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Aegon Asset Management UK Investment Portfolios ICVC (Formerly Kames Capital Investment Portfolios ICVC) Interim Report and Financial Statements for the period from 1 April 2020 to 30 September 2020 (unaudited)
Aegon Asset Management UK Investment Portfolios ICVC 1
Aegon Asset Management UK Investment Portfolios ICVC
Contents
Company Information* 2
Report of the Authorised Corporate Director* 3
Statements of Responsibility 4
Authorised Corporate Director's statement* 4
Independent Valuer's Report 5
Aegon Property Income Fund impact of Covid-19 6
Aegon Property Income Fund suspension of dealing 6
Aegon Property Income Fund Financial Statements* 7
Further Information* 19
*Collectively these comprise the Authorised Corporate Directors' Report. Information specific to the Fund is detailed within its respective section.
Aegon Asset Management UK Investment Portfolios ICVC 2
Aegon Asset Management UK Investment Portfolios ICVC
Company Information
Authorised Corporate Director (ACD), Depositary
Investment Manager Citibank Europe plc, UK Branch
4
Aegon Asset Management UK plc 1, 2, 3
Citigroup Centre
3 Lochside Crescent Canada Square
Edinburgh Canary Wharf
EH12 9SA London
E14 5LB
Directors of the ACD
Custodian
Arnab Banerji (independent non-executive director)5
Jane Daniel Citibank N.A. London Branch 2
Stephen Jones Citigoup Centre
Mary Kerrigan (independent non-executive director)6 Canada Square
Bas NiueweWeme (non-executive director)7 Canary Wharf
David Watson (independent non-executive director) London
E14 5LB
Secretary of the ACD
Gordon Syme Independent Auditors
Registrar PricewaterhouseCoopers LLP
Atria One
Northern Trust Global Services SE UK Branch 2 144 Morrison Street
50 Bank Street Edinburgh
London EH3 8EX
E14 5NT
Property Manager Independent Valuer
Savills (UK) Limited CBRE Limited
33 Margaret Street Henrietta House
London Henrietta Place
W1G 0JD London
W1G 0NB
1 In September 2020 Aegon Asset Management completed a rebranding exercise to align all of its brands, including Kames Capital, and a new governance structure has been put in place.
2 Authorised and regulated by the Financial Conduct Authority.
3 ACD changed from Kames Capital plc to Aegon Asset Management UK plc on 4 September 2020.
4 Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
5 Arnab Banerji resigned as a Director of Aegon Asset Management UK plc on 25 September 2020.
6 Mary Kerrigan was appointed as a Director of Aegon Asset Management UK plc on 24 September 2020.
7 Bas NiueweWeme was appointed as a Director of Aegon Asset Management UK plc on 6 March 2020.
Aegon Asset Management UK Investment Portfolios ICVC 3
Aegon Asset Management UK Investment Portfolios ICVC
Report of the Authorised Corporate Director
The Company
Aegon Asset Management UK Investment Portfolios ICVC (the "Company") is an Open-Ended Investment Company (OEIC) with variable capital, Non-UCITS
Retail Scheme (NURS), and has Property Authorised Investment Fund (PAIF) status, as defined in Part 4A of the Tax Regulations and the Glossary to the
FCA Handbook, incorporated in England on 26 February 2014. It is governed by the OEIC Regulations, the Collective Investment Schemes sourcebook
(COLL) and its Instrument of Incorporation. The registered number of the Company is IC000988.
The shareholders have no interest in the Scheme Property, and are not liable for the debts of the Company.
The Company is an umbrella company with one sub-fund trading as at 30 September 2020. The number of sub-funds may be increased or decreased in the
future.
Authorised Status
The Company is a Collective Investment Scheme as defined in the Financial Services and Markets Act 2000 which is categorised as a Non-UCITS Retail
Scheme (NURS). The Company was authorised by the Financial Conduct Authority (FCA) on 26 February 2014 and its Instrument of Incorporation was
registered with the Registrar of Companies for England & Wales on 26 February 2014. The Company is an Alternative Investment Fund (AIF) for the purposes
of the FCA Rules. The Company was granted AIF status on 21 July 2014. A unit trust in umbrella form (Aegon Asset Management UK Unit Trust (the "Trust"))
was launched for those investors unable to invest directly in the Aegon Property Income Fund. The unit trust has two sub-funds: Aegon Property Income
Feeder (Income) Fund and Aegon Property Income Feeder (Accumulation) Fund (the "Feeder Funds").
The Financial Statements
We are pleased to present the interim report and financial statements for the period ending 30 September 2020.
As required by the OEIC Regulations, information for Aegon Property Income Fund ("the Fund") has been included in these financial statements. We have
provided a detailed description of the strategy that was adopted during the period under review.
Changes to the Prospectus
● Update to Section 9, UK Taxation, to update the tax-free Dividend Allowance and confirm new annual allowances for capital gains for the period 2020/2021.
● Update Appendix E, Historic performance to include percentage growth figures for the period January 2019 to 31 December 2019.
● Updated to Section 7 Fees and Expenses to include an updated indication of Valuer’s fees calculated as a percentage of the Scheme Property as 0.035%
for the period of April 2019 – March 2020 and to remove reference to PWC as tax consultant.
● An update on page 22 to note that Aegon Asset Management Value Hub B.V, Hungarian Branch, has been engaged to perform Performance
Measurement and Analysis functions together with an explanation that these functions serve to analyse the performance returns of the portfolios and funds
managed by the ACD and provide attribution analysis of these returns.
● Appendix F, Directors of the ACD and their main business activities not connected with the business of the ACD, was updated to reflect current directors
and their main business activities.
● Prospectus and Instrument amended to reflect re-branding and a change of name from Kames Capital to Aegon Asset Management UK on 7 September
2020. For full details please see Significant Events below.
● Prospectus amended to reflect changes required by the FCA’s Policy Statement PS19/24 on Illiquid Assets and Open-Ended Funds (including expanded
disclosures on liquidity risk and clearer and additional information on the tools and arrangements which may be used by the ACD to mitigate liquidity risks)
on 30 September 2020.
Value Statement
The first value statement for the Aegon Asset Management UK ICVC is available as part of a stand-alone composite report on our website
https://www.aegonam.com/en/uk-value-assessment/.
Significant Events
Effective from 4 September 2020 the ACD was renamed:
Effective to 4 September 2020 Effective from 4 September 2020
Kames Capital plc Aegon Asset Management UK plc
Effective from 7 September 2020 the Company and its sub-funds were renamed, as follows:
Effective to 7 September 2020 Effective from 7 September 2020
Kames Capital Investment Portfolios ICVC Aegon Asset Management UK Investment Portfolios ICVC
Kames Property Income Fund Aegon Property Income Fund
Aegon Asset Management UK Investment Portfolios ICVC 4
Aegon Asset Management UK Investment Portfolios ICVC
Statements of Responsibility
Statement of Authorised Corporate Director's (ACD's) Responsibilities
The Rules of the Financial Conduct Authority’s Collective Investment Schemes Sourcebook require the Authorised Corporate Director (ACD) to prepare
financial statements for each accounting year that give a true and fair view of the financial affairs of the Company and of its net revenue and the net capital
losses for the year.
In preparing the financial statements the Authorised Corporate Director is required to:
• comply with the Prospectus and applicable accounting standards, subject to any material departures which are required to be disclosed and explained in the
financial statements;
•
comply with UK accounting standards, including FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland and the Statement
of Recommended Practice for UK Authorised Funds issued by the Investment Management Association (now known as The Investment Association) in May
2014 and amended in June 2017;
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in operation for the
foreseeable future; and
•
take reasonable steps for the prevention and detection of fraud, error, and non-compliance with law or regulations.
The ACD is required to keep proper accounting records and to manage the Company in accordance with the Regulations and the Instrument of Incorporation.
The report has been prepared in accordance with the Financial Conduct Authority’s Collective Investment Schemes Sourcebook.
Statement of the Depositary's Responsibilities in respect of the financial statements of the Scheme
The Depositary is responsible for the safekeeping of all property of the Company (other than tangible moveable property) that is entrusted to it. It is the duty of
the Depositary to take reasonable care to ensure that the Company is managed in accordance with the Regulations, in relation to the pricing of, and dealings in,
shares in the Company, and in relation to the revenue of the Company.
Authorised Corporate Director's Statement
In accordance with the requirements of the Financial Conduct Authority's Collective Investment Schemes sourcebook, we hereby certify the report on behalf of
the Board of Aegon Asset Management UK plc.
Jane Daniel
Stephen Jones
Edinburgh
25 November 2020
Aegon Asset Management UK Investment Portfolios ICVC 5
Aegon Asset Management UK Investment Portfolios ICVC
Independent Valuer's Report
CBRE Limited, acting in its capacity as appointed standing independent valuer to Aegon Property Income Fund (the "Fund"), has valued the immoveables held
by the Fund as at 30 September 2020 in accordance with the Royal Institution of Chartered Surveyors ("RICS") Global Standards 2017 including the
International Valuation Standards and the RICS Valuation - Professional Standards UK January 2014 (revised April 2015) and in accordance with 8.4.13R of
the Collective Investment Schemes sourcebook. The immoveables have been valued on the basis of Fair Value as defined in the RICS Valuation -
Professional Standards subject to existing leases. Aegon Asset Management UK plc, as Authorised Corporate Director of the Fund, has been provided with a
full valuation certificate dated 30 September 2020.
We have been provided with information from the Fund's property managers including tenancy schedules and, where we have not measured the immoveables
ourselves, floor areas. We have assumed that the Fund's interests in the immoveables are not subject to any onerous restrictions, to the payment of any
unusual outgoings or to any changes, easements or rights of way, other than those to which we have referred in our reports. We rely upon the property
managers to keep us advised of any changes that may occur in the investments. We are not generally instructed to carry out structural surveys or test any of
the service installations. Our valuations therefore have regard only to the general condition of the immoveables evident from our inspections. We have
assumed that no materials have been used in the construction or subsequent alteration of the buildings which are deleterious, hazardous or likely to cause
structural defects. We are not instructed to carry out investigations into environmental contamination which might affect the immoveables and our valuations
assume the immoveables are not adversely affected by any environmental contamination.
In our opinion the aggregate value of the market values of the immoveables owned by the Fund as at 30 September 2020 is £383,850,000. This figure
represents the aggregate of the individual values attributable to the individual immoveables and should not be regarded as a valuation of the portfolio as a
whole in the context of a sale as a single lot.
No allowances are made for any expenses of realisation, or for taxation, which might arise in the event of a disposal. The immoveables are considered as if
free and clear of all mortgages or other charges which may be secured thereon. Valuations are prepared and expressed exclusive of VAT. The 16 March 2016
Budget issued by UK Government and enacted as part of the Finance Act on 15 September 2016 changed the basis of assessing Stamp Duty Land Tax in
England and Wales to a tiered approach and this has been adopted in the valuation as at 30 September 2019. Pending clarity in the market’s response to the
new International Property Measurement Standard (IPMS), we have continued to use floor areas as defined by the RICS Code of Measuring Practice 6th
Edition 2007. This has been discussed and agreed with the Fund Manager.
The pandemic and the measures taken to tackle COVID-19 continue to affect economies and real estate markets globally. Nevertheless, as at the valuation
date some property markets have started to function again, with transaction volumes and other relevant evidence returning to levels where an adequate
quantum of market evidence exists upon which to base opinions of value. Accordingly, and for the avoidance of doubt, our valuation is not reported as being
subject to `material valuation uncertainty` as defined by VPS 3 and VPGA 10 of the RICS Valuation- Global Standards.
For the avoidance of doubt this Explanatory Note has been included to ensure transparency and to provide further insight as to the market context under which
the valuation opinion was prepared. In recognition of the potential for market conditions to move rapidly in response to changes in the control or future spread
of COVID-19 we highlight the importance of the valuation date.
David Tudor MRICS
Senior Director
CBRE Limited
25 November 2020
Aegon Asset Management UK Investment Portfolios ICVC 6
Aegon Asset Management UK Investment Portfolios ICVC
Aegon Asset Management UK Property Income Fund impact of Covid-19
An outbreak of infectious respiratory illness caused by a novel coronavirus known as Covid-19 was first detected in China in December 2019 and has been
declared a pandemic by the World Health Organization. The impact of Covid-19 could be highly disruptive to economies and markets, adversely impacting
individual companies, sectors, industries, markets, interest and inflation rates, investor sentiment, and other factors affecting the value of a Fund’s
investments. The duration of the Covid-19 pandemic and its effects cannot be determined with certainty, and could prevent the Fund from executing
advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objective.
Despite the unprecedented market conditions created by Covid-19, we continue to have confidence in CBRE’s ability as Standing Investment Valuer to value
the Fund's portfolio. During this period we have seen the Royal Institution of Chartered Surveyors introduce far greater levels of coordination between valuation
houses to ensure that the details of what limited evidence is available are shared freely between valuers.
As the largest valuer of assets in the MSCI universe we are comfortable that CBRE’s market knowledge is giving them the best possible insight into market
dynamics. Whilst the abnormal market conditions mean there is less certainty attached to their valuations, it does not mean that they aren’t able to provide well
considered professional opinions of value. To support this, we and other managers, have also provided more data around rent collection across our portfolios
to enable CBRE to assess the financial stresses that different occupiers are experiencing.
Aegon Asset Management UK Property Income Fund suspension of dealing
Following a formal review on the 13 October 2020, the Aegon Asset Management UK plc (formerly known as Kames Capital plc) has decided, with agreement
from the Depositary, that it remains in the best interests of investors to continue the temporary suspension of dealing in in Aegon Property Income Fund.
The decision has been taken because we believe it is in the best interests of investors to continue suspension activity within the Fund.
The following information explains why we have taken this decision, and what we plan to do during this period.
It is important to reiterate that the continued suspension of dealing in the Fund remains a temporary measure and we are fully focused on recommencing
dealing as soon as possible. In the meantime, we recognise the significant inconvenience this decision may cause you, and with that in mind we have decided
to temporarily apply a discount to the annual management charge on the Fund of 0.15%, resulting in an annual management charge of 0.60% from 1
November 2020 until the end of the suspension period.
Why have we suspended dealing?
The decision has been taken because we believe it is in the best interests of investors to continue suspension activity within the Fund.
The Fund suspended dealing on 16 March 2020 in accordance with the Funds’ prospectus following the introduction of a Material Uncertainty Clause by the
Fund’s Standing Investment Valuer, CBRE for the valuation of the Fund’s directly held property assets. CBRE have advised that Material Uncertainty Clauses
have been lifted with respect to the Funds’ valuation as at 30 September 2020.
Notwithstanding the lifting of the Material Uncertainty Clause the Fund will remain suspended until its liquidity position is at an acceptable level for the Fund to
reopen. The impact of the Government imposed lockdown in March, the economic downturn and uncertainty caused by the Covid-19 pandemic has created
exceptional conditions for the UK commercial property market. The introduction of Material Uncertainty Clauses has severely restricted the operation of the
investment property market. Transaction volumes are dramatically lower than previous periods and as a result, the pipeline of disposals that the Fund had
arranged in quarter 1 2020 to increase liquidity has been disrupted.
Steps to re-open
It is our intention to lift the Funds’ suspension when we are satisfied that the Fund has sufficient liquidity (having regard to the interests of both remaining
investors and those who wish to redeem). The portfolio is currently holding a cash position below our target liquidity level and therefore disposals are in
progress to raise the cash position to an acceptable level. Property sales can take time and must be done in an orderly manner to ensure we achieve a
reasonable price for our investors and do not compromise the portfolio’s characteristics and future performance prospects.
To ensure we provide you with as much information as possible, we have also prepared a Q&A document, which you can find on our website at
www.aegonam.com.
Aegon Asset Management UK Investment Portfolios ICVC 7
Aegon Property Income Fund
Fund objective
The investment objective is to provide a combination of income and capital growth over any 7 year period. The investment objective is to carry on Property
Investment Business and to manage cash raised from investors for investment in the Property Investment Business.
Investment policy
The investment policy is to invest at least 60% of the Fund in a diversified portfolio of commercial property in the British Isles. The Fund may invest in any
commercial property sector and may invest in a mix of freehold and leasehold properties.
To the extent that the Fund is not fully invested in the main asset class listed above, the Fund may also invest in other types of property-related assets,
including real estate investment trusts, as well as collective investment schemes (which may include schemes managed by the ACD) and transferable
securities, money market instruments, deposits, and cash and near cash.
The ACD will select investments that offer attractive income returns and asset management potential. The ACD will seek to add value by actively managing
the portfolio of properties to enhance its capital value and rental income.
The Fund is actively managed and the ACD will also seek to achieve diversification across regions in the British Isles and sectors when constructing the
portfolio.
Risk profile
The Fund is designed for retail and institutional investors seeking pooled exposure from investments mainly in commercial property in the British Isles and
who are comfortable with a medium level of investment risk. In most cases, we expect the Fund to be held as part of a diversified portfolio which may include
other assets such as bonds, equities and cash. Property prices will fluctuate and may fall significantly in value. Consequently, it is important to understand that
the Fund should be viewed as a longer term investment.
Investors should be aware of the following risk factors:
• Investment property is not as liquid as other asset classes such as bonds or equities. Investors may not be able to switch or cash-in their Investment when
they want to because property in the Fund may not always be readily saleable.
•
Investment property transaction charges are higher than those which apply in other asset classes. High volumes of transactions would have a material
impact on Fund's returns.
•
The Fund’s Investment portfolio is exposed to market price fluctuations. Property valuations are a matter of the independent valuer’s opinion rather than fa
• The yield from the Investment property may be negatively affected by tenant failure or availability of supply in the sector.
The Fund is actively managed and exposed to a range of risks, which are listed and defined in the Aegon Asset Management UK Investment Portfolios ICVC
Prospectus. The most material risks from this list also appear in our Key Investor Information documents (KIID) where they are summarised in an easy-to-
read format. You can find both of these documents on our website at www.aegonam.com.
Review of Fund activities
The introduction of the Material Uncertainty Clause (MUC) meant the Board took the decision, along with our Depositary and having informed the FCA, to
immediately suspend dealings within the Fund with effect from the Valuation Point at midday on 16 March 2020. This is in line with COLL rules and ensures
that we protected customers by preventing any subscriptions or redemptions from taking place in the Fund at a share price that is based on property values
that are subject to a MUC. Whilst the Fund’s independent valuer, CBRE, lifted the MUC from the valuation at the end of September 2020, the Board have
agreed with the Depositary that the Fund should remain suspended as we believe this is acting in the best interests of investors whilst our liquidity position is
below target and whilst the potential redemptions are being established. We are working to re-open the Fund as quickly as possible and asset disposals will
be required to increase the Fund’s liquidity position. Market conditions for disposals are challenging with low transaction volumes, widespread investor caution
due to the ongoing impact of the Covid-19 pandemic and uncertainty created by the looming Brexit deadline.
The regulator has been clear that the decision to reopen Funds is a matter for each individual Fund manager and should be made on the basis of their own
analysis of cashflow risks taking account of potential redemptions that could arise once the Fund reopens. The FCA are keen to ensure that managers only
open when they are confident of remaining open on a sustainable basis. The FCA have also launched a consultation paper to introduce notice periods for
Funds which own illiquid assets to address the mis-match of daily dealing in Funds holding illiquid assets. The timing of the consultation on notice periods for
open-ended property Funds has created additional uncertainty that needs to be factored into any decision to reopen.
The Fund currently has a liquidity position of 7.5% compared with a minimum target liquidity level of 20%. We do not have visibility on when the Fund will be
able to reopen but with our sales programme we anticipate that it will be in Q1 2021.
Aegon Asset Management UK Investment Portfolios ICVC 8
Aegon Property Income Fund
Rent collection
Rent collection remains a major focus for our asset management teams throughout the Covid-19 period. We have been working closely with our occupiers,
particularly those whose businesses have been heavily impacted by lockdown measures, to provide support whilst also ensuring that we collect as much of
the rent due as possible. Encouragingly, of the demands issued on the English quarter days we have already collected 89% of the rent due for the March
2020 quarter, and 84% of the rent due for the June 2020 quarter.
The September collection rate at 77% is higher than the equivalent collection rates for March and June, of 67% and 73% respectively, fifteen days after the
quarter day. The September quarter collection rate will increase to 84% once all the payments are received from tenants who are paying rent monthly (on a
temporary basis).
Sector March June September
Offices 94% 90% 78%
Industrial 99% 98% 100%
High Street Retail 83% 72% 75%
Retail Warehousing 96% 100% 78%
Leisure 13% 3% 18%
Other 99% 99% 99%
Total 89% 84% 77%
The table shows that the three sectors accounting for the majority of arrears are Leisure, High Street Retail and Offices. The chart below splits these arrears
by sector and shows the proportion of this debt that is classified as subject to rent deferral agreements, outstanding but expected to be repaid and to be
written off. The Fund has taken a very prudent approach to the distribution of arrears and has made a bad debt provision against almost all rent and service
charge arrears. At this stage we expect to have to write off only 13% of the English Quarter Day rent arrears. The remaining arrears are either subject to
repayment agreements or are being pursued though discussions and lease restructures with our occupiers.
We have adopted a prudent approach and the Fund only distributed rental income received or income that we were very confident of collecting.
We have changed our accounting approach because we can’t be confident about our arrears being paid due to the unprecedented nature of the crisis and the
financial challenges being faced by some occupiers. Our expectation is that some tenants will not be able to repay their arrears in the future and that for
others, the arrears will be written-off by the Fund and treated as a landlord’s incentive in asset management deals to restructure their leases.
It is therefore appropriate to take the accounting impact of treating these arrears as unpaid. It would be unfair for shareholders in the future to take the
performance impact of writing off bad debts so we are protecting all investors by ensuring that the current share price reflects our realistic expectations on
rent and service charge arrears collection. This treatment of the existing arrears will be reviewed on a monthly basis. As we gain greater visibility of the
financial health of the Fund’s occupiers we will be able to form better judgements of their ability to repay the arrears to be distributed in the future and adjust
the accounting treatment of these arrears.
Portfolio activity
Despite the uncertain economic environment, we are pleased to report ongoing success with asset management initiatives across the portfolio. In Cardiff we
have completed office lettings in two buildings, Westgate House and Golate House, achieving record rents in both cases. In Stockton we have let 13,000 sq ft
of office space at Dunedin House to two Government occupiers, Stockton Borough Council and NHS Blood & Transplant. We are pleased to have retained
H&M at our retail asset in the centre of Crawley by renewing their lease that was due to end in January 2021 and have completed the letting of a vacant retail
unit to a local bakery at our retail asset in Plymouth.
Aegon Asset Management UK Investment Portfolios ICVC 9
Aegon Property Income Fund
Sales update
We are determined to be disciplined in the sales process by only selling assets in accordance with strategy whilst ensuring that the remaining portfolio is
capable of delivering the Fund’s objectives over the long term. Sales will therefore be focused on properties that we expect to underperform the market,
properties where we have completed the business plan and we consider them ex-growth and disposals that will improve the risk profile of the Fund. Our
governance and oversight functions will ensure that we balance the needs of investors intending to remain invested with those seeking to redeem throughout
the process.
We have identified 11 assets, across a range of sectors, for sale in Q4 2020 with a combined value in excess of £90m. Five of these assets, all of which are
leisure or retail properties, are currently under offer for a combined value of £23.3m. Completing these sales will increase the Fund’s liquidity to approximately
13%.
The remaining assets are either available on the market or will be launched for sale in the next few weeks. We will provide regular progress reports in our
monthly updates.
Outlook
Whilst 2020 is expected to see further capital falls and negative returns, with PMA forecasting -10% total returns for 2020 All Property, the PMA forecasts for
2021-2025 are that All Property will deliver 4.9% p.a.
The sector forecasts and our view of the sectors are as follows. Our view is that the pandemic will not radically transform how real estate is used, but that the
market is experiencing acceleration of structural changes.
Performance*
The Fund returned (4.19)% over the six months to 30 September 2020, compared to (3.25)% for the Investment Association UK Direct Property Average. As
a result of new rules and guidance from the FCA following their Asset Management Market Study, we changed the comparison benchmark for the Fund during
the period from a customised peer group to the Investment Association UK Direct Property sector. The Investment Association Sector includes both PAIFs
and Feeders in its calculation.
The Fund’s below benchmark performance over the six months reflects the impact of the global pandemic hitting valuations and hitting the active value sector
of the market more severely than the core sector. The portfolio also has a higher than benchmark void rate which impacts on valuations. The whole property
market saw all valuers put an MUC on valuations from 16 March 2020. This was lifted by sectors starting in June, with all sectors and therefore valuations
being free of a MUC from the September valuation date.
Longer-term performance (ie, over three years) is impacted by the price swing to bid price which happened on 20 December 2018. The Fund pricing was
adjusted from creation basis to cancellation basis, so that the pricing methodology reflects the cost of selling assets; this price swing negatively impacts the
Fund’s performance.
Authorised status
The Fund is a Non-UCITS Retail Scheme and has Property Authorised Investment Fund (PAIF) status, as defined in Part 4A of the Tax Regulations and the
Glossary to the FCA Handbook, in accordance with the classifications of the Collective Investment Schemes sourcebook of the Financial Conduct Authority.
The Fund is an Alternative Investment Fund (AIF) for the purposes of the FCA Rules.
*Source: Lipper, % growth, income re-invested at pay date, NAV-NAV, GBP, net of Basic Rate Tax. Index returns are gross of Basic Rate Tax. Investors are
invited to compare the Fund’s performance against the performance of other funds within Investment Association UK Direct Property Sector. Comparison of
the Fund against this Sector will give investors an indication of how the Fund is performing compared with funds investing in a similar but not identical
investment universe. The above comparison should be performed over at least a 7 year period (or period since inception) to provide the most useful long
term comparison.
Aegon Asset Management UK Investment Portfolios ICVC 10
Aegon Property Income Fund
Expense ratios
As at 30 September 2020 B Net
Acc
B Net
Inc
B Gross
Acc
B Gross
Inc
F Gross
Acc***
F Gross
Inc***
ACD's periodic charge 0.75% 0.75% 0.75% 0.75% - -
Other Fund operating expenses 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
Ongoing charges figure (OCF)* 0.86% 0.86% 0.86% 0.86% 0.11% 0.11%
Property expense ratio (PER)** 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Real estate expense ratio (OCF + PER) 4.86% 4.86% 4.86% 4.86% 4.11% 4.11%
*The Ongoing Charges Figures (OCF) is calculated as the ratio of the total expenses to the average net asset value of the Fund over the period. The OCF is made up of the ACD's periodic charge and other
operating costs deducted from the assets of the Fund during the period, except for those payments that are explicitly excluded by regulations.
**The Property Expense Ratio (PER) reflects any additional costs associated with the day-to-day operation of the direct property assets and is presented as a percentage of average net assets over the period.
The PER figure is higher than usually reported due to an increase in property void costs and bad debt write off during the first half of the financial year due to current market conditions. Aegon Asset
Management UK plc anticipates that in the second half of the financial year the PER should level off.
***F share classes are only available to the Feeder Funds.
Performance Information
As at 30 September 2020 B Net
Acc
B Net
Inc
B Gross
Acc
B Gross
Inc
F Gross
Acc**
F Gross
Inc**
Closing net asset value (£'000) 56,863 28,179 26,120 63,756 168,608 82,668
Closing number of shares 47,735,164 31,705,356 20,721,947 71,733,791 127,382,062 88,575,345
Net asset value per share 119.12 88.88 126.05 88.88 132.36 93.33
Direct transaction costs* 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
*In line with the requirements of the 2014 Statement of Recommended Practice for authorised funds, direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in
relation to direct transaction costs. These costs might appear positive or negative depending on the timing of investment activity within the Fund. The current negative charge reflects the fact that the Fund has
collected a dilution adjustment but has not yet incurred all costs of fully investing the portfolio.
**F share classes are only available to the Feeder Funds.
Aegon Asset Management UK Investment Portfolios ICVC 11
Aegon Property Income Fund
Portfolio Statement
The Fund's investments as at 30 September 2020
Location Investment Sector Market value Total net assets
£'000 %
Direct properties (31 March 2020: 94.19%)
Market value over £15,000,000 (31 March 2020: 26.59%)
Manchester The Hive, 47-51 Lever Street Offices
Cheltenham St James House, St James Square Offices
Leeds 2 City Walk, Victoria Road Offices
Orpington Central Court, 1 Knoll Rise Offices
Rawtenstall New Hall Hey Retail Park, New Hall Hey Road Retail Warehouses
Total market value over £15,000,000 102,450 24.04
Market value between £10,000,000 and £15,000,000 (31 March 2020: 24.05%)
Sheffield The Balance, Pinfold Street Offices
Sheffield Fountain Precinct, Balm Green Offices
Birmingham 22 & 35 Gas Street Offices
Newcastle Newburn Riverside Offices, Newburn Offices
Stevenage 40-98 Queensway Retail
Crawley 1-21 The Martletts Retail
Redhill Kingsgate, High Street Offices
Total market value between £10,000,000 and £15,000,000 89,550 21.01
Market value between £5,000,000 and £10,000,000 (31 March 2020: 31.96%)
Newcastle Newburn Riverside Industrial, Newburn Industrial
Cardiff Golate House & Westgate Street Offices
Manchester 39 Deansgate Offices
Slough Keypoint, 17-23 High Street Offices
Preston Premier Inn, Fox Street Leisure
Glasgow 200 Renfield Street Offices
Exeter 252-253 High Street Retail
Cardiff Castle Buildings, Womanby Street Offices
Middlesbrough Jennings Motor Group, Cargo Fleet Lane Other
Cardiff Audi, Cardiff Gate Business Park Other
Bristol Armourers House, 50 Queen Charlotte Street Offices
Chelmsford Chelmer Valley Care Home, Broomfield Hospital Other
Newcastle Nexus House, 33 St James' Boulevard Offices
Glasgow 70-76 Argyle Street & 2-10 Queen Street Retail
Bristol Unum House, Redcliffe Way Offices
Exeter Manor Court, Dix's Field Offices
Wombwell 1 Waterside Park Industrial
Glasgow 120 Buchanan Street Retail
Plymouth 10-44 Cornwall Street and 152-156 Armada Way Retail
Total market value between £5,000,000 and £10,000,000 143,480 33.66
Aegon Asset Management UK Investment Portfolios ICVC 12
Aegon Property Income Fund
Portfolio Statement (continued)
Location
Investment
Sector
Market value
Total net assets
£'000 %
Market value under £5,000,000 (31 March 2020: 11.72%)
Bromborough Matalan Unit, New Chester Road Retail Warehouses
Warrington Dominion House, Temple Court, Birchwood Offices
Wick Wick Retail Park, South Road Retail Warehouses
Worcester Nuffield Health, Droitwich Road Leisure
Nottingham New Look, 14-20 Lister Gate Retail
London 226 & 227/228 The Strand Retail
Norwich 3-4 Haymarket Retail
Godalming The Refectory, Portsmouth Road, Milford Leisure
Birmingham 44-59 Summer Row Leisure
Stockton-On-Tees Dunedin House, Colombia Drive, Thornaby Offices
Harrogate 6-14 Cambridge Street Retail
Newcastle Norfolk House, 8-12 Shakespeare Street Retail
St Albans Ivy, 1-3 Verulam Road Leisure
Edinburgh 77-79 George Street Retail
Beaconsfield White Horse, 70 London End Leisure
St Albans Loch Fyne, 5-5b Verulam Road Leisure
Cardiff 360 Newport Road Leisure
Reading Zero Degrees, 3-4 Gun Street Leisure
Preston Nationwide, 41/41A Fishergate Retail
Lichfield Walkabout, 13 Bird Street Leisure
Reading Smash & Coalition, 5-6 Gun Street Leisure
Total market value under £5,000,000 58,370 13.70
Total valuation per independent valuer 393,850 92.41
Deductions for the lease incentive adjustment* (4,130) (0.97)
Increase for the finance lease adjustment** 3,055 0.72
Total direct properties after fair value adjustments 392,775 92.16
Portfolio of investments 392,775 92.16
Net other assets 33,419 7.84
Total net assets attributable to shareholders 426,194 100.00
*The fair value of direct properties as at 30 September 2020 is calculated after deductions for the lease incentives amounting to £4,130,000 (31 March 2020: £3,812,000).
**The fair value of direct properties as at 30 September 2020 is calculated after additions for the finance lease amounting to £3,055,000 (31 March 2020: £3,212,000).
Aegon Asset Management UK Investment Portfolios ICVC 13
Aegon Property Income Fund
Statement of Total Return
for the six months ended 30 September 2020
2020 2019
£'000 £'000 £'000 £'000
Income
Net capital losses
(26,799)
(10,465)
Revenue 19,065
25,544
Expenses (9,669)
(8,684)
Interest payable and similar charges -
(2)
Net revenue before taxation
9,396
16,858
Taxation -
-
Net revenue after taxation
9,396
16,858
Total return before distributions
(17,403)
6,393
Distributions
(10,399)
(19,119)
Change in net assets attributable to shareholders from investment activities
(27,802)
(12,726)
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 30 September 2020
2020 2019
£'000 £'000 £'000 £'000
Opening net assets attributable to shareholders* 449,622 711,348
Amounts receivable on creation of shares -
147,973
Amounts payable on cancellation of shares (1,524) (202,998)
(1,524) (55,025)
Dilution adjustment
16
587
Change in net assets attributable to shareholders from investment activities
(27,802)
(12,726)
Retained distribution on accumulation shares
5,882
10,907
Closing net assets attributable to shareholders
426,194
655,091
*The opening net assets attributable to shareholders for the current period do not equal the closing net assets attributable to shareholders for the comparative period as they are not consecutive periods.
Aegon Asset Management UK Investment Portfolios ICVC 14
Aegon Property Income Fund
Balance Sheet
as at 30 September 2020
30 September 31 March
2020 2020
£'000 £'000 £'000 £'000
Assets
Fixed assets:
Tangible assets:
Land and buildings 392,775 423,491
392,775 423,491
Current assets:
Debtors 16,824 10,689
Cash and bank balances 34,491 30,514
51,315
41,203
Total assets
444,090
464,694
Liabilities
Creditors
Bank overdrafts - 1,166
Distribution payable 1,028 802
Other creditors 16,868 13,104
Total liabilities
17,896
15,072
Net assets attributable to shareholders
426,194
449,622
Aegon Asset Management UK Investment Portfolios ICVC 15
Aegon Property Income Fund
Cash Flow Statement
for the six months ended 30 September 2020
30 September 30 September
2020 2019
£'000 £'000
Cash flows from operating activities
Net revenue after taxation 9,396 16,858
Adjustments for:
Interest received (22) (462)
(Increase)/decrease in debtors (6,135) 7,339
Increase in creditors 4,024 4,466
Cash from operations
7,263
28,201
Income taxes paid (379)
(500)
Net cash generated from operating activities 6,884
27,701
Cash flows from investing activities
Proceeds from sale of land and buildings 7,275 14,289
Purchases of land and buildings (3,497) (4,427)
Purchases of investments - (8,918)
Interest received 22 462
Net cash generated from investing activities
3,800
1,406
Cash flows from financing activities
Amounts received on issue of shares - 149,170
Amounts paid on cancellation of shares (1,649) (203,743)
Dilution adjustment 17 583
Distributions paid (3,909) (7,585)
Net cash used in financing activities
(5,541)
(61,575)
Net increase/(decrease) in cash and bank balances
5,143
(32,468)
Cash and bank balances at beginning of period
29,348
132,078
Cash and bank balances at end of period 34,491
99,610
Aegon Asset Management UK Investment Portfolios ICVC 16
Aegon Property Income Fund
Accounting Policies
1 Accounting policies
These financial statements have been prepared on the same basis as the audited financial statements for the year ended 31 March 2020. The Financial
Statements have been prepared in accordance with FRS102 and the Statement of Recommended Practice (SORP) for Authorised Funds, issued by the
Investment Management Association (now known as the Investment Association) in May 2014.
2
Changes to Accounting Policies
There have been no changes in the accounting policies since the previous financial statements.
Aegon Asset Management UK Investment Portfolios ICVC 17
Aegon Property Income Fund
Distribution Tables
The Fund pays 12 distributions to its shareholders each year on the last calendar day of each month (“pay date”). Those distributions are based on the
net distributable income for the previous month and are paid to those shareholders on the register on the last day of the previous month (“period end”).
Share Class B Net Accumulation
Period Pay Group Gross Income Net Equalisation* Total 2019 Total
end date Revenue Tax Revenue Payable Paid
30/04/20 31/05/20 Group 1 0.4047 0.0675 0.3372 N/A
0.3372 0.4385 Group 2 0.4047 0.0675 0.3372 0.0000
31/05/20 30/06/20 Group 1 0.4119 0.0642 0.3477 N/A
0.3477 0.4899 Group 2 0.4119 0.0642 0.3477 0.0000
30/06/20 31/07/20 Group 1 0.5374 0.0882 0.4492 N/A
0.4492 0.4380 Group 2 0.5374 0.0882 0.4492 0.0000
31/07/20 31/08/20 Group 1 0.4372 0.0677 0.3695 N/A
0.3695 0.6315 Group 2 0.4372 0.0677 0.3695 0.0000
31/08/20 30/09/20 Group 1 0.5459 0.0894 0.4565 N/A
0.4565 0.5227 Group 2 0.5459 0.0894 0.4565 0.0000
30/09/20 31/10/20 Group 1 0.5557 0.0925 0.4632 N/A
0.4632 0.4694 Group 2 0.5557 0.0925 0.4632 0.0000
Share Class B Net Income
Period Pay Group Gross Income Net Equalisation* Total 2019 Total
end date Revenue Tax Revenue Payable Paid
30/04/20 31/05/20 Group 1 0.3044 0.0480 0.2564 N/A
0.2564 0.3493 Group 2 0.3044 0.0480 0.2564 0.0000
31/05/20 30/06/20 Group 1 0.3129 0.0488 0.2641 N/A
0.2641 0.3891 Group 2 0.3129 0.0488 0.2641 0.0000
30/06/20 31/07/20 Group 1 0.4068 0.0668 0.3400 N/A
0.3400 0.3465 Group 2 0.4068 0.0668 0.3400 0.0000
31/07/20 31/08/20 Group 1 0.3297 0.0510 0.2787 N/A
0.2787 0.4979 Group 2 0.3297 0.0510 0.2787 0.0000
31/08/20 30/09/20 Group 1 0.4105 0.0672 0.3433 N/A
0.3433 0.4101 Group 2 0.4105 0.0672 0.3433 0.0000
30/09/20 31/10/20 Group 1 0.4162 0.0693 0.3469 N/A
0.3469 0.3669 Group 2 0.4162 0.0693 0.3469 0.0000
Share Class B Gross Accumulation**
Period Pay Group Gross Income Net Equalisation* Total 2019 Total
end date Revenue Tax Revenue Payable Paid
30/04/20 31/05/20 Group 1 0.4270 0.0000 0.4270 N/A
0.4270 0.5464 Group 2 0.4270 0.0000 0.4270 0.0000
31/05/20 30/06/20 Group 1 0.4342 0.0000 0.4342 N/A
0.4342 0.6094 Group 2 0.4342 0.0000 0.4342 0.0000
30/06/20 31/07/20 Group 1 0.5671 0.0000 0.5671 N/A
0.5671 0.5368 Group 2 0.5671 0.0000 0.5671 0.0000
31/07/20 31/08/20 Group 1 0.4616 0.0000 0.4616 N/A
0.4616 0.7760 Group 2 0.4616 0.0000 0.4616 0.0000
31/08/20 30/09/20 Group 1 0.5767 0.0000 0.5767 N/A
0.5767 0.6528 Group 2 0.5767 0.0000 0.5767 0.0000
30/09/20 31/10/20 Group 1 0.5876 0.0000 0.5876 N/A
0.5876 0.5756 Group 2 0.5876 0.0000 0.5876 0.0000
All distributions above are in pence per share unless specifically stated.
*Equalisation applies only to shares purchased during the distribution period (group 2 shares). It is the average amount of revenue included in the purchase price of all group 2 shares and is
refunded to holders of these shares as a return of capital. Being a capital repayment, it is not liable to income tax but must be deducted from the cost of the shares for capital gains tax purposes.
**Gross share classes are only available to investors who are permitted in accordance with UK tax law to receive income from the Fund without deduction of any income tax.
Aegon Asset Management UK Investment Portfolios ICVC 18
Aegon Property Income Fund
Distribution Tables (continued)
Share Class B Gross Income**
Period Pay Group Gross Income Net Equalisation* Total 2019 Total
end date Revenue Tax Revenue Payable Paid
30/04/20 31/05/20 Group 1 0.3080 0.0000 0.3080 N/A
0.3080 0.4164 Group 2 0.3080 0.0000 0.3080 0.0000
31/05/20 30/06/20 Group 1 0.3126 0.0000 0.3126 N/A
0.3126 0.4627 Group 2 0.3126 0.0000 0.3126 0.0000
30/06/20 31/07/20 Group 1 0.4070 0.0000 0.4070 N/A
0.4070 0.4058 Group 2 0.4070 0.0000 0.4070 0.0000
31/07/20 31/08/20 Group 1 0.3299 0.0000 0.3299 N/A
0.3299 0.5843 Group 2 0.3299 0.0000 0.3299 0.0000
31/08/20 30/09/20 Group 1 0.4105 0.0000 0.4105 N/A
0.4105 0.4886 Group 2 0.4105 0.0000 0.4105 0.0000
30/09/20 31/10/20 Group 1 0.4163 0.0000 0.4163 N/A
0.4163 0.4289 Group 2 0.4163 0.0000 0.4163 0.0000
Share Class F Gross Accumulation**†
Period Pay Group Gross Income Net Equalisation* Total 2019 Total
end date Revenue Tax Revenue Payable Paid
30/04/20 31/05/20 Group 1 0.4468 0.0000 0.4468 N/A
0.4468 0.5675 Group 2 0.4468 0.0000 0.4468 0.0000
31/05/20 30/06/20 Group 1 0.4547 0.0000 0.4547 N/A
0.4547 0.6333 Group 2 0.4547 0.0000 0.4547 0.0000
30/06/20 31/07/20 Group 1 0.5944 0.0000 0.5944 N/A
0.5944 0.5583 Group 2 0.5944 0.0000 0.5944 0.0000
31/07/20 31/08/20 Group 1 0.4839 0.0000 0.4839 N/A
0.4839 0.8073 Group 2 0.4839 0.0000 0.4839 0.0000
31/08/20 30/09/20 Group 1 0.6051 0.0000 0.6051 N/A
0.6051 0.6798 Group 2 0.6051 0.0000 0.6051 0.0000
30/09/20 31/10/20 Group 1 0.6167 0.0000 0.6167 N/A
0.6167 0.5997 Group 2 0.6167 0.0000 0.6167 0.0000
Share Class F Gross Income**†
Period Pay Group Gross Income Net Equalisation* Total 2019 Total
end date Revenue Tax Revenue Payable Paid
30/04/20 31/05/20 Group 1 0.3222 0.0000 0.3222 N/A
0.3222 0.4325 Group 2 0.3222 0.0000 0.3222 0.0000
31/05/20 30/06/20 Group 1 0.3273 0.0000 0.3273 N/A
0.3273 0.4808 Group 2 0.3273 0.0000 0.3273 0.0000
30/06/20 31/07/20 Group 1 0.4267 0.0000 0.4267 N/A
0.4267 0.4221 Group 2 0.4267 0.0000 0.4267 0.0000
31/07/20 31/08/20 Group 1 0.3457 0.0000 0.3457 N/A
0.3457 0.6079 Group 2 0.3457 0.0000 0.3457 0.0000
31/08/20 30/09/20 Group 1 0.4307 0.0000 0.4307 N/A
0.4307 0.5088 Group 2 0.4307 0.0000 0.4307 0.0000
30/09/20 31/10/20 Group 1 0.4370 0.0000 0.4370 N/A
0.4370 0.4468 Group 2 0.4370 0.0000 0.4370 0.0000
All distributions above are in pence per share unless specifically stated.
*Equalisation applies only to shares purchased during the distribution period (group 2 shares). It is the average amount of revenue included in the purchase price of all group 2 shares and is
refunded to holders of these shares as a return of capital. Being a capital repayment, it is not liable to income tax but must be deducted from the cost of the shares for capital gains tax purposes.
**Gross share classes are only available to investors who are permitted in accordance with UK tax law to receive income from the Fund without deduction of any income tax.
†F share classes are only available to the Feeder Funds.
Aegon Asset Management UK Investment Portfolios ICVC 19
Aegon Asset Management UK Investment Portfolios ICVC
Further Information
Base currency
The Company's base currency is Sterling.
Shares
The Fund may have up to four class types, B, F, Q and S class. Further information on investment limits, management charges, and currency denomination is
available from the ACD on request. The Fund may offer different types of shares within the classes.
Income shares - Investors with this type of share receive income payments from their shareholding periodically.
Accumulation shares - With this type of share all income earned on investments will be reinvested into the Fund.
Valuation point
The valuation point for the Fund is midday on each dealing day. The Fund deals on a forward basis.
Buying and selling shares
Buying
New investors or existing shareholders (in other Aegon Asset Management UK funds) who wish to purchase shares may do so by contacting their IFA,
stockbroker, banker, or solicitor who will provide you with an application form. Once an application form, with completed declarations, has been accepted and
processed, you can telephone our dealing team on 0800 358 3009 to place future orders.
Selling
You can sell your shares back to the Authorised Corporate Director (ACD) at the next quoted price, on the dealing day following receipt of your instructions.
You will then receive your contract note, and within 3 business days of our receipt of the completed statement of renunciation you will receive monies for the
amount due.
Shares may normally be bought or sold on any working day between 8.30am and 5.30pm.
You may also save on a regular basis from as little as £50 a month. Contributions will be made by direct debit.
A share exchange service may, at the ACD's discretion, be available in respect of investment amounts of £250 or more.
Securities Financial Transactions Regulations
The Fund does not currently undertake securities financing transactions (as defined in Article 3 of Regulation (EU) 2015/2365) or uses total return swaps.
Association of Real Estate Funds code of practice
The Fund is a member of the Association of Real Estate Funds (AREF). The aim of the Code of Practice is to achieve high standards of transparency across
the sector and promote consistency of reporting to allow investors to compare different funds.
In accordance with the “Fund Pricing Recommendations” issued by AREF in March 2016, we can confirm that the Accounting NAV presented within these
financial statements equates to the Standard NAV. Property acquisition costs are recovered through the offer price – we operate a mechanism through pricing
to ensure fair allocation of those costs, and monitor this on a regular basis.
Alternative Investment Fund Managers Directive
Leverage
In accordance with the Alternative Investment Funds Management Directive (AIFMD) the Alternative Investment Fund Manager (AIFM) is required to disclose
the leverage of the Alternative Investment Fund (AIF). Leverage is defined as any method by which the Fund increases its exposure through borrowing or the
use of derivatives. The Aegon Property Income Fund was not leveraged during the performance period.
Liquidity
In accordance with the AIFMD the AIFM is required to disclose the percentage of the AIF’s assets that are subject to special arrangements arising from their
illiquid nature. The Aegon Property Income Fund had no such assets during the performance period.
Risk
In accordance with the AIFMD the AIFM is required to disclose the current risk profile of the AIF and the risk management systems employed by the AIFM to
manage those risks. These disclosures have been made within the main body of this document.
64
Who to contact
Investors
0800 358 3009
Our investor helpdesk is open from 8.30am to 5.30pm (Monday to Friday)
To improve customer service, and for training purposes, call may be recorded.
www.aegonam.com