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Transcript
LLOYDS INVESTMENT FUNDS LIMITED Annual Report and Audited Financial Statements For the year ended 30 September 2016 Lloyds Investment Funds Limited Contents Company Information 2 Investment Objectives and Policy 3 Directors’ Profiles 4 Report of the Directors 5 Report of the Investment Manager 7 Report of the Custodian to the Members of Lloyds Investment Funds Limited 12 Report of the Independent Auditor to the Members of Lloyds Investment Funds Limited 13 Statements of Financial Position 14 Statements of Comprehensive Income 18 Statements of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares 20 Cash Flow Statements 22 Investment Dealing 26 Euro High Income Fund Investment Portfolio 27 European Fund Investment Portfolio 30 High Income Fund Investment Portfolio 32 International Fund Investment Portfolio 37 North American Fund Investment Portfolio 39 Sterling Bond Fund Investment Portfolio 41 UK Fund Investment Portfolio 45 Investments Purchased and Sold 48 Summary of Material Portfolio Changes 49 Notes to the Financial Statements 53 Distribution Tables (Unaudited) 84 Performance Record (Unaudited) 88 Net Asset Value per Share (Unaudited) 91 Notice of Meeting 92 Form of Proxy 93 1 Lloyds Investment Funds Limited Company Information Registered Office Investment Manager PO Box 160, 25 New Street, St Helier, Jersey, JE4 8RG, Channel Islands. Aberdeen Asset Investments Limited Bow Bells House, 1 Bread Street, London, EC4M 9HH. Principal Place of Business Custodian Capita Trust Company (Jersey) Limited PO Box 532, 12 Castle Street, St Helier, Jersey, JE2 3RT, Channel Islands. PO Box 311, 11 - 12 Esplanade, St Helier, Jersey, JE4 8ZU, Channel Islands. Directors Secretary c/o Registered Office R. D. Willcox (Chairman) I. M. J. Hardy B. C. James B. Lysiak Lloyds Corporate Services (Jersey) Limited PO Box 160, 25 New Street, St Helier, Jersey, JE4 8RG, Channel Islands. T. J. Herbert PO Box 87, 22 Grenville Street, St Helier, Jersey, JE4 8PX, Channel Islands. Independent Auditor PricewaterhouseCoopers CI LLP 37 Esplanade, St Helier, Jersey, JE1 4XA, Channel Islands. Manager and Registrar Lloyds Investment Fund Managers Limited PO Box 160, 25 New Street, St Helier, Jersey, JE4 8RG, Channel Islands. Paying Agent Lloyds Bank International Limited PO Box 111, Peveril Buildings, Peveril Square, Douglas, Isle of Man, IM99 1JJ. Legal Advisers Mourant Ozannes PO Box 87, 22 Grenville Street, St Helier, Jersey, JE4 8PX, Channel Islands. 2 Lloyds Investment Funds Limited Investment Objectives and Policy International Fund Lloyds Investment Funds Limited (‘the Company’) is an open-ended investment company registered in Jersey with seven classes, each being an individual ‘Fund’. Objective To seek long term capital appreciation through investment in securities world-wide. It is known as an ‘Umbrella’ Fund because it provides its shareholders with a variety of investment options under the umbrella of a single Company. Investment Policy To be invested primarily in a diversified portfolio of international equities and from time to time in securities convertible into equities. The overall objective of the Company is to provide investors with a managed investment designed to meet the specific objectives laid down for each Fund. The investment objectives and policy of each Fund is set out below. North American Fund Objective Euro High Income Fund To seek long term capital appreciation through investment in North American securities. Objective To maintain a high income through investment in a spread of fixed interest securities denominated predominately in euro. Investment Policy To be invested primarily in a diversified portfolio of North American equities and from time to time in securities convertible into equities. Investment Policy To support the payment of dividends above the level of short term euro interest rates. This policy will result in a gradual reduction in the capital value of the shares, except when bond prices generally are rising. The Fund will normally hold a relatively wide range of securities in order to keep a low level of exposure to individual bond issues other than government securities. The Fund may also hold a substantial part of its assets in bank deposits and money market instruments from time to time. The Fund is permitted to invest in securities denominated in currencies other than euro. The current policy of the Directors is that any such investments in non-euro denominated securities should be fully hedged against euro to eliminate the effects of any exchange rate movements. Sterling Bond Fund Objective To provide a regular income from a managed portfolio of sterling fixed interest securities with a particular emphasis on those securities on which interest is paid gross to non-residents of the United Kingdom. Investment Policy The assets of the Fund are generally invested in a managed portfolio of sterling fixed interest securities which have been issued by governments, local authorities, public utilities and corporations. If it appears advisable to hold assets having a short term maturity, then the Fund may also place money on bank deposit (subject to certain limitations) or to purchase money market instruments. European Fund Objective To seek long term capital appreciation through investment in European securities. Similarly, derivative instruments such as traded options and financial futures may be used to reduce risk. Investment Policy UK Fund To be invested primarily in a diversified portfolio of European (excluding the United Kingdom) equities and from time to time in securities convertible into equities. Objective To seek long term capital appreciation through investment in United Kingdom securities. High Income Fund Investment Policy Objective To be invested primarily in a diversified portfolio of United Kingdom equities and from time to time in securities convertible into equities. To seek a high income from a spread of fixed interest securities. Investment Policy Financial risk To support the payment of dividends above the level of short term sterling interest rates. This policy will result in a gradual reduction in the capital value of the shares, except when bond prices generally are rising. The Fund will normally hold a relatively wide range of securities in order to keep a low level of exposure to individual bond issues other than government securities. The Fund may also hold a substantial part of its assets in bank deposits and money market instruments from time to time. The Fund is permitted to invest in securities denominated in currencies other than sterling. The current policy of the Directors is that any such investments in non-sterling denominated securities should be fully hedged against sterling to eliminate the effects of any exchange rate movements. It should be remembered that the price of shares and the income from them can go down as well as up and is not guaranteed. Consequently, and particularly in the case of early encashment, you might not get back the amount originally invested. Dividends are not guaranteed and may fluctuate in money terms. 3 Lloyds Investment Funds Limited Directors’ Profiles Brian Charles James – Head of Investment Operations Jersey, Retail, Lloyds Banking Group. Ross Davey Willcox (Chairman) – Head of International Products, Retail, Customer Products, Lloyds Banking Group. Joined the Lloyds Banking Group in 1977 and held a number of managerial positions in the UK and Internationally. Was appointed Managing Director of the Lloyds Investment Fund Managers Limited in 1999 and is currently Chairman/Director of the Jersey based Fund Management Company. Current responsibilities include the value proposition of all investment products for International Wealth. A qualified Banker, a Fellow of the Securities & Investment Institute and a Chartered Director. Aged 57. Joined the Lloyds Banking Group in 1988 and held a number of managerial positions primarily in Financial Control and Risk Management roles before being appointed as a Director of the Jersey based Fund Management Company and as a Director of the Company in 1997. Current responsibilities include leading a team of specialists delivering operational support for a range of offshore investment products and services. A Chartered Director. Aged 55. Bronislaw Lysiak – Senior Manager Intermediary Sales, Lloyds Bank International Limited, Lloyds Banking Group. Ian Mark Jeremie Hardy – Senior Product Manager, International Products, Retail, Lloyds Banking Group. Joined the Lloyds Banking Group in 1993 and has held a number of managerial positions within a regulated personal customer environment. Current responsibilities are for sales and distribution of investment products to regulated intermediaries and institutions. Holder of an Advanced Financial Planning Certificate in Taxation, Trust and Investment Planning and Higher National Diploma in Business and Finance. Aged 52. Joined the Lloyds Banking Group in 1981 and held a number of managerial positions before being appointed Managing Director of the Group’s Guernsey based Fund Management Company in 1997 and a Director of the Company in 2000. Current responsibilities include provision of technical and regulatory advice on a range of investment products and services. Holder of an upper second class honours degree from the University of Aston in Birmingham in Business Administration and Transport Planning. Aged 57. Timothy Joseph Herbert – Consultant, Mourant Ozannes. Jersey born and educated. M.A. in jurisprudence Trinity College Oxford 1982. Member of Middle Temple. Joined Mourant du Feu & Jeune (now Mourant Ozannes) in May 1983. Sworn in as an advocate of the Royal Court, September 1985. Tim Herbert was a partner of Mourant Ozannes from 1987 to 2012. In July 2012 he stepped down from the partnership and is now retained by Mourant Ozannes as a consultant to the firm. He has extensive experience in corporate and commercial law and mutual funds advice. Holds other external directorships and also acts as Honorary Consul for Finland. Aged 57. 4 Lloyds Investment Funds Limited Report of the Directors Prospectus The Directors have pleasure in submitting their Annual Report together with the Audited Financial Statements for the year ended 30 September 2016. The Company is domiciled and incorporated as a limited liability company in Jersey, Channel Islands, United Kingdom under the Companies (Jersey) Law 1991 and is listed on the Channel Islands Securities Exchange Authority and the Malta Stock Exchange. Full details of the Company are stated on pages 2 to 6. Copies of the Prospectus are available, free of charge, on application to the Manager. Alternatively they can be accessed on our website at http://international.lloydsbank.com/international-investments/ funds/ Management and Administration Providers The names and addresses of management and administration providers are stated on page 2. Results The results for the year are set out in the financial statements on pages 14 to 83. Comparatives Tables The Distribution Tables (unaudited), Performance Records (unaudited) and Net Asset Value per Share tables (unaudited) are stated on pages 84 to 91. Distributions Distributions for the year are detailed in Note 5 to the financial statements. Directors’ Responsibilities The Directors are responsible for preparing the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS). The Directors are required by the Companies (Jersey) Law 1991 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company for that year and are in accordance with applicable laws. In preparing these financial statements the Directors are required to: Directors The Directors of the company who were in office during the year and up to the date of signing the financial statements were: Mr I.M.J. Hardy ( appointed 8 May 2000) Mr T.J. Herbert (appointed 11 February 2005) Mr B.C. James (appointed 12 March 1997) Mr B. Lysiak (appointed 5 June 2014) Mr R.D. Willcox (appointed 31 July 1998) • select suitable accounting policies and then apply them consistently; As at 30 September 2016, the Shares held in the Company by the Directors were as follows: Mr I. M. J. Hardy International Fund • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been Shares followed subject to any material departures disclosed and explained in the financial statements; and 4,441.80 No Director has a service contract with the Company and no Director is, or was, materially interested in any service or other contract entered into by the Company. • prepare the financial statements on the going concern basis Mr T.J. Herbert is a consultant to Mourant Ozannes, who are the Jersey legal advisers to the Company and the Manager. Mourant Ozannes receives fees in connection with advising the Company and the Manager. These are disclosed in Note 10. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991 and the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended). unless it is inappropriate to presume that the Company will continue in business. Mr B.C. James, Mr I.M.J. Hardy and Mr R.D. Willcox (Chairman) are Directors of Lloyds Investment Fund Managers Limited (the ‘Manager’) which has a management contract with the Company. Fees earned by the Manager are disclosed in these financial statements in note 9. They are also responsible for the safeguarding of the assets of the Company which includes the appointment of a duly qualified Custodian. The Directors must also ensure that they or their duly appointed agents take reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations. Investment Activities The Report of the Investment Manager is set out on pages 7 to 11. Independent Auditor The Directors confirm that they have complied with the above requirements in preparing the financial statements. PricewaterhouseCoopers CI LLP were re-appointed as Independent Auditor at the Annual General Meeting held on 16 March 2016 and have indicated their willingness to remain in office. So far as the Directors are aware, there is no relevant audit information of which the Company’s Auditors are unaware, and each Director has taken all the steps that he ought to have taken as Director, in order to make himself aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information. 5 Lloyds Investment Funds Limited Report of the Directors (continued) Market Conditions The market value per Share of the assets of each Fund was as follows: Assets held within certain Funds can be affected by market conditions and this may affect the share price of those Funds. The Directors would like to remind shareholders that investment in the Funds should be considered as a long term commitment, as the price of shares may rise and fall in the short term in response to changing market conditions. Sterling Denominated Strategies 30 September 2016 1 October 2015 (pence) (pence) European Fund Information Exchange Jersey has entered into a number of information exchange agreements with the authorities of other jurisdictions. These include requirements set out under The European Union Savings Tax Directive (EUSD), Foreign Account Tax Compliance Act (FATCA) in the United States of America, Corporate Reporting Standards (CRS) and UK Crown Dependencies Inter Governmental Agreements. 871.23 716.60xd High Income Fund 92.50 85.60xd International Fund 489.38 380.90xd 1,882.32 1,479.00xd Sterling Bond Fund 160.28 144.80xd UK Fund 709.44 642.90xd (Euro cents) (Euro cents) 167.49 158.90xd North American Fund Euro Denominated Strategies Shareholders should be aware that information on their investment may be shared with the relevant authorities, and may be passed to the tax authorities in their country of residence, citizenship or residence for tax purposes. For the avoidance of doubt this information may include (but not be limited to) details of shareholder names, addresses, unique identifiers (such as tax or national insurance numbers), amount of investment, redemption or sale proceeds and dividend payments. Euro High Income Fund The latest prices can be viewed on our website. http:// international.lloydsbank.com/international-investments/ funds/prices/ Website The Directors have selected Lloyds Bank International Limited’s website as the host website for the Company’s financial statements and believe this selection to be a reasonable one; the work carried out by the Auditors does not involve consideration of these matters and, accordingly, the Auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Financial Risk Management The Directors have taken into consideration the financial risk management of the Company, this has been disclosed in Note 19 of the financial statements. Reporting Funds Regime Information published on the internet is accessible in many countries. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. HM Revenue & Customs has accepted the entry of the Company into the Reporting Funds Regime with effect from 1 October 2010 for the purposes of regulation 51 of the Offshore Funds (Tax) Regulations 2009. By order of the Board Lloyds Corporate Services (Jersey) Limited Secretary General Information The Company is an open-ended investment Company with variable capital and shareholders are not liable for the debts of the Company. 16 December 2016 The Company holds a certificate as a recognized Securities Fund under the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended), and holds a permit under Article 7 of the Collective Investment Funds (Jersey) Law, 1988. The Manager maintains an appropriate level of “own funds” to cover the professional liability risks. The Company is listed on the Channel Islands Securities Exchange Authority (the “CISEA”) and the Malta Stock Exchange. 6 Lloyds Investment Funds Limited Report of the Investment Manager Euro High Income Fund From July onwards we reduced overall credit exposure for clients, particularly in cyclically sensitive areas such as financials. Furthermore, we kept duration positions close to index levels and asset allocation between sectors was reduced, leaving fund performance to come through from stock selection. Performance The Fund produced a return of 8.7% over the period ended 30 September 2016, compared to a return of 11% in the iBOXX Euro Corporates 5 years + index. Outlook Background and Strategy The outlook for bond yields and therefore returns from the asset class are somewhat mixed. Yields have started to rise in developed markets as the efficacy of monetary policy actions is being challenged. Credit spreads appear well supported but volatility around the US election and Italian referendum can be expected. During the first three months of the review period, corporate bonds outperformed government bonds as risk premiums fell. The Federal Reserve acted on policy rates moving the target for funds up by 25 basis points in December. Bonds issued by companies with exposure to commodity prices were among the worst performers, while those issued by banks and insurers performed well, reflecting a significant improvement in credit fundamentals. These market moves benefitted the fund. European Fund Performance The Fund produced a return of 22.5% over the period ended 30 September 2016, compared to a return of 21.8% in the Lipper Hindsight European excluding UK Equity sector. Moving into 2016, risk assets had a very poor January as global markets started the year in panic mode. Fears over a faltering Chinese economy, general emerging markets weakness and the collapse in oil price were triggers for wider risk aversion. European investment grade credit was not immune to the selloff, although it was relatively resilient compared to equities and emerging markets linked assets. February was very volatile month for European investment grade credit. Euro denominated bond spreads widened sharply in the first half of the month before rebounding strongly. Supportive central bank comments together with a halt in the fall of oil appeared to be the catalysts for the shift in sentiment. However sterling spreads materially underperformed, failing to retrace in the second half of the month as fears around the UK referendum on European Union membership kept them elevated. Background and Strategy European equities rose in the year under review, marked by distinct halves. Initially, investors were spooked by a sell-off in Chinese equities and a sustained fall in oil prices. Mitigating the declines were the US Federal Reserve’s well-telegraphed interest-rate normalisation and the European Central Bank’s bolder-thanexpected package of fresh stimulus. Subsequently, share prices rebounded from the sell-off following the shock Brexit vote. The backlash was swift: global stock markets plunged; sterling sank to a 30-year low against the US dollar; and David Cameron stepped down as prime minister. Subsequently, risk appetites returned amid relief from the smooth change in the political leadership and a rebound in oil prices. However, the gains were capped by worries over Deutsche Bank’s troubles. Further monetary easing from the European Central Bank (ECB) and in particular the surprise announcement that non-financial investment grade corporate bonds would be purchased by the central bank contributed to a sharp contraction in credit spreads in March. Spreads were further supported by a modest bounce in commodity prices. In economic news, the Eurozone expanded in the second quarter on foreign demand, with employment growing at a steady pace. Economic sentiment rebounded to an eight-month high in September, underpinned by rising confidence among industrialists and retailers, with consumers cautiously optimistic. Conversely, inflation rose to its highest since late 2014 but remained well below the ECB’s target. Private sector growth was the slowest in 20 months, with positive manufacturing activity counterbalanced by the sluggish services sector. The lead into the UK’s EU referendum at the end of June was one of falling yields but stable credit yield spreads. This perhaps reflected the uncertainty of the vote’s impact, balanced by the start of the ECB’s Corporate Sector Purchase Programme. However, this uncertain market backdrop was soon replaced by strong performance of risk assets and some very strong returns in credit markets. Confidence swiftly returned as European markets also rallied strongly with ECB corporate bond purchases once again providing some positive momentum. Despite the difficult environment for credit in the early part of 2016, the Fund’s total return was strong due to a sharp fall of underlying government bond yields. For example, 10-year German bond yields fell between from 0.63% on 31 December to -0.12% on 30 September. 7 Lloyds Investment Funds Limited Report of the Investment Manager (continued) European (continued) High Income Fund Outlook Performance Global growth looks set to improve next year, aided by an on-going recovery in the US, both Russia and Brazil exiting recession and a Chinese economy that increasingly looks to have stabilised, albeit at levels of expansion below those enjoyed previously. However, the risks posed by Brexit, the fragility of the European banking system and US presidential elections mean that there are significant uncertainties facing investors, companies and consumers. The Fund produced a return of 13.8% over the period ended 30 September 2016, compared to a return of 15.5% in the iBoxx Non Gilt ex Sovereign All Maturities index. Background and Strategy Corporate bonds outperformed government bonds in the first three months of the review period. The UK Federal Reserve finally acted on policy rates moving the target for funds up by 25 basis points in December. This action was widely anticipated by financial markets. However, some volatility returned at the end of 2015, as investors became cautious about the outlook for the year ahead. OPEC aims to reduce supply for the first time since 2008, good news for those with exposure to the sector as reflected in the rebound in oil prices. However, history shows that compliance with such quotas is often weak and only time will tell if this will genuinely lead to a structural re-balancing between supply and demand. That volatility continued into the new year, which began with a very negative tone and some significant re-pricing of corporate bonds. Credit spreads across all sectors moved materially wider as slower global growth, and greater risk of some stress in the financial sector, was priced in. That weakness continued into February. While developed market government bonds were the safe haven, driving up prices and causing government bond yields to fall materially, credit spreads continued to widen and overall returns were negative both in January and February. In contrast credit markets received a significant boost from European Central Bank (ECB) actions in March. The introduction of further monetary easing and new measures, including a corporate bond buying programme, had a very positive impact causing credit spreads in the sterling market to tighten significantly. Sterling has continued to weaken as markets have focused on the risks of a so-called hard Brexit. It remains much too early to tell what the ramifications of leaving the EU will be. It is notable that, as more data becomes available, some of the more downbeat prognosis have been forced to shift to less extreme positions. In the meantime, sterling weakness is being regarded as a positive for the profitability of many UK companies, especially the larger ones and hence, the optimism in equity markets. That holds true to a point but devaluing the currency is not a panacea. It brings with it the risk of future inflation, particularly at a time when the tools conventionally used to control rising prices are unavailable. The lead into the UK’s EU referendum at the end of June was one of falling yields but stable credit yield spreads. This perhaps reflected the uncertainty of the vote’s impact, balanced by the start of the ECB’s Corporate Sector Purchase Programme. However, this uncertain market backdrop was soon replaced by strong performance of risk assets and some very strong returns in credit markets. Investors preferred to focus on the shorter term news flow, which included a further loosening of monetary policy by the Bank of England. While sterling was weak, reflecting those policy decisions and the increased likelihood of a slowdown in economic activity, UK investment grade bonds performed very strongly. Throughout the first half of the review period, the Fund was long of credit risk on the grounds that credit spreads offered compelling value. A short duration position relative to the benchmark reflected the low level of government bond yields, and a view that in the medium term UK yields would be moving higher. From July onwards we reduced overall credit exposure for clients, particularly in cyclically sensitive areas such as financials. Furthermore, we kept duration positions close to index levels and asset allocation between sectors was reduced, leaving fund performance to come through from stock selection. 8 Lloyds Investment Funds Limited Report of the Investment Manager (continued) High Income Fund (continued) Meanwhile, positive stock selection in Japan boost performance, as Daito Trust Construction benefited from lower financing costs in Japan, which led to an influx in rental housing orders. Similarly, our non-benchmark exposure to Brazil contributed to performance, as confidence in its economy climbed after suspended President Dilma Rousseff was ousted and Michel Temer was formally sworn into office. Outlook The High Income Bond Fund remains long of credit risk as spreads continue to offer compelling value. Bond issued by banks and insurers, whilst not without risk, are strongly favoured with UK institutions and old style instruments favoured. The Bank of England is purchasing corporate bonds as part of its quantitative easing programme and bonds which fit the criteria are favoured. Outlook International Fund Global growth seems to be faltering again, particularly in developed economies, which are suffering from sluggish investment and tepid private sector confidence. At the same time, mixed economic data has led to uncertainty over whether the Federal Reserve will hike interest rates by the end of the year. In addition, political risks, namely, the outcome of the US presidential election and the triggering of Article 50 by the UK, under which the UK will begin the formal Brexit negotiation process, are likely to add to volatility. Major central banks have started to realise that prolonged easy monetary policy lacks the muscle to boost growth, and we are beginning to see the return of fiscal stimulus, notably in Japan and China. Performance The Fund produced a return of 30.4% over the period ended 30 September 2016, compared to a return of 30.6% in the LipperHindsight Global Equity sector. Background and Strategy Global equities rose during the volatile year under review, with major central banks’ monetary policies weighing on sentiment. Initially, markets were spooked when the US Federal Reserve hiked interest rates for the first time in a decade. Plunging oil prices, on the back of failure by OPEC members to set an oil production ceiling despite an already oversupplied market, sent shockwaves throughout stock markets. Subsequently, investors found relief as tepid economic data and persistent deflationary pressures forced the Fed to keep rates unchanged for the rest of the year. Sentiment picked up dramatically after Japan and parts of Europe unexpectedly imposed negative interest rates to combat low inflation and boost spending. The change in tone resulted in US dollar weakness, which provided relief to commodities and commodity related emerging markets such as Brazil. Towards the end of the period, oil prices received a further boost when OPEC members reached a preliminary deal to curb production. Elsewhere, markets recovered quickly from the temporary jolt of Britain’s unexpected decision to leave the European Union, as central banks pledged to help stabilise the financial markets. Elsewhere, the outlook for commodities is murky, with the slowdown in China plaguing iron ore demand and hurdles still unresolved in the tentative deal among OPEC members to limit production. Despite such a challenging environment, we continue to have faith in our bottom up investment process. We remain focused on quality, and will seek opportunities to build our positions in well-managed businesses that are trading at attractive valuations. North American Fund Performance The Fund produced a return of 29.6% over the period ended 30 September 2016, compared to a return of 34.6% in the Lipper Hindsight North American Equity sector. The fund rose by 32.27% during the year under review, outperforming the benchmark’s total return of 30.64%. Stock selection and asset allocation were positive, while currency effects were negative. Background and Strategy US equities posted solid gains for the 12 month period ended September 30, 2016 amid generally positive economic data reports and increasing clarity on US Federal Reserve (Fed) monetary policy. All 10 sectors within the US broader-market S&P 500 Index recorded positive returns for the review period. The telecommunication services and information technology sectors were the strongest performers, while the financials and consumer discretionary sectors were the primary market laggards. During the year, our non-benchmark exposure to South Africa cost the fund, amid concerns of weak economic growth and political instability. In particular, our holding MTN Group fell, after the Nigerian regulator suspended negotiations over a US$3.9 billion fine for missing the deadline to disconnect unregistered SIM cards. The overweight to the UK also cost the fund, due to sterling weakness post-Brexit. In addition, Swiss-based Novartis detracted from performance, in line with the broader healthcare and pharmaceuticals sectors, due to increased pricing scrutiny. The Fed raised its benchmark interest rate by 25 basis points to a range of 0.25%-0.50% at its meeting in December 2015, and subsequently left the rate unchanged over the next nine months. US GDP grew by a relatively slow but sustainable year-over-year pace of 1.1% to 2.0% in each quarter during the period. While U.S. payrolls grew by a monthly average of 166,000 over the review period, the unemployment rate was little changed at 5.0%, as more workers entered the job market. In contrast, our non-benchmark exposure to Taiwan benefited the fund, as the market was buoyed by foreign demand for large-cap stocks. Our position in Taiwan Semiconductor performed well, as it rose in line with the semiconductor sector. 9 Lloyds Investment Funds Limited Report of the Investment Manager (continued) North American Fund (continued) Sterling Bond Fund Background and Strategy (continued) Performance The Fund produced a return of 14.9% over the period ended 30 September 2016, compared to a return of 15.5% in the iBoxx Non Gilt ex Sovereign All Maturities Index. The Fund’s underperformance versus the benchmark S&P 500 Index for the review period was attributable mainly to stock selection in the information technology and consumer discretionary sectors. Background and Strategy The primary individual stock detractors were IT services provider Cognizant Technology Solutions and marketing and loyalty solutions services provider Alliance Data Systems. Shares of Cognizant Technology underperformed as the company faced questions about the pace of revenue growth. Additionally, towards the end of the review period, Cognizant’s president, Gordon Coburn, resigned following an internal investigation into whether certain payments the company made relating to facilities in India were in violation of the US Foreign Corrupt Practices Act. Alliance Data Systems was hampered by relative weakness in its Epsilon business segment and concerns about rising credit losses, which have yet to materialize. Corporate bonds outperformed government bonds in the first three months of the review period. The UK Federal Reserve finally acted on policy rates moving the target for funds up by 25 basis points in December. This action was widely anticipated by financial markets. However, some volatility returned at the end of 2015, as investors became cautious about the outlook for the year ahead. That volatility continued into the new year, which began with a very negative tone and some significant re-pricing of corporate bonds. Credit spreads across all sectors moved materially wider as slower global growth, and greater risk of some stress in the financial sector, was priced in. That weakness continued into February. While developed market government bonds were the safe haven, driving up prices and causing government bond yields to fall materially, credit spreads continued to widen and overall returns were negative both in January and February. In contrast credit markets received a significant boost from European Central Bank (ECB) actions in March. The introduction of further monetary easing and new measures, including a corporate bond buying programme, had a very positive impact causing credit spreads in the sterling market to tighten significantly. Stock selection in industrials and health care bolstered Fund performance for the period. The largest contributors among individual holdings included diversified health care company Baxter Intl and semiconductor manufacturer Texas Instruments. Baxter Intl benefited from healthy revenue growth in its hospital products segment and its US business over the review period. Texas Instruments’ results for the first two quarters of 2016 were bolstered by record-high margins attributable mainly to a reduction in manufacturing costs and a switch in production from 200 to 300 millimeter semiconductor wafers. The lead into the UK’s EU referendum at the end of June was one of falling yields but stable credit yield spreads. This perhaps reflected the uncertainty of the vote’s impact, balanced by the start of the ECB’s Corporate Sector Purchase Programme. However, this uncertain market backdrop was soon replaced by strong performance of risk assets and some very strong returns in credit markets. Investors preferred to focus on the shorter term news flow, which included a further loosening of monetary policy by the Bank of England. While sterling was weak, reflecting those policy decisions and the increased likelihood of a slowdown in economic activity, UK investment grade bonds performed very strongly. Outlook With the Fed’s September announcement behind us our broader outlook from prior months is largely unchanged. The company fundamentals have generally remained stable through a trickle of US economic data showing slow and steady improvement as global growth has maintained a more measured pace. For the overall US equity market, valuations have expanded in aggregate but still appear to be fair in the context of underlying earnings growth, in our opinion. However, we believe that valuations of high dividend paying companies remain extended beyond fundamental fair value as a result of their favourable yield spreads compared to risk-free US Treasury securities. From July onwards we reduced overall credit exposure for clients, particularly in cyclically sensitive areas such as financials. Furthermore, we kept duration positions close to index levels and asset allocation between sectors was reduced, leaving fund performance to come through from stock selection. Amid this landscape, we feel that the task for us active managers is to remain carefully selective as we sift through the investable universe. Throughout the review period we have favoured subordinated bank paper issued by banks in stronger jurisdictions. In the sterling area, Aviva, Prudential, RBS and Lloyds Banking Group all remain attractive. Exposure to telecoms is being pared back but remains an overweight. A neutral duration position is being maintained. 10 Lloyds Investment Funds Limited Report of the Investment Manager (continued) Sterling Bond Fund (continued) Sterling has continued to weaken as markets have focused on the risks of a so-called hard Brexit. It remains much too early to tell what the ramifications of leaving the EU will be. It is notable that, as more data becomes available, some of the more downbeat prognoses have been forced to shift to less extreme positions. In the meantime, sterling weakness is being regarded as a positive for the profitability of many UK companies, especially the larger ones and hence, the optimism in equity markets. That holds true to a point but devaluing the currency is not a panacea. It brings with it the risk of future inflation, particularly at a time when the tools conventionally used to control rising prices are unavailable. Outlook As markets recovered following the ECB’s March meeting, financials lagged the recovery. Nevertheless, despite the recent underperformance, financials remain favoured relative to nonfinancials on both fundamental and valuation grounds. We continue to favour subordinated bank paper issued by banks in stronger jurisdictions such as the UK where banks such as RBS and Lloyds Banking Group have addressed their balance sheet issues with a degree of success over recent years. Throughout the review period, the Fund was long of credit risk on the grounds that credit spreads offer compelling value. UK Fund This report is solely for information purposes and is not intended to be and should not be construed as an offer or recommendation to buy and sell investments, nor shall it form the basis or part of any contract to be relied upon in any way. Performance The Fund produced a return of 14.6% over the period ended 30 September 2016, compared to a return of 16.8% in the Lipper Hindsight UK Offshore Funds sector. Aberdeen Assets Investments Limited Background and Strategy 16 December 2016 Most UK equities rose in the year under review. Initially, investors were spooked by a sell-off in Chinese equities and a sustained fall in oil prices. Mitigating the declines were the US Federal Reserve’s welltelegraphed interest-rate normalisation and the European Central Bank’s bolder-than-expected package of fresh stimulus. Investors were also cheered by the Bank of England’s interest rate cut, which left the official lending rate at a new low of 0.25%, as well as sterling’s fall to its lowest level since Britain’s shock vote to exit the European Union in June. The backlash to that historic decision was swift: global stockmarkets tumbled; sterling fell to a 30-year low against the US dollar; and David Cameron stepped down as the prime minister. Since then, however, market benchmarks have bounced back and approached their highest in more than 14 months. Sentiment has steadily recovered, helped by robust corporate results and dovish comments from major central banks, particularly the Fed, which continued to hold interest rates steady in the face of still-lacklustre jobs data. However, the benchmark’s gains were capped by worries over Deutsche Bank’s troubles. Outlook Global growth looks set to improve next year, aided by an on-going recovery in the US, both Russia and Brazil exiting recession and a Chinese economy that increasingly looks to have stabilised, albeit at levels of expansion below those enjoyed previously. However, the risks posed by Brexit, the fragility of the European banking system and US presidential elections mean that there are significant uncertainties facing investors, companies and consumers. OPEC aims to reduce supply for the first time since 2008, good news for those with exposure to the sector as reflected in the rebound in oil prices. However, history shows that compliance with such quotas is often weak and only time will tell if this will genuinely lead to a structural re-balancing between supply and demand. 11 Lloyds Investment Funds Limited Report of the Custodian to the Members of Lloyds Investment Funds Limited Statement of Custodian’s Responsibilities. The Custodian is required under the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended) (the ‘Rules’) to ensure that, inter alia, it: • satisfies itself that the sale, issue, redemption, cancellation and valuation of shares in the Company are carried out in accordance with the Rules; and • takes into its custody all the assets of the Company and holds them in trust for the shareholders in accordance with the Rules; and • enquires into the conduct of the Company in each annual accounting year and reports thereon to shareholders in a report, which shall contain the matters prescribed by the Rules. The Custodian’s Report is included in this Annual Report. Report of the Custodian to the Members of Lloyds Investment Funds Limited In accordance with Article 2.06 of the Rules, Capita Trust Company (Jersey) Limited, has acted throughout the year as independent Custodian to the Company. In accordance with Article 7.08 of the Rules we confirm, in our capacity as the Custodian, that we have enquired into the conduct of the Company for the year ended 30 September 2016 and in our opinion, to the best of our knowledge having made such enquiry, the affairs of the Company have been conducted in all material respects for the year then ended: • in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Memorandum and Articles of Association, by prospectuses and by all Orders for the time being in force under Article 11 of the Collective Investment Funds (Jersey) Law 1988 (as amended) (‘the Law’); and • otherwise in accordance with the provisions of the Memorandum and Articles of Association and the Law. Capita Trust Company (Jersey) Limited, Custodian, 12 Castle Street, St Helier, Jersey, JE2 3RT Channel Islands 16 December 2016 12 Lloyds Investment Funds Limited Report of the Independent Auditors to the Members of Lloyds Investment Funds Limited Report on the financial statements Opinion We have audited each of the accompanying financial statements of Lloyds Investment Funds Limited (“the Company”) and the separate financial statements of each Fund listed below (together “the Financial Statements”). The Financial Statements comprise the Statements of Financial Position as of 30 September 2016 and the Statements of Comprehensive Income, Statements of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares, the Cash Flow Statements and the Investment Portfolios for the year then ended and a summary of significant accounting policies and other explanatory information. In our opinion, the Financial Statements give a true and fair view of the financial position of the Company and the Funds as of 30 September 2016, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991 and the Collective Investment Funds (Recognized Funds) (Rules)(Jersey)Order 2003 (as amended). Report on other legal and regulatory requirements We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises the company information, the investment objectives and policy, the Directors’ profiles, the Report of the Directors, Report of the Investment Manager, the Report of the Custodian to the Members of Lloyds Investment Funds Limited, the Investment Dealing, the Investments Purchased and Sold, the Summary of Material Portfolio Changes, the distribution table (Unaudited), the performance record (Unaudited), the net asset value per share (Unaudited), the notice of meeting and the form of proxy. The Funds are: • Euro High Income Fund • European Fund • High Income Fund • International Fund • North American Fund • Sterling Bond Fund • UK Fund Respective responsibilities of directors and auditors The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of the Companies (Jersey) Law 1991 (and the Collective Investment Funds (Recognised Funds)(Rules)(Jersey) Order 2003 (as amended)). The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In our opinion the information given in the Report of the Directors is consistent with the Financial Statements. This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991, and part 4 of the Rules Schedule 3 of the Collective Investment Funds (Recognized Funds) (Rules)(Jersey)Order 2003 (as amended) and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Auditors’ responsibilities Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Rebecca Brewer For and on behalf of PricewaterhouseCoopers CI LLP Chartered Accountants Jersey, Channel Islands An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. 16 December 2016 The maintenance and integrity of the Lloyds Investment Funds Limited (http://international.lloydsbank.com/international-investments/funds/ uk/) website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 13 Lloyds Investment Funds Limited Statements of Financial Position As at 30 September 2016 Notes Company Euro High Income Fund European Fund £ € £ Assets Current Assets Cash and cash equivalents 7,398,978 326,014 117,349 27,993 — 5,637 193,954 — 171,456 373,032,529 15,248,556 14,213,725 7,226,964 247,623 — 387,880,418 15,822,193 14,508,167 Equity Ordinary share capital 1,000 — — Total Equity 1,000 — — Cancellation payable 269,604 10,032 — Investment purchases payable 101,334 — 23,447 Creations receivable Investment sales receivable Financial assets at fair value through profit or loss Other accrued income and other debtors 4 Total Assets Current Liabilites Distribution payable 5 1,620,876 105,980 — Accrued expenses and other creditors 6 527,616 25,098 35,835 Nominal shares 14 1,333,160 3,852,590 141,110 59,282 384,026,828 15,681,083 14,448,885 387,880,418 15,822,193 14,508,167 Total Liabilities* Net assets attributable to holders of participating redeemable preference shares Total Liabilities and Equity 17 * Excluding net assets attributable to holders of participating redeemable preference shares The financial statements on pages 14 to 83 were approved by the Board of Directors on 16 December 2016 and are signed on their behalf by: R. D. Willcox B. Lysiak } Directors The notes on pages 53 to 83 form an integral part of these financial statements. 14 Lloyds Investment Funds Limited Statements of Financial Position As at 30 September 2016 Assets Current Assets Cash and cash equivalents High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 5,702,339 331,269 111,655 557,390 296,933 Creations receivable — 1,709 20,647 — — Investment sales receivable — — 22,498 — — 277,848,172 21,202,633 9,976,334 21,406,272 15,193,459 5,250,124 21,506 8,745 379,433 18,771 288,800,635 21,557,117 10,139,879 22,343,095 15,509,163 Equity Ordinary share capital — — — — — Total Equity — — — — — 238,139 17,310 1,877 — 3,599 — — 29,729 — 48,158 1,123,677 — — 194,489 211,024 326,901 48,113 25,213 32,815 37,026 — — — Financial assets at fair value through profit or loss Other accrued income and other debtors Total Assets Current Liabilites Cancellation payable Investment purchases payable Distribution payable Accrued expenses and other creditors Nominal shares — — Total Liabilities* 1,688,717 65,423 56,819 227,304 299,807 Net assets attributable to holders of participating redeemable preference shares 287,111,918 21,491,694 10,083,060 22,115,791 15,209,356 Total Liabilities and Equity 288,800,635 21,557,117 10,139,879 22,343,095 15,509,163 * Excluding net assets attributable to holders of participating redeemable preference shares The notes on pages 53 to 83 form an integral part of these financial statements. 15 Lloyds Investment Funds Limited Statements of Financial Position (continued) As at 30 September 2015 Notes Company Euro High Income Fund European Fund £ € £ Assets Current Assets Cash and cash equivalents 4,628,831 695,455 172,481 21,188 — 6,370 345,632 102,028 — 370,336,365 14,030,693 11,937,617 7,982,552 218,566 — 383,314,568 15,046,742 12,116,468 Equity Ordinary share capital 1,000 — — Total Equity 1,000 — — 227,220 — — 722,885 — — Creations receivable Investment sales receivable Financial assets at fair value through profit or loss Other accrued income and other debtors 4 Total Assets Current Liabilites Cancellation payable Investment purchases payable Distribution payable 5 1,795,564 108,025 — Accrued expenses and other creditors 6 606,815 29,877 36,839 Nominal shares 14 1,053,019 — — 4,405,503 137,902 36,839 378,908,065 14,908,840 12,079,629 383,314,568 15,046,742 12,116,468 Total Liabilities* Net assets attributable to holders of participating redeemable preference shares Total Liabilities and Equity 17 * Excluding net assets attributable to holders of participating redeemable preference shares The notes on pages 53 to 83 form an integral part of these financial statements. 16 Lloyds Investment Funds Limited Statements of Financial Position (continued) As at 30 September 2015 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 2,453,088 90,996 78,928 511,489 809,355 — 6,542 — — 8,276 176,082 — — 94,364 — 277,989,695 18,235,186 8,544,573 29,215,074 14,074,725 6,110,661 28,047 7,888 605,122 15,751 286,729,526 18,360,771 8,631,389 30,426,049 14,908,107 Equity Ordinary share capital — — — — — Total Equity — — — — — 219,845 — — 6,420 955 — — — 648,105 74,780 1,248,508 — — 264,418 203,033 382,011 52,865 27,315 43,039 42,730 — — — Assets Current Assets Cash and cash equivalents Creations receivable Investment sales receivable Financial assets at fair value through profit or loss Other accrued income and other debtors Total Assets Current Liabilites Cancellation payable Investment purchases payable Distribution payable Accrued expenses and other creditors Nominal shares — — Total Liabilities* 1,850,364 52,865 27,315 961,982 321,498 Net assets attributable to holders of participating redeemable preference shares 284,879,162 18,307,906 8,604,074 29,464,067 14,586,609 Total Liabilities and Equity 286,729,526 18,360,771 8,631,389 30,426,049 14,908,107 * Excluding net assets attributable to holders of participating redeemable preference shares The notes on pages 53 to 83 form an integral part of these financial statements. 17 Lloyds Investment Funds Limited Statement of Comprehensive Income For the year ended 30 September 2016 Notes Operating Profit Net gains on financial assets at fair value through profit or loss 7 Investment income Other income 8 Total operating expenses 9 Operating profit Finance Costs Distributions to holders of participating redeemable preference shares 5 Total finance costs Profit before tax Withholding tax on dividends and other investment income Company Euro High Income Fund European Fund £ € £ 38,801,383 994,026 2,867,918 18,141,165 450,056 398,772 18,382 264 220 (4,484,254) (195,756) (258,005) 52,476,676 1,248,590 3,008,905 (15,837,532) (450,254) — (15,837,532) (450,254) — 36,639,144 798,336 18 Increase in net assets attributable to holders of participating redeemable preference shares from operations (251,545) — 3,008,905 (95,552) 36,387,599 798,336 2,913,353 Company Euro High Income Fund European Fund £ € £ For the year ended 30 September 2015 Notes Operating Profit Net gains / (losses)on financial assets at fair value through profit or loss 7 Investment income Other income 8 Total operating expenses 9 (6,042,508) (720,287) (644,260) 18,173,407 542,960 388,480 7,509 — 292 (4,803,708) (198,155) (277,501) 7,334,700 (375,482) (532,989) (17,748,954) (496,387) — Total finance costs (17,748,954) (496,387) — Profit before tax (10,414,254) (871,869) (532,989) (257,228) (910) (75,368) (10,671,482) (872,779) (608,357) Operating profit Finance Costs Distributions to holders of participating redeemable preference shares Withholding tax on dividends and other investment income Increase in net assets attributable to holders of participating redeemable preference shares from operations 5 18 The notes on pages 53 to 83 form an integral part of these financial statements. 18 Lloyds Investment Funds Limited Statement of Comprehensive Income For the year ended 30 September 2016 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ Operating Profit Net gains on financial assets at fair value through profit or loss 22,977,323 5,051,026 2,365,062 2,867,465 1,895,191 Investment income 14,710,173 517,390 188,965 1,466,079 507,811 10,714 1,080 5 3,962 2,195 Other income Total operating expenses (2,884,509) (381,812) (185,988) (320,324) (300,521) Operating profit 34,813,701 5,187,684 2,368,044 4,017,182 2,104,676 Finance Costs Distributions to holders of participating redeemable preference shares (14,255,510) — — (1,008,523) (211,024) Total finance costs (14,255,510) — — (1,008,523) (211,024) 5,187,684 2,368,044 Profit before tax Withholding tax on dividends and other investment income Increase in net assets attributable to holders of participating redeemable preference shares from operations 20,558,191 (20,530) (81,671) 3,008,659 (51,669) — 1,893,652 (2,123) 20,537,661 5,106,013 2,316,375 3,008,659 1,891,529 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ For the year ended 30 September 2015 £ £ Operating Profit Net gains / (losses)on financial assets at fair value through profit or loss (1,096,890) (2,756,375) Investment income 14,960,201 606,826 201,799 1,104,549 509,979 5,867 239 74 299 738 Other income Total operating expenses (3,162,196) Operating profit 10,706,982 (434,137) (2,583,447) 138,347 (24,769) (1,125,836) (189,133) (269,361) (324,825) 151,087 810,718 (939,944) Finance Costs Distributions to holders of participating redeemable preference shares (16,276,045) — — (903,590) (203,033) Total finance costs (16,276,045) — — (903,590) (203,033) 151,087 (92,872) (1,142,977) Profit before tax Withholding tax on dividends and other investment income Increase in net assets attributable to holders of participating redeemable preference shares from operations (5,569,063) (2,583,447) (22,298) (91,721) (5,591,361) (2,675,168) The notes on pages 53 to 83 form an integral part of these financial statements. 19 (55,070) 96,017 — (92,872) (12,098) (1,155,075) Lloyds Investment Funds Limited Statement of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares For the year ended 30 September 2016 Company Euro High Income Fund European Fund £ € £ Net assets attributable to holders of participating redeemable preference shares as at 1 October 2015 378,908,065 14,908,840 12,079,629 Creation of participating redeemable preference shares 14,013,417 1,500,554 463,970 (47,343,683) (1,526,647) Redemption of participating redeemable preference shares Dilution levies Net (decrease) from share transactions 38,390 (1,008,067) — — (33,291,876) (26,093) (544,097) 36,387,599 798,336 2,913,353 2,023,040 — — 384,026,828 15,681,083 14,448,885 Company Euro High Income Fund European Fund £ € £ Net assets attributable to holders of participating redeemable preference shares as at 1 October 2014 414,771,626 14,281,016 14,196,527 Creation of participating redeemable preference shares 23,627,298 2,887,051 592,736 (48,247,862) (1,386,448) Increase in net assets attributable to holders of participating redeemable preference shares from operations Movement in currency translation Net assets attributable to holders of participating redeemable preference shares as at 30 September 2016 For the year ended 30 September 2015 Redemption of participating redeemable preference shares Dilution levies 30,942 — Net (decrease)/increase from share transactions (24,589,622) 1,500,603 (Decrease)/increase in net assets attributable to holders of participating redeemable preference shares from operations (10,671,482) (872,779) Movement in currency translation Net assets attributable to holders of participating redeemable preference shares as at 30 September 2015 (602,457) 378,908,065 The notes on pages 53 to 83 form an integral part of these financial statements. 20 (2,101,277) — (1,508,541) (608,357) — — 14,908,840 12,079,629 Lloyds Investment Funds Limited Statement of Changes in Net Assets Attributable to Holders of Participating Redeemable Preference Shares For the year ended 30 September 2016 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ Net assets attributable to holders of participating redeemable preference shares as at 1 October 2015 284,879,162 18,307,906 8,604,074 29,464,067 14,586,609 Creation of participating redeemable preference shares issued 9,096,234 79,874 243,395 2,089,306 885,937 Redemption of participating redeemable preference shares (27,401,139) Dilution levies Net (decrease) from share transactions (2,002,099) — (1,080,784) — (1,922,225) 20,537,661 5,106,013 — 38,390 — (1,268,782) 2,316,375 3,008,659 1,891,529 — — — — 287,111,918 21,491,694 10,083,060 22,115,791 15,209,356 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ Net assets attributable to holders of participating redeemable preference shares as at 1 October 2014 316,214,234 24,279,013 9,329,332 22,429,857 17,194,744 Creation of participating redeemable preference shares issued 9,792,150 446,226 410,799 9,509,677 748,187 Movement in currency translation Net assets attributable to holders of participating redeemable preference shares as at 30 September 2016 (837,389) (2,154,719) (10,356,935) Increase in net assets attributable to holders of participating redeemable preference shares from operations (18,304,905) — (12,484,631) For the year ended 30 September 2015 Redemption of participating redeemable preference shares Dilution levies Net (decrease)/increase from share transactions (Decrease)/increase in net assets attributable to holders of participating redeemable preference shares from operations Movement in currency translation Net assets attributable to holders of participating redeemable preference shares as at 30 September 2015 (35,566,803) (3,742,165) 30,942 — (1,232,074) — (25,743,711) (3,295,939) (821,275) (5,591,361) (2,675,168) 96,017 (2,382,595) — 7,127,082 (92,872) (2,201,247) — (1,453,060) (1,155,075) — — — — — 284,879,162 18,307,906 8,604,074 29,464,067 14,586,609 The notes on pages 53 to 83 form an integral part of these financial statements. 21 Lloyds Investment Funds Limited Cash Flow Statement For the year ended 30 September 2016 Company Euro High Income Fund European Fund £ € £ Cash flows from operating activities Purchases of financial assets and settlement of financial liabilities (81,234,707) (8,086,938) (1,988,622) Receipts from sale of investments 118,886,761 7,928,363 2,434,510 18,872,084 457,779 303,220 11,638 210 218 Bank interest received 6,744 54 2 Interest paid (991) (437) (6) Operating expenses paid (4,565,898) (200,098) (259,003) Net cash inflow from operating activities 51,975,631 98,933 490,319 (16,015,555) (452,298) Investment income received Unclaimed distributions over 10 years old Cash flows from financing activities Distributions paid to holders of participating redeemable preference shares issued Proceeds received from issue of participating redeemable preference shares 14,025,453 1,500,555 Payments on redemption of participating redeemable preference shares (47,283,825) (1,516,615) Tax 464,702 (1,008,066) (20,530) — — 38,390 — — Dilution levies Net cash (outflow) from financing activities — (49,256,067) (468,358) (543,364) Net increase/(decrease) in cash and cash equivalents 2,719,564 (369,425) (53,045) Cash and cash equivalents as at 1 October 2015 4,628,831 695,455 172,481 Exchange (losses)/gains on cash and cash equivalents (7,898) (16) Movement in currency translation 58,481 — — 7,398,978 326,014 117,349 Cash and cash equivalents as at 30 September 2016 The notes on pages 53 to 83 form an integral part of these financial statements. 22 (2,087) Lloyds Investment Funds Limited Cash Flow Statement For the year ended 30 September 2016 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ (52,833,513) (3,626,327) (1,754,614) (10,908,797) (3,798,285) Receipts from sale of investments 76,169,479 5,719,816 2,693,559 21,123,283 4,545,581 Investment income received 15,529,673 442,260 136,439 1,599,809 502,668 Unclaimed distributions over 10 years old 5,557 777 — 3,831 1,092 Bank interest received 5,157 303 5 131 1,103 (84) (521) (6) (23) (7) Operating expenses paid (2,939,535) (386,042) (188,084) (330,525) (306,218) Net cash inflow from operating activities 35,936,734 2,150,266 887,299 — — 84,706 222,761 Cash flows from operating activities Purchases of financial assets and settlement of financial liabilities Interest paid Cash flows from financing activities Distributions paid to holders of participating redeemable preference shares issued (14,380,341) Proceeds received from issue of participating redeemable preference shares 9,096,227 Payments on redemption of participating redeemable preference shares (27,382,839) Tax Dilution levies Net cash (outflow) from financing activities (1,984,789) (20,530) — (32,687,483) (1,078,907) 11,487,709 945,934 (1,078,452) (203,033) 2,089,305 894,215 (12,491,051) (2,152,075) — — — — — — 38,390 — (1,900,083) (856,146) (11,441,808) (1,460,893) Net increase/(decrease) in cash and cash equivalents 3,249,251 250,183 31,153 45,901 (514,959) Cash and cash equivalents as at 1 October 2015 2,453,088 90,996 78,928 511,489 809,355 (9,910) 1,574 — 2,537 — — — 557,390 296,933 Exchange (losses)/gains on cash and cash equivalents — Movement in currency translation — Cash and cash equivalents as at 30 September 2016 — 5,702,339 331,269 The notes on pages 53 to 83 form an integral part of these financial statements. 23 111,655 Lloyds Investment Funds Limited Cash Flow Statement (continued) For the year ended 30 September 2015 Company Euro High Income Fund European Fund £ € £ Cash flows from operating activities Purchases of financial assets and settlement of financial liabilities (82,393,035) (15,221,442) (1,718,738) Receipts from sale of investments 112,658,613 13,589,386 3,151,496 20,827,537 568,399 313,112 — — — 7,509 — 292 (6,910) (335) (83) Operating expenses paid (4,824,938) (197,654) (287,272) Net cash inflow/(outflow) from operating activities 46,268,776 Investment income received Unclaimed distributions over 10 years old Bank interest received Interest paid Cash flows from financing activities Distributions paid to holders of participating redeemable preference shares issued (17,985,256) (1,261,646) 1,458,807 (521,210) — Proceeds received from issue of participating redeemable preference shares 23,693,426 2,917,929 Payments on redemption of participating redeemable preference shares (48,051,815) (1,386,448) Tax (21,453) Dilution levies Net cash (outflow)/inflow from financing activities Net increase/(decrease) in cash and cash equivalents 30,942 (42,334,156) 3,934,620 586,365 (2,128,735) 1,142 — — — 1,011,413 (1,542,370) (250,233) (83,563) 945,674 272,998 Cash and cash equivalents as at 1 October 2014 754,600 Exchange (losses)/gains on cash and cash equivalents (21,066) 14 Movement in currency translation (39,323) — — 695,455 172,481 Cash and cash equivalents as at 30 September 2015 4,628,831 The notes on pages 53 to 83 form an integral part of these financial statements. 24 (16,954) Lloyds Investment Funds Limited Cash Flow Statement (continued) For the year ended 30 September 2015 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ (42,839,073) (3,338,321) (1,610,309) (20,046,900) (1,581,925) Receipts from sale of investments 73,535,744 6,439,239 2,470,126 13,375,106 3,636,200 Investment income received 17,829,008 536,904 150,064 1,067,179 510,879 — — — — — 5,867 239 74 299 738 (6,133) (35) (389) (22) — Operating expenses paid (3,164,231) (440,037) (193,189) (265,250) Net cash inflow/(outflow) from operating activities 45,361,182 3,197,989 816,377 (5,869,588) — — (878,136) 448,151 413,760 Cash flows from operating activities Purchases of financial assets and settlement of financial liabilities Unclaimed distributions over 10 years old Bank interest received Interest paid Cash flows from financing activities Distributions paid to holders of participating redeemable preference shares issued (16,458,792) Proceeds received from issue of participating redeemable preference shares 9,792,150 Payments on redemption of participating redeemable preference shares (35,346,957) Tax Dilution levies Net cash (outflow)/inflow from financing activities (3,742,165) (1,232,074) 9,509,677 (2,376,172) (328,772) 2,237,120 (262,840) 785,221 (2,200,292) (22,298) — — — — 30,942 — — — — (42,004,955) (3,294,014) (818,314) 6,255,369 (1,677,911) Net increase/(decrease) in cash and cash equivalents 3,356,227 (96,025) (1,937) 385,781 559,209 Cash and cash equivalents as at 1 October 2014 (903,139) 186,704 85,586 125,708 249,864 — 282 Exchange (losses)/gains on cash and cash equivalents — 317 Movement in currency translation — — — — — 2,453,088 90,996 78,928 511,489 809,355 Cash and cash equivalents as at 30 September 2015 The notes on pages 53 to 83 form an integral part of these financial statements. 25 (4,721) Lloyds Investment Funds Limited Investment Dealing For the year ended 30 September 2016 During the year transactions representing more than 10% of the aggregate value of the transactions in the property of the Funds were carried out with the following counterparties: European Fund Liquidnet Deutsche Bank AG Instinet High Income Fund Barclays Capital Royal Bank of Canada J.P. Morgan International Fund Liquidnet North American Fund Sanford C Bernstein & Co Liquidnet CS First Boston Sterling Bond Fund J.P. Morgan UK Fund CS First Boston Instinet Liquidnet Merrill Lynch 26 Lloyds Investment Funds Limited Investment Portfolios As at 30 September 2016 Euro High Income Fund Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 € € Asia 1.32% (2.60%) Bank of Tokyo Mitsubishi 0.875% 2022 HSBC Holdings 6% (Perp) 200,000 200,000 200,000 — 206,804 — 1.32 — 191,527 197,180 Australia and New Zealand 2.00% (3.77%) APT Pipelines 1.375% 2022 APT Pipelines 2% 2027 Ausnet Services1.5% 2027 BHP Billiton Finance 0.75% 2022 Santos Finance FRN 2070 Transurban Finance 2% 2025 Westpac Securities 3.875% 2017 100,000 — 100,000 100,000 85,000 120,000 75,000 100,000 100,000 100,000 — — — — 102,173 103,236 107,541 — — — — 0.65 0.66 0.69 — — — — 95,606 — 90,609 93,499 86,261 116,163 78,872 — 100,000 107,153 0.68 — — — 200,000 100,000 200,000 100,000 — — 100,000 — 100,000 100,000 100,000 — 100,000 100,000 — — — — 100,000 — — 100,000 — 150,000 — 100,000 200,000 100,000 100,000 200,000 100,000 150,000 100,000 150,000 100,000 100,000 150,000 100,000 150,000 100,000 130,000 — — 200,000 100,000 200,000 200,000 — 100,000 100,000 100,000 — 100,000 100,000 100,000 90,000 250,000 270,000 121,000 — 300,000 100,000 100,000 200,000 150,000 200,000 100,000 100,000 100,000 100,000 — 100,000 150,000 100,000 150,000 — 100,000 150,000 100,000 150,000 105,775 158,238 — — 192,320 102,509 233,041 240,116 — 104,357 102,305 110,341 — 101,091 99,728 111,792 104,162 317,418 308,616 215,501 — 377,336 103,661 99,122 262,865 160,432 223,396 104,469 102,500 106,143 102,637 — 110,136 287,963 153,899 213,441 — 102,862 190,402 127,779 176,460 0.67 1.01 — — 1.23 0.65 1.49 1.53 — 0.67 0.65 0.70 — 0.64 0.64 0.71 0.66 2.02 1.97 1.37 — 2.41 0.66 0.63 1.68 1.02 1.42 0.67 0.65 0.68 0.65 — 0.70 1.84 0.98 1.36 — 0.66 1.21 0.81 1.13 — — 195,130 106,006 173,850 94,074 — — 95,669 — 93,946 101,760 102,828 — 93,713 113,658 — — — — 103,107 — — 94,174 — 149,612 — 98,093 189,497 96,050 97,966 217,894 115,308 246,226 124,234 189,551 99,580 103,487 191,087 128,116 180,014 Central America 0.68% (0.00%) America Movil 2.125% 2028 Europe 62.98% (53.15%) ABN Amro Bank 2.88% 2028 ABN Amro 4.125% 2022 ABN Amro Bank 5.75% (Perp) Achmea 6% 2043 FRN AG Insurance 3.5% 2047 Allianz 3.75% (Perp) Allianz Financial 5.75% 2041 Anheuser Busch 2.75% 2036 Arkema SA 1.5% 2025 ASML Holdings 1.375% 2026 AXA SA 3.875% (Perp) Banque Federative Credit Mutuel 3% 2024 Banque Federative Credit Mutuel 4.375% 2016 Bayer 3% FRN 2075 BNP Paribas FRN (Perp) BNP Paribas FRN (Perp) BNP Paribas 2.875% 2022 BNP Paribas 4.5% 2023 Bundesrepublic 2.25% 2021 Bundesrepublic 5.5% 2031 CAP Gemini 2.5% 2023 Cooperatieve Rabobank 4.75% 2022 Credit Agricole .875% 2022 Credit Agricole 4.5% 2025 Credit Agricole 5.125% 2023 CRH Finance Germany 1.75% 2021 CRH Finance 5% 2019 Danica Pension 4.375% 2045 Demeter Investments 4.375% (Perp) Deutsche Annington FRN (Perp) Deutsche Annington 0.875% 2020 Deutsche Bank 5.125% 2017 Deutsche Telekom Intl Finance 6.625% 2018 Deutsche Telekom Intl Finance 7.5% 2033 EDF 4.5% 2040 EDF 4.625% 2030 EDF 5% (Perp) EDF 5.375% FRN (Perp) EDF 6.25% 2021 Engie SA 6.375% 2021 Gas Natural Capital Markets 6.375% 2019 27 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 Euro High Income Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets € Market Value 30.09.15 € Europe (continued) Gas Natual Fenosa 1.375% 2025 Gas Natual Fenosa 3.375% (Perp) GDF Suez 3.875% (Perp) GDF Suez 5.95% 2111 GE Capital European Funding 6% 2019 GE Capital European Funding 6.025% 2038 GE Capital Trust 4.625% 2066 FRN General Motors Financial 0.85% 2018 Heidelberg Cement 2.25% 2024 Heidelberg Cement 8.5% 2019 Hemsö Fastighets 1% 2026 Iberdrola 5.625% 2018 ING Groep 4.75% 2017 KFW Bankengruppe 4.675% 2023 Koninklijke DSM 1% 2025 Metrovacesa SA 2.375% 2022 Orange SA 8.125% 2033 (formerly France Telecom) Orange SA GRN (Perp) Peugeot 2.375% 2023 Renault 3.625% 2018 Repsol International Finance 4.5% 2075 Roche Finance Europe 0.875% 2025 Ryanair 1.125% 2023 Sanofi SA 0.875% 2021 Santander Consumer Finance 0.9% 2020 Santander 1.125% 2023 SAP SE 1.75% 2027 Siemens FRN 2066 Snam SpA 3.5% 2020 Societe Generale SA 2.625% 2025 Statkraft 1.5% 2030 TDF Infrastructure 2.875% 2022 Terna Rete Elettrica Nazionale 0.875% 2022 Total FRN (Perp) Unibail Rodamco 2% 2016 Unitymedia Hessen 8.125% 2017 Valeo 3.25% 2024 Vattenfall 6.25% 2021 Vesteda Finance 2.5% 2022 Volkswagon 5.375% 2018 Volkswagon FRN (Perp) Volkswagen International Finance 3.75% (Perp) Xstrata Finance Dubai 2.625% 2018 100,000 100,000 100,000 70,000 50,000 202,000 70,000 125,000 — 100,000 — — 105,000 53,000 100,000 — 200,000 100,000 — 200,000 100,000 241,000 130,000 200,000 100,000 — 200,000 115,000 100,000 100,000 200,000 — 200,000 100,000 — 100,000 — 120,000 — 50,000 130,000 150,000 100,000 100,000 100,000 — 70,000 50,000 202,000 — 125,000 128,000 100,000 100,000 200,000 105,000 570,000 — 100,000 170,000 — 55,000 — — — 130,000 — — 108,000 — — — 100,000 — 100,000 — 159,000 300,000 100,000 100,000 — 100,000 — 130,000 — — 106,920 95,715 — 124,624 56,977 383,242 — 126,303 135,039 123,840 100,688 218,318 108,407 752,878 — 105,667 343,466 — 58,128 — — — 133,493 — — 108,156 — — — 103,744 — 111,654 — 153,917 345,542 111,906 120,689 — 110,294 — 132,970 — — 0.68 0.61 — 0.79 0.36 2.44 — 0.81 0.86 0.79 0.64 1.39 0.69 4.80 — 0.67 2.19 — 0.37 — — — 0.85 — — 0.69 — — — 0.66 — 0.71 — 0.98 2.20 0.71 0.77 — 0.70 0.00 0.85 — — 94,288 84,375 99,374 99,678 58,843 312,433 71,225 123,418 — 123,210 — — 112,604 68,929 93,974 — 328,571 102,195 — 212,639 81,063 231,005 123,975 198,840 96,801 — 199,070 119,219 110,413 93,390 177,730 — 193,155 88,007 — 105,380 — 149,286 — 45,906 112,313 129,570 87,874 United Kingdom 18.42% (20.47%) 3i Group 5.625% 2017 Abbey National Treasury Services 1.125% 2022 Aviva Plc 3.375% 2045 Aviva Plc FRN 2038 Barclays Bank 6.625% 2022 BAT International Finance 0.875% 2023 BP Capital Markets 1.573% 2027 BG Energy Capital 6.5% FRN 2072 British American Tobacco 2.375% 2023 British Telecom 1.75% 2026 EE Finance 3.25% 2018 150,000 100,000 100,000 100,000 — 200,000 105,000 100,000 100,000 — 200,000 150,000 — 100,000 100,000 100,000 — 105,000 100,000 — 137,000 200,000 153,728 — 98,959 109,713 122,767 — 111,983 106,790 — 149,612 211,910 0.98 — 0.63 0.70 0.78 — 0.71 0.68 — 0.95 1.35 160,118 96,997 92,035 110,937 — 189,709 97,809 108,469 106,368 — 213,938 28 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 Euro High Income Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 € United Kingdom (continued) Global Switch 5.5% 2018 HBOS 4.5% FRN 2030 Heathrow Funding 4.6% 2020 Imperial Tobacco 8.375% 2016 Lloyds Bank 1% 2021 Lloyds Bank 1.25% 2025 National Grid 5% 2018 Nationwide Building Society 1.25% 2025 Nationwide 6.75% 2020 NGG Finance 4.25% FRN 2076 Pentair Finance ZERO 2019 Royal Bank of Scotland 2.5% 2023 Royal Bank of Scotland 5.375% 2019 Scottish and Southern Energy 5.025% FRN (Perp) SSE FRN (Perp) € — 100,000 250,000 — — — 175,000 100,000 100,000 — 150,000 100,000 150,000 — 100,000 — 111,288 265,761 — — — 190,530 104,360 120,235 — 157,866 102,314 172,420 — 98,473 — 0.71 1.69 — — — 1.22 0.67 0.77 — 1.01 0.65 1.10 — 0.63 Total Capital 5.125% 2024 United Utilities Water 4.25% 2020 100,000 — 250,000 107,000 100,000 100,000 175,000 100,000 150,000 100,000 150,000 — 150,000 100,000 200,000 — — 200,000 200,000 273,364 227,512 1.74 1.45 112,216 — 273,282 110,241 98,250 95,890 196,364 94,784 183,271 104,210 150,324 — 175,030 100,040 183,283 — — United States 11.76% (14.10%) AT&T 2.45% 2035 AT&T 2.75% 2023 AT&T 3.375% 2034 Bank of America 4.75% 2017 Bank of America 7% 2016 Citigroup 1.75% 2025 Directv Holdings 2.75% 2023 Goldman Sachs 2% 2023 Goldman Sachs 4.5% 2016 Jefferies Group 2.375% 2020 JP Morgan Chase 2.75% 2022 Lehman Brothers Holdings FRN 2019 Metlife Global Funding 2.375% 2019 Mondelez Inc 2.375% 2035 National Capital Instruments FRN (Perp) The Coca Cola Company 1.125% 2027 Thermo Fisher Scientific 1.375% 2028 Verizon Communications 1.625% 2024 Verizon Communications 2.625% 2031 200,000 — — 100,000 100,000 200,000 100,000 200,000 150,000 150,000 120,000 150,000 100,000 — 150,000 158,000 — 200,000 200,000 — 100,000 200,000 100,000 — 200,000 — 200,000 — — 120,000 150,000 100,000 150,000 — — 100,000 200,000 200,000 — 114,008 245,899 102,483 — 215,287 — 215,484 — — 136,748 765 107,189 160,564 — — 100,564 215,629 232,054 — 0.73 1.57 0.65 — 1.37 — 1.37 — — 0.87 0.00 0.68 1.02 — — 0.64 1.38 1.48 173,259 — — 106,532 104,815 193,833 105,183 200,398 154,208 146,200 129,689 765 105,983 — 146,807 145,654 — 194,771 195,931 15,248,556 573,637 15,822,193 (141,110) 15,681,083 97.16 3.68 100.84 (0.84) 100.00 14,030,693 1,016,049 15,046,742 (137,902) 14,908,840 Total Value of Investments Other Assets Total Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold Year ended 30.09.16 Year ended 30.09.15 €8,086,938 €7,826,335 €15,221,442 €13,691,414 29 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 European Fund Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ £ Austria 4.05% (4.57%) Schoeller—Bleckmann Vienna Insurance Group 6,600 15,900 6,600 15,900 336,309 249,078 2.33 1.72 244,132 308,451 Denmark 4.33% (4.76%) Novo Nordisk Novozymes 12,200 5,000 12,200 6,900 390,855 234,084 2.71 1.62 431,735 143,627 France 13.87% (12.27%) Casino Guichard-Perrachon Dassault Systèmes Edenred Essilor International Engie (formerly GDF SUEZ) Grandvision L'Oréal Schneider Electric 6,600 7,000 — 2,600 17,600 — 1,800 8,400 — 4,550 14,800 3,050 17,600 17,400 2,100 4,500 — 303,983 266,417 302,981 209,970 373,432 305,398 241,623 — 2.10 1.84 2.10 1.45 2.58 2.11 1.67 230,842 340,483 — 208,556 187,251 — 205,634 309,537 Germany 13.13% (13.38%) Bayer Fuchs Petrolub Henkel KION Group Linde MTU Aero Engines AG — 8,400 3,400 10,100 3,950 8,300 3,600 7,200 5,100 2,761 3,000 4,850 277,890 253,352 458,257 137,750 391,498 378,534 1.92 1.75 3.17 0.95 2.71 2.62 — 244,909 197,786 295,044 421,203 456,763 Italy 0.95% (1.63%) Brunello Cucinelli Eni — 19,000 9,163 — 137,179 — 0.95 — — 196,651 Netherlands 11.63% (10.27%) Furgo Royal Dutch Shell Unilever Vopak 20,000 22,838 17,200 7,450 25,000 24,700 16,700 7,450 311,446 473,849 593,472 301,136 2.16 3.28 4.11 2.08 232,609 356,581 454,938 195,803 Norway 2.55% (2.60%) Kongsberg Gruppen 32,800 30,675 367,852 2.55 313,510 Spain 3.09% (2.91%) Amadeus IT Holdings 12,500 11,600 446,252 3.09 352,040 Sweden 14.79% (16.40%) Assa Abloy Atlas Copco Ericsson Nordea Bank Svenska Handelsbanken Swedish Match 26,000 30,300 42,700 51,600 30,300 14,500 19,000 24,800 51,200 41,600 30,300 14,000 296,720 520,780 284,892 317,355 320,860 395,822 2.05 3.60 1.97 2.20 2.22 2.74 306,880 445,760 276,364 378,340 285,487 288,133 30 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 European Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Switzerland 30.00% (30.03%) Givaudan Holcim Nestle 'R' Novartis Partners Group AG Roche Holdings Schindler Syngenta Syngenta N 2L The Swatch Group B The Swatch Group R Temenos Group UBS Group VZ Holding N Zurich Insurance Group 130 6,825 10,900 5,400 — 3,050 4,000 1,650 — 1,020 1,800 9,000 31,000 — 1,100 115 8,700 9,600 6,700 600 2,840 2,100 — 900 1,020 2,700 9,000 42,800 108 850 Total Value of Investments Other Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold Year ended 30.09.16 Year ended 30.09.15 £2,012,069 £2,605,966 £1,718,738 £3,151,496 31 £ 180,502 362,889 583,776 406,629 233,353 543,417 303,764 — 303,359 222,468 115,730 437,225 449,498 23,372 168,717 1.25 2.51 4.04 2.81 1.62 3.76 2.10 — 2.10 1.54 0.80 3.03 3.11 0.16 1.17 139,170 235,285 539,624 326,258 — 529,386 378,623 347,814 — 248,815 85,373 243,379 377,106 — 177,735 14,213,725 294,442 14,508,167 (59,282) 14,448,885 98.37 2.04 100.41 (0.41) 100.00 11,937,617 178,851 12,116,468 (36,839) 12,079,629 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 High Income Fund Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ UK Government 0.66% (0.04%) Treasury 1.75% 2022 Treasury 4.25% 2049 Treasury 4.5% 2042 UK Corporate 67.40% (64.92%) Abbey National Treasury Services 1.875% 2020 Anglian Water Services Financing 4.5% 2026 Anglian Water Osprey Financing 7% 2018 Annington Finance 5.3236% 2023 Annington Finance 8.07% 2023 Annington Finance No 4 2023 FRN Arkle Master Issuer 4.681% 2060 Aspire Defence Finance 4.674% 2040 Autolink 8.39% 2022 Aviva Plc 4.375% 2049 Aviva Plc 5.125% FRN Aviva Plc FRN (Perp) Aviva Plc G/R (Perp) Aviva 6.625% 2058 Barclays Bank 5.75% 2026 Barclays Bank 7.875% FRN (Perp) Barclays Bank 9.5% 2021 Barclays Bank 10% 2021 Barclays Bank 2049 FRN (Perp) BG Energy Capital 2072 FRN BHP Billiton Finance 4.3% 2042 BHP Billiton Finance 6.5% 2077 BL Superstores 5.27% 2030 British American Tobacco 6% 2022 British American Tobacco 6.375% 2019 British Telecom 6.375% 2037 Broadgate Financing 4.821% 2036 Canary Wharf II 6.455% 2030 Centrica 5.25% 2075 Centrica 6.375% 2022 Centrica 7% 2018 City of Greenwich & Lewisham Rail Link 9.375% 2020 Close Brothers 6.5% 2017 Clydesdale Bank 4.625% 2026 Co-operative Group 5.625% 2020 Coventry Building Society 2050 CRH Finance 4.125% 2029 CYBG Plc 5% 2026 Daily Mail and General 6.375% 2027 Dignity Finance 4.6956% 2049 Dukinfiled No 1 FRN 2045 Dwr Cymru Finance 6.907% 2021 Eastern Power Networks 8.5% 2025 EE Finance 4.375% 2019 Electricity North Western 8.785% 2026 EMH Treasury Plc 4.5% 2044 E.ON International Finance 6.375% 2032 EUR LN Conduit 5.0636% 2033 FCE Bank 2.727% 2022 First Hydro 9% 2021 £ 100,000 — — — 378,000 753,000 — 656,057 1,248,060 — 0.23 0.43 101,866 — — 940,000 1,000,000 600,000 — 1,500,000 2,000,000 1,200,000 1,643,000 1,500,000 — 1,200,000 1,200,000 1,000,000 600,000 550,000 1,000,000 1,697,000 2,860,000 500,000 3,617,000 — — 750,000 700,000 1,240,000 506,000 1,340,000 1,380,000 1,100,000 1,500,000 2,400,000 600,000 900,000 2,050,000 2,300,000 — — — — 2,121,000 824,000 1,900,000 3,530,000 600,000 1,452,000 — — 1,903,000 — 1,550,000 — 1,000,000 600,000 1,120,000 1,500,000 — — 1,643,000 1,500,000 317,000 1,200,000 1,200,000 1,000,000 1,600,000 — — 1,697,000 2,860,000 500,000 3,617,000 1,000,000 700,000 750,000 700,000 1,240,000 506,000 1,340,000 1,510,000 1,100,000 1,500,000 2,400,000 600,000 900,000 2,050,000 2,300,000 1,677,000 430,000 653,000 300,000 2,121,000 824,000 1,900,000 3,530,000 600,000 1,452,000 800,000 600,000 1,903,000 600,000 1,550,000 — 1,209,965 650,964 1,304,568 1,997,459 — — 2,005,571 996,380 313,212 1,245,780 1,260,180 1,073,331 1,782,538 — — 2,172,907 3,693,221 627,500 3,820,670 1,285,860 780,524 621,746 891,086 1,458,861 844,883 1,839,926 604,751 1,140,336 1,919,366 2,685,746 240,857 916,448 2,631,565 2,740,841 1,508,810 517,515 630,145 378,219 2,720,817 698,604 2,407,429 5,464,733 651,577 2,360,891 1,049,712 896,582 2,100,779 636,444 2,077,992 — 0.42 0.23 0.45 0.70 — — 0.70 0.35 0.11 0.43 0.44 0.37 0.62 — — 0.76 1.29 0.22 1.33 0.45 0.27 0.22 0.31 0.51 0.29 0.64 0.21 0.40 0.67 0.94 0.08 0.32 0.92 0.95 0.53 0.18 0.22 0.13 0.95 0.24 0.84 1.90 0.23 0.82 0.37 0.31 0.73 0.22 0.72 919,133 1,070,995 653,088 — 1,983,278 2,056,620 1,254,889 1,842,587 1,123,207 — 1,118,465 1,229,250 1,037,475 649,882 612,091 986,250 2,147,837 3,670,006 645,778 3,806,231 — — 701,513 837,623 1,448,561 655,021 1,609,311 506,690 1,053,931 1,791,714 2,735,438 300,828 952,102 2,424,533 2,473,604 — — — — 2,304,997 801,057 2,330,637 5,068,889 637,774 2,172,212 — — 2,046,174 — 2,033,616 32 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 High Income Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ UK Corporate (continued) Friends Life Group 8.25% 2022 Gatwick Funding Limited 2028 FRN Gemgarto 2015 ZERO 2047 GlaxoSmithKline Capital 6.375% 2039 Great Rolling Stock 6.25% 2031 HBOS FRN (Perp) HBOS 12% (Perp) Heathrow Funding 4.625% 2048 Heathrow Funding 6.45% 2033 Heathrow Funding 6.75% 2028 Housing Association Funding 8.25% 2027 HSBC FRN 2023 HSBC Bank 5.862% (Perp) HSBC 6.00% 2040 HSBC 6.5% 2024 Hutchison Whampoa Finance UK 5.625% 2017 Imperial Tobacco 8.125% 2024 Imperial Tobacco 9% 2022 InterContinental Hotels 3.75% 2025 Integrated Accommodation Service 6.48% 2029 Intu Metrocentre 4.125% 2028 Jaguar Land Rover Automotive 5% 2022 Land Securities FRN 2026 Lloyds Bank 9.625% 2023 Lloyds Bank 2049 FRN (Perp) Lloyds of London 4.75% 2024 Longstone Finance 4.896% 2036 Marstons Issuer 2035 FRN Manchester Airport 4.125% 2024 Manchester Airport 4.75% 2034 Motability 3.625% 2036 Motability Operations Group 6.625% 2019 Motability 3.75% 2026 National Grid Electricity Transmission 6.5% 2028 National Grid Gas 2.75% 2046 National Grid Gas 2.625% 2038 National Grid Gas 8.75% 2025 Nationwide 5.625% 2019 NIE Finance 6.375% 2026 NGG Finance 2073 FRN Northern Powergrid 2.5% 2025 Northern Powergrid Yorkshire 9.25% 2020 Northumberland Services 6.875% 2023 Paragon Zero 2043 Paragon Treasury 3.625% 2047 PICTS 5.218% 2039 Places For People Homes 5.875% 2031 Prudential 5% FRN Prudential 11.375 2039 FRN QBE Insurance 6.115% 2042 QBE Capital Funding 2041 FRN RL Finance 6.125% 2028 Rolls-Royce Plc 3.375% 2026 Royal Bank of Scotland 6.625% 2018 RSA Insurance Group 2039 FRN 1,300,000 1,550,000 466,000 957,000 1,000,000 1,940,000 2,000,000 2,650,000 1,000,000 900,000 1,500,000 3,000,000 — 3,550,000 1,100,000 1,850,000 850,000 1,200,000 1,700,000 1,951,000 760,000 1,500,000 467,000 2,000,000 692,000 646,000 — 2,712,000 1,000,000 2,030,000 — 1,500,000 1,000,000 2,600,000 — — 1,380,000 1,450,000 1,000,000 1,590,000 600,000 3,032,000 2,250,000 — 600,000 1,000,000 1,500,000 2,100,000 1,420,000 — 700,000 — — 1,200,000 1,300,000 1,300,000 1,550,000 466,000 957,000 1,000,000 1,940,000 2,000,000 2,650,000 1,000,000 900,000 1,500,000 2,900,000 402,000 3,550,000 700,000 1,850,000 850,000 1,200,000 1,700,000 1,951,000 760,000 1,500,000 467,000 1,500,000 692,000 646,000 65,000 2,712,000 1,000,000 2,030,000 360,000 1,500,000 1,000,000 — 1,500,000 1,500,000 — 1,450,000 1,000,000 1,590,000 600,000 3,032,000 2,250,000 897,000 600,000 1,000,000 1,500,000 2,100,000 1,420,000 787,000 — 600,000 500,000 1,200,000 546,000 33 1,648,195 2,052,592 197,111 1,671,962 1,323,116 2,350,174 2,600,000 3,762,669 1,561,059 1,307,317 1,328,796 3,027,400 433,165 4,614,982 904,646 1,946,335 1,225,217 1,669,201 1,930,182 1,765,277 858,953 1,649,160 594,397 2,085,467 889,289 714,245 74,950 2,576,400 1,190,837 2,766,060 455,085 1,779,716 1,214,447 — 1,572,908 1,563,375 — 1,642,174 1,415,418 1,789,017 651,570 3,850,200 3,005,345 880,789 688,955 1,175,709 1,983,008 2,124,784 1,745,718 843,455 — 653,912 567,585 1,325,566 639,421 £ 0.57 0.71 0.07 0.58 0.46 0.82 0.91 1.31 0.54 0.46 0.46 1.05 0.15 1.61 0.32 0.68 0.43 0.58 0.67 0.61 0.30 0.57 0.21 0.73 0.31 0.25 0.03 0.90 0.41 0.96 0.16 0.62 0.42 — 0.55 0.54 — 0.57 0.49 0.62 0.23 1.34 1.05 0.31 0.24 0.41 0.69 0.74 0.61 0.29 — 0.23 0.20 0.46 0.22 1,540,601 1,654,458 423,204 1,331,033 1,237,095 2,286,057 2,489,600 2,818,074 1,312,694 1,180,990 1,360,274 3,137,829 — 3,979,628 1,362,132 1,997,434 1,122,506 1,592,555 1,698,037 1,793,917 795,686 1,481,250 555,769 2,685,564 1,031,080 656,884 — 2,576,400 1,062,321 2,236,481 — 1,776,908 1,071,613 3,508,071 — — 2,068,503 1,637,384 1,277,932 1,668,176 577,308 3,876,191 2,826,104 — 567,438 1,063,192 1,805,265 1,966,646 1,791,394 — 766,876 — — 1,349,040 1,515,709 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 High Income Fund (continued) Holding 30.09.15 UK Corporate (continued) Santander UK 3.625% 2026 Santander UK 7.375% FRN (Perp) Santander UK 10.0625% (Perp) Scottish & Southern Energy FRN (Perp) Scottish Power 6.375% (Step) 2041 Segro Plc 6.75% 2021 Severn Trent 6.25% 2029 Society of Lloyds 7.421% FRN (Perp) Southern Gas Networks 4.875% 2029 Southern Gas Networks 6.375% 2040 Southern Water Services 6.125% 2019 Southern Water Greensands Financing 8.5% 2019 SSE FRN (Perp) Stagecoach Group 4% 2025 Standard Chartered 7.75% 2018 Standard Chartered FRN (Perp) Standard Chartered Bank 7.75% FRN (Perp) Standard Life Finance 6.75% FRN (Perp) Telereal Securitisation 5.3887% 2033 Telereal Securitisation 6.1645% 2031 Thames Water Kemble Finance 7.75% 2019 Thames Water Utilities Finance 5.125% 2037 Thames Water Utilities Finance 6.75% 2028 Thames Water Utilities (Cayman) Finance 2025 FRN The Housing Finance Corporation Funding No.2 6.35% 2041 UBS AG (London Branch) 6.625% 2018 UBS AG (Jersey) 8.75% 2025 UPP Bond 1 4.9023% 2040 Vicinity Centres 3.375% 2026 Vodafone Group Plc 3% 2056 Western Power 3.625% 2023 Western Power 5.75% 2032 Whitbread Group Plc 3.375% 2025 WM Morrisons Supermarket 4.75% 2029 WW Grainger PLC 5% 2020 Yorkshire Water Services Odsal Finance 6.5876% 2023 Zurich Finance UK FRN (Perp) Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets £ — 500,000 3,000,000 1,655,000 1,000,000 — 1,250,000 1,189,000 2,550,000 300,000 1,447,000 938,000 1,100,000 505,000 1,350,000 1,500,000 850,000 2,140,000 13,000 1,130,000 1,800,000 1,486,000 — 2,600,000 1,080,000 944,000 2,724,000 — — — — 1,300,000 759,000 500,000 1,250,000 842,000 800,000 34 908,000 — 500,000 — 1,000,000 800,000 1,550,000 1,189,000 2,550,000 300,000 1,447,000 938,000 2,350,000 705,000 1,350,000 — 850,000 2,140,000 13,000 — 1,800,000 1,486,000 800,000 2,600,000 1,080,000 944,000 — 1,100,000 520,000 450,000 1,000,000 1,300,000 — — 1,250,000 842,000 800,000 967,774 — 794,375 — 1,571,290 1,014,443 2,332,713 1,230,223 3,428,776 516,382 1,632,756 1,071,037 2,375,154 797,112 1,473,080 — 966,875 2,462,427 10,910 — 2,041,884 2,224,046 1,238,966 2,680,990 1,722,351 1,027,495 — 1,353,039 582,574 432,349 1,111,586 1,928,020 — — 1,371,875 1,111,255 924,270 Market Value 30.09.15 £ 0.34 — 0.28 — 0.55 0.35 0.81 0.43 1.19 0.18 0.57 0.37 0.83 0.28 0.51 — 0.34 0.86 — — 0.71 0.77 0.43 0.93 0.60 0.36 — 0.47 0.20 0.15 0.39 0.67 — — 0.48 0.39 0.32 — 496,900 4,230,000 1,657,896 1,326,900 — 1,626,236 1,252,730 2,983,255 409,332 1,635,682 1,057,820 1,051,875 506,358 1,498,995 1,528,125 965,813 2,386,635 11,250 1,285,227 1,968,894 1,740,735 — 2,719,571 1,485,001 1,054,240 3,881,853 — — — — 1,613,464 761,915 488,738 1,287,438 1,044,562 876,260 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 High Income Fund (continued) Holding 30.09.15 Market Value 30.09.16 Holding 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Overseas Borrowers 28.69% (32.56%) Aegon 6.125% 2031 America Movil SAB 2073 FRN AIG SunAmerica Institutional Funding 5.375% 2016 APT Pipelines AT&T 4.25% 2043 AT&T 4.375% 2029 AT&T 4.875% 2044 AXA 7.125% 2020 AXA 6.686% Perp AXA 5.453% Perp Bank of America 2.3% 2025 Bank of America 7% 2028 Bank of America Merrill Lynch 7.75% 2018 BNP Paribas FRN (Perp) Chorus Ltd 6.75% 2020 Cie de Saint Gobain 5.625% 2016 Citigroup 6.8% 2038 Cooperatieve Rabobank 5.375% 2060 Cooperatieve 6.6% PERP Deutsche Telekom 6.5% 2022 DIRECTV Holdings 4.375% 2029 E.ON International Finance 5.825% 2037 EDF 5.5% 2041 EDF 5.875% 2031 EDF 6% 2014 EDF 6% FRN EDF 5.125% 2050 Enel 5.75% 2037 European Coal and Steel 6.875% 2019 First Group 8.75% 2021 Freshwater Finance 5.182% 2035 GE Capital UK Funding 5.125% 2023 GE Capital UK Funding 8% 2039 General Electric Cap. Corp. 2067 6.5% FRN Glencore Finance GR 2022 Glencore Finance 6.5% 2019 Goldman Sachs 7.125% 2025 Goldman Sachs 7.25% 2028 Health Care REIT Highbury Finance 7.017% 2023 H J Heinz 4.125% 2027 Holcim Finance 8.75% 2017 Koninklijke KPN 5% 2026 MetLife 5.25% 2020 Muenchener Rueckversicherungs 2028 FRN Orange G/R (Perp) Orange SA FRN (Perp) RWE Finance 6.125% 2039 £ 1,102,000 3,240,000 — 2,240,000 — 2,399,936 — 0.84 1,397,350 3,353,400 2,504,000 — — — 2,602,713 920,000 2,027,000 — 1,300,000 1,100,000 1,030,000 2,492,000 — 2,700,000 2,150,000 1,200,000 — 1,450,000 2,291,000 — — — 2,300,000 2,100,000 3,700,000 1,178,000 700,000 1,500,000 1,600,000 1,500,000 1,700,000 1,000,000 858,000 3,998,000 1,500,000 1,900,000 1,400,000 750,000 850,000 577,000 700,000 1,550,000 500,000 1,450,000 700,000 1,238,000 2,000,000 725,000 2,002,000 — 920,000 2,027,000 1,000,000 1,300,000 1,100,000 1,030,000 2,492,000 1,000,000 2,700,000 2,150,000 — 1,200,000 — 2,291,000 500,000 500,000 400,000 — 2,100,000 1,700,000 1,178,000 700,000 1,500,000 1,600,000 1,300,000 1,700,000 1,561,000 858,000 — 1,500,000 — — — 850,000 577,000 700,000 1,550,000 1,500,000 1,450,000 700,000 — 2,000,000 725,000 2,002,000 500,000 987,091 2,386,924 1,211,855 1,694,048 1,350,934 1,157,445 2,640,857 1,011,220 3,911,220 2,370,225 — 1,408,534 — 3,793,777 871,640 620,950 515,522 — 3,161,850 2,424,924 1,668,214 1,090,193 1,510,448 2,222,034 1,803,758 1,926,466 2,020,956 1,200,148 — 3,043,736 — — — 1,178,623 838,998 850,143 1,405,927 1,756,263 1,511,763 863,448 — 2,189,160 785,127 2,179,712 715,333 0.34 0.83 0.42 0.59 0.47 0.40 0.92 0.35 1.36 0.83 — 0.49 — 1.32 0.30 0.22 0.18 — 1.10 0.84 0.58 0.38 0.53 0.77 0.63 0.67 0.70 0.42 — 1.06 — — — 0.41 0.29 0.30 0.49 0.61 0.53 0.30 — 0.76 0.27 0.76 0.25 852,094 1,843,915 — 1,299,355 1,281,331 1,138,580 2,501,355 — 3,657,301 2,459,020 1,222,860 — 1,517,406 3,231,792 — — — 2,330,967 2,394,212 4,187,283 1,414,361 851,167 1,491,563 1,746,342 1,737,776 1,982,982 1,245,884 1,024,929 4,632,834 2,491,170 1,974,020 1,197,473 689,023 1,117,856 780,672 750,186 1,463,215 519,158 1,602,198 751,962 1,403,467 2,244,466 724,764 2,016,983 — 35 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 High Income Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets £ Overseas Borrowers (continued) RWE Finance 6.25% 2030 RWE Finance 6.5% 2021 Scentre Management 2.375% 2022 SLM Student Loan 2038 FRN Societe Generale FRN (Perp) ELM FRN (Perp) Telefonica Emisione 5.445% 2029 Time Warner Cable 5.25% 2042 United Mexico STS 5.625% 2014 Vattenfall 6.875% 2039 Verizon Communications 4.75% 2034 Wal-Mart Stores 5.25% 2035 Westpac Bank 2.625% 2022 1,200,000 700,000 1,200,000 1,350,000 2,067,000 1,850,000 1,250,000 800,000 1,710,000 1,976,000 1,400,000 2,483,000 — 700,000 700,000 — 1,000,000 1,665,000 1,850,000 — 800,000 1,710,000 — 2,500,000 2,483,000 1,200,000 Total Value of Investments Other Assets Total Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold Year ended 30.09.16 Year ended 30.09.15 £52,833,513 £75,993,396 £42,119,713 £71,181,061 36 Market Value 30.09.15 £ 953,159 856,791 — 876,475 1,841,940 2,038,817 — 934,297 1,921,613 — 3,246,973 3,759,272 1,294,687 0.33 0.30 — 0.31 0.64 0.71 — 0.33 0.67 — 1.13 1.31 0.45 1,315,898 798,317 1,172,773 1,221,170 2,291,580 1,949,438 1,408,053 702,274 1,613,813 2,647,731 1,479,104 3,122,003 — 277,848,172 10,952,463 288,800,635 (1,688,717) 287,111,918 96.75 3.84 100.59 (0.59) 100.00 277,989,695 8,739,831 286,729,526 (1,850,364) 284,879,162 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 International Fund Holding 30.09.15 Market Value 30.09.16 Holding 30.09.16 % of Total Net Assets Market Value 30.09.15 £ £ Brazil 2.12% (2.88%) Banco Bradesco Vale 96,025 84,900 65,147 — 455,126 — 2.12 — 339,471 188,044 Canada 1.28% (3.04%) Canadian National Railway Co. Potash Corp. of Saskatchewan 7,800 19,600 — 21,900 — 274,255 — 1.28 291,072 264,731 France 0% (1.37%) Schneider Electric 6,800 — — — 250,578 Germany 4.32% (1.62%) Fresenius Medical care Henkel — 4,400 6,300 4,800 424,486 502,466 1.98 2.34 — 297,436 119,400 6,200 — 26,000 96,600 8,300 61,500 26,000 494,506 387,206 260,345 215,548 2.30 1.80 1.21 1.00 407,344 192,887 — 191,300 26,000 26,000 401,310 1.87 274,950 3,800 7,100 424,169 1.97 199,025 Japan 9.99% (7.50%) Daito Trust Construction FANUC Japan Tobacco Keyence 3,100 2,700 21,300 — 2,100 2,700 18,000 600 258,462 348,832 563,769 335,205 1.20 1.62 2.62 1.56 206,978 272,435 432,953 — Shin-Etsu Chemical 13,700 12,100 643,573 2.99 461,037 Luxembourg 1.69% (2.14%) Tenaris 24,600 16,600 362,989 1.69 391,473 7,400 5,800 410,978 1.91 436,110 Singapore 1.11% (0.91%) City Developments 46,700 46,700 239,024 1.11 167,173 South Africa 1.08% (1.64%) MTN Group 35,400 35,400 233,006 1.08 301,183 South Korea 2.56% (2.64%) Samsung 950 610 549,389 2.56 483,616 17,200 40,700 39,100 17,200 — — 398,124 — — 1.85 — — 272,196 263,419 286,688 Hong Kong 6.31% (4.31%) AIA Group Jardine Matheson MTR Swire Pacific Ireland 1.87% (1.50%) Experian Israel 1.97% (1.09%) Check Point Software Technologies Mexico 1.91% (2.38%) Fomento Economico Mexicano Sweden 1.85% (4.50%) Atlas Copco Ericsson Nordea Bank 37 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 International Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Switzerland 9.30% (11.22%) Nestle Novartis Roche Holding Zurich Insurance Group 9,000 10,400 3,700 2,100 7,200 13,100 4,000 — 437,832 795,051 765,376 — 2.04 3.70 3.56 — 445,561 628,349 642,206 339,312 — 55,800 233,066 1.08 — 43,000 29,500 694,806 3.23 589,183 — 28,100 18,000 80,651 40,284 23,000 47,741 127,100 — 7,200 17,900 8,982 — 43,034 23,000 49,524 234,000 8,628 320,619 208,043 442,858 — 309,952 459,368 311,184 518,848 337,786 1.49 0.97 2.06 — 1.44 2.14 1.45 2.41 1.57 — 282,335 655,785 402,231 272,823 359,375 305,900 264,978 — 10,200 8,100 4,900 7,800 10,200 10,000 15,000 — — — — 9,700 9,200 8,800 12,200 1,500 — — — 355,629 469,809 602,824 908,191 310,924 — — — 1.65 2.19 2.80 4.23 1.45 211,912 175,636 255,149 322,350 382,715 636,970 720,812 — 6,200 4,600 418,267 1.95 382,069 2,500 24,100 7,900 — 8,900 4,100 8,400 7,000 8,000 5,000 18,400 7,900 4,400 7,300 4,700 5,500 5,500 8,000 446,844 556,320 661,465 312,691 546,095 437,129 332,943 316,599 509,346 2.08 2.59 3.08 1.45 2.54 2.03 1.55 1.47 2.37 201,263 574,438 491,524 — 466,079 275,598 382,138 330,025 366,371 21,202,633 354,484 21,557,117 (65,423) 21,491,694 98.63 1.65 100.30 (0.30) 100.00 18,235,186 125,585 18,360,771 (52,865) 18,307,906 Thailand 1.08% (0.00%) Kasikornbank Taiwan 3.23% (3.22%) Taiwan Semiconductor Manufacturing UK 13.53% (13.89%) Amdocs BNP Billiton British American Tobacco HSBC Rolls Royce Holdings Royal Dutch Shell Standard Chartered Vodafone Group Whitbread USA 33.43% (33.74%) Baxalta Baxter International Chevron Cognizant Technology Solutions Comcast CVS Healthcare EOG Resources Intercontinental Exchange Johnson & Johnson M&T Bank Oracle Pepsico Perrigo Philip Morris International Praxair Schlumberger TJX Companies Visa Total Value of Investments Other Assets Total Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold £ Year ended 30.09.16 Year ended 30.09.15 £3,626,327 £5,719,816 £3,338,321 £6,439,239 38 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 North American Fund Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ £ Chemicals 7.97% (5.88%) International Flavors & Fragrances Parexel Intl Potash Corp. of Saskatchewan Praxair Consumer Goods 37.48% (40.62%) BorgWarner Canadian National Railway Co. Casey's General Stores Costco Wholesale CVS Healthcare Deere & Company Emerson Electric Estée Lauder Gilead Sciences Johnson & Johnson Kraft Heinz Monsato Pepsico Pfizer Philip Morris International PVH Corporation Target TJX Companies United Technologies Verisk Analytics Energy 11.63% (10.96%) Chevron Ecolab EOG Resources National Oilwell Varco Schlumberger Texas Instruments Financials 23.73% (20.49%) AIG American Express Charles Schwab Equifax Intercontinental Exchange M&T Bank Moodys Royal Bank of Canada Visa Wells Fargo Information Technology 8.11% (10.61%) Cognizant Technology Solutions EMC Oracle Qualcomm Rockwell Automation TELUS 2,630 — 9,220 2,830 1,980 4,700 10,804 2,139 217,968 251,155 135,695 198,940 2.16 2.49 1.35 1.97 179,225 — 125,114 190,230 4,900 6,080 1,797 2,350 4,420 2,300 3,800 2,126 3,020 3,320 3,110 3,100 2,920 11,700 3,700 3,730 3,900 4,480 2,830 — 9,719 5,373 2,532 2,215 3,474 3,318 — 2,047 2,908 2,669 — 2,342 3,237 11,267 2,639 3,070 2,531 3,371 — 3,210 263,176 270,471 234,186 260,062 237,978 217,905 — 139,547 177,122 242,686 — 184,286 271,033 293,731 197,417 261,210 133,808 194,047 — 200,829 2.61 2.68 2.32 2.58 2.36 2.16 — 1.38 1.76 2.41 — 1.83 2.69 2.91 1.96 2.59 1.33 1.92 — 1.99 134,522 227,787 122,080 224,272 281,541 112,362 110,795 113,216 195,565 204,592 144,880 174,662 181,677 242,574 193,763 250,973 202,537 211,216 166,166 — 2,930 — 4,000 3,860 2,710 4,200 2,822 2,140 3,852 — 3,477 4,656 223,577 200,450 286,750 — 210,480 251,510 2.22 1.99 2.84 — 2.09 2.49 152,569 — 192,217 96,006 123,285 137,278 2,883 3,900 10,750 3,200 1,760 1,800 — 3,580 5,880 7,060 4,902 3,755 10,352 2,183 1,599 3,385 2,400 3,448 5,662 4,314 223,911 185,105 251,628 226,123 331,445 302,513 200,065 164,195 360,489 147,071 2.22 1.84 2.50 2.24 3.29 3.00 1.98 1.63 3.58 1.46 108,116 190,797 202,651 205,267 272,915 144,909 — 129,937 269,282 239,124 5,500 6,900 8,930 4,790 — 9,300 4,763 — 7,798 — 2,189 7,940 174,625 — 235,771 — 205,621 201,331 1.73 — 2.34 — 2.04 2.00 227,298 110,031 212,852 169,875 — 192,791 39 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 North American Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Services 10.02% (13.69%) Aetna Alliance Data Systems Baxalta Baxter International Comcast Lockheed Martin Quest Diagnostics Starwood Hotels & Resorts Worldwide 3,330 1,000 3,800 6,300 4,770 923 2,900 2,910 2,157 1,232 — 6,195 4,869 756 — — Total Value of Investments Other Assets Total Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold Year ended 30.09.16 Year ended 30.09.15 £1,784,343 £2,716,057 £1,610,309 £2,470,126 40 £ 191,797 203,470 — 226,983 248,641 139,531 — — 1.90 2.02 — 2.25 2.47 1.38 — — 240,459 170,933 78,948 136,606 178,975 126,341 117,637 127,725 9,976,334 163,545 10,139,879 (56,819) 10,083,060 98.94 1.62 100.56 (0.56) 100.00 8,544,573 86,816 8,631,389 (27,315) 8,604,074 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 Sterling Bond Fund Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ UK Government 2.90% (5.59%) Treasury 4.25% 2032 Treasury 4.25% 2049 Treasury 4.25% 2055 Treasury 5% 2025 Treasury 6% 2028 UK Corporate 66.14% (57.62%) Abbey National 5.25% 2029 Alba 2007-1 Plc FRN 2039 Amlin FRN 6.5% 2026 Annington Finance 5.3236% 2023 Annington Finance 8.07% 2023 Aspire Financial Management 4.674% 2040 Autolink 8.39% 2022 Aviva FRN 2058 Aviva 6.625% 2058 Bank of Scotland 6.375% 2019 Bank of Scotland 9.375% 2021 Bank of Scotland 10.5% 2018 Barclays Bank FRN 6.75% 2023 Barclays Bank 9.5% 2021 Barclays Bank 10% 2021 BG Energy Capital 5.00% 2036 BG Energy Capital 2072 FRN BL Superstores 4.482% 2030 British American Tobacco 6% 2022 British Telecom 6.375% 2037 Canary Wharf Finance 5.952% 2035 Centrica 5.25% 2075 Centrica 7% 2033 Centrica 6.375% 2022 Close Brothers 6.5% 2017 Clydesdale Bank 4.625% 2026 CRH Finance 4.125% 2029 Daily Mail and General 6.375% 2027 Dignity Finance 4.6956% 2049 Dukinfiled No 1 FRN 2045 Dukinfiled ZERO 2052 Eastern Power Networks 5.75% 2024 EMH Treasury Plc 4.5% 2044 EE Finance 4.375% 2019 FCE Bank 2.727% 2022 First Group 6.875% 2024 First Group 8.125% 2018 First Group 8.75% 2021 Friends Life Group 8.25% 2022 Gatwick Funding Ltd 6.125% 2026 Gatwick Funding 6.5% 2043 Gemgarto 2015 ZERO 2047 GlaxoSmithKline 5.25% 2042 Great Rolling Stock 6.25% 2020 Great Rolling Stock 6.25% 2031 Hutchinson WHAMPOA Finance UK 5.625% 2026 Heathrow Funding 5.875% 2043 Heathrow Funding 6% 2020 £ 877,000 — 350,000 — — — 63,000 150,000 57,000 111,000 — 109,343 278,483 77,551 176,174 — 0.49 1.26 0.35 0.80 1,126,875 — 521,411 — — 137,000 — 100,000 — 120,000 300,000 300,000 225,000 — 72,000 40,000 100,000 100,000 — 425,000 200,000 320,000 241,154 100,000 101,000 150,000 100,000 120,000 225,000 100,000 100,000 — — 151,000 100,000 — 250,000 — 100,000 — 120,000 140,000 204,000 300,000 100,000 100,000 — — — 100,000 69,000 356,000 100,000 — 290,000 — — 150,000 100,000 120,000 225,000 — 100,000 100,000 50,000 151,000 100,000 100,000 169,000 100,000 — 100,000 85,000 — 90,000 100,000 100,000 100,000 100,000 100,000 204,000 100,000 50,000 115,000 100,000 — 77,311 — 139,775 186,429 249,585 199,276 121,007 111,409 — — — 105,024 88,350 459,716 142,201 — 267,859 — — 201,155 103,667 199,395 287,905 — 128,369 120,352 63,037 193,703 84,782 99,253 219,748 131,214 — 106,074 113,344 — 116,519 126,784 137,277 171,719 42,299 159,929 240,477 132,312 67,501 184,019 115,459 — 0.35 — 0.63 0.84 1.13 0.90 0.55 0.50 — — — 0.47 0.40 2.08 0.64 — 1.21 — — 0.91 0.47 0.90 1.30 — 0.58 0.54 0.29 0.88 0.38 0.45 0.99 0.59 — 0.48 0.51 — 0.53 0.57 0.62 0.78 0.19 0.72 1.09 0.60 0.31 0.83 0.52 174,829 — 101,833 — 158,662 335,660 224,641 246,146 — 80,866 50,732 117,668 107,592 — 545,368 235,914 336,741 268,767 119,660 130,745 187,756 95,812 161,967 268,757 105,789 118,270 — — 164,099 97,216 — 300,064 — 106,296 — 161,932 171,593 112,130 118,508 123,379 — 90,816 — 345,006 123,710 122,164 143,723 112,657 100,000 — 135,000 150,000 90,000 100,000 100,000 — 100,000 — 300,000 100,000 100,000 115,000 100,000 41 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 Sterling Bond Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ UK Corporate (continued) Heathrow Funding 6.45% 2033 Heathrow Funding 6.75% 2028 Heathrow Funding 7.125% 2024 HSBC FRN 2023 HSBC Bank 5.84% HSBC 6.00% 2040 HSBC 6.375% FRN 2022 HSBC 6.5% 2024 Imperial Tobacco 8.125% 2024 Imperial Tobacco 9% 2022 Integrated Accommodation Service 6.48% 2029 InterContinental Hotels 3.75% 2025 InterContinental Hotels 3.875% 2022 Lloyds Bank 5.75% 2025 Lloyds Bank 6% 2029 Lloyds Bank 6.5% 2040 Lloyds Bank 7.625% 2025 Manchester Airport 4.75% 2034 Marks & Spencer 4.75% 2025 Meadowhall 4.988% 2037 Mitchells FRN 2032 Mitchells & Butler 5.965% 2025 Motability 3.75% 2026 Motability 4.375% 2027 NATS En Route 5.25% 2026 National Grid Gas 2.625% 2038 National Grid Gas 2.75% 2046 National Grid Gas 8.75% 2025 Nationwide 5.625% 2019 NGG Finance 2073 FRN NIE Finance 6.375% 2026 Northumbrian Water 5.125% 2042 Orbit Capital 3.5% 2045 Paragon Mortgages No.23 2015 Permanent Master 4.805% 2017 Places For People Homes 5.875% 2031 Porterbrook Rail Finance 5.5% 2019 Prudential 5.7% 2063 Prudential 11.375 2039 FRN QBE Insurance 6.115% 2042 QBE Capital Funding 2041 FRN Rio Tinto Finance 4% 2029 RL Finance 6.125% 2028 RMPA Services 5.337% 2038 Rolls-Royce Plc 3.375% 2026 Royal Bank of Scotland 5.125% 2024 Royal Bank of Scotland 6.875% 2025 Royal Sun Alliance 5.125% 2045 Santander UK 9.625% 2023 FRN Scottish Amicable Finance 8.5% Scottish & Southern Energy FRN (Perp) Segro Plc 6.75% 2021 Severn Trent 6.25% 2029 Society of Lloyds 7.421% FRN (Perp) Southern Gas Networks 4.875% 2020 Southern Gas Networks 6.375% 2040 Southern Water 5% 2021 SSE Plc 6.25% 2038 200,000 150,000 100,000 300,000 — 365,000 200,000 200,000 150,000 200,000 225,000 100,000 110,000 308,000 100,000 155,000 — 200,000 112,000 300,000 150,000 550,000 100,000 100,000 200,000 — — 100,000 170,000 120,000 100,000 100,000 100,000 139,000 147,000 150,000 300,000 — 100,000 — 100,000 125,000 — 180,000 — 200,000 200,000 200,000 125,000 — 150,000 — 170,000 114,000 150,000 100,000 180,000 90,000 200,000 150,000 100,000 204,000 50,000 115,000 200,000 200,000 150,000 — 152,000 — 110,000 100,000 100,000 — 370,000 100,000 112,000 300,000 100,000 371,000 — — — 100,000 100,000 — — 120,000 200,000 100,000 100,000 139,000 147,000 150,000 — 210,000 — 112,000 — — 100,000 — 100,000 — — 100,000 125,000 123,000 — 200,000 170,000 114,000 — 100,000 180,000 90,000 42 £ 312,212 217,886 134,452 212,962 57,783 149,499 208,771 258,470 216,215 — 137,531 — 123,559 110,503 149,056 — 490,055 136,259 131,138 299,515 74,292 161,232 — — — 104,225 104,861 — — 135,020 283,084 151,768 112,660 132,352 149,120 198,301 — 225,185 — 120,034 — — 108,985 — 113,517 — — 103,435 143,397 132,628 — 253,611 255,846 117,952 — 172,127 211,026 146,648 1.41 0.99 0.61 0.96 0.26 0.68 0.94 1.17 0.98 — 0.62 — 0.56 0.50 0.67 — 2.22 0.62 0.59 1.35 0.34 0.73 — — — 0.47 0.47 — — 0.61 1.28 0.69 0.51 0.60 0.67 0.90 — 1.02 — 0.54 — — 0.49 — 0.51 — — 0.47 0.65 0.60 — 1.15 1.16 0.53 — 0.78 0.95 0.66 262,539 196,832 124,170 313,783 — 409,173 213,239 247,660 198,089 265,426 206,884 99,885 112,869 332,061 135,826 215,428 — 220,343 121,429 285,682 125,625 268,652 107,161 111,911 185,826 — — 149,892 191,969 125,900 127,793 117,353 93,208 137,129 153,285 180,527 331,085 — 126,155 — 109,554 123,627 — 175,359 — 239,967 254,933 197,129 149,369 — 150,263 — 221,168 120,110 167,992 136,444 201,066 117,063 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 Sterling Bond Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ £ UK Corporate (continued) SSE FRN (Perp) Standard Chartered Bank 5.125% 2034 Standard Chartered Bank 7.75% FRN (Perp) Standard Life Finance 6.75% FRN (Perp) Swan Housing Capital Plc 3.625% 2048 Telereal Securitisation 6.1645% 2031 Thames Water Utilities 3.5% 2028 Trafford Centre Finance 6.5% 2033 United Utilities 5% 2035 UPP Bond 1 4.9023% 2040 Western Power 3.625% 2023 Western Power 5.75% 2040 Western Power 5.75% 2040 Whitbread Group Plc 3.375% 2025 Yorkshire Building Society 3.5% 2026 Yorkshire Building Society 4.75% 2018 200,000 100,000 200,000 220,000 — 150,000 — 200,000 120,000 — — — 100,000 100,000 — 100,000 200,000 100,000 140,000 100,000 100,000 — 100,000 200,000 120,000 150,000 100,000 50,000 100,000 — 100,000 — 202,141 98,699 159,250 115,067 114,796 — 117,945 258,241 172,184 184,505 111,159 80,068 160,055 — 108,928 — 0.91 0.45 0.72 0.52 0.52 — 0.53 1.17 0.78 0.83 0.50 0.36 0.72 — 0.49 — 191,250 87,846 227,250 245,355 — 170,605 — 252,032 140,794 — — — 126,538 100,384 — 108,714 Overseas Borrowers 27.73% (35.92%) America Movil SAB 4.948% 2033 America Movil SAB 2073 FRN Apple Incorporated 3.6% 2042 APT Pipelines AT&T 4.25% 2043 AT&T 4.875% 2044 AT&T 7% 2040 AXA 5.453% Perp AXA 6.686% Perp Bank of America 2.3% 2025 Bank of America 7% 2028 Bank of America Merrill Lynch 7.75% 2018 BHP Billiton Finance 4.3% 2042 BMW Finance 1.6675% 2047 Chorus Ltd 6.75% 2020 Citigroup 4.5% 2031 Citigroup 6.8% 2038 Cooperatieve 6.6% PERP Deutsche Telekom 6.5% 2022 Deutsche Telekom Intl Finance GRN 2030 Direct TV Holdings 5.2% 2033 E.ON International Finance 6.375% 2032 EDF 5.125% 2050 EDF 5.5% 2041 EDF 6% FRN EDF 6.125% 2034 ELM FRN (Perp) European Investment Bank 4.5% 2044 General Electric Cap Corp 5.875% 2033 General Electric Cap Corp 8% 2039 General Electric Cap Corp 2067 6.5% FRN GKN Holdings 5.375% 2022 Glencore Finance GR 2022 Glencore Finance 6.5% 2019 H J Heinz 4.125% 2027 Iberdrola Finanzas 7.375% 2024 ING Groep 6.875% 2023 FRN Koninklijke KPN 5% 2026 Linde Finance 8.125% 2068 150,000 100,000 180,000 100,000 235,000 100,000 100,000 250,000 225,000 — 150,000 150,000 200,000 — — 270,000 85,000 — — 165,000 130,000 275,000 150,000 300,000 200,000 250,000 150,000 150,000 140,000 210,000 317,000 170,000 150,000 50,000 210,000 150,000 126,000 100,000 125,000 150,000 — 180,000 100,000 135,000 100,000 100,000 100,000 100,000 173,000 — — 200,000 40,000 100,000 170,000 — 80,000 50,000 — — 275,000 150,000 200,000 — 200,000 200,000 — — — — — — — 210,000 — 126,000 100,000 — 193,671 — 220,455 107,293 158,971 130,311 162,672 105,973 112,373 174,941 — — 257,172 42,929 117,378 197,884 — 99,352 64,440 — — 410,934 208,316 285,285 — 292,090 220,413 — — — — — — — 245,877 — 135,092 123,350 — 0.88 — 1.00 0.49 0.72 0.59 0.74 0.48 0.51 0.79 — — 1.16 0.19 0.53 0.89 — 0.45 0.29 — — 1.86 0.94 1.29 — 1.32 1.00 — — — — — — — 1.11 — 0.61 0.56 — 164,498 103,500 175,191 92,619 213,774 99,950 129,837 250,939 248,719 — 203,183 171,560 196,630 — — 277,361 119,905 — — 232,874 138,762 329,916 163,720 339,509 198,875 304,445 158,063 200,492 184,971 348,764 329,350 185,300 128,301 45,935 218,046 193,392 138,111 107,423 130,330 43 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 Sterling Bond Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Overseas Borrowers (continued) Mellon Capital FRN 2066 MetLife 5.25% 2020 Mondelez International 4.5% 2035 National Capital Trust FRN (Perp) Orange SA 5.25% 2025 Orange SA 5.375% 2050 Orange SA FRN (Perp) PGH Capital Ltd 5.75% 2021 Precise Mortgage Funding 1.6675% 2047 Rabobank Capital FRN (Perp) RCI Banque 1.8% 2017 Residential Mortgage Securities FRN 2046 RWE Finance 6.125% 2039 Saint Gobain 4.625% 2029 Scentre Management 2.375% 2022 Siemens 6.125% FRN 2066 SLM Student Loan 2038 FRN Stagecoach Group 4% 2025 Svenska Handelsbanken 2.75% 2022 Talisman Energy Incorporated 5.875% 2017 Telefonica Emisiones 5.289% 2022 Thames Water Utilties Cayman 4.375% 2034 Thames Water Utilities Finance 2025 FRN UBS AG (London Branch) 6.625% 2018 United Mexico STS 5.625% 2014 Vattenfall 6.875% 2039 Verizon Communications 4.75% 2034 Welltower Inc 4.8% 2028 Westpac Bank 2.625% 2022 150,000 189,000 — 220,000 115,000 150,000 222,000 — 100,000 156,000 250,000 100,000 100,000 100,000 100,000 150,000 190,000 — 150,000 300,000 150,000 100,000 140,000 140,000 100,000 194,000 200,000 100,000 — — — 120,000 150,000 — 100,000 — 124,000 100,000 110,000 — 200,000 — — 100,000 — 190,000 100,000 — — 150,000 — — — — — 300,000 100,000 100,000 Total Value of Investments Other Assets Total Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold Year ended 30.09.16 Year ended 30.09.15 £10,260,692 £21,028,918 £20,595,772 £13,469,470 44 £ — — 147,056 158,160 — 155,005 — 135,521 24,578 117,323 — 138,936 — — 105,148 — 166,530 113,066 — — 182,804 — — — — — 389,637 121,449 107,891 — — 0.66 0.72 — 0.70 — 0.61 0.11 0.53 — 0.63 — — 0.48 — 0.75 0.51 — — 0.83 — — — — — 1.76 0.55 0.49 151,781 214,261 — 228,323 133,703 174,790 223,661 — 73,783 162,989 248,947 88,937 106,160 107,973 97,731 154,100 171,868 — 152,344 326,071 165,948 106,523 146,438 156,349 94,375 259,949 211,301 107,169 — 21,406,272 936,823 22,343,095 (227,304) 22,115,791 96.77 4.26 101.03 (1.03) 100.00 29,215,074 1,210,975 30,426,049 (961,982) 29,464,067 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 UK Fund Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Basic Resources 1.91% (4.35%) Rio Tinto £ 8,500 11,300 290,947 1.91 187,829 16,500 105,000 14,300 104,000 498,284 226,512 3.28 1.49 447,068 234,255 8,500 10,500 17,600 115,000 107,000 36,000 — 7,600 9,600 12,800 — 106,000 28,300 8,200 12,000 78,000 121,000 23,000 — 67,200 119,500 17,300 197,562 480,336 631,104 — 339,465 464,898 325,807 — 484,008 218,542 632,185 1.30 3.16 4.15 — 2.23 3.06 2.14 — 3.18 1.44 4.16 283,943 439,084 641,212 328,325 286,707 455,580 — 240,840 528,255 221,648 617,550 Energy 11.96% (16.88%) BG Group BHP Billiton Centrica John Wood Group KSK Power Ventur Royal Dutch Shell 'A' Royal Dutch Shell Weir Group 61,000 40,000 124,000 75,767 31,668 27,914 — 24,500 — 40,000 — 54,400 — — 29,300 20,900 — 464,900 — 413,032 — — 585,194 355,405 — 3.06 — 2.72 — — 3.85 2.34 580,141 401,900 284,270 465,778 10,609 433,714 — 286,528 Financials 15.09% (14.32%) Capita HSBC Holdings Provident Financial Prudential Schroders Schroders Non-Voting Standard Chartered Bank 14,000 107,561 — 42,500 3,500 12,500 66,106 33,000 86,703 1,145 47,500 2,900 16,301 76,500 221,018 501,794 34,739 648,969 78,170 330,095 480,688 1.45 3.30 0.23 4.27 0.51 2.17 3.16 167,650 536,439 — 592,131 98,158 270,875 423,574 14,000 19,500 388,928 2.56 283,850 — 9,160 48,500 7,500 235,710 337,163 1.55 2.22 — 256,526 Chemicals 4.77% (1.29%) Croda International Elementis Consumer Goods 24.81% (27.72%) Associated British Foods AstraZeneca British American Tobacco Cobham GKN GlaxoSmithKline Imperial Brands Persimmon Rolls Royce Holdings Tesco Unilever Information Technology 2.56% (1.95%) Aveva Group Materials 3.77% (1.76%) Essentra Plc Spirax-Sarco Engineering 45 Lloyds Investment Funds Limited Investment Portfolios (continued) As at 30 September 2016 UK Fund (continued) Holding 30.09.15 Holding 30.09.16 Market Value 30.09.16 % of Total Net Assets Market Value 30.09.15 £ Services 35.03% (27.90%) Aggreko American Leisure (Suspended) BTG Group Bunzl Compass Group Dignity Experian Inchcape Inmarsat Intertek Group Pearson Rotork RPC Group Sage Group Ultra Electronics Vodafone Group Whitbread 20,500 416,667 — — 50,000 — 43,000 45,500 43,000 — 48,000 108,000 — 96,000 23,500 25,300 416,667 24,839 7,000 38,800 8,417 34,000 46,500 50,500 9,500 40,500 161,200 30,000 65,500 23,200 138,000 5,500 136,000 7,800 Total Value of Investments Other Assets Total Assets Liabilities Total Net Assets Cost of investments purchased Proceeds from investments sold Year ended 30.09.16 Year ended 30.09.15 £3,771,663 £4,545,581 £1,656,705 £3,636,200 46 £ 241,362 — 157,417 159,635 579,866 235,844 524,790 306,319 356,151 331,503 305,066 340,374 288,075 483,226 411,452 301,553 305,371 1.59 — 1.04 1.05 3.81 1.55 3.45 2.01 2.34 2.18 2.01 2.24 1.89 3.18 2.71 1.98 2.01 195,006 — — — 526,750 — 454,725 326,918 422,153 — 540,720 177,930 — 479,376 402,320 287,702 256,686 15,193,459 315,704 15,509,163 (299,807) 15,209,356 99.90 2.08 101.97 (1.97) 100.00 14,074,725 833,382 14,908,107 (321,498) 14,586,609 Lloyds Investment Funds Limited 47 Lloyds Investment Funds Limited Investments Purchased and Sold For the year ended 30 September 2016 This schedule refers to investments both purchased and sold during the year and as a result do not appear on the portfolio listings. Nominal Euro High Income Fund AP Moeller FRN 2019 100,000 AT&T Inc 2.4% 2024 100,000 Bayer AG 3% 2075 47,000 Kraft Heinz Foods 2% 2023 305,000 Molson Coors 1.25% 2024 100,000 Rio Tinto Finance 2% 2020 100,000 Royal Bank of Scotland 2.5% 2023 100,000 High Income Fund Treasury Gilt 4.25% 2036 1,680,000 Treasury Gilt 4.75% 2030 3,770,000 Treasury Gilt 5% 2018 1,000,000 Treasury Gilt 2% 2025 4,205,000 Vodafone Group 3.375% 2049 980,000 Wells Fargo & Co 2% 2025 530,000 Sterling Bond Fund AT&T Inc 5.2% 2033 130,000 Charter Communications inc 5.75% 2031 125,000 Cooperatieve Rabobank 5.375% 2060 50,000 Glencore Finance 7.375% 2020 150,000 Motability 3.625% 2036 100,000 Santander UK 3.625% 2026 122,000 South Eastern Power GRN 2031 100,000 Treasury Gilt 5% 2018 150,000 Treasury Gilt 3.75% 2020 161,000 Treasury Gilt 3.75% 2021 100,000 Treasury Gilt 1.75% 2022 95,000 Treasury Gilt 2% 2025 262,000 Vodafone Group 3.375% 2049 105,000 Wells Fargo & Co 2% 2025 100,000 48 Lloyds Investment Funds Limited Summary of Material Portfolio Changes For the year ended 30 September 2016 This schedule refers to securities purchased and sold during the year which had a value of greater than 2% of the net asset value of each Fund. The Directors consider that where applicable the disclosure of the 20 largest purchases and sales is sufficient to reflect the nature of the operating activity of the Funds. Euro High Income Fund Purchases Cooperatieve Rabobank 4.75% 2022 KFW Bankengruppe 4.675% 2023 BNP Paribas 4.5% 2023 Barclays Bank 6.625% 2022 Unibail Rodamco 2% 2016 Total Capital 5.125% 2024 Credit Agricole 5.125% 2023 KFW Bankengruppe 4.675% 2023 HBOS Plc 4.5% 2030 United Utilities Water 4.25% 2020 Total FRN (Perp) Iberdrola 5.625% 2018 CRH Finance 5% 2019 AT&T 3.375% 2034 Kraft Heinz 2% 2023 Bundesrepublic 5.5% 2031 ABN Amro Bank 2.88% 2028 Anheuser Busch 2.75% 2036 America Movil 2.125% 2028 Bundesrepublic 2.25% 2021 Cost € Sales 381,613 377,100 323,059 309,249 299,412 269,304 267,343 266,965 265,069 235,631 234,435 234,255 229,266 225,238 210,682 205,892 198,766 197,228 196,922 195,826 Roche Finance Europe 0.875% 2025 Renault 3.625% 2018 Deutsche Bank 5.125% 2017 Kraft Heinz 2% 2023 SAP SE 1.75% 2027 Sanofi SA 0.875% 2021 HSBC Holdings 6% (Perp) Terna Rete Elettrica Nazionale 0.875% 2022 BAT International Finance 0.875% 2023 ABN Amro Bank 5.75% (Perp) AT&T 2.45% 2035 Statkraft 1.5% 2030 The Coca Cola Company 1.125% 2027 Barclays Bank 6.625% 2022 Vattenfall 6.25% 2021 Goldman Sachs 4.5% 2016 National Capital Instruments FRN (Perp) Jefferies Group 2.375% 2020 Volkswagen International Finance 3.75% (Perp) HBOS Plc 4.5% 2030 Proceeds € 254,463 219,881 219,847 217,939 215,798 206,380 202,659 198,328 193,589 191,688 186,905 184,757 165,665 161,874 154,914 150,000 148,446 147,437 139,366 134,719 European Fund Purchases Bayer Partners Group Holding UBS Group Essilor International L'Oreal Bayer Henkel Grandvision Edenred Grandvision Holcim Edenred Ericsson Novartis Bayer Unilever Novozymes UBS Group Brunello Cucinelli Furgo Cost £ Sales 150,581 147,690 76,938 73,254 63,681 59,835 59,279 59,038 58,754 54,583 52,538 51,150 45,571 41,078 40,768 40,394 39,552 38,339 37,553 36,796 KION Group ENI Atlas Copco Schindler Schindler Casino Guichard-Perrachon Syngenta Syngenta Casino Guichard-Perrachon Swedish Match Nordea Bank MTU Aero Engines AG Syngenta Schindler Assa Abloy ENI MTU Aero Engines AG Casino Guichard-Perrachon Linde Schneider Electric 49 Proceeds £ 131,616 120,371 85,630 81,016 77,718 73,839 73,071 71,769 70,821 70,291 68,477 67,612 62,954 61,172 61,130 54,344 50,055 48,152 44,269 44,239 Lloyds Investment Funds Limited Summary of Material Portfolio Changes (continued) For the year ended 30 September 2016 High Income Fund Purchases Treasury Gilt 2% 2025 Treasury Gilt 4.75% 2030 Westpac Bank 2.625% 2022 SSE FRN (Perp) Treasury Gilt 4.25% 2036 Coventry Building Society 2050 National Grid Gas 2.625% 2038 National Grid Gas 2.75% 2046 Chorus Ltd 6.75% 2020 Thames Water 6.75% 2028 UPP Bond 1 4.9023% 2040 Treasury Gilt 5% 2018 Aviva 2041 FRN Treasury Gilt 4.75% 2030 Treasury Gilt 1.75% 2022 AT&T Inc 4.375% 2029 Bank of America 2.3% 2025 Western Power 3.625% 2023 Vodafone Group 3.375% 2049 H J Heinz 4.125% 2027 Cost £ Sales 3,043,073 2,685,566 2,191,156 2,046,452 2,016,571 1,677,000 1,490,475 1,479,045 1,438,324 1,267,214 1,263,267 1,110,490 1,098,606 1,074,400 1,023,099 1,022,831 998,040 995,810 969,269 923,823 National Grid Electricity Transmission 6.5% 2028 UBS AG (Jersey) 8.75% 2025 Santander UK 10.0625% (Perp) GE Capital UK Funding 5.125% 2023 Vattenfall 6.875% 2039 AIG SunAmerica Institutional Funding 5.375% 2016 National Grid Gas 8.75% 2025 General Electric Capital Corp 2067 FRN Scottish & Southern Energy (Perp) FRN Aegon 6.125% 2031 Annington Finance No 4 2023 FRN Cie de Saint Gobain 5.625% 2016 Treasury Gilt 4.75% 2030 Standard Chartered (Perp) FRN Telefonica Emisione 5.445% 2029 MetLife 5.25% 2020 Treasury Gilt 2% 2025 Telereal Securitisation 6.1645% 2031 Arkle Master Issuer 4.681% 2060 Scentre Management 2.375% 2022 Proceeds £ 4,081,846 3,953,483 3,699,381 3,603,927 2,664,878 2,617,424 2,294,332 2,071,339 1,655,000 1,622,683 1,560,311 1,526,642 1,504,555 1,500,000 1,424,014 1,414,232 1,340,844 1,247,217 1,239,207 1,200,339 International Fund Purchases Novartis M&T Bank Perrigo Whitbread Perrigo Standard Chartered Standard Chartered Whitbread Perrigo Perrigo Keyence Roche Holdings Kasikornbank M&T Bank Perrigo Keyence Keyence Keyence Keyence Keyence Cost £ Sales 98,887 98,317 91,856 90,577 80,285 63,426 63,426 60,096 58,016 53,654 53,277 51,241 48,975 47,888 43,978 42,401 42,232 41,466 40,940 40,902 Chevron Schlumberger Oracle Samsung British American Tabacco Taiwan Semiconductor Manufacturing Schneider Electric British American Tabacco BNP Billiton Chevron Philip Morris International Fomento Economico Mexicano Zurich Insurance Group Banco Bradesco Nestle Shin-Etsu Chemical AIA Group Banco Bradesco EOG Resources Daito Trust Construction 50 Proceeds £ 202,524 150,944 136,143 123,557 114,636 110,240 107,407 104,935 103,011 98,165 96,057 95,856 95,413 94,437 89,602 86,216 84,524 84,338 82,924 82,554 Lloyds Investment Funds Limited Summary of Material Portfolio Changes (continued) For the year ended 30 September 2016 North American Fund Purchases Rockwell Automation Moodys Parexel International Ecolab Verisk Analytics CL A Parexel International Moodys M&T Bank Casey's General Stores Schlumberger Lockheed Martin BorgWarner Verisk Analytics CL A M&T Bank Alliance Data Systems Ecolab BorgWarner M&T Bank AIG Lockheed Martin Cost £ Sales 113,934 112,464 105,113 102,061 88,927 85,103 51,109 50,669 48,261 45,381 45,167 45,112 44,524 44,091 42,601 42,528 42,170 38,973 37,659 37,063 Kraft Heinz Qualcomm Starwood Hotels & Resorts Worldwide United Technologies EMC Emerson Electric Quest Diagnostics National Oilwell Varco Equifax Lockheed Martin Target Lockheed Martin TJX Companies Wells Fargo PVH Corporation Monsato Qualcomm CVS Healthcare Wells Fargo Texas Instruments Proceeds £ 160,538 143,742 135,488 130,106 124,185 122,093 111,573 83,880 76,912 62,411 61,929 59,036 52,850 52,157 47,454 46,317 43,366 37,616 37,448 36,118 Sterling Bond Fund Purchases Treasury Gilt 4.25% 2032 Treasury Gilt 6% 1998 Lloyds Bank 7.625% 2025 PGH Capital Ltd 5.75% 2021 Treasury Gilt 5% 2025 Treasury Gilt 4.25% 2032 Bank of America 2.3% 2025 Treasury Gilt 4.25% 2055 Westpac Bank 2.625% 2022 Prudential 5.7% 2063 UPP Bond 1 4.9023% 2040 Glencore 7.375% 2020 Treasury Gilt 5% 2018 Treasury Gilt 2% 2025 National Grid Gas 8.75% 2025 Swiss Reinsurance Co via ELM BV (Perp) FRN Treasury Gilt 4.25% 2055 HSBC Bank 5.84% Treasury Gilt 6% 1998 Gatwick Funding 6.5% 2043 Cost £ Sales 532,418 495,469 487,498 276,777 275,037 269,297 257,169 232,384 199,196 174,713 172,264 171,711 166,574 165,609 158,650 158,510 154,981 154,846 153,848 144,492 Treasury Gilt 4.25% 2032 Treasury Gilt 4.25% 2032 GE Capital UK Funding 8% 2039 BG Energy Capital 2072 FRN General Electric Capital Corp 2067 FRN Porterbrook Rail Finance 5.5% 2019 Talisman Energy Incorporated 5.875% 2017 Imperial Tobacco 9% 2022 Royal Bank of Scotland 6.875% 2025 HSBC Holdings 6% 2040 Royal Bank of Scotland 5.125% 2024 Vattenfall 6.875% 2039 RCI Banque 1.8% 2017 Treasury Gilt 4.25% 2055 Deutsche Telekom Intl Finance GRN 2030 Orange SA FRN (Perp) Lloyds Bank 5.75% 2025 Treasury Gilt 4.25% 2055 General Electric Cap. Corp. 5.875% 2033 National Grid Gas 8.75% 2025 51 Proceeds £ 1,120,684 395,548 367,047 354,793 345,587 339,329 319,002 282,714 278,526 276,541 264,023 261,633 257,900 239,068 237,123 234,461 232,830 228,622 228,547 226,108 Lloyds Investment Funds Limited Summary of Material Portfolio Changes (continued) For the year ended 30 September 2016 UK Fund Purchases Royal Dutch Shell Imperial Brands Royal Dutch Shell RPC Group Standard Chartered Standard Chartered Imperial Brands Imperial Brands Prudential Essentra Plc Capita Dignity Rio Tinto Schroders Non-Voting Whitbread Rotork Associated British Foods Intertek Group Intertek Group Essentra Plc Cost £ Sales 399,113 147,503 102,544 92,853 87,825 87,825 75,060 72,205 70,981 69,883 69,276 65,435 61,552 52,110 50,965 49,203 46,878 43,933 43,193 42,183 BG Group Royal Dutch Shell 'A' Royal Dutch Shell 'A' Unilever GlaxoSmithKline Royal Dutch Shell 'A' John Wood Group British American Tabacco Persimmon HSBC Standard Chartered Persimmon Associated British Foods Royal Dutch Shell Rolls Royce Holdings British American Tabacco Centrica Pearson Cobham Sage Group 52 Proceeds £ 632,743 150,585 141,547 126,304 122,880 101,318 99,151 96,383 90,108 89,953 87,825 84,358 75,459 74,846 74,560 71,359 68,463 67,535 65,741 62,007 Lloyds Investment Funds Limited Notes to the Financial Statements For the year ended 30 September 2016 1. The Company Significant accounting estimates and judgements The Company is domiciled and incorporated as a limited liability company in Jersey, Channel Islands, United Kingdom under the Companies (Jersey) Law 1991 and is listed on the Channel Islands Securities Exchange Authority and the Malta Stock Exchange. Full details of the Company, Investment Objectives and Policy and Report of the Directors are stated on pages 2 to 6. The Company makes assumptions and estimates that affect the reported amounts of assets and liabilities at the statement of financial position date. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The accounting policies deemed significant to the Company’s results and financial position, based upon materiality and significant judgements and estimates, are discussed in the following notes. See Note 3 for further details on what are considered to be the significant accounting estimates and judgments. 2. Basis of Presentation The financial statements of the Company and the Funds have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) on the going concern basis. The Funds are: • • • • • • • Euro High Income Fund European Fund High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund 3. Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated in the following text: The policies set out below have been consistently applied to all years presented. The Directors also monitor new standards and ensure that they are applied where relevant. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investments, held at fair value through the profit or loss and in accordance with the Companies (Jersey) Law 1991 and with the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended). Jersey is not part of the United Kingdom (‘UK’) and the Company is not regulated by the Financial Conduct Authority (‘FCA’) or the Prudential Regulation Authority (‘PRA’) of the UK. 3. Adoption of new and revised IFRS’s The capital of the Company comprises various classes of Shares each relating to a separate Fund consisting of securities, cash, other assets and liabilities. These financial statements present the statements of financial position, statements of comprehensive income, statements of changes in net assets attributable to holders of participating redeemable preference shares, cash flow statements, investment portfolios, notes to the financial statements, distribution tables (unaudited) and performance records (unaudited). At the statement of financial position date there were seven Funds in existence; Euro High Income Fund, European Fund, High Income Fund, International Fund, North American Fund, Sterling Bond Fund and UK Fund. The Directors may from time to time create further classes (Funds). The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities. 3.1 Standards, amendments and interpretations effective for the current year The following new standards, amendments and interpretations have been adopted in these financial statements. Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: The Company has applied the amendments to IFRS 10, IFRS 12 and IAS 28 - Investment Entities for the first time in the current year. The Company did not control any entities during the year or the prior year and as a result, the investment entities amendments have had no impact on the Company. Amendments to IAS 28 Investments in Associates and Joint Ventures: The Company has applied the amendments to IAS 28 Investments in Associates and Joint Ventures for the first time in the current year. The Company had no Associates or Joint Ventures during the year or the prior year and as a result, the investment entities amendments have had no impact on the Company. 3.2 The following New and revised standards, amendments and interpretations have been published but are not yet effective: • IFRS 9, ‘Financial Instruments’ (effective from 1 January 2018). • IFRS 15, ‘Revenue from contracts with customers’ (effective 1 The net assets attributable to holders of participating redeemable preference shares are classified as financial liabilities and therefore, in the opinion of the Directors, the Capital of the Company is only represented by the Founders Shares. Details of Founders Shares are disclosed in Notes 3 and 14. January 2017). • IAS 7, ‘Cash Flow Statements’ (effective from 1 January 2017). • IAS 12, ‘Income Taxes’ (effective from 1 January 2017). There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Company. Where assets of an individual Fund are insufficient to meet the Funds liabilities, then any liabilities that remain undischarged will revert to the Company as a whole and be allocated amongst the other Funds. 53 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 3. Summary of Significant Accounting Policies (continued) Foreign currency translation Assets and liabilities denominated in currencies other than the functional currency of the Fund are translated at the rate of exchange ruling at the statement of financial position date. The currency profits or losses arising on translation, together with currency profits or losses realised during the year, are recognised in the statement of comprehensive income. Functional currency and presentational currency Items included in the Company’s financial statements are measured using the currency of the primary economic environment in which it operates (the ‘functional currency’). The Directors have adopted sterling as the functional and presentational currency for consolidation purposes which reflects the Company’s primary economic environment in which financial assets are invested and the regulatory environment of the majority of investors, being UK based. The rate of exchange to sterling from euro ruling at 30 September 2016 used for the conversion of statement of financial position items was 1.1559 and the average rate for the year used for the conversion of the statement of comprehensive income was 1.2787. The Company has adopted sterling as its presentational and functional currency for European Fund, High Income Fund, International Fund, North American Fund, Sterling Bond Fund and UK Fund as the majority of Shares in each Fund have been subscribed for in sterling and all non dealing related fees and expenses are paid in sterling. Financial assets and financial liabilities at fair value through profit or loss (a) Classification The Company classifies its investments in debt and equity securities as financial assets at fair value through profit or loss. These financial assets and financial liabilities are designated by the Board of Directors as fair value through profit or loss at inception. The Company has adopted euro as its presentational and functional currency for the Euro High Income Fund as the Shares in the Fund have been subscribed for in Euros and the majority of non dealing related fees and expenses are paid in euro. Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Company’s documented investment strategy. Share premium and share capital currency translation Share premium and share capital transactions are translated into sterling at the exchange rate ruling at the time of the transaction. (b) Recognition The aggregated balance of net assets attributable to holders of participating redeemable preference Shares is translated at the appropriate month end exchange rate. Purchases and sales are recognised on the trade date (the date on which the Company commits to purchase or sell the asset). (c) Measurement Segmental reporting Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value, and transaction costs for all financial assets and financial liabilities carried at fair value through profit or loss are expensed in the statement of comprehensive income as incurred. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. The Company, at the statement of financial position date is organised into seven business segments, each focusing on achieving returns by investing in a range of investments as described in the Investment Objectives and Policy on page 3. The Company issues Shares which are allocated to the Fund selected by the investor. A separate account is maintained for each Fund, to which proceeds of issue, the income arising from those proceeds and expenses are allocated. Upon redemption shareholders are entitled to their proportion of the net assets held in the Fund in which their Shares have been designated. Gains and losses arising from changes in the fair value of financial assets or financial liabilities at fair value through profit or loss are recognised in the statement of comprehensive income in the year in which they arise. A statement of financial position, statement of comprehensive income, statement of changes in net assets attributable to holders of participating redeemable preference shares and cash flow statement have been prepared for each Fund as well as for the Company as a whole. Revenue recognition Investment income is recognised in the statement of comprehensive income on an ex-dividend basis when the right to receive payment is established or on a time proportionate basis for all debt instruments using the Effective Interest Rate method (‘EIR’). This is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant year. 54 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 3. Summary of Significant Accounting Policies (continued) Revenue recognition (continued) Bank interest is recognised in the statement of comprehensive income on a time proportionate basis using the EIR method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial asset or liability, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. Fair value estimation The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market prices at the statement of financial position date. The quoted market price used for financial assets and financial liabilities held by the Fund is the current mid-market price as required by IFRS 13 financial assets and financial liabilities at fair value at close of business on the last business day of the accounting year. (iii)Nominal Shares have been accounted for in accordance with the Companies (Jersey) Law 1991 and corresponding amounts have been included in debtors and financial liabilities. A Nominal Share will be created when a Participating Share is cancelled. A Nominal Share will be cancelled when a Participating Share is created until the number of Nominal Shares falls to zero. (iv)Both issued Nominal and Participating Shares have a nominal value of £ 0.01 per Share. etails of the Company’s Share capital transactions are shown in D Note 14. Share premium Cash and cash equivalents The premium on issues and redemptions of Participating Shares is accounted for within the Share premium account which forms part of the net assets attributable to holders of participating redeemable preference Shares. Details are shown in Notes 15 and 17. Cash and cash equivalents include cash in hand and deposits held at call with banks. Share capital (i)The Founders Shares have been subscribed for by the Manager and are ‘non-participating’. The holders thereof are entitled only to income arising on the assets represented by the Founders Shares. These Shares are classified as Ordinary Share capital in the statement of financial position. istributions payable to holders of participating redeemable D preference shares Distributions to holders of Participating Shares are recognised as finance costs when they are ratified by the Directors. Accrued income and expenses Accrued income and expenses are recognised initially at fair value and subsequently stated at amortised cost using the EIR. (ii)Unclassified Shares may be issued as either participating redeemable preference shares (‘Participating Shares’) or Nominal Shares. Participating Shares are redeemable at the shareholder’s option and are classified as financial liabilities. Participating Shares are carried at the redemption amount that is payable if the holder exercises the right to redeem Shares at the statement of financial position date. Participating Shares are issued and redeemed at the holder’s option at prices based on each Fund’s net asset value per Share at the time of issue or redemption. Each Fund’s net asset value per Share is calculated by dividing the net assets attributable to the holders of participating redeemable preference shares with the total number of Participating Shares in issue. In accordance with the provisions of the Company’s regulations, investments are valued based on the latest traded market price for the purpose of determining the net asset value per Share for subscriptions and redemptions. The Shares are divided into Funds according to the type of investment in which the proceeds of the issue of Shares in each Fund are invested. A separate portfolio of investments is maintained for each Fund. Each holder of a Participating Share is entitled on a poll, to one vote for each Participating Share held. Participating Shares have a right to dividends declared. If any dividends are paid, different amounts of dividends may be payable in respect of different Funds. 55 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 4. Other Accrued Income and Other Debtors Company Euro High Income Fund European Fund £ £ € Year ended 30 September 2016 Accrued Income Founders Shares Nominal Shares Total other accrued income and other debtors 5,892,804 1,000 1,333,160 7,226,964 247,623 — — 247,623 — — — — Year ended 30 September 2015 Accrued Income Founders Shares Nominal Shares 6,928,533 1,000 1,053,019 218,566 — — — — — Total other accrued income and other debtors 7,982,552 218,566 — 5. Distributions The distributions take account of income received on the creation of shares and income deducted on the cancellation of shares, and comprise: Company Year ended 30 September 2016 31 October 2015 30 November 2015 31 December 2015 31 January 2016 29 February 2016 31 March 2016 30 April 2016 31 May 2016 30 June 2016 31 July 2016 31 August 2016 30 September 2016 Total distributions Income paid on cancellation of shares Income received on creation of shares Net distributions for the year Fees charged to capital* Net distributions after taxation £ 1,246,603 1,235,019 1,575,912 1,206,004 1,198,644 1,566,339 1,189,063 1,184,032 1,513,463 1,149,437 1,152,140 1,620,876 15,837,532 (130,522) 5,243 15,712,253 (2,723,403) 12,988,850 * Details can be found in Note 10. 56 Euro High Income Fund € — — 116,394 — — 114,592 — — 113,288 — — 105,980 450,254 (4,206) — 446,048 (152,129) 293,919 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 4. Other Accrued Income and Other Debtors High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ Year ended 30 September 2016 Accrued Income Founders Shares Nominal Shares Total other accrued income and other debtors 5,250,124 — — 5,250,124 21,506 — — 21,506 8,745 — — 8,745 379,433 — — 379,433 18,771 — — 18,771 Year ended 30 September 2015 Accrued Income Founders Shares Nominal Shares 6,110,661 — — 28,047 — — 7,888 — — 605,122 — — 15,751 — — Total other accrued income and other debtors 6,110,661 28,047 7,888 605,122 15,751 5. Distributions The distributions take account of income received on the creation of shares and income deducted on the cancellation of shares, and comprise: High Income Fund Year ended 30 September 2016 31 October 2015 30 November 2015 31 December 2015 31 January 2016 29 February 2016 31 March 2016 30 April 2016 31 May 2016 30 June 2016 31 July 2016 31 August 2016 30 September 2016 Total distributions Income paid on cancellation of shares Income received on creation of shares Net distributions for the year Fees charged to capital* Net distributions after taxation £ 1,246,603 1,235,019 1,227,973 1,206,004 1,198,644 1,198,083 1,189,063 1,184,032 1,144,835 1,149,437 1,152,140 1,123,677 14,255,510 (55,106) — 14,200,404 (2,576,350) 11,624,054 Sterling Bond Fund UK Fund £ £ — — 262,153 — — 277,399 — — 274,482 — — 194,489 1,008,523 (72,126) — 936,397 (4,284) 932,113 — — — — — — — — — — — 211,024 211,024 — 5,243 216,267 (23,794) 192,473 * Details can be found in Note 10. 57 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 5. Distributions (continued) Company Year ended 30 September 2015 31 October 2014 30 November 2014 31 December 2014 31 January 2015 28 February 2015 30 September 2015 30 April 2015 31 May 2015 30 June 2015 31 July 2015 31 August 2015 30 September 2015 Total distributions Income paid on cancellation of shares Income received on creation of shares Net distributions for the year Fees charged to capital* Net distributions after taxation £ 1,420,083 1,415,089 1,737,465 1,410,863 1,389,323 1,665,544 1,356,172 1,352,489 1,629,125 1,308,777 1,268,460 1,795,564 17,748,954 51,652 (110,675) 17,689,931 (2,974,811) 14,715,120 Euro High Income Fund € — — 143,387 — — 122,955 — — 122,020 — — 108,025 496,387 10,485 (5,478) 501,394 (159,182) 342,212 * Details can be found in Note 10. 6. Accrued Expenses and Other Creditors Company Euro High Income Fund European Fund £ € £ Year ended 30 September 2016 Due to Manager Due to Custodian Other Creditors 410,511 21,676 95,429 18,687 1,280 5,131 26,308 1,660 7,867 Total accrued expenses and other creditors 527,616 25,098 35,835 Year ended 30 September 2015 Due to Manager Due to Custodian 436,987 23,301 19,134 1,370 26,036 1,607 Other Creditors 146,527 9,373 9,196 Total accrued expenses and other creditors 606,815 29,877 36,839 58 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 5. Distributions (continued) High Income Fund Year ended 30 September 2015 31 October 2014 30 November 2014 31 December 2014 31 January 2015 28 February 2015 30 September 2015 30 April 2015 31 May 2015 30 June 2015 31 July 2015 31 August 2015 30 September 2015 Total distributions Income paid on cancellation of shares Income received on creation of shares Net distributions for the year Fees charged to capital* Net distributions after taxation £ 1,420,083 1,415,089 1,411,327 1,410,863 1,389,323 1,364,054 1,356,172 1,352,489 1,330,900 1,308,777 1,268,460 1,248,508 16,276,045 23,400 (88,656) 16,210,789 (2,835,071) 13,375,718 Sterling Bond Fund UK Fund £ £ — — 214,860 — — 212,534 — — 211,778 — — 264,418 903,590 17,430 (12,346) 908,674 (3,580) 905,094 — — — — — — — — — — — 203,033 203,033 3,067 (5,621) 200,479 (18,429) 182,050 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ Year ended 30 September 2016 Due to Manager Due to Custodian Other Creditors 259,261 12,673 54,967 38,560 1,949 7,604 18,315 1,222 5,676 23,019 1,588 8,208 28,881 1,477 6,668 Total accrued expenses and other creditors 326,901 48,113 25,213 32,815 37,026 Year ended 30 September 2015 Due to Manager Due to Custodian 280,241 13,873 38,301 1,911 17,843 1,177 30,447 2,145 30,019 1,578 87,897 12,653 8,295 10,447 11,133 382,011 52,865 27,315 43,039 42,730 * Details can be found in Note 10. 6. Accrued Expenses and Other Creditors Other Creditors Total accrued expenses and other creditors 59 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 7. Net gain/(loss) on financial assets at fair value through profit or loss The net gain/(loss) on investments during the year comprise: Year ended 30 September 2016 Proceeds from sales of investments during the year Original cost of investments sold during the year Gains/(losses) realised on investments sold during the year Company Euro High Income Fund European Fund £ € £ 118,730,474 7,826,335 2,605,966 (110,335,654) (8,109,793) (2,462,689) 8,394,820 Realised foreign exchange (losses)/gains (138,626) Net realised gains / (losses) for the year 8,256,194 (283,458) — (283,458) 143,277 (56,067) 87,210 Net unrealised gains for the year 30,545,189 1,277,484 2,780,708 Net gains on investments 38,801,383 994,026 2,867,918 110,473,753 13,691,414 3,151,496 (104,790,193) (12,983,230) (2,872,373) Year ended 30 September 2015 Proceeds from sales of investments during the year Original cost of investments sold during the year Gains/(losses) realised on investments sold during the year Realised foreign exchange (losses)/gains Net realised gains/(losses) for the year 5,683,560 (26,888) 5,656,672 708,184 118 708,302 279,123 (18,106) 261,017 Net unrealised losses for the year (11,699,180) (1,428,589) (905,277) Net (losses)/gains on investments (6,042,508) (720,287) (644,260) 60 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 7. Net gain/(loss) on financial assets at fair value through profit or loss The net gain/(loss) on investments during the year comprise: Year ended 30 September 2016 Proceeds from sales of investments during the year Original cost of investments sold during the year Gains/(losses) realised on investments sold during the year Realised foreign exchange (losses)/gains Net realised gains / (losses) for the year High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 75,993,396 5,719,816 2,716,057 21,028,918 4,545,581 (69,383,745) (6,387,555) (2,438,312) (18,672,456) (4,648,473) 2,356,462 (102,892) — 2,162 6,609,651 (667,739) 277,745 — (65,630) (19,091) 6,609,651 (733,369) 258,654 2,356,462 (100,730) Net unrealised gains for the year 16,367,672 5,784,395 2,106,408 511,003 1,995,921 Net gains on investments 22,977,323 5,051,026 2,365,062 2,867,465 1,895,191 71,181,061 6,439,239 2,470,126 13,469,470 3,636,200 (66,871,865) (6,519,940) (2,278,339) (13,160,879) (3,484,407) Year ended 30 September 2015 Proceeds from sales of investments during the year Original cost of investments sold during the year Gains/(losses) realised on investments sold during the year Realised foreign exchange (losses)/gains Net realised gains/(losses) for the year 4,309,196 (80,701) — 4,309,196 5,170 (75,531) 191,787 (6,690) 308,591 — 185,097 308,591 Net unrealised losses for the year (5,406,086) (2,680,844) (46,750) (333,360) Net (losses)/gains on investments (1,096,890) (2,756,375) 138,347 (24,769) 61 151,793 (7,351) 144,442 (1,270,278) (1,125,836) Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 8. Other Income Company Euro High Income Fund European Fund £ € £ Year ended 30 September 2016 Bank interest 6,744 54 2 Unclaimed distributions over 10 years old 11,638 210 218 Total 18,382 264 220 7,509 — 292 — — — 7,509 — 292 Year ended 30 September 2015 Bank interest Unclaimed distributions over 10 years old Total 9. Operating Expenses Note Company Euro High Income Fund European Fund £ € £ Year ended 30 September 2016 Payable to the Manager: Annual management fees 10 3,694,866 135,897 194,630 Registrar fees 10 188,533 14,384 17,322 Custodian fees 11 258,185 15,408 18,726 Safe custody fees 11 74,795 5,452 5,031 183,579 22,167 10,647 Broker commission, dealing charges and stamp duty 67,527 1,848 9,449 Audit fee 16,769 600 2,200 4,484,254 195,756 258,005 1.25% 1.92% Payable to the Custodian: Other expenses: Administration expenses* Total expenses Total Expense Ratio** *The Administration expenses includes £5,000 of Director fees (see note 10). **The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year 62 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 8. Other Income High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ Year ended 30 September 2016 Bank interest 5,157 303 5 131 1,103 Unclaimed distributions over 10 years old 5,557 777 — 3,831 1,092 10,714 1,080 5 3,962 2,195 5,867 239 74 299 738 — — — — — 5,867 239 74 299 738 Total Year ended 30 September 2015 Bank interest Unclaimed distributions over 10 years old Total 9. Operating Expenses High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund Year ended 30 September 2016 £ £ £ £ £ 2,479,689 294,351 140,416 254,493 225,006 93,231 23,832 11,701 12,954 18,244 150,470 22,130 14,038 23,264 17,507 47,457 6,563 3,338 6,146 1,996 102,132 13,995 9,211 17,983 12,274 Broker commission, dealing charges and stamp duty 3,430 19,441 5,684 4,284 23,794 Audit fee 8,100 1,500 1,600 1,200 1,700 2,884,509 381,812 185,988 320,324 300,521 1.02% 1.85% 1.93% 1.09% 1.85% Payable to the Manager: Annual management fees Registrar fees Payable to the Custodian: Custodian fees Safe custody fees Other expenses: Administration expenses* Total expenses Total Expense Ratio** *The Administration expenses includes £5,000 of Director fees (see note 10). **The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year 63 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 Note Company Euro High Income Fund European Fund Annual management fees 10 3,981,268 136,549 205,987 Registrar fees 10 201,189 14,697 18,674 Custodian fees 11 274,879 15,444 19,666 Safe custody fees 11 75,852 4,484 6,053 168,043 17,245 10,111 Broker commission, dealing charges and stamp duty 76,246 7,936 14,810 Audit fee 26,231 1,800 2,200 4,803,708 198,155 277,501 1.22% 1.91% 9. Operating Expenses Year ended 30 September 2015 Payable to the Manager: Payable to the Custodian: Other expenses: Administration expenses* Total expenses Total Expense Ratio** *The Administration expenses includes £5,000 of Director fees (see note 10). **The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year 64 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 9. Operating Expenses High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund 2,730,239 335,210 143,476 214,612 250,752 101,466 25,711 11,909 13,198 19,361 164,764 24,847 14,344 20,619 19,217 48,721 7,979 2,768 5,647 1,368 97,640 14,436 9,399 9,505 14,198 3,366 24,454 5,737 3,580 18,429 16,000 1,500 1,500 2,200 1,500 3,162,196 434,137 189,133 269,361 324,825 1.01% 1.84% 1.92% 1.08% 1.83% Year ended 30 September 2015 Payable to the Manager: Annual management fees Registrar fees Payable to the Custodian: Custodian fees Safe custody fees Other expenses: Administration expenses* Broker commission, dealing charges and stamp duty Audit fee Total expenses Total Expense Ratio** *The Administration expenses includes £5,000 of Director fees (see note 10). **The Total Expense Ratio, represents the management fee and total operating expenses less the dealing and broker charges, expressed as an annualised percentage of the average daily net asset values during the year. 65 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 10. Related Party Transactions (a) Management and Registrar fees Parties are considered to be related if one party has the ability to control the other party or exercise influence over the party in making financial or operating decisions. The following are considered by the Directors of the Company to be related parties: The Manager of the Company, Lloyds Investment Fund Managers Limited, is part of the Lloyds Bank Group of companies. The Manager is entitled to a daily fee equal at the annual rate set out below by reference to the net assets of each Fund calculated daily and paid monthly by the Company. • The Manager, Lloyds Investment Fund Managers Limited. • The Investment Manager, Aberdeen Asset Management Limited. • Key management personnel. Euro High Income Fund 0.875% The fees received by the Manager are set out in Note 9. The Investment Manager is paid by the Manager. Details of amounts due to the Manager at the end of the year are shown in Note 6. European Fund 1.500% High Income Fund 0.875% All investor share transactions in the Company are facilitated through the Manager, the aggregate values of which are set out in the statement of changes in net assets attributable to holders of participating redeemable preference shares on pages 20 and 21. International Fund 1.500% North American Fund 1.500% Sterling Bond Fund 0.875% UK Fund 1.500% At the year end the Manager held Participating Shares in the Company as follows: The Directors and the Manager may agree a higher fee for any Fund subject to a maximum annual rate of 1.5% of the mid market value of net assets of the Fund. If such a higher fee is agreed, shareholders of the relevant Fund will be given at least three months written notice before it comes into effect. 30 September 30 September 2016 2015 Euro High Income Fund 8,001 8,015 European Fund 2,616 2,762 High Income Fund 6,991 7,022 International Fund 2,962 3,026 North American Fund 2,718 2,426 Sterling Bond Fund 4,990 4,981 Details of amounts due to the Manager at the year end are shown in Note 6. UK Fund 2,542 2,737 (b) Fees charged to capital 30,820 30,969 The Manager, in its capacity as Registrar, is entitled to a fee payable by the Company of £12.00 for each shareholding which appears on the Share Register on the last business day of each annual and half yearly accounting period. The Manager and the Company may agree a higher fee. In order to maximise the income available for distribution to shareholders, the Directors, in consultation with the Custodian, have agreed to charge the Management and Registrar fees for High Income Fund and Euro High Income Fund only, to the capital of these Funds. (c) Key management personnel The following Directors of the Company at 30 September 2016 are employees of Lloyds Banking Group: I.M.J. Hardy, B.C. James, B. Lysiak and R.D. Willcox. T.J. Herbert is a consultant to Mourant Ozannes, who are the Jersey legal advisers to the Company and the Manager. I.M.J.Hardy, B.C. James and R.D. Willcox are Directors of the Manager, Lloyds Investment Fund Managers Limited. (d) Directors’ Fees Directors who are employees of the Lloyds Banking Group do not receive Directors’ fees. All other Directors receive a fee of £5,000 per annum (2015: £5,000 per annum). 66 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 11. Custodian The fees received by the Custodian are set out in Note 9. Details of amounts due to the Custodian at the year end are shown in Note 6. The Custodian is entitled to an annual fee payable monthly by the Company, in respect of each Fund, at the rates set out in the table below by reference to the net asset value of each Fund calculated on a mid-market basis and subject to a minimum overall fee of £20,000 per annum for the Company as a whole. The Custodian is entitled to reimbursement by each Fund of its expenses in connection with its duties as Custodian and to make transaction charges to cover the cost of effecting settlement of stock and cash. Custodian Fee Rates Sterling Funds paid in £ Up to £10m % NAV of each Fund £10m to £25m % £25m Plus % European Fund 0.150 0.125 0.100 High Income Fund 0.100 0.075 0.050 International Fund 0.125 0.100 0.075 North American Fund 0.150 0.125 0.100 Sterling Bond Fund 0.100 0.075 0.050 UK Fund 0.125 0.100 0.075 Up to €15m % NAV of each Fund €15m to €40m % €40m to Plus % 0.100 0.075 0.050 Euro Fund paid in € Euro High Income Fund 12. Controlling Party In the opinion of the Directors, there is no ultimate controlling party of the Company as defined by International Accounting Standards (IAS) 24 Related Party Disclosures. 13. Equalisation The price of a participating share includes an equalisation payment calculated by dividing the net undistributed income of the Fund by the number of Shares in issue at the time when the prices are calculated. The payment of the first distribution after the issue of a Share includes an amount of equalisation calculated by averaging the amounts received by way of equalisation during the year to which the distribution relates. 67 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 14. Share Capital 30 September 2015 30 September 2016 Authorised share Capital: £ £ 1,000 Founders Shares of £1 1,000 1,000 7,500,000 7,500,000 7,501,000 7,501,000 1,000 1,000 750,000,000 Unclassified Shares of 1p Issued Share Capital: Founders Shares Nominal shares: Balance brought forward Creations Redemptions Balance carried forward 1,053,019 407,950 (127,809) 1,333,160 804,962 443,064 (195,007) 1,053,019 Participating Shares: Balance brought forward Creations Redemptions Balance carried forward 3,721,035 127,809 (407,950) 3,440,894 3,969,092 195,007 (443,064) 3,721,035 Fund £ Shares £ European High Income International North American Sterling Bond UK 1,640,323 312,132,511 4,386,747 531,848 13,892,095 2,126,616 16,403 3,121,326 43,867 5,318 138,921 21,266 1,706,523 332,935,361 4,837,797 581,498 20,339,895 2,308,503 17,065 3,329,354 48,378 5,815 203,399 23,085 Total Sterling Funds 334,710,140 3,347,101 362,709,577 3,627,096 Shares € Shares € 9,378,764 138,048 9,393,414 138,194 Shares £ Shares £ 3,440,894 372,102,991 3,721,035 Fund Euro High Income Total Company (Sterling equivalent) Shares 344,088,904 68 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 15. Share Premium 30 September 2016 30 September 2015 £ £ European High Income International North American Sterling Bond UK — 320,000,386 6,339,798 — 20,689,916 — — 338,066,552 8,257,516 — 30,957,177 — Total Sterling Funds 347,030,100 377,281,245 € € Fund Fund Euro High Income 16,022,883 16,052,573 Total Company (Sterling equivalent) 358,098,319 388,406,683 Balance brought forward Premium on creations Premium on redemptions Transfer from capital reserve £ 388,406,683 13,849,275 (46,788,461) 2,630,822 £ 408,869,960 23,448,722 (47,687,455) 3,775,456 Balance carried forward 358,098,319 388,406,683 69 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 16. Capital Reserves Note Company Euro High Income Fund European Fund £ € £ Net realised gains/(losses) on investments b/fwd (Restated) 36,936,407 Transfers to share premium b/fwd (3,775,455) Net realised gains/(losses) for the year — 15,287,723 (1,506,218) 8,256,194 (283,458) Net realised gains/(losses) on investments c/fwd 41,417,146 94,831 Net unrealised movement on investment b/fwd (Restated) 19,095,337 165,800 30,545,189 1,277,484 2,780,708 Net unrealised movement on investment c/fwd 49,640,526 1,443,284 1,870,927 Total realised/unrealised movement 91,057,672 1,538,115 15,739,642 Net unrealised movement in the year 7 378,289 7 Distributions unclaimed over 10 years old b/fwd — — 87,210 13,868,715 (909,781) — Net movement in the period 11,639 210 218 Distributions unclaimed over 10 years old c/fwd 11,639 210 218 Fees charged to Capital b/fwd* (Restated) Net movement in the year Fees charged to Capital c/fwd* Transfer to share premium in year 15 As at 30 September 2016 (40,547,178) (1,213,627) (808,539) (2,757,979) (152,129) (9,449) (43,305,157) (1,365,756) (817,988) (2,630,822) — (541,424) 45,133,332 172,569 14,380,448 * Details of the fees can be found in Note 10. Under the Reporting Fund Regime, broker commission, dealing charges and stamp duty are not allowable expenses. The Directors have therefore, transferred these expenses from the Net undistributed income reserve to a separate broker charges reserve. 70 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 16. Capital Reserves Net realised gains/(losses) on investments b/fwd Transfers to share premium b/fwd Net realised gains/(losses) for the year High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 9,956,294 (1,911,830) 20,135,866 (20,599,482) 13,833,920 — 6,609,651 — (733,369) (820,771) — 258,654 2,356,462 9,394,177 444,632 390,401 1,904,815 (1,448,466) (100,730) Net realised gains/(losses) on investments c/fwd (13,989,831) 13,100,551 Net unrealised movement on investment b/fwd 21,695,960 (2,688,959) Net unrealised movement in the year 16,367,672 5,784,395 2,106,408 511,003 1,995,921 Net unrealised movement on investment c/fwd 38,063,632 3,095,436 2,496,809 2,415,818 482,389 Total realised/unrealised movement 24,073,801 16,195,987 11,890,986 2,860,450 19,069,059 Distributions unclaimed over 10 years old b/fwd — — — — 18,586,670 (1,513,532) — Net movement in the period 5,557 777 — 3,831 1,092 Distributions unclaimed over 10 years old c/fwd 5,557 777 — 3,831 1,092 Fees charged to Capital b/fwd* Net movement in the year Fees charged to Capital c/fwd* Transfer to share premium in year As at 30 September 2016 (35,137,675) (802,596) (203,499) (4,572) (2,608,824) (2,576,350) (19,441) (5,684) (4,284) (23,794) (37,714,025) (822,037) (209,183) (8,856) (2,632,618) — — (836,894) — (1,252,503) (13,634,667) 15,374,727 71 10,844,909 2,855,425 15,185,030 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 17. Net assets attributable to holders of participating redeemable preference shares Notes Company Euro High Income Fund European Fund £ € £ Year ended 30 September 2016 Share capital 14 3,440,894 138,048 16,403 Share premium 15 358,098,319 16,022,883 — Capital reserves 16 45,133,332 172,569 14,380,448 290,999 30,772 5,272 (683,189) 46,762 Dilution levies Undistributed income* (25,777,791) Movement in currency translation As at 30 September 2016 2,841,075 — — 384,026,828 15,681,083 14,448,885 Year ended 30 September 2015 Share capital 14 3,721,035 138,194 17,065 Share premium 15 388,406,683 16,052,573 — Capital reserves 16 11,079,989 Dilution levies Undistributed income* Movement in currency translation As at 30 September 2015 248,665 (25,927,076) (669,538) 12,063,185 30,773 5,272 (643,162) (5,893) 1,378,769 — — 378,908,065 14,908,840 12,079,629 * The distributions detailed in Note 5 have been declared by the Directors using a dividend policy based on the accruals method of accounting for income on debt instruments, as opposed to the EIR method of accounting for investment income which is the basis used for recognition of income on debt instruments as explained in the accounting policies. Future distributions will continue to be made on the basis of the existing distribution policy. Equity Fund distributions were declared net of broker fees. Undistributed income under the accruals method As at 30 September 2016 amounts to £(940,656) (30 September 2015 amounts to£(1,068,829). 72 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 17. Net assets attributable to holders of participating redeemable preference shares High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 3,121,326 43,867 5,318 138,921 21,266 Share premium 320,000,386 6,339,798 — 20,689,916 — Capital reserves (13,634,667) 15,374,727 10,844,909 2,855,425 15,185,030 — 7,857 71,476 6,784 Year ended 30 September 2016 Share capital Dilution levies Undistributed income* Movement in currency translation 172,988 (22,548,115) (266,698) (775,024) (1,639,947) (3,724) — — — — — 287,111,918 21,491,694 10,083,060 22,115,791 15,209,356 3,329,354 48,378 5,815 203,399 23,085 Share premium 338,066,552 8,257,516 — 30,957,177 — Capital reserves (34,041,197) 10,342,365 9,322,425 — 7,857 As at 30 September 2016 Year ended 30 September 2015 Share capital Dilution levies Undistributed income* Movement in currency translation As at 30 September 2015 172,989 (22,648,536) (340,353) (732,023) (11,587) 33,086 (1,718,008) 14,565,044 6,784 (8,304) — — — — — 284,879,162 18,307,906 8,604,074 29,464,067 14,586,609 73 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 18. Taxation In accordance with International Accounting Standard (IAS) 12 Income Taxes, investment income is shown gross of withholding tax. These may include: • Investments including equity and non-equity Shares, fixed income securities and floating rate securities The withholding tax suffered is recorded on the taxation line as set out below: 30 September 30 September 2016 2015 Foreign tax on income £251,545 £257,228 for the year • Cash, liquid resources and short term debtors and creditors that arise directly from the investment activities • Hedging instruments, such as forward exchange contracts and traded options which a Fund may enter into, for the purpose of managing the risks arising from the Fund’s investment activities. The Company is liable to be charged at a tax rate of 0% under Schedule D under the Income Tax (Jersey) Law 1961, as amended (the ‘Income Tax Law’) in respect of: Market risk All securities investments present a risk of loss of capital. The Manager moderates this risk through a careful selection of investments within specified limits. The maximum risk resulting from investments is determined by the fair value of those investments. (i) the income or profits of any trade carried on by the Company in Jersey or elsewhere, (ii) any interest of money, whether yearly or otherwise, or other annual payment paid to the Company, whether such payment is made within or outside of Jersey, The overall market position and therefore the risk exposure for each Fund are governed by the Prospectus, the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 (as amended) and the investment objectives for each Fund. These positions are monitored on a daily basis by the Manager and are reviewed on a quarterly basis by the Board of Directors. (iii) d ividends and other distributions of a company regarded as resident in Jersey paid to the Company, (iv) i ncome arising to the Company from securities outside of Jersey and The investments are principally equities, fixed interest securities and bank deposits, dependent on each Fund’s investment policy. The value of these is not fixed (other than bank deposits) and may go down as well as up. This may be the result of a specific factor affecting the value of an individual stock or be caused by general market factors (such as interest rates, government policy or the health of the underlying economy) which could affect the entire portfolio of a Fund. (v) a ny other income of the Company that is not derived from the ownership or disposal of land in Jersey. It is not expected that the Company will be in receipt of income charged to tax under any Schedule under Income Tax Law other than Schedule D. As such the Company is no longer subject to the payment of tax in Jersey. Jersey resident individuals should note that any income received from the Fund(s) will be paid gross and will be taxable under Schedule D Case III (D3) of the Income Tax (Jersey) Law 1961, as amended. The year end portfolios of each Fund are detailed on pages 27 to 46. The Manager controls this risk on a Fund by Fund basis and monitors the movements in the equities, bonds and interest rates against the relevant equity and bond indices and market interest rates respectively. 19. Financial risk management Strategy in using financial instruments The Manager considers that a reasonably possible movement in the market risk components would be equivalent to a 5% movement in equity and bond indices and a 1% movement in market interest rates. The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), liquidity risk, counter-party risk, capital risk and certain other risks. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance. Each Fund is able to use derivative financial instruments to moderate certain risk exposures. There were no such exposures as at 30 September 2016. The table on the following page summarises, for each of the Funds, the impact of increases / (decreases) in the equity and bond indices, and market interest rates on the net asset value as at 30 September 2016. The analysis is based on the assumption that the equity and bond indices increase / (decrease) by 5%, and market interest rates increase / (decrease) by 1%, with all other variables held constant. The analysis also assumes that the movement in the portfolios of each Fund has perfect positive correlation with the equity and bond indices and market interest rates. Each Fund’s investment objectives and policy are stated on page 3. To achieve these objectives the Company’s assets and liabilities comprise financial instruments held in accordance with each Fund’s investment objectives and policy. 74 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Market risk (continued) End of Period/Year Fund Value (base currency) Equities 5% Movement in equity index Bonds 5% Movement in bond index Cash 1% Movement in interest rate 30.09.16 Euro High Income 15,681,083 — 762,428 3,260 30.09.15 Euro High Income 14,908,840 — 701,535 6,955 30.09.16 European 14,448,885 710,686 — 1,173 30.09.15 European 12,079,629 596,881 — 1,725 30.09.16 High Income 287,111,918 — 13,892,409 57,023 30.09.15 High Income 284,879,162 — 13,899,485 24,531 30.09.16 International 21,491,694 1,060,132 — 3,313 30.09.15 International 18,307,906 911,759 — 910 30.09.16 North American 10,083,060 498,817 — 1,117 30.09.15 North American 8,604,074 427,229 — 789 30.09.16 Sterling Bond 22,115,791 — 1,070,314 5,574 30.09.15 Sterling Bond 29,464,067 — 1,460,754 5,115 30.09.16 UK 15,209,356 759,673 — 2,969 30.09.15 UK 14,586,609 703,736 — 8,094 Interest rate risk Each Fund receives income from its various investments. For the Sterling Bond Fund, Euro High Income Fund and High Income Fund, the income is received from investments in bonds and loan stock. In accordance with the Funds policy, the Manager monitors the Fund’s overall interest rate sensitivity on a daily basis, and the Board of Directors reviews it on a quarterly basis. The interest bearing financial assets and liabilities held in the Funds expose them to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on their financial position and cash flows. The table overleaf summarises the effect of interest rate risks on each Fund. It includes the Fund’s assets and trading liabilities at fair values, categorised by the earlier of contractual re-pricing or maturity dates. Other than those financial instruments identified in the table, each Fund has no significant exposure to interest rate risks. The income received by each Fund is primarily fixed in nature and shown in the table on the next page. Income is derived from the securities held in the portfolio of each Fund which may be varied from time to time in accordance with its investment objectives and policy. 75 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Interest rate risk (continued) The interest rate profile of each Fund’s financial assets at 30 September 2016 was: Fund Euro High Income High Income Sterling Bond Fund Euro High Income High Income Sterling Bond Currency Euro Sterling Sterling Currency Euro Sterling Sterling Total 000s 15,681 287,112 22,116 Fixed rate interest securities 000s 13,372 228,730 17,733 Floating rate interest securities 000s 1,921 51,443 3,777 Interest Free Assets 000s 248 5,250 379 Weighted average period for which the rate is fixed (years) 16.49 23.69 21.30 Weighted average effective interest rate % Weighted average coupon rate % 3.95 6.22 5.57 Interest Free Liablities 000s 141 1,689 227 1.23 2.99 2.81 The interest rate profile of each Fund’s financial assets at 30 September 2015 was: Fund Euro High Income High Income Sterling Bond Fund Euro High Income High Income Sterling Bond Currency Euro Sterling Sterling Currency Euro Sterling Sterling Total 000s 14,909 284,879 29,464 Fixed rate interest securities 000s 12,280 212,826 23,466 Floating rate interest securities 000s 2,446 67,616 6,261 Weighted average effective interest rate % Weighted average coupon rate % 3.85 6.49 5.80 2.44 3.88 3.60 76 Interest Free Assets 000s 321 6,287 699 Interest Free Liablities 000s 138 1,850 962 Weighted average period for which the rate is fixed (years) 22.03 24.42 22.44 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Foreign currency risk With the exceptions of the Sterling Bond Fund and the UK Fund, each Fund may purchase securities denominated in a currency other than its base currency, and hence take a position in other currencies. The Euro High Income Fund is denominated in euro. All of the other Funds are denominated in sterling. A portion of the underlying financial assets of the Funds may be denominated in currencies other than the base currency with the effect that the statement of financial position and each Fund’s total return can be significantly affected by currency movements. An investment in a currency other than the shareholders’ own base currency will be subject to the movement of foreign exchange rates, which may cause additional favourable or unfavourable changes in value. In respect of foreign currency exposure, derivative instruments will only be utilised where a forward exchange or currency option is used for the purpose of reduction of foreign currency risk, in order to hedge this exposure back to the base currency of the Fund. The Company is not currently involved in currency hedging transactions. In accordance with the Company’s policy, the Manager monitors each Fund’s currency position on a daily basis, and the Board of Directors reviews it on a quarterly basis. As at 30 September 2016 the Funds had the following currency exposures: Fund Euro High Income European North American UK Currency Sterling Euro Danish Krone Norwegian Krona Swedish Krona Swiss Franc US Dollar Canadian Dollar Euro US Dollar Euro US Dollar Foreign Currency Assets £ 000’s Fund — 6,663 620 371 2,106 4,293 — 365 — 9,538 — — International Currency Euro Hong Kong Dollar Japanese Yen Korean Won Singapore Dollar South African Rand Swedish Krona Swiss Franc US Dollar Canadian Dollar Foreign Currency Assets £ 000’s 910 972 2,159 550 239 232 392 1,987 10,252 273 As at 30 September 2015 the Funds had the following currency exposures: Fund Euro High Income European North American UK Currency Sterling Euro Danish Krone Norwegian Krona Swedish Krona Swiss Franc US Dollar Canadian Dollar Euro US Dollar Euro US Dollar Foreign Currency Assets £ 000’s Fund — 5,445 575 314 1,981 3,629 2 323 — 8,248 9 3 International 77 Currency Euro Hong Kong Dollar Japanese Yen Korean Won Singapore Dollar South African Rand Swedish Krona Swiss Franc US Dollar Canadian Dollar Foreign Currency Assets £ 000’s 552 599 1,373 484 169 301 822 2,055 8,530 558 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Credit risk each morning at 10am and represented in the Fund’s daily share prices; the appropriate quoted market price for financial liabilities is the current asking price. When the Company holds derivatives with offsetting market risks, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies this bid or asking price to the net open position, as appropriate. If a significant movement in fair value occurs subsequent to the close of trading on the year end date, valuation techniques will be applied to determine the fair value. There has been no significant movements in the fair value of any holdings since the year end date. The Company takes on exposure to credit risk, which is the risk that a counter-party will be unable to pay amounts in full when due. Impairment provisions would be provided for losses that have been incurred by the statement of financial position date. As at 30 September 2016 no impairment provisions were required and there was no money overdue. The Company’s main credit risk exposure arises through investments in debt securities at the Fund level. If any of the Funds hold any interest bearing instruments, at least 90% of these instruments must have a credit rating of ‘Investment Grade’ as provided by Moodys Investor Services Limited, Standard and Poors or Fitch Ratings Limited. These instruments could include inter alia money market instruments, bonds, gilts, corporate bonds etc. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions at an arm’s length basis. In accordance with each Fund’s policy, the Manager monitors the Fund’s credit position on a daily basis, and the Board of Directors reviews it on a quarterly basis. IFRS 13 states the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Certain transactions that the Funds enter into expose them to the risk that the counter-party will not deliver the investment (purchase) or cash (sale) after the Fund has fulfilled its responsibilities. It is the policy of the Manager to buy and sell investments only through approved brokers, or directly with the Fund Manager. Credit risk exposure is balanced by the regulatory obligation of the counter parties. • Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). • Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). • Inputs for the asset or liability that are not based on observable The risk to Shareholders is that we will not have enough cash to cover redemptions. To counter this risk each Fund’s cash is managed to meet its liabilities. Where investments cannot be realised in time to meet any redemptions of Participating Shares, each Fund may borrow up to 10% of its value to ensure settlement of its liabilities. No such borrowings have arisen during the year. market data (that is, unobservable inputs) (level 3). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. Capital risk If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. Where the objective of the underlying Fund seeks to provide high or good levels of income, the investment policy which supports this may result in a gradual reduction in the capital value of the underlying Fund’s Shares, except where bond prices are generally rising. Capital risk management The net assets attributable to holders of participating redeemable preference shares are classified as financial liabilities and therefore, in the opinion of the Directors, the capital of the Company is only represented by the Founders Shares. Details of the Founders Shares are shown in notes 3 and 14. The determination of what constitutes ‘observable’, requires significant judgement by the Directors. The Directors consider observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. With the exception of the Sterling Bond Fund all other assets held by the Company at fair value through profit or loss are all quoted in active markets and therefore fall under level 1 as defined above. The fair value hierarchy table in respect to the Sterling Bond Fund is shown overleaf. Due to the nature and requirement of the Founders’ Shares the Directors have decided that no active capital risk management is required. Fair value estimation The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the year end date. The quoted market price used for financial assets held by the Company is the current mid price, these are updated 78 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Fair value estimation (continued) Sterling Bond Fund 30 September 2016 Financial assets at fair value through profit and loss Level 1 £ 21,406,272 Level 2 £ — Level 3 £ — Totals £ 21,406,272 Bloomberg daily pricing of Mitchells FRN 2032 commenced on 15 January 2016. 30 September 2015 Financial assets at fair value through profit and loss Level 1 £ Level 2 £ 29,089,449 125,625 Level 3 £ — Totals £ 29,215,074 The value in level 2 is representative of Mitchells FRN 2032. The valuation of this asset is based on a static price as at 8 July 2015 obtained from Bloomberg. 79 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Fair value estimation (continued) Liquidity risk Derivatives The Company is exposed to daily cash redemptions of Participating Shares which are redeemed on demand at the holder’s option. It therefore invests all of its assets in investments that are traded in an active market and can be readily disposed of. From time to time assets held could become illiquid due to in-active trading. At 30 September 2016 the percentage of the assets within the portfolios which are subject to special arrangements arising from their illiquid nature is 0% (2015: 0.43%). As such each Fund’s financial assets are considered to be readily realisable for cash. Derivatives will only be used where they accord with existing investment objectives and policy. They may not be used for the purpose of reducing risk independently of investment strategy in respect of the underlying physical assets or for merely speculative purposes. Derivatives will only be used for efficient portfolio management. Derivatives may not be used for the purpose of gearing or leveraging or for purposes of producing, enhancing or generating income. No derivative can be traded on an “Over The Counter” basis, and no uncovered positions are allowed. The Manager manages each Fund’s cash to meet its liabilities. Where investments cannot be realised in time to meet any redemptions of Participating Shares, each Fund may borrow up to 10% of its value to ensure settlement of its liabilities. No such borrowings have arisen during the year. The underlying Funds may hold the following derivatives: (a) Futures Futures are contractual obligations to buy or sell financial instruments on a future date at a specified price established in an organised market. The futures contracts are collateralised by cash or marketable securities. Changes in the futures contracts value are settled daily with the exchange. Interest rate futures are contractual obligations to receive or pay a net amount based on changes in interest rates at a future date at a specified price, established in an organised financial market. Futures are settled on a net basis. In accordance with the Company’s policy, the Manager monitors each Fund’s liquidity position on a daily basis, and the Board of Directors review it on a quarterly basis. The table on the following pages analyses the Company’s financial liabilities into relevant maturity groups based on the remaining period at the statement of financial position date to the contractual maturity date. (b) Options Cross fund liability An option is a contractual arrangement under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of securities or a financial instrument at a predetermined price. Shareholders should be aware that in the event of the Company being unable to meet liabilities attributable to any particular Fund or share class out of the assets attributable to such Fund or share class, the excess liabilities may have to be met out of the assets attributable to the other Funds or share classes. The seller receives a premium from the purchaser in consideration for the assumption of future securities prices. Where options are held by the underlying Funds, they are exchange-traded. The Funds are exposed to credit risk on purchased options only to the extent of their carrying amount, which is their fair value. Options are settled on a gross basis. The notional amounts of certain types of financial instrument provide a basis for comparison with instruments recognised on the statements of financial position, but they do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and do not therefore indicate the Company’s exposure to credit or market price risks. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are favourable or unfavourable, and thus the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. During the year the Company did not enter into any derivative contracts. 80 Lloyds Investment Funds Limited 81 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Liquidity risk (continued) Year ended 30 September 2016 Company Euro High Income Fund European Fund £ € £ 385,360,988 15,681,083 14,448,885 269,604 10,032 — 101,334 — 23,447 1,123,677 — — 497,199 105,980 — 432,187 19,967 27,968 Share Capital (less than 1 month) Cancellation payable (less than 1 month) Investment purchase payable (less than 1 month) Proposed dividend (less than 1 month) (1 month to 3 months) Accrued expenses (less than 1 month) (1 month to 3 months) 95,429 5,131 7,867 Total financial liabilities 387,880,418 15,822,193 14,508,167 Company Euro High Income Fund European Fund £ € £ 379,962,084 14,908,840 12,079,629 227,220 — — 722,885 — — 1,248,508 — — 547,056 108,025 — (less than 1 month) 460,288 20,504 27,643 (1 month to 3 months) 146,527 9,373 9,196 Total financial liabilities 383,314,568 15,046,742 12,116,468 Year ended 30 September 2015 Share Capital (less than 1 month) Cancellation payable (less than 1 month) Investment purchase payable (less than 1 month) Proposed dividend (less than 1 month) (1 month to 3 months) Accrued expenses 82 Lloyds Investment Funds Limited Notes to the Financial Statements (continued) For the year ended 30 September 2016 19. Financial risk management (continued) Liquidity risk (continued) Year ended 30 September 2016 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 287,111,918 21,491,694 10,083,060 22,115,791 15,209,356 238,139 17,310 1,877 — 3,599 — — 29,729 — 48,158 1,123,677 — — — — — — — 194,489 211,024 271,934 40,509 19,537 24,607 30,358 Share Capital (less than 1 month) Cancellation payable (less than 1 month) Investment purchase payable (less than 1 month) Proposed dividend (less than 1 month) (1 month to 3 months) Accrued expenses (less than 1 month) (1 month to 3 months) 54,967 7,604 5,676 8,208 6,668 Total financial liabilities 288,800,635 21,557,117 10,139,879 22,343,095 15,509,163 High Income Fund International Fund North American Fund Sterling Bond Fund UK Fund £ £ £ £ £ 284,879,162 18,307,906 8,604,074 29,464,067 14,586,609 219,845 — — 6,420 955 — — — 648,105 74,780 1,248,508 — — — — — — — 264,418 203,033 294,114 40,212 19,020 32,592 31,597 (1 month to 3 months) 87,897 12,653 8,295 10,447 11,133 Total financial liabilities 286,729,526 18,360,771 8,631,389 30,426,049 14,908,107 Year ended 30 September 2015 Share Capital (less than 1 month) Cancellation payable (less than 1 month) Investment purchase payable (less than 1 month) Proposed dividend (less than 1 month) (1 month to 3 months) Accrued expenses (less than 1 month) 20. Events After the Year End Date There has not arisen in the interval between the end of the financial year and the date of this report, any other item, transaction or event of a material nature likely in the opinion of the Directors, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company, in subsequent financial years. 83 Lloyds Investment Funds Limited Distribution Tables (unaudited) For the year ended 30 September 2016 Euro High Income Fund Gross income 1st Quarter Group 1 Group 2 2nd Quarter Group 1 Group 2 3rd Quarter Group 1 Group 2 4th Quarter Group 1 Group 2 1st Quarter Group 1 : Shares purchased prior to 1 October 2015 Group 2 : Shares purchased between 1 October 2015 and 31 December 2015 2nd Quarter Group 1 : Shares purchased prior to 1 January 2016 Group 2 : Shares purchased between 1 January 2016 and 31 March 2016 3rd Quarter Group 1 : Shares purchased prior to 1 April 2016 Group 2 : Shares purchased between 1 April 2016 and 30 June 2016 4th Quarter Group 1 : Shares purchased prior to 1 July 2016 Group 2 : Shares purchased between 1 July 2016 and 30 September 2016 84 Equalisation payable Distribution paid current year (cents) Distribution paid prior year (cents) 1.200 0.298 — 0.902 1.200 1.200 1.500 1.500 1.200 0.259 — 0.941 1.200 1.200 1.300 1.300 1.180 0.408 — 0.772 1.180 1.180 1.290 1.290 1.130 0.373 — 0.757 1.130 1.130 1.150 1.150 Lloyds Investment Funds Limited Distribution Tables (unaudited) (continued) For the year ended 30 September 2016 High Income Fund Gross income 31 October 2015 Group 1 Group 2 30 November 2015 Group 1 Group 2 31 December 2015 Group 1 Group 2 31 January 2016 Group 1 Group 2 28 February 2016 Group 1 Group 2 31 March 2016 Group 1 Group 2 30 April 2016 Group 1 Group 2 31 May 2016 Group 1 Group 2 30 June 2016 Group 1 Group 2 31 July 2016 Group 1 Group 2 31 August 2016 Group 1 Group 2 30 September 2016 Group 1 Group 2 31 October 2015 Group 1 : Shares purchased prior to 1 October 2015 Group 2 : Shares purchased between 1 October 2015 and 31 October 2015 30 November 2015 Group 1 : Shares purchased prior to 1 November 2015 Group 2 : Shares purchased between 1 November 2015 and 30 November 2015 31 December 2015 Group 1 : Shares purchased prior to 1 December 2015 Group 2 : Shares purchased between 1 December 2015 and 31 December 2015 31 January 2016 Group 1 : Shares purchased prior to 1 January 2016 Group 2 : Shares purchased between 1 January 2016 and 31 January 2016 29 February 2016 Group 1 : Shares purchased prior to 1 February 2016 Group 2 : Shares purchased between 1 February 2016 and 29 February 2016 31 March 2016 Group 1 : Shares purchased prior to 1 March 2016 Group 2 : Shares purchased between 1 March 2016 and 31 March 2016 85 Equalisation payable Distribution paid current year (pence) Distribution paid prior year (pence) 0.375 0.176 — 0.199 0.375 0.375 0.395 0.395 0.375 0.207 — 0.168 0.375 0.375 0.395 0.395 0.375 0.270 — 0.105 0.375 0.375 0.395 0.395 0.370 0.198 — 0.172 0.370 0.370 0.395 0.395 0.370 0.153 — 0.217 0.370 0..370 0.390 0..390 0.370 0.144 — 0.226 0.370 0.370 0.385 0.385 0.370 0.157 — 0.213 0.370 0.370 0.385 0.385 0.370 0.199 — 0.171 0.370 0.370 0.385 0.385 0.360 0.166 — 0.194 0.360 0.360 0.385 0.385 0.360 0.159 — 0.201 0.360 0.360 0.385 0.385 0.360 (0.003) — 0.363 0.360 0.360 0.375 0.375 0.360 0.083 — 0.277 0.360 0.360 0.375 0.375 Lloyds Investment Funds Limited Distribution Tables (unaudited) (continued) For the year ended 30 September 2016 High Income Fund (continued) 30 April 2016 Group 1: Shares purchased prior to 1 April 2016 Group 2: Shares purchased between 1 April 2016 and 30 April 2016 31 May 2016 Group 1: Shares purchased prior to 1 May 2016 Group 2: Shares purchased between 1 May 2016 and 31 May 2016 30 June 2016 Group 1: Shares purchased prior to 1 June 2016 Group 2: Shares purchased between 1 June 2016 and 30 June 2016 31 July 2016 Group 1: Shares purchased prior to 1 July 2016 Group 2: Shares purchased between 1 July 2016 and 31 July 2016 31 August 2016 Group 1: Shares purchased prior to 1 August 2016 Group 2: Shares purchased between 1 August 2016 and 31 August 2016 30 September 2016 Group 1: Shares purchased prior to 1 September 2016 Group 2: Shares purchased between 1 September 2016 and 30 September 2016 Sterling Bond Fund Gross income 1st Quarter Group 1 Group 2 2nd Quarter Group 1 Group 2 3rd Quarter Group 1 Group 2 4th Quarter Group 1 Group 2 1st Quarter Group 1 : Shares purchased prior to 1 October 2015 Group 2 : Shares purchased between 1 October 2015 and 31 December 2015 2nd Quarter Group 1 : Shares purchased prior to 1 January 2016 Group 2 : Shares purchased between 1 January 2016 and 31 March 2016 3rd Quarter Group 1 : Shares purchased prior to 1 April 2016 Group 2 : Shares purchased between 1 April 2016 and 30 June 2016 4th Quarter Group 1 : Shares purchased prior to 1 July 2016 Group 2 : Shares purchased between 1 July 2016 and 30 September 2016 86 Equalisation payable Distribution paid current year (cents) Distribution paid prior year (cents) 1.300 0.820 — 0.480 1.300 1.300 1.400 1.400 1.400 0.609 — 0.791 1.400 1.400 1.400 1.400 1.400 0.809 — 0.591 1.400 1.400 1.400 1.400 1.400 0.936 — 0.464 1.400 1.400 1.300 1.300 Lloyds Investment Funds Limited Distribution Tables (unaudited) (continued) For the year ended 30 September 2016 UK Fund Gross income 30 September 2016 Group 1 Group 2 9.923 5.348 30 September 2016 Group 1 : Shares purchased prior to 1 October 2015 Group 2 : Shares purchased between 1 October 2015 and 30 September 2016 87 Equalisation payable — 4.575 Distribution paid current year (cents) 9.923 9.923 Distribution paid prior year (cents) 8.795 8.795 Lloyds Investment Funds Limited Performance Record (unaudited) For the year ended 30 September 2016 Euro High Income Fund Shares in the Fund were first offered to the public in October 2006 at an offer price of 178.90 cents per share. Calendar Year / Period Highest Offer Price c Lowest Bid Price c Income per Share c Income per €1,000 Invested at Launch 02/10/06 € 2007 2008 2009 2010 2011 2012 2013 2014 2015 179.50 162.60 xd 156.20 163.70 156.60 167.40 169.10 170.30 173.50 162.20 132.00 120.90 153.20 xd 140.60 144.60 161.70 161.70 159.70 8.41 7.72 7.55 7.52 7.73 7.71 7.45 6.51 3.74 47.01 43.21 42.20 41.98 32.03 43.07 41.64 36.39 20.91 30.09.16 163.90 158.10 3.51 19.62 Income per Share p Income per £1,000 Invested at 31/12/05 £ 0.93 6.50 4.60 0.98 3.80 2.51 2.00 14.00 9.91 2.11 8.19 5.39 European Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Calendar Year / Period Highest Offer Price p Lowest Bid Price p 2007 2008 2009 2010 2011 2012 770.40 774.30 656.20 xd 667.80 738.70 682.50 635.40 445.00 xd 411.00 545.00 522.20 559.60 2013 826.90 682.80 — — 2014 2015 30.09.16 832.20 850.30 772.50 695.70 698.30 687.00 — — — — — — Income per Share p Income per £1,000 Invested at 31/12/05 £ High Income Fund Shares in the Fund were first offered to the public in June 1995 at an offer price of 100p per share. Calendar Year / Period 2007 2008 2009 2010 2011 2012 2013 2014 2015 30.09.16 Highest Offer Price p Lowest Bid Price p 97.26 91.61 xd 83.53 88.28 85.30 89.19 91.66 89.56 89.79 xd 76.09 xd 69.03 xd 82.15 79.70 81.20 85.23 85.55 5.79 5.70 5.60 5.40 3.89 5.25 4.82 4.78 55.48 54.62 53.61 51.75 37.23 50.26 46.19 45.81 92.53 86.21 85.86 83.74 3.46 3.29 33.16 33.05 88 Lloyds Investment Funds Limited Performance Record (unaudited) (continued) For the year ended 30 September 2016 International Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Calendar Year / Period 2007 2008 2009 2010 2011 2012 2013 2014 2015 30.09.16 Highest Offer Price p Lowest Bid Price p 346.40 347.90 312.20 341.30 354.70 348.40 439.80 455.10 305.00 228.40 xd 222.80 284.30 278.60 309.50 354.30 412.50 469.40 419.40 369.70 368.90 Income per Share p Income per £1,000 Invested at 31/12/05 £ 0.98 — 1.35 1.48 — — — 3.42 — 4.71 5.16 — — — — — — — — — Income per Share p Income per £1,000 Invested at 31/12/05 £ — — — 1.27 — — — — — — 1.55 — — — — — — — — — Income per Share p Income per £1,000 Invested at 31/12/05 £ 6.52 6.78 6.95 6.54 6.41 6.27 5.91 5.78 4.10 4.20 41.94 43.62 44.71 42.07 41.24 40.33 38.02 37.18 26.38 27.80 North American Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Calendar Year / Period Highest Offer Price p Lowest Bid Price p 2007 2008 2009 2010 2011 2012 2013 2014 2015 30.09.16 947.50 915.90 887.30 1,016.00 1,048.00 1,140.00 1,429.00 1,617.00 1,734.00 1,641.00 839.90 637.60 xd 609.80 837.20 823.00 1,001.00 1,153.00 1,356.00 1,418.00 1,432.00 Sterling Bond Fund Shares in the Fund were first offered to the public in July 2001 at an offer price of 148.6p per share. Calendar Year / Period 2007 2008 2009 2010 2011 2012 2013 2014 2015 30.09.16 Highest Offer Price p Lowest Bid Price p 148.20 142.70 xd 130.50 139.00 136.80 147.00 151.60 151.30 156.80 147.50 138.60 xd 116.80 xd 107.60 xd 127.40 128.60 131.20 140.10 140.20 144.70 142.20 89 Lloyds Investment Funds Limited Performance Record (unaudited) (continued) For the year ended 30 September 2016 UK Fund Shares in the Fund were first offered to the public in May 1990 at an offer price of 100p per share. Calendar Year / Period 2007 2008 2009 2010 2011 2012 2013 2014 2015 30.09.16 Highest Offer Price p Lowest Bid Price p 720.40 692.40 572.30 640.00 663.00 637.30 747.60 765.70 763.70 649.40 616.00 xd 391.60 368.90 522.70 527.20 564.00 642.10 643.90 629.20 569.90 90 Income per Share p Income per £1,000 Invested at 31/12/05 £ 6.75 11.80 8.50 6.87 4.68 5.75 11.57 10.46 8.80 9.92 14.67 25.65 18.48 14.93 10.17 12.50 25.15 22.74 19.12 16.11 Lloyds Investment Funds Limited Net Asset Value per Share (unaudited) For the year ended 30 September 2016 Net Asset Value of Fund Net Asset Value per Share No. of Shares in Issue Euro High Income Fund 30.09.13 30.09.14 30.09.15 30.09.16 €13,095,361 €14,281,016 €14,908,840 15,708,263 161.53c 167.81c 158.72c 167.49c 8,091,144 8,510,164 9,393,414 9,378,764 £16,438,247 £14,196,527 £12,079,629 £14,291,006 782.06p 745.74p 707.85p 871.23p 2,103,073 1,903,673 1,706,523 1,640,323 £324,498,273 £316,214,234 £284,879,162 £288,725,080 86.11p 87.27p 85.57p 92.50p 376,776,611 362,342,611 332,935,361 312,132,511 £25,560,787 £24,279,013 £18,307,906 £21,468,018 414.97p 434.30p 378.43p 489.38p 6,155,467 5,590,367 4,837,797 4,386,747 £8,547,802 £9,329,332 £8,604,074 £10,011,085 1,325.86p 1,476.17p 1,479.64p 1,882.32p £23,113,065 £22,429,857 £29,464,067 £22,265,948 141.58p 145.49p 144.86p 160.28p 16,324,793 15,417,043 20,339,895 13,892,095 £20,393,311 £17,194,744 £14,586,609 £15,087,064 702.49p 684.29p 631.86p 709.44p 2,903,103 2,512,803 2,308,503 2,126,616 European Fund 30.09.13 30.09.14 30.09.15 30.09.16 High Income Fund 30.09.13 30.09.14 30.09.15 30.09.16 International Fund 30.09.13 30.09.14 30.09.15 30.09.16 North American Fund 30.09.13 30.09.14 30.09.15 30.09.16 645,548 631,998 581,498 531,848 Sterling Bond Fund 30.09.13 30.09.14 30.09.15 30.09.16 UK Fund 30.09.13 30.09.14 30.09.15 30.09.16 91 Lloyds Investment Funds Limited Notice of Meeting Notice is hereby given that the 33rd Annual General Meeting of Lloyds Investment Funds Limited will be held at: 11-12 Esplanade, St. Helier, Jersey, on Tuesday, 7 March 2017 at 10.30 a.m. for the following purposes: NOTES: A Member entitled to attend and vote at this Meeting may appoint one or more Proxies to attend and, on a poll, vote instead of him. A Proxy need not be a Member of the Company. To be valid, completed proxy forms must be deposited at the Company’s principal place of business not less than 48 hours before the appointed time for holding the meeting, or any adjournment thereof. Agenda Ordinary Business 1. To appoint the Chairman of the meeting. In the case of joint holders the vote of the senior shall be accepted to the exclusion of the votes of the other joint holder(s). 2. To read the convening notice. 3. RESOLUTION 1. The quorum requirement is two members present in person or by proxy. If a quorum is not present, the meeting shall stand adjourned to Tuesday, 14 March 2017 at 10.30 a.m. at the same venue and at such adjourned meeting the shareholder’s present in person or by proxy shall be the quorum. To receive and if deemed appropriate, adopt the Annual Report and Audited Financial Statements of the Company for the year ended 30 September 2016. 4. RESOLUTION 2. By Order of the Board Lloyds Corporate Services (Jersey) Limited, Secretary, PO Box 160, 25 New Street, St. Helier, Jersey JE4 8RG, Channel Islands. To consider, and if deemed appropriate, re-elect Ross Davey Willcox as a Director of the Company. 5. RESOLUTION 3. To consider, and if deemed appropriate, re-elect Ian Mark Jeremie Hardy as a Director of the Company. 16 December 2016 6. RESOLUTION 4. To consider, and if deemed appropriate, re-elect Timothy Joseph Herbert as a Director of the Company. 7. RESOLUTION 5. To consider, and if deemed appropriate, re-elect Brian Charles James as a Director of the Company. 8. RESOLUTION 6. To consider, and if deemed appropriate, re-elect Bronislaw Lysiak as a Director of the Company. 9. RESOLUTION 7. To re-appoint PricewaterhouseCoopers CI LLP as Auditors of the Company for the ensuing year and to authorise the Directors to agree their remuneration. 10. RESOLUTION 8. To fix the remuneration of each of the Directors at a maximum of £5,000 per annum. 92 Lloyds Investment Funds Limited Form of Proxy BLOCK LETTERS PLEASE. FULL NAME(S). ................................................................................................... ADDRESS. ............................................................................................................. I/We being a Member(s) of the above named Company hereby appoint the Chairman of the Meeting ................................................ (see Note 1.) as my/our proxy to attend and vote for me/us on my/our behalf at the 33rd Annual General Meeting of the Company to be held on Tuesday, 7 March 2017 at 10.30 a.m. and at any adjournment thereof. I/We direct my/our proxy to vote on the resolutions as follows: FOR Ordinary Resolutions: AGAINST 1. To receive and if deemed appropriate, adopt the Annual Report and Audited Financial Statements of the Company for the year ended 30 September 2016. 2. To consider, and if deemed appropriate, re-elect Ross Davey Willcox as a Director of the Company. 3. To consider, and if deemed appropriate, re-elect Ian Mark Jeremie Hardy as a Director of the Company. 4. To consider, and if deemed appropriate, re-elect Timothy Joseph Herbert as a Director of the Company. 5. To consider, and if deemed appropriate, re-elect Brian Charles James as a Director of the Company. 6. To consider, and if deemed appropriate, re-elect Bronislaw Lysiak as a Director of the Company. 7. To re-appoint PricewaterhouseCoopers CI LLP as Auditors and to authorise the Directors to agree their remuneration. 8. To fix the remuneration of each of the Directors at a maximum of £5,000 per annum. NOTES: 1. If you wish to appoint another person to be your proxy instead of the Chairman of the Meeting, you should delete the words “the Chairman of the Meeting”, and write the name of your proxy in the space provided and initial the alteration. 2. Except as otherwise indicated by you, the proxy will vote, or abstain from voting, at the meeting or any adjournment thereof as the proxy thinks fit. 3. In the case of a corporation, the form of proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised in writing. 4. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members. 5. To be valid, forms of proxy must reach the principal place of business of the Company, P.O. Box 311, 11-12 Esplanade, St. Helier, Jersey JE4 8ZU, Channel Islands, not later than 48 hours before the time appointed for the meeting (or any adjourned meeting). Any power of attorney or other authority under which the form of proxy is signed must be sent with the form of proxy. Signature ........................................................................................... Date .......................................................................................... 93 DOCREF 0913 For more information please go to international.lloydsbank.com/internationalinvestments/funds or call us on 01534 845 555