## **Quilter Investors Charity Authorised Investment Funds**
Annual Report and Financial Statements For the period ended 31 October 2020
Quilter Investors Charity Authorised Investment Funds
## **Contents**
|**Contents**||
|---|---|
||**Page**|
|**Trust Information**|**3**|
|**Manager's report**|**4**|
|**Statement of the Manager's Responsibilities**|**7**|
|**Remuneration Policy**|**8**|
|**Statement of the Trustee's Responsibilities in Respect of the Scheme and Report of the Trustee to the Unitholders of**||
|**Quilter Investors Charity Authorised Investment Funds**|**10**|
|**Statement of the Advisory Committee's Responsibilities**|**11**|
|**Independent auditors’ report to the Unitholders of Quilter Investors Charity Authorised Investment Funds**|**12**|
|**Quilter Cheviot Global Income and Growth Fund for Charities**|**14**|
|Investment Adviser's review|14|
|Performance record|15|
|Portfolio statement|17|
|Summary of material purchases and sales|21|
|Statement of total return|22|
|Statement of change in net assets attributable to unitholders|22|
|Balance sheet|23|
|Notes to the financial statements|24|
|Distribution tables|31|
|**Quilter Investors Charity Authorised Investment Funds**|**32**|
|Accounting policies|32|
Quilter Investors Charity Authorised Investment Funds
Quilter Investors Charity Authorised Investment Funds
## **Trust Information**
## **Manager**
Quilter Investors Limited Senator House 85 Queen Victoria Street London EC4V 4AB Authorised and regulated by the Financial Conduct Authority.
## **Directors of the Manager**
D Bowden (appointed 9 March 2020) P Simpson T Breedon – Non-Executive Director (appointed 1 September 2020) S Fromson – Non-Executive Director (appointed 1 August 2020) J Little – Non-Executive Director (resigned 30 September 2020) R Skelt – Non-Executive Director (appointed 1 March 2020) C Turner – Non-Executive Director (resigned 14 May 2020)
## **Investment Adviser**
Quilter Cheviot Limited Senator House 85 Queen Victoria Street London EC4V 4AB
## **Advisory Committee Members**
Shonaig Macpherson (Chairperson) Peter Cazalet Helen Simmons
Authorised and regulated by the Financial Conduct Authority.
## **Trustee**
Citibank Europe plc, UK Branch Citigroup Centre Canada Square, Canary Wharf London E14 5LB
Authorised by the Central Bank of Ireland and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority.
## **Legal Adviser**
Farrer & Co LLP 66 Lincoln’s Inn Fields London WC2A 3LH
## **Independent Auditor**
PricewaterhouseCoopers LLP 141 Bothwell Street Glasgow G2 7EQ
## **Administrator**
Citibank Europe plc 1, North Wall Quay Dublin 1 Ireland
Authorised by the Central Bank of Ireland (Central Bank) under the Investment Intermediaries Act 1995.
## **Registrar**
SS&C Financial Services International Limited & SS&C Financial Services Europe Limited (formerly DST Financial Services International Limited & DST Financial Services Europe Limited respectively) SS&C House Saint Nicholas Lane Basildon Essex SS15 5FS
The register of unitholders can be inspected at the above address.
Quilter Investors Limited, a member of the Quilter plc group of companies, is authorised and regulated by the Financial Conduct Authority. FCA Register number 208543. Registered Office: Senator House, 85 Queen Victoria Street, London, EC4V 4AB, United Kingdom. Registered Number: 4227837 England. www.quilterinvestors.com
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Quilter Investors Charity Authorised Investment Funds
## **Manager’s Report**
## **Manager's report**
The Directors present the report and financial statements for Quilter Investors Charity Authorised Investment Funds (the “Trust”) for the period from 8 January 2020 to 31 October 2020.
## **Authorised status**
The Trust is a Charity Authorised Investment Fund structured as an umbrella-type authorised unit trust and is a non-UCITS retail scheme. The Charity Commission has issued an order under section 96 of the Charities Act 2011 in relation to the Trust dated 27 November 2018 and with effect from the date of that order the Trust was established as a common investment fund for the purposes of the Charities Act 2011 and is registered with the Charity Commission with registered charity number 1180874. For the purposes of the Alternative Investment Fund Managers Directive 2011/61/EI ("AIFMD"), the Trust qualifies as an Alternative Investment Fund. It was authorised by the FCA on 27 November 2018 and is registered with FCA product reference number (PRN) 822209. It is established by way of a Trust Deed dated 27 November 2018.
## **Liability**
The sub-fund represents a segregated portfolio of assets and, accordingly, the assets of a sub-fund belong exclusively to that sub-fund and shall not be used or made available to discharge (directly or indirectly) the liabilities of, or claims against, any other person or body, including the Trust and shall not be available for any such purpose.
## **Director changes** .
Richard Skelt appointed as a Non-Executive Director of the Manager effective 1 March 2020.
Dean Bowden appointed as a Director of the Manager effective 9 March 2020.
Catherine Turner resigned as a Non-Executive Director of the Manager effective 14 May 2020.
Sarah Fromson appointed as a Non-Executive Director of the Manager effective 1 August 2020.
Timothy Breedon appointed as a Non-Executive Director of the Manager effective 1 September 2020.
Jonathan Little resigned as a Non-Executive Director of the Manager effective 30 September 2020.
## **Fund launch**
The Trust launched its first sub-fund detailed below. **Sub-fund name Unit class Launch date** Quilter Cheviot Global Income and Growth Fund for Charities Income GBP 8 January 2020
## **Significant event**
The Manager has continually assessed the impact of COVID-19 and the developments of the United Kingdom’s departure from the European Union (Brexit) on the sub-fund in the Trust. Whilst these events may have an impact on global supply chains, global market growth and employee availability over the next few years, the Manager has continued to operate as normal and has not noted a detrimental impact on the Trust to date.
The risk remains that the Trust may be adversely impacted by falls in equity market levels and adverse investor sentiment affecting revenue. In addition, there are increased operational risks depending on the extent of employment availability, however, the Manager is not adversely affected by Brexit in terms of its employees’ rights to work in the United Kingdom and its employees continue to work at home during the COVID-19 pandemic. The Manager continues to work with its counterparties and advisers to ensure that any operational and legal risks are mitigated. The sub-fund is not registered for sale in Europe and its customer base is, in the main, the United Kingdom.
The outcome of both events continues to be unclear and therefore there is an element of risk, but the Manager does not expect this to materially change the underlying long-term prospects going concern basis of the Trust or it’s individual sub-fund.
## **Assessment of value**
The COLL Sourcebook requires the Manager to conduct an “assessment of value” at least annually for the sub-fund in the Trust which includes, amongst other things (i) an assessment of whether the payments out of scheme property set out in the prospectus are justified in the context of the overall value delivered to unitholders; (ii) an assessment of the range and quality of services provided to unitholders; (iii) an assessment of performance over an appropriate timescale; and (iv) an assessment of comparable market rates for the services provided by the Manager.
The Manager’s assessment of value of the sub-fund in the Trust as at 31 March 2020 has been published and is available on the Manager's website at https://www.quilterinvestors.com/siteassets/documents/legal/assessment-of-value-report-2020-for-sub-advised-funds-.pdf.
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## **Manager’s Report (continued)**
## **Additional information**
The Trust’s Registrar, DST, changed its name to SS&C with effect from 31 March 2020, as detailed in the Trust Information section on page 3.
PricewaterhouseCoopers LLP replaced KPMG LLP as Auditor of the Trust with effect from 11 May 2020.
The head office and registered office of the Manager changed to Senator House, 85 Queen Victoria Street, London, EC4V 4AB with effect from 14 September 2020.
These financial statements have been prepared in accordance with the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Management Association in May 2014 and as amended in June 2017.
The Trust is an umbrella scheme which complies with the COLL Sourcebook and as at 31 October 2020 had one sub fund (listed below). Additional sub-funds may be launched in the future.
## **Sub-fund name**
## **Launch date**
Quilter Cheviot Global Income and Growth Fund for Charities
8 January 2020
In accordance with the requirements of the Financial Services and Market Act 2000, we hereby certify these financial statements on behalf of the Manager.
## **P Simpson**
## **D Bowden**
For and on behalf of Quilter Investors Limited Director
For and on behalf of Quilter Investors Limited Director
16 February 2021 16 February 2021
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Quilter Investors Charity Authorised Investment Funds
## **Manager's Report (continued)**
The purpose of this report is to provide details of the progress of the Trust, and the sub-fund contained within. The report provides details of the performance and the portfolio of the sub-fund.
## **Net asset value**
|**Net asset value**||||
|---|---|---|---|
||**31**|**October 2020**||
||**Net asset**|**Units**|
**Net asset**|
||**value of**|**in**|**value pence**|
||**sub-fund**|**issue**
|**per unit**|
|**Quilter Cheviot Global Income and Growth Fund for Charities**||||
|- Income|£50,453,931|50,928,604|99.07|
## **Securities Financing Transactions Regulation Disclosure**
The Trust does not currently undertake securities financing transactions (as defined in Article 3 of Regulation (EU) 2015/2365) or use total return swaps.
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## **Statement of the Manager's Responsibilities**
The COLL Sourcebook requires the Manager to prepare financial statements for each annual and semi-annual accounting period which give a true and fair view of the financial position of the Trust and of the net income and net gains or losses on the property of the Trust for the period.
- In preparing the financial statements the Manager is responsible for:
- selecting suitable accounting policies and then applying them consistently;
- making judgements and estimates that are reasonable and prudent;
- following UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland;
- complying with the disclosure requirements of the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Management Association in May 2014 and as amended in June 2017;
- keeping proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements;
- assessing the Trust and its sub-fund ability to continue as a going concern, disclosing, as applicable, matters related to going concern;
- using the going concern basis of accounting unless it either intends to liquidate the Trust or its sub-fund or to cease operations, or has no realistic alternative but to do so;
- such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and
- taking reasonable steps for the prevention and detection of fraud and irregularities.
- The Manager is responsible for the management of the Trust in accordance with its Trust Deed, the Prospectus and the COLL Sourcebook.
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Quilter Investors Charity Authorised Investment Funds
## **Remuneration Policy**
## **Remuneration Disclosure Annual Report and Accounts**
## **Remuneration Policy**
Sub-funds under the Quilter Investors Charity Authorised Investment Funds umbrella are managed by Quilter Investors Limited (QIL), a wholly owned subsidiary of Quilter plc.
The board of QIL has established a Remuneration Policy encompassing the specific requirements of the Alternative Investment Fund Managers Directive (AIFMD). This policy applies to QIL and the Alternative Investment Funds (AIFs) it manages.
## **Remuneration philosophy and alignment with risk management**
QIL’s remuneration philosophy is focused on pay for performance, where the performance is delivered within the risk appetite of the firm and the funds it manages. Remuneration is structured in a way to attract, motivate and retain the individuals needed to lead and develop the business. Remuneration structures are designed to support the delivery of QIL’s strategy and align the interests of executives, shareholders and customers.
Remuneration is comprised of fixed pay, variable pay (cash bonus with deferral and long-term incentive arrangements for eligible senior managers), non-contributory defined contribution pension and other market competitive benefits. A proportion of the annual bonus is deferred into approved funds or Quilter plc shares. QIL has taken a proportionality assessment which takes into account criteria including but not limited to:
- the conservative and low volatility strategies of the funds it manages;
- the low number of remuneration code staff and risk takers in QIL; and
- the low number of investment strategies and styles and restricted portfolio of funds it manages.
The Remuneration Committee monitors the compensation process and ensures that proposals do not reward senior staff for excessive risk-taking.
The deferred element of the annual bonus vests in equal tranches on an annual basis over three years after award. During the deferral period the unvested bonus award remains at risk of forfeiture or reduction. This helps promote sound risk management and discourage risk taking that exceeds the firm’s level of tolerated risk or that of QIL’s client funds. Through the use of deferral into funds or shares the interests of staff are closely aligned to the long-term interests of investors and shareholders.
Long-term incentive arrangements are provided in the form of either a performance-based share award or an award of Restricted Stock Units (RSUs), which are designed to align senior management reward to the success of the company in achieving its strategic priorities and growing the value of the business. Awards under the plan have a vesting period of three years and are subject to clawback for a further two years.
A copy of the Remuneration Policy is available upon request.
## **Financial and non-financial criteria**
Variable remuneration is based on a rounded assessment of firm and individual performance. The assessment of corporate performance covers both financial and non-financial performance including risk management.
Individual performance is assessed against the individual’s objectives and includes an employee’s compliance with controls and applicable company standards including the Quilter plc Code of Ethics.
## **Conflicts of interest**
The approach to and management of remuneration contain a number of measures to avoid conflicts of interest.
- Guidance is provided to managers to assist them in determining appropriate remuneration recommendations for their staff. Remuneration proposals are subject to approval by department or functional heads. For senior employees these proposals are subject to moderation as part of a broader Quilter process. No employee may determine their own remuneration.
- Employees engaged in control functions (e.g. Risk, Compliance and Internal Audit) have functional line management structures outside of the business units they oversee to ensure that remuneration decisions are not directly determined by the business units they oversee. Variable remuneration for control function employees is determined on the achievement of meeting their own functional objectives as set in their appraisal.
- The Quilter Remuneration Committee signs off the remuneration of higher paid staff.
- Personal hedging strategies which may undermine the risk alignment of variable remuneration are not permissible (e.g. entering into an arrangement with a third party under which payments will be linked to the person's remuneration or deferred consideration). Personal Account dealing policies are in place, which prohibit dealing on a personal basis or by any connected party, unless it is in compliance with the relevant policy(ies).
## **Employee remuneration disclosure**
The table below provides an overview of the following:
- Aggregate total remuneration of QIL entire staff; and
- Aggregate total remuneration of QIL ‘Material Risk Takers (MRTs)’
The MRTs are those employees who are considered could have a material impact on the risk profile of QIL or the funds it manages. This broadly includes senior management, risk takers and control functions. For the purposes of this disclosure, ‘MRTs’ does not include employees of entities to which activities have been delegated.
Amounts shown reflect payments made during the financial reporting period of QIL.
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## **Remuneration Policy (continued)**
## **Quilter Investors Charity Authorised Investment Funds**
||**Headcount**|**Total Remuneration**|**Proportion3**|
|---|---|---|---|
|**QIL Staff1**|**82**|**£13,148,921**|**-**|
|of which
Fixed remuneration
Variable remuneration
Carried interest||£7,109,696
£6,039,225
Nil|-
-
-|
|**QIL Material Risk Takers2**|**9**|**£5,410,069**|**-**|
|of which
Senior Management
Other Identified Staff|7
2|£4,590,231
£819,838|-
-|
- 1 Total remuneration costs represent the total headcount and costs associated for QIL as at the 31 December 2019.
2 The MRTs are those that have been either identified as a Qualitative Risk Taker or Quantitative Risk Taker for the QIL Business as approved by the Remuneration Committee (as at 31 December 2019).
3 The proportion of this remuneration applied to the Quilter Investors Charity Authorised Investment Funds umbrella is nil as its sub-fund did not exist as at 31 December 2019. This figure will be updated in the next annual report and Financial Statements for the year ended 31 October 2021.
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Quilter Investors Charity Authorised Investment Funds
## **Statement of the Trustee's Responsibilities in Respect of the Scheme and Report of the Trustee to the Unitholders of Quilter Investors Charity Authorised Investment Funds (the “Trust”)**
for the period from 8 January 2020 to 31 October 2020
The Trustee is responsible for the safekeeping of all the property of the Trust which is entrusted to it and ensuring proper registration of tangible moveable property, and for the collection of income arising from all such scheme property.
It is the duty of the Trustee to take reasonable care to ensure that the Trust is managed and operated in accordance with the Financial Conduct Authority’ Collective Investment Schemes Sourcebook (“the Sourcebook”), the Financial Services and Markets Act 2000, as amended, and the Trust Deed and the Prospectus of the Trust, concerning: the pricing of and dealing in Trust Units; the application of income of the scheme; and the Trust investment portfolio and borrowing activities.
Having carried out procedures and enquiries considered duly necessary to discharge our responsibilities as Trustee of the scheme, based on information and explanations provided to us, we believe that, in all material respects, the Manager:
- accordance with the Sourcebook, the Trust Deed and Prospectus;
- (ii) has observed the investment and borrowing powers and restrictions applicable to the scheme; and
- (iii) has, otherwise, ensured the proper operation of the Trust.
**Citibank Europe plc, UK Branch** Trustee 16 February 2021
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## **Statement of the Advisory Committee's Responsibilities**
The Trust has an Advisory Committee which is independent from the Manager and Trustee. It has a consultative role and is tasked with representing the interests of Unitholders.
The Advisory Committee meets twice a year to consider and, if necessary, make representations to the Manager, in relation to:
- the investment objective of the Trust and its sub-fund;
- the income distribution policy of the Trust and its sub-fund;
- the appointment of the Manager’s and Trustee’s key service providers; and
- the fees and charges associated with each class of units within the Trust and its sub-fund.
The Advisory Committee are pleased to report on the discharge of their responsibilities for the period ending 31 October 2020 as set out above.
At our twice-yearly meetings with the Manager, we are able to ask the sort of questions that individual charities would have asked of the management of their assets. We seek reassurance that the sub-fund is managed appropriately and that policies set by the Manager remain suitable and have been complied with.
At both meetings we have reviewed the investment performance of the sub-fund as well as the evolution of the client base since the inception of the Trust in January 2020. We also reviewed the costs associated with managing the sub-fund, including the Manager’s remuneration and the Ongoing Charge Figure, which includes the charges for the underlying open-ended funds held and the sub-fund’s management fees. We took a critical look at the Investment Objective and Policies of the sub-fund to ensure that they remain appropriate.
We believe that the sub-fund has been well-managed and should be able to meet its objective over the longer-term.
Unitholders can contact the Advisory Committee, care of the Manager, if they have any questions or comments to share.
## **Shonaig Macpherson**
Chair of the Advisory Committee 16 February 2021
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## **Independent auditors’ report to the Unitholders of Quilter Investors Charity Authorised Investment Funds**
## **Opinion**
In our opinion, Quilter Investors Charity Authorised Investment Funds’ financial statements:
- give a true and fair view of the financial position of the Trust as at 31 October 2020 and of the net revenue and the net capital gains on its scheme property for the 10 month period (the “period”) then ended; and
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law), the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: the Balance sheet as at 31 October 2020; the Statement of total return and the Statement of change in net assets attributable to unitholders for the period then ended; the distribution tables; the accounting policies and the notes to the financial statements.
## **Basis for opinion**
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
## **Independence**
We remained independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
## **Conclusions relating to going concern**
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you where:
- the Manager’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
- the Manager has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Trust’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Trust's ability to continue as a going concern.
## **Reporting on other information**
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Manager is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below.
## **Manager’s Report**
Under the Charities Act 2011 we are required to report to you if, in our opinion the information given in the Manager’s Report is inconsistent in any material respect with the financial statements. We have no exceptions to report arising from this responsibility.
## **Responsibilities for the financial statements and the audit**
## **Responsibilities of the Manager for the financial statements**
As explained more fully in the Statement of the Manager’s Responsibilities, the Manager is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Manager is also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Manager is responsible for assessing the Trust’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to wind up or terminate the Trust, or has no realistic alternative but to do so.
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## **Independent auditors’ report to the Unitholders of Quilter Investors Charity Authorised Investment Funds (continued)**
## **Auditors’ responsibilities for the audit of the financial statements**
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
## _**Use of this report**_
This report, including the opinions, has been prepared for and only for the Trust’s unitholders as a body in accordance with paragraph 4.5.12 of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
## **Other required reporting**
## **Opinion on matter required by the Collective Investment Schemes sourcebook**
In our opinion, we have obtained all the information and explanations we consider necessary for the purposes of the audit.
## **Collective Investment Schemes sourcebook and Charities Act 2011 exception reporting**
Under the Collective Investment Schemes sourcebook and Charities Act 2011 we are required to report to you if, in our opinion:
- sufficient and proper accounting records have not been kept; or
- the financial statements are not in agreement with the accounting records and returns.
Under the Charities Act 2011 we are also required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit.
We have no exceptions to report arising from these responsibilities.
## **PricewaterhouseCoopers LLP**
Chartered Accountants and Statutory Auditors Glasgow
16 February 2021
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Quilter Cheviot Global Income and Growth Fund for Charities**
|**Launch date**|8 January 2020|
|---|---|
|**IA Sector**|Unclassified|
|**Investment Adviser**|Quilter Cheviot Limited|
|**Net asset value**|£50,453,931|
## **Objective**
The sub-fund aims to achieve an annualised total return (net of fees) of 3.5% above the UK Consumer Prices Index over the medium term (i.e. 5 years) through exposure to a diversified range of asset classes. Out of this return, the sub-fund aims to provide a minimum income yield of 3% per annum.
Notwithstanding that the sub-fund aims to achieve a positive return over the medium term, capital is in fact at risk and there is no guarantee that such return (income or capital) will be achieved over that time period or within another time period.
## **Policy**
The sub-fund will invest globally, either directly or through collective investment schemes, in a diversified portfolio focussed on equities. The sub-fund may also invest, either directly or through collective investment schemes, in government bonds, corporate bonds, alternative investments and cash. The sub-fund may also gain exposure through regulated or unregulated collective investment schemes to alternative asset classes including commercial property, infrastructure, renewable energy and private equity.
The sub-fund may use derivatives for efficient portfolio management. The Manager considers that the use of derivatives for this purpose is not likely to affect the risk profile of the sub-fund.
The sub-fund may use derivative instruments for investment purposes on the giving of 60 days' notice to Unitholders. The use of derivatives for investment purposes may alter the risk profile of the sub-fund.
## **Investment Adviser's review**
This sub-fund launched on 8 January 2020 and this is reflected in the commentary.
## **Market review**
On the back of a successful fourth quarter, and 2019 as a whole, global stock markets reached new all-time highs in early February 2020. However, they suffered a sharp and broad-based sell-off once it became clear that the coronavirus had not been contained within China and that, due to the nature of our globalised world, the virus was soon to become a global pandemic.
From April, markets reverted to ‘risk-on’ mode, however they paused for breath in September after a steady rebound from the 23 March lows. The global economic recovery continues but a second wave of coronavirus in Europe and further regional lockdowns are a timely reminder that the pandemic still has some way to run. Unsurprisingly the pipeline of vaccines has been greeted positively by markets however, the economic consequences remain significant.
## **Performance review**
In the period from 8 January to 31 October 2020, there was a significant divergence in returns between markets. The UK as represented by the FTSE All-Share Index fell 23.1%, conversely the FTSE World ex UK Index (in sterling) rose 0.7%. Over the period the sub-fund returned 1.2% versus its performance comparator, which declined 7.7%.
The sub-fund benefited from incoming cash flows in the first three months of 2020 enabling us to time investment and therefore mitigate to a small degree the impact of the fall in global equity markets for investors in that period.
As markets rebounded in the second quarter of 2020, the sub-fund performed well across the board with underweight positions in government bonds and UK equities paying off. Although, stock selection played a greater role across the portfolio.
The overall sub-fund positioning remains underweight UK equities and overweight the overseas allocation versus the performance comparator. It is highly likely that this positioning will continue into the medium/long term, given the prospects for the UK versus other markets as we perceive them. In the third quarter of 2020, the sub-fund benefited from this underweight stance in the UK (as well as stock selection), and particularly from the positioning within the US equity element.
At a stock level, examples of companies that performed well included B&M European Value Retail, which traded well throughout the year. The majority of its stores are located in retail parks, which are easier to make covid-safe and, in our view, the company is well placed to continue to capture market share. Apple also contributed strongly; the balance sheet remains rock solid and the growth of software revenues has helped to reduce the reliance on iPhone sales, precipitating a re-rating in the share price. Even so, the iPhone 12 is expected to drive revenues in the period ahead.
The search for income, while maintaining a focus on long-term growth prospects, can be a rather head-scratching endeavour in the current environment and this has added impetus to our plans to introduce non-correlated assets and diversifiers. Market uncertainty remains: our job is to stay focused on the long term and, as ever, to try to navigate through the noise to identify rewarding long-term themes and investments.
(All performance figures rounded to one decimal place)
## **Risk and Reward Profile**
The calculated risk and reward category, as shown above, uses a method of calculation derived from EU rules. It is based on the rate at which the returns of the sub-fund have moved up and down in the past (i.e. volatility) and is not a guide to the future risk and reward category of the sub-fund. The category shown is not a target or guarantee and may shift over time. Even the lowest category 1 does not mean a riskfree investment. The seven-category scale is nonlinear, for example, 2 is not twice as risky as 1.
Sub-fund in category 4 have in the past shown moderate volatility. With a sub-fund of category 4, you have a moderate risk of losing money but your chance for gains is also moderate.
**Investment risk** - the performance aim is not a guarantee, may not be achieved and a capital loss may occur. Sub-fund which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected.
**Strategy risk** - as the sub-fund invests in other collective investment schemes, which themselves invest in assets such as bonds, company units, cash and currencies, it will be subject to the collective risks of these other sub-funds. This may include emerging markets risk and sub- investment grade credit risk.
**Smaller companies risk** - smaller companies are subject to greater risk and reward potential. Investments may be volatile or difficult to buy or sell.
**Credit risk** - the issuer of a bond or a similar investment within the sub-fund may not pay income or repay capital to the sub-fund when due. Bonds which are rated below investment grade are considered to have a higher risk exposure with respect to meeting their payment obligations.
**Interest rate risk** - investments in bonds are affected by interest rates and inflation trends which may affect the value of the sub-fund.
**Liquidity risk** - some investments may become hard to value or sell at a desired time and price. In extreme circumstances this may affect the sub-fund’s ability to meet redemption requests upon demand.
**Currency risk** - the sub-fund is denominated in British Pounds but may hold assets denominated in, or with exposure to, other currencies. The value of your units may rise and fall as a result of exchange rate movements between these currencies.
**Derivative risk** - the sub-fund uses derivatives to generate returns and/or to reduce costs and the overall risk of the sub-fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment. Derivatives also involve counterparty risk where the institutions acting as counterparty to derivatives may not meet their contractual obligations.
**Capital erosion risk** - the sub-fund takes its charges from the capital of the sub-fund. Investors should be aware that there is potential for capital erosion if insufficient capital growth is achieved by the sub-fund to cover the charges. Capital erosion may have the effect of reducing the level of income generated.
For a more detailed explanation of risks, please refer to the " **Risks** " section of the prospectus.
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Performance Record**
## **Comparative Tables**
|**Comparative Tables**||
|---|---|
|**Income**†
**Change in net assets per unit**
Opening net asset value per unit
Return before operating charges*
Operating charges**
Return after operating charges*
Distributions
Retained distributions
Closing net asset value per unit
* after direct transaction costs of***
**Performance**
Return after charges
**Other information**
Closing net asset value (£)
Closing number of units
Operating charges****
Direct transaction costs***
**Prices**
Highest unit price
Lowest unit price|**8 January 2020 to**
**31 October 2020**
**p/unit**
100.00|
||1.69
(0.60)|
||1.09|
||(2.02)
-|
||99.07|
||0.04
1.09%
50,453,931
50,928,604
0.75%
0.05%
**pence per unit**
104.1
82.52|
† From 8 January 2020. ** The operating charges include all costs borne by the sub-fund, except for direct transaction costs. They include the operating charges of any collective investment schemes in which the sub-fund invests.
*** The direct transaction costs are made up of fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. They do not include any difference between the quoted bid and offer prices or internal administrative or holding costs. These costs arise as a result of transactions undertaken both for efficient portfolio management and the meeting of the sub-fund’s objectives. These costs exclude any effect of dilution adjustments used to offset the costs.
**** The operating charges percentage is the ratio of the sub-fund's ongoing charges (excluding interest on borrowings) to the average net assets of the sub-fund. If the unit class launched during the period the operating charges figures are annualised. This includes a synthetic element of 0.10% to incorporate the OCF of the underlying sub-funds.
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Performance**
Quilter Cheviot Global Income and Growth Fund for Charities* UK Consumer Prices Index (CPI) +3.5% (benchmark)
**for the period from 8 January 2020 to 31 October 2020** 1.32% 3.62%
* Income Units
Data Source – Factset. Figures are calculated on a total return and single price basis, with net income reinvested into the sub-fund.
|**Portfolio allocation**||
|---|---|
|United Kingdom|53.56%|
|North America|20.64%|
|Europe|19.17%|
|Asia Pacific (excluding Japan)|2.16%|
|Net other assets|4.47%|
|**Total**|**100.00%**|
|**Asset allocation**||
|United Kingdom Equities|35.24%|
|Collective Investment Scheme|21.02%|
|United States Equities|20.64%|
|Sterling Denominated Debt Securities|6.30%|
|Ireland Equities|3.84%|
|Switzerland Equities|2.00%|
|Netherlands Equities|1.60%|
|France Equities|1.14%|
|China Equities|1.05%|
|Taiwan Equities|0.62%|
|Germany Equities|0.59%|
|Spain Equities|0.58%|
|South Korea Equities|0.49%|
|Italy Equities|0.42%|
|Net other assets|4.47%|
|**Total**|**100.00%**|
||**Percentage of**|
|---|---|
|**Major holdings**|**portfolio**|
|Royal London Sterling Credit Fund - Z Income|3.88%|
|Baillie Gifford Japanese Income Growth Fund - W4 Income|3.65%|
|PIMCO GIS Global Investment Grade Credit Fund -||
|Institutional Income (GBP) Hedged|2.97%|
|United Kingdom Gilt 4.5% 07/12/2042|2.21%|
|United Kingdom Gilt Inflation Linked 0.125% 22/11/2036|2.12%|
|HICL Infrastructure|1.80%|
|Microsoft|1.67%|
|Amazon.com|1.67%|
|Apple|1.57%|
|Mayfair Capital Property Income Trust for Charities|1.50%|
|**Number of holdings**|**95**|
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Portfolio statement**
as at 31 October 2020
|**Holding**
**Investment**
**United Kingdom 53.56%**
**Sterling Denominated Fixed Rate Corporate Bonds 1.02%**
£110,000
A2D Funding II 4.5% 30/09/2026
£100,000
British Telecommunications 5.75% 07/12/2028
£100,000
Motability Operations Group 4.375% 08/02/2027
£100,000
Thames Water Utilities Finance 6.75% 16/11/2028
**Sterling Denominated Fixed Rate Government Bonds 5.28%**
£406,630
United Kingdom Gilt 1.5% 22/07/2047
£629,070
United Kingdom Gilt 4.5% 07/12/2042
£602,961
United Kingdom Gilt Inflation Linked 0.125% 22/11/2036
**United Kingdom Equities 35.24%**
450,000
Aberdeen Standard European Logistics Income
640,024
Assura
7,628
AstraZeneca
133,110
B&M European Value Retail
80,116
BlackRock Throgmorton Trust
40,000
Compass
17,426
Diageo
122,800
Doric Nimrod Air Two (Preference shares)
154,608
DS Smith
570,679
Foresight Solar Fund
37,975
GlaxoSmithKline
15,006
Halma
514,618
HICL Infrastructure
425,000
Hipgnosis Songs
36,013
Intermediate Capital
438,571
International Public Partnerships
497,537
JPMorgan Global Core Real Assets
369,525
Legal & General
5,228
London Stock Exchange
478,793
M&G
60,230
National Grid
44,180
NB Private Equity Partners
16,750
Ocado
16,250
Persimmon
45,319
Princess Private Equity
26,000
Prudential
6,283
Reckitt Benckiser
29,000
RELX
463,665
Renewables Infrastructure
11,557
Rio Tinto|**Market**
**Percentage of**
**Value**
**total net assets**
**£′000**
**%**
126
0.25
130
0.26
122
0.24
139
0.27|
|---|---|
||517
1.02|
||478
0.95
1,115
2.21
1,071
2.12|
||2,664
5.28|
||461
0.91
481
0.95
600
1.19
655
1.30
494
0.98
421
0.84
436
0.86
87
0.17
431
0.85
582
1.15
491
0.97
357
0.71
906
1.80
499
0.99
421
0.84
732
1.45
488
0.97
680
1.35
435
0.86
702
1.39
556
1.10
448
0.89
387
0.77
379
0.75
400
0.79
245
0.49
427
0.85
439
0.87
626
1.24
498
0.99|
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17
Quilter Cheviot Global Income and Growth Fund for Charities
## **Portfolio statement (continued)**
as at 31 October 2020
|**Holding**
**Investment**
**United Kingdom Equities (continued)**
40,805
Smiths
295,934
Tesco
13,824
Unilever
36,000
Unite
55,356
United Utilities
482,876
Vodafone
**United Kingdom Collective Investment Schemes 12.02%**
572,042
AXA US Short Duration High Yield Fund - ZI Income
1,283,913
Baillie Gifford Japanese Income Growth Fund - W4 Income
78,400
BMO Property Growth & Income Fund - I Income
122,425
Fidelity Asia Pacific Opportunities Fund - W Accumulation
924,523
Mayfair Capital Property Income Trust for Charities
1,358,613
Royal London Sterling Credit Fund - Z Income
**Overseas 41.97%**
**Asia Pacific (excluding Japan) 2.16%**
**China Equities 1.05%**
1,115
Alibaba ADR
4,450
Tencent
**South Korea Equities 0.49%**
254
Samsung Electronics GDR
**Taiwan Equities 0.62%**
4,776
Taiwan Semiconductor Manufacturing ADR
**Europe 19.17%**
**France Equities 1.14%**
1,049
LVMH Moet Hennessy Louis Vuitton
2,750
Sanofi
**Germany Equities 0.59%**
2,179
Allianz|**Market**
**Percentage of**
**Value**
**total net assets**
**£′000**
**%**
542
1.07
601
1.19
608
1.21
293
0.58
476
0.94
495
0.98|
|---|---|
||17,779
35.24|
||517
1.02
1,841
3.65
687
1.36
305
0.61
757
1.50
1,958
3.88|
||6,065
12.02|
||268
0.53
261
0.52|
||529
1.05|
||247
0.49|
||247
0.49|
||312
0.62|
||312
0.62|
||381
0.76
192
0.38|
||573
1.14|
||295
0.59|
||295
0.59|
Quilter Investors Charity Authorised Investment Funds
18
Quilter Cheviot Global Income and Growth Fund for Charities
## **Portfolio statement (continued)**
as at 31 October 2020
|**Holding**
**Investment**
**Ireland Equities 3.84%**
5,283
Aptiv
21,955
Experian
5,970
Medtronic
4,400
Trane Technologies
**Italy Equities 0.42%**
33,500
Enel
**Netherlands Equities 1.60%**
1,262
ASML
49,373
Royal Dutch Shell 'B'
**Spain Equities 0.58%**
5,943
Cellnex Telecom
**Switzerland Equities 2.00%**
2,621
Nestle
5,607
Novartis
900
Roche
25,547
UBS
**Overseas Collective Investment Scheme 9.00%**
294,718
BBGI SICAV Fund
51,925
Matthews Asia ex Japan Dividend Fund - S Income
107,733
PIMCO GIS Global Investment Grade Credit Fund - Institutional Income (GBP) Hedged
41,243
Polar Capital Automation & Artificial Intelligence Fund - S Accumulation (GBP)
350
Veritas Asian Fund - D Income
3,440
Vontobel Sustainable Emerging Markets Leaders
7,943
Wells Fargo Emerging Markets Equity Income Fund - Y Income
**North America 20.64%**
**United States Equities 20.64%**
1,449
Adobe
526
Alphabet 'C'
341
Amazon.com
9,000
Apple
12,474
Ares Management
12,642
Coca-Cola
4,766
Electronic Arts|**Market**
**Percentage of**
**Value**
**total net assets**
**£′000**
**%**
400
0.79
623
1.24
466
0.92
447
0.89|
|---|---|
||1,936
3.84|
||211
0.42|
||211
0.42|
||354
0.70
453
0.90|
||807
1.60|
||293
0.58|
||293
0.58|
||226
0.45
335
0.66
221
0.44
228
0.45|
||1,010
2.00|
||509
1.01
676
1.34
1,500
2.97
494
0.98
333
0.66
375
0.74
656
1.30|
||4,543
9.00|
||514
1.02
632
1.25
843
1.67
794
1.57
405
0.80
467
0.93
455
0.90|
Quilter Investors Charity Authorised Investment Funds
19
Quilter Cheviot Global Income and Growth Fund for Charities
## **Portfolio statement (continued)**
as at 31 October 2020
|**Holding**
**Investment**
**United States Equities (continued)**
2,470
Facebook
2,476
Intuit
6,050
JPMorgan Chase
10,071
Merck
5,361
Microsoft
1,348
Netflix
4,000
NextEra Energy
16,546
Pfizer
1,925
Rockwell Automation
2,635
Stryker
1,200
Thermo Fisher Scientific
3,284
Visa
5,936
Xylem
**Investment assets**
**Net other assets**
**Total net assets**|**Market**
**Percentage of**
**Value**
**total net assets**
**£′000**
**%**
532
1.05
621
1.23
453
0.90
588
1.17
844
1.67
523
1.04
228
0.45
449
0.89
350
0.69
417
0.83
436
0.86
468
0.93
397
0.79|
|---|---|
||10,416
20.64|
|||
||**48,197**
**95.53**
**2,257 **
**4.47**|
||**50,454**
**100.00**|
All investments are approved securities being either officially listed in a member state or traded on or under the rules of an eligible securities market, unless otherwise stated.
|**Analysis of investments by asset class**
Equities
Collective Investment Schemes
Bonds
**Portfolio of investments**
**Net other assets**
**Total net assets**|**Market**
**Percentage of**
**Value**
**total net assets**
**£'000**
**%**
34,917
69.22
10,099
20.01
3,181
6.30
**48,197**
**95.53**
**2,257 **
**4.47**
**50,454**
**100.00**|
|---|---|
Quilter Investors Charity Authorised Investment Funds
20
Quilter Cheviot Global Income and Growth Fund for Charities
## **Summary of material purchases and sales**
for the period from 1 November 2019 to 31 October 2020
||**Cost**||**Proceeds**|
|---|---|---|---|
|**Purchases**|**£'000**|**Sales**|**£'000**|
|Royal London Sterling Credit Fund - Z Income|1,922|iShares UK Property UCITS ETF GBP - Distributing|1,125|
|Baillie Gifford Japanese Income Growth Fund - W4 Income|1,695|Royal Dutch Shell 'B'|461|
|PIMCO GIS Global Investment Grade Credit Fund - Institutional||Sands Capital Emerging Markets Growth Fund - A Accumulation|371|
|Income (GBP Hedged)|1,492|BlackRock Throgmorton Trust|337|
|Royal Dutch Shell 'B'|1,311|Compass|337|
|iShares UK Property UCITS ETF GBP - Distributing|1,262|United Kingdom Gilt 1.75% 07/09/2037|329|
|United Kingdom Gilt 4.5% 07/12/2042|1,094|Halma|318|
|United Kingdom Gilt Inflation Linked 0.125% 22/11/2036|1,022|Apple|316|
|Compass|963|United Kingdom Gilt Inflation Linked 0.125% 10/08/2028|288|
|HICL Infrastructure|873|Palo Alto Networks|247|
|Legal & General|854|||
Quilter Investors Charity Authorised Investment Funds
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Statement of total return**
for the period from 8 January 2020 to 31 October 2020
|**Statement of total return**
for the period from 8 January 2020 to 31 October 2020|||
|---|---|---|
|
**Note**
Income
Net capital gains
2
Revenue
3
Expenses
4
Interest payable and similar charges
5
Net revenue before taxation
Taxation
6
Net revenue after taxation
**Total return before distributions**
Distributions
7
**Change in net assets attributable to**
**unitholders from investment activities**
|**08.01.20 to**|**08.01.20 to**|
||**31.10.20**|**31.10.20**|
||**£'000**|**£'000**|
||||
||||
|||1,141|
||787||
||(193)||
||(2)||
||592||
||(21)||
|||571|
|||**1,712**|
|||(795)|
||||
|||**917**|
## **Statement of change in net assets attributable to unitholders**
for the period from 8 January 2020 to 31 October 2020
|**Opening net assets attributable to unitholders**
Amounts received on issue of units
Amounts paid on cancellation of units
Dilution adjustment
Change in net assets attributable to
unitholders from investment activities
**Closing net assets attributable to unitholders**
|**08.01.20 to**|**08.01.20 to**|
|---|---|---|
||**31.10.20**|**31.10.20**|
||**£'000**|**£'000**|
||||
|||**-**|
||||
||49,647||
||(162)||
|||49,485|
|||52|
||||
|||917|
||||
|||**50,454**|
The notes on pages 24 to 30 form an integral part of these financial statements.
Quilter Investors Charity Authorised Investment Funds
22
Quilter Cheviot Global Income and Growth Fund for Charities
## **Balance sheet**
## as at 31 October 2020
|
**Assets**
Fixed assets
Investments
Current assets
Debtors
8
Cash and bank balances
9
Total assets
**Liabilities**
Creditors
Distribution payable
Other creditors
10
Total liabilities
**Net assets attributable to unitholders**|**31.10.20**
**£'000**
48,197
1,566
1,226
50,989
(308)
(227)
(535)
**50,454**|
|---|---|
The notes on pages 24 to 30 form an integral part of these financial statements.
Quilter Investors Charity Authorised Investment Funds
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements**
for the period from 8 January 2020 to 31 October 2020
## **1 Accounting policies**
The applicable accounting policies adopted by the Quilter Cheviot Global Income and Growth Fund for Charities are included on pages 32 to 33.
## **2 Net capital gains**
|**Net capital gains**||
|---|---|
|The net capital gains on investments comprise:
Gains on non-derivative securities
Gains on forward currency contracts
Losses on currency contracts
**Net capital gains on investments**
Realised losses*
Unrealised gains*
**Total realised/unrealised gains**
**Revenue**
Franked distributions on Collective Investment Scheme
Unfranked Interest distributions on Collective Investment Schemes
Interest on debt securities
Manager’s fee rebate
Non-taxable distributions on Offshore Funds
Non-taxable overseas dividends
Property income distributions
Taxable distributions on Offshore Funds
UK dividends
UK REIT dividends
**Total revenue**
**Expenses**
**Payable to the Manager, associates of the Manager and agents of either of them:**
Annual Management Charge
Fixed expenses*
**Total expenses**|**08.01.20 to**|
||**31.10.20**|
||**£'000**|
|||
||1,162|
||2|
||(23)|
||**1,141**|
|||
||(408)|
||1,572|
||**1,164**|
|||
||**08.01.20 to**|
||**31.10.20**|
||**£'000**|
|||
||7|
||32|
||12|
||1|
||30|
||237|
||18|
||29|
||417|
||4|
||**787**|
|||
||**08.01.20 to**|
||**31.10.20**|
||**£'000**|
|||
|||
||148|
||45|
||**193**|
## **3 Revenue**
## **4 Expenses**
* This figure represents the fixed expense charge which covers all fees payable by the sub-fund to the to the Trustee (including associates etc.), and other expenses. The Audit fee for the period, excluding VAT, was £16,000.
Quilter Investors Charity Authorised Investment Funds
24
Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements (continued)**
for the period from 8 January 2020 to 31 October 2020
## **5 Interest payable and similar charges**
|**Interest payable and similar charges**||
|---|---|
|Bank overdraft interest
**Total interest payable and similar charges**|**08.01.20 to**|
||**31.10.20**|
||**£'000**|
|||
||2|
||**2**|
## **6 Taxation**
## **a) Analysis of tax charge in the period**
|**Analysis of tax charge in the period**||
|---|---|
|
Overseas tax suffered
**Total current tax charge for the period**
Deferred tax charge for the period
**Total taxation for the period (see note 6(b))**|**08.01.20 to**|
||**31.10.20**|
||**£'000**|
|||
||21|
||**21**|
|||
||-|
||**21**|
## **b) Factors affecting tax charge for the period**
As the Trust is a Charity Authorised Investment Fund, it is exempt from United Kingdom tax on capital gains realised on the disposal of investments held within the subfund and any UK corporation tax.
The sub-fund is also excluded from the normal tax rules which apply to revenue allocations to units and payments on redemption of units made to unitholders in an authorised unit trust scheme. For the purposes of the sub-fund, revenue of the sub-fund is not considered to be dividends in the hands of the unitholders and therefore no income tax is payable in respect of the revenue allocated to each unit.
In addition, any gains on the redemption of units in the sub-fund are not to be treated as chargeable gains for Capital Gains Tax purposes and therefore no Capital Gains Tax is payable on redemption of units.
|The taxation assessed for the period is lower than the standard rate of corporation tax in the UK for an open-ended
investment company 20%. The differences are explained below:
Net revenue before taxation
Corporation tax at 20%
Effects of:
Revenue not taxable due to charitable status
Overseas tax suffered
**Total tax charge for the period (see note 6(a))**|**08.01.20 to**|
|---|---|
||**31.10.20**|
||**£'000**|
|||
|||
|||
||592|
|||
||119|
|||
|||
||(119)|
||21|
||**21**|
Quilter Investors Charity Authorised Investment Funds
25
Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements (continued)**
for the period from 8 January 2020 to 31 October 2020
## **7 Distributions**
The distributions take account of revenue received on the issue of units and revenue deducted on the cancellation of units, and comprise:
|First Interim – Income units (30 April)
Second Interim – Income units (31 July)
Final – Income units (31 October)
Revenue deducted on cancellation of units
Revenue received on issue of units
**Distributions**
**Reconciliation of distributions:**
Net revenue after taxation
Capitalised fees
Equalisation on Collective Investment Schemes
**Distributions**
Details of the interim and final distributions per unit are set out in the tables on page 31.
**Debtors**
Accrued revenue
Amounts receivable for issue of units
Overseas tax recoverable
**Total debtors**
**Cash and bank balances**
Cash and bank balances
**Total cash and bank balances**
**Other creditors**
Accrued expenses
Amounts payable for cancellation of units
Amounts payable to Manager
Purchases awaiting settlement
**Total other creditors**|**08.01.20 to**|
|---|---|
||**31.10.20**|
||**£'000**|
|||
||253|
||346|
||308|
||907|
||1|
||(113)|
||**795**|
|||
|||
||571|
||193|
||31|
||**795**|
|||
||**31.10.20**|
||**£'000**|
|||
||89|
||1,475|
||2|
||**1,566**|
|||
||**31.10.20**|
||**£'000**|
|||
||1,226|
||**1,226**|
|||
||**31.10.20**|
||**£'000**|
|||
||6|
||100|
||21|
||100|
||**227**|
## **8 Debtors**
## **9 Cash and bank balances**
## **10 Other creditors**
Quilter Investors Charity Authorised Investment Funds
26
Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements (continued)**
for the period from 8 January 2020 to 31 October 2020
## **11 Related party transactions**
Quilter Investors Limited, as Manager, is a related party, and acts as principal in respect of all transactions of units in the sub-fund. The aggregate monies received on issue and paid on cancellation are disclosed in the Statement of change in net assets attributable to unitholders on page 22. Any amounts due to or from the Manager at the end of the accounting period in respect of transactions of units in the sub-fund are disclosed in notes 8 and 10. Amounts paid to the Manager in respect of expenses are disclosed in note 4 and amounts due to it at the period end are disclosed in note 10.
## **12 Derivatives and other financial instruments**
## **a) Financial instrument risk**
The Manager has appointed specialist managers to manage the sub-fund, and continuously monitors this appointment. Each Investment Adviser is responsible for monitoring the portfolio of his/her sub-fund in accordance with its investment objective and seeks to ensure that individual assets also meet a risk reward profile that is acceptable. The Investment Adviser regularly considers the asset allocation of the portfolio in order to minimise the risk associated with particular market or industry sectors. Stock selection is based on financial, market and sector analysis.
The sub-fund has little direct exposure to credit or cash flow risk. There are no material borrowings or unlisted securities and so little exposure to liquidity risk.
The main risks it faces arising from its financial instruments are (i) interest rate risk, being the risk of movements in the value of financial instruments as a result of fluctuations in interest rates, and (ii) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate movements. In addition, the sub-fund may hold financial instruments such as forward currency contracts, futures or options contracts for the purpose of efficient portfolio management. The sub-fund may use derivative instruments for investment purposes on giving 60 days’ notice to unitholders.
These risks are monitored by the Investment Adviser in pursuance of the investment objectives and policy set out in page 14.
Adherence to the investment guidelines and the investment and borrowing powers as set out in the Prospectus and in the rules of the COLL Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer.
## **b) Market risk**
## **i) Foreign currency risk**
A proportion of the sub-fund's financial assets and liabilities are invested overseas. As a result, movements in exchange rates may affect the market price of investments and, due to timing differences between the transaction dates of investment sales, purchases and income, and actual cash settlement, create currency exchange gains/losses. The Investment Adviser does seek to reduce some of this risk by using forward currency contracts.
The foreign currency exposure of the sub-fund as at 31 October 2020 is as follows:
|**Currency**
Euro
Hong Kong dollar
Swiss franc
US dollar
**Total**|**Net foreign currency assets**|
|---|---|
||**Monetary**
**Non-monetary**|
||**exposures***
**31.10.20**
**£'000**
**exposures**
**31.10.20**
**£'000**
**Total**
**31.10.20**
**£'000**|
||2
2,126
2,128|
||-
261
261|
||3
1,010
1,013|
||5
12,557
12,562|
||**10**
**15,954**
**15,964**|
* For the purpose of the above disclosure, monetary is taken to include only cash or near-cash items.
## **Currency sensitivity**
A 5% increase in the value of the sub-fund’s foreign currency exposure would have the effect of increasing the return and net assets as at 31 October 2020 by £798,195 or 1.58%. A 5% decrease would have an equal and opposite effect.
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements (continued)**
for the period from 8 January 2020 to 31 October 2020
## **12 Derivatives and other financial instruments (continued)**
## **b) Market risk (continued)**
## **ii) Interest rate risk**
Interest rate risk is the risk of movements in the value of financial instruments as a result of fluctuations in interest rates.
The interest rate risk profile of the sub-fund’s financial assets and liabilities at 31 October 2020 is as follows:
|**Currency**|**Variable rate**
**financial assets**
**£'000**
**Fixed rate**
**financial assets**
**£'000**
**Financial assets not**
**carrying interest**
**£'000**
**Total**
**£'000**|
|---|---|
|||
|**31.10.20**||
|Euro|-
-
2,128
2,128|
|Hong Kong dollar|-
-
261
261|
|Sterling|1,225
3,181
30,619
35,025|
|Swiss franc|-
-
1,013
1,013|
|US dollar|1
-
12,561
12,562|
|**Total**|**1,226**
**3,181**
**46,582**
**50,989**|
|**Currency**
**31.10.20**|**Variable rate**
**financial liabilities**
**£'000**
**Financial liabilities**
**not carrying interest**
**£'000**
**Total**
**£'000**|
|---|---|
|Sterling|-
(535)
(535)|
|**Total**|**-**
**(535)**
**(535) **|
## **Interest rate risk sensitivity**
In the event of changes in interest rates, there would be no material impact on the Statement of Total Return or Net Assets of the sub-fund.
## **iii) Other price risk**
Other price risk arises from uncertainty about future prices of financial instruments held. The main source of risk to the sub-fund is the potential movement in the value of financial instruments held as a result of price fluctuations. Stock market prices can move erratically and be unpredictably affected by diverse factors including political and economic events but also rumours and sentiment. The Manager adheres to the investment guidelines and borrowing powers set out within the Prospectus and the COLL Sourcebook. In this way the Manager monitors and controls the exposure to risk from any type of security, sector or issuer. The sub-fund may also use derivative instruments to mitigate risk and reduce cost.
## **Market price risk sensitivity**
Market price risk sensitivity A 5% market movement in the price of investments held by the sub-fund, with all other variables remaining constant, would result in an increase or decrease on net asset value of the sub-fund by approximately £2,409,861 or 4.78%.
## **c) Credit risk**
Credit risk is the risk of suffering loss due to another party not meeting its financial obligation. The risk is managed by the Investment Adviser who monitors the credit profile of financial instruments in accordance with the objective and policy of the sub-fund.
Adherence to the investment guidelines and the investment and borrowing powers as set out in the Prospectus and in the rules of the COLL Sourcebook also mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the Investment Adviser’s review and the Portfolio statement.
## **d)**
## **Counterparty risk**
Certain transactions in financial instruments that the sub-fund enters into have the risk that the counterparty will not meet its financial obligations, i.e. the investment (purchase) or cash (sale) after the sub-fund has fulfilled its responsibilities.
The sub-fund will only buy and sell investments through brokers which have been approved by the Manager and Investment Adviser as an acceptable counterparty. This is overseen by the Trustee to ensure that the exposure to any counterparty remains appropriate for investors.
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements (continued)**
for the period from 8 January 2020 to 31 October 2020
## **12 Derivatives and other financial instruments (continued)**
## **e) Liquidity risk**
The sub-fund's assets comprise mainly of readily realisable securities which can be sold promptly to meet liquidity requirements. The main source of this risk comes from the obligation to unitholders to meet any cancellation of units. Assets from the sub-fund may need to be sold to meet any redemption proceeds. As part of its operating duties the Manager regularly monitors the liquidity levels held on the sub-fund (cash and underlying securities) to ensure any redemption can be readily met. Some investments may be less liquid than other securities and can be more sensitive to economic factors. The rules of the COLL Sourcebook mitigate the risk of excessive exposure to assets which are not readily realisable.
## **f) Fair value of financial assets and financial liabilities**
There is no material difference between the carrying value of the financial assets and financial liabilities, as shown in the balance sheet, and their fair value.
|||
|---|---|
|**Basis of valuation**|**31.10.20**|
||**Assets**
**£'000**
**Liabilities**
**£'000**|
|Level 1: Quoted prices|37,581
-|
|Level 2: Observable market data|10,616
-|
|Level 3: Unobservable data|-
-|
|**Total**|**48,197**
**-**|
## **g) Global exposure**
The Manager assesses the market risk of Quilter Cheviot Global Income and Growth Fund for Charities, including any derivative exposures, using a commitment approach. All exposure arising through the investment in financial derivative instruments will be covered by the underlying assets of the sub-fund. The sub-fund will use the commitment approach methodology to measure, monitor and manage the “leverage” effect produced by the use of financial derivative instruments and for the calculation of global exposure. In using the commitment approach for the calculation of global exposure, the sub-fund will convert each derivative position into the market value of an equivalent position in the underlying asset of that derivative.
## **13 Contingent liabilities**
The sub-fund had no contingent liabilities at the balance sheet date.
## **14 Portfolio transaction costs**
|**Analysis of total purchase costs**
**31.10.20**
Bonds
Equities
Collective Investment Schemes
Corporate actions
**Total**
**Total purchases including transaction costs**
**Analysis of total sale costs**
**31.10.20**
Bonds
Equities
Collective Investment Schemes
Corporate actions
**Total**
**Total sales including transaction costs**
**Transaction costs as a percentage of average Net Assets**
Commissions:
Other costs:|**Value**
**Commissions**|**Other costs**|
|---|---|---|
||**£'000**
**£'000**
%|**£'000**
%|
||3,735
-
-|-
-|
||35,373
13
0.04%|-
-|
||15,413
-
-|-
-|
||44
-
-|-
-|
||54,565
13|-|
||**54,578**||
||||
||**Value**
**Commissions**|**Other costs**|
||**£'000**
**£'000**
%|**£'000**
%|
||618
-
-|-
-|
||4,263
1
0.02%|-
-|
||2,610
-
-|-
-|
||10
-
-|-
-|
||7,501
1|-|
||**7,500**||
||**31.10.20**
0.05%
0.00%||
In the case of shares, transaction costs are paid by the sub-fund on each transaction. Commissions relate to those paid to agents, advisers, brokers and dealers in the buying and selling of securities. Other costs include any additional fees that may be paid to agents, advisers, brokers and dealers as well as levies by regulatory agencies and security exchanges and any transfer taxes or duties. In addition, there is a dealing spread between the buying and selling prices of the underlying investments. Unlike shares, other types of investments have no separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads may vary considerably depending on the transaction value and market sentiment. At the balance sheet date the dealing spread was 0.38%.
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Notes to the financial statements (continued)**
for the period from 8 January 2020 to 31 October 2020
## **15 Unitholders' funds**
The sub-fund currently has one unit class; Income Units. The net asset value of the unit class, net asset value per unit and the number of units in are given in the Comparative tables.
The unit class currently in issue and the Annual Management Charge of the unit class is shown below.
|||||**31.10.20**|
|---|---|---|---|---|
|- Income Units†||||0.50%|
|**Unit class movement reconciliation**|**Opening**|**Issued**|**Redeemed**|**Closing**|
|- Income Units†|-|
51,089,973|
(161,369)|50,928,604|
|† From 8 January 2020|||||
## **16 Post balance sheet date events**
The table below shows the net asset values per unit as at the balance sheet date, compared against values as at 10 February 2021 and the percentage movement in that period:
|||**31.10.20**|**10.02.21**|**%**|
|---|---|---|---|---|
|||**pence per unit**|**pence per unit**|**Movement**|
|-|Income Units|99.07|108.40|9.42%|
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Quilter Cheviot Global Income and Growth Fund for Charities
## **Distribution tables**
## **Final distribution**
|**Final distribution**||||
|---|---|---|---|
|Group 1: Units purchased prior to 1 August 2020||||
|Group 2: Units purchased from 1 August to 31 October 2020||||
||||**Distribution**|
||**Revenue**|**Equalisation**|**paid 30.11.20**|
||**pence per unit**|**pence per unit***|**penceper unit**|
|**Income Units**||||
|Group 1|0.6043|-|0.6043|
|||||
|Group 2|0.2872|0.3171|0.6043|
|**Second interim distribution**||||
|Group 1: Units purchased prior to 1 May 2020||||
|Group 2: Units purchased from 1 May 2020 to 31 July 2020||||
||||**Distribution**|
||**Revenue**|**Equalisation**|**paid 31.08.20**|
||**pence per unit**|**pence per unit***|**penceper unit**|
|**Income Units**||||
|Group 1|0.7332|-|0.7332|
|||||
|Group 2|0.5155|0.2177|0.7332|
## **First interim distribution**
|**First interim distribution**||||
|---|---|---|---|
|Group 1: Units purchased prior to 8 January 2020||||
|Group 2: Units purchased from 8 January 2020 to 30 April 2020||||
||||**Distribution**|
||**Revenue**|**Equalisation**|**paid 31.05.20**|
||**pence per unit**|**pence per unit***|**penceper unit**|
|**Income Units**†||||
|Group 1|0.6847|-|0.6847|
|||||
|Group 2|0.4715|0.2132|0.6847|
† From 8 January 2020
* Equalisation only applies to units purchased during the distribution period (Group 2 units). It is the average amount of revenue included in the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable to income tax but must be deducted from the cost of units for capital gains tax purposes.
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Quilter Investors Charity Authorised Investment Funds
## **Accounting policies**
## **a) Basis of preparation**
The financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, in compliance with FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association in May 2014 and as amended in June 2017.
The Manager has undertaken a detailed assessment of the sub-fund’s ability to meet its liabilities as they fall due, including liquidity, declines in global capital markets and investor redemption levels. Based on this assessment, the sub-fund continues to be open for trading and the Manager is satisfied the sub-fund has adequate financial resources to continue in operation and accordingly it is appropriate to adopt the going concern basis in preparing the financial statements.
The principal accounting policies, which have been applied consistently throughout the period, are set out below.
## **b) Recognition of revenue**
Dividends on quoted ordinary shares, preference shares and distributions on holdings in Collective Investment Schemes are recognised when the securities are quoted ex-dividend. Where such securities are not quoted, dividends are recognised when they are declared.
Dividends from UK REITs are split into PID (Property Income Distributions) and Non-PID components for tax purposes. Revenue arising from UK REITs’ tax-exempt rental business is commonly known as PID revenue and is taxable in the hands of the sub-fund. A UK REIT may also carry out activities that give rise to taxable profits and gains, it is from these that the REIT will make a Non-PID distribution, these are treated for tax purposes in the same way as dividends from UK companies and are reflected under UK dividends within the revenue note.
All distributions from accumulation holdings in Collective Investment Schemes are treated as revenue. The equalisation component of Collective Investment Scheme distributions has been recognised as capital.
Nominal interest on interest bearing securities and bank interest are recognised on an accruals basis. Accrued interest purchased and sold on interest bearing securities is excluded from the capital cost of these securities and dealt with as part of the revenue of the sub-fund.
Revenue arising on debt securities that are purchased at a discount/premium to the maturity value is amortised or accumulated over the life of such securities and recognised at a consistent rate over the life of the instrument (effective yield basis). This basis uses the effective interest rate of the security to discount exactly the expected stream of future cash flows to the current net carrying value of the security.
Interest receivable or payable on credit default swaps is accounted for on an accruals basis and classified as revenue or capital based on the motives and circumstances of their use with any interest purchased and sold on the derivatives dealt with as part of the revenue of the sub-fund.
## **c) Treatment of stock dividends**
Ordinary stock dividends are recognised wholly as revenue and are based on the market value of the shares on the dates they are quoted ex-dividend. Where an enhancement is offered, the amount by which the market value of the shares (on the date they are quoted ex-dividend) exceeds the cash dividend is taken to capital. The ordinary element of stock dividends is treated as revenue but does not form part of the distribution.
## **d) Special dividends and share buy-backs**
The underlying circumstances behind both special dividends and share buy backs are reviewed on a case by case basis in determining whether the amount is revenue or capital in nature. Amounts recognised as revenue will form part of the distribution. Any tax treatment will follow the accounting treatment of the principal amount.
## **e) Underwriting commission**
Underwriting commission is wholly recognised as revenue when the issue takes place, except where the Trust is required to take up some or all of the shares underwritten, in which case an appropriate proportion of the commission received is deducted from the cost of those shares.
## **f) Treatment of expenses**
All expenses, except those relating to the purchase and sale of investments, are included in expenses, in the Statement of Total Return. Expenses are recognised on an accruals basis and include irrecoverable VAT where appropriate.
## **g) Revenue allocation to unit classes**
Revenue is allocated to the unit classes of each sub-fund based on the proportion of assets held within each unit class. As at 31 October 2020 there is a single unit class.
## **h) Rebate of manager’s periodic charge from underlying instruments**
The sub-fund may be entitled to a rebate of manager’s periodic charge, or is sometimes paid as renewal commission, when it holds underlying investments in Collective Investment Schemes. This is accrued daily and treated as revenue or capital depending on the treatment of the manager charge in the underlying investment.
## **i) Taxation and deferred taxation**
The Trust is a CAIF and has tax-exempt status in the UK as it is a Charity registered with the Charity Commission subject to its being recognised as a charity by HMRC. Each sub-fund will also benefit from tax-exempt status in the UK. As a result the Trust is not subject to UK tax on gains arising on the disposal of investments. As a CAIF, the Trust will benefit from an exemption from UK VAT in respect of investment management fees.
## **j) Distribution policy**
All of the net revenue available for distribution at the end of interim and final distribution periods will be distributed to unitholders. Any unit class in deficit of revenue will be made-up from the capital attributable to that unit class. Should taxation and expenses taken together exceed revenue, there will be no distribution and the shortfall will be met from capital. The sub-fund distributes revenue on debt securities on an effective yield basis. Equalisation received on collective investment scheme distributions will be distributed.
As income may fluctuate from accounting period to accounting period, the Manager may, in consultation with the Trustee, decide to retain up to 15% of income from one accounting period to be held in the Income Reserve Account in order to smooth out future income payments in the following period. The Manager may, in consultation with the Trustee, in any accounting period withdraw any sum standing to the credit of the Income Reserve Account, and such sum shall be treated as income available for allocation or distribution in that accounting period. In the period ended 31 October 2020 this option has not been utilised.
In respect of Quilter Cheviot Global Income and Growth Fund for Charities the policy in accordance with the Prospectus is to charge all expenses to capital. This may have the effect of constraining capital growth.
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Quilter Investors Charity Authorised Investment Funds
## **Accounting policies (continued)**
## **k) Basis of valuation of investments**
The investments are valued at 12 noon bid prices on the last business day of the accounting year. Any unquoted or suspended investments are valued at the Manager’s valuation taking into account, where appropriate, latest dealing prices, valuations from reliable sources, financial performance and other relevant factors.
The Manager may apply a fair value price determined in accordance with the COLL Sourcebook if it has reasonable grounds for believing that no reliable price exists for a security at a valuation point or the most recent price available does not reflect the Manager's best estimate of the value at the valuation point.
Where a sub-fund invests in securities markets that are closed for trading (including planned stock exchange closures) at the sub-fund's valuation point, there is a risk that the price calculated is not representative of the markets in which it invests due to developments since the market’s closure. Potentially this could lead to gains or losses on the sub-fund as it opens a window for investors or market timers to buy or sell at stale prices. An example would be when a sub-fund is priced using end of day prices from a market which closed for trading for a material period prior to the sub-fund's valuation point, for example, a UK Fund which is invested in US stocks, valuing at 12 noon UK time and using US asset prices from the previous day close of the US market within the sub-fund valuation. During this period it may be concluded that prices may change significantly when the market re-opens, based on a global event or on indications from the global futures markets. In this scenario, the Manager has the power to invoke a fair value price to give our best estimate of the value of the market or asset in question using a reliable source. A delegated committee is responsible for the monitoring and approval of any fair value pricing decisions.
The fair value pricing policy for the Trust differs dependent on the type of instruments held within the sub-fund’s portfolio, their economic exposure and the materiality of any fair value adjustment. The Manager’s fair value pricing policy is regularly reviewed by the Trustee of the sub-fund to ensure adherence to the COLL Sourcebook.
Authorised unit trusts and collective investment schemes operated by the Manager have been valued at cancellation price. Single priced authorised unit trusts, open ended investment companies and collective investment schemes have been valued at the latest available dealing price. Dual priced authorised trusts, open ended investment companies and collective investment schemes have been valued at the latest available bid price.
## **l)**
## **Exchange rates**
Assets and liabilities in foreign currencies are translated into sterling at the exchange rates ruling at 12 noon on the last business day of the accounting year. Revenue items in foreign currencies are translated into sterling at the exchange rates ruling when the revenue is received.
## **m)**
## **Financial instruments**
Where appropriate, certain permitted financial instruments such as derivatives or forward currency contracts are used for efficient portfolio management. Where such financial instruments are used to protect or enhance revenue, and the circumstances support it, the revenue and expenses derived therefrom are included in “revenue” or “expenses” in the statement of total return. Where such financial instruments are used to protect or enhance capital, and the circumstances support it, the gains and losses derived there from are included in “Net capital gains/(losses)" in the statement of total return. Any positions on such financial instruments open at the year end are reflected in the balance sheet at their market value at the close of business on the last business day of the accounting year. Assets and liabilities in foreign currencies are translated into sterling at the exchange rates ruling at close of business on the last business day of the accounting year.
Returns on option contracts are treated as capital or revenue depending on the motives and characteristics in entering the transaction. For options written for the purposes of capital protection/growth, the premium is treated as capital. For options written for the purposes of income generation, the premium is treated as revenue and forms part of the distributable revenue of the sub-fund. Option premiums are only permitted to be treated as revenue where they are written ‘out of the money’.
## **n) Dilution policy**
The Manager has discretion to require a dilution adjustment to the price of a unit on the purchase or redemption of units in the sub-fund. The Manager's policy is to make a dilution adjustment when the Manager believes it is in the interest of the unitholders to do so.
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