THE LOCAL AUTHORITIES’ pROpERTy fUnd AnnUAL REpORT And ... · 12 months expressed as a percentage of the offer price at the year end. THE LOCAL AUTHORITIES’ PROPERTY FUND

THE LOCAL AUTHORITIES’

pROpERTy fUnd

AnnUAL REpORT And

fInAnCIAL STATEmEnTS

year ended 31 march 2020

THE LOCAL AUTHORITIES’ PROPERTY FUND

Annual Report and financial Statements02 31 march 2020

CONTENTS

Structure of the fund* 03

Report of the Trustee 06

Report of the property manager* 07

Statement of Trustee and manager responsibilities 14

Statement of depositary responsibilities and Report of the depositary 15

Independent Auditors’ Report 16

Report of the Valuers 19

Summary r isk indicator 20

Comparative table 21

portfolio analysis 22

portfolio statement* 24

Ownership of the fund 24

property portfolio* 25

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

AIfmd disclosures (Unaudited) 61

Trustee and manager* 62*Collectively, these comprise the manager’s Report.^Audited.

References to “CCLA” refer to the CCLA Group, comprising CCLA Investment management Limited andCCLA fund managers Limited.

Disability Discrimination Act 1995Extracts from the Annual Report and financial Statementsare available in large print and audio formats.

Structure and managementThe Local Authorities’ property fund (the“fund”) is established under a Scheme approvedby Hm Treasury under Section 11 of the TrusteeInvestments Act 1961 together with the Trustdeed dated 6 April 1972 as amended by aSupplemental Trust deed dated 13 September1978 together with the trust deed dated 6 April1972 as amended by supplemental trust deedsdated 13 September 1978, 21 April 2016 and23 September 2019 (the ‘Scheme’).

The Local Authorities’ mutual Investment Trust(the “Trustee”) is a company limited byguarantee. It does not have share capital and actsas the Trustee and Operator of the fund.

The Trustee is controlled by members andofficers of a council appointed by the LocalGovernment Association, the Convention ofScottish Local Authorities, the northern IrelandLocal Government Officers’ SuperannuationCommittee, The Welsh Local GovernmentAssociation and unitholders represented bythe Trustee.

The members of the Council meet regularlyto receive reports and monitor the progress ofthe fund.

The fund is an open-ended, unregulatedcollective investment scheme. It is classifiedas an Alternative Investment fund under theAlternative Investment fund managers directive(“AIfmd”). It is domiciled in the UnitedKingdom and subject to appropriate UK lawsand regulations.

CCLA fund managers Limited (“CCLA fm”),an authorised full-scope UK AlternativeInvestment fund manager (“AIfm”), has beenappointed by the Trustee as the manager of thefund. The manager has appointed CCLAInvestment management Limited (“CCLA Im”)as the Investment manager of the fund underan Investment management Agreement dated22 July 2014. The manager has delegated tothe Investment manager the fund management,administration and secretarial functions of thefund. CCLA fm is a wholly owned subsidiaryof CCLA Im.

The Trustee has delegated to CCLA Im theregistrar functions of the fund under a RegistrarAgreement dated 1 October 1998. CCLA fm andCCLA Im are both authorised and regulated bythe financial Conduct Authority (“fCA”). As at31 march 2020 the Trustee owns 13.42% of theordinary share capital of CCLA Im.

HSBC Bank plc, an AIfmd authoriseddepositary, has been appointed in accordancewith the AIfmd requirements as the depositaryof the fund. The primary functions of thedepositary are cash flow monitoring, safekeepingof assets and oversight of operational functions.



STRUCTURE OF THE FUND

for the year ended 31 March 2020

Investment objectivesThe fund provides facilities exclusively for localauthorities and other public sector organisationsto invest in commercial and industrial property ona collective basis so as to obtain a spread of riskwith constant expert property management. Thefund aims to provide investors with a high levelof income and long-term capital appreciation.

Investment policyThe fund’s powers of investment are notrestricted either to particular types of property or,subject to the consent of Hm Treasury, to specificparts of the world. However, it is the presentpolicy to confine investment to commercial andindustrial properties and property pooled fundswithin the United Kingdom.

A suitable spread is maintained betweendifferent types of property and geographiclocation. Overriding importance is attached tolocation, standard of construction and tocovenant quality of the tenants. The portfolio iskept under constant review with the object ofdisposing of any property if appropriate returnshave not been achieved or if future growthprospects diminish unacceptably. properties areregularly inspected to ensure that the tenantscomply with maintenance and other contractualobligations. finance may be provided forsuitable property developments.

Any proposed amendment to the investmentobjective or policy of the fund must be approvedby Hm Treasury and sanctioned by a specialresolution of the Trustee.

BenchmarkThe performance benchmark for the fund is themSCI/AREf UK Other Balanced Quarterlyproperty fund Index calculated on a net assetvalue basis, after all expenses.

The benchmark covers the investmentperformance of 22 property funds valued at£22.56bn as at 31 march 2020, ranging in sizefrom £122.30m to £3.20bn.

A mSCI direct property Benchmark is also usedto review and monitor the performance of thefund’s property portfolio. This provides anappropriate and durable index for measuringthe performance of the fund’s property assetsand details can be supplied on application tothe manager.

Eligible contributorsUnits of the fund can only be issued to andowned by local authorities in the UnitedKingdom which are entitled to receivedistributions from the fund gross of tax.





Monthly subscription datesInvestment in the fund may be made by alocal authority on any month end valuationdate. Withdrawals from the fund may be madeby a local authority on any month end valuationdate. The fund may, however, at its discretion,defer the processing of any application orwithdrawal for a period, as it may deem fit, toallow time for the purchase or sale of propertiesto utilise funds, meet the withdrawals or toprotect the interest of the unitholders in thefund, if required.

Borrowing powersThe Trustee believes that the management of aproperty portfolio is facilitated by the exerciseof a limited power to borrow and the Schemeprovides for borrowings of up to 25% of thevalue of the fund. The fund has in placeborrowing facilities of £40m.

These facilities can also be used to accommodatetiming differences between the availability offunds for investment and the making of suitableproperty purchases.

The fund does not use any financial instrumentsor derivatives for the purpose of interest ratehedging or for any other purpose.





We have pleasure in presenting our annual reportof the fund to the unitholders of the fund.

Responsibilities of the TrusteeThe Trustee is responsible for approving thefund’s property investment strategy, monitoringdiversification, suitability and risk, reviewingthe performance of the fund and approving itsdistribution payments. In addition, we havemonitored the administration, expenses andproperty valuations of the fund.

The Trustee meets four times in each calendar yearto undertake the responsibilities detailed above.

Controls and risk managementCCLA fm has a risk management frameworkwhich provides a methodology for theassessment, mitigation and reporting of risk,ensuring a high quality of risk management andcontrol is maintained for all funds under themanager’s control. The effectiveness of risks andcontrols is assessed by the directors of themanager, with the help of the Assurancefunction, on a continuing basis. The Trusteereceives and considers relevant operational riskinformation from the manager.

Compliance with Trust Deed andManagement Agreementfollowing our regular meetings and considerationof the reports and papers we have received, weare satisfied that the manager, to whom we havedelegated the administration and management ofthe fund, has complied with the terms of theScheme and the management Agreement.

R Kemp CBEChairman of The Local Authorities’ mutual Investment Trust20 July 2020



REPORT OF THE TRUSTEE


Performancefor the year the total return after all expenseswas +0.66%. This compares to a total return of+0.12% recorded for the mSCI/AREf UKOther Balanced Quarterly property fund Index,the benchmark. The fund generated an aboveaverage level of income and distributions toUnitholders over this year totalled 13.06p,almost matching the 13.08p distributed in theprevious year and equivalent to an incomereturn for the year of 4.14%. By comparison,the yield on the benchmark is 3.7%, and thaton the UK All property fund Index, is 2.8%.In contrast to the positive contribution fromincome, capital valuations declined, duesubstantially to weakness in the retail sectors.These adverse trends worsened late in theperiod as the UK Government’s COVId-19containment policies began to have an impact on

the economy and property markets as at31 march 2020, as a result, the unit pricedeclined from 305.20p at 31 march 2019 to293.85p, as at 31 march 2020, a capital returnof -3.72%. The fund’s performance recordcompared to the benchmark over the longerterm is shown in the table below.

The fund’s underweight position in the retailsector, along with a greater allocation toindustrials and to the ‘other’ sector, has beenhelpful to performance. There was also apositive contribution from property assetmanagement activity.

Cash flows remained positive over the year andthis resulted in an increase in the size of thefund to £1.20bn, despite weaker valuations.Liquidity ended the period at 6.81%.



REPORT OF THE PROPERTY MANAGER


Total return against benchmark to 31 March 2020 (after expenses)

1 year 3 years 5 years 10 years % % % %

Performance against market indices (after expenses)

The Local Authorities’ Property Fund 0.66 5.39 6.07 8.31mSCI/AREf UK Other Balanced Quarterly property fund Index 0.12 5.33 6.29 7.44

Source: CCLA

past performance is not a reliable indicator of future results.

Market reviewThe last twelve months has been marked byuncertainty. for much of the period, the UKproperty sector was subdued by Brexit concernsexacerbated by structural challenges in sectorssuch as retail and offices. There were hopes, inthe immediate aftermath of the election, ofincreased activity levels but this was soonfrustrated by the pandemic. In a world of‘lockdown’ transaction volumes fell and manypossible deals were simply aborted. Supply driedup too as sales plans were put on hold and forcedselling not yet a feature of the crisis. This pausein activity levels reflects a general lack of distresson both the buy and the sell sides and as a result,transaction volumes have fallen below the longterm averages. Whilst the level of transactions is avisible indicator of sector health, the true extentof the damage will only be known when we seehow quickly income and capital value can berecouped. The unusual feature of this crisis is theimmediate impact on business revenue and cashflow. This has a direct impact on the ability ofmany tenants to meet financial obligationsincluding the payment of rents and servicecharges. Added to this, the UK Government hasput in place temporary legislation to protecttenants, providing relief from lease forfeiture andother debt and rent arrears recovery solutionsusually available to landlords. A high and reliableincome yield is a fundamental attraction ofproperty as an investment asset class, but rent

collection challenges have been experiencedsince the 25 march 2020 rent payment Quarterday and are anticipated to continue over theshort term. Although Q1 2020 rental incomeand the annual income distribution for thisperiod can be paid in full, income distributionsfor the year ahead will be affected.

In these conditions valuations will be lessreliable reflecting the paucity of evidence onwhich valuers can base their assessments andthe resulting uncertainty, in a difficult generalenvironment, has resulted in valuers issuingmaterial uncertainty clauses with theirvaluations. These notices effectively requirethat property funds suspend dealing to protectunitholders. As a result, the valuations providedby the fund’s External Valuer, have carried amaterial Valuation Uncertainty clause, andThe LApf has been suspended since 31 march2020 dealing date. Valuers have also becomeincreasingly cautious, extrapolating thin andpatchy evidence to apply reductions incapital and rental valuations more broadly. Theresult is a steady fall in valuations in each monthduring 2019 and 2020, which means that thesector has experienced six consecutive quartersof decline, a trend which has acceleratedrecently as economic conditions have worsened.Retail has remained a poor performer, buthotels have weakened too due to the impactof travel restrictions.





By far the weakest segment of the UK propertymarket has been retail, where rents have tumbledalong with capital values. The scale of the collapsein retail has been the major factor in the declinein the mSCI All property Indices of -5.0%. Thisweakness is part of a longer term process whichthe current crisis has accelerated, bringingforward a collapse in asset values and rents that intime will facilitate the re-purposing of retailproperty and speed up the regeneration of towncentres. difficult trading conditions and tenantfrailty has affected all types of retail propertyassets. Over the past twelve months retailvaluations have declined by -15.3% and estimatesof occupational market rents are -5.2% lower.

Office valuations only became modestly negativein march 2020 with some regional offices andsecure income investments remaining popular.Industrial assets continue to make progress,delivering both capital and rental growth,although at a slower pace. The positive news forinvestors in the sector is that the declines in

capital values have been offset in part by income.The mSCI Quarterly Index Total Return Indexis -0.6% for the last twelve months, supported byan income return of +4.7%. As would beexpected in this environment, void rates haverisen, the total vacancy rate, including standinginvestments and developments, has risen over theyear to 13.9%. A notable feature is the trend ofshorter leases and less stable tenants, that has ledto greater vacancy in office markets. It should beanticipated that the impact of COVId-19 islikely to lead to a further deterioration inproperty sector void data.

ActivityThe fund’s capital cash holding was largelyunchanged over the year, ending the period at£42m or 3.49%. A steady flow of new investorcapital into the fund funded several newacquisitions, one sale was completed in the year.Inflows amounted to £131m and five purchaseswere completed at a total cost of £117.4m, asnoted in the table below.





Purchase Initial DateLocation Sector Tenant Price Yield of purchase

Reading, Other Sainsbury’s £10.8m 4.2% may 201952-55 friar St Supermarkets Ltd& 12 GreyfriarsLondon, Office/Shops Kaplan Estates Ltd £48.8m 5.0% June 20193 Cathedral StreetBristol, Office Bevan Brittan LLp £35.0m 5.2% July 2019Kings Orchard motherwell, Industrial mB Engineering £5.5m 7.5% January 2020motherwell Bridge property mB AerospaceEllesmere port, Industrial novar Ed&S £17.3m 6.0% January 2020pioneer propertyBusiness park





A key feature of the fund’s purchase strategy hasbeen a focus on high quality assets and secureincome streams. All the properties added to theportfolio offer strong tenant covenants to protectan attractive shorter-term income yield, withthe potential for income growth and activemanagement over longer term horizons. Theone property sold in the period was a part vacantoffice building on St Vincent Street in centralGlasgow that represented a significant vacancyrisk and income expense. An adjacent propertywas acquired and added to the existing holdingto create an attractive redevelopment opportunitythat was sold at a price substantially ahead ofthe valuation.

A large volume of management activity wascompleted during the year, including activemanagement, new lettings, lease renewals and rentreviews. Initially this activity boosted performanceby growing rental income but has increasinglybecome defensive to protect capital valuations andthe fund’s income. Letting successes have beencounter balanced by new vacancy and greaterdevelopment activity and has resulted in anincrease in the portfolio total void rate over thewhole year. At end march the fund’s investmentvoids amounted to 6.4%, whilst developmentproperties added 4.5% to the total. By comparison,the mSCI monthly Index recorded an investmentvacancy rate of 8.2%, and total voids of 13.9%,including developments. despite the challengespresented by the UK Government’s containmentmeasures in force to control the spread of the

virus, property management operational activitiescontinue to function and it is largely business asusual. Since lockdown, significant progress hasbeen made in letting two of the larger propertiesvacant at the year end with deals completing inthe coming weeks.

StrategyThe strategy adopted in managing the fund isasset focused. This investment approach reflectsthe long-term characteristics of property as aninvestment asset class and remains consistent withthe fund’s performance objectives and theincome needs of the unitholders. The bottom-upinvestment process supports holding higheryielding investments and assets with shorter leaseassets, helping to deliver an above average level ofincome whilst maintaining asset quality andwithout the need to use gearing to boost returns.Instead, an attractive range of investmentmanagement opportunities backed by highquality property assets and active managementadds value to the portfolio, whilst a pro-activeapproach strives to protect value and income andkeep risk under control. A dynamic approach toportfolio structure means the fund is well placedto navigate ongoing sector and asset challenges,and to be better prepared for what lies ahead inthe outlook. The portfolio has increased itsweightings towards office and industrial assetsand has a low exposure to a difficult retail sector.Reflecting the maturity of the investment cycleand the persistent uncertain backdrop, weightingshave been growing in the alternative ‘Other’





group of assets, with the objective of enhancingportfolio diversification, lengthening the leaseexpiry profile and building greater incomeresilience and growth prospects.

The issue of new units and redemptionsThe income attraction of property investmentfor many local authorities in the UK isdemonstrated by the continued steady inflow ofnew investor capital. Over the course of the year£131m was received from 56 new and existinginvesting local authorities, 253 authorities nowparticipate in the fund. There are no redemptionrequests outstanding as at the year end, buta queue of investing local authorities meansfurther flows of capital into the fund awaits dueto the current suspension in dealing. The size ofthe fund has grown to £1.20bn compared to£1.12bn at the start of the period.

OutlookAt the start of the year expectations for theproperty sector were for a continuation of thetrends evident in 2019, with modestly improvingtotal returns this year and in 2021. Continuingsupport for industrials, parts of the office sectorand assets offering good long-term incomevisibility, would offset downward pressure onvaluations and rents in the retail sub-sectors.Clearly much has changed, and the outlook hasbecome more complex with a number ofimportant unknowns.

Greater political clarity followed the generalelection, but Brexit negotiations remain to beresolved and will continue to be a source of

uncertainty as 2020 progresses. Overall, theheadwinds faced by the sector have intensifieddramatically and the speed of structural changewithin key sub-sectors should accelerate as aresult. The whole sector will be impacted but itis clear that retail and leisure has suffered firstand most due to the shut down of so much spacewiping out business revenues but not costs. forthe property sector this has focused attention onrent collection, and for investors the currentchallenge in maintaining the income return isunprecedented. A broad collapse in marketactivity and pricing uncertainty means values arenow likely to fall more widely for the remainderof 2020 and, unusually for the sector, incomereceipts are unreliable. At best some rents will bedelayed, whilst some others may be lost entirelyin the months ahead. The scale of valuationdecline experienced in march 2020 is likely tobe repeated in the months to come. The fullimpact of the pandemic on society, business, theeconomy and the property markets remainsunknown but is likely to be substantial.

The problems faced by the retail sector willcontinue and the decline in retail valuationsand rents will continue to impact on theperformance of the property sector overall. Theslowdown will affect all asset types, althoughsome sectors and investment types such asindustrial warehouse and long let secure incomestreams should demonstrate greater resilience.This will mean that sector weightings will beinfluential on both absolute and relative returns.diversification and a well-structured portfoliofocused on industrials and on high quality assets





with more secure tenant covenants will protectincome and investment value. Greater tenantengagement will be a feature of the period aheadas the unique nature of the crisis demandscooperation and flexibility in the landlord andtenant relationship, and agreements on rentalpayments and new leases become a priority toprotect income and value. An active approach tomanagement still offers the potential for addedvalue, although operational and practicaldifficulties will continue to hinder progress. Theperformance benefit from management activitymay only be recognised once market volume andvaluation stability returns. Volatility at theindividual asset level will remain elevated.

more positively, although 2020 will be a year ofrecession 2021 should be one of recovery.

Suspension of Local Authorities’Property Fundmarkets around the world have experiencedhuge disruption as COVId-19 spreads and

trading in the UK property market is beingseverely impacted. The fund’s Independent Valuerhas informed us that it was not currently possibleto provide a valuation with the required level ofaccuracy. from march 2020, valuations aretherefore reported on the basis of ‘materialvaluation uncertainty’ per VpGA 10 of the RICSValuation – Global Standards. We are thereforeunable to produce a price which we can say withany confidence reflects the fair value of the assets.In order to protect the interests of investors, wehave suspended dealing in the fund on 24 march2020. This action reflects the exceptionalcircumstances in the UK property market and theneed to protect investor interests, by suspendingtrading, when there is material uncertaintyregarding how the assets should be valued. Weaim to lift the suspension as soon as confidencereturns to the market and there is more certaintyregarding asset valuations, taking into account thebest interests of investors.





Association of Real Estate FundsThe fund complies with the minimumrequirements of the Association of Real Estatefunds (AREf) Code of practice, which is avoluntary Code which aims to encouragemembers of AREf to adopt best practicewhenever possible.

The Code is publicly available and published onthe Association’s website: www.aref.org.uk.

p HannamHead of propertyCCLA Investment management Limited20 July 2020

Risk warningThe fund’s units and the revenue from them can fall aswell as rise and an investor may not get back the amountoriginally invested.

past performance is no guarantee of future returns. pastperformance is not a reliable indicator of future results.The price of the fund’s units and the revenue any incomedistributions from them may fall as well as rise and aninvestor may not get back the amount originally invested.past performance is no guarantee of future returns.

property and property related assets are inherently difficultto 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 propertieswill reflect the sale price achieved even where such saleoccurs shortly after the valuation point.

The performance of the fund could be affected adverselyby a downturn in the property market in terms of capitalvalue or a weakening of rental yields. The revenue

received by the fund is dependent to a large extent uponthe occupancy levels of any property owned by the fundand the rents paid by these tenants.

Rental revenues and property values are affected bychanges in general economic climate and local conditions.

property values are dependent in particular on currentrental values, prospective rental growth, lease lengths,tenant credit worthiness and the valuation yield (which isitself related to interest rates, the market appetite forproperty investment in general and with reference to thespecific property in question) together with the nature,location and physical condition of the property concerned.

The fund’s units are intended only for long terminvestment and are not suitable for money liable to bespent in the near future. The units are realisable only oneach monthly valuation date and a period of delay maybe imposed for redemption of units depending on thefund’s liquidity.



STATEMENT OF TRUSTEE AND MANAGER RESPONSIBILITIES

Responsibilities of the Trustee and ManagerThe Trustee of the fund is required by theTrust deed to prepare accounts which give atrue and fair view of the financial position ofthe fund at the end of each half-yearlyaccounting period and the movement in netassets for the period then ended, together withthe information set out in clause 15(1) of theTrust deed. In preparing these accounts theTrustee is required to:

• select accounting policies that areappropriate for the fund and apply them ona consistent basis;

• comply with the disclosure requirements ofthe Statement of Recommended practicerelating to Authorised funds issued by TheInvestment Association (IA) in may 2014(and amended in June 2017);

• follow generally accepted accountingprinciples and applicable United Kingdomaccounting standards;

• keep proper accounting records whichenable the manager to demonstrate thatthe accounts, as prepared, comply with theabove requirements;

• make judgments and estimates that arereasonable and prudent; and

• prepare the accounts on a going concern basisthat the fund will continue in operationunless it is inapproproate to presume this.

The Trustee has delegated to the manager theday-to-day management, accounting andadministration as permitted by the Trust deedand the manager is required to carry out theseduties in accordance with the terms of theTrust deed.

The Trustee is also required to manage thefund in accordance with the Trust deed andtake reasonable steps for the prevention anddetection of fraud and other irregularities.

Under AIfmd the manager acquired certainadditional responsibilities including, ensuringcompliance with AIfmd and that anydelegation by the manager is in accordancewith AIfmd.

Should the manager wish to retire, themanager can only be discharged from its dutiesunder the Scheme following the appointmentof a replacement manager who is eligibleunder AIfmd to act as manager of the fund.



STATEMENT OF DEPOSITARY RESPONSIBILITIES AND

REPORT OF THE DEPOSITARY


Responsibilities of the DepositaryThe depositary must ensure that the fundis managed in accordance with the financialConduct Authority’s Investment fundsSourcebook, (“the Sourcebook”), theAlternative Investment fund managers directive(“AIfmd”) (together “the Regulations”) andthe fund’s Scheme particulars.

The depositary must in the context of its roleact honestly, fairly, professionally, independentlyand in the interests of the fund and its investors.

The depositary is responsible for the safekeepingof the assets of the fund in accordance withthe Regulations.

The depositary must ensure that:

• the fund’s cash flows are properly monitored andthat cash of the fund is booked into the cashaccounts in accordance with the Regulations;

• the sale, issue, repurchase, redemption andcancellation of units are carried out inaccordance with the Regulations;

• the assets under management and the net assetvalue per share of the fund are calculated inaccordance with the Regulations;

• any consideration relating to transactions in thefund’s assets is remitted to the fund within theusual time limits;

• that the fund’s income is applied in accordancewith the Regulations; and

• the instructions of the Alternative Investmentfund manager (“the AIfm”) are carried out(unless they conflict with the Regulations).

The depositary also has a duty to takereasonable care to ensure that the fund ismanaged in accordance with the Schemeparticulars in relation to the investment andborrowing powers applicable to the fund.

Having carried our such procedures as weconsider necessary to discharge our responsibilitiesas depositary of the fund, it is our opinion, basedon the information available to us and theexplanations provided, that in all material respectsthe fund, acting through the AIfm has beenmanaged in accordance with the rules in theSourcebook, the Scheme particular of theCompany and as required by the AIfmd.

HSBC Bank plcTrustee and depositary Services8 Canada SquareLondon E14 5HQ

HSBC Bank plc is authorised by the PrudentialRegulation Authority and regulated by theFinancial Conduct Authority and the PrudentialRegulation Authority.

20 July 2020



Report on the audit of the financial statementsOpinionIn our opinion, The Local Authorities’property fund’s financial statements (the“financial statements”):

• give a true and fair view of the financialposition of the fund as at 31 march 2020and of the net revenue and the net capitallosses of its scheme property for the yearthen ended; and

• have been properly prepared in accordancewith United Kingdom Generally AcceptedAccounting practice (United KingdomAccounting Standards, comprising fRS 102“The financial Reporting Standard applicablein the UK and Republic of Ireland”, andapplicable law), and the Trust deed.

In our opinion, The Local Authorities’ propertyfund’s financial statements for the year ended31 march 2020 have been properly prepared, inall material respects, in accordance with the basisof preparation and accounting policies in note 1to the financial statements, and the Trust deed.

We have audited the financial statements,included within the Annual Report and Auditedfinancial Statements (the “Annual Report”),which comprise: the balance sheet as at31 march 2020; the statement of total return,the statement of changes in net assets attributableto unit holders and the cash flow statement forthe year then ended; the accounting policies;and the notes to the financial statements.

Emphasis of Matter – Significant estimationuncertainty in relation to the valuation ofinvestment propertyIn forming our opinion on the financialstatements, which is not modified, we haveconsidered the adequacy of the disclosures madein note 1 (Accounting policies) and note 7(property Investments) to the financialstatements. These notes explain that there issignificant estimation uncertainty in relationto the valuation of investment properties of£1,162m included in the balance sheet as at31 march 2020. The third party valuers engagedby management have included a materialvaluation uncertainty clause in their report.This clause highlights that less certainty, andconsequently a higher degree of caution, shouldbe attached to the valuation as a result of theCOVId-19 pandemic.

Basis for opinionWe conducted our audit in accordance withInternational Standards on Auditing (UK)(“ISAs (UK)”) and applicable law. Ourresponsibilities under ISAs (UK) are furtherdescribed in the Auditors’ responsibilities for theaudit of the financial statements section of ourreport. We believe that the audit evidence wehave obtained is sufficient and appropriate toprovide a basis for our opinion.

INDEPENDENT AUDITORS’ REPORT

to the unitholders of The Local Authorities’ Property Fund



IndependenceWe remained independent of the fund inaccordance with the ethical requirements thatare relevant to our audit of the financialstatements in the UK, which includes thefRC’s Ethical Standard and we have fulfilledour other ethical responsibilities in accordancewith these requirements.

Conclusions relating to going concernWe have nothing to report in respect of thefollowing matters in relation to which ISAs(UK) require us to report to you where:

• the Trustee’s use of the going concern basis ofaccounting in the preparation of the financialstatements is not appropriate; or

• the Trustee has not disclosed in the financialstatements any identified material uncertaintiesthat may cast significant doubt about thefund’s ability to continue to adopt the goingconcern basis of accounting for a period of atleast twelve months from the date when thefinancial statements are authorised for issue.

However, because not all future events orconditions can be predicted, this statement is nota guarantee as to the fund’s ability to continueas a going concern.

Reporting on other information The other information comprises all of theinformation in the Annual Report other thanthe financial statements and our auditors’ reportthereon. The Trustee is responsible for the otherinformation. Our opinion on the financialstatements does not cover the other informationand, accordingly, we do not express an auditopinion or, except to the extent otherwiseexplicitly stated in this report, any form ofassurance thereon.

In connection with our audit of the financialstatements, our responsibility is to read theother information and, in doing so, considerwhether the other information is materiallyinconsistent with the financial statements orour knowledge obtained in the audit, orotherwise appears to be materially misstated.If we identify an apparent material inconsistencyor material misstatement, we are required toperform procedures to conclude whether thereis a material misstatement of the financialstatements or a material misstatement of theother information. If, based on the work wehave performed, we conclude that there is amaterial misstatement of this other information,we are required to report that fact. We havenothing to report based on these responsibilities.





Responsibilities for the financial statements andthe auditResponsibilities of the Manager for thefinancial statementsAs explained more fully in the Statement ofTrustee and manager Responsibilities set outon page 14, the Trustee is responsible for thepreparation of the financial statements inaccordance with the applicable framework andfor being satisfied that they give a true and fairview. The Trustee is also responsible for suchinternal control as they determine is necessaryto enable the preparation of financial statementsthat are free from material misstatement,whether due to fraud or error.

In preparing the financial statements, the Trusteeis responsible for assessing the fund’s ability tocontinue as a going concern, disclosing asapplicable, matters related to going concern andusing the going concern basis of accountingunless the Trustee either intends to liquidate thefund or to cease operations, or has no realisticalternative but to do so.

Auditors’ responsibilities for the audit of thefinancial statementsOur objectives are to obtain reasonableassurance about whether the financial statementsas a whole are free from material misstatement,whether due to fraud or error, and to issue anauditors’ report that includes our opinion.Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted inaccordance with ISAs (UK) will always detect amaterial misstatement when it exists.

misstatements can arise from fraud or error andare considered material if, individually or in theaggregate, they could reasonably be expected toinfluence the economic decisions of users takenon the basis of these financial statements.

A further description of our responsibilities forthe audit of the financial statements is locatedon the financial Reporting Council’s websiteat: www.frc.org.uk/auditorsresponsibilities. Thisdescription forms part of our auditors’ report.

Use of this reportThis report, including the opinion, has beenprepared for and only for the unitholders ofthe fund as a body in accordance with theTrust deed and for no other purpose. We donot, in giving this opinion, accept or assumeresponsibility for any other purpose or to anyother person to whom this report is shown orinto whose hands it may come save whereexpressly agreed by our prior consent in writing.

pricewaterhouseCoopers LLpChartered AccountantsLondon20 July 2020



dear Sirs,

The Local Authorities’ Property FundProperty valuation as at 31 March 2020

In accordance with your instructions receivedfrom The Local Authorities’ property fund(“the fund”) to value all the propertyinvestments owned by the fund (“theproperties”) on a monthly basis, we have valuedthe properties as at 31 march 2020. Thevaluation has been prepared on the basis of fairValue, in accordance with the current edition ofthe RICS valuation- professional Standardspublished by the Royal Institution of CharteredSurveyors (RICS). We understand that ourvaluation is required for unit pricing andfinancial statements purposes. Our report isaddressed to the fund.

We are of the opinion that the aggregate fairValues of all the properties held by the fundas at 31 march 2020 is £1,162,075,000 (OneBillion, One Hundred and Sixty Two millionand Seventy five Thousand pounds).

Material valuation uncertainty due to NovelCoronavirus (COVID-19)The outbreak of the novel Coronavirus(COVId-19), declared by the World HealthOrganisation as a “Global pandemic” on the11th march 2020, has impacted global financialmarkets. Travel restrictions have beenimplemented by many countries. In the UK,market activity is being impacted in all sectors.As at the valuation date, we consider that we canattach less weight to previous market evidence

for comparison purposes, to inform opinionsof value. Indeed, the current response toCOVId-19 means that we are faced with anunprecedented set of circumstances on which tobase a judgement. Our valuations are thereforereported on the basis of ‘material valuationuncertainty’ per VpGA 10 of the RICSValuation – Global Standards. Consequently, lesscertainty – and a higher degree of caution –should be attached to our valuation than wouldnormally be the case. Given the unknown futureimpact that COVId-19 might have on the realestate market, we recommend that you keep thevaluation of the CCLA The Local Authorities’property fund under frequent review.

for the avoidance of doubt, the inclusion of the‘material valuation uncertainty’ declarationabove does not mean that the valuation cannotbe relied upon. Rather, the phrase is used inorder to be clear and transparent with all parties,in a professional manner that – in the currentextraordinary circumstances – less certainty canbe attached to the valuation than wouldotherwise be the case. The material uncertaintyclause is to serve as a precaution and does notinvalidate the valuation.

details of the basis of our valuation and theindividual properties are set out in ourvaluation report dated 31 march 2020.

yours faithfully,

Knight frank LLp20 July 2020



REPORT OF THE VALUERS

The European Union imposed legislation which sets out detailed guidelines for the calculation of therisk ratings of products to be portrayed through a summary risk indicator. It is intended to be a guideto the level of risk of this product compared to other products. It shows how likely it is that the productwill 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 riskindicator 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 arevery unlikely to impact the manager’s capacity to pay you. This classification is not guaranteed and maychange over time and may not be a reliable indication of the future risk profile of the fund. The lowestcategory does not mean risk free.

The summary risk indicator assumes investment in the fund for the RHp of five years. The actual riskcan 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 noalternative liquidity facility is promoted by the manager or a third party. property is recognised as anilliquid asset and is thus most suited to long-term investment. However, investors can request redemptionat any time and the fund normally deals on the last business day of each month. The fund does notinclude 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 deferredemptions 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 ofthe 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 SchemeInformation, which is available on the manager’s website or by request.



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 31.03.2020 31.03.2019 31.03.2018 31.03.2017 31.03.2016 pence pence pence pence pence per unit per unit per unit per unit per unit

Opening net asset value per unit 305.20 301.27 287.34 291.72 274.08Return before operating charges 5.10 20.29 30.38 11.62 34.13Operating charges (3.39) (3.28) (2.75) (2.81) (2.53)Return after operating charges 1.71 17.01 27.63 8.81 31.60distributions on income units (13.06) (13.08) (13.70) (13.19) (13.96)Closing net asset value per unit 293.85 305.20 301.27 287.34 291.72

PerformanceReturn after charges** 0.56% 5.65% 9.44% 3.02% 11.53%Gross yield*** 4.14% 4.00% 4.25% 4.29% 4.46%

Other informationClosing net asset value (£’000) 1,198,323 1,121,586 973,948 705,409 596,471Closing number of units 407,798,343 367,497,998 323,280,765 245,494,148 204,466,118

Prices (pence per unit)Highest unit price (offer) 328.16 329.35 322.40 315.17 312.67Lowest unit price (bid) 291.15 297.38 283.31 277.89 274.76

Annual management charge* 0.64% 0.61% 0.61% 0.63% 0.61%Other costs 0.07% 0.08% 0.07% 0.11% 0.13%Operating charges 0.71% 0.69% 0.68% 0.74% 0.74%

Other property costs 0.40% 0.40% 0.28% 0.22% 0.22%Total charges figure 1.11% 1.09% 0.96% 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 ischarged 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 thefund’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 previous12 months expressed as a percentage of the offer price at the year end.



COMPARATIVE TABLE



PORTFOLIO ANALYSIS

at 31 March 2020

Tenure31.03.2020 31.03.2019

£’000 % £ ’000 %

freehold or heritable 1,023,425 88.07 947,183 87.44Leasehold 138,650 11.93 136,050 12.56

1,162,075 100.00 1,083,233 100.00

Tenants’ unexpired lease terms 31.03.2020 31.03.2019

Unexpired term %* %*

Over 10 years 18.50 18.305-10 years 26.10 16.50Under 5 years 44.50 57.00Investment void 6.40 5.60development void 4.50 2.60

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 Capital31.03.2020 31.03.2019

£’000 % £ ’000 %

Completed properties 1,162,075 96.98 1,083,233 96.58Indirect investments 2,486 0.21 3,682 0.33net other assets 33,762 2.81 34,671 3.09

1,198,323 100.00 1,121,586 100.00

Largest top ten property holdings

Property % of fund

London, Beckton Retail park Retail Warehouses 4.78London, 3 Cathedral Street Offices/Shops 4.29London, 8 Kean Street Offices/Shops 4.17London, 1 Goodman’s yard Other 4.15London, 3 Longwalk Road Offices 3.22Elstree, Centennial park Industrial property 3.22Bristol, Kings Orchard Offices 3.01Leeds, 1 park Row Offices 2.92Bracknell, The Arena Offices 2.84Coventry, Torrington Avenue Industrial property 2.47

Asset by type Geographical distribution



PORTFOLIO ANALYSIS

at 31 March 2020

Portfolio turnover rateThe portfolio turnover rate gives an indication of how frequently assets are purchased and sold bythe fund.

31.03.2020 31.03.2019

portfolio turnover rate 0.51% 0.00%

The portfolio turnover rates are calculated by the total sales or purchases (excluding cash), whicheveris less, divided by average monthly assets during the year.

Rest of London 27.05%

South East 14.38%

East Midlands 10.77%

Yorkshire & Humberside 7.99%

City 6.43%

Eastern 6.38%

South West 6.36%

West Midlands 5.77%

North West 5.63%

Scotland 5.06%

West End 4.18%

Industrial & Warehouses 35.69%

O!ces 33.72%

Other 14.07%

Retail Warehouses 9.76%

Cash 3.44%

Shops 3.11%

Indirect 0.21%

Properties

Total in valuation ranges £’000 % of fund

Valued between £0 and £5m 43,650 3.6411 properties



Valued at over £25m 435,300 36.3211 properties

Other investments 2,486 0.21

net other assets 33,762 2.82Net assets 1,198,323 100.00

Ownership of the Fund

at 31 March 2020%

number number of of unitsof investors units in issue in issue

Less than 1% 229 205,077,211 50.291% or greater but less than 2% 14 75,445,392 18.502% or greater but less than 4% 7 73,917,678 18.134% or greater but less than 8% 1 19,879,891 4.87Greater than 8% 1 33,478,171 8.21

252 407,798,343 100.00Held by the largest investor 1 33,478,171 8.21Held by top 5 investors 5 91,594,693 22.46



PORTFOLIO STATEMENT

at 31 March 2020

Standard RetailLease Mkt value

Term/ review Next Rent rangeProperty Tenant from period review £ £m

84,85 & 86 East St River Island 3 yrs 0 yrs 2022 150,000 0-5CHICHESTER Clothing Co. Ltd 23.02.19

1 OSU LTd 1 yr 0 yrs 2020 48,00004.12.19

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

89-89A Broad Street Accessorize 25 yrs 5 yrs 2019 34,650 0-5REAdInG 25.08.94

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

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

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

Cryptonic Ltd 5 yrs 0 yrs 2024 45,00030.05.19



PROPERTY PORTFOLIO

at 31 March 2020

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

OfficesLease Mkt value


The Arena Epicor Software 11 yrs 5 yrs 2021/ 472,565 >25BRACKnELL (UK) Ltd 01.01.16 2027

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

milton Road AstraZeneca UK Ltd 10 yrs 0 yrs 2023 1,971,526 10-25CAmBRIdGE 28.11.13

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

SpX flow 10 yrs 5 yrs 2019/ 292,000Technology Ltd 19.06.14 2024

Rentokil Initial 10 yrs 5 yrs 2025 168,8101927 plc 05.06.15

Lakeview East & West Kuehne & nagel 10 yrs 5 yrs 2024/ 408,432 5-10dARTfORd 12.10.09 2029

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

HSBC Bank plc 10 yrs 5 yrs 2016/ 116,29823.05.11 2021

Crossways mazda motors 15 yrs 5 yrs 2020/ 588,500 10-25Business park UK Ltd 17.07.15 2030dARTfORd

9-10 Lochside place Regus (Edinburgh 24 yrs 5 yrs 2023/ 382,213 5-10EdInBURGH Lochside place) 27.02.01 2025

Bluefin Insurance 7 yrs 0 yrs 2019/ 56,380Services Ltd 14.07.14 2021

Spie Ltd 5 yrs 0 yrs 2021 40,00021.01.16



PROPERTY PORTFOLIO

at 31 March 2020


Offices (continued)Lease Mkt value


Edinburgh park Sainsbury’s Bank plc 15 yrs 5 yrs 2019/ 1,274,038 10-25EdInBURGH 19.02.14 2029

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

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

ICA Architects Ltd 10 yrs 5 yrs 2019/ 56,31215.12.14 2024

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

1 park Row pinset masons LLp 30 yrs 5 yrs 2019/ 1,685,000 >25LEEdS 30.07.99 2029

Vanwall Business park Consignor Ltd 5 yrs 0 yrs 2023 61,215 5-10mAIdEnHEAd 06.03.18

morgan mcKinley 10 yrs 5 yrs 2020/ 56,446Group Ltd 10.04.15 2025

pharmalink 3 yrs 0 yrs 2021 78,260Consulting Ltd 19.01.18

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

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

preact Ltd 10 yrs 5 yrs 2023/ 93,65219.10.18 2028



PROPERTY PORTFOLIO

at 31 March 2020




Castle Boulevard Buzz Group Ltd 10 yrs 5 yrs 2023/ 505,000 10-25nOTTInGHAm 01.08.18 2028

UpS Ltd 5 yrs 0 yrs 2024 252,54430.04.14

Interroute 10 yrs 0 yrs 2025 292,102Communications Ltd 01.12.15

Telefonica UK Ltd 15 yrs 0 yrs 2016 18,18608.03.01

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

Castle Street The Trustees 10 yrs 5 yrs 2022/ 46,152 0-5TAUnTOn of Unison 20.04.17 2027

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

Eden Brown Ltd 10 yrs 5 yrs 2022/ 21,30006.03.17 2027

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

newsquest media 10 yrs 5 yrs 2024/ 45,480Group Ltd 14.02.19 2029

Bruce W A Leyland 10 yrs 5 yrs 2024/ 20,700and Victoria 23.04.19 2029Louise Osborne



PROPERTY PORTFOLIO

at 31 March 2020




Warwick Rolls Royce plc 9 yrs 5 yrs 2021 402,950 10-25Technology park 09.07.12WARWICK

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

Alliance medical Ltd 10 yrs 5 yrs 2022 216,40024.04.12

Siemens plc 7 yrs 5 yrs 2021 216,40003.12.14

Warwick IBm UK Ltd 25 yrs 5 yrs 2024 655,000 5-10Technology park 25.03.99WARWICK

3 Longwalk Road marks & Spencer plc 16 yrs 5 yrs 2021/ 2,600,000 >25LOndOn 29.09.10 2026



PROPERTY PORTFOLIO

at 31 March 2020


Offices/ShopsLease Mkt value


8 Kean Street Wasabi Co Ltd 15 yrs 5 yrs 2022 135,000 >25LOndOn 17.07.07

pOd food Ltd 10 yrs 5 yrs 2021/ 135,00006.05.16 2026

Sweet Ventures Ltd 10 yrs 5 yrs 2024/ 30,70031.01.19 2029

Knotel 8 Kean Ltd 10 yrs 5 yrs 2023/ 332,37520.11.18 2028

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


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

Sphere digital 5 yrs 0 yrs 2020 148,940Recruitment Ltd 30.03.15

Thornton & Baines 10 yrs 5 yrs 2024 149,000Independent 21.01.14financial Advisors


Sphere digital 5 yrs 0 yrs 2020 116,985Recruitment Ltd 30.03.15

playbuzz UK Ltd 5 yrs 0 yrs 2023 257,15019.03.18

GdfC Services plc 5 yrs 0 yrs 2022 215,65916.12.17



PROPERTY PORTFOLIO

at 31 March 2020




Offices/Shops (continued)Lease Mkt value


8 Kean Street finance & Leasing 10 yrs 5 yrs 2023/ 3,978LOndOn (continued) Association 18.02.18 2028


AC priggen & 10 yrs 0 yrs 2028 1,500Tp Gale 09.01.18

dX network 10 yrs 5 yrs 2025 1,500Services Ltd 26.07.10

Huntress Search Ltd 15 yrs 0 yrs 2022 6,88810.09.07






34 Threadneedle Replete Ltd 30 yrs 5 yrs 2022/ 177,500 5-10Street 29.09.07 2037LOndOn

Replete Ltd 24 yrs 0 yrs 2018/ 57,12019.07.13 2037

City Career 10 yrs 5 yrs 2023/ 47,581management Ltd 15.08.18 2028

PROPERTY PORTFOLIO

at 31 March 2020




34 Threadneedle Emmaus Consulting 5 yrs 0 yrs 2024 90,000Street Ltd 05.08.19LOndOn

professional Assured 10 yrs 5 yrs 2020 58,000(continued)financial Services Ltd 26.11.10

mssrs mcCredie, 5 yrs 0 yrs 2022 50,000Hayden Hale, mcCus 29.09.17

3 Cathedral Street nero Holdings Ltd 15 yrs 1 yr 2019/ 150,000 >25LOndOn 11.06.07 2022

Kaplan Estates Ltd 15 yrs 5 yrs 2022/ 148,92504.06.17 2032




Kaplan EstatesLtd 14 yrs 5 yrs 2022/ 565,61601.09.18 2032


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



PROPERTY PORTFOLIO

at 31 March 2020




157-159 fenchurch Tm Lewin and 15 yrs 5 yrs 2022 368,000 10-25Street Sons Ltd 20.02.07LOndOn

O2 (UK) Ltd 10 yrs 5yrs 2016 3,85117.07.06

EE Ltd 10 yrs 5 yrs 2020/ 4,42823.07.15 2025

Central Bank of the 10 yrs 5 yrs 2020 122,000Republic of Turkey 10.08.10

Bircroft Insurance 10 yrs 5 yrs 2020/ 122,265Services Ltd 25.03.10 2035

If p & C 5 yrs 0 yrs 2024 122,100Insurance Ltd 24.08.14

Resolute Asset 6 yrs 0 yrs 2023 122,265management LLp 01.11.17

Resolute Asset 5 yrs 0 yrs 2023 105,325management LLp 21.06.18



PROPERTY PORTFOLIO

at 31 March 2020


Industrial PropertyLease Mkt value


Aker Solutions Village mW Wirth Ltd 2 yrs 0 yrs 2022 258,000 0-5ABERdEEn 20.12.17

peregrine Road IKm Testing facility 15 yrs 5 yrs 2019/ 318,606 0-5ABERdEEn (UK) Ltd 17.03.14 2029

peregrine Road Halliburton 15 yrs 0 yrs 2023 264,750 0-5ABERdEEn manufacturing 02.06.08

and Services Ltd

The Boulevard menzies 10 yrs 5 yrs 2021/ 252,688 5-10ASHfORd distribution Ltd 25.03.16 2026

Unit 16 Junction Six BSS Group plc 15 yrs 5 yrs 2020 592,905 10-25BIRmInGHAm 04.02.05

BSS Group plc 13 yrs 0 yrs 2020 30,00015.08.07

Great Bank Road Tesco Stores Ltd 4 yrs 0 yrs 2021 1,395,000 10-25BOLTOn 01.01.17

Huntsworth Rochpion properties 21 yrs 5 yrs 2017/ 622,275 5-10Business park (4) Ltd 06.11.02 2023BRIdGWATER

plot 5 Interlink park mTS Logistics Ltd 5 yrs 0 yrs 2020 388,375 5-10COALVILLE 15.05.15

Torrington Avenue peugeot motor 15 yrs 3 yrs 2019/ 1,432,631 >25COVEnTRy Company plc 13.12.13 2028

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

pioneer Business park novar E d & S Ltd 10 yrs 5 yrs 2024/ 1,112,585 10-25ELLESmERE pORT 08.11.19 2029



PROPERTY PORTFOLIO

at 31 March 2020


Industrial Property (continued)Lease Mkt value


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

Entel UK Ltd 5 yrs 0 yrs 2024 111,60021.07.09

Entel UK Ltd 5 yrs 0 yrs 2024 112,30021.07.09

Secomak Ltd 10 yrs 5 yrs 2021/ 115,00006.02.16 2026

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

Sensornet Ltd 10 yrs 5 yrs 2021/ 168,55002.02.16 2026

Apatech Ltd 10 yrs 5 yrs 2024/ 241,25014.12.19 2029

Apatech Ltd 10 yrs 5 yrs 2024/ 241,75014.12.19 2029

Apatech Ltd 15 yrs 0 yrs 2019 133,32513.12.04

masters 5 yrs 0 yrs 2020 130,650pharmaceuticals Ltd 24.08.15

Lumenis (Uk) Ltd 10 yrs 5 yrs 2023/ 77,50015.05.18 2028

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

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



PROPERTY PORTFOLIO

at 31 March 2020



Term/ review Next Rent rangeProperty from period review £ £m

Cardinal north Co-operative 25 yrs 5 yrs 2019 562,067 5-10HUnTInGdOn foodstores Ltd 09.08.94

Stadium Gate mailing and marketing 20 yrs 20 yrs 2024/ 178,375 0-5LEEdS Solutions Ltd 11.02.19 2039

Leeds 27 AAH pharmaceuticals 5 yrs 0 yrs 2023 365,000 10-25Industrial Estate 25.03.18LEEdS

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

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

Apleona HSG Ltd 10 yrs 5 yrs 2020 139,09526.04.10

Aptar UK Ltd 5 yrs 0 yrs 2020 170,00020.03.15

nobia Holdings 5 yrs 0 yrs 2017 230,000UK Ltd 24.06.12

nobia Holdings 25 yrs 0 yrs 2019 260,000UK Ltd 08.06.94

Watermill Business nSL Ltd 11 yrs 5 yrs 2017/ 95,000 10-25Centre 01.09.12 2023LOndOn

dW Spinks 5 yrs 0 yrs 2024 129,300(Embossing) Ltd 22.12.09

Eyre & Elliston Ltd 10 yrs 5 yrs 2021/ 33,70011.05.16 2026

Riel Chyc (UK) Ltd 5 yrs 0 yrs 2020 32,50029.08.15



PROPERTY PORTFOLIO

at 31 March 2020




Watermill Business Eurocell Building 5 yrs 0 yrs 2020 32,140Centre plastics Ltd 25.12.15LOndOn (continued)

B C Services Ltd 5 yrs 0 yrs 2021 37,00027.04.16

Holemasters 10 yrs 5 yrs 2019/ 27,000demtech Ltd 10.06.14 2024

Chevron distribution 4 yrs 0 yrs 2020 19,268Ltd 22.12.16

Gamma Systems Ltd 5 yrs 0 yrs 2020 17,50020.03.15

Bushfire Ltd 5 yrs 0 yrs 2021 19,10025.03.16

Spie facilities Ltd 10 yrs 5 yrs 2021/ 61,60025.03.16 2026

print4uk Ltd 5 yrs 0 yrs 2021 34,16001.11.16

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 10-25LOndOn 02.09.11 2026

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

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

Eurocell Group Ltd 5 yrs 0 yrs 2022 35,75002.10.17



PROPERTY PORTFOLIO

at 31 March 2020




Clayton Business TfS Handling 10 yrs 5 yrs 2023 37,500Centre (UK) Ltd 13.08.13LOndOn (continued)

Luxwood Bespoke 10 yrs 5 yrs 2021/ 27,198Joinery Ltd 10.05.16 2026

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

Sky 15 yrs 5 yrs 2020/ 67,505Telecommunications 22.09.15 2030Services Ltd

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

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

Garamonde drive Apex Space 25 yrs 5 yrs 2022/ 755,110 10-25mILTOn KEynES Solutions Ltd 17.10.17 2042

motherwell Bridge mB Engineering 25 yrs 5 yrs 2022/ 134,389 5-10mOTHERWELL Services Ltd 19.04.07 2032

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

mB Aerospace Ltd 25 yrs 5 yrs 2022/ 201,58419.04.07 2032



PROPERTY PORTFOLIO

at 31 March 2020




Brackmills Stertil UK Ltd 10 yrs 5 yrs 2019/ 76,585 5-10Business park 25.03.14 2024nORTHAmpTOn

Concorde Tyre & 10 yrs 5 yrs 2019/ 90,000Exhaust Centres Ltd 17.04.14 2024

Bourbon Automotive 5 yrs 0 yrs 2024 172,128plastics northampton 26.06.19Ltd

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

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

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

Brackmills 192 Uniserve Holdings 10 yrs 5 yrs 2023/ 1,086,428 10-25nORTHAmpTOn Ltd 04.05.18 2028

Cray Avenue Carpetright plc 15 yrs 5 yrs 2020 88,000 10-25ORpInGTOn 29.09.05

Tile magic Ltd 15 yrs 5 yrs 2020 53,94029.09.05

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

Crown paints Ltd 15 yrs 0 yrs 2020 41,56429.09.05

Experteffect Ltd 15 yrs 0 yrs 2020 90,40029.09.05



PROPERTY PORTFOLIO

at 31 March 2020




Cray Avenue Carpets 4 All Ltd 15 yrs 5 yrs 2018/ 143,451ORpInGTOn 10.07.08 2023(continued)

Toolstation Ltd 15 yrs 5 yrs 2018/ 68,43210.07.08 2023

Giant floors Ltd 5 yrs 0 yrs 2020 23,48013.11.15

Kula Homes Ltd 5 yrs 0 yrs 2020 23,82104.12.15

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

Teamframes Ltd 10 yrs 5 yrs 2019/ 22,10030.10.14 2024

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

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

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

Alpha park Cath Kidson Ltd 10 yrs 0 yrs 2020 424,500 10-25ST nEOTS 16.04.10

Applehill properties 5 yrs 0 yrs 2020 450,000Ltd 02.07.15

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

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



PROPERTY PORTFOLIO

at 31 March 2020




Winwick Quay Vacant – – – – 5-10WARRInGTOn

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

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

70 Sinclair drive IfCO Systems 10 yrs 5 yrs 2023/ 605,000 10-25WELLInGBOROUGH UK Ltd 12.02.18 2028



PROPERTY PORTFOLIO

at 31 March 2020


Retail WarehousesLease Mkt value


Goodliffe park Wickes Building 42 yrs 5 yrs 2021/ 517,110 5-10BISHOpS Supplies Ltd 29.09.89 2031STORTfORd

Gallagher Retail park B&Q plc 25 yrs 5 yrs 2023 1,730,000 10-25BRISTOL 29.09.98

dSG Retail Ltd 10 yrs 5 yrs 2023 292,60024.05.13

Wincheap Retail park mothercare UK Ltd 30 yrs 5 yrs 2021/ 317,811 5-10CAnTERBURy 24.06.96 2026

Boots UK Ltd 10 yrs 5 yrs 2021/ 143,70012.04.16 2026

Argos Ltd 15 yrs 5 yrs 2023 237,83301.04.08

The Carphone 15 yrs 5 yrs 2016/ 45,000Warehouse Ltd 06.03.06 2021

Tewkesbury Road CdS (Superstores 35 yrs 5 yrs 2015/ 510,000 5-10CHELTEnHAm International) Ltd 14.06.85 2020

Victoria Street north CdS (Superstores 20 yrs 5 yrs 2020/ 292,952 0-5GRImSBy International) Ltd 25.03.15 2035

Beckton Retail park Iceland food Ltd 10 yrs 5 yrs 2018/ 125,000 >25LOndOn 15.07.13 2023

fresh Bazar Ltd 6 yrs 0 yrs 2023 202,80022.11.17

multi-Tile Ltd 10 yrs 5 yrs 2022 135,00029.09.12

poundstretcher Ltd 20 yrs 5 yrs 2021 115,00009.01.01



PROPERTY PORTFOLIO

at 31 March 2020


Retail Warehouses (continued)Lease Mkt value


Beckton Retail park TJ morris Ltd 15 yrs 5 yrs 2018/ 250,000LOndOn (continued) 09.09.13 2028

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

dreams Ltd 20 yrs 5 yrs 2018/ 150,00029.09.03 2023

Lituanica UK Ltd 15 yrs 5 yrs 2013/ 144,54017.07.08 2023

fresh Bazar Ltd 4 yrs 0 yrs 2023 98,18220.09.19

matalan Retail Ltd 20 yrs 5 yrs 2020 514,08505.10.00

Lituanica UK Ltd 7 yrs 0 yrs 2023 10,00019.12.16

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

Albion mills dSG Retail Ltd 20 yrs 5 yrs 2020 206,500 5-10Retail park t/a pC World 29.09.00WAKEfIELd

Wickes Building 25 yrs 5 yrs 2015/ 602,325Supplies Ltd 25.05.05 2030

Developments

7 Roundwood Vacant – – – – 10-25AvenueWEST LOndOn



PROPERTY PORTFOLIO

at 31 March 2020


OtherLease Mkt value


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

Bickley Road dC management 18 yrs 5 yrs 2023/ 457,500 5-10BROmLEy Services Ltd 31.12.15 2033

Locomotive Way derby College 20 yrs 5 yrs 2019/ 960,066 10-25dERBy 20.10.09 2029

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

A10 Great dC management 18 yrs 5 yrs 2023/ 710,000 10-25Cambridge Road Services Ltd 31.12.15 2033LOndOn

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

UK Broadband Ltd 20 yrs 5 yrs 2019/ 6,18930.09.14 2034

Everything 13 yrs 0yrs 2018/ 11,154Everywhere Ltd 21.12.07 2020

duke of Wellington dC management 18 yrs 5 yrs 2023/ 340,000 5-10Avenue Services Ltd 31.12.15 2033LOndOn

Queens drive Car Shops Ltd 20 yrs 5 yrs 2024/ 1,100,000 10-25nOTTInGHAm 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 2038REAdInG

maidstone Road dC management 18 yrs 5 yrs 2023/ 450,000 5-10SIdCUp Services Ltd 31.12.15 2033



PROPERTY PORTFOLIO

at 31 March 2020


Year ended year ended31.03.2020 31.03.2019

Notes £’000 £’000 £ ’000 £’000

net capital (losses)/gains 2 (54,159) 3,868Revenue 3 66,561 60,961Expenses 4 (15,553) (15,507)finance Costs: Interest 6 – (15)net revenue before taxation 51,008 45,439Taxation 5 (16) (23)net revenue after taxation 50,992 45,416Total return before distributions (3,167) 49,284finance costs: distributions 6 (50,992) (45,416)Change in net assets attributable tounitholders from investment activities (54,159) 3,868

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS



£’000 £’000 £ ’000 £’000

Opening net assets attributable to unitholders 1,121,586 973,948Amounts receivable on issue of units 131,042 144,018Amounts payable on cancellation of units (146) (248)

130,896 143,770Change in net assets attributable tounitholders from investment activities (54,159) 3,868Closing net assets attributable to unitholders 1,198,323 1,121,586

The notes on pages 48 to 59 and the distribution table on page 60 form part of these financial statements.



STATEMENT OF TOTAL RETURN


31.03.2020 31.03.2019Notes £’000 £’000 £ ’000 £’000

ASSETSInvestment assets 7 1,156,871 1,081,381debtors 8 14,965 10,081Cash and bank balances 9 6,602 12,303Cash equivalents 9 49,000 44,000Total other assets 70,567 66,384Total assets 1,227,438 1,147,765

LIABILITIESCreditors 10 16,001 14,202distribution payable on income units 13,114 11,977Total liabilities 29,115 26,179Net assets attributable to unitholders 1,198,323 1,121,586

The financial statements on pages 45 to 59 were approved on behalf of the Trustee by R Kemp CBE,Chairman, on 20 July 2020.




BALANCE SHEET

at 31 March 2020


Notes £’000 £’000 £ ’000 £’000

net cash inflow from operating activities 17 47,923 42,529

Servicing of financedistributions paid (49,855) (43,618)

Taxation (16) (23)

Net cash outflow from investment activitiesCapital expenses (10,909) (4,674)payments to acquire investments (124,440) (159,233)proceeds on disposal of investments 5,700 –

(129,650) (163,907)Net cash inflow from financing activitiesIssue of units 16 131,042 144,018Cancellation of units 16 (146) (248)drawdown of loan – 12,000Repayment of loan – (12,000)

130,896 143,770decrease in cash (701) (21,249)




CASH FLOW STATEMENT


1. Accounting policies(a) Basis of preparationThe financial statements have been prepared on a going concern basis, in compliance with fRS 102and 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 byrevaluation of investment property.

(b) Revenue recognitionRental revenue, interest on bank deposits and The public Sector deposit fund are accrued on amonthly basis. dividends on unit trusts are accrued on the dates when the investments are firstquoted 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 areamortised over the entire term of the lease.

(c) Expensesduring the year, the manager’s periodic charge, paid by the Trustee to the manager and rechargedto the fund, was deducted from revenue of the fund before distribution. The fee is based on afixed 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 coversthe 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 fundor by the Trustee and recharged to the revenue of the fund before distribution.

(d) Distributionsdistributions are prepared quarterly and paid one month after each quarter end. Each month therevenue is applied to unitholders in the fund and no revenue is included in the unit price. A netdistribution is paid after deduction of expenses.

(e) Capitalised costsAll 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 deductedfrom revenue.



NOTES TO THE FINANCIAL STATEMENTS


1. Accounting policies (continued)(f) Basis of valuationfreehold and leasehold properties are valued at each month end, on the basis of fair Value inaccordance with the current RICS Appraisal and Valuation Standards (The Red Book) as advisedby Knight frank LLp, Chartered Surveyors. In addition, the manager reviews these values at eachintervening month end and makes adjustments where necessary. Additions to the portfolio arevalued externally after acquisition. The UK Retail Warehouse fund is valued monthly as advisedby nuveen property management (Jersey) Limited. (please refer to note 20 for more details.)

from the end of march 2020 property valuers have provided their valuations with a materialvaluation uncertainty clause attached.

(g) Unit pricing policyThe fund follows AREf ’s fund pricing recommendations and is priced at the Standard nAV. Anyadjustments around the mid price (Bid/Offer) would follow AREf ’s fund pricing recommendationsas required.

(h) Cash equivalentsThe manager has treated some assets as Cash equivalents for the purposes of the Balance Sheetdisclosure. 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 (losses)/gainsYear ended year ended31.03.2020 31.03.2019

£’000 £’000

The net capital (losses)/gains during the period comprise:Unrealised (losses)/gains on investment properties* (52,001) 4,695Unrealised losses on collective investment schemes* (1,196) (815)Realised losses on investment properties* (962) (12)

net capital (losses)/gains (54,159) 3,868

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





3. RevenueYear ended year ended31.03.2020 31.03.2019

£’000 £’000

Rental revenue 62,417 56,414Service charge income 3,047 4,016Other revenue 563 14Income from collective investment schemes 228 239Interest on The public Sector deposit fund 196 208Bank interest 110 70

66,561 60,961

4. ExpensesYear ended year ended31.03.2020 31.03.2019

£’000 £’000

i) property expenses:Services charge expenses 4,050 5,042property ground rent and empty rates 2,034 1,868Other property outgoings 828 608property legal and professional fees 400 576property repairs and maintenance 224 122property valuation fees 163 151Loan administration fees 91 301

7,790 8,668







4. Expenses (continued)Year ended year ended31.03.2020 31.03.2019

£’000 £’000

ii) management expenses:payable to The Local Authorities’ mutual Investment Trust:manager’s periodic charge – see note 1(c) 7,233 6,459Bad debt 347 227miscellaneous expenses 58 13Investment property database fee 47 39Insurance fee 21 30Legal fees 18 30Audit fee 18 17depositary fee 15 15Taxation fees 6 9

7,763 6,839

Total expenses 15,553 15,507

The above expenses include irrecoverable VAT where applicable.

5. TaxationThe fund is not subject to capital gains tax. The fund was approved as an exempt unauthorisedunit trust on 1 April 2014 and is not subject to income tax from this date. prior to this, the fundwas subject to income tax at the basic rate.


£’000 £’000

Income tax 16 23

Income tax is calculated as follows:prior year tax adjustment 16 23

Income tax 16 23



6. Finance Costs: interest and distributionsDistributionsdistributions take account of revenue received on the issue of units and revenue deducted on thecancellation of units, and comprise:


£’000 £’000

30 June – interim distribution 11,957 10,91930 September – interim distribution 13,288 10,87631 december – interim distribution 12,633 11,64431 march – final distribution 13,114 11,977

distribution for the year 50,992 45,416

InterestInterest for the year – 15

Total finance costs 50,992 45,431

net revenue for the year 50,992 45,416

net distribution for the year 50,992 45,416

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 2020 (31.03.2019: nil)

7. Investment assetsYear ended year ended31.03.2020 31.03.2019

£’000 £’000

market value at the start of the year 1,081,381 913,606Acquisitions at cost 124,440 159,233Capitalised expenses 10,909 4,674disposals at cost (6,662) (12)Unrealised (losses)/gains on revaluation (53,197) 3,880

market value at the end of the year 1,156,871 1,081,381

Historical cost at the end of the year 1,179,810 1,051,136





8. DebtorsYear ended year ended31.03.2020 31.03.2019

£’000 £’000

property incentives 7,690 5,535Rents receivable 6,805 4,000property payments recoverable 350 413Accrued revenue 120 124due from The Local Authorities’ mutual Investment Trust – 4prepayments – 5

14,965 10,081

9. Cash and bank balances and Cash equivalentsYear ended year ended31.03.2020 31.03.2019

£’000 £’000

Cash in The public Sector deposit fund 49,000 44,000

Cash at bank 6,602 12,303

Total cash 55,602 56,303

10. CreditorsYear ended year ended31.03.2020 31.03.2019

£’000 £’000

Rent received in advance 13,514 11,975VAT payable 1,265 1,662Accrued expenses 1,204 565due to The Local Authorities’ mutual Investment Trust 18 –

16,001 14,202

11. LoansThe fund has available an overdraft facility of £40m (2019: £30m). Unutilised rolling creditfacility has been withdrawn during the year to 31 march 2020 (2019: £30m). Total borrowingat the end of the year was £nil (2019: £nil). fund has not exceeded the maximum permittedlevel of gearing.





12. Financial instrumentsThe main risks arising from the fund’s financial instruments and manager’s policies for managingthese risks are summarised below. These policies have been applied throughout the year and thecomparative year.

Market price riskWhilst the value of direct property is independently valued on a monthly basis, such valuationsare a matter of the valuer’s opinion and such values may or may not be achieved on disposal. Thefund seeks to minimise the impact of these risks by maintaining a well diversified propertyportfolio, both geographically and by sector.

following the collapse of economic and property market activity as a result of the ongoingCOVId-19 health crisis and the UK Government containment policies, from the end of march2020 property valuers have provided their valuations with a material valuation uncertainty clauseattached. This is a matter of disclosure, for anybody seeking to rely on those valuations and thepricing of the funds. pricing uncertainty also means values overall are now likely to fall morewidely and, unusually for the sector, income receipts will become unreliable, and at best somerents will be delayed, whilst some others may be lost entirely in the months ahead.

At 31 march 2020, if the value of investment held by the fund increased or decreased by 5%, withall other variables remaining constant, then the net assets attributable to unitholders, and profit orloss, would increase or decrease respectively by approximately £57.84m (31.03.2019: £54.07m).

Financial assetsAll 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 liabilitiesUnder the Scheme of the fund, the manager may borrow a maximum of 25% of the value of theproperty of the fund to assist with investing in, improvements to, or the managing of propertyand the short-term financing of, or meeting payments to be made out of the fund.





12. Financial instruments (continued)Liquidity riskBy their very nature, direct properties are less liquid and therefore the investments may not bereadily 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 theredemption of units. The units are realisable only on each monthly dealing day.

Currency riskThere is no exposure to foreign currency fluctuations as all investments, revenue and short termdebtors and creditors are denominated in sterling.

Interest rate riskThe majority of the fund’s assets are direct property investments and therefore do not pay interestor have maturity dates. As a consequence any changes in interest rates will not significantly affectthe fund, except in so far as they affect rental levels generally. The fund also invests in cashdeposits, the revenue of which may be affected by changes to interest rates. A sensitivity analysisfor interest rate risk is not shown as the impact is unlikely to be significant.

The total exposure at 31 march 2020 was:

Financial assetsFloating rate Fixed rate not carrying

financial assets* financial assets interest TotalCurrency £’000 £’000 £’000 £’000

Sterling 55,602 – 1,171,836 1,227,438

FinancialFloating rate Fixed rate liabilities

financial financial not carryingliabilities liabilities interest Total

Currency £’000 £’000 £’000 £’000

Sterling – – 29,115 29,115





12. Financial instruments (continued)Interest rate risk (continued)The total exposure at 31 march 2019 was:

financial assetsfloating rate fixed rate not carrying

financial assets* financial assets interest TotalCurrency £’000 £’000 £’000 £’000

Sterling 56,303 – 1,091,462 1,147,765

financialfloating rate fixed rate liabilities

financial financial not carryingliabilities 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 interestrate of The public Sector deposit fund.

There were no derivatives held by the fund as at 31 march 2020 (31.03.2019, £nil).

13. Commitments and contingent liabilitiesThere were no contingent liabilities as at 31 march 2020 (31.03.2019, £nil). At 31 march 2020there were no redemption notices outstanding (31.03.2019, nil units).

14. Trustee remunerationThe Trustee is controlled by the members of the Council who receive no remuneration fromthe fund.

15. Related party transactionsmanagement expenses are payable to the Trustee, a related party to the fund. The amounts paidin respect of management expenses are disclosed in note 4. A balance of £18,120 was due to theTrustee at 31 march 2020 (31.03.2019, £nil). There were outstanding balances due from theTrustee at 31 march 2020 of £nil (31.03.2019, £4,409).

mr d murphy (northern Ireland Local Government Officers’ Superannuation Committee) is amember of the Council and the Trust, he resigned on 23 September 2019.





16. Turnover of unitsThe number and net asset value of units in the fund issued, cancelled and transferred in the yearto 31 march 2020 was as follows:

Number Valueof units £’000 % of NAV

Units issued 40,349,229 131,042 10.94%Units cancelled 48,884 146 0.01%

year to 31 march 2019 was as follows:

number Valueof units £’000 % of nAV

Units issued 44,299,455 144,018 12.84%Units cancelled 82,222 248 0.02%

At 31 march 2020 there were no redemption notices outstanding (31 march 2019, nil).

17. Reconciliation of net cash inflow from operating activitiesYear ended year ended31.03.2020 31.03.2019

£’000 £’000

net revenue for the year before taxation 51,008 45,439Increase in creditors 1,799 2,300Increase in debtors (2,079) (2,130)Increase in accrued revenue (2,805) (3,080)

net cash inflow from operating activities 47,923 42,529

18. Reconciliation of net cash flow to movement in cash balancesYear ended year ended31.03.2020 31.03.2019

£’000 £’000

net cash at beginning of the year 56,303 77,552movement in cash during the year (701) (21,249)

net cash at the end of the year 55,602 56,303





19. Unitholders’ funds – reconciliation of unitsYear ended year ended31.03.2020 31.03.2019

Income Incomeunits units

Opening number of units at beginning of year 367,497,998 323,280,765Units issued in year 40,349,229 44,299,455Units cancelled in year (48,884) (82,222)

Closing number of units at end of year 407,798,343 367,497,998

20. Fair value of financial assets and financial liabilitiesIn respect of financial assets and liabilities other than investments, there is no material differencebetween 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 fromvaluation techniques using non-observable data.

The fund’s freehold and leasehold investment properties were independently valued by Knightfrank LLp, Chartered Surveyors, acting in the capacity of external valuers. As described in note1(f), the valuation was to fair value in accordance with the professional Standards of The RoyalInstitution of Chartered Surveyors (the ‘Red Book’). Knight frank LLp’s opinions were primarilyderived from comparable recent market transactions on arm’s length terms. The manager discussesthese valuations with Knight frank LLp at least once every quarter to assess them.

from the end of march 2020 property valuers have provided their valuations with a materialvaluation uncertainty clause attached.

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 thatthe entity can access at the measurement date

Level 2 Inputs other than quoted prices included above that are observable (i.e. developed usingmarket 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





20. Fair value of financial assets and financial liabilities (continued)for the year ended 31 march 2020:

Level 1 Level 2 Level 3 TotalCategory £’000 £’000 £’000 £’000

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

– – 1,156,871 1,156,871

for the year ended 31 march 2019:

Level 1 Level 2 Level 3 TotalCategory £’000 £’000 £’000 £’000

Investment property – – 1,081,381 1,081,381

– – 1,081,381 1,081,381





dividends paid/payableperiod ended date paid/payable pence per unit

2020 2019

Income units30 June 31 July 3.15 3.2830 September 31 October 3.45 3.1731 december 31 January 3.21 3.3231 march 30 April 3.25 3.31

13.06 13.08

The distributions for income units were paid in the same year, apart from the distribution declared on31 march, which is payable on 30 April in the subsequent year.



DISTRIBUTION TABLE


Manager RemunerationThe manager has no employees, but delegates the performance of its services to employees of itsparent company, CCLA Investment management Limited.

Recharges for the services of CCLA Im to the manager are levied in respect of the year ending on31 march each year. The recharge for the year to 31 march 2020 was £28,700,000. A recharge of£24,000,000 was levied in the year to 31 march 2019.

The average number of full time equivalent staff of CCLA Im, including temporary staff, for the yearended 31 march 2020 was 137 (year ended 31 march 2019: 124).

during the year ended 31 march 2020 and the prior year, remuneration was paid to CCLA Im staffas 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 2020 year to 31 march 2019 Fixed Variable fixed Variable remuneration remuneration Total remuneration remuneration Total £000 £000 £000 £000 £000 £000

Identified staff 1,264 3,346 4,610 1,190 1,651 2,841Other staff 10,159 4,298 14,457 8,876 3,412 12,288

Total 11,423 7,644 19,067 10,066 5,063 15,129

Remuneration above is the total remuneration for CCLA Im; it is not possible to separate the elementof that relating only to this fund. The components of remuneration are appropriately balanced and donot create a conflict of interest for the fund.



AIFMD DISCLOSURES (UNAUDITED)



Members of the Council and the TrustChairmanR Kemp CBE

SecretaryJ fox

Local Government AssociationR Kemp CBE (Acting Chairman) T BeattieE Eyre – resigned 23 September 2019p findlow – resigned 23 September 2019 A naylor – appointed 19 february 2020 C noble – appointed 27 April 2020S pickup OBEJ Rhodes – resigned 2 march 2020

Northern Ireland Local Government Officers’Superannuation Committeed murphy – resigned 23 September 2019

Unitholder Memberp Clokie OBE

The ManagerCCLA fund managers LimitedAuthorised and regulated by the Financial Conduct AuthoritySenator House, 85 Queen Victoria StreetLondon EC4V 4ETTelephone: 0207 489 6000Client Service:freephone: 0800 022 3505Email: [email protected]

Investment Manager, Adminstrator and RegistrarCCLA Investment management LimitedAuthorised and regulated by the Financial Conduct AuthoritySenator House, 85 Queen Victoria StreetLondon EC4V 4ETTelephone: 0207 489 6000Client Service:freephone: 0800 022 3505Email: [email protected]

Directors responsible for the Fundp Hugh Smith (Chief Executive) –appointed 8 July 2019m Quicke OBE (Chief Executive) – retired 5 July 2019J Bevan (Chief Investment Officer)E Sheldon (Chief Operating Officer) A Robinson mBE (director market development)

Head of Propertyp Hannam

Company SecretaryJ fox

Head of AssuranceR plumridge – resigned 31 January 2020Jp Lim – appointed 1 may 2020

Third party AdvisersExternal Property ValuerKnight frank LLp55 Baker StreetLondon W1U 8An

Managing AgentBnp paribas Real Estate5 Aldermanbury SquareLondon EC2V 7Bp

DepositaryHSBC Bank plc8 Canada SquareLondon E14 5HQ

BankerHSBC Bank plc60 Queen Victoria StreetLondon EC4n 4TR

Solicitorsfarrer & Co LLp66 Lincoln’s Inn fieldsLondon WC2A 3LH

Hogan Lovells LLpAtlantic House, Holborn ViaductLondon EC1A 2fG

dLA piper Scotland LLpCollins HouseRutland SquareEdinburgh EH1 2AA

Independent AuditorspricewaterhouseCoopers LLp7 more London RiversideLondon SE1 2RT

TRUSTEE AND MANAGER

CCLA fund managers Limited (Registered in England and Wales no. 8735639) andCCLA 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 4ETT: 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 powerof investment markets. This requires us to provide a supportive and stable environment forour staff and deliver trusted, responsibly managed and strongly performing products and

services to all organisations, irrespective of their size.

Documents

THE LOCAL AUTHORITIES’ pROpERTy fUnd AnnUAL REpORT And ... · 12 months expressed as a percentage of the offer price at the year end. THE LOCAL AUTHORITIES’ PROPERTY FUND