Ecclesiastical investment funds

Transcription

1 Ecclesiastical investment funds short report

2 2 ECCLESIASTICAL Investment Funds Contents Report of the Authorised Corporate Director - Investment Environment 3 Investment Objectives and Policies 4 Amity UK Fund 6 Amity European Fund 8 Amity International Fund 10 Amity Sterlin Bond Fund 12 Hiher Income Fund 14 UK Equity Growth Fund 16 Manaement contact details Authorised Corporate Director The Authorised Corporate Director (ACD) is Ecclesiastical Investment Manaement Limited (EIM). The investments of Ecclesiastical Investment Funds (EIF) are manaed by the ACD. The ACD has prepared financial statements that comply with the Statement of Recommended Practice for Open-Ended Investment Companies issued by the Investment Manaement Association in November Constitution EIF is an Open-Ended Investment Company (OEIC). It has variable capital and was incorporated with limited liability under the Open-Ended Investment Companies Reulations 2001 (OEIC Reulations) in Great Britain under reistered number IC It is authorised and reulated by the Financial Services Authority. EIF is an umbrella company and comprises six authorised investment securities sub-funds. Ecclesiastical Investment Manaement Limited Beaufort House, Brunswick Road, Gloucester GL1 1JZ. Tel information@ecclesiastical.com Authorised and reulated by the Financial Services Authority Directors of Ecclesiastical Investment Manaement Limited M Hews, BSc, FIA (Chairman) MH Tripp, BSc, ARCS, FIA Ultimate Parent Company of the ACD Allchurches Trust Limited Beaufort House, Brunswick Road, Gloucester GL1 1JZ. Depositary BNY Mellon Trust and Depositary (UK) Limited The Bank of New York Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Authorised and reulated by the Financial Services Authority Reistrar Northern Trust Global Services Limited 50 Bank Street, Canary Wharf, London E14 5NT. Auditors Deloitte LLP 2 New Street Square, London EC4A 3BZ. This Short Report is for the period from 1 January 2009 to 31 December Included in the Report by the Authorised Corporate Director (ACD), you will find information on the performance of the sub-funds and the Funds prospects, as well as information on the performance record and major holdins of each sub-fund. The ACD will send a copy of the interim and annual Short Report to any shareholder whose name appears on the share reister at the relevant accountin reference date or interim accountin reference date as permitted by the Financial Services Authority reulations. Full copies of the interim and annual Lon Reports will be available free of chare on request from the ACD and to download from Copies of all reports to shareholders will be available for inspection by the eneral public at the ACD s offices.

3 ECCLESIASTICAL Investment Funds 3 Report of the Authorised Corporate Director Investment Environment The start of 2009 coincided with the worst of the financial crisis and the lobal economy appeared headed for a deep depression. Whilst the lobal economy and especially the developed countries did experience one of the sharpest and worst recessions in post-war history, the equity markets performed well over the year, as concerted policy actions averted outriht financial collapse and most economies exited recession by the end of the year. The radual easin of the financial crisis and improvin economic outlook provided a positive backdrop for the investment markets and consequently lobal equity markets and corporate bonds performed well. Government securities fared less well as the radual recovery in the economy increased investor appetite for risk and reduced demand for safe assets, thouh in the UK the ilt market was supported by Bank of Enland purchases throuh its quantitative easin proramme. The UK The FTSE 100 Index of leadin companies ended the year up 22.1%, havin recovered very stronly from its low in March at the heiht of the financial crisis. Amid the stron market rally and move towards more risky assets the FTSE Indices for medium-sized and smaller companies performed even more stronly risin by 49.8% and 46.3% respectively. As the UK avoided the kind of economic and financial meltdown many investors expected at the start of the year it should come as little surprise that more cyclical sectors such as minin, oil equipment and enineerin performed well. In contrast, the more defensive sectors, such as the pharmaceutical, telecom and utilities sectors, which had performed well amid the financial turmoil, laed the wider market as investor confidence improved. The threat of financial collapse and deep recession led the overnment to bail out several leadin banks, cut VAT and raise overnment expenditure whilst the Bank of Enland cut base rates to 0.5% and bean an unprecedented quantitative easin proramme. The investment markets reacted positively to these developments and were also supported by the purchase of almost 200bn in ilts as part of the quantitative easin proramme which diverted investment from the ilt market in to corporate bonds and equities. The UK equity market also benefited from the weakness of Sterlin which improved the competitive position of British exporters and increased the Sterlin value of overseas earnins. Europe The European equity markets rebounded stronly after hittin lows in March and the FTSE World Europe (excludin UK) Index rose by 15.4% in Sterlin terms over the course of The strenth of the European economies varied reatly across the Eurozone. The smaller periphery economies such as Portual, Greece, Spain and Ireland struled to cope with collapsin housin markets, hih levels of debt and trade deficits. Meanwhile the core European economies such as Germany and Scandinavia initially suffered badly as the demand for capital oods dried up but an early recovery in Asia led to a rebound in the demand for exports. The US Over the course of 2009 the Dow Jones Industrial Averae Index rose 18.8%, while the more broadly spread S&P500 Index performed more stronly and rose 25.5%. Hih consumer debts, a de-leverain bankin system, hih unemployment and weak housin market all led to deep recession. The US economy officially exited recession in the third quarter of 2009, but only after a massive policy stimulus and hue aid packaes to shore up the country s financial system. Althouh the US economy has formidable strenths, that perhaps allow the country to be more profliate than others, sooner or later it will have to tackle the issue of its budet deficit which is expected to reach 12% of GDP. Japan The Japanese stock market underperformed most of the major equity markets in 2009 with the Nikkei 225 Index up 19.0%. Japanese companies suffered badly from the collapse in world trade and the strenth of the Yen which led to a collapse in corporate profits. The Japanese market is still almost 75% below its peak reached in December 1989 and many world class Japanese companies are tradin at lare discounts to book value. China and the rest of Asia Most Asian equity markets performed stronly with the Hon Kon Han Sen Index up 52.0% over the course of the year. Prudent macroeconomic policies and resilient bankin systems contributed to China recordin 8.7% GDP rowth in 2009, without eneratin sinificant inflationary pressures. Outlook Thouh the worst of the economic downturn may now be behind us, the hih debt levels prevalent in many developed western economies provide ood reason to be cautious. The lobal economy may have stabilised but only after record monetary and fiscal stimulus which at some point will have to be withdrawn. In this environment, the lobal rowth is likely to remain weak, especially in the West, and the financial markets volatile.

4 4 ECCLESIASTICAL Investment Funds Fund Name & Investment Objectives Investment Policy Amity UK The Fund aims to achieve lon-term capital appreciation and a reasonable level of income by investin principally in UK companies Amity European To achieve lon-term capital rowth with a reasonable level of income primarily throuh a diversified portfolio of European companies Amity International These Funds seek to invest in a portfolio of companies which make a positive contribution to society and the environment throuh sustainable and socially responsible practices. These Funds seek to avoid investment in certain areas such as companies which have a material involvement in alcohol, tobacco and weapon production, amblin and publication of violent or explicit materials. To achieve lon-term capital rowth with a reasonable level of income primarily throuh a diversified portfolio of International companies Amity Sterlin Bond The Fund aims to provide an attractive level of income. The Amity Sterlin Bond Fund seeks to invest in a hihly diversified portfolio of Government and ood quality fixed interest securities issued by companies which make a positive contribution to society and the environment throuh sustainable and socially responsible practices. The Fund seeks to avoid investment in certain areas such as companies which have a material involvement in alcohol, tobacco and weapon production, amblin and publication of violent or explicit materials. Hiher Income To provide an above averae and rowin level of income toether with capital rowth over the loner term. The Manaer will seek to achieve the investment objective by investin in a mix of equities, fixed interest securities and such other investments that the Manaer considers suitable. UK Equity Growth To achieve lon-term capital rowth with a reasonable level of income. The UK Equity Growth Fund is desined to invest primarily in a rane of UK incorporated and/or listed companies which the Manaer believes offer ood potential for lon-term capital rowth.

5 ECCLESIASTICAL Investment Funds 5 Risks Most of the assets will be invested in the UK stock market so could be affected by any chane in this market. Selectin stocks due to our ethical criteria means that the choice of stocks is limited to a sub set of the stock market and this could lead to reater volatility. These Funds are marketable to all retail investors. These Funds are manaed in line with the requirements for inclusion in an ISA. The portfolio will consist primarily of transferable securities but the Manaer may also invest in units in collective investment schemes, money-market instruments, derivatives and forward transactions, deposits, nil and partly paid securities, bonds, convertible bonds, cash and near cash as deemed economically appropriate to meet the Funds objectives. The Manaer does not currently intend to use derivatives for any purpose other than the efficient portfolio manaement of the Funds, althouh it may, subject to obtainin and maintainin the requisite permissions from the FSA under the Financial Services and Markets Act 2000 and on ivin not less than 60 days notice to shareholders in the Funds, use derivatives in pursuit of their investment objectives in the future. If derivatives are used for the purpose of meetin the investment objectives of the Funds it is not intended that the use of derivatives would cause the Net Asset Value of the Funds to have hiher volatility or otherwise cause the existin risk profiles of the Funds to chane. The investment s value may be affected by chanes in exchane rates. The entire market of European stocks and shares miht decline thus affectin the prices and values of the assets. Selectin stocks due to our ethical criteria means that the choice of stocks is limited to a sub set of the stock market and this could lead to reater volatility. The investment s value may be affected by chanes in exchane rates. The equity markets invested in miht decline thus affectin the prices and values of the assets. Some of the investments may be in emerin markets, which can be more volatile and carry risks associated with chanes in their economies and political status. Also they may not offer the same level of investor protection as would apply in more developed jurisdictions. Selectin stocks due to our ethical criteria means that the choice of stocks is limited to a sub set of the stock market and this could lead to reater volatility. The Fund holds a variety of different fixed interest securities includin overnment and corporate bonds, preference shares and permanent interest bearin shares with a spread of durations. The Fund may invest in index or inflation linked bonds as well as conventional fixed interest instruments. Some of the bonds hold credit ratins however the Fund also invests in unrated bonds and other fixed interest instruments. The investment s value may be affected by chanes in inflation and interest rates. An issuer of fixed interest stock may default, so causin a reduction in the capital value and income value of the Fund. The annual manaement chare is taken from capital not income so the capital value of the Fund could be reduced over time. Selectin stocks due to our ethical criteria means that the choice of stocks is limited to a sub set of the stock market and this could lead to reater volatility. Most of the assets will be invested in the UK stock market so could be affected by any chane in this market. The Fund holds Corporate and Government bonds of a spread of durations. The various bonds have a spread of different security ratins as the investment manaers do not set minimum security standards for such bonds. The annual manaement chare is taken from capital not income so the capital value of the Fund could be reduced over time. An issuer of fixed interest stock may default, so causin a reduction in the capital and income value of the Fund. The investment s value may be affected by chanes in exchane rates and interest rates. Most of the assets will be invested in the UK stock market so could be affected by any chane in this market.

6 6 Amity UK Fund ECCLESIASTICAL Investment Funds Report of the Authorised Corporate Director This review covers the year from 1 January 2009 to. Over the course of the year the share price of the Amity UK Fund rose by 27.6%* with income reinvested, compared to a rise of 30.1% in the FTSE All Share Index measured on a similar basis and 30.4%* in the IMA UK All Companies Sector Averae. Cash balances at were 4.8%. Good performances came from holdins in eneral retailers such as Next, Dunelm and Marks & Spencer which benefited from stroner than expected retail sales. China Shineway (pharmaceuticals), Standard Chartered (banks), Rentokil (support Services) and Volex (enineerin) were also amon the best performin companies. On the debit side, the weak housin market and slump in office construction had a neative impact on the performance of the buildin merchants, SIG and Wolseley and on the home builder, Berkeley Group. Several defensive holdins also fell in value over the year includin United Utilities, Severn Trent and Cable & Wireless. Fund activity included purchases in Astra Zeneca (pharmaceuticals), HSBC and Standard Chartered (banks), Booker (food wholesale) and National Grid (utilities). The Fund also increased holdins in companies involved in affordable housin includin Galliford Try, Mears, WSP Group and Moran Sindall. There were numerous rihts issues durin the year as companies attempted to strenthen their balance sheets amid the economic and financial uncertainty. The rihts issues the Fund participated in included Land Securities, British Land, Cookson, Marshalls, HSBC, Lloyds and Holidaybreak. The Fund benefited from the proceeds of the takeover of BPP Holdins. The Fund took some profits in holdins of Dechra Pharmaceuticals and Great Portland Estates. Prospects The economic environment remains challenin and it is possible that there will be further bad news to come. Consequently the Fund will continue to follow a cautious approach to investment, maintainin a bias towards the more defensive sectors. The weakness of Sterlin should support the performance of companies which enerate a hih proportion of their revenues overseas. Despite the disappointin outcome of the Copenhaen Summit, we believe that there are still ood opportunities to invest in companies providin services or products in environmental markets particularly enery conservation, pollution control and water treatment. Asset allocation by sector at The fiures in brackets show allocation at 31 December 2008 Healthcare 14.8% (14.2%) Performance Financials 18.3% (20.5%) /12/04 30/06/05 Telecommunications 5.8% (7.0%) 31/12/05 30/06/06 Amity UK Fund Utilities 4.7% (6.0%) Consumer Services 22.4% (21.7%) 31/12/06 30/06/07 IMA UK All Companies Sector Averae Oil & Gas 4.7% (5.0%) Consumer Goods 3.2% (3.3%) Industrials 21.9% (18.7%) Fiures exclude cash Graph showin the rowth of the Amity UK Fund compared to IMA UK All Companies Sector Averae from 31 December 2004 to 31 Dec 2009, mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prices re-based to 100. Source: Morninstar. 31/12/07 30/06/08 31/12/08 30/06/09 Basic Materials 2.5% (2.0%) Technoloy 1.7% (1.6%) 31/12/09 * mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer Performance and rankin Amity UK Fund IMA UK All Companies Sector Averae Growth Rank Growth Number 31/12/08-31/12/ % % /12/07-31/12/ % % /12/06-31/12/07-4.3% % /12/05-31/12/ % % /12/04-31/12/ % % 239 Table showin % rowth and rankin of the Amity UK Fund aainst IMA UK All Companies Sector Averae and total number of funds. Fiures compared on a mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Source: Morninstar.

7 ECCLESIASTICAL Investment Funds 7 Major holdins Net income distribution/accumulation Top ten holdins Percentae of total net assets at Morrison (Wm) Supermarkets 3.00% Tesco 2.75% Dunelm Group 2.65% GlaxoSmithKline 2.63% Dechra Pharmaceuticals 2.44% BG Group 2.36% Centrica 1.92% Halma 1.83% Net income Pence per share Per 1,000 invested distribution/ at 2 January 2005 ( ) accumulation 2009 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C China Shineway Pharmaceuticals 1.81% Smith & Nephew 1.76% Share Class A Share Class B Share Class C Total expense ratio at 1.63% 0.88% 1.38% Total expense ratio at 31 December % 0.82% 1.32% 2006 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Portfolio turnover rate 31/12/09 31/12/ % 25.61% Please note: Stocks and shares should be viewed as a medium to lon-term investment, usually for a period of 5 years or more. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance. Share prices and Fund size Share Class A ,711, ,713,365 Share Class B ,793, ,295,436 Share Class C ,678, ,722, December 2008 Share Class A ,205, ,607,885 Share Class B ,222, ,295,436 Share Class C ,867, ,548, December 2007 Share Class A ,632, ,886,673 Share Class B , ,935 Share Class C ,642, ,704, December 2006 Share Class A ,455, ,002,224 Share Class B , ,935 Share Class C ,342, ,696, December 2005 Share price rane Fund size Hihest for the year Lowest for the year Net asset value Net asset value Number of (pence) (pence) ( ) (pence per share) shares in issue Share Class A ,082, ,091,862 Share Class B , ,935 Share Class C ,609, ,702,963

8 8 Amity European Fund ECCLESIASTICAL Investment Funds Report of the Authorised Corporate Director This review covers the year from 1 January 2009 to. Over the course of the year the share price of the Amity European Fund rose by 18.2%*, compared to ains of 20.1% in the FTSE World Europe ex UK Index ( terms) measured on a similar basis and 19.3%* in the IMA Europe (excludin UK) Sector Averae. Cash balances were reduced durin the year and fell from 17.6% at the start of the year down to 8.8% on. Amid the stron rally in the equity market, ood performances came from some of the more cyclical equities includin the capital oods companies, CaroTec and Kone and the chemical companies Kemira and Yara. The watch company Swatch also performed stronly over the year. In contrast the more defensive holdins in companies such as Vivendi, France Telecom and Gas Natural all recorded neative returns as did the insurance companies, Munich Re and Zurich Financial Services. The Fund acquired new holdins in the telecom companies, France Telecom and KPN, the utility company, Fortum, the life assurance company, Allianz and a leadin manufacturer of artificial limbs, Ossur. There were also additional purchases in Yara, Swatch, Merck Kaa, Roche and Suez Environment. The economic downturn and bankin crisis led numerous companies to strenthen their balance sheets throuh rihts issues and the Fund took up shares in Enel, Imerys, Nordea Bank, Saint Gobain, Husqvarna and Gas Natural. The Fund disposed out of its holdins in Husqvarna, Nordea Bank and Brisa. The Fund also took some profits in Swatch, Schneider Electric, Terna and Kone. Prospects Europe currently faces an environment of weak domestic demand and a loss of competitiveness from the strenth of the Euro. The rowin debt crisis amon some periphery Eurozone economies such as Greece, Portual, Ireland and Spain is leadin to the early withdrawal of expansionary fiscal policy which threatens to stranle any nascent recovery in these economies. The core European economies such as Germany and Scandinavian countries are in a stroner position and already benefitin from the pick up in lobal trade led by China and the Asian economies. The Fund will continue to maintain a relatively cautious stance holdin hiher than normal cash balances and havin a bias towards defensive investments in the core European economies. * mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer Asset allocation by eoraphical area at The fiures in brackets show allocation at 31 December 2008 Scandinavia 21.7% (18.5%) Performance Ireland 1.0% (0.6%) /12/07 Switzerland 11.0% (11.4%) 31/03/08 Germany 24.8% (22.7%) 30/06/08 30/09/08 Amity European Fund Spain 3.9% (3.9%) 31/12/08 IMA Europe (excludin UK) Sector Averae Graph showin the rowth of the Amity European Fund compared to IMA Europe (excludin UK ) Sector Averae from 31 Dec 2007 to 31 Dec 2009, mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prices re-based to 100. Source: Morninstar. Performance and rankin* Amity European Fund Netherlands 9.4% (6.4%) IMA Europe (excludin UK) Sector Averae Growth Rank Growth Number 31/12/08-31/12/ /12/07-31/12/ /03/09 United Kindom 1.1% (2.8%) Other Continental Europe 4.5% (9.7%) France 22.6% (24.0%) Fiures exclude cash 30/06/09 30/09/09 31/12/09 Amity European Fund IMA Europe (Includin UK) Sector Averae Growth Rank Growth Number 31/12/06-31/12/07 8.4% % 17 31/12/05-31/12/ % % 16 31/12/04-31/12/ % % 16 Table showin % rowth and rankin of the Amity European Fund aainst IMA Europe (excludin UK) Sector Averae and IMA Europe (includin UK) Sector Averae and total number of funds. Fiures compared on a mid-tomid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prior to the 31 December 2007 fiures compared on a bid-to-bid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Source: Morninstar. *On the 1st July 2008 The Amity European Fund transferred from the IMA Europe (includin UK) Sector to the IMA Europe (excludin UK) Sector. From the 31st December 2007 the portfolio had been rebalanced to meet the new sector requirements which is reflected in the performance raph above.

9 ECCLESIASTICAL Investment Funds 9 Major holdins Net income distribution/accumulation Top ten holdins Percentae of total net assets at Roche 3.66% Yara International 2.56% Swatch 2.37% Statoil Hydro 2.34% Metro 2.29% Bayer 2.26% Sanofi-Aventis 2.21% Munich Re 2.20% Net income Pence per share Per 1,000 invested distribution/ at 2 January 2005 ( ) accumulation 2009 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Suez Environnement 2.17% Carbone Lorraine 2.15% Share Class A Share Class B Share Class C Total expense ratio at 1.62% 0.87% 1.37% Total expense ratio at 31 December % 0.83% 1.37% 2006 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Portfolio turnover rate 31/12/09 31/12/ % 68.66% Please note: Stocks and shares should be viewed as a medium to lon-term investment, usually for a period of 5 years or more. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance. Share prices and Fund size Share Class A ,502, ,325,058 Share Class B ,201, ,242,265 Share Class C , , December 2008 Share Class A ,285, ,773,153 Share Class B ,980, ,242,265 Share Class C , , December 2007 Share Class A ,777, ,736,353 Share Class B ,004, ,242,264 Share Class C , , December 2006 Share Class A ,480, ,669,298 Share Class B ,795, ,242,265 Share Class C , , December 2005 Share price rane Fund size Hihest for the year Lowest for the year Net asset value Net asset value Number of (pence) (pence) ( ) (pence per share) shares in issue Share Class A ,034, ,603,956 Share Class B ,742, ,242,265 Share Class C , ,050

10 10 Amity International Fund ECCLESIASTICAL Investment Funds Report of the Authorised Corporate Director This review covers the year from 1 January 2009 to. Over the course of the year the share price of the Amity International Fund rose by 26.0%*, compared to a rise of 19.6% in the FTSE World Index measured on a similar basis and 22.8%* in the IMA Global Growth Sector Averae. Cash balances were kept hih throuhout the period due to continued caution over the outlook for lobal economy and at were 18.3%. The Fund benefited from a hih exposure to Asian companies as the reion has weathered the lobal economic turmoil better than the developin countries. Some China related holdins which performed stronly included China Shineway (pharmaceuticals), Lonkin Holdins (enineerin), Hop Fun (cardboard boxes), SIA Enineerin (aircraft maintenance) and VTech (electronics). Other ood performers included the UK enineerin company Fenner, the Swiss watch manufacturer, Swatch and the Norweian fertiliser company, Yara. Portfolio activity included the acquisition of shares in defensive sectors in the more developed markets includin the purchase of pharmaceutical companies such as AstraZeneca, GlaxoSmithKline and Johnson & Johnson and food retailers such as Carrefour, Metro, Morrison and Tesco. The Fund also invested in crop science and fertiliser companies, as rowin populations and income levels in developin countries increase food demand, throuh purchases of Synenta and Yara. Other purchases in developed markets included Alstom, Aviva, BT Group and Swatch Group. The Fund increased its exposure to Asia and especially to China related stocks as this economy was less affected and recovered more quickly from the lobal downturn. Acquisitions in this reion included purchases of Advanced Info Services (telecoms), China Resources Power (electricity eneration), China Honxin (sports shoes), DBS Group (bankin), Li & Fun (tradin) and Jardine Matheson. The Fund participated in a number of rihts issues includin AXA, Malayan Bankin, Husqvarna and Wolseley. The Fund also benefited from proceeds from the takeover of Sinapore Petroleum and British Enery. Sales included Sero, Lloyds Bankin Group Rihts and China Oriental. Prospects Credit conditions have beun to ease and lobal equity markets have enjoyed a stron bull run, but there is little evidence of any meaninful improvement in Western economic fundamentals. Japan has experienced many false dawns over the last 20 years, but was unable to escape the economic consequences of its bankin crisis and the hih debt levels in many Western economies is likely to impede recovery. Lower exposure to the financial industry meant that Asia was less exposed to the bankin crisis better positioned to deal with the threat of deflation than many of the western economies and appears a more attractive reion for investment. The Fund continues to hold hiher than normal cash balances and our intention is to adopt a radual and selective stratey, endeavourin to increase the levels of net investment when the outlook seems darkest. Asset allocation by eoraphical area at The fiures in brackets show allocation at 31 December 2008 Performance Europe 39.6% (39.4%) 31/12/04 Asia (ex Japan) 34.6% (25.2%) 30/06/05 31/12/05 30/06/06 31/12/06 Amity International Fund IMA Global Growth Sector Averae Graph showin the rowth of the Amity International Fund compared to IMA Global Growth Sector Averae from 31 December 2004 to 31 December 2009, mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prices re-based to 100. Source: Morninstar. Performance and rankin North & South America 7.7% (11.0%) 30/06/07 31/12/07 30/06/08 Australasia 0.5% (0.9%) Japan 0.3% (0.5%) United Kindom 17.3% (23.0%) Fiures exclude cash 31/12/08 30/06/09 31/12/09 * mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer Amity International Fund IMA Global Growth Sector Averae Growth Rank Growth Number 31/12/08-31/12/ % % /12/07-31/12/ % % /12/06-31/12/ % % /12/05-31/12/ % 6 8.1% /12/04-31/12/ % % 134 Table showin % rowth and rankin of the Amity International Fund aainst IMA Global Growth Sector Averae and total number of funds. Fiures compared on a mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Source: Morninstar.

11 ECCLESIASTICAL Investment Funds 11 Major holdins Net income distribution/accumulation Top ten holdins China Shineway Pharmaceuticals 3.12% Lonkin Holdins 2.06% Yara International 2.04% Telefonica ADR 1.98% Statoil Hydro 1.97% GlaxoSmithKline 1.91% Roche 1.91% Sanofi-Aventis 1.77% Swatch 1.71% SIA Enineerin 1.60% Total expense ratio at Percentae of total net assets at 1.59% 0.84% 1.34% Total expense ratio at 31 December % 0.83% 1.33% Net income Pence per share Per 1,000 invested distribution/ at 2 January 2005 ( ) accumulation 2009 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Portfolio turnover rate 31/12/09 31/12/ % 73.36% Please note: Stocks and shares should be viewed as a medium to lon-term investment, usually for a period of 5 years or more. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance. Share prices and Fund size Share Class A ,276, ,532,949 Share Class B ,314, ,939,672 Share Class C , , December 2008 Share Class A ,280, ,691,583 Share Class B ,174, ,773,269 Share Class C , , December 2007 Share Class A ,974, ,212,188 Share Class B ,107, ,773,269 Share Class C , , December 2006 Share Class A ,392, ,055,235 Share Class B ,618, ,773,269 Share Class C , , December 2005 Share price rane Fund size Hihest for the year Lowest for the year Net asset value Net asset value Number of (pence) (pence) ( ) (pence per share) shares in issue Share Class A ,055, ,184 Share Class B ,702, ,773,269 Share Class C , ,750

12 12 Amity Sterlin Bond Fund ECCLESIASTICAL Investment Funds Report of the Authorised Corporate Director This review covers the year from 1 January 2009 to. Over the course of the year the share price of the Amity Sterlin Bond Fund rose by 12.9%*, compared to a rise of 22.2%* in the IMA Strateic Bond Sector Averae. The FTSE All-Stocks Index decreased by 1.2% measured on a similar basis. The Fund benefited from the narrowin in the yield advantae of corporate bonds compared to ilts durin the year as confidence in the financial markets improved. The sharp fall in yield for stocks such as Hammerson 5 ¼% 2016, Next 5 7/8% 2016 and Rentokil 5 ¾% 2016 led to lare rises in the price of the bonds. Portfolio activity involved reducin the exposure of the Fund to overnment securities in order to take advantae of the hih credit spreads available from corporate bonds and preference shares. Purchases included bonds from RSA, British Telecom, Kinfisher, RaboBank and British Suar. The Fund also invested in issues from the International Finance Facility for Immunisation and BUPA. A purchase was also made in an Anlian Water floatin rate note which offered some protection from inflation as its yield is linked to LIBOR. The Fund sold holdins in Co-op after it mered with Britannia Buildin Society as this increased our exposure to a sinle non-ilt credit to over 5% of Fund assets which was considered too hih. Prospects There are stron reasons to believe that ilt yields will be pushed hiher in Inflation is movin up as the depreciation of Sterlin and risin commodity prices feed throuh to hiher import prices. Loose monetary and fiscal policy could also push up domestically enerated inflation. Furthermore the size of the UK budet deficit may encourae investors to demand hiher yields. In this environment the fall in demand for ilts brouht about by the end of quantitative easin should be expected to drive yields hiher. The Fund has no conventional ilt exposure and will continue to concentrate on opportunities in corporate bond markets. Whilst corporate bonds do not represent as compellin a case as they did at the start of 2009, we still believe they look ood value, especially when compared to ilts and cash. We remain wary of the daner of hiher inflation followin the extensive use of quantitative easin, hih budet deficits and loose monetary policy and are lookin for opportunities to increase the exposure of the Fund to index-linked bonds. Overall the aim of the Fund will be to maintain a balanced and diversified portfolio, with a sinificant deree of income security. Asset allocation by Bond Ratin at The fiures in brackets show allocation at 31 December 2008 BB 3.7% (0.0%) Performance /04/08 11/05/08 11/06/08 Unrated 24.6% (30.4%) BBB 37.0% (34.5%) 11/07/08 11/08/08 11/09/08 11/10/08 11/11/08 11/12/08 Amity Sterlin Bond Fund 11/01/09 11/02/09 Cash 6.4% (0.7%) IMA Strateic Bond Sector Averae AAA 4.6% (8.4%) A 21.1% (26.0%) AA 2.6% (0.0%) Graph showin the rowth of the Amity Sterlin Bond Fund compared to IMA Strateic Bond Sector Averae from 11 April 2008 to 31 Dec 2009, mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prices re-based to 100. Source: Morninstar. 11/03/09 11/04/09 11/05/09 11/06/09 11/07/09 11/08/09 11/09/09 11/10/09 11/11/09 11/12/09 * mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer Performance and rankin Amity Sterlin Bond Fund IMA Strateic Bond Sector Averae Growth Rank Growth Number 31/12/08-31/12/ % % 62 31/12/07-31/12/08 N/A N/A N/A N/A Table showin % rowth and rankin of the Amity Sterlin Bond Fund aainst IMA Strateic Bond Sector Averae and total number of funds. Fiures compared on a mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Source: Morninstar.

13 ECCLESIASTICAL Investment Funds 13 Major holdins Net income distribution/accumulation Top ten holdins Percentae of total net assets at Marks & Spencer 5.625% 24/03/ % IFFIM 3.375% 15/05/ % Aviva 8.75% 3.03% British Suar 10.75% 02/07/ % Lewis (John) 10.5% 23/01/ % BUPA 7.5% 07/04/ % Pearson 7% 27/10/ % Net income Pence per share Per 1,000 invested distribution/ at launch ( ) accumulation 2009 Share Class A Share Class B Share Class C* n/a n/a 2008 Share Class A Share Class B Share Class C* n/a n/a 8 9 Smith Industries 7.25% 30/06/ % Compass 6.375% 29/05/ % Fund launched on 18 February 2008 *Share Class C is currently inactive 10 British Telecom 4.5% I/L 25/04/ % Total expense ratio at 1.37% 0.77% N/A* Please note: Stocks and shares should be viewed as a medium to lon-term investment, usually for a period of 5 years or more. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance. Total expense ratio at 31 December % 0.50% N/A* Portfolio turnover rate 31/12/09 31/12/ % % Share prices and Fund size Share Class A ,312, ,513,606 Share Class B ,159, ,000,000 Share Class C* n/a n/a n/a n/a n/a 31 December 2008 Share price rane Fund size Hihest for the year Lowest for the year Net asset value Net asset value Number of (pence) (pence) ( ) (pence per share) shares in issue Share Class A , ,789 Share Class B ,281, ,000,000 Share Class C* n/a n/a n/a n/a n/a Fund launched on 18 February 2008 *Share Class C is currently inactive

14 14 Hiher Income Fund ECCLESIASTICAL Investment Funds Report of the Authorised Corporate Director This review covers the year from 1 January 2009 to. Over the course of the year the share price of the Hiher Income Fund rose by 23.0%*, compared to a rise in the IMA UK Equity & Bond Income Sector Averae of 19.3%*. The FTSE All-Share Index rose 30.1% and the FT All-Stock Government Securities Index decreased by 1.2%, both on a similar basis. Cash balances increased over the year and at reached 6.9%. The performance of the Fund benefited from the stron returns from UK companies includin Fenner (enineerin), Marks & Spencer, Spirent Communications (telecom equipment) and Yule Catto (chemicals). Some China related equities also enerated ood returns includin China Shineway, Hop Fun and Ta Yan. The Fund also benefited from the stron performance of corporate bonds, which rose in value as credit spreads fell. In contrast, some of the worst performin holdins included lare, hih yieldin, defensive companies, such as Cable & Wireless, Ladbrokes, RSA Insurance, Sainsbury and Severn Trent. The bond weihtin fell from 57.7% to 45.8% as most new investment was tareted towards equities. New purchases of corporate bonds mainly occurred at the start of the year when credit spreads were at their widest. Equity investment was mainly in hih yieldin defensive equities includin the pharmaceutical companies, AstraZeneca, GlaxoSmithKline and Roche, the brewer, Diaeo, and the telecommunications companies, Cable & Wireless and BT Group. The Fund also invested in the insurance industry throuh purchases of Aviva, RSA Insurance and Prudential. The Fund reduced its ilt holdins to raise cash for re-investment in other areas. The Fund also received cash from the takeover of British Enery. Prospects The Great Recession of 2009 proved less catastrophic than many had feared. Thouh rowth has stabilised, it appears fraile and anaemic. If it were not for Government support and corporate restockin, demand, in the West at least, would probably still be fallin. Many of the imbalances which caused the crisis remain unresolved. Despite the liquidity and monetary stimuli, property prices continue to fall in most countries. Bankin stresses still persist, made worse by the hih level of over-indebtedness in the West. We are continuin with the stratey that served us well durin the market downturn, with hiher than normal fixed interest exposure and overweiht positions to those sectors that should prove resilient in the event that there is a further economic downturn. We prefer Asian over Western focussed companies with Sterlin s weakness providin extensive opportunities for profitable expansion. Asset allocation at The fiures in brackets show allocation at 31 December 2008 Performance /12/04 30/06/05 Fixed Interest 43.1% (56.1%) 31/12/05 30/06/06 Hiher Income Fund 31/12/06 30/06/07 IMA UK Equity & Bond Income Sector Averae Net Other Assets (Inc cash) 7.3% (1.8%) Equities 49.6% (42.1%) Graph showin the rowth of the Hiher Income Fund compared to IMA UK Equity & Bond Income Sector Averae from 31 Dec 2004 to 31 Dec 2009, mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prices re-based to 100. Source: Morninstar. 31/12/07 30/06/08 31/12/08 30/06/09 31/12/09 * mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer Performance and rankin Hiher Income Fund IMA UK Equity & Bond Income Sector Averae Growth Rank Growth Number 31/12/08-31/12/ % % 21 31/12/07-31/12/ % % 20 31/12/06-31/12/07 7.7% 1 0.5% 20 31/12/05-31/12/ % % 20 31/12/04-31/12/ % % 19 Table showin % rowth and rankin of the Hiher Income Fund aainst IMA UK Equity & Bond Income Sector Averae and total number of funds.fiures compared on a mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Source: Morninstar.

15 ECCLESIASTICAL Investment Funds 15 Major holdins Net income distribution/accumulation Top ten holdins Percentae of total net assets at Treasury 3.25% 07/12/ % Treasury 4.5% 07/03/ % China Shineway Pharmaceuticals 2.16% Fenner 1.72% GlaxoSmithKline 1.64% Roche-Finance 5.375% 29/08/ % National Grid 3.603% 08/07/ % Vodafone 1.48% Net income Pence per share Per 1,000 invested distribution/ at 2 January 2005 ( ) accumulation 2009 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C General Accident 7.875% 1.19% Prudential 0.99% Share Class A Share Class B Share Class C Total expense ratio at 1.38% 0.88% 1.13% Total expense ratio at 31 December % 0.83% 1.08% 2006 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Portfolio turnover rate 31/12/09 31/12/ % 78.01% Please note: Stocks and shares should be viewed as a medium to lon-term investment, usually for a period of 5 years or more. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance. Share prices and Fund size Share Class A ,072, ,927,969 Share Class B ,159, ,662,423 Share Class C ,021, ,627, December 2008 Share Class A ,703, ,742,478 Share Class B ,088, ,976,476 Share Class C ,692, ,008, December 2007 Share Class A ,889, ,788,998 Share Class B ,689, ,218,959 Share Class C ,389, ,609, December 2006 Share Class A ,379, ,188,583 Share Class B ,267, ,250,129 Share Class C ,534, ,132, December 2005 Share price rane Fund size Hihest for the year Lowest for the year Net asset value Net asset value Number of (pence) (pence) ( ) (pence per share) shares in issue Share Class A ,347, ,593,451 Share Class B ,166, ,250,129 Share Class C ,654, ,862,894

16 16 UK Equity Growth Fund ECCLESIASTICAL Investment Funds Report of the Authorised Corporate Director This review covers the year from 1 January 2009 to. Over the course of the year the share price of the UK Equity Fund rose by 24.2%*. The FTSE All Share Index rose 30.1% on a similar basis and the IMA UK All Companies Sector Averae increased by 30.4%*. At, 55.0% of the fund was invested in FTSE 100 companies, 24.7% in mid cap companies and 14.8% in Smaller UK companies. Cash balances at were 5.5% (31 December 2008: 16.7%). Good performances came from many of the smaller companies in the portfolio includin Volex (enineerin), Pace (electronics), Dunelm (eneral retail) and Spirent (telecom equipment). Some of the larer companies to perform stronly compared to the market included Rentokil (support services), Next (eneral retail), Standard Chartered (banks) and Prudential (life assurance). Amid the slowdown in the construction industry, Wolseley, Balfour Beatty and Berkeley all laed the index. In the sharp market rally some of the lare defensive companies, such as Sainbury, Morrison Supermarkets, Cable & Wireless, BT and National Grid, underperformed as investors switched into more cyclical sectors. Fund activity durin the year included the purchase of companies in the real estate sector, such as Sonbird Estates, Quintain Estates & Development and London & Stamford which appear cheap followin the collapse in value of the property sector durin the financial crisis. The Fund also souht to increase exposure to companies with stable earnins that were placed to withstand the difficult economic environment includin Booker (food wholesale), Astra Zeneca (pharmaceuticals) and Cable & Wireless (telecoms). Other purchases included Galiform, Intec, Melrose and Valiant Petroleum. The outlook for the retail sector remains poor as some of the financial stimuli put in place at the heiht of the financial crisis are slowly withdrawn and the Fund made sales of Marks & Spencer, Home Retail and Next. The Fund made some disposals in the life assurance sector of Prudential and Leal & General thouh these were balanced by purchases of Friends Provident and Resolution. Prospects 2010 is shapin up to be a tu of war between economic rowth driven from emerin markets and the likelihood of monetary and fiscal tihtenin in developed markets, a potent mix which could lead to a period of rane bound tradin. The Fund will remain focused on companies able to demonstrate earnins and balance sheet resilience. * mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer Asset allocation at The fiures in brackets show allocation at 31 December 2008 Consumer Goods 9.8% (10.7%) Healthcare 8.6% (7.2%) Performance Financials 13.1% (12.7%) 31/12/04 30/06/05 31/12/05 30/06/06 UK Equity Growth Fund Oil & Gas 9.2% (10.6%) 31/12/06 30/06/07 IMA UK All Companies Sector Averae Technoloy 7.3% (2.6%) Consumer Services 17.2% (17.8%) Telecommunications 4.0% (4.5%) Utilities 3.0% (9.7%) Basic Materials 1.8% (2.4%) Industrials 26.0% (21.8%) Fiures exclude cash Graph showin the rowth of the UK Equity Growth Fund compared to IMA UK All Companies Sector Averae from 31 Dec 2004 to 31 Dec 2009, mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Prices re-based to 100. Source: Morninstar. 31/12/07 30/06/08 31/12/08 30/06/09 31/12/09 Performance and rankin UK Equity Growth Fund IMA UK All Companies Sector Averae Growth Rank Growth Number 31/12/08-31/12/ % % /12/07-31/12/ % % /12/06-31/12/07-1.4% % /12/05-31/12/ % % /12/04-31/12/ % % 239 Table showin % rowth and rankin of the UK Equity Growth Fund aainst IMA UK All Companies Sector Averae and total number of funds. Fiures compared on a mid-to-mid basis excludin initial chares with net income reinvested for a basic rate UK taxpayer. Source: Morninstar.

17 ECCLESIASTICAL Investment Funds 17 Major holdins Net income distribution/accumulation Top ten holdins Percentae of total net assets at Pace 3.81% GlaxoSmithKline 3.30% BG Group 3.08% BP 2.66% British American Tobacco 2.51% Compass 2.35% Next 2.35% AstraZeneca 2.10% Net income Pence per share Per 1,000 invested distribution/ at 2 January 2005 ( ) accumulation 2009 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Unilever 2.08% Vodafone 2.06% Share Class A Share Class B Share Class C Total expense ratio at 1.61% 0.86% 1.36% Total expense ratio at 31 December % 0.80% 1.33% 2006 Share Class A Share Class B Share Class C Share Class A Share Class B Share Class C Portfolio turnover rate 31/12/09 31/12/ % 24.42% Please note: Stocks and shares should be viewed as a medium to lon-term investment, usually for a period of 5 years or more. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance. Share prices and Fund size Share Class A ,795, ,188,284 Share Class B ,777, ,138,383 Share Class C ,523, ,573, December 2008 Share Class A ,340, ,952,503 Share Class B ,548, ,138,383 Share Class C ,228, ,388, December 2007 Share Class A ,660, ,946,983 Share Class B ,948, ,927,667 Share Class C ,993, ,385, December 2006 Share Class A ,666, ,805,148 Share Class B ,338, ,974,952 Share Class C ,123, ,385, December 2005 Share price rane Fund size Hihest for the year Lowest for the year Net asset value Net asset value Number of (pence) (pence) ( ) (pence per share) shares in issue Share Class A ,406, ,575,041 Share Class B ,306, ,974,952 Share Class C ,351, ,385,254