Master cbf main fund

The CBF Church of England
Investment Fund
Annual Report and Accounts Year to 30 November 2007 Contents
1 Report of the Trustee
3 Report of the Investment Manager
5 Statement of Ethical Investment Policy
6 Report of the Independent Auditors
7 Net asset value, share price range, net distributions, share prices and total expense ratio
8 Statement of total return
8 Statement of change in shareholders’ net assets
9 Portfolio Statement
15 Balance Sheet
16 Summary of material portfolio changes
17 Notes to the accounts
25 Distribution table
26 Statement of Trustee and Manager responsibilities
Trustee and Manager
(inside back cover)
Description of The CBF Church of England Funds
(outside back cover)
Disability Discrimination Act 1995
Extracts from the Report and Accounts
are available in large print and audio formats.
The CBF Church of England Investment Fund
Report of the Trustee
for the year ended 30 November 2007
On behalf of the Trustee, I have pleasure in presenting Total return benchmark
the Annual Report and Accounts of The CBF Church of The total return performance benchmark for the Fund is England Investment Fund (the Fund), which includes a the WM Co Charity Fund Service Universe with gross separate report from CCLA Investment Management income reinvested and before management expenses.
Limited (the Manager) as Manager of the Fund. There is also an investment income performance targetof increasing the annual distribution of the Fund each Structure and management
year. A customised performance benchmark is used by The Fund is a Common Fund established by the Church CBFFT to monitor in more detail the investment Funds Investment Measure 1958 (as amended from performance of the Manager, taking account of the time to time), and the Trustee Act 2000.
specific asset allocation of the Fund.
CBF Funds Trustee Limited (CBFFT), a company Responsibilities of the Trustee
incorporated under the Companies Act, limited by CBFFT receives a report on the published accounts guarantee and not having share capital, is the Trustee from the Manager twice a year and is wholly and Operator of the Fund. CBFFT has an Audit responsible for the Fund. CBFFT monitors the Committee which meets twice each year to review the investment, property and cash management, financial statements and monitor the control environment administration, registration, secretarial and company secretarial services provided by the Manager underrespective Management Agreements. It meets CBFFT has delegated to the Manager, which is quarterly with the Manager to monitor investment authorised and regulated by the Financial Services strategy, dividend and interest rate policy, investment Authority (FSA), the investment management, diversification and risk and to review the Fund's administration, registrar, secretarial and company performance. In addition, CBFFT reviews the Annual secretarial functions of the Fund under Management Report and Accounts of the Fund prepared on its behalf Under the provisions of the Financial Services and CBFFT is responsible for appointing an Audit Markets Act 2000 (FSMA), CBFFT is not considered to Committee, the Auditor and the Safe Custody Agent. be operating the Fund by way of business. In It reviews annually the objectives of the Fund in consequence, it is not required to be authorised and regulated by the FSA and the trustee directors ofCBFFT are not required to be authorised by the FSA for RBS monitoring service
CBFFT has appointed The Royal Bank of Scotland plc tomonitor the Manager in respect of its activities related Investments in the Fund are not covered by the to the management and administration of the Fund and Financial Services Compensation Scheme. The Manager to provide formal six-monthly reviews of its findings to will pay fair compensation on eligible claims arising the Audit Committee. The Royal Bank of Scotland plc from its negligence or error in the management and Delegation of functions
Charitable status of the Fund
Following its regular meetings and consideration of the The Fund is entitled to charitable status by virtue of section reports and papers it has received, CBFFT is satisfied 24(9) of the Charities Act 1993. In the administration of the that Manager, to whom it has delegated the Fund, CBFFT is exempt from the jurisdiction of the administration and management of the Fund, has Charity Commission by virtue of section 5(1) of the Church complied with the terms of the Measure and with the Investment objective of the Fund
Ethical investment
The Fund aims to generate capital appreciation and CBFFT continues to support the Church of England’s rising income and a total return in excess of its Ethical Investment Advisory Group (EIAG), and is benchmark, whilst adopting an appropriate Ethical represented on the EIAG by Mrs Farrall, a trustee Investment Policy. It invests mainly in equities in the director of CBFFT. The EIAG co-ordinates and develops United Kingdom and overseas but may also invest in ethical investment policy on behalf of the Church’s three other assets. In this way, it aims to be suitable for up to central investment bodies, (the Church Commissioners 100% of a church trust's long-term capital.
and the Church of England Pensions Board being the The CBF Church of England Investment Fund
Report of the Trustee
for the year ended 30 November 2007
others) and communicates to the wider Church through In the year to 30 November 2007, the Manager voted at an Annual Report of its work. The EIAG makes 108 UK company meetings; 93% of votes were cast in considered recommendations on a range of ethical and support of management, 3% against, and 4% were cast responsible investment issues based upon papers in abstention. The majority of action was taken against prepared by the research secretariat. Responsibility company remuneration reports, long-term incentive rests with CBFFT for accepting and implementing any plans and for Board balance reasons. Further recommendations made by the EIAG. The EIAG’s information on corporate governance and the Fund, Annual Report (available in July) and other publications together with detailed voting statistics, is available from associated with the Church's ethical investment process are available from the Socially ResponsibleInvestment Unit at the Managers, to whom enquiries on Controls and risk management
this subject should be addressed. Publications are also CBFFT receives and considers regular reports from the available to download from the Manager’s website at Manager. Ad hoc reports and information are supplied During the year, CBFFT endorsed a revised Statement The Manager has established an internal control of Ethical Investment Policy recommended by the EIAG.
framework to provide reasonable, but not absolute, This has now become the policy for all of the Church’s assurance on the effectiveness of the internal controls national investment bodies, and is set out on page 5.
operated on behalf of its clients. The effectiveness ofthe internal controls is assessed by the directors and CBFFT also welcomed a major report published by the senior management of the Manager on a continuing EIAG entitled “Fair trade begins at home; Supermarkets and the effect on British farming livelihoods”. The report,based on individual and group interviews with 50 CBFFT receives internal audit reports on the controls of farmers, formed a submission to the Competition the Manager. During the year CBFFT, assisted by the Commission as evidence of its ongoing review into the Manager, reviewed the Fund's systems of internal groceries market. The report highlighted a number of control. At each of its meetings, the Audit Committee supply chain practices that are largely invisible to the receives and reviews, a formal risk management report consumer but which act against the interests of farmers from the Manager. This sets out the main risks facing the and contribute to putting many at the edge of economic Fund, the controls in place to mitigate those risks and viability. The report is available in hard copy and from the the assessment of each risk in terms of both gross and residual exposure after the application of mitigatingcontrols.
CBFFT is supported in its ethical investment prioritiesthrough the Manager having signatory status to the UNPrinciples of Responsible Investment (UNPRI) and viathe Carbon Disclosure Project (CDP) relating to climate change. The Manager is also a member of the Institutional Investors Group on Climate Change and a signatory to the Investor Statement on Transparency in the Extractives Sector. The Manager is a corporatemember of the Institute of Business Ethics.
Corporate governance
CBFFT receives and considers regular reports from the
Manager on proxy voting, which is undertaken across
the UK equities portfolio and other assets as required
of the Fund. CBFFT has adopted a policy of supporting
management, except where proposals are either not
considered to be in shareholder interests, or reflect
poor corporate governance practice.
The CBF Church of England Investment Fund
Report of the Investment Manager
for the year ended 30 November 2007
on the back of some stronger than expected economic data. At this time the consensus view was that the economic outlook was broadly benign and that theglobal interest rate tightening cycle would continue for • Managed in compliance with Church of In July however, there was a sudden and marked change in market sentiment as worries about theimpact of the US subprime mortgages debacle on the broader economy came to the fore. This made investors more risk averse and global equity marketscame under selling pressure. Mergers and acquisitionsactivity which had driven the equity market for much Performance
of the year all but dried up and government bonds Over the year under review the Fund returned 8.2% before management expenses, compared with anestimated return of 7.9% from the benchmark, WM Co The market turmoil continued into August, prompting Charity Fund Universe. This outperformance reflected a the US Central Bank, the Federal Reserve (the Fed), to strong performance from the Fund’s UK equities in spite make borrowing easier for distressed financial of a significant negative impact from the Fund’s ethical companies. This helped markets recover some of their policy (-1.3%). The Fund also benefited from its poise. On 18 September the Fed then took further overweight position in equities and underweight decisive action, cutting interest rates by 0.5% to 4.75%. The rate cut helped global equity markets torally while bond markets fell back a little as market The accumulation share price rose by 8.09% from 1,676.75p to 1,812.39p and the income share price concerned that inflationary pressures could increase rose by 4.8% from 1,190.26p to 1,247.03p. As at 30 November 2007, the dividend yield was 3.2% based onthe net asset value at that date and the distribution of Global equity markets continued to rally over October 40p over the previous twelve months. This compares but not without some more turbulence along the way.
with the FTSE All-Share Index dividend yield, on an The rally came despite some lacklustre corporate earnings results, from financial services companies inparticular, and a continued spike in the oil price. During Funds under management
November, equity markets fell back again in volatile The total value of the Fund rose by 2.3% to conditions but were rescued by an end of month rally £991,232,108 during the year to 30 November 2007.
built on the expectation of a further interest rate cut in This was attributable to a rise in equity and property the US. Bond markets again benefited from increasing markets during the year together with a net outflow of risk aversion as investors sought the comfort of Market review
Following several years in which investors have Over the year under review the equity, bond and UK benefited from very strong returns from investing in commercial property markets all made positive UK commercial property, growth in the market began progress, with equities producing the best returns for to slow moderately during the first half of 2007. This investors. However, volatility picked up sharply over was an expected and broadly welcome development, the second half of the period as financial conditions given that a continued rapid rise in property values became more difficult as a result of problems linked to would have been unsustainable. Nevertheless, with subprime mortgage lending in the US and the outlook solid support for commercial property from sound for the global economy became more clouded.
fundamentals, we continued to view the outlook as Over the first half of the period global equity markets relatively attractive. In the second half of the year made good progress against a background of however, conditions within commercial property continued expansion in the global economy, solid deteriorated markedly as a consequence of the corporate profits growth and high levels of merger and broader developments within global markets. The acquisitions activity. There were some concerns about increased level of uncertainty reduced investor slowing growth and higher inflation in the US but confidence and a more difficult lending environment markets nevertheless surged higher during the spring forced some speculative holders to sell investments.
The CBF Church of England Investment Fund
Report of the Investment Manager
for the year ended 30 November 2007
The combination of keen sellers and a shortage of buyers in our view led to a clear dislocation between There are clear signs that the global economy is beginning to slow moderately, led by a fall in domesticactivity in several major economies including the US, Strategy
UK and Japan. However, activity in emerging The Fund remained overweight in equities and property economies such as China and India remains very robust and underweight in bonds and cash over the period. We and central banks in the developed economies have felt reduced the Fund’s exposure to UK equities and added able to take action to shore up growth, despite worries to the weighting in US equities, which now offer better value than in recent years following a prolonged periodof relative underperformance. We also made purchases Markets dislike uncertainty, and with questions still in a broad range of overseas markets towards the end remaining about the extent of subprime related of the year in preparation for the launch of The CBF problems, volatility is likely to remain at elevated levels Church of England Global Equity Income Fund. The Fund for some time to come. Equity markets are not still has a bias towards UK equities relative to the WM expensive however in terms of historic valuations and should be supported by companies’ earnings and cashflows. As the global economy slows, we expect thatthere will be an increasing worldwide focus on thequality of companies and their ability to pay and sustain The CBF Church of England Investment Fund
Annualised total capital and income return
For now bonds are buoyed by the prospect of lower interest rates but there are risks that inflationary pressures will rise, undermining returns.
Performance against market indices (before expenses)
The CBF Church of England
We expect that commercial property prices will fall back Investment Fund
in the face of low transaction volumes, but that overtime the prospect of attractive rental growth will support prices, with superior performance associatedwith higher yields and yield growth. * Net asset value to net asset value plus income Risk warning
be subject to political and economic change. The Fund may also The Fund’s shares and the income from the shares can fall as well invest in collective investment schemes and other assets which as rise and an investor may not get back the amount originally may, on occasions, be illiquid such as The CBF Church of England invested. Past performance is no guarantee of future returns. Property Fund which invests directly in property and property The Fund’s shares are intended for long-term investment only related assets which are valued by an independent valuer and as and are not suitable for money liable to be needed in the near such are open to substantial subjectivity. The performance of this future. The shares are realisable on each weekly dealing day.
Fund may be adversely affected by a downturn in the propertymarket which could impact on the capital and or income value of The Fund may invest in emerging market countries which could The CBF Church of England Investment Fund
Statement of Ethical Investment Policy
to the Shareholders of The CBF Church of England Investment Fund
Ethical investment considerations form an integral part Companies are monitored according to this Statement of the Church of England’s witness and mission.
of Ethical Investment Policy and, where appropriate, by Through its Ethical Investment Policy, the Church of developing an ongoing dialogue and engagement with England seeks a constructive engagement with the them. The national Church investment bodies believe corporate world in order that responsible business this to be the best means of exercising responsible practices and high standards of corporate behaviour stewardship and shareholder responsibility and of are encouraged and supported. The Church of England communicating Church concerns. Disinvestment, if is also mindful of the need to avoid undermining the recommended, remains the preserve of each national credibility, effectiveness and unity of the Church’s Church investment body, and is only considered if a witness by profiting from, or providing capital to, company’s activities fall outside of the Church’s Ethical activities that are materially inconsistent with Christian Investment Policy or if, after sustained dialogue, it does not respond positively to the Church’s concerns.
The Ethical Investment Advisory Group (EIAG) of the Companies that promote pornography or supply Church of England carries out ethical investment armaments are avoided. Separate media and defence research on behalf of the three national investment investment policies have been published outlining the bodies of the Church of England, the Church criteria employed to determine whether companies Commissioners for England, The CBF Church of breach the Church’s policy in these areas. England Funds, and the Church of England PensionsBoard (the national Church investment bodies). It Investment is also avoided in any company a major develops policy recommendations, which once agreed part of whose business activity or focus is in the by the national Church investment bodies, are then following areas, where this is usually defined as communicated to the wider Church. The General Synod, the Archbishops’ Council and the Mission andPublic Affairs Council are also represented on the EIAG to provide counsel and wider expertise. The legal authority for investment decisions rests solely with the alcoholic beverages (manufacture and licensed national Church investment bodies, as well as individual parishes, cathedrals, dioceses and other non-offensive military equipment (see defence associated Church of England organisations.
weekly-collected home credit (doorstep lending) The national Church investment bodies are supportive of companies that seek to develop their businessessuccessfully and sustainably in the interests of The national Church investment bodies also reserve shareholders. The use of positive ethical criteria in the right to avoid investment in companies whose assessing companies is firmly incorporated within the management practices they judge to be unacceptable.
Ethical Investment Policy through a process of Given the complexity of many companies, some will constructive engagement with business. Criteria have have business interests in areas the national Church been identified across five broad areas as: investment bodies seek to avoid, and these are closelymonitored to ensure they meet the Church’s broader criteria. Advice may be offered in respect of all classes of asset under management including domestic and conscientiousness with regard to human rights international securities, land and real estate.
sensitivity towards the communities in which business operates The Church of England Ethical Investment Advisory Group General Synod, the Archbishops’ Council, and the Mission & was established in 1994 and includes representation from the Church Commissioners for England, The CBF Church of Website http://www.cofe.anglican.org/info/ethical England Funds, the Church of England Pensions Board, the The CBF Church of England Investment Fund
Report of the Independent Auditors
to the Shareholders of The CBF Church of England Investment Fund
We have audited the financial statements of The CBF We read the other information contained in the annual Church of England Investment Fund for the year ended report and consider whether it is consistent with the 30 November 2007 which comprise the statement of audited financial statements. This other information total return, the statement of change in shareholders' comprises only of the Report of the Investment Manager net assets, the portfolio statement, the balance sheet, and the other items set out on the contents page. We the summary of material portfolio changes, the related consider the implications for our report if we become notes and the distribution table. These financial aware of any apparent misstatements or material statements have been prepared under the accounting inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
This report is made solely to the shareholders of the Basis of audit opinion
Fund, as a body, in accordance with the Church Funds We conducted our audit in accordance with International Investment Measure 1958, as amended. Our audit work Standards on Auditing (United Kingdom and Ireland)has been undertaken so that we might state to the issued by the Auditing Practices Board. An audit includes shareholders of the Fund those matters we are required examination, on a test basis, of evidence relevant toto state to them in an auditor’s report and for no other amounts and disclosures in the financial statements. It purpose. To the fullest extent permitted by law, we do also includes an assessment of the significant estimates not accept or assume responsibility to anyone other and judgements made by the Trustee in the preparation of than the Fund and the shareholders of the Fund, as a the financial statements, and of whether the accounting body, for our audit work, for this report, or for the policies are appropriate to the Fund's circumstances, consistently applied and adequately disclosed.
Respective responsibilities of the Trustee
We planned and performed our audit so as to obtain all and Auditors
the information and explanations which we considered The Trustee is responsible for the preparation of the necessary in order to provide us with sufficient evidence annual report and the financial statements in to give reasonable assurance that the accounts are free accordance with Accounting Standards (United from material misstatement, whether caused by fraud or Kingdom generally accepted accounting practice) as set other irregularity or error. In forming our opinion we also out in the Statement of Trustee and Manager evaluated the overall adequacy of the presentation of responsibilities in relation to the financial statements.
information in the financial statements. Our responsibility is to audit the financial statements inaccordance with United Kingdom legal and regulatory requirements and International Standards on Auditing • give a true and fair view in accordance with UnitedKingdom generally accepted accounting practice of the We report to you our opinion as to whether the financial financial position of the Fund at 30 November 2007, the statements give a true and fair view and are properly net income and the net gains and losses on the prepared in accordance with the United Kingdom scheme property of the Fund for the year then ended; generally accepted accounting practice, Church Funds Investment Measure 1958, as amended, and the Trustee • have been properly prepared in accordance with Act 2000. We also report to you if, in our opinion, the United Kingdom generally accepted accounting Report of the Investment Manager is not consistent with practice, the Church Funds Investment Measure 1958, the financial statements, if the Manager has not kept as amended, and the Trustee Act 2000.
proper accounting records for the Fund, if the financialstatements are not in agreement with those accounting records, or if we have not received all the information and explanations we require for our audit.
The maintenance and integrity of the CCLA Investment occurred to the financial statements since they were initially Management Limited web site is the responsibility of the directors; the work carried out by the auditors of The CBFChurch of England Investment Fund does not involve Legislation in the United Kingdom governing the preparation consideration of these matters and, accordingly, the auditors and dissemination of financial statements may differ from accept no responsibility for any changes that may have The CBF Church of England Investment Fund
Net Asset Value, Share Price Range, Net Distributions,
Share Prices and Total Expense Ratio
Net asset value
* The net asset value is calculated on a mid-market value basis compared to the Balance Sheet where theinvestments are valued on a bid-market value basis in accordance with the December 2005 IMA SORP.
Share price range
Net distributions
Share prices at 30 November 2007
The share prices are published in The Daily Telegraph, Financial Times and The Church Times. The offer and bid prices are calculated on the net asset value plus or minus a 0.75% surcharge or deduction.
Total expense ratio
The total expense ratio is the ratio of the Fund’s total operating costs to its average net assets calculated over the year.
The CBF Church of England Investment Fund
Statement of Total Return
for the year ended 30 November 2007
30.11.2007
£’000
£’000
Total return before distributions
(32,103)
Change in net assets attributable
to shareholders
Statement of Change in Shareholders’ Net Assets
for the year ended 30 November 2007
30.11.2007
£’000
£’000
Net assets at start of the year
Movement due to creations and cancellations
of shares
Amounts receivable on creation of shares
Less: amounts payable on cancellation of shares (50,808)
(22,986)
Change in net assets attributableto shareholders (see above) Retained distribution on accumulation shares Net assets at end of the year
The notes on pages 17 to 24 form part of these accounts.
The CBF Church of England Investment Fund
Portfolio Statement
at 30 November 2007
UNITED KINGDOM 58.26% (30.11.06, 64.56%)
Pharmaceuticals & Biotechnology 2.18%
Oil & Gas 7.53%
0.19 Food & Drug Retailers 1.98%
0.01 Financials 0.81%
Chemicals 0.18%
Mining 4.72%
1.18 General Financial 0.62%
Basic Materials 0.05%
General Retailers 0.48%
Electronic & Electrical Equipment 0.16%
Media 0.11%
Support Services 1.31%
Travel & Leisure 1.17%
0.08 Fixed Line Telecommunications 0.98%
Industrials 0.53%
Balfour Beatty
0.22 Mobile Telecomunications 3.27%
Electricity 0.73%
Food Producers & Processors 2.18%
0.41 Gas Water & Multiutilities 2.00%
Consumer Services 0.80%
0.10 Banks 7.61%
Household Goods 1.63%
Life Assurance 2.13%
Health 0.35%
The CBF Church of England Investment Fund
Portfolio Statement
at 30 November 2007
Real Estate 0.59%
Investment Companies 0.25%
Other UK Equities 13.91%
EUROPE 7.44% (30.11.2006, 6.27%)
Belgium 0.17%
Denmark 0.05%
Germany 1.04%
Finland 0.61%
France 2.39%
Ireland 0.14%
Italy 1.16%
* The CBF Church of England UK Equity Fund is managed by CCLA Investment Management Limited.
The CBF Church of England Investment Fund
Portfolio Statement
at 30 November 2007
Greece 0.06%
Netherlands 0.42%
Norway 0.08%
Spain 0.41%
Sweden 0.19%
Switzerland 0.72%
UNITED STATES OF AMERICA 7.93%
(30.11.06, 5.51%)
The CBF Church of England Investment Fund
Portfolio Statement
at 30 November 2007
JAPAN 2.43% (30.11.06, 3.01%)
The CBF Church of England Investment Fund
Portfolio Statement
at 30 November 2007
PACIFIC BASIN 3.93% (30.11.06, 2.96%)
Australia 1.11%
Thailand 0.04%
Malaysia 0.12%
Indonesia 0.11%
New Zeland 0.07%
Telecom Corp of NZ
Hong Kong 0.99%
ASM Pacific Technology
OTHER OVERSEAS 1.89% (30.11.06, 0.56%)
Companlita Energetic de Mines Gerais 14,162 Singapore 0.40%
DBS
UNQUOTED STOCKS 0.88% (30.11.06, 0.83%)
AGRICULTURAL PROPERTIES 0.18%
(30.11.06, 0.14%)
South Korea 0.55%
PROPERTY UNIT TRUSTS 6.54% (30.11.06, 6.95%)
FIXED INTEREST STOCKS 6.25% (30.11.06, 6.56%)
United Kingdom 4.65%
Taiwan 0.54%
Advanced Semiconductor Engineering 96,675 * The CBF Church of England Property Fund is managed by CCLA Investment Management Limited.
The CBF Church of England Investment Fund
Portfolio Statement
at 30 November 2007
Overseas Fixed Interest 1.60%
Germany 1.08%
Bund 4.5% 2009
Japan 0.08%
JGB 0.8% 2010
USA 0.44%
US Treasury 5.625% Bond 2008
PORTFOLIO OF INVESTMENTS
NET OTHER ASSETS
NET ASSETS
The CBF Church of England Investment Fund
Balance Sheet
at 30 November 2007
30.11.2007
£’000
£’000
ASSETS
Portfolio of investments
Total assets
1,001,585
LIABILITIES
Total liabilities
Net assets attributable to shareholders
The notes on pages 17 to 24 form part of these accounts.
The CBF Church of England Investment Fund
Summary of Material Portfolio Changes
for the year ended 30 November 2007
Total purchases for the year (Note 16)
Major purchases:
Treasury 5.75% Stock 2009
Total sales for the year (Note 16)
Major sales:
GlaxoSmithKline
The above represents the 20 largest purchases and sales aggregated per investmentduring the year.
The CBF Church of England Investment Fund
Notes to the Accounts
1. Accounting policies
The accounts have been prepared under the historical cost basis, as modified by the revaluation ofinvestments, and in accordance with accounting policies set out below and the Statement ofRecommended Practice for Authorised Funds issued by the Investment Management Association (IMA) inDecember 2005.
Dividends on ordinary stocks, including special dividends where appropriate, are credited to income on thedates when the investments are first quoted ex-dividend. Interest on Government stocks, debentures,convertible loan stocks, other fixed interest stocks, bank and The CBF Church of England Deposit Fundbalances, and direct property income is accrued on a daily basis. Underwriting commission is recognisedwhen an issue takes place and is taken to income, except where the Fund is required to take up some or allof the shares underwritten, in which case a portion of the commission is taken to capital.
Whether a special dividend, share buy-back or additional share issue is income or capital by nature dependsupon the facts of each individual case. It is likely that where the receipt of a special dividend results in asignificant reduction in the capital value of the holding, then the special dividend is regarded as capital bynature. Otherwise, the special dividends are regarded as income.
The Manager’s periodic charge, paid to the Manager, is charged to the capital of the Fund. During the yearthe fee was based on a fixed percentage of the value of the Fund, 0.30% p.a. plus VAT. During the year theFund received a management fee rebate credited to the income expenses of the Fund for its holding in TheCBF Church of England Property Fund and for the Fund’s deposits in The CBF Church of England DepositFund where, in both Funds, management fees were charged to income. The Fund also received amanagement fee rebate credited to the capital of the Fund for its holding in The CBF Church of England UKEquity Fund where management fees were charged to capital. Each month, the value at the end of theprevious month is taken to calculate the fee due. This fee covers the provision of investment services andother expenses incurred by the Manager. Audit, legal, safe custody fees, transaction charges, insurancefees, direct property expenses and monitoring fees are charged separately to the income of the Fund beforedistribution. For the purposes of the distribution, the Manager’s periodic charge and the Trustee’sadministration fee is charged to the capital of the Fund.
Distributions are paid quarterly. The Fund utilises an income reserve to even out fluctuations in incomewhich arise over the years (see Note 11).
Listed investments are valued at bid-market values at the close of business on the last business day of theaccounting period. Any unlisted or de-listed, unquoted or suspended investments are stated at cost orvaluation by the Manager and reviewed by the Trustee.
Suspended securities are valued by the Manager having regard to the last dealing price on the date ofsuspension and subsequent available information. Suspended securities are written off after they have beencarried at nil value for two years.
Agricultural property is valued at the Fund’s half-year and year end by the Manager on the basis of openmarket value as advised by independent chartered surveyors.
Assets and liabilities in foreign currencies are expressed in sterling at rates of exchange ruling on theaccounting date. Transactions in foreign currencies are translated into sterling at the exchange rates rulingon the transaction dates.
The CBF Church of England Investment Fund
Notes to the Accounts
2. Net gains on investments
30.11.2007
£’000
The gains on investments during the year comprise:Non-derivative securities 3. Other losses
30.11.2007
£’000
4. Income
30.11.2007
£’000
The CBF Church of England Property Fund dividends The CBF Church of England UK Equity Fund dividends Interest on The CBF Church of England Deposit Fund 5. Expenses
30.11.2007
£’000
Payable to the Manager, associates of the Managerand agents of either of them:Manager’s periodic charge – see Note 1(c) Manager’s periodic charge rebate – see Note 1(c)* Payable to the Trustee, associates of the Trusteeand agents of either of them:Safe custody fees and transaction charges The above expenses include irrecoverable VAT where applicable.
* This amount represents the rebate of management fees credited to The Fund’s income for its holding in The CBF Church of England Property Fund and for the Fund’s deposits in The CBF Church of England Deposit Fundwhere, in both Funds, management fees were charged to income. This amount also includes a rebate which is credited to the capital of the Fund for its holding in The CBF Church of England UK Equity Fund, where management fees were charged to capital.
The CBF Church of England Investment Fund
Notes to the Accounts
6. Taxation
The Fund is exempt from UK income and capital gains tax due to its charitable status pursuant to Sections 505and 506 of the Income and Corporation Taxes Act 1988. Distributions are paid and reinvested income creditedgross to shareholders on the basis that all recoverable UK taxation has been reclaimed. Overseas withholdingtax is deducted in full from overseas income on receipt. Recoverable withholding tax is credited to income onreceipt.
30.11.2007
£’000
7. Finance costs
DistributionsDistributions take account of income received on the creation of shares and income deducted on thecancellation of shares, and comprise: 30.11.2007
£’000
Add: income deducted on cancellation of shares Deduct: income received on creation of shares Transfer to income reserve – see Note 11 Manager’s periodic charge – see Note 1(c) Trustee’s administration fee – see Note 1(c) Details of the distribution per share are set out in the distribution table on page 25.
8. Debtors
30.11.2007
£’000
9. Cash and bank balances
30.11.2007
£’000
Cash in The CBF Church of England Deposit Fund The CBF Church of England Investment Fund
Notes to the Accounts
10. Creditors
30.11.2007
£’000
11. Income reserve
The income reserve, accumulated out of income, is used to smooth fluctuations in the income received in the Fund. The income reserve is included in the total value of the Fund and is attributable to income shareholders.
30.11.2007
£’000
12. Financial instruments
Fair valueSecurities held by the Fund are valued at bid-market value (see Note 1(e)). Bid-market value is considered to be a fair representation of the amount repayable to shareholders should they wish to sell their shares. Other financial assets and liabilities of the Fund are included in the balance sheet at their fair value.
The main risks arising from the Fund’s financial instruments and the Manager’s policies for managing these risks are summarised below. These policies have been applied throughout the year and the comparative year.
This is an actively-managed Fund, which invests mainly in UK and overseas equities and fixed interest investments. Investors are thus exposed to market price risk, which can be defined as the uncertainty aboutfuture price movements of the financial instruments the Fund is invested in. Market price risk arises mainlyfrom economic factors, including investor confidence, and is not limited to interest rate and currencymovements. This exposure to market price risk may result in substantial fluctuations in the share price fromtime to time, although there will generally be a close correlation in the movement of the share price to themarkets the Fund is invested in. The Fund seeks to minimise the risks by holding a diversified portfolio ofinvestments in line with the Fund’s investment objectives. Risk is monitored at both the asset allocation andstock selection levels by Directors of the Manager on a regular basis.
The Fund is exposed to fluctuations in foreign currencies as some of its assets and income are denominated in currencies other than sterling, the base currency of the Fund. However, it does not seek to avoid this rate movement risk on investments and income accrued but not yet received. In respect of income, receipts are converted to sterling shortly after receipt.
The CBF Church of England Investment Fund
Notes to the Accounts
At 30 November 2007, the Fund’s foreign currency exposure was predominantly from the overseas equities it was invested in, which are detailed in the portfolio statement. The total exposure at 30 November was: 30.11.2007
£’000
Credit riskThe Fund’s transactions in securities expose it to the risk that the counterparty will not deliver the investmentfor a purchase or the cash for a sale. To minimise this, the Fund only deals with an approved list of brokersmaintained by the Manager.
Liquidity riskFinancial instruments held by the Fund, excluding short-term debtors and creditors, are made up of UK andoverseas equities, fixed interest securities, sterling and overseas cash deposits. These assets are generallyliquid and enable the Fund to meet the payment of any redemption of shares that shareholders may wish tomake.
Interest rate riskThe majority of the Fund’s financial assets are equities which do not earn interest nor have maturity dates. TheFund invests in some fixed interest securities, the income of which may be affected by changes to interest ratesrelevant to particular securities or as a result of the Manager being unable to secure similar returns following thedisposal or redemption of securities. The value of fixed interest securities may be affected by interest ratemovements or the expectation of such movements in the future.
The CBF Church of England Investment Fund
Notes to the Accounts
The interest rate profile of the Fund’s financial assets and liabilities at 30 November 2007 was as set out below: Floating rate
Fixed rate
Financial assets
Currency
financial assets*
financial assets
not carrying interest
Total
£’000
£’000
£’000
£’000
Sterling
US Dollar
1,001,585
Floating rate
Fixed rate
Financial liabilities
Currency
financial liabilities financial liabilities
not carrying interest
Total
£’000
£’000
£’000
£’000
Sterling
* The floating rate financial assets of the Fund earn interest at rates based on either LIBOR or the base rate. All financial liabilities are due to be settled within one year, or on demand.
There were no derivatives held by the Fund at 30 November 2007 (30.11.2006, £nil).
The CBF Church of England Investment Fund
Notes to the Accounts
The fixed rate element of the portfolio as at 30 November 2007 is further analysed in the following table.
Fixed rate
Weighted average
Weighted average period
Currency
financial assets
interest rate
for which the rate is fixed
£’000
%
Years
Sterling
US Dollar
13. Commitments and contingent liabilities
There were no commitments or contingent liabilities at 30 November 2007 (30.11.2006, £nil). 14. Unquoted and other investments
Unquoted investments include the Fund’s holding of 60% of the issued share capital of the Manager, whichprovides investment management and administrative services to The CBF Church of England Funds. Thevaluation of £8,750,300 is based on a discounted market value calculation, prepared yearly and reviewedquarterly.
Including its holding in the Manager, the Fund is not permitted to invest more than 2% of the total Fund inunquoted securities excluding holdings in other CBF Church of England Funds.
Not more than 35% in value of the Fund may be invested in units in Common Funds, Authorised Unit TrustSchemes and collective investment and deposit schemes. At 30 November 2007 6.54% of the value of the Fund was held in The CBF Church of England Property Fund (30.11.2006, 6.95%), 13.91% of the value of the Fund was held in The CBF Church of England UK Equity Fund (30.11.2006, 13.46%) and 2.45% of the value of the Fund was held in The CBF Church of England Deposit Fund(30.11.2006, 1.96%). A further 0.50% of the value of the Fund was held in Authorised Unit Trust Schemes (30.11.2006, 0.50%). At 30 November 2007 the Fund held 94.3% of the total shares on issue in The CBF Church of England UKEquity Fund (30.11.2006, 97.8%). The Fund also held 38.6% of the total shares on issue in The CBF Church ofEngland Property Fund (30.11.2006, 38.6%) which may not be readily realisable. The Manager may impose aperiod of notice or delay before carrying out a redemption of shares in The CBF Church of England PropertyFund if it is deemed to be necessary to protect the interests of shareholders in The CBF Church of EnglandProperty Fund or to permit properties to be sold to meet a redemption. The net assets of The CBF Church ofEngland UK Equity Fund have not been consolidated as, due to the Trustee arrangements, the Fund is unableto exercise control over The CBF Church of England UK Equity Fund.
The CBF Church of England Investment Fund
Notes to the Accounts
15. Related party transactions
The Manager’s periodic charge is paid to the Manager, a related party to the Fund. The amounts paid inrespect of the Manager’s periodic charge are disclosed in Note 5. There were no outstanding balances due tothe Manager at 30 November 2007 (30.11.2006, £nil). There were no other transactions entered into with theManager during the year.
CBFFT, as Trustee, is a related party to the Fund. The amounts paid in respect of the Trustee’s administration fee are disclosed in Note 5. There were no outstanding balances due to CBFFT at 30 November 2007 (30.11.2006, £nil). There were no other transactions entered into with CBFFT during the year.
At 30 November 2007 a cash balance of £24,278,517 (30.11.2006, £18,986,359) was held in The CBF Church ofEngland Deposit Fund.
Further details of the Fund’s holdings in other CBF Church of England Funds are disclosed in Note 14.
16. Portfolio transaction costs
30.11.2007
£’000
Purchases in period before transaction costs The CBF Church of England Investment Fund
Distribution Table
for the year ended 30 November 2007
2007
Income shares
28 February 2007
Accumulation shares
28 February 2007
The CBF Church of England Investment Fund
Statement of Trustee and Manager Responsibilities
The Trustee shall comply with the duty of care when Preparation of accounts
exercising their powers and discharging their duties The Trustee of the Fund is required, by the Measure, to under the Church Funds Investment Measure 1958 as prepare accounts which give a true and fair view of the amended by the Church of England (Miscellaneous financial position of the Fund at each half year and year Provisions) Measure 1995 and the Trustee Act 2000 end valuation date. The net income for the year, together with a report on the operation of the Fund is make and revise the written statement of the also required. The accounts show the net asset value of investment objectives of the Fund and details of the shares in the Fund as at the date to which the such investment objectives will be included in the accounts are prepared, the amount of income per share, and the amount of income, if any, to betransferred to capital pursuant to paragraph 11 of the determine the criteria and methods for evaluating Schedule to the Measure. In preparing these accounts, appoint the Auditor of the Fund and settle their selects suitable accounting policies that are appropriate for the Fund and applies them on determine the rate of remuneration of the Manager in accordance with the Measure and the Scheme complies with the disclosure requirements of the Statement of Recommended Practice relating to supervise and oversee the Manager's compliance Authorised Funds issued by the Investment with the Measure and the Scheme Information. In Management Association (IMA) in December 2005; particular, the Trustee shall be satisfied on a follows generally accepted accounting principles continuing basis that the Manager is competently exercising the powers and discharging the duties conferred or imposed on it by or pursuant to the provisions of the Measure and ensure the Manager keeps proper accounting records which enables is maintaining adequate and proper records; them to demonstrate that the accounts, asprepared, comply with the above requirements; appoint, supervise and oversee any Registrar or other delegate which it has appointed in makes judgments and estimates that are prudent accordance with the provisions of the Scheme; review the custody and control of the property of prepares the accounts on the basis that the Fund the Fund and the collection of all income due to the will continue in operation unless it is inappropriate make distributions to investors holding income The Trustee is also required to manage the Fund in shares and make allocations to investors holding accordance with the Measure and has delegated to the accumulation shares in proportion to their Manager the day-to-day management, accounting and respective shares in the property of the Fund; and administration of the Fund, as permitted by the Measure.
The Manager is required to carry out these duties in take all steps and execute all documents which are accordance with the Measure and take reasonable necessary to ensure that the purchases and sales steps for the prevention and detection of fraud and of investments for the Fund are properly CCLA INVESTMENT MANAGEMENT LIMITED
The CBF Church of England Investment Fund
Trustee – CBF Funds Trustee Limited
R Broadhurst (Chairman)
J Clunie*
L Farrall
N Pearson
S Steele
Rev Dr R Turnbull*
R Williams*
Manager, Administrator and Registrar
CCLA Investment Management Limited
Authorised and regulated by the Financial Services Authority
80 Cheapside, London EC2V 6DZ
Telephone: 020 7489 6000
Client service freephone: 0800 022 3505
Facsimile: 0844 561 5126
Email: clientservices@ccla.co.uk
www.ccla.co.uk
Directors responsible for the Fund
MQuicke (Chief Executive)J Bevan (Chief Investment Officer)S Curran (Chief Operating Officer from 1 May 2007)D Butler (Chief Operating Officer to 30 April 2007)C Peters (Investment Director)A Robinson (Director Market Development) Fund Manager
N Debenham (to 31 December 2007)M Humphreys (from 1 January 2008) Company Secretary
Head of Operational Risk,
Internal Audit and Compliance
Socially Responsible Investment Unit
Banker and Monitoring Service
The Royal Bank of Scotland plc62/63 Threadneedle Street, London EC2R 8LA Safe-Custody Agent
The Northern Trust Company50 Bank Street, Canary Wharf, London E14 5NT Solicitors
Bates, Wells & Braithwaite LLP 2-6 Cannon Street, London EC4M 6YHFarrer & Co LLP66 Lincoln Inn Fields, London, WC2A 3LH Independent Auditor
Ernst & Young LLP1 More London Place, London SE1 2AF CCLA INVESTMENT MANAGEMENT LIMITED
The CBF Church of England Funds
The CBF Church of England Funds provide Church of England parishes,dioceses and other church charitable trusts with a ready-made service tolook after their money and investments. These Funds aim to provideprudent management of church money avoiding unnecessary risks but atthe same time seeking to deliver satisfactory investment results. A CHOICE OF FUNDS
Six CBF Church of England Funds aim to meet most of the investment and
deposit needs of a Church trust.
• Investment
• A suitable ‘all-in-one’ long-term fund for most church organisations• Highly diversified and well-balanced spread of investments• Designed to help meet growth and income requirements• Focus on delivering attractive, growing income• Aligned with the Church of England’s Ethical Investment Policy • Attractive income now• Rising income in the future• Strong growth opportunities from the global economy • The only UK equity fund entirely aligned with the Church of England’s • High quality, well-diversified portfolio• Designed to help meet growth and income requirements• Usually held with other investments such as overseas equities, bonds and cash to give a broad spread of assets and achieve overall objectives • Long-term investment focused on income• Gross income paid quarterly• Usually held with other investments such as equities and cash to give a broad spread of assets and achieve combined income and growth objectives • High quality, well-diversified commercial and industrial property • Focus on delivering attractive income• Actively managed to add value• Usually held with other investments such as equities, bonds and cash to give a broad spread of assets and achieve combined income and growth objectives • A great rate• Interest paid gross• No minimum balance• Easy access • Simple operation• Excellent service • Free BACS transfers• Aaa (triple A) credit rating* *The Deposit Fund has consistently achieved a Aaa rating from the creditrating agency Moody’s Investors Service – the highest possible.
The Funds are common funds established under the Church FundsInvestment Measure 1958 (as amended from time to time). CBF Funds TrusteeLimited, a company incorporated under the Companies Act is the Trustee andOperator of the Funds. CCLA manages the investment of the Funds.
The value of the investments may fall as well as rise and an investor maynot get back the full amount originally invested. CCLA INVESTMENT MANAGEMENT LTD
CCLA Investment Management Limited (registered in England No. 2183088 at 80 Cheapside, London EC2V 6DZ) is authorised and regulated by the Financial Services Authority. CBF Funds Trustee Limited is a Registered Charity No. 1116932 and is registered in England as a company limited by Facsimile: 0844 561 5126Email: clientservices@ccla.co.uk CCLA is committed to making a positive contribution to environmental protection. We seek to ensure our suppliers are using environmentally friendly production processes. The paper and board used for this publication contains 50% recovered waste and50% virgin fiber, and is certified as a Forest Stewardship Council (FSC) mixed source product.

Source: http://www.ccla.co.uk/publications/Churches/CCLA%20CBF%20Investment%20Fund%20RA%20Annual.pdf