sectors shrink. Notably, questions remain about the institutional quality of some retail assets and the future for office occupation and investment. The sector continues to face several fundamental challenges each of which could have an





important influence on returns. Against that, the sector continues to offer an accessible and transparent market for investors with a high-income yield premium which stands out in a low-income environment. Overseas investors continue to support investment in UK property and investor appetite for risk is increasing and yield margins for secondary stock look attractive compared to prime. Opportunities exist in many sub-sectors for active management, offering the prospect of added value to support returns. P Hannam Head of Property CCLA Investment Management Limited 30 July 2021

Risk warning The Fund’s Units and the revenue from them can fall as well as rise and an investor may not get back the amount originally invested. Past performance is no guarantee of future returns. Past performance is not a reliable indicator of future results. The price of the Fund’s Units and the revenue any income distributions from them may fall as well as rise and an investor may not get back the amount originally invested. Past performance is no guarantee of future returns. Property and property related assets are inherently difficult to value because of the individual nature of each property. As a result valuations are open to substantial subjectivity. There is no assurance that the valuations of the properties will reflect the sale price achieved even where such sale occurs shortly after the valuation point. The performance of the Fund could be affected adversely by a downturn in the property market in terms of capital

value or a weakening of rental yields. The revenue received by the Fund is dependent to a large extent upon the occupancy levels of any property owned by the Fund and the rents paid by these tenants. Rental revenues and property values are affected by changes in general economic climate and local conditions. Property values are dependent in particular on current rental values, prospective rental growth, lease lengths, tenant credit worthiness and the valuation yield (which is itself related to interest rates, the market appetite for property investment in general and with reference to the specific property in question) together with the nature, location and physical condition of the property concerned. The Fund’s Units are intended only for long term investment and are not suitable for money liable to be spent in the near future. The Units are realisable only on each monthly valuation date and a period of delay may be imposed for redemption of Units depending on the Fund’s liquidity.



Report on the audit of the financial statements Opinion In our opinion, the financial statements of The Local Authorities’ Property Fund (the “Fund”): • give a true and fair view of the financial

position of the Fund as at 31 March 2021 and of the net revenue and the net capital (losses) of its scheme property for the year then ended; and

• have been properly prepared in accordance

with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law), and the Trust Deed.

In our opinion, the financial statements of The Local Authorities’ Property Fund (the “Fund”) for the year ended 31 March 2021 have been properly prepared, in all material respects, in accordance with the basis of preparation and accounting policies in note 1 to the financial statements, and the Trust Deed. We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: Balance Sheet as at 31 March 2021; the Statement of Total Return, the Statement of Change in Net Assets Attributable to Unitholders and the Cash Flow Statement for the year ended 31 March 2021; the distribution

table;and the notes to the financial statements , which include a description of the significant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. Conclusions relating to going concern Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Fund’s ability to continue as a going concern for a period of at least twelve months from the date on which the financial statements are authorised for issue.

INDEPENDENT AUDITORS’ REPORT

to the Unitholders of The Local Authorities’ Property Fund



In auditing the financial statements, we have concluded that the Manager’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Fund’s ability to continue as a going concern. Our responsibilities and the responsibilities of the Manager with respect to going concern are described in the relevant sections of this report. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Manager is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material

misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Responsibilities for the financial statements and the audit Responsibilities of the Manager for the financial statements As explained more fully in the Manager’s Responsibilities Statement, the Manager is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Manager is also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Manager is responsible for assessing the Fund’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.





Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the Fund industry, we identified that the principal risks of non-compliance with laws and regulations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial

statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or to increase the net asset value of the Fund and judgements and assumptions made by management in their significant account estimates. Audit procedures performed included: • Discussions with the Manager, including

consideration of known or suspected instances of non-compliance with laws and regulation and fraud;

• Reviewing relevant meeting minutes, including those of the Manager’s board of directors;

• Identifying and testing journal entries, specifically any journals posted as part of the financial year end close process;

• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing; and

• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to the valuation of investment assets.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,



as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinion, has been prepared for and only for the Unitholders of the Fund as a body in accordance with the Trust Deed 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. PricewaterhouseCoopers LLP Chartered Accountants London 30 July 2021





Dear Sirs, The Local Authorities’ Property Fund Property valuation as at 31 March 2021 In accordance with your instructions received from The Local Authorities’ Property Fund (“the Fund”) to value all the property investments owned by the Fund (“the Properties”) on a monthly basis, we have valued the Properties as at 31 March 2021. The valuation has been prepared on the basis of Fair Value, in accordance with the current edition of the RICS valuation- Professional Standards published by the Royal Institution of Chartered Surveyors (RICS). We understand that our valuation is required for Unit pricing and financial statements purposes. Our report is addressed to the Fund. We are of the opinion that the aggregate Fair Values of all the properties held by the Fund as at 31 March 2021 is £1,147,650,000 (One Billion, One Hundred and Forty Seven Million, Six Hundred and Fifty Thousand Pounds). Material valuation uncertainty due to Novel Coronavirus (COVID-19) The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a “Global Pandemic” on the 11th March 2021, has impacted global financial markets. Travel restrictions have been implemented by many countries. In the UK, market activity is being impacted in all sectors. As at the valuation date, we consider that we can attach less weight to previous market evidence for comparison purposes, to inform opinions

of value. Indeed, the current response to COVID-19 means that we are faced with an unprecedented set of circumstances on which to base a judgement. Our valuations are therefore reported on the basis of ‘material valuation uncertainty’ per VPGA 10 of the RICS Valuation – Global Standards. Consequently, less certainty – and a higher degree of caution – should be attached to our valuation than would normally be the case. Given the unknown future impact that COVID-19 might have on the real estate market, we recommend that you keep the valuation of the CCLA The Local Authorities’ Property Fund under frequent review. For the avoidance of doubt, the inclusion of the ‘material valuation uncertainty’ declaration above does not mean that the valuation cannot be relied upon. Rather, the phrase is used in order to be clear and transparent with all parties, in a professional manner that – in the current extraordinary circumstances – less certainty can be attached to the valuation than would otherwise be the case. The material uncertainty clause is to serve as a precaution and does not invalidate the valuation. Details of the basis of our valuation and the individual properties are set out in our valuation report dated 31 March 2021. Yours faithfully, Knight Frank LLP 30 July 2021



REPORT OF THE VALUERS

The European Union imposed legislation which sets out detailed guidelines for the calculation of the risk ratings of products to be portrayed through a summary risk indicator. It is intended to be a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because the Manager is not able to pay you.The risk of the product may be significantly higher than the one represented in the summary risk indicator where the product is not held for the recommended holding period (RHP). The Manager has classified The Local Authorities’ Property Fund as 2 out of 7, which is a low risk class. This rates the potential losses from future performance at a low level and poor market conditions are very unlikely to impact the Manager’s capacity to pay you. This classification is not guaranteed and may change over time and may not be a reliable indication of the future risk profile of the Fund. The lowest category does not mean risk free. The summary risk indicator assumes investment in the Fund for the RHP of five years. The actual risk can vary significantly if you cash in at an early stage and you may get back less. The Fund should be considered illiquid as it is not admitted to trading on a secondary market and no alternative liquidity facility is promoted by the Manager or a third party. Property is recognised as an illiquid asset and is thus most suited to long-term investment. Whilst investors can request redemption at any time, all such requests are subject to a minimum notice period of 90 calendar days. The Fund normally deals on the last business day of each month. The Fund does not include any protection from future market performance, so you could lose some or all your investment. Commercial property can be an illiquid asset class and the Manager has the discretion to defer redemptions beyond the minimum notice period, up to six months in total (subject to a period of notice of not less than 30 days to investors), if it believes doing so is in the interest of investors and the good management of the Fund. Where an investor makes an application to sell or cancel Units the Manager may, with the agreement of the Trustee, arrange to transfer fund property out of the Fund in place of payment in cash for the Units, but only if it is judged by the Manager not to disadvantage the remaining investors. A more detailed description of risk factors that apply to this product is set out in the latest Scheme Information, which is available on the Manager’s website or by request. * This is subject to the redemption deferral provisions set out in the Scheme Information.



SUMMARY RISK INDICATOR

1 2 3 4 5 6 7

Lower risk Higher risk

Change in net assets per Unit Income Units Year to Year to Year to Year to Year to 31.03.2021 31.03.2020 31.03.2019 31.03.2018 31.03.2017 pence pence pence pence pence per Unit per Unit per Unit per Unit per Unit

Opening net asset value per Unit 293.85 305.20 301.27 287.34 291.72 Return before operating charges 13.48 5.10 20.29 30.38 11.62 Operating charges (3.50) (3.39) (3.28) (2.75) (2.81) Return after operating charges 9.98 1.71 17.01 27.63 8.81 Distributions on income Units (12.62) (13.06) (13.08) (13.70) (13.19) Closing net asset value per Unit 291.21 293.85 305.20 301.27 287.34

Performance Return after charges** 3.40% 0.56% 5.65% 9.44% 3.02% Gross yield*** 4.03% 4.14% 4.00% 4.25% 4.29% Other information Closing net asset value (£’000) 1,192,976 1,198,323 1,121,586 973,948 705,409 Closing number of Units 409,662,787 407,798,343 367,497,998 323,280,765 245,494,148 Prices (pence per Unit) Highest Unit price (offer) 313.45 328.16 329.35 322.40 315.17 Lowest Unit price (bid) 278.22 291.15 297.38 283.31 277.89 Annual management charge* 0.62% 0.64% 0.61% 0.61% 0.63% Other costs 0.26% 0.07% 0.08% 0.07% 0.11% Operating charges 0.88% 0.71% 0.69% 0.68% 0.74% Other property costs 0.31% 0.40% 0.40% 0.28% 0.22% Total charges figure 1.19% 1.11% 1.09% 0.96% 0.96%

All of the above figures are ratios set against the Fund’s average net assets calculated over the period. * The Annual Management Charge is 0.65% (plus VAT, which is recoverable) of the net asset value of the Fund and is

charged to income. The month end valuation forms the basis of the charge for the following month. ** The return after charges has been calculated in accordance with the Statement of Recommended Practices’

prescribed calculation methodology. This is for financial statement reporting purposes only and may differ from the Fund’s performance disclosed on the Report of the Manager.

*** The gross yield is calculated as the sum of the gross of tax, net of expenses income distributed over the previous 12 months expressed as a percentage of the offer price at the year end.



COMPARATIVE TABLE



PORTFOLIO ANALYSIS

at 31 March 2021

Tenure 31.03.2021 31.03.2020

£’000 % £’000 %

Freehold or heritable 1,009,000 87.92 1,023,425 88.07 Leasehold 138,650 12.08 138,650 11.93

1,147,650 100.00 1,162,075 100.00 Tenants’ unexpired lease terms 31.03.2021 31.03.2020

Unexpired term %* %*

Over 10 years 16.29 18.50 5-10 years 26.07 26.10 Under 5 years 47.44 44.50 Investment void 9.68 6.40 Void 0.52 4.50

100.00 100.00 Lease termination is calculated at first break clause, if any. * Percentage of total revenue from contracted leases plus estimated rental values of unlet units/developments. Use of Capital

31.03.2021 31.03.2020 £’000 % £’000 %

Completed properties 1,147,650 96.20 1,162,075 96.98 Indirect investments 1,507 0.13 2,486 0.21 Net other assets 43,819 3.67 33,762 2.81

1,192,976 100.00 1,198,323 100.00

Largest top ten property holdings Property % of Fund

London, Beckton Retail Park Retail Warehouse 4.47 London, 3 Cathedral Street Offices/Shops 4.32 London, 1 Goodman’s Yard Other 3.96 London, Imperial House Offices/Shops 3.82 Elstree, Phase300 Centennial Park Industrial Property 3.18 Bracknell, The Arena Offices 3.15 London, 3 Longwalk Road Offices 2.99 Bristol, Kings Orchard Offices 2.71 Cambridge, Milton Road Offices 2.61 Leeds, 1 Park Row Offices 2.61 Asset by type Geographical distribution



PORTFOLIO ANALYSIS

at 31 March 2021

Portfolio turnover rate The portfolio turnover rate gives an indication of how frequently assets are purchased and sold by the Fund.

31.03.2021 31.03.2020

Portfolio turnover rate 0.54% 0.00% The portfolio turnover rates are calculated by the total sales or purchases (excluding cash), whichever is less, divided by average monthly assets during the year.

Rest of London 27.36%

South East 14.48%

East Midlands 10.92%

Yorkshire & Humberside 8.06%

City 5.92%

Eastern 7.23%

South West 5.97%

West Midlands 5.65%

North West 5.24%

Scotland 4.85%

West End 3.82%

Scotland 0.50%

Industrial & Warehouses 37.82%

Offices 30.37%

Other 15.60%

Retail Warehouses 9.50%

Cash 4.46%

Shops 2.11%

Indirect 0.14%

Properties Total in valuation ranges £’000 % of Fund

Valued between £0 and £5m 37,850 3.17 7 properties Valued between £5 and £10m 165,800 13.90 22 properties Valued between £10 and £25m 420,900 35.29 32 properties Valued at over £25m 523,100 43.86 13 properties Other investments 1,507 0.13 Net other assets 43,505 3.65 Net assets 1,192,662 100.00

OWNERSHIP OF THE FUND

at 31 March 2021 %

Number Number of of Units of investors Units in issue in issue

Less than 1% 232 206,941,655 50.52 1% or greater but less than 2% 14 75,445,392 18.42 2% or greater but less than 4% 7 73,917,678 18.04 4% or greater but less than 8% 1 19,879,891 4.85 Greater than 8% 1 33,478,171 8.17

255 409,662,787 100.00 Held by the largest investor 1 33,478,171 8.17 Held by top 5 investors 5 91,594,693 22.36



PORTFOLIO STATEMENT

at 31 March 2021

Standard Retail Lease Mkt value

Term/ review Next Rent range Property Tenant from period review £ £m

84, 85 & 86 East St River Island 2 yrs 0 yrs 2022 50,000 5-10 CHICHESTER Clothing Co. Ltd 09.10.20

22 and 23 Gentleman’s Walk The White Company 10 yrs 5 yrs 2019/ 270,000 0-5 NORWICH (U.K.) Ltd 24.03.14 2024

89-89A Broad Street Arch Properties Ltd 2 yrs 0 yrs 2022 24,000 5-10 READING 02.12.20

Waterstones 10 yrs 5 yrs 2021/ 270,000 Booksellers Ltd 24.06.16 2026

13-17 Coney Street Hutchison 3G UK Ltd 5 yrs 0 yrs 2023 80,000 5-10 YORK 22.11.18

Waterstones 10 yrs 5 yrs 2023 285,000 Booksellers Ltd 30.12.13



PROPERTY PORTFOLIO

at 31 March 2021

*Date in the past indicates that the review has not been settled yet.

Offices Lease Mkt value


The Arena Epicor Software 11 yrs 5 yrs 2026/ 534,664 >25 BRACKNELL (UK) Ltd 01.01.16 2027

Eli Lilly and 10 yrs 5 yrs 2025/ 1,085,021 Company Ltd 07.04.20 2030

Southern Electric 99 yrs 0 yrs 2119 – Power Distribution 22.07.20

Flying Bean 3 yrs 0 yrs 2023 – Café Limited 11.1.20

Kings Orchard Bevan Brittan LLP 20 yrs 5 yrs 2022/ 1,926,359 >25 BRISTOL 14.03.07 2027

Milton Road AstraZeneca UK Ltd 10 yrs 0 yrs 2023 1,971,526 10-25 CAMBRIDGE 28.11.13

Compass & Sivantos Ltd 25 yrs 5 yrs 2023 350,000 10-25 Alexandra House 24.08.98 CRAWLEY

Rentokil Initial 10 yrs 0 yrs 2031 587,685 1927 PLC 05.06.15

Lakeview East & West Kuehne & Nagel 10 yrs 5 yrs 2024/ 408,432 5-10 DARTFORD 12.10.19 2029

Swan Staff 11 yrs 5 yrs 2019/ 202,092 Recruitment Ltd 12.12.14 2025

HSBC Bank Plc 10 yrs 5 yrs 2016/ 116,298 23.05.11 2021



PROPERTY PORTFOLIO

at 31 March 2021


Offices (continued) Lease Mkt value


Crossways Mazda Motors 15 yrs 5 yrs 2020/ 588,500 10-25Business Park UK Ltd 17.07.15 2030 DARTFORD

K&T Heating 10 yrs 5 yrs 2025/ 413,011 Services Ltd 16.11.20 2030

9-10 Lochside Place Bluefin Insurance 7 yrs 0 yrs 2019/ 70,000 5-10 EDINBURGH Services Ltd 14.07.14 2021

Spie Ltd 6 yrs 0 yrs 2022 40,000 21.01.16

Computacenter Plc 10 yrs 0 yrs 2025/ 133,043 27.04.20 2030

Edinburgh Park Sainsbury’s Bank Plc 15 yrs 5 yrs 2024/ 1,514,280 10-25 EDINBURGH 19.02.14 2029

6-20 Bell Street Hub West 5 yrs 0 yrs 2024 57,118 0-5 GLASGOW Scotland Ltd 01.04.19

Scottish Children’s 10 yrs 5 yrs 2024 250,810 Reporter 11.02.14 Administraton

ICA Architects Ltd 10 yrs 5 yrs 2019/ 56,312 15.12.14 2024

2-4 Blythswood Chivas Brothers Ltd 16 yrs 5 yrs 2023/ 630,471 10-25 Square 12.11.18 2034 GLASGOW

1 Park Row Pinset Masons LLP 30 yrs 5 yrs 2019/ 1,685,000 >25 LEEDS 30.07.99 2029



PROPERTY PORTFOLIO

at 31 March 2021




Vanwall Business Park Consignor Ltd 5 yrs 0 yrs 2023 61,215 5-10 MAIDENHEAD 06.03.18

Hiscox Insurance 5 yrs 0 yrs 2021 57,640 Company Ltd 07.04.19

Hiscox Insurance 3 yrs 0 yrs 2021 23,744 Company Ltd 19.11.18

Preact Ltd 10 yrs 5 yrs 2023/ 93,652 19.10.18 2028

Castle Boulevard UPS Ltd 5 yrs 0 yrs 2019 252,544 10-25 NOTTINGHAM 30.04.14

Interroute Ltd 10 yrs 0 yrs 2025 300,865 Communications 01.12.15

Telefonica UK Ltd 15 yrs 0 yrs 2016 18,186 08.03.01

Coral Racing Ltd 10 yrs 5 yrs 2023/ 212,086 01.08.18 2028

Trinity Park Allianz Management 32 yrs 8 yrs 2022/ 420,000 5-10 SOLIHULL Services Ltd 25.03.92 2024

Castle Street The Trustees 10 yrs 5 yrs 2022/ 46,152 5-10 TAUNTON of Unison 20.04.17 2027

Metron Technology 10 yrs 5 yrs 2022/ 62,520 Ltd 11.08.17 2027

Eden Brown Ltd 10 yrs 5 yrs 2022/ 21,300 06.03.17 2027

Techedge (UK) Ltd 5 yrs 0 yrs 2024 16,800 02.07.19



PROPERTY PORTFOLIO

at 31 March 2021




Castle Street Newsquest Mwdia 10 yrs 5 yrs 2024/ 45,480 TAUNTON Group Ltd 14.02.19 2029 (continued)

Bruce W A Leyland 10 yrs 5 yrs 2024/ 23,000 and Victoria Osborne 23.04.19 2029

Optical Express Ltd 5 yrs 0 yrs 2025 18,396 01.10.20

Warwick Arvato Financial 1 yr 0 yrs 2022 453,312 10-25 Technology Park Solutions Ltd 24.02.21 WARWICK

Industrial Turbine 10 yrs 5 yrs 2021 402,950 Company (UK) Ltd 24.02.11

Alliance Medical Ltd 10 yrs 5 yrs 2022 216,400 24.04.12

Siemens PLC 7 yrs 5 yrs 2021 216,400 03.12.14

Warwick IBM UK Ltd 25 yrs 5 yrs 2024 655,000 5-10 Technology Park 25.03.99 WARWICK

3 Longwalk Road Marks & Spencer Plc 16 yrs 5 yrs 2021/ 2,600,000 >25 LONDON 29.09.10 2026



PROPERTY PORTFOLIO

at 31 March 2021


Offices/Shops Lease Mkt value


Imperial House Wasabi Co Ltd 15 yrs 5 yrs 2022 27,000 >25 LONDON 17.07.07

MDCT 10 yrs 5 yrs 2021/ 1,000 Realisation Ltd 06.05.16 2026

Sweet Ventures Ltd 10 yrs 5 yrs 2024/ 30,700 31.01.19 2029

Knotel 8 Kean Ltd 10 yrs 5 yrs 2023/ 332,375 20.11.18 2028

Finance & Leasing 10 yrs 5 yrs 2023/ 266,934 Association 18.02.18 2028


Alliots Chartered 10 yrs 5 yrs 2023/ 328,500 Accountants 25.04.18 2028

Thornton & Baines 10 yrs 5 yrs 2024 149,000 Independent Financial 21.01.14 Advisers


St Luke’s 5 yrs 0 yrs 2025 243,250 Communication Ltd 09.07.20

Finance & 10 yrs 5 yrs 2023/ 3,978 Leasing Association 18.02.18 2028


AC Priggen & 10 yrs 0 yrs 2028 1,500 TP Gale 09.01.18



PROPERTY PORTFOLIO

at 31 March 2021




Offices/Shops (continued) Lease Mkt value


Imperial House DX Network 10 yrs 0 yrs 2025 1,500 LONDON Services Ltd 26.07.10 (continued)

Huntress Search Ltd 15 yrs 0 yrs 2022 6,888 10.09.07






34 Threadneedle Replete Ltd 30 yrs 5 yrs 2022/ 60,000 5-10 Street 29.09.07 2037 LONDON

Replete Ltd 24 yrs 5 yrs 2023/ 30,000 19.07.13 2037

City Career 10 yrs 5 yrs 2023/ 95,163 Management Ltd 15.08.18 2028

Emmaus Consulting 5 yrs 0 yrs 2024 90,000 Ltd 05.08.19

Mssrs McCredie, 5 yrs 0 yrs 2022 50,000 Hayden Hale, McCus 29.09.17

PROPERTY PORTFOLIO

at 31 March 2021




3 Cathedral Street Nero Holdings Ltd 1 yr 1 yr 2022 37,500 LONDON 26.02.21

Kaplan Estates Ltd 15 yrs 5 yrs 2022/ 148,925 04.06.17 2032






James Roberts and 75 yrs 0 yrs 2085 10 Sarah Lygo Roberts 02.12.10

157-159 Fenchurch TM Lewin and 15 yrs 5 yrs 2022 368,000 10-25 Street Sons Ltd 20.02.07 LONDON

O2 (UK) Ltd 10 yrs 5 yrs 2016 3,851 17.07.06

EE Ltd 10 yrs 5 yrs 2020/ 4,428 23.07.15 2025

Central Bank of the 10 yrs 5 yrs 2025/ 128,586 Republic of Turkey 10.08.10 2030

Bircroft Insurance 10 yrs 5 yrs 2025/ 122,265 Services Ltd 25.03.20 2030



PROPERTY PORTFOLIO

at 31 March 2021




157-159 Fenchurch IF P & C 5 yrs 0 yrs 2024 122,100 Street Insurance Ltd 24.08.19 LONDON

Resolute Asset 6 yrs 0 yrs 2023 122,265 (continued)Management LLP 01.11.17

Resolute Asset 5 yrs 0 yrs 2023 105,324 Management LLP 21.06.18



PROPERTY PORTFOLIO

at 31 March 2021


Industrial Property Lease Mkt value


Aker Solutions Village MW Wirth Ltd 5 yrs 0 yrs 2022 258,000 0-5 ABERDEEN 20.12.17

Peregrine Road IKM Testing Facility 15 yrs 5 yrs 2024/ 360,471 0-5 ABERDEEN (UK) Ltd 17.03.14 2029

Halliburton 15 yrs 0 yrs 2023 264,750 Manufacturing 02.06.08 and Services Ltd

The Boulevard Menzies 10 yrs 5 yrs 2021/ 252,688 5-10 ASHFORD Distribution Ltd 25.03.16 2026

Unit 16 Junction Six Pointbid Logistics 10 yrs 10 yrs 2024/ 652,430 10-25 BIRMINGHAM Systems Ltd 04.11.19 2029

Great Bank Road Tesco Stores Ltd 4 yrs 0 yrs 2021 1,395,000 >25 BOLTON 01.01.17

Huntsworth Rochpion Properties 21 yrs 5 yrs 2017/ 622,275 5-10 Business Park (4) Ltd 06.11.02 2023 BRIDGWATER

Plot 5 Interlink Park MTS Logistics Ltd 5 yrs 0 yrs 2025 466,050 5-10 COALVILLE 15.05.20

Torrington Avenue Peugeot Motor 15 yrs 3 yrs 2019/ 1,432,631 >25 COVENTRY Company Plc 13.12.13 2028

Unit 4 500 VOW Europe Ltd 25 yrs 5 yrs 2021 824,000 10-25 Purley Way 13.05.96 CROYDON

Pioneer Business Park Novar E D & S Ltd 10 yrs 5 yrs 2024/ 1,112,585 10-25 ELLESMERE PORT 08.11.19 2029



PROPERTY PORTFOLIO

at 31 March 2021


Industrial Property (continued) Lease Mkt value


Phase 300 Richardson 10 yrs 5 yrs 2023/ 105,000 >25 Centennial Park Healthcare Ltd 14.05.18 2028 ELSTREE

Entel UK Ltd 5 yrs 0 yrs 2024 112,300 21.07.09

Secomak Ltd 10 yrs 5 yrs 2026 146,800 06.02.16

Fujitsu General (UK) 5 yrs 0 yrs 2023 51,661 Co. Ltd 04.01.18

Apatech Ltd 10yrs 5 yrs 2024/ 241,250 14.12.19 2029

Apatech Ltd 11 yrs 5 yrs 2024/ 241,750 07.05.08 2029

Masters 5 yrs 0 yrs 2025 166,200 Pharmaceuticals Ltd 25.12.20

Lumenis (UK) Ltd 10 yrs 5 yrs 2023/ 77,500 15.05.18 2028

Licensed Carriage 8 yrs 0 yrs 2024 79,468 Hire Ltd 25.07.16

Licensed Carriage 10 yrs 0 yrs 2024 80,532 Hire Ltd 24.07.14

Entel UK Ltd 5 yrs 0 yrs 2024 111,600 21.07.19



PROPERTY PORTFOLIO

at 31 March 2021




Cardinal North Co-operative 5 yrs 5 yrs 2024 611,000 5-10 HUNTINGDON Foodstores Ltd 09.08.19

Stadium Gate Mailing and Marketing 20 yrs 5 yrs 2024/ 178,375 0-5 LEEDS Solutions Ltd 11.02.19 2039

Leeds 27 AAH Pharmaceuticals 5 yrs 0 yrs 2023 365,000 >25 Industrial Estate 25.03.18 LEEDS

Herida Healthcare 5 yrs 0 Yrs 2024 125,844 Ltd 09.09.19

Morley Glass & 15 yrs 5 yrs 2021/ 185,886 Glazing Ltd 17.05.16 2031

Apleona HSG Ltd 10 yrs 5 yrs 2025 180,000 26.04.10

Aptar UK Ltd 5 yrs 0 yrs 2025 209,000 09.07.20

Nobia Holdings 5 yrs 0 yrs 2025 292,127 UK Ltd 07.08.20

Nobia Holdings 5 yrs 0 yrs 2025 360,250 UK Ltd 07.08.20

Watermill Business Chevron 10 yrs 5 yrs 2025/ 52,650 10-25 Centre Distribution Ltd 23.09.20 2030 LONDON

NSL Ltd 11 yrs 5 yrs 2017/ 95,000 01.09.12 2023

DW Spinks 5 yrs 0 yrs 2019 129,300 (Embossing) Ltd 22.12.19



PROPERTY PORTFOLIO

at 31 March 2021




Watermill Business Eyre & Elliston Ltd 10 yrs 0 yrs 2021/ 33,700 Centre 11.05.16 2026 LONDON (continued)

Riel Chyc (UK) Ltd 5 yrs 0 yrs 2025 45,110 29.08.20

Eurocell Building 5 yrs 0 yrs 2020 32,140 Plastics Ltd 25.12.15

B C Services Ltd 5 yrs 0 yrs 2021 37,000 27.04.16

Holemasters 10 yrs 5 yrs 2024 43,750 Demtech Ltd 10.06.14

Bonvilla Foods Ltd 5 yrs 0 yrs 2025 43,500 26.10.20

DSA Trading Ltd 5 yrs 0 yrs 2025 28,575 15.07.20

Worldwide 5 yrs 0 yrs 2026 27,525 Automations Ltd 25.03.21

Bushfire Ltd 5 yrs 0 yrs 2021 19,100 25.03.16

Print4uk Ltd 5 yrs 0 yrs 2021 34,160 01.11.16

Comex 2000 5 yrs 0 yrs 2021 42,250 (UK) Ltd 22.06.16

5 Pickett’s Lock Lane Abra Wholesales Ltd 15 yrs 5 yrs 2021/ 793,000 10-25 LONDON 02.09.11 2026



PROPERTY PORTFOLIO

at 31 March 2021




Clayton Business Fitted Wardrobes Ltd 10 yrs 5 yrs 2024/ 37,141 10-25 Centre 14.01.19 2029 LONDON

Luxwood Bespoke 10 yrs 5 yrs 2021/ 27,015 Joinery Ltd 10.05.16 2026

Eurocell Group Ltd 5 yrs 0 yrs 2022 35,750 02.10.17

TFS Handling 10 yrs 5 yrs 2023 37,500 (UK) Ltd 13.08.13

Luxwood Bespoke 10 yrs 5 yrs 2021/ 27,197 Joinery Ltd 10.05.16 2026

Howdens Joinery 15 yrs 5 yrs 2024/ 99,500 Properties Ltd 15.09.14 2029

Sky 15 yrs 5 yrs 2025/ 93,168 Telecommunications 22.09.15 2030 Services Ltd

Hayes Automobiles 20 yrs 5 yrs 2020/ 102,008 Ltd 25.09.15 2035

3310 Hunter DHL Supply 5 yrs 0 yrs 2024 1,005,810 10-25 Boulevard Chain Ltd 16.01.19 LUTTERWORTH

Garamonde Drive Apex Space 25 yrs 5 yrs 2022/ 755,110 10-25 MILTON KEYNES Solutions Ltd 17.10.17 2042



PROPERTY PORTFOLIO

at 31 March 2021




Motherwell Bridge MB Engineering 25 yrs 5 yrs 2022/ 134,389 5-10 MOTHERWELL Services Ltd 19.04.07 2032

MB Engineering 25 yrs 5 yrs 2022/ 100,793 Services Ltd 19.04.07 2032

MB Aerospace Ltd 25 yrs 5 yrs 2022/ 201,584 19.04.07 2032

Brackmills Stertil UK Ltd 10 yrs 5 yrs 2024 91,200 5-10 Business Park 25.03.14 NORTHAMPTON

In ‘N’ Out 10 yrs 5 yrs 2024 120,540 Centres Ltd 17.04.14

Bourbon Automotive 5 yrs 0 yrs 2024 172,128 Plastics Northampton 26.06.19

Howden Joinery 9 yrs 5 yrs 2022 90,630 Corporate Services 25.12.13 Ltd

Howden Joinery 17 yrs 3 yrs 2016/ 9,142 Corporate Services 16.03.05 2022 Ltd

Brackmills 192 Uniserve Holdings Ltd 10 yrs 5 yrs 2023/ 1,086,428 10-25 NORTHAMPTON 2028

Corner Rhosili & Johnson & Starley Ltd 15 yrs 5 yrs 2021/ 300,000 5-10 Kilvey Road 25.03.16 2031 NORTHAMPTON



PROPERTY PORTFOLIO

at 31 March 2021




Cray Avenue Carpetright PLC 15 yrs 5 yrs 2020 88,000 10-25 ORPINGTON 29.09.05

Tile Magic Ltd 15 yrs 5 yrs 2020 53,940 29.09.05

Bathroom and 2 yrs 0 yrs 2020 41,646 Plumbing 16.10.18 Superstore Ltd

Crown Paints Ltd 15 yrs 0 yrs 2020 41,564 29.09.05

Carpets 4 Less Ltd 10 yrs 0 yrs 2025/ 97,463 29.09.05 2030

Carpets 4 All Ltd 15 yrs 5 yrs 2023 147,000 10.07.08

Toolstation Ltd 15 yrs 5 yrs 2023 70,570 10.07.08

Giant Floors Ltd 5 yrs 0 yrs 2025 30,627 13.11.20

Kula Homes Ltd 5 yrs 0 yrs 2020 23,821 04.12.15

C & S Contracts 5 yrs 0 yrs 2021 27,375 (Sevenoaks) Ltd 18.07.16

Teamframes Ltd 10 yrs 5 yrs 2019/ 22,100 30.10.14 2024

Fresh Eric’s Cakes 10 yrs 5 yrs 2020/ 37,000 Company Ltd 22.12.15 2025

Trade Spray 10 yrs 0 yrs 2021 34,072 Services Ltd 24.10.11



PROPERTY PORTFOLIO

at 31 March 2021




1 Ivatt Way Clipper Logistics Plc 15 yrs 5 yrs 2023/ 1,095,000 10-25 PETERBOROUGH 28.09.18 2033

Alpha Park Applehill Properties 5 yrs 0yrs 2025 1,219,900 10-25 ST NEOTS Ltd 02.07.20

Wellingborough Road Premium Warehousing 16 yrs 5 yrs 2022/ 800,000 10-25 SYWELL Ltd 07.02.17 2033

Wakefield Eurohub Allied Glass 10 yrs 5 yrs 2022/ 803,854 10-25 WAKEFIELD Containers Ltd 19.01.17 2027

Grandstand Ceva Freight 8 yrs 5 yrs 2021/ 274,500 5-10 WARRINGTON (UK) Ltd 25.03.16 2024

Topgrade 5 yrs 0 yrs 2022 190,500 Sportwear Ltd 29.09.17

70 Sinclair Drive IFCO Systems 10 yrs 5 yrs 2023/ 605,000 10-25 WELLINGBOROUGH UK Ltd 12.02.18 2028



PROPERTY PORTFOLIO

at 31 March 2021


Retail Warehouses Lease Mkt value


Goodliffe Park Wickes Building 42 yrs 5 yrs 2021/ 517,110 5-10 BISHOPS Supplies Ltd 29.09.89 2031 STORTFORD

Gallagher Retail Park B&Q PLC 25 yrs 5 yrs 2023 1,730,000 >25 BRISTOL 29.09.98

DSG Retail Ltd 10 yrs 5 yrs 2023 292,600 24.05.13

Wincheap Retail Park Mothercare UK Ltd 30 yrs 5 yrs 2021/ 317,811 10-25 CANTERBURY 24.06.96 2026

Boots UK Ltd 10 yrs 5 yrs 2021/ 143,700 12.04.16 2026

Argos Ltd 15 yrs 5 yrs 2023 237,833 01.04.08

Tewkesbury Road HHGL Ltd 15 yrs 5 yrs 2021/ 500,000 5-10 CHELTENHAM 05.03.21 2036

Victoria Street North CDS (Superstores 20 yrs 5 yrs 2025/ 323,443 0-5 GRIMSBY International) Ltd 25.03.15 2035

Birstall Retail Park CDS (Superstores 10 yrs 0 yrs 2029 429,390 LEEDS International) Ltd 21.06.19

Beckton Retail Park Iceland Food Ltd 10 yrs 5 yrs 2018/ 125,000 >25 LONDON 15.07.13 2023

Fresh Bazar Ltd 8 yrs 0 yrs 2025 202,800 22.11.17

Multi-Tile Ltd 10 yrs 5 yrs 2022 135,000 29.09.12



PROPERTY PORTFOLIO

at 31 March 2021


Retail Warehouses (continued) Lease Mkt value


Beckton Retail Park Fresh Bazar Ltd 5 yrs 0 yrs 2025 130,000 LONDON (continued) 09.11.20

TJ Morris Ltd 15 yrs 5 yrs 2018/ 250,000 09.09.13 2028

Selco Trade 15 yrs 5 yrs 2021/ 380,000 Centres Ltd 12.10.16 2031

Dreams Ltd 20 yrs 5 yrs 2018/ 150,000 29.09.03 2023

Lituanica UK Ltd 15 yrs 5 yrs 2013/ 144,540 17.07.08 2023

Fresh Bazar Ltd 6 yrs 0 yrs 2025 98,182 20.09.19

Matalan Retail Ltd 20 yrs 5 yrs 2020 514,085 05.10.00

Lituanica UK Ltd 7 yrs 0 yrs 2023 10,000 19.12.16

27 Tollbar Way TJX UK 15 yrs 5 yrs 2020/ 742,847 10-25 SOUTHAMPTON 08.06.15 2030

Albion Mills Wickes Building 25 yrs 5 yrs 2015/ 602,325 10-25 Retail Park Supplies Ltd 25.05.05 2030 WAKEFIELD



PROPERTY PORTFOLIO

at 31 March 2021


Other Lease Mkt value


7 Roundwood Avenue Vacant – – – – 10-25 WEST LONDON



PROPERTY PORTFOLIO

at 31 March 2021


Other Lease Mkt value


14 West Street Travelodge Hotels 41 yrs 5 yrs 2022/ 1,131,214 >25 BRIGHTON Ltd 20.12.07 2048

Bickley road DC Management 18 yrs 5 yrs 2023/ 457,500 10-25 BROMLEY Services Ltd 31.12.15 2033

Locomotive Way Derby College 20 yrs 5 yrs 2024/ 960,066 10-25 DERBY 20.10.09 2029

Mobberley Road R Stratton & Co Ltd 50 yrs 5 yrs 2023/ 412,859 5-10 KNUTSFORD 24.06.08 2058

A10 Great DC Management 18 yrs 5 yrs 2023/ 710,000 10-25 Cambridge Road Services Ltd 31.12.15 2033 LONDON

1 Goodman’s Yard Travelodge Hotels 40 yrs 5 yrs 2023/ 2,014,550 >25 LONDON Ltd 15.12.08 2048

UK Broadband Ltd 20 yrs 5 yrs 2019/ 6,188 30.09.14 2034

Duke of Wellington DC Management 18 yrs 5 yrs 2023/ 340,000 5-10 Avenue Services Ltd 31.12.15 2033 LONDON

Queens Drive Car Shops Ltd 20 yrs 5 yrs 2024/ 1,100,000 10-25 NOTTINGHAM 22.05.19 2039

52-55 Friar St & Sainsbury’s 20 yrs 5 yrs 2023/ 485,000 5-10 12 Greyfriars Supermarkets Ltd 29.09.18 2038 READING

Maidstone Road DC Management 18 yrs 5 yrs 2023/ 450,000 10-25 SIDCUP Services Ltd 31.12.15 2033



PROPERTY PORTFOLIO

at 31 March 2021

Year ended Year ended 31.03.2021 31.03.2020

Notes £’000 £’000 £’000 £’000

Net capital losses 2 (11,082) (54,159) Revenue 3 69,320 66,561 Expenses 4 (17,682) (15,553) Net revenue before taxation 51,638 51,008 Taxation 5 (94) (16) Net revenue after taxation 51,544 50,992 Total return before distributions 40,462 (3,167) Finance costs: distributions 6 (51,544) (50,992) Change in net assets attributable to Unitholders from investment activities (11,082) (54,159)

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS



£’000 £’000 £’000 £’000

Opening net assets attributable to Unitholders 1,198,323 1,121,586 Amounts receivable on issue of Units 5,775 131,042 Amounts payable on cancellation of Units (40) (146)

5,735 130,896 Change in net assets attributable to Unitholders from investment activities (11,082) (54,159) Closing net assets attributable to Unitholders 1,192,976 1,198,323 The notes on pages 48 to 59 and the distribution table on page 60 form part of these financial statements.



STATEMENT OF TOTAL RETURN


31.03.2021 31.03.2020 Notes £’000 £’000 £’000 £’000

ASSETS Investment assets 7 1,139,012 1,156,871 Debtors 8 19,292 14,965 Cash and bank balances 9 14,241 6,602 Cash equivalents 9 51,955 49,000 Total other assets 85,488 70,567 Total assets 1,224,500 1,227,438 LIABILITIES Creditors 10 19,331 16,001 Distribution payable on income Units 12,193 13,114 Total liabilities 31,524 29,115 Net assets attributable to Unitholders 1,192,976 1,198,323 The financial statements on pages 45 to 59 were approved on behalf of the Trustee by R Kemp CBE, Chairman, on 30 July 2021 The notes on pages 48 to 59 and the distribution table on page 60 form part of these financial statements.



BALANCE SHEET

at 31 March 2021


Notes £’000 £’000 £’000 £’000

Net cash inflow from operating activities 17 50,641 47,923 Servicing of finance Distributions paid (52,465) (49,854) Taxation (94) (16) Net cash outflow from investment activities Capital expenses (6,652) (10,909) Payments to acquire investments (6,271) (124,440) Proceeds on disposal of investments 19,700 5,700

6,777 (129,649) Net cash inflow from financing activities Issue of Units 16 5,775 131,042 Cancellation of Units 16 (40) (146)

5,735 130,896 Increase/(decrease) in cash 10,594 (700) The notes on pages 48 to 59 and the distribution table on page 60 form part of these financial statements.



CASH FLOW STATEMENT


1. Accounting policies (a) Basis of preparation The financial statements have been prepared on a going concern basis, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for UK Authorised Funds (“SORP”) issued by the Investment Association in May 2014 (and amended in June 2017) and the Scheme. The financial statements have been prepared under the historical cost basis, as modified by revaluation of investment property. (b) Revenue recognition Rental revenue, interest on bank deposits and The Public Sector Deposit Fund are accrued on a monthly basis. Dividends on unit trusts are accrued on the dates when the investments are first quoted ex-dividend. In accordance with FRS 102 the rent free period is recognised over the entire term of the lease. Lease incentives in the form of capital contributions are also shown as capital debtors and are amortised over the entire term of the lease. (c) Expenses During the year, the Manager’s periodic charge, paid by the Trustee to the Manager and recharged to the Fund, was deducted from revenue of the Fund before distribution. The fee is based on a fixed percentage of the value of the Fund, which is currently 0.65% p.a. plus VAT. Each month, the value at the end of the previous month is taken to calculate the fee due. This fee covers the provision of investment services and other expenses incurred by the Manager. The audit, insurance, property valuation fees and direct property fees are paid either directly by the Fund or by the Trustee and recharged to the revenue of the Fund before distribution. (d) Distributions Distributions are prepared quarterly and paid one month after each quarter end. Each month the revenue is applied to Unitholders in the Fund and no revenue is included in the Unit price. A net distribution is paid after deduction of expenses.



NOTES TO THE FINANCIAL STATEMENTS


1. Accounting policies (continued) (e) Capitalised costs All costs associated with buying, selling and the development of properties are charged to capital. Other expenses, including the property valuation fees payable to Knight Frank LLP, are deducted from revenue. (f) Basis of valuation Freehold and leasehold properties are valued at each month end, on the basis of Fair Value in accordance with the current RICS Appraisal and Valuation Standards (The Red Book) as advised by Knight Frank LLP, Chartered Surveyors. In addition, the Manager reviews these values at each intervening month end and makes adjustments where necessary. Additions to the portfolio are valued externally after acquisition. The UK Retail Warehouse Fund is valued monthly as advised by Nuveen Property Management (Jersey) Limited. (please refer to note 20 for more details.) (g) Unit pricing policy The Fund follows AREF’s fund pricing recommendations and is priced at the Standard NAV. Any adjustments around the Mid price (Bid/Offer) would follow AREF’s fund pricing recommendations as required. (h) Cash equivalents The manager has treated some assets as Cash equivalents for the purposes of the Balance Sheet disclosure. Investments are regarded as Cash equivalents if they meet all of the following criteria: • highly liquid investments held in sterling that are readily convertible to a known amount

of cash; • are subject to an insignificant risk of change in value; and • provide a return no greater than the rate of a three month high quality government bond.





2. Net capital gains Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

The net capital losses during the period comprise: Unrealised losses on investment properties* (20,903) (52,001) Unrealised losses on collective investment schemes* (980) (1,196) Realised gains/(losses) on investment properties* 10,801 (962)

Net capital losses (11,082) (54,159)

* Where net realised gains include gains/(losses) arising in previous periods, a corresponding (loss)/gain is included

in unrealised gains/(losses).

3. Revenue Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

Rental revenue 65,084 62,417 Service charge income 3,818 3,047 Other revenue 161 563 Income from collective investment schemes 139 228 Interest on the Public Sector Deposit Fund 102 196 Bank interest 16 110

69,320 66,561

4. Expenses


£’000 £’000

i) Property expenses: Services charge expenses 4,863 4,050 Property legal and professional fees 1,323 400 Other property outgoings 1,041 828 Property ground rent and empty rates 222 2,034 Property valuation fees 167 163 Loan administration fees 45 91 Property repairs and maintenance 24 224

7,685 7,790







4. Expenses (continued) Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

ii) Management expenses: Payable to The Local Authorities’ Mutual Investment Trust: Manager’s periodic charge – see note 1(c) 7,215 7,233 Bad debt 2,574 347 Investment Property Database fee 77 47 Audit fee 51 18 Legal fees 28 18 Insurance fee 23 21 Depositary fee 15 15 Taxation fees 12 6 Miscellaneous expenses 2 58

9,997 7,763

Total expenses 17,682 15,553

The above expenses include irrecoverable VAT where applicable.

5. Taxation The Fund is not subject to capital gains tax. The Fund was approved as an exempt unauthorised unit trust on 1 April 2014 and is not subject to income tax from this date. Prior to this, the Fund was subject to income tax at the basic rate.


£’000 £’000

Income tax 94 16

Income tax is calculated as follows: Net taxable revenue at 20% – – Prior year tax adjustment 94 16 Items not allowable for income tax purposes: – – Revaluation fee at 20% – –

Income tax 94 16



6. Finance Costs: interest and distributions Distributions Distributions take account of revenue received on the issue of Units and revenue deducted on the cancellation of Units, and comprise:


£’000 £’000

30 June – interim distribution 11,431 11,957 30 September – interim distribution 12,658 13,288 31 December – interim distribution 15,262 12,633 31 March – final distribution 12,193 13,114

Distribution for the year 51,544 50,992 Interest Interest for the year – –

Total finance costs 51,544 50,992 Net revenue for the year 51,544 50,992

Net distribution for the year 51,544 50,992 Details of the distribution per Unit are set out in the distribution table on page 60. There were no unclaimed distributions as at 31 March 2021 (31.03.2020: nil)

7. Investments assets Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

Value at the start of the year 1,156,871 1,081,381 Capitalised expenses 6,652 10,909 Acquisitions at cost 6,271 124,440 Disposals at cost (8,899) (6,662) Unrealised losses on revaluation (21,883) (53,197)

Value at the end of the year 1,139,012 1,156,871

Historical cost at the end of the year 1,183,833 1,179,810





8. Debtors Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

Unamortised rent free periods 8,049 5,585 Rents receivable 7,825 6,805 Unamortised lease incentives 2,095 2,105 Accrued revenue 725 120 Property payments recoverable 524 350 Prepayments 74 –

19,292 14,965

9. Cash and bank balances and Cash equivalents


£’000 £’000

Cash in the Public Sector Deposit Fund 51,955 49,000 Restricted cash – –

Total cash equivalents 51,955 49,000 Cash at bank 14,241 6,602

Total cash 66,196 55,602

10. Creditors


£’000 £’000

Rent received in advance 13,398 13,514 Accrued expenses 4,067 1,204 VAT payable 1,692 1,265 Due to The Local Authorities’ Mutual Investment Trust 174 18

19,331 16,001





11. Loans Arranged overdraft facility with HSBC in a form of a £40.0m continuing overdraft lapsed on 21 October 2020.

12. Financial instruments The main risks arising from the Fund’s financial instruments and Manager’s policies for managing these risks are summarised below. These policies have been applied throughout the year and the comparative year. Market price risk Whilst the value of direct property is independently valued on a monthly basis, such valuations are a matter of the valuer’s opinion and such values may or may not be achieved on disposal. The Fund seeks to minimise the impact of these risks by maintaining a well diversified property portfolio, both geographically and by sector. At 31 March 2021, if the value of investment held by the Fund increased or decreased by 5%, with all other variables remaining constant, then the net assets attributable to Unitholders, and profit or loss, would increase or decrease respectively by approximately £56,951,000 (31.03.2020: 57,844,000). Financial assets All cash and bank balances earn interest at a floating rate based on either LIBOR or base rate. Debtors and creditors of the Fund do not pay or receive interest. Financial liabilities Under the Scheme of the Fund, the Manager may borrow a maximum of 25% of the value of the property of the Fund to assist with investing in, improvements to, or the managing of property and the short-term financing of, or meeting payments to be made out of the Fund.





12. Financial instruments (continued) Liquidity risk By their very nature, direct properties are less liquid and therefore the investments may not be readily realisable. The Fund’s liquidity may be affected by unexpected or high levels of redemptions. Under these circumstances, a period of notice of up to six months may be imposed for the redemption of Units. The Units are realisable only on each monthly dealing day. Currency risk There is no exposure to foreign currency fluctuations as all investments, revenue and shortterm debtors and creditors are denominated in sterling. Interest rate risk The majority of the Fund’s assets are direct property investments and therefore do not pay interest or have maturity dates. As a consequence any changes in interest rates will not significantly affect the Fund, except in so far as they affect rental levels generally. The Fund also invests in cash deposits, the revenue of which may be affected by changes to interest rates. A sensitivity analysis for interest rate risk is not shown as the impact is unlikely to be significant. The total exposure at 31 March 2021 was:

Financial assets Floating rate Fixed rate not carrying

financial assets* financial assets interest Total Currency £’000 £’000 £’000 £’000

Sterling 66,196 – 1,158,304 1,224,500

Financial Floating rate Fixed rate liabilities

financial financial not carrying liabilities** liabilities interest Total

Currency £’000 £’000 £’000 £’000

Sterling – – 31,524 31,524





12. Financial instruments (continued) Interest rate risk (continued) 31 March 2020

Financial assets Floating rate Fixed rate not carrying

financial assets* financial assets interest Total Currency £’000 £’000 £’000 £’000

Sterling 56,303 – 1,091,462 1,147,765

Financial Floating rate Fixed rate liabilities

financial financial not carrying liabilities** liabilities interest Total

Currency £’000 £’000 £’000 £’000

Sterling – – 26,179 26,179 * The floating rate financial assets of the Fund earn interest at rates based on either LIBOR, base rate or the interest

rate of The Public Sector Deposit Fund. ** All financial liabilities are due to be settled within one year or on demand. There were no derivatives held by the Fund as at 31 March 2021 (31.03.2020, £nil).

13. Commitments and contingent liabilities There were no contingent liabilities as at 31 March 2021 (31.03.2020, £nil). At 31 March 2021 there were no redemption notices outstanding (31.03.2020, nil Units).

14. Trustee remuneration The Trustee is controlled by the Members of the Council who receive no remuneration from the Fund.

15. Related party transactions The management expenses are reimbursed to the Trustee, a related party to the Fund. The amounts paid in respect of management expenses are £8,849,987 (31 March 2020, £8,872,626). Net costs in respect of mangement expenses are disclosed in note 4. A balance of £174,170 was due to the Trustee at 31 March 2021 (31.3.2020, £18,120). There were no outstanding balances due from the Trustee at 31 March 2021 (31.3.2020, £nil).





16. Turnover of Units The number and net asset value of Units in the Fund issued, cancelled and transferred in the year to 31 March 2021 was as follows:

Number Value of Units £’000 % of NAV

Units issued 1,878,779 5,775 0.48% Units cancelled 14,335 40 0.00% Year to 31 March 2020 was as follows:

Number Value of Units £’000 % of NAV

Units issued 40,349,229 131,042 10.94% Units cancelled 48,884 146 0.01% At 31 March 2021 there were no redemption notices outstanding (31 March 2020, nil).

17. Reconciliation of net cash inflow from operating activities Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

Net revenue for the year before taxation 51,638 51,008 Increase in accrued revenue (1,020) (2,805) Increase in debtors (3,307) (2,079) Increase in creditors 3,330 1,799

Net cash inflow from operating activities 50,641 47,923





18. Reconciliation of net cash flow to movement in cash balances Year ended Year ended 31.03.2021 31.03.2020

£’000 £’000

Net cash at beginning of the year 55,602 56,303 Movement in cash during the year 10,594 (701)

Net cash at the end of the year 66,196 55,602

19. Unitholders’ funds – reconciliation of Units


Income Income Units Units

Opening number of Units at beginning of the year 407,798,343 367,497,998 Units issued in the year 1,878,779 40,349,229 Units cancelled in the year (14,335) (48,884)

Closing number of Units at end of the year 409,662,787 407,798,343

20. Fair value of financial assets and financial liabilities

In respect of financial assets and liabilities other than investments, there is no material difference between their value, as shown on the balance sheet, and fair value. Investment property is held at fair value. The fair value of all investments are derived from valuation techniques using non-observable data. The Fund’s freehold and leasehold investment properties were independently valued by Knight Frank LLP, Chartered Surveyors, acting in the capacity of external valuers. As described in note 1(f), the valuation was to fair value in accordance with the Professional Standards of The Royal Institution of Chartered Surveyors (the ‘Red Book’). Knight Frank LLP’s opinions were primarily derived from comparable recent market transactions on arm’s length terms. The Manager discusses these valuations with Knight Frank LLP at least once every quarter to assess them.





20. Fair value of financial assets and financial liabilities (continued) The fair value of investment property has been determined using the following hierarchy: Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that

the entity can access at the measurement date Level 2 Inputs other than quoted prices included above that are observable (i.e. developed using

market data) for the asset or liability, either directly or indirectly Level 3 Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability

Level 1 Level 2 Level 3 Total Category £’000 £’000 £’000 £’000

Investment property – – 1,139,012 1,139,012

– – 1,139,012 1,139,012

For the year ended 31 March 2020:

Level 1 Level 2 Level 3 Total Category £’000 £’000 £’000 £’000

Investment property – – 1,156,871 1,156,871

– – 1,156,871 1,156,871





Dividends paid/payable Period ended Date paid/payable pence per Unit

2021 2020

Income Units 30 June 31 July 2.80 3.15 30 September 31 October 3.10 3.45 31 December 31 January 3.74 3.21 31 March 30 April 2.98 3.25

12.62 13.06

The distributions for income Units were paid in the same year, apart from the distribution declared on 31 March, which is payable on 30 April in the subsequent year.



DISTRIBUTION TABLE




STATEMENT OF TRUSTEE AND MANAGER RESPONSIBILITIES

Responsibilities of the Trustee and Manager The Trustee of the Fund is required by the Trust Deed to prepare accounts which give a true and fair view of the financial position of the Fund at the end of each half-yearly accounting period and the movement in net assets for the period then ended, together with the information set out in clause 15(1) of the Trust Deed. In preparing these accounts the Trustee is required to: • select accounting policies that are

appropriate for the Fund and apply them on a consistent basis;

• comply with the disclosure requirements of

the Statement of Recommended Practice relating to Authorised Funds issued by The Investment Association (IA) in May 2014 (and amended in June 2017);

• follow generally accepted accounting

principles and applicable United Kingdom accounting standards;

• keep proper accounting records which

enable the Manager to demonstrate that the accounts, as prepared, comply with the above requirements;

• make judgments and estimates that are

reasonable and prudent; and • prepare the accounts on a going concern basis

that the Fund will continue in operation unless it is inapproproate to presume this.

The Trustee has delegated to the Manager the day-to-day management, accounting and administration as permitted by the Trust Deed and the Manager is required to carry out these duties in accordance with the terms of the Trust Deed. The Trustee is also required to manage the Fund in accordance with the Trust Deed and take reasonable steps for the prevention and detection of fraud and other irregularities. Under AIFMD the Manager acquired certain additional responsibilities including, ensuring compliance with AIFMD and that any delegation by the Manager is in accordance with AIFMD. Should the Manager wish to retire, the Manager can only be discharged from its duties under the Scheme following the appointment of a replacement Manager who is eligible under AIFMD to act as Manager of the Fund.



STATEMENT OF DEPOSITARY RESPONSIBILITIES AND

REPORT OF THE DEPOSITARY


Responsibilities of the Depositary The Depositary must ensure that the Fund is managed in accordance with the Financial Conduct Authority’s Investment Funds Sourcebook, (“the Sourcebook”), the Alternative Investment Fund Managers Directive (“AIFMD”) (together “the Regulations”) and the Fund’s Scheme Particulars. The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Fund and its investors. The Depositary is responsible for the safekeeping of the assets of the Fund in accordance with the Regulations. The Depositary must ensure that: • the Fund’s cash flows are properly monitored and

that cash of the Fund is booked into the cash accounts in accordance with the Regulations;

• the sale, issue, repurchase, redemption and

cancellation of Units are carried out in accordance with the Regulations;

• the assets under management and the net asset

value per share of the Fund are calculated in accordance with the Regulations;

• any consideration relating to transactions in the

Fund’s assets is remitted to the Fund within the usual time limits;

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

• the instructions of the Alternative Investment

Fund Manager (“the AIFM”) are carried out (unless they conflict with the Regulations).

The Depositary also has a duty to take reasonable care to ensure that the Fund is managed in accordance with the Scheme Particulars in relation to the investment and borrowing powers applicable to the Fund. Having carried our such procedures as we consider necessary to discharge our responsibilities as Depositary of the Fund, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Fund, acting through the AIFM has been managed in accordance with the rules in the Sourcebook, the Scheme Particular of the Company and as required by the AIFMD. HSBC Bank plc Trustee and Depositary Services 8 Canada Square London E14 5HQ HSBC Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 30 July 2021

Manager Remuneration The Manager has no employees, but delegates the performance of its services to employees of its parent company, CCLA Investment Management Limited. Recharges for the services of CCLA IM to the Manager are levied in respect of the year ending on 31 March each year. The recharge for the year to 31 March 2021 was £30,000,000. A recharge of £28,700,000 was levied in the year to 31 March 2020. The average number of full time equivalent staff of CCLA IM, including temporary staff, for the year ended 31 March 2021 was 145 (year ended 31 March 2020: 137). During the year ended 31 March 2021 and the prior year, remuneration was paid to CCLA IM staff as shown below. Totals for staff whose actions have a material impact on the risk profile of the Fund (“identified staff ”) are shown separately. Year to 31 March 2021 Year to 31 March 2020 Fixed Variable Fixed Variable remuneration remuneration Total remuneration remuneration Total £000 £000 £000 £000 £000 £000

Identified staff 1,283 2,040 3,323 1,264 3,346 4,610 Other staff 12,117 5,126 17,243 10,159 4,298 14,457

Total 13,400 7,166 20,566 11,423 7,644 19,067

Remuneration above is the total remuneration for CCLA IM; it is not possible to separate the element of that relating only to this Fund. The components of remuneration are appropriately balanced and do not create a conflict of interest for the Fund.



AIFMD DISCLOSURES (UNAUDITED)



Members of the Council and the Trust Chairman R Kemp CBE Secretary J Fox Local Government Association R Kemp CBE (Acting Chairman) T Beattie A Naylor C Noble – appointed 27 April 2020 S Pickup C West – appointed 18 January 2021 Unitholder Member P Clokie OBE Northern Ireland Local Government Officers’ Superannuation Committee D Donnelly – appointed 12 January 2021 Welsh Local Government Association C Clement-Williams – appointed 14 January 2021 Convention of Scottish Loacl Authorities G Macgregor – appointed 17 February 2021 The Manager CCLA Fund Managers Limited Authorised and regulated by the Financial Conduct Authority Senator House, 85 Queen Victoria Street London EC4V 4ET Telephone: 0207 489 6000 Client Service: Freephone: 0800 022 3505 Email: [email protected] www.ccla.co.uk Investment Manager, Adminstrator and Registrar CCLA Investment Management Limited Authorised and regulated by the Financial Conduct Authority Senator House, 85 Queen Victoria Street London EC4V 4ET Telephone: 0207 489 6000 Client Service: Freephone: 0800 022 3505 Email: [email protected] www.ccla.co.uk

Directors responsible for the Fund P Smith (Chief Executive) J Bevan (Chief Investment Officer) E Sheldon (Chief Operating Officer) A Robinson MBE (Director Market Development) Head of Property P Hannam Company Secretary J Fox Head of Assurance JP Lim – appointed 1 May 2020 Third party Advisers External Property Valuer Knight Frank LLP 55 Baker Street London W1U 8AN Managing Agents BNP Paribas Real Estate 5 Aldermanbury Square London EC2V 7BP Depositary HSBC Bank plc 8 Canada Square London E14 5HQ Banker HSBC Bank plc 60 Queen Victoria Street London EC4N 4TR Solicitors Farrer & Co LLP 66 Lincoln’s Inn Fields London WC2A 3LH Hogan Lovells LLP Atlantic House, Holborn Viaduct London EC1A 2FG DLA Piper Scotland LLP Collins House Rutland Square Edinburgh EH1 2AA Independent Auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT

TRUSTEE AND MANAGER

CCLA Fund Managers Limited (Registered in England and Wales No. 8735639) and CCLA Investment Management Limited (Registered in England and Wales No. 2183088)

are authorised and regulated by the Financial Conduct Authority. Registered address: Senator House, 85 Queen Victoria Street, London EC4V 4ET.

CCLA Fund Managers Limited

Senator House, 85 Queen Victoria Street, London EC4V 4ET T: 0800 022 3505 E: [email protected]

www.ccla.co.uk

ABOUT CCLA

Founded in 1958, CCLA manages investments for the public sector, charities and religious organisations.

Our purpose is to help our clients maximise their impact on society by harnessing the power

of investment markets. This requires us to provide a supportive and stable environment for our staff and deliver trusted, responsibly managed and strongly performing products and

services to all organisations, irrespective of their size.

the local authorities’ property fund annual …

Documents