LWM ETHICAL PORTFOLIO 2014 / 2015

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1 AIM OF THE PORTFOLIO The portfolio will look to invest in a basket of OEICS (open ended investment companies) and investment trusts to achieve above inflation returns over the medium to long term. The investments will be screened from the available UK Ethical Funds and Investment Trusts (currently approximately 80 available investments). The portfolio will look to avoid investments which are sustainable but don t have an ethical screening. BENCHMARK At LWM we benchmark all our portfolios against a basket of index tracking funds. However, with Ethical investing there is only a small number of index funds. The only one which we could use is the CIS UK FTSE4Good Tracker Fund. The LWM portfolio will look to outperform this over the medium to long term. The FTSE4Good Tracker Fund does invest in oil and other stocks which many Ethical investors may feel unhappy with so it is purely to compare performance rather than as an alternative investment option. RISK AND VOLATILITY Due to the limited number of funds we are unable to produce a series of different portfolios to compare the risk and volatility. The risk scale is between 1% and 10%. In theory the higher the risk the greater the return. However in all the portfolios we construct we aim to keep the risk scale low without compromising return. As an example volatility of between 2.88% and 8.43% is seen as cash whereas volatility of 31.25% and 38.13% is seen as adventurous. Our portfolios vary between 7.35% for the Defensive Portfolio and 12.82% for Adventurous. On this basis the portfolios fall between a 2 and 3 on the risk scale. The LWM Ethical Portfolio has a volatility rating 10.53%. This is close to our Balanced Portfolio. For investors worried about the future direct of bonds we have replaced the bonds with the SLI Global Absolute Return Strategy Fund. This fund is not ethical and will mean that will be holdings which ethical investments may be uncomfortable with. However, it does provide bond like volatility. The volatility on this option is 10.53%. ASSET ALLOCATION We would aim to split investments across most classes and regions however most ethical funds are either specialist, global or UK based. The split is therefore not our normal allocation. The proposed allocation is as follows: 2014 / 2015 Allocation Fixed Interest / Money Markets 20% UK 20% Europe 5% Global 40% Specialist 15% 100% GEORGE LADDS 1

2 PROPOSED HOLDINGS We have selected what we believe to be the most appropriate holdings in terms of performance and investment style for the portfolio. Further details of each these holdings are contained in this report. % Holdings Fixed Interest / Money Markets Total Fund Charge Fund Code Rathbone Ethical Bond I Acc 10% 0.71% OWF6.LN Kames Ethical Corporate Bond B Acc 5% 0.58% ZH97.LN Ecclesiastical Amity Sterling Bd B 5% 0.78% BGR8.LN 20% UK Equities Kames Ethical Equity B Acc 5% 0.81% SN54.LN Premier Ethical C Inc 5% 0.96% BY56.LN SLI UK Eth Inst 10% 0.78% SL87.LN 20% European Equities Ecclesiastical Amity European B 5% 0.89% FR37.LN 5% Global Equities F&C Responsible Global Equity 2 Acc 10% 0.88% IO51.LN Ecclesiastical Intl B 5% 0.83% FR59.LN Sarasin Eq Sr Soly Rspsble P Acc 10% 0.98% GSJT.LN Jupiter Ecology I Acc 5% 0.95% FER8.LN Alliance Trust SF Abs Gth 2 Acc 10% 0.88% CU94.LN 40% Specialist Quilter Cheviot Clmt Ass B Acc 5% 1.19% 039J.LN Impax Environmental Markets Trust Plc 10% IEM:LSE 15% BENCHMARK We cannot build a suitable, comparable index we have therefore used the FTSE4Good Index as the closest benchmark to compare performance. The FTSE4Good Index is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. The fund we have used is the CIS FTSE4Good Tracker Index. The investment objective is to provide above-average capital growth over the medium to long term principally by tracking the performance of the FTSE4GoodTM UK Index. GEORGE LADDS 2

3 Its current top-ten holdings are shown below and indicate that the fund may not appeal to all ethical investors but it provides benchmark to compare performance: Name Country % of Assets HSBC Holdings PLC United Kingdom 7.85 Royal Dutch Shell PLC Class B United Kingdom 6.86 GlaxoSmithKline PLC United Kingdom 4.45 AstraZeneca PLC United Kingdom 3.70 Vodafone Group PLC United Kingdom 3.56 Diageo PLC United Kingdom 3.00 Lloyds Banking Group PLC United Kingdom 2.66 Royal Dutch Shell PLC Class A United Kingdom 2.48 Barclays PLC United Kingdom 2.42 Rio Tinto PLC United Kingdom 2.39 ETHICAL PORTFOLIO VS BENCHMARK Volatility The volatility of the portfolio is currently 10.53%, this is slightly higher than the benchmark which is 8.13%. Performance Below is performance over 1, 3, 5 and 10 years of the proposed portfolio vs the benchmark: 1 year 3 years 5 years 10 years LWM Ethical Portfolio 3.04% 39.27% 60.61% % CIS UK FTSE4Good Tracker Trust 0.32% 32.63% 48.06% 72.55% You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. GEORGE LADDS 3

4 Top Ten Underlying Holdings LWM Ethical Portfolio CIS UK FTSE4Good Tracker Trust Holding % of assets Holding % of assets BG Group PLC 0.94% HSBC Holdings 7.85% Prudential PLC 0.78% Royal Dutch Shell Class B 6.86% BorgWarner Inc 0.73% GlaxoSmithKline 4.45% Praxair Inc 0.68% Astra Zeneca 3.70% Vodafone Group Plc 0.63% Vodafone Group PLC 3.56% Roche Holding 0.62% Diageo PLC 3.00% Amgen Inc 0.60% Lloyds Banking Group PLC 2.66% Ecolab Inc 0.55% Royal Butch Shell Class A 2.48% Ashtead Group Plc 0.50% Barclays 2.42% Novo Nordisk 0.50% Rio Tinto 2.39% COST The estimated cost of investing in the portfolio is detailed below: Investment Pension Fund Charge 0.773% 0.773% Investment Platform Charge 0.36% 0.40% LWM Fee 0.75% 1.00% 1.883% 2.173% On an investment of 100,000 this means the monetary amount is 1,883. The Investment platform charge may reduce depending on the amount invested. GEORGE LADDS 4

5 PORTFOLIO HOLDINGS Fixed Interest / Money Markets Proposed Holdings % Holdings Fixed Interest / Money Markets Rathbone Ethical Bond Fund 10% Kames Ethical Corporate Fund 5% Ecclesiastical Amity Sterling Bond Fund 5% 20% Performance 1 January October 2014 Rathbone Ethical Bond Fund Kames Ethical Corporate Bond Fund Ecclesiastical Amity Sterling Bond Fund Total Return 20.81% 16.11% 3.08% 17.66% 4.91% 8.66% 12.03% p.a % 9.10% 7.23% 12.41% 0.86% 7.43% 8.94% p.a % 9.16% 5.31% 13.98% 3.87% 7.48% 9.24% p.a. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. Fund Characteristics Fund Focus Rathbone Ethical Bond Fund Corporate bond fund with a focus on high quality investment grade bonds Kames Ethical Corporate Bond Fund Corporate bond fund covering investment grade and higher yield bonds Ecclesiastical Amity Sterling Bond Fund Invests in government and good quality fixed interest securities issued by companies Top 5 Holdings (if provided) FRESH Finance for Residential Social Housing Suncorp Insurance Principality Building Society QBE Capital Funding Fidelity International Legal and General Group AA Bond Co Ltd Dignity Fin Plc Municipality Fin Investec Bnk Plc Nottingham BS Treasury 4.75% LSE PLC Society of Lloyds Premier Farnell GEORGE LADDS 5

6 Screening Rathbone Ethical Bond Fund Positive Corporate community investment i.e. demonstrating long-term involvement in programmes of benefit to the community Employment - i.e. a commitment to workplace diversity and equal opportunities Human rights companies should comply with local and national standards in accordance with minimums set by the International Labour Organisation and United Nations Universal Declaration of Human Rights Management of environmental impacts companies should have a clearly defined and published policy for managing their environmental impact Provision of beneficial products and services companies should be involved in providing products or services that offer social or environmental benefits Negative Alcohol Animal testing Armaments Environmental unsustainable or high impact activities i.e. companies involved in mineral extraction, fossil fuel exploration and production etc Gambling Nuclear power Pornography Tobacco Kames Ethical Corporate Bond Fund Do not apply positive screening Animal welfare e.g. animal testing, and selling of products, intensive farming, abattoirs etc Military e.g. manufacture armaments, nuclear weapons etc Nuclear power Environment e.g. companies involved with the manufacture of PVC, ozone depleting chemicals and pesticides Political donations e.g. have made political donations of more than 25,000 in the last year Genetic engineering Gambling where it accounts for more than 10% of their business GEORGE LADDS 6

7 Tobacco where it accounts for more than 10% of their business Pornography Banks which are corporate or international banks with exposure to large corporate or third world debt Oppressive regimes - e.g. operate in countries with poor human rights record Ecclesiastical Amity Sterling Bond Fund Business practices following ethical practices towards customers including maintaining product quality, ethical sources of supply and respecting indigenous people Community relations - making charitable donations, employing local people, offering work placement schemes Corporate governance practices - transparency, antibribery and corruption codes, adhering to International Labour Organisation regulations on labour and child labour Education - providing training and development along with access to education Environmental management - supporting biodiversity, managing their climate change impact, carbon footprint, water conservation, air pollution, managing waste, recycling, and supporting renewable energy Healthcare - providing affordable healthcare and access to medicine Human rights - supporting basic human rights by adopting the United Nations Universal Declaration of Human Rights Alcohol production - manufacturers of alcoholic beverages, but not retailers (except dedicated pub companies) Gambling operations Pornographic and violent material Weapon testing - the manufacture of weapons and weapons systems or goods and services specifically to support those systems. The policy is designed to avoid what are recognisably 'defence' or 'aerospace' companies Animal testing Oppressive regimes Intensive farming GEORGE LADDS 7

8 Labour relations - promoting health and safety, transparent pay structure, union participation, professional development, employee participation and whistleblower protection Urban regeneration - supporting social/affordable housing GEORGE LADDS 8

9 UK Equities Proposed holdings % of holdings UK Equities Kames Ethical Equity Fund 5% Premier Ethical Equity Fund 5% SLI UK Ethical Fund 10% 20% Performance 1 January October Total Return Kames Ethical Equity Fund 17.70% 17.86% -0.83% 14.64% 19.77% 2.54% 12.00% p.a. Premier Ethical Equity Fund 20.83% 10.89% -6.43% 23.87% 36.58% 2.92% 14.33% p.a. Standard Life Investments UK Ethical Fund 39.87% 24.44% -5.50% 21.80% 34.65% -7.78% 16.91% p.a. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. Fund Characteristics Kames Ethical Equity Fund Premier Ethical Equity Fund Standard Life Investments UK Ethical Fund Fund Focus Companies principally conducting business in the UK or listed in the UK stock exchange UK companies whose business is based on ethical, or socially responsible principles both in the UK and overseas UK equities which meet strict ethical criteria Top 5 Holdings (if provided) Prudential BG Reed Elsevier Legal and General Vodafone HSBC Prudential AA Plc One Savings Bank Micro Focus BT Whitbread Barclays Howden Standard Chartered GEORGE LADDS 9

10 Screening Kames Ethical Equity Fund Positive Negative Do not apply positive screening Animal welfare e.g. animal testing, and selling of products, intensive farming, abattoirs etc Military e.g. manufacture armaments, nuclear weapons etc Nuclear power Environment e.g., companies involved with the manufacture of PVC, ozone depleting chemicals and pesticides Political donations e.g. have made political donations of more than 25,000 in the last year Genetic engineering Gambling where it accounts for more than 10% of their business Tobacco where it accounts for more than 10% of their business Pornography Banks which are corporate or international banks with exposure to large corporate or third world debt Oppressive regimes - e.g. operate in countries with poor human rights record Premier Ethical Equity Fund Companies whose products have an emphasis on improving individuals basic standard of living rather than focusing on luxuries examples given include food companies and medical and healthcare companies Companies involved in products and services that aid environmental sustainability, including mitigating climate change examples given include companies involved with pollution control or monitoring and industrial efficiency to preserve energy The fund will look to avoid investing in companies: Who have a major business in the production of goods or services for weapons of destruction With more than 10% of turnover from the sale of tobacco products Which have a significant involvement in gambling Whose major business is printing, publishing, wholesaling or broadcasting violent or pornographic material That promote the irresponsible use of alcohol Which are consistently involved in breaches of international norms of behaviour in regard to GEORGE LADDS 10

11 pollution and environmental damage That have a record of poor labour relations: engage in forced, compulsory or child labour or fail to meet international standards in their overseas operations That target children with inappropriate advertising or sexualise children with their advertising That use animals for testing products other than for required medical products and procedures Standard Life Investments UK Ethical Fund Make a positive contribution to the environment for example if they develop or use renewable energy, produce environmental technologies etc Promote sound employment practices for example good policies on equal opportunities and diversity Promote products and services that benefit the environment or human life Donate to charities or are strongly involved in the community Have clear policies and procedures on bribery and corruption Have a policy that encourages good principles of business behaviour and ethics Environmental damage and pollution, including companies that do not adequately address climate change, airline companies are excluded under this Marketing breast milk substitutes where the companies do not commit to adopting the Code of Marketing Breast Milk Substitutes Testing products on animals Genetic engineering Intensive farming Fur Companies that operate in countries that violate the political and civil rights of their people, unless the companies policies address human rights Pornography Production or sale of weapons Processing of nuclear power Alcohol production companies which derive 10% or more of their turnover from alcohol production Tobacco production Involvement in gambling where companies derive 10% or more in turnover from involvement in gambling GEORGE LADDS 11

12 European Equities Proposed holdings % Holdings European Equities Ecclesiastical Amity European Fund 5% 5% Performance 1 January October 2014 Ecclesiastical Amity European Fund Total Return 18.49% 13.73% % 13.80% 31.73% -4.75% 8.52% p.a. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. Fund Characteristics Ecclesiastical Amity European Fund Fund Focus European companies which make a positive contribution to society and the environment through sustainable and socially reasonable practices Top 5 Holdings (if provided) Sanofi Merck KGAAA Novartis Ansaldo STS Wolters Kluwer Screening Ecclesiastical Amity European Fund Positive Business practices following ethical practices towards customers including maintaining product quality, ethical sources of supply and respecting indigenous people Community relations - making charitable donations, employing local people, Negative Alcohol production - manufacturers of alcoholic beverages, but not retailers (except dedicated pub companies) Gambling operations Pornographic and violent material Weapon testing - the manufacture of weapons and GEORGE LADDS 12

13 offering work placement schemes Corporate governance practices - transparency, antibribery and corruption codes, adhering to International Labour Organisation regulations on labour and child labour Education - providing training and development along with access to education Environmental management - supporting biodiversity, managing their climate change impact, carbon footprint, water conservation, air pollution, managing waste, recycling, and supporting renewable energy Healthcare - providing affordable healthcare and access to medicine Human rights - supporting basic human rights by adopting the United Nations Universal Declaration of Human Rights Labour relations - promoting health and safety, transparent pay structure, union participation, professional development, employee participation and whistleblower protection Urban regeneration - supporting social/affordable housing weapons systems or goods and services specifically to support those systems. The policy is designed to avoid what are recognisably 'defence' or 'aerospace' companies Animal testing Oppressive regimes Intensive farming GEORGE LADDS 13

14 Global Equities Proposed holdings % Holdings Global Equities F&C Responsible Global Equity Fund 10% Ecclesiastical International Fund 5% Sarasin EquiSar Socially Responsible Fund 10% Jupiter Ecology Fund 5% Alliance Trust Sustainable Future Absolute 10% Growth Fund 40% Performance 1 January October 2014 F&C Responsible Global Equity Fund Ecclesiastical International Fund Sarasin EquiSar Socially Responsible Fund Total Return 25.74% 16.62% -9.87% 9.34% 25.44% 3.09% 11.32% p.a % 18.24% % 11.20% 15.95% 3.57% 9.96% p.a. N/A N/A N/A 9.39% 22.72% 5.55% N/A Jupiter Ecology Fund 15.92% 13.55% -9.95% 5.91% 29.35% -2.07% 8.28% p.a. Alliance Trust Sustainable Future Absolute Growth Fund 20.18% 21.46% % 13.56% 22.46% 2.43% 10.79% p.a. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. GEORGE LADDS 14

15 Fund characteristics F&C Responsible Global Equity Fund Ecclesiastical International Fund Sarasin EquiSar Socially Responsible Fund Fund Focus Global companies whose products and practices are considered benefit to society. It excludes those which are felt to be harming the world, its people or its wildlife Global companies which make a positive contribution to society and the environment through sustainable and socially responsible practices Invests mainly in global ethical company shares which it believes will be the main beneficiaries of key global trends Top 5 Holdings (if provided) Apple Praxair Cardinal Health CVS Caremark US Bancorp Ezion Holdings GlaxoSmithKline Sound Global Ltd Intel BYD Electronic Hartford Financial Services Borgwarner Amgen CitiGroup JPMorgan Chase Geographic Split North America 53.5% Europe Ex UK 21.8% Japan 10.3% UK 9.8% Asia ex Japan 1.5% Emerging Markets 1.2% Cash 1.9% Hong Kong 14.45% Singapore 13.46% USA 13.01% UK 12.00% Japan 7.61% France 6.68% Germany 6.38% Switzerland 2.64% Other 18.65% Cash 5.11% North America 45.1% Europe Ex UK 20.7% Global Emerging Markets 11.1% UK 8.7% Japan 7.8% Money Market 4.8% Pacific ex-japan 1.8% GEORGE LADDS 15

16 Fund Focus Jupiter Ecology Fund Global companies which demonstrate a positive commitment to the long-term protection of the environment Alliance Trust Sustainable Future Absolute Growth Fund Global companies which meet their rules for environmental and social responsibility Top 5 Holdings (if provided) Stantec United Natural Foods Cranswick Pall LKQ Oil Search Amgen Inc HCA Holdings Roper Industries Ecolab Geographic Split North America 41.86% Europe 21.54% UK 18.60% Pacific 12.72% Cash 5.28% USA 48.99% UK 17.35% Japan 9.78% Australia 6.42% Germany 3.12% Netherlands 3.09% Switzerland 2.31% Norway 2.14% Brazil 2.10% Others 4.70% Screening F&C Responsible Global Equity Fund Positive Do not apply positive screening Negative Alcohol any turnover from the production of alcoholic beverages, over 33% turnover from selling alcohol and over 10% turnover from bottling or wholesale Animal welfare require cosmetics manufacturers to have an animal testing policy that commits to applying a fixed cutoff date, or rolling rule, for both finished products and ingredients. Exclude any pharmaceutical companies that do not adopt and apply the three Rs (replace, reduce and refine) and test on great apes Aviation exclude companies whose core business is aviation Banks exclude financial institutions that have a significant GEORGE LADDS 16

17 banking presence (revenues exceed 50%) and where banks have been involved in major ethical breaches or controversies Climate change require that disproportionately contribute to climate change to take meaningful steps to reduce their greenhouse gas emissions Corruption require companies operating in countries where there is a high risk of bribery and corruption to have strong policies against participation in these Fur exclude companies producing or trading in fur if turnover from fur is over 1% Gambling core business or where gambling accounts for more than 10% of turnover Genetic modification Hazardous substances exclude companies involved in PVC manufacturing where greater than 10% of revenues and companies involved in the manufacturing or trade of POPs and other substances banned or restricted under international conventions Human rights exclude companies whose activities infringe international agreements and those whose operations directly and significantly contribute to the persistence of an oppressive regime Fracking companies required to provide transparency on the use of chemicals and exclude those with poor safety records Labour standards required to comply with ILO conventions and encourage suppliers to do the same Mining exclude uranium companies (more than 3% turnover), coal companies (more than one quarter of revenues), GEORGE LADDS 17

18 mining waster, in-situ leaching and blood diamonds Nuclear power stations and companies where more than 3% of revenue comes from nuclear power Oil and gas exclude companies where more than 3% of revenue comes from oil sands and companies where 20% of revenue comes from the artic Pornography and harmful material Roads where road building accounts for 33% of total turnover Tobacco manufacturers, companies where 10% of revenue comes from sale of tobacco or machinery and packaging involved in tobacco and ENDS Weapons exclude companies that derive any turnover from the manufacture or sale of weapons, weapons systems or platforms, including products or services specific to such systems. In addition, these funds exclude companies that supply goods and services designed for strategic military use Ecclesiastical International Fund Business practices following ethical practices towards customers including maintaining product quality, ethical sources of supply and respecting indigenous people Community relations - making charitable donations, employing local people, offering work placement schemes Corporate governance practices - transparency, antibribery and corruption codes, adhering to International Labour Organisation regulations on labour and child labour Alcohol production - manufacturers of alcoholic beverages, but not retailers (except dedicated pub companies) Gambling operations Pornographic and violent material Weapon testing - the manufacture of weapons and weapons systems or goods and services specifically to support those systems. The policy is designed to avoid what are recognisably 'defence' or 'aerospace' companies Animal testing Oppressive regimes GEORGE LADDS 18

19 Education - providing training and development along with access to education Environmental management - supporting biodiversity, managing their climate change impact, carbon footprint, water conservation, air pollution, managing waste, recycling, and supporting renewable energy Healthcare - providing affordable healthcare and access to medicine Human rights - supporting basic human rights by adopting the United Nations Universal Declaration of Human Rights Labour relations - promoting health and safety, transparent pay structure, union participation, professional development, employee participation and whistleblower protection Urban regeneration - supporting social/affordable housing Intensive farming Sarasin EquiSar Socially Responsible Fund Specific screening process Illegal weapons does the company breach international recognised protocols against cluster bombs, landmines, biological and chemical weapons Investment materiality does the company s environmental, social and governance performance pose significant investment risks or offer valuable opportunities that need to be incorporated into their investment process Products excluded - does the company produce or sell a product, above a materiality threshold (e.g. 5% of turnover), that can contribute to social harm, such as tobacco, gambling, pornography or armaments? GEORGE LADDS 19

20 Damaging practices does the company persistently engage in practices that needlessly cause social and environmental harm and there is no potential for their engagement to materially improve its practices Jupiter Ecology Fund Fund only invests in companies providing environmental solutions The Jupiter Ecology Fund seeks to avoid investments in industrial activities, which do not fit with its environmental and social goals. Examples of such negative activities include: Manufacturing of armaments, alcoholic drinks or tobacco products Publication of pornographic material Generation of nuclear power Operation of gambling facilities The Jupiter Ecology Fund will not invest in any company that derives over 10% of its turnover from any one of these activities. It may however, invest in a company which derives less than 10% of turnover from any one of these activities, but only if it makes an outstanding contribution to sustainable development in other respects. Additionally, the Jupiter Ecology Fund will not invest in any company that conducts or commissions animal tests carried out for cosmetic and toiletry purposes. Alliance Trust Sustainable Future Absolute Growth Fund Do not apply positive screening Alcohol only invest in alcohol companies that have policies and practices to address responsible marketing, consumption and sale of their products Animal testing excludes companies where more than 10% of turnover comes from the provision of animal testing, manufacture of cosmetics or cosmetic intermediates that are tested on animals, retail sale of GEORGE LADDS 20

21 own-brand cosmetics and household products that are tested on animals Climate change excludes companies where 10% of turnover comes from airports, airlines or cars powered by the internal combustion engine. Excludes oil and gas companies whose reserves are typically under 70% natural gas, or which have more than 10% of reserves in oil sands, or which have more than 10% of reserves in shale gas, or are drilling offshore in the Artic. For companies deriving 10% of turnover from the production of energy intensive materials there is an expectation that substantive steps have been taken to minimise greenhouse gas emissions Deforestation excludes forestry and paper companies that do not have policies and practices in place to ensure that forests are managed in a sustainable way and those involved in the deforestation of primary or virgin forest or illegal logging practices Gambling excludes companies where 10% of turnover comes from management or ownership of gambling facilities Genetic engineering Human rights exclude companies judged not to be addressing serious allegations of violations of international human right laws and standards including the OECD Guidelines for Multi National Enterprises and the UN Global Compact Infrastructure projects excludes companies involved in large dam projects where these have not met best practice standards Intensive farming excludes companies that derive greater than 10% turnover from intensive GEORGE LADDS 21

22 meat and fish farming, manufacture of chemical pesticides and fur trade Labour standards exclude companies judged not be addressing allegations of labour standards Nuclear excludes companies which derive greater than 10% of turnover from owning or operating nuclear power stations, uranium mining or reprocessing of nuclear fuel and the development or manufacture of non-safety related products for nuclear power plants Ozone depleting substances companies that derive 10% of turnover from the manufacture or sale of ozone depleting substances Pornography Tobacco Weapons systems excludes companies that are major producers of full weapons systems or critical components of weapon systems and those involved in the manufacture of anti-personnel mines or cluster munitions or their critical components COMMENT ON GLOBAL FUNDS We have selected a blend of global funds. Both Jupiter and Ecclesiastical have lower volatility when compared to Alliance, F&C and Sarasin. The trade-off is returns where the returns are lower. We have placed a higher weighting to the more volatile funds as we believe over the longer term this should deliver stronger performance (although this is not guaranteed) however the lower volatility funds have been added as a cushion against negative performance. The funds all have different aims and objections, as an example Ecclesiastical has more of a diversified spread of investments whereas the other funds tend to be more heavily waited to the US. Sarasin has a higher weighting to emerging markets. All five have a good reputation as ethical providers. GEORGE LADDS 22

23 Specialist Proposed holdings % Holdings Specialist Quilter Cheviot Climate Assets Fund 5% Impax Environmental Markets plc 10% 15% Performance 1 January October 2014 Impax Environmental Markets Plc Quilter Cheviot Climate Assets Fund Total Return 42.17% 8.58% % 8.08% 47.42% -0.54% 10.80% p.a. N/A N/A -8.04% 11.92% 17.81% 2.73% N/A You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. Fund Characteristics Fund Focus Quilter Cheviot Climate Assets Fund Global companies that stand to benefit from the convergence of climate change, population shifts and resource scarcity. The fund invests in equities, fixed interest, cash and alternatives Impax Environmental Markets Plc Global companies which provide, utilise, implement or advise upon technology-based systems, products or services in environmental markets, particularly those of alternative energy and energy efficiency, water treatment and pollution control, and waste technology and resource management (which includes sustainable food, agriculture and forestry) Top 5 Holdings (if provided) TSY 1.25% Index Linked Gilt TSY 1.875% Index Linked Gilt Novo-Nordisk Sonocco Fresenius Spirax-Sarco Engineering Kingspan Group China Longyuan Power Group Pall Corporation NIBE Industrier GEORGE LADDS 23

24 Geographic Split Fixed Interest 18.25% UK 17.34% North America 25.35% Europe ex UK 20.17% Asia Pacific ex Japan 2.35% Japan 4.04% Emerging Markets 1.10% Alternatives 8.56% Cash 2.84% USA 48.99% UK 17.35% Japan 9.78% Australia 6.42% Germany 3.12% Netherlands 3.09% Switzerland 2.31% Norway 2.14% Brazil 2.10% Others 4.70% Screening Quilter Cheviot Climate Assets Fund Impax Environmental Markets Plc Screening overview The fund focuses on five areas: Energy the fund invests in companies providing solutions to the problems of fossil fuels and energy scarcity and security, such as those involved in renewable energy generation, green transport, products and technologies for green building design and construction and energy efficiency Food the fund invests in companies providing solutions to the food supply / demand imbalance problem, such as those involved in grain production and harvesting, food testing, food processing measurement and control, and high-tech agriculture supplies Health the fund invests in companies providing products and solutions to these problems, such as those involved in medical supply and devices, vaccines and products for infectious diseases, minimal invasive surgery and medical analysis and testing Resources the fund invests in companies providing solutions to the problems of resource scarcity, such as those involved in waste management, production and processing of environmentally friendly, waste to energy, coastal protection, productivity and efficiency gains and process control Water the fund invests in companies providing solutions to the water scarcity problem, such as those involved in water supply and distribution, water analysis, monitoring and purification, water metering and efficient methods for crop irrigation The fund focuses on companies operating in fast growing environmental and resource efficiency markets. These are companies that generate profits by providing goods and services and exploit the following themes: Resource scarcity exacerbated by an expanding global population Replacement of aging infrastructure Demand for new infrastructure driven by urbanisation in developing countries Cost constraints in the developed world requiring efficiency savings GEORGE LADDS 24

25 Environmental pollution Energy security Climate change adaptation & mitigation technologies COMMENT ON SPECIALIST FUNDS Two specialist funds focusing on changes in the environment. The Impax Fund is more volatile and we feel blends well with the Quilter Cheviot Fund. NOTE: The information provided is correct as at 31 October This document is for information only and investment in any of these funds should only be carried out with advice. We cannot take any responsibility for investment without advice. Past performance is only a guide and is not a guarantee of future returns. Investments can fall as well as rise. The launch date of the LWM Ethical Portfolio is 1 August GEORGE LADDS 25