cfb annual report 2011 christian stewardship our …€¦ · marketing of breast milk substitutes....

CFB ANNUAL REPORT 2011

ChRisTiAN sTEwARdshiPOUR jOURNEy CONTiNUEs

CONTENTs02 2011 AChiEvEmENTs12 ChAiRmAN’s sTATEmENT14 iNvEsTmENT REviEw20 mARkET mOvEmENTs ANd PERFORmANCE23 PERFORmANCE sUmmARy 24 CFB COUNCiL

wE ThEREFORE Aim…… TO PROvidE A hiGh QUALiTy iNvEsTmENT sERviCE

sEEkiNG ABOvE AvERAGE RETURNs FOR iNvEsTORs… TO FOLLOw A disCiPLiNE iN whiCh ThE EThiCAL dimENsiON

is AN iNTEGRAL PART OF ALL iNvEsTmENT dECisiONs… TO CONsTRUCT iNvEsTmENT PORTFOLiOs whiCh

ARE CONsisTENT wiTh ThE mORAL sTANCE ANd TEAChiNGs OF ThE ChRisTiAN FAiTh

… TO ENCOURAGE sTRATEGiC ThiNkiNG ON ThE EThiCs OF iNvEsTmENT

… TO BE A ChRisTiAN wiTNEss iN ThE iNvEsTmENT COmmUNiTy.

missiONOUR missiON, ALONGsidE ThE ChURCh, is TO sEEk PRACTiCAL sOLUTiONs whiCh COmBiNE ChRisTiAN EThiCs ANd iNvEsTmENT RETURNs.

1 Central Finance Board of the Methodist Church Annual Report 2011

2011 hiGhLiGhTssECONd sUCCEssivE yEAR OF POsiTivE RETURNs FOR ALL CFB FUNds

CFBimPACT OF EThiCAL POLiCy BOOsTs RETURN OF CFB Uk EQUiTy BENChmARk By 0.2% OvER ThE yEAR ANd REdUCEs iT By 0.2% PA OvER FivE yEARs.

CFBALL CFB FUNds, BUT ONE, ExCEEd OR mATCh ThEiR BENChmARk AFTER dEdUCTiNG ExPENsEs.

Uk EQUiTy FUNd

+18.3%RELATivE TO BENChmARk +1.1%

OvERsEAs FUNd


iNFLATiON LiNkEd FUNd


CORPORATE BONd FUNd

+5.9%RELATivE TO BENChmARk -0.3%

GiLT FUNd


shORT FixEd iNTEREsT FUNd


PROPERTy FUNd

+10.6%RELATivE TO BENChmARk N/A

dEPOsiT FUNd



2011 AChiEvEmENTs

OiL ANd GAs sAFETy wE mET wiTh BP mAiN BOARd diRECTOR, iAiN CONN, TO disCUss ONGOiNG sAFETy ANd ENviRONmENTAL CONCERNs ARisiNG FROm ThE dEEPwATER hORizON ACCidENT iN ThE GULF OF mExiCO. This wAs PART OF A sUCCEssFUL COLLABORATiON wiTh OThER mEmBERs OF ThE ChURCh iNvEsTORs GROUP ANd iNTERNATiONAL FAiTh PARTNERs, whiCh EsTABLishEd A COmmON APPROACh TO ENGAGEmENT wiTh ThE COmPANy. iT wAs dECidEd NOT TO BRiNG A shAREhOLdER REsOLUTiON AT ThE AGm. hOwEvER, wE PUBLiCLy OPPOsEd ThE RE-ELECTiON OF ThE diRECTOR whO ChAiREd ThE COmPANy’s sAFETy, ENviRONmENT ANd EThiCs AssURANCE COmmiTTEE, wiTh 43% OF iNvEsTORs jOiNiNG Us iN EiThER vOTiNG AGAiNsT OR ABsTAiNiNG.

CFBPOsiTivE CFB diALOGUE wiTh ROyAL dUTCh shELL wAs FOLLOwEd By ThE RELEAsE OF sUBsTANTiAL NEw iNFORmATiON. This LEd Us TO CONCLUdE ThAT ThE sPiRiT OF OUR OiL sANds REsOLUTiON hAd BEEN mET ANd CONsEQUENTLy wE ABsTAiNEd.


CFBThE CFB POLiCy REsULTEd iN ONLy 12% OF OUR vOTEs BEiNG mAdE iN FAvOUR OF COmPANy REmUNERATiON REPORTs.

REmUNERATiON ANd GOvERNANCEOUR vOTiNG POLiCy APPLiEs RiGOROUs CRiTERiA TO ThE AssEssmENT OF ExECUTivE REmUNERATiON ANd BOARd iNdEPENdENCE, AdOPTs A ‘BEsT PRACTiCE’ FORmULA FOR OThER shAREhOLdER issUEs. wE vOTE AGAiNsT ThE REAPPOiNTmENT OF diRECTORs whO ARE LiNkEd TO POOR sTANdARds, FOR ExAmPLE ON REmUNERATiON ANd sAFETy. iN ThE Uk wE UsE ThE ChURCh iNvEsTORs GROUP vOTiNG TEmPLATE, whiCh wE wERE iNsTRUmENTAL iN dEvisiNG. sUmmARy vOTiNG REPORTs ARE AvAiLABLE ON OUR wEBsiTE. FOLLOwiNG ThE mEThOdisT CONFERENCE dECisiON TO imPLEmENT ThE LiviNG wAGE ThROUGhOUT ThE CONNExiON, ThE CFB BECAmE A siGNATORy OF ThE FAiRPENsiONs CAmPAiGN TO ENCOURAGE FTsE 100 COmPANiEs TO imPLEmENT A LiviNG wAGE POLiCy.


2011 AChiEvEmENTsCONTiNUEd

CFBThE CFB APPROvEs POLiCy ON CAsTE disCRimiNATiON, whiCh ENCOURAGEs COmPANiEs TO ENhANCE EmPLOymENT OPPORTUNiTiEs AmONG ExCLUdEd GROUPs ThROUGh CORPORATE REsPONsiBiLiTy ANd COmmUNiTy PROGRAmmEs.

PROTECTiNG ThE vULNERABLEiN ThE LiGhT OF ThE wORLd CUP iN sOUTh AFRiCA, wE FOLLOwEd UP wORk CARRiEd OUT By ChRisTiAN BROThERs iNvEsTmENT sERviCEs iNTO ThE POTENTiAL FOR hUmAN TRAFFiCkiNG iN ThE hOTEL iNdUsTRy. ChiLdREN ARE PARTiCULARLy vULNERABLE ANd wE wERE kEEN TO ENGAGE wiTh ThE LARGEsT Uk hOTELiER, iNTERCONTiNENTAL hOTELs GROUP (ihG), ON ThE mATTER. iT wAs disAPPOiNTiNG ThAT iT did NOT ENdORsE ThE TOURism COdE whiCh hAd BEEN dEvELOPEd iN REsPONsE TO ThE PROBLEm OF ChiLd sEx TRAFFiCkiNG. hOwEvER, iT wAs sEEkiNG TO BECOmE COmPLiANT wiTh ThE UN GLOBAL COmPACT ANd ROLL OUT iTs hUmAN RiGhTs POLiCy TO iNCLUdE ihG FRANChisEEs. wE wiLL CONTiNUE TO mONiTOR PROGREss ANd ENGAGE FURThER wiTh ThE COmPANy iF PROGREss is NOT sUFFiCiENTLy RAPid.


CFBThE CFB QUEsTiONEd iTs ExTERNAL EmERGiNG mARkETs mANAGER ON ALLEGATiONs OF hUmAN RiGhTs viOLATiONs iNvOLviNG ChiNEsE COmPANiEs ANd wAs REAssUREd ThAT wE hAd NO ExPOsURE.

hUmAN RiGhTswE AskEd ThE jOiNT AdvisORy COmmiTTEE ON ThE EThiCs OF iNvEsTmENT TO UsE OUR NEw POLiCy ON iNvEsTmENTs LiNkEd TO isRAEL/PALEsTiNE TO PROvidE AdviCE ON TwO FRENCh COmPANiEs, vEOLiA ANd ALsTOm, dUE TO ThEiR iNvOLvEmENT iN A LiGhT RAiL sysTEm CENTREd ON jERUsALEm. ENGAGEmENT REvEALEd ThAT BOTh ARE CLOsE TO COmPLETiNG AGREEd sALEs OF ThEiR EQUiTy sTAkEs iN ThE PROjECT. ALThOUGh vEOLiA RETAiNs A CONTRACTUAL sAFETy ANd OPERATiONAL AdvisORy ROLE FOR A LimiTEd PERiOd ANd ALsTOm is COmmiTTEd TO mAiNTAiNiNG ThE ROLLiNG sTOCk, jACEi AdvisEd Us ThAT CONTiNUEd iNvEsTmENT wAs APPROPRiATE. NEw iNFORmATiON ON vEOLiA’s iNvOLvEmENT iN BUs sERviCEs ANd wAsTE disPOsAL iN ThE REGiON hAs REsULTEd iN FURThER ENGAGEmENT.



miNiNGOUR ExTENsivE REsEARCh ON xsTRATA REvEALEd A COmPANy ThAT wAs ABLE TO dEmONsTRATE A siGNiFiCANTLy imPROvEd sAFETy ANd ENviRONmENTAL RECORd TOGEThER wiTh A sTRONG CORPORATE REsPONsiBiLiTy PROFiLE. ENGAGEmENT wiTh RANdGOLd REsOURCEs REvEALEd A RiGOROUs APPROACh TO sAFETy ANd COmmiTmENT TO GREATER TRANsPARENCy. ThE jOiNT AdvisORy COmmiTTEE ON ThE EThiCs OF iNvEsTmENT AdvisEd ThAT ThERE wERE iNsUFFiCiENT EThiCAL REAsONs TO CONTiNUE ExCLUdiNG xsTRATA ANd RANdGOLd REsOURCEs FROm iNvEsTmENT. wE ALsO hAd FRUiTFUL disCUssiONs wiTh ANGLO AmERiCAN ANd RiO TiNTO ON A RANGE OF ENviRONmENTAL, sAFETy ANd COmmUNiTy issUEs.

CFBCFB BECAmE A siGNATORy OF ThE ‘CdP wATER disCLOsURE iNiTiATivE’, whiCh ENCOURAGEs A BETTER UNdERsTANdiNG OF BUsiNEss Risks ANd OPPORTUNiTiEs AssOCiATEd wiTh wATER sCARCiTy ThROUGh sEEkiNG ANd PUBLishiNG iNFORmATiON OBTAiNEd FROm ThE mOsT wATER iNTENsivE COmPANiEs.


CLimATE ChANGEwE CONTiNUE TO ENGAGE wiTh COmPANiEs ThAT hAvE mATERiAL ExPOsURE TO CARBON ANd CLimATE ChANGE Risk. iN PARTiCULAR wE hAvE sOUGhT ExPLANATiONs FROm ThOsE ThAT hAvE NOT PARTiCiPATEd iN ThE hiGhLy REsPECTEd CARBON disCLOsURE PROjECT (CdP) ANd ENCOURAGEd ThEm TO ChANGE ThEiR miNd. ThE REviEw OF xsTRATA hiGhLiGhTEd ThE CONTiNUEd imPORTANCE OF COAL iN ThE ENERGy mix, PARTiCULARLy As iT RELATEs TO dEvELOPiNG ECONOmiEs. CONsEQUENTLy wE hAvE EmBARkEd ON A FOssiL FUEL REsEARCh PROjECT wiTh ThE OBjECTivE OF FURThER dEvELOPiNG CFB POLiCiEs ON CLimATE ChANGE, ThE ExTRACTivE iNdUsTRiEs ANd POwER GENERATiON.

CFBThE CFB Uk EQUiTy PORTFOLiO hAs A RELATivELy LOw CARBON FOOTPRiNT, ACCORdiNG TO BOTh TRUCOsT ANd EiRis.



NUTRiTiONAL issUEswE ENGAGEd wiTh dANONE ON iTs APPROACh TO ThE mARkETiNG OF BREAsT miLk sUBsTiTUTEs. COmPREhENsivE REsPONsEs wERE RECEivEd FROm ThE COmPANy, ANd AN iNviTATiON TO mEET wiTh ThE COmPANy wiLL BE ACCEPTEd. ThE wORLd hEALTh ORGANisATiON COdE ‘REPORTEd BREAChEs’ wERE disCUssEd wiTh NEsTLé AT OUR REGULAR mEETiNG wiTh ThE COmPANy. wE ALsO NOTEd ThAT NEsTLé wAs AdmiTTEd TO ThE FTsE4GOOd iNdEx iN mARCh hAviNG BEEN AssEssEd By ThE ExPERT COmmiTTEE As hAviNG mET ThEiR CRiTERiA ON BREAsT miLk sUBsTiTUTEs.

CFBCFB CONTiNUEs TO ENGAGE wiTh NEsTLé ANd UNiLEvER ON PALm OiL ANd wELCOmEd ThEiR RECENT COmmiTmENTs TO sOURCE ThE PROdUCT sUsTAiNABLy.


iNFRAsTRUCTURE ANd dEFENCEjACEi PROvidEd AdviCE ON A NUmBER OF COmPANiEs iN RELATiON TO ThE CFB POLiCy ON miLiTARy ExPOsEd COmPANiEs. dEsPiTE A CONTRACT TO mOdERNisE ThE miNisTRy OF dEFENCE hEAdQUARTERs jOhN LAiNG iNFRAsTRUCTURE FUNd wAs ACCEPTABLE UNdER ThE POLiCy. wEiR GROUP wAs ALsO jUdGEd TO BE COmPLiANT wiTh OUR POLiCy FOLLOwiNG ThE sALE OF A NUmBER OF BUsiNEssEs LiNkEd TO ThE dEFENCE iNdUsTRy. hOwEvER, iNTERsERvE, ThE FACiLiTiEs mANAGEmENT COmPANy, wAs NOT CONsidEREd ACCEPTABLE. ALThOUGh ThE sERviCEs iT PROvidEs ARE FAiRLy iNNOCUOUs, miLiTARy RELATEd ExPOsURE is OvER 20% ANd GROwiNG.

CFBwE shARE ThE CFB POLiCy ON ThE UsE OF PRivATE sECURiTy FORCEs wiTh PETROFAC As ThEy dEvELOP ThEiR APPROACh TO hUmAN RiGhTs.



COdEs ANd PRiNCiPLEswE ARE FULLy COmPLiANT wiTh ThE Uk sTEwARdshiP COdE LAUNChEd By ThE FiNANCiAL REPORTiNG COUNCiL iN NOvEmBER 2010. This PROmOTEs ENGAGEmENT ANd iNFORmEd diALOGUE wiTh COmPANiEs, whiCh ARE AT ThE vERy hEART OF OUR APPROACh TO REsPONsiBLE iNvEsTmENT. OUR dETAiLEd REsPONsE CAN BE FOUNd ON OUR wEBsiTE. wE ARE siGNATORiEs OF PRiNCiPLEs FOR REsPONsiBLE iNvEsTmENT (PRi) ANd wERE iNTERviEwEd As PART OF ThE ChURCh iNvEsTORs GROUP CONTRiBUTiON TO ThE PRi BOOkLET ON ThE imPLEmENTATiON OF REsPONsiBLE iNvEsTmENT POLiCiEs By FAiTh iNvEsTORs.

CFBCFB RANkEd iN ThE TOP QUARTiLE OF iNvEsTmENT mANAGERs iN ThE UN PRi 2010 REPORTiNG ANd AssEssmENT sURvEy.


ChURCh iNvEsTORs GROUP (CiG)wE CONTiNUE TO PLAy A mAjOR ROLE iN ThE ChURCh iNvEsTORs GROUP. OUR CEO BiLL sEddON is iTs viCE ChAiR ANd siTs ON ThE sTEERiNG GROUP ANd hAs REPREsENTEd CiG iN A NUmBER OF Tv, RAdiO ANd PREss iNTERviEws. CiG is BECOmiNG iNCREAsiNGLy imPORTANT As ThE vOiCE OF ThE widER ChRisTiAN COmmUNiTy TO ThE wORLd OF BUsiNEss. iN AddiTiON TO mEETiNG BP ABOUT ThE OiL disAsTER iN ThE GULF OF mExiCO, ThERE hAvE BEEN A NUmBER OF ENGAGEmENT mEETiNGs wiTh OThER COmPANiEs, iNCLUdiNG BARCLAys, FiRsT GROUP, ROyAL dUTCh shELL ANd xsTRATA. ThE CiG ANNUAL REPORT CAN BE FOUNd ThROUGh A LiNk ON ThE CFB wEBsiTE.

CFBCFB iNvOLvEd iN ARRANGiNG A mEETiNG OF sENiOR ExECUTivEs OF ChURCh iNvEsTORs AROUNd ThE wORLd AT A GROUNd BREAkiNG EvENT ORGANisEd By CiG.


OvER-CONFidENCE?A year ago I remarked on a fragile confidence returning to the financial system. This trend has continued to strengthen to such an extent that the concern today is whether investors have become over-confident about prospects. Despite Bank rate having been unchanged at the ‘emergency’ level of 0.5% for over two years, the economic recovery is less than robust whilst the government’s austerity measures are yet to bite. The FTSE All Share Index ended the year 14% higher than it began and is now only 10% from the all time peak of October 2007. It can no longer be described as cheap and requires continued recovery in corporate profits to justify further progress. Gilt yields having finished the half year at a new cyclical low point and despite prices falling throughout most of the second half, produced solid if unspectacular returns for the year. However, against a background of steadily rising inflation and increasingly hollow assurances from the Bank of England that the trend is temporary, the current level of bond yields, which in real terms are negative, appear increasingly unrealistic. The effect of a return to a more normal monetary environment does not yet appear to be a concern. It will be interesting to see if investors remain so relaxed when interest rates eventually begin to rise.

ChAiRmAN’s sTATEmENT

ROGER smiTh ChAiRmAN

As PREsENTEd AT ThE CFB BOARd mEETiNG ON 5 mAy 2011


POsiTivE RETURNs ON ALL FUNdsFor the second successive year all the CFB funds produced positive returns and all but one exceeded or matched their benchmark. The UK Equity Fund produced the highest figure both in absolute terms (+18.3%) and relative to its benchmark (+1.1%). It is worth pointing out that despite a relatively poor result last year the Fund’s five year record shows outperformance of 0.5% pa. The Overseas Fund was not far behind with an absolute return for the year of 15.2% and a similar relative return (+1.1%). Index linked securities produced the best bond returns with 9.5% from the Inflation Linked Fund, 0.9% ahead of its benchmark. This was followed by the Corporate Bond (+5.9%), Gilt (+5.7%) and Short Fixed Interest (+4.1%) funds. The Corporate Bond Fund continues to suffer from investor preference for higher risk securities and underperformed its benchmark by 0.3%, but the Gilt Fund outperformed by 0.1% and the Short Fixed Interest Fund matched its index. Although we cannot provide a comparison over the CFB year, the Property Fund also did well with a return of 10.5%.

BP dividENd CUTLast year I anticipated that as the economy recovered dividends would begin to rise again. This indeed happened, but the benefit was more than wiped out by the cut in the BP dividend following the Deepwater Horizon disaster. The distributions of the bond funds also continued to slide as interest rates fell, although the Deposit Fund began to raise its distribution at the end of July and following a fourth increase in March, is now 0.2% higher than when I last wrote.

imPACT OF AUsTERiTy Although security markets may have been rising throughout the past year, Methodist finances have suffered from the austere economic conditions. An indication of this can be seen in the £29 million net withdrawals from the Deposit Fund over the past year. We have also been informed that one of our large pension fund clients needs to make a significant change in the way it manages its portfolio and as a consequence £150 million will be transferred to another specialist fund manager. Although a mixture of cost reductions and modestly increased charges should enable us to mitigate the impact, we are now embarking on a major review of our operation to ensure that the CFB continues to provide the first class service that Methodism has come to expect. A major help has been the ability to share costs more widely due to the continued development of Epworth Investment Management and the Affirmative Investment Funds for Charities. These now add around £170 million to the assets managed by our team, with over 500 non Methodist accounts totalling £73 million in the Affirmative Deposit Fund.

EThiCs It has been another busy year in relation to ethics with two new Policy Statements being agreed: one on Israel/Palestine and the other on Caste Discrimination. The CFB also became a signatory of the Financial Reporting Council’s UK Stewardship Code and our response to its seven principles can be found on our website along with all our Policy Statements and Position Papers. We have continued to engage with a variety of companies, both on our own and in conjunction with our ecumenical partners. In particular we worked through the Church Investors Group to establish a global church approach to the BP catastrophe in the Gulf of Mexico. Time has been given to allow BP to make the changes necessary to its safety regime, but if its response is insufficient, strong collective action by the churches will result. Finally, the CFB was pleased to give its support to the campaign to encourage FTSE 100 companies to adopt a Living Wage.

CELEBRATiON ANd FAREwELLsLast year we celebrated the fiftieth anniversary of the CFB with a dinner to thank many of those who have walked with us on our journey. The Rt Hon Stephen Timms, former Financial Secretary to the Treasury and the Labour Party’s Vice Chair for Faith Groups, was our guest speaker. He encouraged us by describing how, as Pensions Minister, he introduced a requirement for pension fund trustees to state their policy on socially responsible investment. Meeting the CFB and seeing how we had incorporated ethical policies into our investment process for many years had been major influences in persuading him to push through the regulation.

We are also sad to say goodbye to three of the CFB Council members. Alan Groves has only been with us for a relatively short time, but Peter Cussons joined the Council in 1992, whilst Sir Michael Partridge’s involvement with the CFB dates back to 1980. Their wise counsel and long experience will be sorely missed. However, we are fortunate to welcome three very able replacements in John Sandford, Garry Young and Terry Wynn, to join our hard working Council. Thanks should also go to our staff who continue to work selflessly on behalf of the Board witnessing to Gospel values in the heart of the business community.

EThiCAL PLEdGEThE sECURiTiEs hELd By ALL CFB FUNds wiLL, TO ThE BEsT OF OUR ABiLiTy, BE iN LiNE wiTh ThE EThiCAL POLiCy OF ThE mEThOdisT ChURCh.


iNvEsTmENT REviEw

BiLL sEddON ChiEF ExECUTivE

5 mAy 2011

ECONOmiC OvERviEwGLOBALGlobal food and energy prices continue to increase and the United Nations index of world food prices has recently exceeded its previous peak reached in 2008. The IMF believes that this trend is mainly due to the impact of the major emerging economies switching to more western-style diets. Consequently, the pressure on food prices is therefore likely to: “remain high for a prolonged period”. The US Department of Agriculture has published a similar outlook, in which it also notes that the energy intensive nature of US farming means that the price of food and oil are closely linked. The current price of Brent crude oil at $117/barrel may be well below the 2008 high of $144, but at 65% above its low of last May, it is a major threat to global growth. The price of oil has doubled over twelve months on five occasions since 1973 and each time it has been followed by both a recession and equity bear market. Although the oil price would probably have to rise well above current levels before a recession becomes a significant possibility, this cannot be ruled out with unrest in much of the Middle East. A growth slowdown in the second half of the year seems increasingly likely.


The Eurozone economies started the year strongly with the European Commission’s composite sentiment index reaching its highest level since 2007. Retail sales rose in January, the first increase since June, although consumer confidence remains weak. Unfortunately this relative buoyancy has come at the cost of inflation, which in March reached 2.6%, compared to the European Central Bank’s (ECB) 2% target ceiling. The ECB has also increased its 2011 economic growth forecast for the Eurozone by 0.3% to 1.7%, with expected inflation revised up by 0.6% to 2.2%. It is not surprising that the ECB has recently warned of a potential rate rise with questions over the future of the Euro still to be answered. There seems to be a large gulf between northern European countries, led by Germany, who want to impose tough measures to improve competitiveness on countries requiring support, whilst others simply want to increase substantially the lending ability of the European Financial Stability Facility (EFSF). Although there has been agreement to increase this from €250bn to €440bn and reduce slightly the interest rate paid by Greece, this does not appear to represent an adequate solution to the Eurozone’s structural problems.

Growth in the Pacific and emerging economies remains strong, although the OECD’s leading indicators are predicting a slowdown in both China and India. In addition a number of governments have expressed their concern over inflation and the need to rein it back. The Chinese Prime Minister Wen Jiabiao recently told the ruling People’s Congress that “the top priority is to keep overall price levels stable”. Chinese inflation was just below 5% in January and is expected to reach 6% this Spring on the back of food price inflation that is currently 10%. The Chinese leadership is believed to be primarily concerned that food prices could lead to social unrest such as has broken out in North Africa and the Middle East, although calls for a ‘Jasmine Revolution’ in China appear to have fallen flat. It is difficult to assess the economic impact of the huge earthquake, which rocked north east Japan, although Prime Minister Kan has described it as “Japan’s worst crisis since the Second World War”. Prior to this the most severe earthquake of recent years had been that of Kobe in 1995. This did not seriously affect economic growth, although it did materially impact Japanese financial markets.

The OECD’s leading indicators suggest that the US economic expansion will accelerate over the next six months. This is consistent with most recent survey data, with February’s Purchasing Managers Indices (PMIs) for both the manufacturing and service sectors at their best levels for five years. However, the University of Michigan’s consumer confidence index fell sharply in March due to worries over large food and fuel price increases. Although fourth quarter annualised GDP growth was revised down from 3.2% to 2.8%, it is expected to reach 3.6% in the first quarter of 2011. There has also been a significant increase in US exports over the last six months, which has kept the trade deficit low despite soaring oil prices. There are also signs that inflationary pressures are growing with the headline rate at 2.1% in February, although ‘core inflation’ excluding food and energy, was only 1.1%.

The Federal Reserve has revised up its 2011 predictions for the US economy, bringing them into line with the consensus. Overall growth is predicted to be in a range of 3.4% to 3.9%, up from its previous forecast of 3.0% to 3.4%, while inflation is expected to be only 1.7%. Unemployment is expected to decline only slowly, down from 9.0% in January to 8.8% by the end of the year. However the employment components of the PMIs suggest that unemployment is likely to fall at a more rapid rate. This is important for government policy as the Federal Reserve is unusual among central banks in having a ‘dual mandate to maximise employment and to ensure stable prices’. The Fed’s current’s prediction that unemployment will fall only marginally may be overly pessimistic. Indeed, if recent trends continue by the end of the year unemployment could approach the 7.0% level associated with rising wage inflation. If this occurs it would be likely to persuade the Fed to accelerate the monetary tightening that is currently not expected to occur until 2012. However, there is also a risk that the bond market loses patience with the political indifference to a budget deficit approaching 10% of GDP and forces bond yields higher unless significant action is taken to reduce it.

‘ A GROwTh sLOwdOwN iN ThE sECONd hALF OF ThE yEAR sEEms iNCREAsiNGLy LikELy.’

‘ ThERE ARE ALsO siGNs ThAT iNFLATiONARy PREssUREs ARE GROwiNG iN ThE Us wiTh ThE hEAdLiNE RATE AT 2.1%.’


UNiTEd kiNGdOm Preliminary data for UK GDP in the fourth quarter of 2010 which indicated a 0.5% decline were greeted first with shock and then with a conviction that revisions would remove part or all of the decline. Such hopes seemed well founded on the basis of consistently stronger survey evidence. However, with the Office of National Statistics playing down the influence of the bad weather and a weaker than expected service sector, later revisions have confirmed the original estimate of last quarter’s GDP. Although manufacturing data is growing at the fastest rate since 1994, it accounts for less than 13% of the economy, whilst services are over 75%. It appears that structural problems with the UK economy remain, with trade continuing to exert a negative effect on growth. Despite export volumes growing at a healthy 2.3%, imports were 3.0% higher in the fourth quarter. Construction spending was expected to bounce back sharply following the weather related decline in December. However, a further decline was seen in the data released for January putting hopes for a strong economic recovery in further doubt. On the other hand encouragement can be found in a continued fall in unemployment and a sharp recovery in the service sector PMI data. In the first two months of the year the composite PMI data continues to be consistent with GDP growth of around 3% pa. There has also been a rebound in retail sales, although anecdotal evidence suggests that this has not been sustained.

However, the bulk of the government spending cuts and tax increases will not take effect until the new fiscal year as the multi-year deficit reduction plan is rolled out. Whilst a slide into recession seems overly pessimistic, the assumption by both the Office for Budget Responsibility and the Bank of England that trend growth can return close to the level artificially boosted by the credit bubble seems to be too optimistic. It appears more realistic to assume that whilst debt levels are brought back to more sustainable levels and the austerity programme remains in place, trend growth will struggle to reach 2% rather than the level seen between 1995 and 2008, which was close to 3%.

Much attention in recent weeks has been centred on inflation. The February figures for CPI and RPI were 4.4% and 5.5% respectively, whilst the domestic demand deflator, a measure of the underlying rate of inflation, accelerated to 3.4% in the fourth quarter. There was a hawkish letter from the Bank of England Governor to the Chancellor of the Exchequer explaining the overshoot in CPI. This was followed by a more dovish commentary in the Inflation Report, in spite of expectations that CPI will remain above 3% through 2011 and the central two year forecast being raised by 0.2% since November. There was also a recognition that the ‘second round effect’ of rising inflation has begun to result in higher wage pay settlements, with the rolling three month average increasing from 2.2% in December to 2.8% in January. Much has been said about the temporary impact of the increase in VAT and oil prices, but there is a growing recognition that inflation can no longer be ignored if the Monetary Policy Committee is to retain any credibility. Its members are gradually moving towards an interest rate increase, with three supporting a rise at the February meeting, whilst “of those not favouring a rise, some thought the case for an increase had grown.” There is a widespread belief that the first rise in the base rate could be as early as May, although the less than convincing growth data may see this delayed.

mARkET OUTLOOkmONEy mARkETsMonetary policy in the US remains accommodative although thoughts are beginning to turn to whether this will remain the case when the QE2 programme is completed in June. Pacific and emerging market central banks continue to tighten but may be joined by the European Central Bank (ECB) in the near future, which surprised markets when it warned that “an increase in interest rates at the next meeting is possible”. It also used the phrase “strong vigilance on inflation”, which has in the past signalled an imminent rate rise, although the ECB stressed that only one increase was being considered. Not all economists are convinced of the wisdom of even this limited action given the sovereign debt and banking solvency concerns in the Eurozone.

iNvEsTmENT REviEwCONTiNUEd

‘ iT APPEARs mORE REALisTiC TO AssUmE ThAT whiLsT dEBT LEvELs iN ThE Uk ARE BROUGhT BACk TO mORE sUsTAiNABLE LEvELs ANd ThE AUsTERiTy PROGRAmmE REmAiNs iN PLACE, TRENd GROwTh wiLL sTRUGGLE TO REACh 2% RAThER ThAN ThE LEvEL sEEN BETwEEN 1995 ANd 2008, whiCh wAs CLOsE TO 3%.’


The minutes of February’s Monetary Policy Committee (MPC) showed growing support for a base rate increase. Historically the major central banks often raise rates in concert so the likelihood of an ECB increase could encourage the MPC to shift in favour of monetary tightening as early as May. However, there is perhaps a closer correlation with the US Federal Reserve, which indicates that the first rise could be delayed. Once interest rates begin to rise they normally do so quickly, but the current upturn does not seem typical and the consensus forecast of a 0.75% rise in base rates to 1.25% within twelve months appears overdone. At present the rates directly on offer from banks for longer-term deposits remain attractive as they appear to more than compensate for the likely rise in money market rates.

FixEd iNTEREsT

Despite a temporary rally in early March due to a ‘flight to safety’ as geopolitical risks grew, US Treasury yields have continued to increase with the ten year yield at 3.5%. It should also be noted that the Fed has purchased over half of all new US Treasury issuance since its QE2 programme began last November. When this is completed yields could be forced higher especially if concerns over the budget deficit grow. The core Eurozone bond market has also been reasonably resilient in the light of the ECB’s rate rise hint, with ten year German bond yields at 3.4%. However, trading in peripheral markets remains poor. It seems inevitable that Portugal will have to ask for an EFSF bail-out with ten-year government bond yields now over 8%.

Gilt prices have also fallen with the ten year yield up to 3.7%, despite being supported to some degree by geopolitical concerns and data suggesting that the economy may be weaker than predicted. However, the longer term outlook remains poor with little real value. It is a worrying sign that the inflation rate implied by the market continues to rise and currently stands at 3.3%, similar to its level before the financial crisis erupted in 2008. Index-linked gilts are little changed and continue to look expensive due to strong demand from liability matching strategies. The ten year real yield is currently at 0.6%. Corporate bonds have moved in line with gilts recently, with little change in their yield premium. While spreads are at high levels compared with most periods, they are well below the peaks reached in 2009 at the height of the financial crisis and they could rise, if only temporarily, on growth concerns or renewed worries about Eurozone sovereign and financial debt.

Us TREAsURy 10 yEAR yiELd

5.500

4.600

3.700

2.800

1.900March 2006 February 2011

yiELd PREmiUm OF CORPORATEs OvER GiLTs

600

450

300

150

0March 2007 February 2011

‘ LONGER-TERm dEPOsiTs REmAiN ATTRACTivE As ThEy APPEAR TO mORE ThAN COmPENsATE FOR ThE LikELy RisE iN mONEy mARkET RATEs.’

‘ ThE LONGER TERm OUTLOOk FOR GiLTs REmAiNs POOR wiTh LiTTLE REAL vALUE. iT is A wORRyiNG siGN ThAT ThE iNFLATiON RATE imPLiEd By ThE mARkET CONTiNUEs TO RisE ANd CURRENTLy sTANds AT 3.3%.’


CURRENCiEs ANd OvERsEAs EQUiTiEs

The dollar has been weak recently, with its trade weighted value approaching the lows last reached last November. This is rather surprising as the dollar normally benefits from its safe haven status in periods of geopolitical tension. However, with nervous oil producers recycling petrodollars to boost domestic spending, the Japanese seeking to repatriate funds, prospects of interest rates increases in Europe and continued lax US monetary policy, it may just be suffering from a short term imbalance of demand and supply. A dollar rally appears overdue given its superior economic fundamentals. This could hurt Sterling which has benefited from dollar weakness and looks vulnerable if the robustness of the UK economic recovery is called into question.

Since their low point in March 2009 global equity markets have benefited from a relatively rare combination of strong economic and earnings growth together with low interest rates. This helped the FTSE All-World ex UK index rise 76% from its low of two years ago. However, the fundamental background has deteriorated in recent months with the surge in food and energy prices likely to result in slower growth eventually, while leading indicators are now declining, which is usually a bad sign for equity markets as they are often the first indication of weaker growth to come. The period of ultra-low interest rates also appears to be coming to an end, with the ECB being the first central bank of a developed economy to indicate that it is about to raise rates and other major central banks likely to follow suit before long. The combination of slower growth and higher interest rates could lead to a period of relatively dull stock market performance. Although this should not result in a new bear market, it could lead to a switch from cyclical to more defensive sectors. The current situation seems similar to that of 1994, when the Fed started to increase interest rates as an economic recovery began to gain momentum. The FTSE All-World ex UK index drifted lower for much of the year, falling 10% from peak to trough, but as economic growth remained reasonably firm, equity markets moved strongly higher once rates had stabilised.

Pacific and emerging markets are particularly sensitive to rising food and energy prices such as is currently underway, which with further interest rate increases expected in China and India, could result in a hard economic landing. However, as the FTSE all-World Pacific ex Japan index has underperformed the world index by nearly 10% since last September, it seems appropriate to reduce the Overseas Fund’s underweight position modestly. The recent earthquake makes it difficult to assess the economic outlook in Japan but a relief rally is likely in the near future. However, if the Kobe earthquake in 1995 is any guide, a strong yen and a weak equity market may be on the cards for several months. This could provide a major buying opportunity as Japan is the only major equity market that appears cheap. For now it seems appropriate to maintain a neutral position whilst looking to increase exposure in the medium term. Growing concerns over the UK economic outlook, and the consequent risk of renewed sterling weakness, indicate a modest preference for overseas compared to UK equities.

iNvEsTmENT REviEwCONTiNUEd

sTERLiNG/$ ExChANGE RATE

2.200

2.000

1.800

1.600


‘ ThE COmBiNATiON OF sLOwER GROwTh ANd hiGhER iNTEREsT RATEs COULd LEAd TO A PERiOd OF RELATivELy dULL GLOBAL sTOCk mARkET PERFORmANCE.’


Uk EQUiTiEs

UK equity prices have returned to the end of February levels after a sharp fall in early March. Economic data has been far from reassuring for those expecting the recovery to gather pace. At the same time concerns have been rising that inflation is not just experiencing a temporary acceleration due to short-lived external factors, but is beginning to look like a more enduring trend, with the growth of pay settlements accelerating. Calls for the Bank of England to take action have become louder, but it is recognised that this would dampen economic activity at a time when the impact of the government’s austerity measures is finally about to be felt. It is estimated that a 50bp increase in the average mortgage rate from the current level of 3.5% would reduce the income available for discretionary spending by about 3%. As the savings ratio is already well below levels experienced at a similar stage of previous recoveries, there seems little scope to offset the squeeze from higher energy prices and taxes. Consequently, there has been concern that corporate earnings growth may subside. Such worries are given greater weight by the negative outlook for profit margins. These have been declining from a peak in the second quarter of last year, with the number of companies exceeding their margin estimates in the fourth quarter at the lowest level since 2005. On top of any economic headwinds, political unrest in the Middle East and North Africa are adding to nervousness. However, it may be a mistake to become complacent as equity prices rise, just as it is easy to become over-pessimistic when prices plummet.

Tragic though it was in human terms, the global economic repercussions of the Japanese earthquake and its associated nuclear accidents are likely to be limited. Similarly, whilst the prospect of escalating civil unrest in the oil producing states is a significant risk, it should be remembered that even the Iraqi wars had little lasting impact on financial markets. Concentrating on the economic fundamentals indicates that UK equity prices are not expensive in absolute terms. The ten year average historic earnings multiple is below its thirty year average, the current multiple is no worse than fair value whilst earnings, dividends in the coming year are still likely to grow even if the level disappoints and the ratio of gilt to equity yields at 1.25x is reasonably comfortable. It is also worth recognising that the returns over the past decade have not been typical. Even after the strong rally last year, the real rate of return over the past decade was a modest 0.6% compared to 2.4% for gilts. Although the annualised returns over twenty years for the two asset classes were similar at 6.0% and 5.8% respectively, this was an unusually favourable period for gilts and not much better than average for equities. Over fifty years and since 1900 returns were respectively 5.4% and 5.1% for UK equities but only 2.5% and 1.2% for gilts. Whilst the need for financial retrenchment over the next few years would indicate that expectations should not be set too high, equities should provide long term investors with superior relative and absolute returns than bonds. Opportunities to increase weightings following setbacks should be taken.

10 yEAR GiLT yiELd RELATivE TO ALL shARE yiELd

2.900

2.300

1.700

1.100


‘ whiLsT ThE NEEd FOR FiNANCiAL RETRENChmENT OvER ThE NExT FEw yEARs wOULd iNdiCATE ThAT ExPECTATiONs shOULd NOT BE sET TOO hiGh, EQUiTiEs shOULd PROvidE LONG TERm iNvEsTORs wiTh sUPERiOR RELATivE ANd ABsOLUTE RETURNs ThAN BONds. OPPORTUNiTiEs TO iNCREAsE wEiGhTiNGs FOLLOwiNG sETBACks shOULd BE TAkEN.’


mARkET mOvEmENTs ANd PERFORmANCE

mONEy mARkET• The base rate has remained unchanged at 0.5% since

March 2009.

• The premium of 3 month deposit rates over the base rate began the year at zero, rose to 32bps and ended February at 27bps.

• 3 month rates opened the year at their low point of 0.50%, peaked at 0.82% in November before closing the year at 0.77%.

• 12 month rates opened at 1.14%, the low for the year and closed at 1.55%, the high.

• The Deposit Fund’s average life began the year at the low of 85 days and closed the year at 109 days, having peaked at 113 days in December.

• An average rate of interest of 1.1% (AER) was paid over the year compared to 0.1% (AER) for higher rate bank deposits.

FixEd iNCOmE• A weak second half closely mirrored the first, but a late rally

resulted in positive bond returns overall. The 10 year US Treasury yield opened the year at 3.62%, peaked at 3.99% in April before plummeting to 2.39% by October and ending the year at 3.43%.

• UK gilt prices followed a similar pattern. The 10 year yield opened at 4.03%, moved between 4.15% in March and 2.83% in August and closed at 3.60%.

• The gradient of the yield curve lessened as the 2 year gilt yield rose 46bp to 1.40%, while that of the 30 year gilt yield fell by 21bp to 4.37%.

• The average premium of corporate bond yields over gilts was little changed closing down 4bp at +176bp having traded between +147bp and +198bp.

• The spread between AAA and BBB rated bonds opened at the high of +251bp, traded between +214bp and +298bp, before closing at +230bp.

Uk 10 yEAR GiLT yiELd per cent4.200

4.000

3.600

3.200

2.800

March 2010 February 2011

mONEy mARkET dEPOsiT RATEs per cent

1.6

1.2

0.8

0.4

0

0.0

0.4

0.8

1.2

1.6

1 wk 1 mth 2 mth 3 mth 6 mth 9 mth 1 yr

28 February 2011 28 February 2010


• Index linked prices did not progress after a strong first half year. The ten year yield opened at 1.02%, soon peaked at 1.14% before collapsing to 0.36% in October before closing at 0.60%.

• Over the year index linked gilts outperformed corporate bonds and conventional gilts, whilst long dates outperformed shorts: FTSE All Stocks Index Linked Index (+8.6%); FTSE Over 15 Year Gilt Index (+7.8%); iBoxx Non Gilts Index (+6.6%); FTSE All Stocks Gilts Index (+5.6%); Short dated Composite Index (+4.1%).

• The best return relative to benchmark came from the Inflation Linked Fund (+0.9%) followed by the Gilt Fund (+0.1%). The Short Fixed Interest and Managed Fixed Interest funds matched their benchmarks and the Corporate Bond Fund (-0.3%) lagged behind. All figures are after expenses.

Uk EQUiTiEs• UK equity prices rose 9.2% between the end of February

and mid April before slumping nearly 17% by the end of June. However, for the rest of the year prices were strong and the FTSE All Share finished the year 13.5% higher for a total return of 17.0%.

• Smaller more cyclical companies continued to outperform although less so than in the first half: FTSE 100 (+15.5%); FTSE Mid 250 (+27.5%).

• The main positive relative contributors to All Share returns were Mining, Mobile Telecoms and Media stocks, while the main negative contributors were Banks, Pharmaceuticals and Oil Producers. BP was the main cause for the poor returns from oil offsetting a strong contribution from Shell.

10 yEAR iNFLATiON LiNkEd GiLT yiELd per cent1.150

0.950

0.750

0.550


FTsE ALL shARE iNdEx

3200

3000

2800

2600

2400March 2010 February 2011


• The CFB ethically adjusted benchmark exceeded the All Share Index by 15bp over the year. The return on ethically excluded stocks, which account for 12% of the index was 15.9% compared to 17.2% for the rest of the Index.

• Over the year the UK Equity Fund return (+18.3%) exceeded that of the ethically adjusted Index by 1.1% and the FTSE All Share Index by 1.3%. The Managed Equity Fund (+17.9%) and Managed Mixed Fund (+15.2%) outperformed their benchmarks by 1.2% and 1.3%, respectively.

• The Property Fund produced an estimated return of +10.5% over the year based on distributions to 31 December and the price on 28 February. The purchase yield on the distribution in the fourth quarter of 2010 would have been 8.2%.

OvERsEAs EQUiTiEs• The FTSE All World ex UK Index also dipped sharply last

Spring before rallying strongly to complete the year 11.4% higher for a total return of 14.1%.

• Over the year under review sterling rose against the $ (+6.8%) & € (+5.6%) but fell against the ¥ (1.5%).

• The total return of the FTSE World ex UK Index lagged that of the FTSE All Share Index by 2.9%.

• North America (+15.1%) was the best performer while Europe (+14.4%) and the Pacific ex Japan (+14.3%) also outperformed, whilst the Rest of the World (+12.0%) and Japan (+9.6%) lagged behind.

• The return on the Overseas Fund (+15.2%) was 1.1% in excess of the Benchmark.

• Over the year asset allocation had little impact, with the main contributors to performance being stock picking in North America and the Pacific.

FTsE wORLd Ex Uk

212.5

202.5

192.5

182.5


FTsE Uk vs wORLd Ex Uk

15.50

15.05

14.60

14.15


mARkET mOvEmENTs ANd PERFORmANCECONTiNUEd


PERFORmANCE sUmmARy

iNTERNAL AssEssmENTTOTAL RETURNs OF AUdiTEd UNiT vALUEs 1 year to 5 years to 10 years to 28/2/11 28/2/11 28/2/11 Index % %p.a. %p.a.

Equity & Convertibles CFB Managed Mixed Fund +15.2 +5.1 +4.2CFB Managed Equity Fund +17.9 +5.0 +3.8CFB UK Equity Fund (Charity) +18.3 +4.7 +3.8FTSE All Share Index (Gross) +17.0 +4.7 +4.3FTSE 100 Index (Gross) +15.5 +4.5 +3.7CFB UK Equity Fund (Pension) +18.3 +4.7 +3.7FTSE All Share Index (Net) +17.0 +4.7 +4.2FTSE 100 Index (Net) +15.5 +4.5 +3.6FTSE All Share Index Ethically Adjusted +17.2 +4.2 n/aCFB Overseas Fund +15.2 +5.7 +3.2FTSE All World Index (ex UK) +14.1 +5.9 +3.8

Fixed Interest CFB Managed Fixed Interest Fund +5.0 +5.1 +5.5Managed Fixed Interest Composite +5.0 +4.8 +5.2CFB Short Fixed Interest Fund +4.1 +5.5 +5.5FTSE Short Gilt Index Composite +4.1 +5.4 +5.4CFB Gilt Fund* +5.7 +4.6 +5.1FTSE All Stock Gilt Index +5.6 +4.4 +5.1CFB Corporate Bond Fund +5.9 +4.8 n/aiBoxx Non Gilts Index +6.6 +3.3 +5.4Corporate Bond Index Composite +6.2 +2.9 +5.1

Inflation Linked CFB Inflation Linked Fund +9.5 +5.6 +6.2FTSE All Stock Index Linked Index +8.6 +5.7 +6.1FTSE Inflation Linked Index Composite +9.1 +5.7 +6.4

Property CFB Property Fund +10.5 -1.6 n/aIPD All Balanced Funds Index n/a n/a n/a

Cash (AERs) CFB Deposit Fund +1.1 +3.6 +3.9Higher Rate Bank Deposits (over £10,000) +0.1 +1.2 +1.21 Week LIBID (less CFB expenses) +0.4 n/a n/a

*Figures prior to 01/11/02 relate to CFB Long Fixed Interest Fund

CFB FUNds PERFORmANCE 2011FOR mORE dETAiL OF OUR FUNds PERFORmANCE PLEAsE GO TO www.CFBmEThOdisTChURCh.ORG.Uk/2011

Risk wARNiNGCFB FUNds ARE dEsiGNEd FOR LONG TERm iNvEsTORs. whiLE wE hOPE ThAT UNiT vALUEs wiLL RisE, PRiCEs CAN ANd dO FALL. ThEy ARE NOT sUiTABLE FOR yOU TO UsE iF yOU CANNOT ACCEPT ThE POssiBiLiTy OF CAPiTAL LOssEs.


CFB COUNCiL

ROGER smiTh ChAiRmANChairman of family investment company, following a career in the oil and gas industry and the motor industry. Chairman of Epworth Investment Management.

RiChARd REEvEs viCE ChAiRmANChartered accountant with many years experience in the areas of governance and compliance as Company Secretary of a public listed company. He retired in 2005 as Company Secretary of Corus Group plc (formerly British Steel plc). A director of Epworth Investment Management.

TEd AwTy Recently retired as a senior partner with KPMG having specialised in working with large corporates. Ted is also the second Connexional Treasurer for The Methodist Church.

jOhN GiBBONAdviser to a number of pension funds and member of the Investors’ Committee of the Property Income Trust for Charities.

sUE hAwORTh A qualified accountant with experience in tax and compliance. Previously compliance officer and company secretary for Montagu Private Equity, and CFO for Advantage Capital Limited.

ANNE hUGhEs-hOLmEs Chief Executive of Trustees for Methodist Church Purposes. Articled with Hodgson Impey, then specialised in personal tax at Ernst & Young. Subsequently partner in local practice, dedicated to small businesses and director within Charity Sector.

COLiN PEARsON A qualified actuary and former Investment Manager with AXA Equity & Law. Director of Methodist Ministers’ Pension Trust and Methodist Lay Employees’ Pension Trust. A local preacher in the Ashford Circuit.

jOhN sANdFORdA Chartered Accountant and former Audit Partner with KPMG’s Manchester office, with considerable experience of the pensions sector, internal controls and corporate governance. Chairman of the CFB Audit Committee.

REvd GRAhAm ThOmPsONChair of East Anglia District. Trained in accountancy, member of the Connexional Allowances Committee and former Director of the Methodist Ministers’ Pension Fund.

TERRy wyNNA former member of the European Parliament and President of its Budget Committee. Currently a trustee of both the Trustees for Methodist Church Purposes and Action for Children. Also a Methodist local preacher.

GARRy yOUNGA professional economist with strong focus on economic policy, currently working for the Bank of England. Former winner of The Independent’s Golden Guru award. Methodist Lay Preacher in the Blackheath & Lewisham Circuit.

COUNCiL mEmBERsRoger Smith (Chairman) Richard Reeves FCA (Vice Chairman)

Ted Awty FCA John Gibbon Sue Haworth FCCA ATII Anne Hughes-Holmes BSc (Econ) Colin Pearson MA FIA John Sandford MA FCA Revd Graham Thompson Terry Wynn Garry Young BSc (Econ) MSc PhD

AUdiT COmmiTTEEJohn Sandford (Chairman) Sue Haworth Richard Reeves

REmUNERATiON COmmiTTEERoger Smith (Chairman) Richard Reeves Garry Young

CFB APPOiNTEEs TO jOiNT AdvisORy COmmiTTEE ON ThE EThiCs OF iNvEsTmENTKeith Aldred Alan Emery Bill Seddon Roger Smith Terry Wynn

COmmiTTEEs ANd AdvisORs

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sENiOR OFFiCERsChief Executive Bill Seddon BSc (Econ) ASIP Chief Financial Officer Peter Forward FCA Chief Investment Officer Russell Sparkes MA ASIP Senior Fund Manager Miles Askew BA MSc ASIP Senior Fund Manager Stephen Beer BA ASIP Senior Fund Manager Chris Wigley BA Relationship Manager Bill Lane MSc ASIP

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