northern trust investment funds plc

311 Pages·2017·4.37 MB·English

NORTHERN TRUST
INVESTMENT FUNDS PLC

(INVESTMENT COMPANY WITH VARIABLE CAPITAL)
ANNUAL REPORT AND FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2018 - AUDITED
NORTHERN TRUST INVESTMENT FUNDS PLC
(INVESTMENT COMPANY WITH VARIABLE CAPITAL)
(Company Number: 378116)
ANNUAL REPORT AND FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2018
NORTHERN TRUST INVESTMENT FUNDS PLC
TABLE OF CONTENTS
Report of the Directors 1
Report of the Depositary 5
The NT Europe (Ex-UK) Equity Index Fund
Investment Review (Unaudited) 6
Portfolio and Schedule of Investments (Unaudited) 8
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 17
The NT Euro Government Bond Index Fund
Investment Review (Unaudited) 18
Portfolio and Schedule of Investments (Unaudited) 20
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 27
The NT Index Linked Bond Index Fund
Investment Review (Unaudited) 29
Portfolio and Schedule of Investments (Unaudited) 31
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 32
The NT Japan Equity Index Fund
Investment Review (Unaudited) 33
Portfolio and Schedule of Investments (Unaudited) 35
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 43
The NT North America Equity Index Fund
Investment Review (Unaudited) 44
Portfolio and Schedule of Investments (Unaudited) 46
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 62
The NT Pacific (Ex-Japan) Equity Index Fund
Investment Review (Unaudited) 63
Portfolio and Schedule of Investments (Unaudited) 65
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 70
The NT UK Equity Index Fund
Investment Review (Unaudited) 71
Portfolio and Schedule of Investments (Unaudited) 73
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 77
The NT Emerging Markets Index Fund
Investment Review (Unaudited) 78
Portfolio and Schedule of Investments (Unaudited) 80
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 100
The NT Euro Government Inflation Linked Index Fund
Investment Review (Unaudited) 101
Portfolio and Schedule of Investments (Unaudited) 103
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 104
The NT All Country Asia (Ex-Japan) Custom ESG Equity Index Fund
Investment Review (Unaudited) 105
Portfolio and Schedule of Investments (Unaudited) 107
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 121
The NT High Quality Euro Government Bond Index Fund
Investment Review (Unaudited) 122
Portfolio and Schedule of Investments (Unaudited) 124
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 128
The NT Emerging Markets Custom Low Carbon Optimised Equity Index Fund
Investment Review (Unaudited) 130
Portfolio and Schedule of Investments (Unaudited) 132
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 150
The NT Emerging Markets Custom ESG Equity Index Fund
Investment Review (Unaudited) 151
Portfolio and Schedule of Investments (Unaudited) 153
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 171
NORTHERN TRUST INVESTMENT FUNDS PLC
TABLE OF CONTENTS (Continued)
The NT Emerging Markets Custom Equity Index Fund
Investment Review (Unaudited) 172
Portfolio and Schedule of Investments (Unaudited) 174
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 193
The NT US High Yield Fixed Income Fund
Investment Review (Unaudited) 194
Portfolio and Schedule of Investments (Unaudited) 196
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 202
The NT Emerging Markets Custom ESG Feeder Fund
Investment Review (Unaudited) 203
Portfolio and Schedule of Investments (Unaudited) 205
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 206
The NT Emerging Markets ESG Leaders Equity Index Fund
Investment Review (Unaudited) 207
Portfolio and Schedule of Investments (Unaudited) 209
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 220
The NT EM Local Currency Government Bond Index Fund
Investment Review (Unaudited) 221
Portfolio and Schedule of Investments (Unaudited) 223
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 232
The NT World Equity Index Feeder Fund
Investment Review (Unaudited) 233
Portfolio and Schedule of Investments 235
Portfolio Changes – Material Acquisitions and Disposals (Unaudited) 236
Independent Auditor’s Report 237
Statement of Comprehensive Income 240
Statement of Financial Position 246
Statement of Changes in Net Assets attributable to holders of Redeemable Participating Shares 249
Statement of Comprehensive Income (2017 Comparatives) 252
Statement of Financial Position (2017 Comparatives) 256
Statement of Changes in Net Assets attributable to holders of Redeemable Participating Shares (2017 Comparatives) 258
Notes Forming Part of the Financial Statements 260
Directors and Other Information (Unaudited) 329
UCITS V Remuneration Policy (Unaudited) 330
Securities Financing Transactions Regulation (Unaudited) 331
Fund of Fund Disclosures (Unaudited) 349
Additional Information for Switzerland 350
NORTHERN TRUST INVESTMENT FUNDS PLC
REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their Annual Report to the Shareholders together with the audited financial statements for the year
ended 31 March 2018.
Date of Incorporation
The Company was incorporated on 13 November 2003 and commenced business on 28 November 2003 when the first investments were made.
Principal Activities
Northern Trust Investment Funds Plc (the “Company”) is an open-ended investment company with variable capital organised under the
laws of Ireland. The Company is organised in the form of an umbrella fund. The Company is authorised by the Central Bank of Ireland
as an Undertaking for Collective Investment in Transferable Securities in accordance with the provisions of the European Communities
(Undertakings for Collective Investment in Transferable Securities) Regulations, 2011.
Results
The results for the year are stated in the Statement of Comprehensive Income on pages 240 to 245.
The net assets under management increased to €5,816,885,470 from €5,311,135,502 during the year ended 31 March 2018.
A detailed review of the principal activities and future developments of each Sub-Fund (“the Sub-Funds”) is included in the Investment
Manager’s Reviews on pages 6, 18, 29, 33, 44, 63, 71, 78, 101, 105, 122, 130, 151, 172, 194, 203, 207, 221 and 233.
Future Developments
The Company will continue to act as an investment vehicle as set out in its Prospectus.
Directors
The Directors, who held office during the year ended 31 March 2018 as stated below, are not required to retire by rotation under the
Memorandum and Articles of Association.
The Directors are:
Michael Boyce Irish
Gerry Brady Irish
Eleanor Fitzgerald (resigned 21 April 2017) Irish
John Fitzpatrick Irish
Hazel McNeilage (resigned 31 May 2018) British
James Patrick Wright (resigned 22 September 2017) British
Martha Fee (appointed 12 December 2017) Irish
Bimal Shah (appointed 14 December 2017) British
Directors' & Secretary’s Interests
None of the Directors or the Secretary held any interest in the shares of the Company at any time during the year or at 31 March 2018.
Cross Liability Risk
The Company has segregated liability between its Sub-Funds and accordingly any liability incurred on behalf of or attributable to any Sub-
Fund shall be discharged solely out of the assets of that Sub-Fund.
Dividends
Dividends declared during the year are stated in Note 18 on pages 326 and 327 of the Annual Report. A detailed dividend policy note is
included in Note 2 on page 263.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company are market risk (including price risk, interest rate risk and foreign currency risk),
liquidity risk, counterparty credit risk and operational risk which are outlined in Note 11.
Soft Commission Arrangements and Directed Brokerage Services
There were no soft commission arrangements, directed brokerage services or similar arrangements affecting the Company during the year
under review or in the prior year.
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NORTHERN TRUST INVESTMENT FUNDS PLC
REPORT OF THE DIRECTORS (Continued)
Political Donations
There were no political donations made by the Company during the year ended 31 March 2018 (31 March 2017: Nil).
Material Events During the Year and Principal Material Changes to Prospectus
Eleanor Fitzgerald resigned as a Director of the Company with effect from 21 April 2017.
James Patrick Wright resigned as a Director of the Company with effect from 22 September 2017.
Martha Fee was appointed as a Director of the Company with effect from 12 December 2017.
Bimal Shah was appointed as a Director of the Company with effect from 14 December 2017.
Effective 1 June 2017, The NT All Country Asia (Ex-Japan) Equity Index Fund became known as The NT All Country Asia (Ex-Japan) Custom
ESG Equity Index Fund.
New Supplements for the Company and its sub-funds were issued on 18 December 2017, 12 February 2018 and 16 February 2018.
The NT Emerging Markets ESG Leaders Equity Index Fund launched on 27 September 2017, The NT EM Local Currency Government Bond
Index Fund launched on 29 November 2017 and The NT World Equity Index Feeder Fund launched on 19 December 2017.
The NT Index Linked Bond Index Fund terminated on 22 February 2018.
There were no other material events during the year.
Subsequent Events
Hazel McNeilage resigned as a Director of the Company with effect from 31 May 2018.
Marie Dzanis was appointed as a Director of the Company with effect from 21 June 2018.
There have been no other events affecting the Company subsequent to the year end which, in the view of the Directors, could be described as
significant.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and Company’s financial statements, in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to
prepare the financial statements in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK
and Republic of Ireland (“FRS 102”) issued by the Financial Reporting Council and published by the Institute of Chartered Accountants in
Ireland.
The Company’s financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or
loss for that financial year and comply with the Companies Act 2014.
In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the
financial statements;
• assess the Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Company or to crease operations, or have no realistic
alternative but to do so.
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NORTHERN TRUST INVESTMENT FUNDS PLC
REPORT OF THE DIRECTORS (Continued)
Statement of Directors' Responsibilities (Continued)
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial
position, assets, liabilities and profit or loss of the Company and enable them to ensure that the financial statements comply with the Companies
Act 2014 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (“the UCITS
Regulations”) and the Central Bank (Supervision and Enforcement) Act 2013 (Sections 48(1)) (Undertakings for Collective Investment in
Transferable Securities) Regulations 2015 (the “Central Bank UCITS Regulations”). They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Company. In this regard they have entrusted the assets of the Company to a
Depositary for safe-keeping. They have general responsibility for taking such steps as are reasonably open to them to prevent and detect
fraud and other irregularities. The directors are also responsible for preparing a Directors’ Report that complies with the requirements of the
Companies Act 2014.
The Directors are responsible for the maintenance and integrity of the corporate and financial information relating to the Company included on
the Manager’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Directors' Compliance Statement
As required by Section 225(2) of the Companies Act 2014 (“the Act”), the Directors of the Company acknowledge the responsibility for
securing the Company’s compliance with the relevant obligations as defined by the Act.
The Directors confirm that:
(a) they have documented and approved a compliance policy statement which sets out the Company’s policies which, in our opinion, are
appropriate with respect to compliance by the Company with its relevant obligations set out in the Act;
(b) they have put in place appropriate arrangements or structures that, in our opinion, are designed to secure material compliance with the
Company's relevant obligations; and,
(c) during the course of the financial year ended 31 March 2018 to which this Directors’ Report relates, a review of the arrangements and
structures put in place to ensure material compliance with the Company’s relevant obligations has been completed.
Statement on Relevant Audit Information
As required by Section 330 of the Companies Act 2014, the Directors of the Company confirm that during the financial year ended 31 March
2018:
1) as far as the Directors are aware, there is no relevant audit information of which the Company’s statutory auditors are unaware; and,
2) the Directors have taken all necessary steps to make themselves aware of any relevant audit information and to establish that the Company’s
statutory auditors are aware of that information.
Accounting Records
The Directors are responsible for ensuring that adequate accounting records, as outlined in section 281 of the Companies Act 2014, are kept
by the Company. To achieve this, the Directors have appointed experienced administrators and service providers in order to ensure that those
requirements are complied with. Those accounting records are maintained at the Company’s registered office at:
Georges Court
54-62 Townsend Street
Dublin 2, Ireland
Independent Auditor
KPMG, Chartered Accountants, have indicated their willingness to continue in office in accordance with section 383(2) of the Companies Act
2014.
Connected Persons
The Central Bank UCITS Regulations require that any transaction carried out with a Company by a management company or depositary to
the Company, the delegates or sub-delegates of the management company or depositary, and any associated or group of such a management
company, depositary, delegate or sub-delegate (“connected persons”) must be carried out as if negotiated at arm’s length. Transactions must
be in the best interests of the Shareholders.
The Directors are satisfied that there are arrangements (evidenced by written procedures) in place, to ensure that the obligations set out
in Regulation 41(1) of the Central Bank UCITS Regulations are applied to all transactions with connected persons, and are satisfied that
transactions with connected persons entered into during the year complied with the obligations set out in Regulation 41(1) of the Central Bank
UCITS Regulations.
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NORTHERN TRUST INVESTMENT FUNDS PLC
REPORT OF THE DIRECTORS (Continued)
Audit Committee
The Company has established an Audit Committee, as required by Section 167(3) of the Companies Act 2014, with responsibility for:
1) the monitoring of the financial reporting process;
2) the monitoring of the effectiveness of the Company’s systems of internal control, internal audit and risk management;
3) the monitoring of the statutory audit of the Company’s statutory financial statements; and
4) the review and monitoring of the independence of the statutory auditors and in particular the provision of additional services to the Company.

Corporate Governance Code
A corporate governance code (“the IF Code”) applicable to Irish domiciled collective investment schemes was issued by Irish Funds in
December 2011. The Code provides a framework for the organisations and operation of Funds to ensure that Funds operate efficiently and in
the interest of shareholders. A copy of the IF Code can be found at the following web address:
www.irishfunds.ie/fs/publication/corporate-governance-code-for-collective-investement-schemes-and-management-companies.
The Board of Directors (the “Board”) have put in place a framework for corporate governance which it believes is suitable for an investment
company and which enables the Company to comply with the requirements of the IF Code, which sets out principles of good governance and
a code of best practice.
The Board considers that the Company has complied with the provisions contained in the IF Code throughout this accounting period.

On behalf of the Board

Gerry Brady John Fitzpatrick
Director Director
26 July 2018
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NORTHERN TRUST INVESTMENT FUNDS PLC
REPORT OF THE DEPOSITARY
Report of the Depositary to the Shareholders
We, Northern Trust Fiduciary Services (Ireland) Limited, appointed Depositary to Northern Trust Investment Funds plc (“the Company”)
provide this report solely in favour of the shareholders of the Company for the year ended 31 March 2018 (“Annual Accounting Period”).
This report is provided in accordance with the UCITS Regulations – European Communities (Undertakings for Collective Investment in
Transferable Securities) Regulations 2011 (SI No 352 of 2011), as amended, which implemented Directive 2009/65/EU into Irish Law (“the
Regulations”). We do not, in the provision of this report, accept nor assume responsibility for any other purpose or person to whom this report
is shown.
In accordance with our Depositary obligation as provided for under the Regulations, we have enquired into the conduct of the Company for
the Annual Accounting period and we hereby report thereon to the shareholders of the Company as follows;
We are of the opinion that the Company has been managed during the Annual Accounting period, in all material respects:
(i) in accordance with the limitations imposed on the investment and borrowing powers of the Company by the constitutional documents
and by the Regulations; and
(ii) otherwise in accordance with the provisions of the constitutional document and the Regulations.

_________________________________
For and on behalf of
Northern Trust Fiduciary Services (Ireland) Limited

26 July 2018
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NORTHERN TRUST INVESTMENT FUNDS PLC
THE NT EUROPE (EX-UK) EQUITY INDEX FUND
INVESTMENT REVIEW (UNAUDITED)
For the year ended 31 March 2018
Launch Date
12 October 2003
Fund Size
€330.04 million
Benchmark
MSCI Europe (ex-UK) Index
Performance Data
6 Months 1 Year 3 Years
Fund -4.05% 0.92% 1.23%
Benchmark -4.21% 0.46% 0.80%
Fund Review
Portfolio Summary
*Country breakdown may not sum to 100% as the fund has a small allocation to futures and cash for efficient portfolio management.
Performance Commentary
During the year ending March 2018, the fund returned 0.92% against a benchmark return of 0.46%. Since the fund inception date, in December
in 2003, the fund has posted an annualised return of 7.07% against an annualised benchmark return of 6.60%. The ex-post tracking error
reported for one year is 0.12% and for three years is 0.15%. During the year the fund experienced a net outflow of €164.51m.
MSCI announced the results of its quarterly review for the MSCI Standard Developed and Emerging Market Index Series for May 2017. For
MSCI Europe ex UK, there were 5 additions to and 4 deletions from the index. One-way index turnover was 0.96%.
MSCI announced the results of its quarterly review for the MSCI Standard Developed and Emerging Market Index Series for August 2017. For
MSCI Europe ex UK, there were 1 addition to and no deletions from the index. One-way index turnover was 0.26%.
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