CCLA AUTHORISED CONTRACTUAL SCHEME ANNUAL REPORT …

CCLA AUTHORISED CONTRACTUAL SCHEME

ANNUAL REPORT AND

FINANCIAL STATEMENTS

Year ended 31 December 2020


Annual Report and Financial Statements02 31 December 2020

CONTENTS

Disability Discrimination Act 1995 Extracts from the Annual Report and Financial Statements are available in large print and audio formats.

Report of the ACS Manager 03

Statement of the ACS Manager’s Responsibilities and ACS Manager’s Statement 05

Statement of the Depositary’s Responsibilities and Depositary’s Report 06

Independent Auditors’ Report 08

Accounting Policies 12

Diversified Income Fund

Report of the Investment Manager* 14

Summary r isk indicator 18

Comparative table 19

Operating charges analysis 22

Portfolio analysis 23

Portfolio statement* 24

Statement of total return** 32

Statement of change in net assets attr ibutable to Unitholders** 32

Balance sheet** 33

Notes to the financial statements** 34

Distr ibution tables** 47

AIFMD disclosures 48

Directory* 49

*Collectively, these comprise the Investment Manager’s Report. **Audited.

References to “CCLA” refer to the CCLA Group, comprising CCLA Investment Management Limited and CCLA Fund Managers Limited.

The Financial Statements We are pleased to present the Annual Report and Financial Statements for the CCLA Authorised Contractual Scheme (the Fund or Scheme) and its only Sub-Fund, the Diversified Income Fund for the year ended 31 December 2020. The Fund The Fund is an umbrella-type authorised contractual scheme (ACS) and is a Non-UCITS Retail Scheme (NURS). For the purposes of the Alternative Investment Fund Managers Directive (AIFMD), the Fund qualifies as an alternative investment fund (AIF). It is established by way of a Co-ownership Deed which is binding on each Unitholder, who is deemed to have notice of it. Being an umbrella scheme, the Fund is capable of comprising various Sub-Funds and such Sub-Funds may be established from time to time by the ACS Manager with the approval of the Financial Conduct Authority. Each Sub-Fund is an AIF and a NURS for the purpose of the Regulations. Each Sub-Fund is operated as a distinct fund with its own portfolio of investments. The assets of a Sub-Fund are beneficially owned by the Unitholders as tenants in common and must not be used to discharge the liabilities of, or meet any claims against, any person or body other than the Unitholders in that Sub-Fund (including the umbrella and other Sub-Funds).

Each Sub-Fund will be charged with the liabilities, expenses, costs and charges of the Fund attributable to that Sub-Fund, and within each Sub-Fund, charges will be allocated between Unit Classes in accordance with the terms of issue of Units of those Classes. Any assets, liabilities, expenses, costs or charges not attributable to a particular Sub-Fund may be allocated by the ACS Manager in a manner which it believes is fair to the Unitholders generally. This will normally be pro rata to the Net Asset Value of the relevant Sub-Funds. The investment objective of the Fund is to invest the property of the Fund with the aim of spreading investment risk and giving Unitholders the benefit of the results of the management of that property. The investment objective and policy of each Sub-Fund will be formulated by the ACS Manager at the time of creation of the relevant Sub-Fund, which may be varied from time to time subject to the requirements regarding Unitholder approval and Financial Conduct Authority consent as set out in the Regulations. Authorised Status The Fund is an ACS in co-ownership form authorised by the Financial Conduct Authority with effect from 24 October 2016.



REPORT OF THE ACS MANAGER

for the year ended 31 December 2020

Responsible Investment and Stewardship The Fund is managed in accordance with CCLA’s responsible investment approach. This integrates environmental, social and governance issues into investment decision making and prioritises ongoing stewardship with investee companies. These activities are conducted with the aim of increasing the security of the Fund. The Investment Manager is a signatory to the United Nations backed Principles for Responsible Investment (PRI) and the Financial Reporting Council’s Stewardship Code. The most recent PRI Assessment and the full response to the Stewardship Code are available at https://www.ccla.co.uk/our-approach/how-we-approach-stewardship-and-ethics.

Ethical Investment The Diversified Income Fund follows the ethical investment policy of the COIF Charities Investment Fund which prohibits investment in companies identified by our third-party data provider (MSCI), as being involved in: • producing landmines, cluster bombs or

chemical/biological weapons; • producing tobacco products; and • having significant (>10%) turnover relating

to online gambling or the production of pornography.

Reflecting client demand, the Diversified Income Fund implements a further restriction that prohibits the purchase of companies that derive more than 10% of their revenue from the extraction and/or refining of coal, oil or natural gas. CCLA Fund Managers Limited ACS Manager 20 April 2021



REPORT OF THE ACS MANAGER




STATEMENT OF THE ACS MANAGER’S RESPONSIBILITIES

AND ACS MANAGER’S STATEMENT


Statement of the ACS Manager’s Responsibilities The Collective Investment Schemes sourcebook of the Financial Conduct Authority requires the ACS Manager to prepare financial statements for each accounting period which give a true and fair view of the financial position of the Fund at the year end and of the net income and net gains or losses of the Fund for the year then ended. In preparing the financial statements the ACS Manager is required to: • follow applicable accounting standards; • make judgements and estimates that are

reasonable and prudent; • select suitable accounting policies and then

apply them consistently; • prepare the financial statements on the going

concern basis unless it is inappropriate to presume that the Fund will continue in operation for the foreseeable future; and

• comply with the Co-Ownership Deed and

the Statement of Recommended Practice for UK Authorised Funds (SORP).

The ACS Manager is required to keep proper accounting records and to manage the Fund in accordance with the Regulations and the Co-Ownership Deed. The ACS Manager is responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities. ACS Manager’s Statement We hereby approve the Annual Report and Financial Statements of CCLA Authorised Contractual Scheme for the year ended 31 December 2020 on behalf of CCLA Fund Managers Limited in accordance with the requirements of the Collective Investment Schemes sourcebook of the Financial Conduct Authority. P Hugh Smith Director 20 April 2021 E Sheldon Director 20 April 2021



STATEMENT OF THE DEPOSITARY’S RESPONSIBILITIES

AND DEPOSITARY’S REPORT


Statement of the Depositary’s responsibilities in respect of the Scheme The Depositary must ensure that the Scheme is managed in accordance with the Financial Conduct Authority’s Collective Investment Schemes sourcebook, the Investment Funds sourcebook, the Financial Services and Markets Act 2000, as amended, the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (together “the Regulations”) and the Contractual Scheme Deed and Prospectus (together the “Scheme documents”) as detailed below. The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Scheme and its investors. The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Scheme in accordance with the Regulations. The Depositary must ensure that: • the Scheme’s cash flows are properly

monitored and that cash of the Scheme is booked in cash accounts in accordance with the Regulations;

• the sale, issue, repurchase, redemption and cancellation of Units are carried out in accordance with the Regulations;

• the value of Units of the Scheme are

calculated in accordance with the Regulations; • any consideration relating to transactions in

the Scheme’s assets is remitted to the Scheme within the usual time limits;

• the Scheme’s income is applied in accordance

with the Regulations; and • the instructions of the Alternative Investment

Fund Manager (“the AIFM”) are carried out (unless they conflict with the Regulations).

The Depositary also has a duty to take reasonable care to ensure that Scheme is managed in accordance with the Scheme documents and the Regulations in relation to the investment and borrowing powers applicable to the Scheme.



STATEMENT OF THE DEPOSITARY’S RESPONSIBILITIES

AND DEPOSITARY’S REPORT


Report of the Depositary Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Scheme, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Scheme, acting through the AIFM: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme’s Units and the application of the Scheme’s income in accordance with the Regulations and the Scheme documents, and (ii) has observed the investment and borrowing powers and restrictions applicable to the Scheme in accordance with the Regulations and Scheme documents of the Scheme. The report is given on the basis that no breaches are subsequently advised to us before the distribution date. We therefore reserve the right to amend the report in the light of such circumstances. HSBC Bank plc Trustee and Depositary Services 8 Canada Square London E14 5HQ HSBC Bank plc is authorised and regulated by the Financial Conduct Authority 20 April 2021

Report on the audit of the financial statements Opinion In our opinion, the financial statements of CCLA Authorised Contractual Scheme (the “Scheme”): • give a true and fair view of the financial

position of the Scheme and its sub-fund as at 31 December 2020 and of the net revenue and the net capital losses on the scheme property of the Scheme and its sub-fund for the year 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 Instrument of Incorporation.

CCLA Authorised Contractual Scheme is an Authorised Contractual Scheme (“ACS”) with a single sub-fund. The financial statements of the Scheme comprise the financial statements of its sub-fund. 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 December 2020; the Statement of total return and the Statement of change in net assets attributable to Unitholders for the year then

ended; the distribution tables; the Accounting policies and the notes to the financial statements, which include a description of the significant accounting policies. 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 Scheme 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 Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Scheme’s ability to continue as a going concern for a period of at least twelve months from the date on which the financial statements are authorised for issue.



INDEPENDENT AUDITORS’ REPORT


In auditing the financial statements, we have concluded that the Authorised Contractual Scheme Manager’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Scheme’s ability to continue as a going concern. Our responsibilities and the responsibilities of the Authorised Contractual Scheme Manager with respect to going concern are described in the relevant sections of this report. 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 Authorised Contractual Scheme 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. Statement of the ACS Manager’s Responsibilities and ACS Manager’s Statement In our opinion, the information given in the Statement of the ACS Manager’s Responsibilities and ACS Manager’s Statement for the financial year for which the financial statements are prepared is consistent with the financial statements. Responsibilities for the financial statements and the audit Responsibilities of the Authorised Contractual Scheme Manager for the financial statements As explained more fully in the ACS Manager’s Responsibilities and ACS Manager’s Statement, the Authorised Contractual Scheme 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. Authorised Contractual Scheme 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 Authorised Contractual Scheme Manager is responsible for assessing the Scheme’s and its sub-fund’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 Authorised Contractual Scheme Manager either intends to wind up or terminate the Scheme or its sub-fund, or has no realistic alternative but to do so. 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Scheme/industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of the Collective Investment Schemes sourcebook, and we considered the extent to which non-compliance might have a material effect on the financial statements, in particular those parts of the sourcebook which may directly impact on the determination of amounts and disclosures in the financial statements. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or to increase the net asset value of the Scheme and judgements and assumptions made by management in their significant accounting estimates. Audit procedures performed included: • Discussions with the Authorised Contractual

Scheme Manager, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;

• Reviewing relevant meeting minutes, including those of the Authorised Contractual Scheme Manager’s board of directors;

• Identifying and testing journal entries, specifically any journals posted as part of the financial year end close process;

• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing; and

• Challenging assumptions and judgements made by management in their significant accounting estimates





There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’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 Scheme’s unitholders as a body in accordance with paragraph 4.5.12 of the Collective Investment Schemes sourcebook as required by paragraph 67(2) of the Open-Ended Investment Companies Regulations 2001 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 exception reporting Under the Collective Investment Schemes sourcebook we are also required to report to you if, in our opinion: • proper accounting records have not been

kept; or • the financial statements are not in agreement

with the accounting records. We have no exceptions to report arising from this responsibility. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 20 April 2021







ACCOUNTING POLICIES


The following accounting policies apply to all Sub-Funds, where applicable.

(a) Basis of preparation

The financial statements have been prepared on a going concern basis, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for UK Authorised Funds (SORP) issued by the Investment Association in May 2014 (and amended in June 2017) and the Collective Investment Scheme sourcebook. The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments.

(b) Revenue recognition Dividends on ordinary stocks, including special dividends where appropriate, distributions received on collective investment schemes, preference shares and unit trusts are accrued to revenue on the dates when the investments are first quoted ex-dividend, or otherwise on receipt of cash. Interest on Government and other fixed interest stocks and bank deposits are accrued on a daily basis. Revenue on debt securities is recognised on the effective yield basis which takes into account the amortisation of any discounts or premiums arising on the purchase price, compared to the final maturity value, over the remaining life of the security. Accrued interest purchased or sold is excluded from the cost of the security and is recognised as revenue of the Fund.

Where material, dividends received from US Real Estate Investment Trusts (US REITs) are allocated between revenue and capital for distribution purposes. The split is based on the year end tax reporting date issued by the US REIT. Where the split of revenue and capital has not been announced at the accounting date a provisional split will be used. The provision will be calculated on the prior year’s aggregated dividend split for each US REIT. Revenue is stated net of irrecoverable tax credits. In the case where revenue is received after the deduction of withholding tax, the revenue is shown gross of taxation and the tax consequences are shown within the tax charge. Overseas tax recovered is recorded in the period it is received.

(c) Stock dividends The ordinary element of stock received in lieu of cash dividends is recognised as revenue of the Fund. Any enhancement above the cash dividend is treated as capital.

(d) Special dividends, share buy-back or additional share issue The underlying circumstances behind a special dividend, share buy-back or additional share issue are reviewed on a case by case basis in determining whether the amount is revenue or capital in nature. Amounts recognised as revenue form part of the distribution.



ACCOUNTING POLICIES


(e) Cash equivalents Interest on deposits in The Public Sector Deposit Fund (PSDF) are reinvested in the PSDF on a monthly basis.

(f) Expenses Please refer to the accounting policies section of each Sub-Fund.

(g) Distributions Please refer to the accounting policies section for each Sub-Fund.

(h) Basis of valuation Quoted investments are valued at bid-market values, at 3pm London time, on the last business day of the accounting period. The ACS Manager is satisfied that the resultant portfolio valuation is not materially different from a valuation carried out at close of business on the balance sheet date.

(i) Taxation As the Fund is an umbrella co-ownership ACS, neither the Fund nor its Sub-Funds are subject to UK tax on income and capital gains.



Diversified Income Fund Unit Class 1 This class of Units is restricted for use by the COIF Charities Investment Fund. Over the year Unit Class 1 achieved a total return after expenses of -1.57%. This compares with a return of 2.95% on the comparator benchmark. In the year income of 5.18p was paid to investors, 5.08p was paid in 2019. At 31 December 2020 the income yield on Unit Class 1 was 3.34%. Diversified Income Fund Unit Class 2 This class of Units is restricted to local authority, public sector and other tax exempt investors who can receive income gross. Over the year Unit Class 2 achieved a total return after

expenses of -1.59%. This compares with a return of 2.95% on the benchmark. In the year income of 5.01p was paid to investors, 4.94p was paid in 2019. As at 31 December 2020 the income yield on Unit Class 2 Units was 3.36%. Diversified Income Fund Unit Class 3 This class of Units is restricted to UK charity investors. Over the years Unit Class 3 achieved a total return after expenses of -1.63%. This compares with a return of 2.95% on the benchmark. In the year income of 4.94p was paid to investors, 4.91p was paid in 2019. As at 31 December 2020 the income yield on Unit Class 3 Units was 3.29%.

DIVERSIFIED INCOME FUND

REPORT OF THE INVESTMENT MANAGER


Total capital and income return 1 year 2 years 3 years To 31 December 2020 % % p.a. % p.a.

Performance against market indices (after expenses)

Diversified Investment Fund Unit Class 1 -1.57 4.97 3.09 Diversified Investment Fund Unit Class 2 -1.59 4.96 3.06 Diversified Investment Fund Unit Class 3 -1.63 4.93 3.05 Comparator Benchmark# 2.95 7.69 3.94 MSCI UK Investable Market Index (IMI) -11.78 2.21 -1.95 MSCI Europe ex UK Index 7.49 13.56 5.14 MSCI North America 16.24 20.85 13.50 MSCI Pacific 8.47 11.52 5.14 iBoxx Markit £ Gilts 8.83 7.98 5.46 iBoxx Markit £ Non-Gilts 7.80 8.53 5.07 # Comparator Benchmark – Composite: MSCI UK IMI 20%, MSCI North America 6.67%, MSCI Europe

Ex UK 6.67%, MSCI Pacific 6.67%, iBoxx £ Gilts 30% and iBoxx £ Non-Gilts 30%. * Net asset value to net asset value plus income re-invested. ** Unit Classes 2 and 3 launched in March 2017 and December 2017 respectively. Source: CCLA.






Strategy The investment objective of the Diversified Income Fund is to provide income and the potential for capital growth over the long term from an actively managed diversified portfolio. Over the year the portfolio has maintained an allocation to conventional fixed interest investments below that of the benchmark. This reflects the very low income yields available from the sector which are a poor match to the Fund’s longer term requirements and which, in the fund manager’s view, do not sufficiently compensate investors for the risks associated with investment. The fixed income assets held are good quality corporate issues typically with a short average time to maturity, which supports a cautious stance in the sector. Equity investments are selected on a ‘bottom-up’ basis, that is by holding companies thought to be attractive in their own right, rather than by having any predetermined allocation to any sector or country. At the year end this approach resulted in relatively high weightings to technology companies and the consumer sector. There was a low exposure to banks and no exposure to companies deriving more than 10% of their turnover from oil and gas production or refining, which are excluded from the range of permitted investments. The portfolio holds a broad range of non-traditional investments in areas including infrastructure, alternative energy, music royalties and student accommodation. These holdings provide an important support to income and are a good source of diversification.

Economic and market review The global pandemic and the efforts to control its effects dominated the global economy in 2020. The virus, and the movement constraints which followed it, triggered a deep recession which, although only short lived, had a severe impact on overall activity. Governments and central banks responded with fiscal measures to support consumers and businesses where cash flows had suddenly ceased. Monetary conditions were eased by interest cuts and quantitative easing programmes which supported economic revival but also fed into asset markets, pushing values higher in the process. Most investment markets gave positive returns over the year with equities the strongest performers. The global equity index gave a return to a Sterling based investor of 12.67%, of the major regional indices Asia performed best, gaining 19.42%. Fixed interest prices rose as yields fell. Government bonds out-performed the corporate alternatives and there was a marked preference for longer dated and lower credit rated issues. Property values fell modestly, improving in the final months of the year although student accommodation underperformed, reflecting income uncertainties.

Outlook The year ahead is expected to be a period of recovery for the world economy. After a slow start, activity is expected to build under the influence of the support measures already in place and as the vaccination programme gradually breaks the link between mobility and infection rates. Monetary policies will remain supportive throughout the period, however, it is not expected that by the end of the year all the output levels lost will have been recovered, that is likely only in 2022 or beyond. A challenge for investors is that valuations for most asset classes are already high, having risen to reflect a recovery which is expected, but which has yet to be achieved. We expect a positive performance overall but favour high quality companies not dependent on the broad economy to raise earnings. We remain cautious of fixed interest assets on the view that sector valuations are too high, having been moved above fair value by the effects of loose monetary policies. J Bevan Chief Investment Officer CCLA Investment Management Limited 20 April 2021











Risk warning Past performance is not a reliable indicator of future results. The price of the Diversified Income Fund’s Units and any income distributions from them may fall as well as rise and an investor may not get back the amount originally invested. The Diversified Income Fund’s Units are intended only for long-term investment and are not suitable for money liable to be spent in the near future. Units are realisable on each dealing day.

The Diversified Income Fund may invest in countries which could be subject to political and economic change. The Diversified Income Fund may invest in collective investment schemes and other assets which may, on occasions, be illiquid, or invest in assets which are valued by an external valuer and as such are open to substantial subjectivity.

Top ten changes in portfolio composition Cost £’000

Purchases: HICL Infrastructure 1,752 UK Treasury 4.25% 2039 1,629 International Public Partnership 1,610 Sequoia Economic Infrastructure Income Fund 1,193 Greencoat Renewables 1,175 Round Hill Music Royalty Fund 1,059 Royal Bank of Canada FRN 2022 997 BMO Real Estate Investments 937 BNP Paribas 1.875% 2027 893 PepsiCo 884

Proceeds £’000

Sales: UK Treasury 0.875% 2029 2,134 Ediston Property Investment 1,484 Alcentra European Floatings Rate Income Fund 1,357 UK Treasury 2% 2025 1,214 UK Treasury 2.75% 2024 1,118 BMO Commercial Property Trust 973 Primary Health Properties REIT 907 Bluefield Solar Income Fund 883 Impact Healthcare REIT 823 Unitedhealth Group 808

When a stock has both purchases and sales in the reporting period, these transactions have been netted and the net amount has been reflected as either a net purchase or net sale in the table above.




SUMMARY RISK INDICATOR

The European Union imposed legislation which sets out detailed guidelines for the calculation of the risk ratings of products to be portrayed through a summary risk indicator. It is intended to be a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because the ACS Manager is not able to pay you. The risk of the product may be significantly higher than the one represented in the summary risk indicator where the product is not held for the recommended holding period (RHP).

The ACS Manager has classified the Diversified Income Fund as 3 out of 7, which is a medium-low risk class. This rates the potential losses from future performance at a medium-low level and poor market conditions are unlikely to impact the ACS Manager’s capacity to pay you. This classification is not guaranteed and may change over time and may not be a reliable indication of the future risk profile of the Fund. The lowest category does not mean risk free. The summary risk indicator assumes investment in the Sub-Fund for the RHP of three to five years. The actual risk can vary significantly if you cash in at an early stage and you may get back less. The Sub-Fund should be considered illiquid as it is not admitted to trading on a secondary market and no alternative liquidity facility is promoted by the ACS Manager or a third party. However, investors can request redemption at any time and the Sub-Fund deals on each business day. The Sub-Fund does not include any protection from future market performance, so you could lose some or all your investment. A more detailed description of risk factors that apply to this product is set out in the latest Prospectus, which is available on CCLA’s website or by request.

1 2 3 4 5 6 7

Lower risk Higher risk

Change in net assets per Unit Unit Class 1 – Income Year ended Year ended Year ended 31.12.2020 31.12.2019 31.12.2018 £ per Unit £ per Unit £ per Unit

Opening net asset value per Unit 1.63 1.50 1.56 Return before operating charges* (0.03) 0.19 0.00 Operating charges (0.01) (0.01) (0.01) Return after operating charges* (0.04) 0.18 (0.01) Distributions on Income Units (0.05) (0.05) (0.05) Closing net asset value per Unit 1.54 1.63 1.50

* After direct transaction costs of: 0.00 0.00 0.00 Performance Return after charges (2.45%) 12.00% (0.64%) Other information Closing net asset value (£’000) 51,490 54,195 49,949 Closing number of Units 33,333,334 33,333,334 33,333,334 Operating charges** 0.65% 0.69% 0.75% Direct transaction costs 0.06% 0.04% 0.11% Prices (£ per Unit) Highest Unit price 1.65 1.65 1.58 Lowest Unit price 1.30 1.51 1.50 This class of Units is restricted for use by the COIF Charities Investment Fund. The return after charges has been calculated in accordance with the Statement of Recommended Practice for UK Authorised Funds’ prescribed calculation methodology. This is for financial statement reporting purposes only and differs from the Diversified Income Fund’s performance disclosed in the Report of the Investment Manager. ** Operating charges comprise the ACS Manager’s annual management charge and other expenses, but before

taking account of rebates (if any), as these only offset charges incurred within the underlying funds. The percentages above reflect these charges annualised and divided by average net assets for the year.




COMPARATIVE TABLE



* After direct transaction costs of: 0.00 0.00 0.00 Performance Return after charges (1.91%) 12.50% (0.67%) Other information Closing net asset value (£’000) 120,276 117,780 72,481 Closing number of Units 80,869,711 75,218,431 50,212,343 Operating charges** 0.64% 0.69% 0.73% Direct transaction costs 0.06% 0.04% 0.11% Prices (£ per Unit) Highest Unit price 1.59 1.59 1.52 Lowest Unit price 1.25 1.45 1.45 This class of Units is restricted to local authority, public sector and other tax exempt investors who meet the minimum investment criteria. The return after charges has been calculated in accordance with the Statement of Recommended Practice for UK Authorised Funds’ prescribed calculation methodology. This is for financial statement reporting purposes only and differs from the Diversified Income Fund’s performance disclosed in the Report of the Investment Manager. ** Operating charges comprise the ACS Manager’s annual management charge and other expenses, but before





COMPARATIVE TABLE





* After direct transaction costs of: 0.00 0.00 0.00 Performance Return after charges (1.90%) 12.41% (0.66%) Other information Closing net asset value (£’000) 6,858 7,311 3,360 Closing number of Units 4,582,835 4,641,329 2,314,669 Operating charges** 0.65% 0.69% 0.74% Direct transaction costs 0.06% 0.04% 0.11% Prices (£ per Unit) Highest Unit price 1.60 1.59 1.53 Lowest Unit price 1.26 1.46 1.46 This class of Units is restricted to UK charity investors who meet the minimum investment criteria. The return after charges has been calculated in accordance with the Statement of Recommended Practice for UK Authorised Funds’ prescribed calculation methodology. This is for financial statement reporting purposes only and differs from the Diversified Income Fund’s performance disclosed in the Report of the Investment Manager. ** Operating charges comprise the ACS Manager’s annual management charge and other expenses, but before



COMPARATIVE TABLE

The table below analyses expenses in note 4 to the financial statements. These expenses also represent the total operating charges, which are shown below as a percentage of average net assets of the Diversified Income Fund.

2020 2019 % %

ACS Manager’s annual management charge 0.60 0.60 Safe custody fees and depositary fee 0.03 0.07 Other expenses 0.02 0.02

Total operating charges 0.65 0.69




OPERATING CHARGES ANALYSIS





PORTFOLIO ANALYSIS

at 31 December 2020

The portfolio analyses above differs from the following portfolio statement because prices used here are mid-market rather than bid.

Portfolio Allocation

Breakdown of Overseas Equities by Geography North America 13.26% EMEA 4.81% Asia Pacific ex Japan 2.54%

20.61%

Breakdown of Equities by Sector Real Estate 10.02% Health Care 4.36% Consumer Staples 3.87% Information Technology 3.40% Financials 3.07% Communication Services 2.62% Industrials 1.97% Utilities 1.94% Consumer Discretionary 1.24% Materials 1.08%

33.57%

Fixed Interest 25.13%

Overseas Equities 20.61%

Infrastructure & Operating Assets 16.62%

UK Equities 12.96%

Cash and Near Cash 9.53%

Contractual & Other Income 8.27%

Property 4.80%

Private Equity & Other 2.08%

UNITED KINGDOM 11.74% (31.12.2019 – 12.02%) Consumer Discretionary 0.36% (31.12.2019 – 0.82%) Moneysupermarket.com Group 246,569 643 0.36 Communication Services 0.00% (31.12.2019 – 0.42%) Consumer Staples 1.20% (31.12.2019 – 0.99%) Diageo 31,002 892 0.50 Unilever 28,423 1,248 0.70 Financials 0.49% (31.12.2019 – 1.09%) Admiral Group 30,342 882 0.49 Health Care 0.59% (31.12.2019 – 0.51%) GlaxoSmithKline 78,754 1,057 0.59 Industrials 0.74% (31.12.2019 – 1.22%) Experian 15,144 421 0.23 RELX 50,501 905 0.51 Materials 0.64% (31.12.2019 – 0.75%) Croda International 8,420 554 0.31 Rio Tinto 10,759 589 0.33 Real Estate 7.72% (31.12.2019 – 6.22%) Assura 2,129,492 1,629 0.91 Empiric Student Property 2,634,673 1,952 1.09 Primary Health Properties REIT 1,216,084 1,853 1.04 Target Healthcare REIT 1,872,179 2,127 1.19 Tritax Big Box REIT 2,131,194 3,559 2.00 UK Commercial Property REIT 2,507,265 1,730 0.97 Warehouse REIT 775,515 931 0.52




PORTFOLIO STATEMENT

at 31 December 2020

Fair % of value total net

Holding £’000 assets

OVERSEAS EQUITIES 19.95% (31.12.2019 – 16.42%) DEVELOPED EUROPE 4.77% (31.12.2019 – 5.62%) Consumer Discretionary 0.40% (31.12.2019 – 0.55%) LVMH Moët Hennessy Louis Vuitton 1,553 713 0.40 Consumer Staples 1.58% (31.12.2019 – 1.23%) Heineken 8,132 658 0.37 L’Oreal 1,990 551 0.31 Nestlé 10,891 944 0.53 Pernod Ricard 4,732 664 0.37 Financials 0.50% (31.12.2019 – 0.58%) Deutsche Börse 3,064 385 0.21 Partners Group 598 517 0.29 Health Care 0.85% (31.12.2019 – 0.97%) Novartis 6,338 441 0.25 Novo Nordisk Class B 5,819 301 0.17 Roche Holdings 3,036 780 0.43 Industrials 0.78% (31.12.2019 – 0.94%) Schneider Electric 2,099 223 0.12 SGS 233 517 0.29 Wolters Kluwer 10,610 658 0.37 Information Technology 0.22% (31.12.2019 – 0.86%) SAP 4,016 388 0.22 Materials 0.44% (31.12.2019 – 0.49%) Chr. Hansen Holding 5,129 388 0.22 Givaudan 129 400 0.22 NORTH AMERICA 12.66% (31.12.2019 – 9.01%) Communication Services 1.63% (31.12.2019 – 1.10%) BCE 24,986 782 0.44 Telus 87,995 1,274 0.71 Verizon Communications 19,971 851 0.48




PORTFOLIO STATEMENT

at 31 December 2020



Consumer Discretionary 0.47% (31.12.2019 – 0.64%) McDonald’s 2,365 367 0.20 Starbucks 6,094 476 0.27 Consumer Staples 1.06% (31.12.2019 – 0.65%) PepsiCo 8,207 885 0.50 Procter & Gamble 3,404 344 0.19 The Coca-Cola Company 16,645 665 0.37 Financials 1.70% (31.12.2019 – 1.74%) Bank of America 19,866 436 0.24 CME Group 5,689 746 0.42 Intercontinental Exchange Group 5,602 466 0.26 JP Morgan Chase & Co 5,560 509 0.29 Marsh & McLennan Companies 3,777 319 0.18 The Blackstone Group 11,661 550 0.31 Health Care 2.36% (31.12.2019 – 2.31%) Johnson & Johnson 5,600 640 0.36 Medtronic 7,036 597 0.33 Merck & Co 17,840 1,054 0.59 Pfizer 48,839 1,303 0.73 Stryker 3,553 629 0.35 Industrials 0.44% (31.12.2019 – 0.46%) Honeywell International 3,075 474 0.27 Masco 7,702 305 0.17 Information Technology 1.97% (31.12.2019 – 1.08%) Accenture 2,380 451 0.25 Automatic Data Processing 3,918 500 0.28 Broadcom 1,528 486 0.27 Cisco Systems 24,687 800 0.45 Microsoft 3,739 606 0.34 Texas Instruments 5,742 683 0.38 Materials 0.00% (31.12.2019 – 0.13%)






PORTFOLIO STATEMENT

at 31 December 2020

Utilities 1.93% (31.12.2019 – 0.34%) Brookfield Infrastructure Partners 26,896 985 0.55 Duke Energy 11,717 780 0.44 NextEra Energy 20,412 1,139 0.64 Xcel Energy 11,297 545 0.30 Real Estate 1.10% (31.12.2019 – 0.56%) Alexandria Real Estate Equities 6,792 871 0.49 American Tower 1,766 286 0.16 Prologis 11,248 811 0.45 JAPAN 0.00% (31.12.2019 – 0.26%) Consumer Staples 0.00% (31.12.2019 – 0.26%) ASIA PACIFIC EX JAPAN 2.52% (31.12.2019 – 1.53%) Communication Services 0.97% (31.12.2019 – 0.53%) Autohome 4,241 306 0.17 carsales.com 51,157 579 0.32 Spark New Zealand 342,447 852 0.48 Financials 0.36% (31.12.2019 – 0.00%) Bank Central Asia 120,900 213 0.12 Singapore Exchange 82,600 425 0.24 Health Care 0.00% (31.12.2019 – 0.33%) Information Technology 1.19% (31.12.2019 – 0.67%) Iress 140,992 846 0.47 Taiwan Semiconductor Manufacturing Company 16,041 1,281 0.72 PRIVATE EQUITY & OTHER 2.04% (31.12.2019 – 1.67%) Private Equity 2.04% (31.12.2019 – 1.67%) BMO Private Equity Trust 485,493 1,461 0.82 Princess Private Equity Holding 208,188 2,179 1.22




PORTFOLIO STATEMENT

at 31 December 2020



INFRASTRUCTURE & OPERATING ASSETS 17.58% (31.12.2019 – 17.47%) Energy Resources & Environment 12.15% (31.12.2019 – 11.83%) Aquila European Renewables Income Fund 2,426,279 2,289 1.28 Bluefield Solar Income Fund 1,314,591 1,696 0.95 Foresight Solar Fund 2,429,160 2,478 1.39 Greencoat Renewables 1,128,212 1,186 0.66 Greencoat UK Wind 1,766,247 2,367 1.33 Gresham House Energy Storage Fund 2,240,475 2,487 1.39 JLEN Environmental Assets Group 1,975,648 2,252 1.26 Octopus Renewables Infrastructure Trust 1,089,140 1,236 0.69 SDCL Energy Efficiency Income Trust 1,775,787 1,891 1.06 The Renewables Infrastructure Group 2,147,378 2,731 1.53 US Solar Fund 1,414,388 1,098 0.61 General 2.05% (31.12.2019 – 1.45%) International Public Partnership 959,547 1,631 0.92 Picton Property Income 2,694,294 2,023 1.13 Social 3.38% (31.12.2019 – 4.19%) GCP Student Living 1,432,359 2,048 1.15 HICL Infrastructure 993,805 1,721 0.96 Triple Point Social Housing REIT 2,088,851 2,266 1.27 PROPERTY 4.73% (31.12.2019 – 7.16%) Aberdeen Standard European Logistics Income 2,302,895 2,476 1.39 AEW UK REIT 1,894,941 1,455 0.81 BMO Real Estate Investments 3,446,547 2,033 1.14 Tritax Eurobox REIT 2,549,787 2,478 1.39




PORTFOLIO STATEMENT

at 31 December 2020



CONTRACTUAL & OTHER INCOME 8.19% (31.12.2019 – 9.23%) Ares Capital 91,496 1,118 0.63 Blackstone Mortgage Trust 46,678 936 0.52 GCP Asset Backed Income Fund 2,574,031 2,296 1.28 GCP Infrastructure Investments 2,255,697 2,454 1.37 Hipgnosis Songs Fund 2,506,923 3,096 1.73 RM Secured Direct Lending 847,073 728 0.41 Round Hill Music Royalty Fund 1,403,485 1,048 0.59 Sequoia Economic Infrastructure Income Fund 2,693,717 2,958 1.66 FIXED INTEREST 25.27% (31.12.2019 – 20.14%) Gilts 2.09% (31.12.2019 – 3.48%) UK Treasury 1.75% 2037 £1,800,000 2,132 1.20 UK Treasury 4.25% 2039 £970,000 1,593 0.89 Non-Gilts 23.18% (31.12.2019 – 16.66%) Apple 3.05% 2029 £800,000 975 0.55 Asian Development Bank 0.625% 2026 £500,000 510 0.29 Assura 1.5% 2030 £600,000 628 0.35 Bank of America 6.125% 2021 £300,000 312 0.18 Bank of Montreal FRN 2023 £400,000 400 0.22 Bank of Nova Scotia 1.25% 2022 £650,000 660 0.37 Banque Federative du Credit Mutuel 1.375% 2021 £500,000 506 0.28 Banque Federative du Credit Mutuel 2.25% 2023 £500,000 528 0.30 Barclays 2.375% VRN 2023 £500,000 514 0.29 Bazalgette Finance 2.375% 2027 £500,000 548 0.31 BNP Paribas 1.875% 2027 £900,000 956 0.54 BUPA Finance 2% 2024 £800,000 839 0.47 BUPA Finance 3.375% 2021 £800,000 811 0.45 Citigroup 5.15% 2026 £500,000 613 0.34 Close Brothers Group 2.75% 2023 £500,000 519 0.29 Close Brothers Group 3.875% 2021 £630,000 640 0.36 Commonwealth Bank of Australia 1.125% 2021 £100,000 101 0.06 Community Finance Company 1 5.017% 2034 £400,000 559 0.31 Coöperatieve Rabobank 2.25% 2022 £1,000,000 1,025 0.57 Coöperatieve Rabobank 4.625% 2021 £690,000 691 0.39 Coventry Building Society 1.875% 2023 £1,000,000 1,036 0.58




PORTFOLIO STATEMENT

at 31 December 2020



Non-Gilts (continued) CPPIB Capital 1.125% 2029 £500,000 521 0.29 Danaher 5% 2023 Convertible Preference 1,000 945 0.53 Deutsche Bahn Finance 1.875% 2026 £400,000 429 0.24 Dexia Credit Local 1.125% 2022 £500,000 507 0.28 Dexia Credit Local 2.125% 2025 £600,000 644 0.36 DWR Cymru Financing UK 6.907% 2021 £745,000 756 0.42 E.ON 5.625% 2023 £670,000 768 0.43 ENW Finance 1.415% 2030 £600,000 623 0.35 Friends Life Holdings 12% 2021 £182,000 190 0.11 GlaxoSmithKline Capital 1.625% 2035 £600,000 630 0.35 Hiscox 2% 2022 £500,000 511 0.29 ING Bank 5.375% 2021 £500,000 507 0.28 International Bank for Reconstruction and Development 1% 2022 £600,000 612 0.34 LVMH Moët Hennessy Louis Vuitton 1% 2022 £500,000 505 0.28 Metropolitan Life Global Funding I 1.625% 2022 £900,000 919 0.51 Morgan Stanley 2.625% 2027 £600,000 667 0.37 Network Rail Infrastructure Finance 3% 2023 £400,000 431 0.24 Notting Hill Genesis 3.75% 2032 £600,000 736 0.41 OP Corporate Bank 2.5% 2022 £700,000 723 0.40 Ørsted 2.125% 2027 £1,000,000 1,087 0.61 Places for People Treasury 2.875% 2026 £700,000 767 0.43 Places for People Treasury 4.25% 2023 £370,000 373 0.21 Prologis 2.25% 2029 £900,000 1,004 0.56 Royal Bank of Canada FRN 2022 £1,000,000 1,000 0.56 Scottish Hydro Electric Transmission 2.25% 2035 £1,000,000 1,132 0.63 SGN 3.1% 2036 £500,000 610 0.34 Skandinaviska Enskilda Banken 1.25% 2022 £700,000 712 0.40 Skipton Building Society 1.75% 2022 £800,000 810 0.45 Sovereign Housing Capital 2.375% 2048 £500,000 592 0.33 Svenska Handelsbanken 1.625% 2022 £500,000 511 0.29 Swedbank 1.25% 2021 £700,000 708 0.40 Swedbank 1.625% 2022 £500,000 514 0.29 Thames Water Utilities Finance 2.625% 2032 £750,000 839 0.47 The Procter & Gamble Company 1.8% 2029 £500,000 554 0.31 Transport for London 2.125% 2025 £700,000 751 0.42 Tritax Big Box REIT 2.625% 2026 £500,000 552 0.31




PORTFOLIO STATEMENT

at 31 December 2020



Non-Gilts (continued) TSB Bank FRN 2022 £1,200,000 1,203 0.67 Unilever 1.5% 2026 £800,000 851 0.48 Verizon Communications 1.875% 2030 £800,000 856 0.48 Western Power Distribution (West Midlands) 3.875% 2024 £250,000 278 0.16 Yorkshire Building Society FRN 2024 £700,000 708 0.40 FORWARD CURRENCY CONTRACTS 0.00% (31.12.2019 – (0.02%))

INVESTMENT ASSETS 159,865 89.50 NET OTHER ASSETS 18,759 10.50 TOTAL NET ASSETS 178,624 100.00




PORTFOLIO STATEMENT

at 31 December 2020






STATEMENT OF TOTAL RETURN


Year ended Year ended 31.12.2020 31.12.2019

Note £’000 £’000 £’000 £’000

Income Net capital (losses)/gains 2 (7,614) 12,687 Revenue 3 5,996 5,182

Expenses 4 (1,108) (1,076) Net revenue before taxation 4,888 4,106 Taxation 5 (89) (55) Net revenue after taxation 4,799 4,051 Total (deficit)/return before distributions (2,815) 16,738 Distributions 6 (5,859) (5,003) Change in net assets attributable to Unitholders from investment activities (8,674) 11,735

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS


Year ended Year ended 31.12.2020 31.12.2019

£’000 £’000 £’000 £’000

Opening net assets attributable to Unitholders 179,286 125,790 Amounts receivable on issue of Units 9,475 48,757 Amounts payable on cancellation of Units (1,502) (7,173)

7,973 41,584 Dilution levy 39 177 Change in net assets attributable to Unitholders from investment activities (8,674) 11,735 Closing net assets attributable to Unitholders 178,624 179,286 The notes on pages 34 to 46 and the distribution tables on page 47 form part of these financial statements.




BALANCE SHEET

at 31 December 2020

31.12.2020 31.12.2019 Note £’000 £’000 £’000 £’000

ASSETS Fixed assets:

Investments 159,865 150,811 Current assets:

Debtors 7 884 531 Cash equivalents 8 5,806 26,246 Cash and bank balances 8 13,520 3,204

Total current assets 20,210 29,981

Total assets 180,075 180,792

LIABILITIES Investment liabilities – 41 Creditors

Other creditors 9 123 150 Distribution payable on Income Units 1,328 1,315

Total creditors 1,451 1,465 Total liabilities 1,451 1,506

Net assets attributable to Unitholders 178,624 179,286

The financial statements on pages 32 to 47 have been approved by the ACS Manager. Approved on behalf of the ACS Manager P Hugh Smith, Director 20 April 2021 CCLA Fund Managers Limited Approved on behalf of the ACS Manager E Sheldon, Director 20 April 2021 CCLA Fund Managers Limited The notes on pages 34 to 46 and the distribution tables on page 47 form part of these financial statements.

1. Accounting policies Please see pages 12 and 13 for accounting basis and policies applicable to all Sub-Funds. Please see below for accounting basis and policies applicable to the Diversified Income Fund only. (a) Basis of preparation The Diversified Income Fund is exempt from preparing a statement of cash flows under FRS 102 as substantially all of the Diversified Income Fund’s investments are highly liquid, substantially all of the Diversified Income Fund’s investments are carried at market value and the Diversified Income Fund provides a statement of change in net assets. (b) Expenses During the year, the ACS Manager’s annual management charge (“AMC”), paid to the ACS Manager, was taken to the capital of the Diversified Income Fund before distribution. The fee is based on a fixed percentage of the value of the Diversified Income Fund and was 0.60% during the year. No VAT is charged on the AMC. The AMC is calculated by reference to the daily Net Asset Value of the Diversified Income Fund. For Unit Class 2, the ACS Manager agreed to rebate one quarter of the AMC for two years from the date of investment to investors who invested prior to the end of the month in which the first anniversary of the launch of Unit Class 2 fell. The last rebate paid to Unit Class 2 investors was in May 2020. The Depositary fee, audit, legal, safe custody fees and insurance fees are charged seperately to the revenue of the Diversified Income Fund before distribution. (c) Distributions The policy of the Diversified Income Fund is to distribute all available revenue, excluding any items treated as capital and after deduction of expenses chargeable against revenue. Distributions are declared and paid quarterly. It is the Diversified Income Fund’s policy to calculate the distribution based on the revenue on debt securities which is computed on an effective yield basis.




NOTES TO THE FINANCIAL STATEMENTS


1. Accounting policies (continued) Distributions received by the Diversified Income Fund from other collective investment schemes may include equalisation, which is taken to capital and does not form part of the Diversified Income Fund’s distribution.

2. Net capital (losses)/gains 31.12.2020 31.12.2019

£’000 £’000

The net capital (losses)/gains during the year comprise: Unrealised (losses)/gains on non-derivative securities (3,244) 11,209 Realised (losses)/gains on non-derivative securities (2,548) 1,110 Realised (losses)/gains on forward currency contracts (2,193) 509 Currency gains/(losses) 355 (129) SDRT income 16 14 Unrealised losses on forward currency contracts – (26)

(7,614) 12,687

3. Revenue

31.12.2020 31.12.2019 £’000 £’000

Overseas dividends 2,805 2,117 UK dividends 1,285 1,055 Indirect property income 1,151 1,194 Interest on debt securities 692 650 Deposit interest 61 143 Bank interest 2 22 Collateral interest – 1

5,996 5,182






4. Expenses 31.12.2020 31.12.2019

£’000 £’000

Payable to the ACS Manager, associates of the ACS Manager and agents of either of them: ACS Manager’s annual management charge – see note 1(b) 1,035 939

1,035 939

Payable to the Depositary, associates of the Depositary and agents of either of them: Safe custody fees 1 50 Depositary fee 56 64

57 114

Other expenses: Audit fee 11 13 Other fees 5 10

16 23

Total expenses 1,108 1,076

Audit fee net of VAT is £11,000 (31.12.2019, £10,658). The above expenses include VAT where applicable.

5. Taxation The Diversified Income Fund is exempt from UK Income and Capital Gains tax pursuant to part 11 Chapter 3 of the Corporation Tax Act 2010. Distributions are paid, and reinvested revenue credited gross to Unitholders on the basis that all recoverable UK taxation has been reclaimed. Overseas withholding tax is deducted in full from overseas revenue. Recoverable withholding tax is credited to revenue.

31.12.2020 31.12.2019 £’000 £’000

Overseas taxation suffered in the year 89 55

Total taxation 89 55






6. Distributions Distributions take account of revenue received on the issue of Units and revenue deducted on the cancellation of Units, and comprise:

31.12.2020 31.12.2019 £’000 £’000

31 March – interim distribution 1,353 1,138 30 June – interim distribution 1,751 1,455 30 September – interim distribution 1,466 1,275 31 December – final distribution 1,328 1,315

5,898 5,183 Add: revenue deducted on cancellation of Units 1 14 Deduct: revenue received on issue of Units (40) (194)

Net distribution for the year 5,859 5,003 Net revenue after taxation for the year 4,799 4,051 Rebate on Gresham House 25 – Rebate on IPO – 13 Manager’s annual management charge – see note 1(b) 1,035 939

Net distribution for the year 5,859 5,003 Details of the distribution per Unit are set out in the distribution tables on page 47. The ACS Manager’s annual management charge is charged to capital, so this amount above is added back in the table above to the net distribution for the year and deducted from capital. There were no unclaimed distributions as at 31 December 2020 (31.12.2019, £nil).

7. Debtors 31.12.2020 31.12.2019

£’000 £’000

Accrued revenue 755 474 Overseas tax recoverable 73 46 Sales awaiting settlement 39 1 SDRT reclaim receivable 16 10 Income tax recoverable 1 –

884 531






8. Cash equivalents, cash and bank balances 31.12.2020 31.12.2019

£’000 £’000

Cash equivalents: cash in The Public Sector Deposit Fund 5,806 26,246

Cash and bank balances: cash at bank 13,520 3,204

9. Other creditors

31.12.2020 31.12.2019 £’000 £’000

Accrued expenses 113 143 SDRT reclaim fee payable 10 7

123 150

10. Financial instruments

Fair value Securities held by the Diversified Income Fund are valued at bid-market value. Bid-market value is considered to be a fair representation of the amount repayable to Unitholders should they wish to sell their Units. Other financial assets and liabilities of the Diversified Income Fund are included in the balance sheet at their fair value. The main risks arising from the Diversified Income Fund’s financial instruments and the Manager’s policies for managing these risks are summarised below. These policies have been applied consistently throughout the year. Market price risk The Sub-Fund is actively managed and which invests mainly in UK and overseas equities and fixed interest investments. Investors are thus exposed to market price risk, which can be defined as the uncertainty about future price movements of the financial instruments the Diversified Income Fund is invested in. Market price risk arises mainly from economic factors, including investor confidence and is not limited to interest rate and currency movements. This exposure to market price risk may result in substantial fluctuations in the Unit price from time to time, although there will generally be a positive correlation in the movement of the Unit price to the markets the Diversified Income Fund is invested in. The Diversified Income Fund seeks to minimise the risks by holding a diversified portfolio of investments in line with it’s investment objectives. Risk is monitored at both the asset allocation and stock selection levels by the ACS Manager on a regular basis.






10. Financial instruments (continued) Market price risk (continued) At 31 December 2020, if the price of the investments held by the Diversified Income Fund increased or decreased by 5%, with all other variables remaining constant, then the net assets attributable to Unitholders, and profit or loss, would increase or decrease respectively by approximately £7,993,000 (31.12.2019, £7,539,000). Credit risk The Diversified Income Fund’s transactions in securities expose it to the risk that the counterparty will not deliver the investment for a purchase , the cash for a sale or the settlement amounts for forward currency contracts. To minimise this, the Diversified Income Fund only deals with an approved list of brokers maintained by the ACS Manager. Depending on the counterparty, the Diversified Income Fund may employ collateral arrangements for forward currency contracts. Portfolio composition by credit rating

31.12.2020 31.12.2019 Rating category % Sub-Fund % Sub-Fund

AAA 11.4 5.5 AA 37.3 51.6 A 37.7 26.8 BBB 13.6 16.1 Non investment grade – – Not rated (Debentures/Preference Shares) – – Liquidity risk Financial instruments held by the Diversified Income Fund, excluding short-term debtors and creditors, are made up of UK and overseas equities, fixed interest stocks, unit trusts, and sterling and overseas cash deposits. These assets are generally liquid (except for the unit trusts, which are realisable only on their weekly or monthly dealing dates, and the holdings in the unquoted investments, which are not readily realisable) and enable the Diversified Income Fund to meet the payment of any redemption of Units that Unitholders may wish to make.






10. Financial instruments (continued) Currency risk The Diversified Income Fund is exposed to fluctuations in foreign currencies as some of its assets and revenue are denominated in currencies other than sterling, the base currency of the Diversified Income Fund. The Diversified Income Fund may enter into forward currency contracts to protect the sterling value of the underlying portfolio of securities against the effect of possible adverse movements in foreign exchange rates on investments and revenue accrued, but not yet received. In respect of revenue, receipts are converted to sterling shortly after receipt. At 31 December 2020, if the value of sterling increased or decreased by 1% against all currencies, with all other variables remaining constant, then the net assets attributable to Unitholders, and profit or loss, would decrease or increase respectively by approximately £467,000 (31.12.2019, £238,000). The total foreign currency exposure at 31 December was: 31.12.2020 31.12.2019 Non- Non- Monetary monetary Monetary monetary exposures exposures Total exposures exposures Total Currency £’000 £’000 £’000 £’000 £’000 £’000

Australian dollar – 1,425 1,425 – 1,698 1,698 Canadian dollar 24 2,056 2,080 6 681 687 Danish krona 2 690 692 3 199 202 Euro 78 9,892 9,970 30 4,449 4,479 Hong Kong dollar – – – – 498 498 Indonesian rupiah – 213 213 – – – Japanese yen – – – 3 459 462 New Zealand dollar – 852 852 – – – Norwegian krone – – – 5 – 5 Singapore dollar – 425 425 – – – Swedish krona – – – – 886 886 Swiss franc 47 3,599 3,646 31 4,077 4,108 US dollar 119 27,289 27,408 53 10,686 10,739

Total 270 46,441 46,711 131 23,633 23,764

The Diversified Income Fund held derivatives relating to forward currency contracts with a net value of £nil as at 31 December 2020 (31.12.2019, (£27,000)).






10. Financial instruments (continued) Interest rate risk The majority of the Diversified Income Fund’s financial assets are equities which neither receive interest nor have maturity dates. The Diversified Income Fund also invests in fixed interest securities and cash deposits, the revenue of which may be affected by changes to interest rates relevant to particular securities or as a result of the ACS Manager being unable to secure similar returns on the disposal or redemption of securities. The value of fixed interest securities may be affected by interest rate movements or the expectation of such movements in the future. As at 31 December 2020, it is estimated that a 1% movement in interest rates would result in an opposite movement of £2,473,000 (31.12.2019, £1,881,000) in the value of the fixed interest portfolio. The total exposure at 31 December 2020 was:

Financial assets Floating rate Fixed rate not carrying

financial assets* financial assets interest Total Currency £’000 £’000 £’000 £’000

Euro – – 9,970 9,970 Sterling 23,152 40,362 69,850 133,364 US dollar – – 27,408 27,408 Other – – 9,333 9,333

Total 23,152 40,362 116,561 180,075

Financial

Floating rate Fixed rate liabilities financial financial not carrying liabilities liabilities interest Total

Currency £’000 £’000 £’000 £’000

Sterling – – (1,451) (1,451)

Total – – (1,451) (1,451)






10. Financial instruments (continued) Interest rate risk (continued) The total exposure at 31 December 2019 was:

Financial assets Floating rate Fixed rate not carrying

financial assets* financial assets interest Total Currency £’000 £’000 £’000 £’000

Euro – – 8,918 8,918 Sterling 30,955 34,612 91,420 156,987 US dollar – – 19,405 19,405 Other – – 8,546 8,546

Total 30,955 34,612 128,289 193,856

Financial

Floating rate Fixed rate liabilities financial financial not carrying liabilities liabilities interest Total

Currency £’000 £’000 £’000 £’000

Euro – – 4,439 4,439 Sterling – – 1,465 1,465 US dollar – – 8,666 8,666

Total – – 14,570 14,570

* The floating rate financial assets of the Diversified Income Fund earn interest at rates based on either

LIBOR or base rate.

All financial liabilities are due to be settled within one year or on demand.

11. Commitments and contingent liabilities There were no other commitments or contingent liabilities as at 31 December 2020 (31.12.2019, £nil).

12. Related party transactions The AMC is paid to the ACS Manager, a related party to the Diversified Income Fund. The amount incurred in respect of this charge is disclosed in note 4. An amount of £90,173 was due to the ACS Manager at 31 December 2020 (31.12.2019, £94,349). There were no other transactions entered into with the ACS Manager during the year.






12. Related party transactions (continued) At 31 December 2020, a cash balance of £5,806,171 (31.12.2019, £26,245,533) was held in The Public Sector Deposit Fund (PSDF), which is managed by CCLA Investment Management Ltd. During the year, the Diversified Income Fund received interest of £60,639 (31.12.2019, £142,550) from PSDF and all of the interest was reinvested in the PSDF. At 31 December 2020, the COIF Charities Investment Fund, which is also managed by the ACS Manager, held 28.83% (31.12.2019, 30.31%) of the value of the Diversified Income Fund. There is no other individual investor holding more than 20% of the Fund.

13. Portfolio transaction costs For the year ended 31 December 2020

Value Commissions Taxes Total £’000 £’000 % £’000 % £’000

Analysis of total purchases costs Equity transactions 50,996 23 0.05 62 0.12 51,081 Bond transactions 22,618 1 – – – 22,619 Corporate actions 644 – – – – 644

Total 74,258 24 62 74,344


Analysis of total sales costs Equity transactions 44,029 (22) 0.05 (2) – 44,005 Bond transactions 5,442 – – – – 5,442 Corporate actions 9,623 – – – – 9,623

Total 59,094 (22) (2) 59,070 Commissions and taxes as a percentage of average net assets Commissions 0.03% Taxes 0.03% The average portfolio dealing spread, including the effect of foreign exchange, as at 31 December 2020 was 0.77%.






13. Portfolio transaction costs (continued) For the year ended 31 December 2019


Analysis of total purchases costs Equity transactions 35,000 13 0.04 39 0.11 35,052 Bond transactions 15,449 – – – – 15,449 Corporate actions 1,429 – – – – 1,429

Total 51,878 13 39 51,930


Analysis of total sales costs Equity transactions 13,764 (8) 0.06 – – 13,756 Bond transactions 8,640 – – – – 8,640 Corporate actions 3,979 – – – – 3,979

Total 26,383 (8) – 26,375

Commissions and taxes as a percentage of average net assets Commissions 0.01% Taxes 0.03% The average portfolio dealing spread, including the effect of foreign exchange, as at 31 December 2019 was 0.64%. In order to protect existing investors from the effects of dilution, portfolio transaction costs incurred as a result of investors buying and selling Units in the Sub-Fund are recovered from those investors through a ‘dilution levy’ to the price they pay or receive.






13. Portfolio transaction costs (continued) For the current year and the comparative period, in the case of equities, commissions and taxes are paid by the Diversified Income Fund on each transaction. In addition, there is a dealing spread between the buying and selling prices of the underlying investments. Unlike equities, the majority of other types of investments (such as bonds, money market instruments, derivatives) have no separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads vary considerably depending on the transaction value and market sentiment.

14. Unitholders’ funds – reconciliation of Units

31.12.2020 Unit Class 1 – Unit Class 2 – Unit Class 3 –

Income Income Income

Opening number of Units at beginning of year 33,333,334 75,218,431 4,641,329 Units issued in year – 5,651,280 963,661 Units cancelled in year – – (1,022,155)

Closing number of Units at end of year 33,333,334 80,869,711 4,582,835

All Units carry the same rights.

15. Fair value of financial assets and financial liabilities In respect of financial assets and liabilities other than investments, there is no material difference between their value, as shown on the balance sheet, and their fair value. Investments are held at fair value. An analysis of the valuation technique used to derive the fair value of the investments is shown below: The fair value of investments has been determined using the following hierarchy: Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the

entity can access at the measurement date. Level 2 Inputs other than quoted prices included above that are observable (i.e. developed using

market data) for the asset or liability, either directly or indirectly. Level 3 Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.






15. Fair value of financial assets and financial liabilities (continued) For the year ended 31 December 2020

1 2 3 Total Category £’000 £’000 £’000 £’000

Investment assets 115,678 44,187 – 159,865

115,678 44,187 – 159,865

For the year ended 31 December 2019

1 2 3 Total Category £’000 £’000 £’000 £’000

Investment assets 122,587 28,224 – 150,811 Investment liabilities – (41) – (41)

122,587 28,183 – 150,770

For financial instruments which have quoted prices for identical instruments in active markets, those prices are taken to be fair value. For financial instruments for which the ACS Manager uses valuation techniques using observable market data, the inputs include: prices of recent transactions for identical instruments in inactive markets; broker quotes; evaluated pricing data from data providers; or prices quoted for closely similar (but not identical) instruments.






Dividends payable/paid Period ended Date payable/paid pound per Unit 2020 2019 2020 2019

Unit Class 1 – Income 31 March 29 May 31 May 0.01222 0.01228 30 June 28 August 30 August 0.01535 0.01476 30 September 30 November 29 November 0.01277 0.01194 31 December 26 February 28 February 0.01151 0.01185

0.05185 0.05083 Dividends payable/paid Period ended Date payable/paid pound per Unit 2020 2019 2020 2019


0.05008 0.04941 Dividends payable/paid Period ended Date payable/paid pound per Unit 2020 2019 2020 2019


0.04937 0.04910

The distributions for all Units were paid in the same year, apart from the distribution declared on 31 December which is payable on 26 February in the subsequent year.




DISTRIBUTION TABLES




ACS Manager Remuneration The ACS Manager has no employees, but delegates the performance of its service to employees of its parent company, CCLA Investment Management Limited. Recharges for these services of CCLA Investment Management Limited to the ACS Manager are levied in respect of CCLA Investment Management Limited’s year ending on 31 March each year. The recharge for the financial year to 31 March 2020 was £28,700,000. A recharge of £24,000,000 was levied in the year to 31 March 2019. The average number of full time equivalent staff of CCLA Investment Management Limited, including temporary staff, for the year ended 31 March 2020 was 137 (year ended 31 March 2019, 152). During the year to 31 December 2020 and the prior period, remuneration was paid to CCLA Investment Management Limited staff as shown below. Totals for staff whose actions have a material impact on the risk profile of the Fund (“identified staff ”) are shown separately. Year ended 31 December 2020 Fixed Variable remuneration remuneration Total £000 £000 £000

Identified staff 1,355 1,870 3,225 Other staff 11,605 4,422 16,027

Total 12,960 6,292 19,252

Year ended 31 December 2019 Fixed Variable remuneration remuneration Total £000 £000 £000

Identified staff 1,212 3,394 4,606 Other staff 9,824 3,412 13,236

Total 11,036 6,806 17,842

Remuneration above is the total remuneration for CCLA Investment Management Limited; it is not possible to separate the element of that relating only to this fund. The components of remuneration are appropriately balanced and do not create a conflict of interest for the Fund.

AIFMD DISCLOSURES



ACS Manager and Alternative Investment Fund Manager CCLA Fund Managers Limited Both CCLA Fund Managers Limited and CCLA Investment Management Limited have the same address Investment Manager and Registrar CCLA Investment Management Limited Senator House, 85 Queen Victoria Street London EC4V 4ET Telephone: 0207 489 6000 Client Service: Freephone: 0800 022 3505 Email: [email protected] www.ccla.co.uk Both CCLA Fund Managers Limited and CCLA Investment Management Limited are authorised and regulated by the Financial Conduct Authority Administrator HSBC Bank plc 8 Canada Square Canary Wharf London E14 5HQ Authorised and regulated by the Financial Conduct Authority Executive Directors of the ACS Manager P Hugh Smith (Chief Executive Officer) J Bevan (Chief Investment Officer) E Sheldon (Chief Operating Officer) A Robinson, MBE (Director Market Development) Non-Executive Directors of the ACS Manager R Horlick J Jesty – appointed 24 April 2020 C Johnson G Newson A Roughead – appointed 24 April 2020 J Tattersall – retired 8 July 2020

Fund Manager J Bevan Company Secretary J Fox Chief Risk Officer R Plumridge – resigned 31 January 2020 JP Lim – appointed 1 May 2020 Head of Ethical and Responsible Investment J Corah Third Party Advisors Custodian and Depositary HSBC Bank plc 8 Canada Square Canary Wharf London E14 5HQ Banker HSBC Bank plc 60 Queen Victoria Street London EC4N 4TR Solicitor Farrer & Co LLP 66 Lincoln’s Inn Fields London WC2A 3LH Independent Auditor PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT

DIRECTORY

CCLA Fund Managers Limited

Senator House, 85 Queen Victoria Street, London EC4V 4ET T: 0800 022 3505 E: [email protected]

www.ccla.co.uk

ABOUT CCLA

CCLA is the trading name for CCLA Investment Management Limited (Registered in England and Wales No. 2183088) and CCLA Fund Managers Limited (Registered in England and Wales No. 8735639)

Both companies are authorised and regulated by the Financial Conduct Authority. Registered address: Senator House, 85 Queen Victoria Street, London EC4V 4ET.

Printed on 100% post consumer waste and is certified by the Forest Stewardship Council (FSC).

Founded in 1958, CCLA is one of the UK’s largest charity fund managers. Managing investments for charities, religious organisations

and the public sector is all that we do.

Our purpose is to help our clients maximise their impact on society by harnessing the power of investment markets. This requires us to provide a supportive and stable environment for our staff and deliver trusted, responsibly managed and strongly performing products and

services to all organisations, irrespective of their size.

Documents

CCLA AUTHORISED CONTRACTUAL SCHEME ANNUAL REPORT …