Quarterly Review Summer 2021

Issue No. 85 INVESTMENT RISK Investing in ordinary shares and other assets that will be included in your investment portfolio entails risks to your capital and the income that it might generate. The paragraph below is an important reminder, please always remember that:

The value of investments and the income you get from them may fall as well as rise and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.

The second half of this Review, from page 16 onwards, gives information on the Church House fund portfolios that we manage for our clients. Some, or all, of these funds feature in most portfolios and the risk warning above is pertinent to each of them as well as to investment portfolios generally.

It is crucial to our approach to the management of risk to utilise these Church House funds to construct portfolios; each has a specific ‘building block’ role. This approach ensures a proper diversification and that we know in detail the risks that we are undertaking on your behalf - not something that we are happy to delegate to others.

These funds are individually authorised by the Financial Conduct Authority under the Collective Investment Schemes regulations, with which we must comply at all times. We are required to point out that:

1. the main risks faced by the funds arise from market price and interest rate risk; 2. they have no borrowings, or unlisted securities of a material nature (so there is little exposure to liquidity or cash-flow risk) and, 3. we review the policies for managing these risks on a regular basis.

Please get in touch with any questions about your portfolio, this report, or any change in your circumstances that you feel we should know about or could assist you with.

Stewardship Little has changed under this heading. We have implemented the new UK Stewardship Code 2020, which incorporates Environmental, Social and Governance (ESG) matters, but have yet to hear back from The Financial Reporting Council as to whether we have satisfied their conditions to be on the first list of Stewardship Code ‘signatories’.

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Quarterly Review

Issue no. 85 - Summer 2021

CONTENTS

THE ECONOMIC & MARKET BACKGROUND 5 THE UK ECONOMY AND INTEREST RATES 6 CREDIT MARKET COMMENTARY – JEREMY WHARTON 8 UK EQUITY MARKETS 10 INTERNATIONAL EQUITY MARKETS 12 FOREIGN EXCHANGE 14 COMMODITIES 14 CHURCH HOUSE INVESTMENT GRADE FIXED INTEREST 16 CHURCH HOUSE UK EQUITY GROWTH 20 CHURCH HOUSE BALANCED EQUITY INCOME 24 CH UK SMALLER COMPANIES 28 CH ESK GLOBAL EQUITY 30 CH TENAX ABSOLUTE RETURN STRATEGIES 34 DONALD RUMSFELD 36

Church House Investment Management

Church House Investments Limited is authorised and regulated by:

The Financial Conduct Authority

3 3 High inflation figures led to uncertain times in the fixed interest markets. I have marked the reaction to the 12th May release of 5% inflation in America, but, despite this, Gilt prices recovered (prices up in this market = interest rates down): UK Ten-Year Gilt – 31st March to 30th June

Source: Bloomberg Meanwhile, the price of oil started to pick-up again, having rather stalled over the previous three months, adding to the inflationary concerns: Oil

Source: Bloomberg

4 4 THE ECONOMIC & MARKET BACKGROUND After a good run, the enthusiasm of the market appears to be fading somewhat as we end the second quarter of 2021. Economic recovery is on track, but we face a tricky inflation conundrum and, of course, concerns over the latest virus variant as we ‘open up’ again.

We have seen some uncomfortably high readings for inflation on both sides of the Atlantic, and this looks likely to persist for a few months yet. A jump in the reported numbers was inevitable as we work through comparisons with 2020 when practically everything stopped. The Bank of England, in common with the other major Central Banks, are explaining in soothing tones that this is a temporary blip in inflation and that it will subside again shortly.

This is probably right but it will need to be seen to be right quite soon. Some aspects of inflation feel rather more persistent than transitory, which could easily start to impact inflation expectations, and so on to wage expectations. It could get tricky for the Central banks to justify rock-bottom interest rates if this happens.

The other part of the conundrum is the level of longer-term interest rates in relation to inflation. Interest rates have actually fallen over the past few months (bond prices have gone up), such that the interest rate available on a Government ‘Gilt-Edged’ bond maturing in fifty years is currently 1%. This looks odd, certainly in relation to current inflation, but also in relation to the Bank of England’s long-term target of 2% annual inflation. As was observed recently: “If the two strongest month/month inflation prints in forty years didn’t upset bond markets, what will?”

I think it is worth putting this into straightforward figures. Investing, say, £100,000 today in that fifty-year Government Gilt and assuming the Bank realises its inflation target, that investment will be worth a little over £60,000 in 2071 (in today’s money). I’m not sure that future generations would be that impressed. Put another way, the UK average house price today is around £250,000, are we really expecting it to be £151,000 in fifty years?

That is enough soothsaying for now. Suffice to say that this represents an uncomfortable backdrop with potential for a sharp correction in the pricing of these assets, as the Bank of England recognises in its recent Financial Policy Report.

Our portfolios have had a solid six months, good companies are returning to dividend payments and are in optimistic mood. As ever, we will continue to focus on the value, prospects and quality of the individual investments that make up these portfolios.

James Mahon July 2021

5 5 THE UK ECONOMY AND INTEREST RATES Our economy continues to recover with overall activity up to around 92% of pre- COVID levels, which accords roughly with comments from Andrew Bailey, the Governor of the Bank of England, in a recent speech that: “The good news is that the economy is only around 5% smaller than it was eighteen months ago”. The latest minutes of the Bank’s Monetary Policy Committee (MPC) noted that growth has been stronger than they expected: “Since May, developments in global GDP growth have been somewhat stronger than anticipated, particularly in advanced economies” and “Bank staff have revised up their expectations for the level of UK GDP in 2021 Q2 by around 1½% since the May Report”.

It is interesting to look at Jefferies’ ‘EAR’ reports (the source of our 92% figure above) to see the make-up of this recovery. At the extremes, flight activity (aeroplanes!) has improved slightly to 26% of pre-COVID levels (transport overall is running at about 80%), while visits to property web sites are running at 165% of normal (ending of that Stamp Duty holiday?). Visits to grocery web sites are running at around 140% (they had been up at 200%). Encouragingly, hiring and the listing of job vacancies continues to grow. It will be fascinating to see what impact the next round of lifting of social restrictions has on these numbers.

The concern that is exercising economists everywhere at the moment is whether the strength of the recovery at a time of ultra-low interest rates and ‘easy money’ will lead to a resurgence in inflation. While we have all been expecting an increase as the comparisons to last year work through the system, the scale is causing some consternation, as can readily be seen on this long-term chart of US Inflation:

US Inflation - CPI Measure - 1990 to 2021

Source: Bloomberg 6 6 The inflation picture for the UK is similar though it has not ‘spiked’ quite so dramatically at this stage. We have just seen a further move up in June, taking the annual rate of (CPI) inflation to 2.5%, the previous RPI measure is running at 3.9%. As with the US Federal Reserve and the European Central Bank, the MPC considers this to be transitory: “the Committee’s central expectation is that the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back.” ... “In judging the appropriate stance of monetary policy, the Committee will, consistent with its policy guidance and as always, focus on the medium-term prospects for inflation, including the balance between demand and supply, and medium-term inflation expectations, rather than factors that are likely to be transient.”

So we must expect no change for the base rate, which the MPC has held at 0.1% for fifteen months now. For longer periods, market interest rates have edged back down again: UK Interest Rates – The ‘Yield Curve’ (Base Rate and the income yield from Gilts)

Source: Church House, Bloomberg

Short-term: Base Rate 0.1% 3-mnth LIBOR 0.1% SONIA* 0.0%.

Longer-term: Gilt maturing in: 2 years 5 yrs 10 yrs 20 yrs 30 yrs 50 yrs Yield** 0.1% 0.3% 0.7% 1.2% 1.2% 1.2% Source: Bloomberg *Sterling overnight index average. **The yield to maturity, taking into account interest received and price paid.

7 7 CREDIT MARKET COMMENTARY – JEREMY WHARTON President Biden remains busy, although not necessarily in a frantic rush to reverse some of the protectionist measures put in place by his predecessor (now in deep trouble with US investigators). Proposing a global rate of corporation tax might have some merit, but suggesting a nationalisation of the IP and patents of pharmaceutical companies at this stage does not. Federal Reserve officials are busy too, promoting the ‘lower for longer’ message and a weaker than expected jobs report was timely. Reflation trades lost a little steam as worries for global growth persist in the face of rising infection rates from new virus variants, however, these worries have not stopped US stock indices reaching new heights.

Meanwhile,US inflation printed at the highest level we have seen in thirteen years at 5.4%, used car prices getting the blame (up 10.5%), as supply chain disruption hits new car production. Whether it is McDonald’s workers receiving a 10% pay rise or junior bankers receiving retention bonuses, there is certainly upward pressure on wage inflation. Commodity prices haven’t helped and it is intriguing that surging lumber prices have added $24,000 to the average price of a new home for Americans. Sovereign yields have been fairly stable in the face of these inflation numbers, in the context of Q1’s sharp moves, but more volatility in longer duration assets looks likely.

The Federal Reserve will come under increasing pressure to act, but they insist that they see this bout of inflation as being short-lived, as do the other Western Central Banks, the debate continues as to whose hand will be forced first. A recent meeting of the Fed’s Open Market Committee turned out to be more hawkish than some expected with the ‘dot plots’ shifted and two rate hikes signalled for 2023 along with fewer asset purchases in 2022, they upgraded their growth forecast to 7% for 2021.

The European Central Bank has maintained that its emergency asset purchases will continue “until it judges that the coronavirus crisis phase is over”, but wisely does not attempt to impose a timescale for this. Christine Lagarde continues to insist that it is “way too early to think about long-term policy”, she recently went further saying there was still room to cut rates if needed, I’m not sure how many believed her. The European Union does now debate quite openly how and when to end the bond buying. The ‘haves’ in the form of ECB official, German Jens Weidmann and Austrian Robert Holzmann (France tagging along) argue for a reduction and the ‘have not’s’ in the form of Italian Fabio Panetta and Spanish officials argue against. Plus ça change.

The European Commission, who appeared to insert a gate-crasher into the G7 photoshoot (I hope it wasn’t only me who took a while to work out it was the President of the European Council), flexed its muscles by excluding ten large investment banks from the sale of the first €20bn issue by the EU’s recovery fund, for previous breaches of antitrust rules. These banks included the biggest players in European debt capital markets, they must have plenty of confidence that the remaining second tier banks

8 8 have the reach to fund the €1tn need for the Next Generation EU pandemic recovery fund.

The Bank of England remains on hold in the face of our own inflationary spike (UK CPI doubling month on month makes for plenty of headlines) and also insists that it will be ‘transient’, ‘transitory’ or ‘transitive’. As the drivers of inflation shift from goods to services, and wage inflation gathers pace, there remains a significant chance that some of this inflation will become structural and therefore entrenched. The MPC remained unchanged at 0.1%, but sounded more hawkish as the Bank sharply upgraded inflation, GDP and employment forecasts, while tapering the scale of its current programme of asset purchases to £100bn from £150bn.

It still appears likely that the timescale for a cycle of base rate increases to begin won’t be until 2023, but these timescales are all subject to change and there is no room for complacency. The Bank of England celebrated forty years of Index linked Gilt issuance by coming to market with their biggest linker issue to date, printing £4bn of 2039 paper on a real yield of minus 2.25% (strictly, -2.2448%), which was more than seven times oversubscribed. Their inaugural ‘Green Gilt’ syndications will begin in September.

Credit spreads (the difference between the yield on Gilts and corporate securities) remain well supported. Some individual corporate borrowers continue to benefit from reopening, such as Heathrow Funding, despite the Government’s silly fiddling with their travel traffic light system. A Private Equity bid for Wm. reminded investors of specific risk as Wm Morrison bonds fell sharply on the news (the interest yield moved out by 2.5%).

Primary markets remained active across all currencies in Investment Grade but, as ever, it pays to be selective. Appetite for the asset class is unabated, which was evidenced recently by Amazon further bloating its balance sheet with cash by coming to market to borrow $18.5bn via a range of bonds. All the tranches were heavily oversubscribed and priced well inside of their initial targets, although why investors want to lend the company money for twenty or forty years for such slim margins over US Treasuries is baffling.

High Yield also saw continued new issuance, at the fastest pace since 2007, most of which offers little extra compensation for the investor. Uncomfortably, the $1.2tn ‘Leveraged Loan’ market, benefitting from rampant appetite for its bonds (mostly floating rate) has steadily degraded covenants on new issuance, and now 80% of new issuance has no protection for the investor and no restrictions on use of proceeds at all.

Jeremy Wharton July 2021

9 9 UK EQUITY MARKETS Index: 30 Jun 2021 31 Mar 2021 Quarter FTSE All-Share 4015 3831 +4.8% FTSE 100 7038 6714 +4.8% FTSE 250 22376 21519 +4.0% FTSE Small Cap 7342 6780 +8.3% FTSE AIM All-Share 1248 1198 +4.2%

London stocks saw further gains over the second quarter, but most of this happened over the first six weeks, since when it has become increasingly choppy again. Smaller companies had a good run until the end of April but then faded. We are showing the performance of the AIM markets indices as AIM is significantly bigger than the FTSE Small Cap Index these days with three times the number of constituent companies: FTSE 100 (dark blue) and AIM Indices –2021

Source: Bloomberg, FTSE International

The first quarter had seen a revival for the more economically sensitive, or cyclical, sectors and move away from the more ‘defensive’ and growth sectors; this begun to unwind over the second quarter. Notable here was the banking sector, which produced a ‘Grand Old Duke of York’, moving ahead to the end of May, then all the way back down again by the end of June as interest rates drifted down (banks prefer higher interest rates). The more international banks, HSBC, and , all fell back over the quarter, while the more UK centric was gained around 10% after good figures, the other UK names, Natwest Group and Virgin Money, also held on to some gains. 10 10 The house-builders also fell back, led by Barratt Developments and Taylor Wimpey, despite the strong residential property market and demand for new housing. Berkeley Group, with a more London and SE focus was the exception, holding a small gain. The leisure sector is rather dominated by the sports betting and gambling companies at present and these had a mixed quarter, presumably there will be less on-line gambling as we emerge from the restrictions, Flutter Entertainment (Betfair and Paddy Power) fell 15% while Entain (Coral, Ladbrokes, Sportingbet) gained 15%.

Leading the gainers were the major pharmaceutical and medical suppliers, AstraZeneca gained around 20% from their quite depressed levels around the end of March, Smith & Nephew also put in a strong performance. GlaxoSmithKline broke out of the decline since the end of 2019 as, first, Elliott Management (an ‘activist investor’) announced a stake in the Company and, second, Chief Executive, Emma Walmsley, set out their plans to spin-off (and list on the Stock Exchange) their consumer health business.

Telecommunications was another sector to see divergent returns, BT Group put in its best performance for some while, gaining 25%, as Altice U.K. took a 12% stake. Altice is controlled by the French billionaire, Patrick Drahi, who probably has his eye on BT’s Openreach. Going the opposite direction was Vodafone, down by around 8% this quarter, after their earnings disappointed expectations.

The food retailers continued to be rather dull, stuck between decent sales but slim margins, with on-going competition from the German discounters. But the sector jumped into life in late June with a surprise bid for William Morrison Supermarkets from an American company, Clayton Dubilier & Rice, which is rapidly becoming competitive. Unsurprisingly, their stock has jumped 35% over the quarter.

Fundamental Valuation Indicators Estimates for corporate profitability for the year ahead continue to increase and will probably reach pre-pandemic levels quite soon. Estimates for dividend growth have stalled as it becomes clear that some companies will not be returning to earlier levels for a while yet. For example, as part of their re-organisation, GlaxoSmithKline confirmed a dividend cut.

FTSE All-Share Estimates* 30 Jun 2021 31 Mar 2021 31 Dec 2020 Earnings (per Share) 309.6 297.5 255.1 Price / Earnings Ratio 12.9 12.9 14.4 Earnings Yield 7.7% 7.8% 6.9% Dividends (per Share) 143 143 129.1 Dividend Yield 3.6% 3.7% 3.5% Dividend Cover 2.2X 2.1X 2.0X *Bloomberg aggregate earnings estimates for the year ahead 11 11 INTERNATIONAL EQUITY MARKETS Index: 30 Jun 2021 31 Mar 2021 Quarter* US - S&P 500 4298 3973 +8.2% US - NASDAQ 14504 13247 +9.5% UK – FTSE All-Share 4015 3831 +4.8% Germany - DAX 15531 15008 +3.5% France - CAC 40 6508 6067 +7.3% Switzerland - SMI 11943 11047 +8.1% Japan - TOPIX 1944 1954 -0.5% Brazil - Bovespa 126802 116634 +8.7% China – Shanghai Comp. 3591 3442 +4.3% Hong Kong – Hang Seng 28828 28378 +1.6% Australia – ASX 200 7313 6791 +7.7%

*Change in local currency

Performance this quarter was split between good returns for the Western markets, notably American, and rather more insipid returns from the Far East. US technology companies, as represented by the NASDAQ Index, returned to fine form, though they still lag the broader market over the year as a whole (see below). Japan was the laggard, down a shade over the quarter, with Hong Kong not much better. S&P 500 and NASDAQ Composite Indices – 2021

Source: Bloomberg

12 12 The same general theme was in evidence as in the UK market, cyclical sectors running out of steam while the growth and ‘quality’ areas revived. In Japan, Panasonic and Sony Group fell back, as did Nissan Motor, though Toyota Motor was a gainer as their figures at the end of May were well received. In Europe, Volkswagen slipped back by 10% while Daimler drifted. The financial sectors, notably the banks and insurers, provided most of the weak spots as interest rates picked-up again. The insurance and life assurance groups suffered, in Germany, Allianz fell as did the re-insurer Munich Re, down by 12% over this period. This was also the case for Swiss Re and for Axa in France and Prudential over here. The banks weakened in most markets but the two US investment banks, Goldman Sachs and Morgan Stanley, were an exception providing good gains.

US technology stocks provided the best performance after a quiet first quarter. Alphabet gaining by more than 20% (adding to a strong first quarter) as did Adobe, followed by mid-teens percentage gains for , Microsoft and Salesforce. Apple and Amazon also gained, it appears that the convenience and availability of internet shopping is here to stay. I do wonder if there comes a time quite soon when (some of) these giant technology companies fall prey to anti-trust concerns in the manner of behemoths in the past. All quite a contrast to their Far Eastern counterparts as the Chinese authorities continue to flex their regulatory muscles, Tencent Holdings slipped a further 4% this quarter. Japan’s Softbank had a difficult quarter, down by around 17% after disappointing figures and reflecting their myriad investments in early-stage technology companies. The semiconductor ‘chip’ companies drifted back after their strong first quarter, Intel falling around 12% while Samsung Electronics drifted by around 1%.

The Swiss market matched the US as strong gains from Roche Holding and Nestlé, the two biggest Swiss companies, more than compensated for weakness amongst their banks and insurance companies. As noted in the UK market report, pharmaceuticals provided a number of bright spots. Beside Roche and AstraZeneca, Lonza Group had a good quarter along with Fresenius Medical Care and the Danish diabetes specialist, Novo Nordisk, which leapt 22%.

In Europe, it was the turn of the luxury goods companies to shine (again), Bernard Arnault’s LVMH Moet Hennessy Louis Vuitton, rose by more than 16% while Kering (Gucci, Balenciaga, Saint Laurent…) jumped by 25%. With slightly less of a luxury tinge, Nike shares surged by 16% at the end of the quarter after projecting that revenue this year will surpass $50bn for the first time (that is a lot of trainers!), benefitting from rebounding growth in North America. 13 13 FOREIGN EXCHANGE Cross Rate: 30 Jun 2021 31 Mar 2021 Quarter £ $/£ 1.381 1.381 0% euro/£ 1.165 1.175 -0.5% £ Exchange Rate Index 81.7 82.1 -0.5% $ US$/euro 1.185 1.175 +0.9% Yen / US$ 111.1 110.6 +0.5% Renminbi / US$ 6.46 6.55 -1.3% $ Exchange Rate Index 92.4 93.0 -0.6% Source: Bloomberg

There is little to note in the foreign exchange markets this time. The dollar drifted down to turn-of-the-year levels and then picked-up again, ending a shade weaker overall. Sterling moved ahead to buying more than US$1.40 then faded back down again as the dollar rallied. The euro tracked a mirror image of the US dollar, closing a shade firmer on balance.

COMMODITIES 30 Jun 2021 31 Mar 2021 Quarter Oil – Brent (barrel) $75.2 $63.9 +17.7% Gold (troy ounce) $1768 $1710.6 +3.4% Copper* (25 metric tons) $9390 $8786 +6.9% Commodity Price Index 213.4 185.0 +15.4% Source: Bloomberg *3-month forward contract on the London Metal Exchange

There was much more excitable action in the commodities markets, led by a strong move for the price of oil (with all of that commodity’s potential for inflation upsets). OPEC now appears to be bickering amongst its own members again as to whether and by how much to increase production. Quite possibly, we have seen the best of this move for now.

The top chart opposite shows the colossal squeeze in the price of timber, the contrast with the previous twenty years being stark. Rapidly rising demand for new housing met supply bottlenecks in the wake of the pandemic. At a more mundane level, I have recently met this problem: I have just acquired a new shed, the price is now twice that on their January 2020 price list! - inflation at rather more than indicated by the official statistics… The lower chart shows the price of gold, which is responding more to moves in the bond markets at present (i.e. the level of long-term interest rates) than those inflation figures.

14 14 Timber prices went on a wild ride:

Lumber (110,000 board feet of softwood 2X4s) (as used in construction)

Source: Bloomberg

While, perhaps surprisingly, the price of gold fell back again: The price of Gold – past year

Source: Bloomberg

15 15 CHURCH HOUSE INVESTMENT GRADE FIXED INTEREST 30 Jun 2021 31 Mar 2021 Quarter CH..5 Investment Grade* - Inc. 118.1 117.3 +0.7%

iBoxx AA Corporate 5-15 year 99.1 98.6 +0.5% CH Investment Grade - Accum. 182.8 180.6 +1.2% iBoxx £ ABS 5-10 year TR** 358.0 351.3 +1.9% *bid price to bid price, excluding income. **Total Return Index.

There is little change in the overall cautious stance of the Investment Grade Fixed Interest portfolio, which is still dominated by bonds that mature in the short-term as we simply do not see the value in longer-dated issues at the moment:

CH Investment Grade Fixed Interest Jun 20 21 Mar 20 21 Short-dated Securities (less than 7 years)* 58% 57% Medium-dated Securities (7 to 15 years) 34% 34% Long-dated Securities (over 15 years) 8% 9% Duration of Portfolio 4.5 4.7 Volatility (past year) 3.1% 4.1% Number of Holdings 107 111 Yield 2.2% 2.2% Portfolio Value £346m £353m Volatility is annual standard deviation expressed as a percentage

CH Investment Grade Fixed Interest – by Credit Rating – 30 June 2021

Source: Church House

16 16 The top holding in the portfolio is still a floating rate note (FRN) from the European Investment Bank, followed by another such from the Royal Bank of Canada. In the same vein, we have sold the last of the Canadian Pension Plan 1.125% 2029 stock, and re- invested in a five-year FRN from the same issuer - we like switching from fixed to floating rates in current market conditions. As ever, we remain active in new issues, recently taking new stock from Close Brothers, Credit Agricole and Lloyds.

Calendar Year Performance: YTD 2020 2019 2018 2017 2016 -1.0% 6.0% 5.6% -1.5% 3.3% 4.6% Source: Church House, bid price to bid price, accumulation units.

CH Investment Grade Fixed Interest vs AA rated Corporate Securities (Total Return)

Source: Bloomberg, Church House 17 17 CH INVESTMENT GRADE FIXED INTEREST PORTFOLIO -

Security Weight Security Weight

Floating Rate Notes Short-Dated Bonds (cont.)

Goldman Sachs Coll’d 2021 0.6% Close Bros 2.75% 2023 0.7% ANZ Covered 2022 2.0% LV Friendly 6.5% 2023 0.5% Toronto Dom. 2022 0.6% Scottish Widows 5.5% 2023 1.3% CIBC 2022 1.5% HSBC 6.5% 2023 0.3% RBS Cvd 2023 1.2% Barclays 2.375% 2023 1.8% Pfandbriefe Covered 2023 0.4% Fidelity 7.125% 2024 1.0% Yorkshire B/S 2023 1.8% Rothesay Life 5.5% 2024 1.1% Nationwide B/S 2024 0.6% Lloyds Covered 4.875% 2024 0.5% Santander 2024 1.2% Lloyds Covered 5.125% 2025 0.8% TSB Cvd 2024 1.5% Moeller-Maersk 4% 2025 2.0% Virgin Money Cvd 2024 0.9% Central Networks 5.5% 2025 0.2% RBC 2024 1.5% Thames Water 4% 2025 0.5% RBC 2025 2.6% Tesco 3.5% 2025 1.6% NAB Covered 2025 0.6% Burberry 1.125% 2025 0.3% EIB 2025 0.6% VW Finance 4.25% 2025 1.3% EBRD 2025 1.5% Rothesay Life 8% 2025 1.5% CPPIBC 2026 1.5% BG Energy Cap. 5.125% 2025 0.3% EIB 2027 3.0% SSE Hybrid 3.74% 2049 1.7% Nationwide 2031 1.2% Glencore Fin. 3.125% 2026 1.1% Virgin Money 2.625% 2026 0.4% Short-Dated Bonds Citigroup 5.15% 2026 1.6% Legal & General 10% 2021 0.6% Clydesdale 4.625% 2026 0.4% Eastern Power 4.75% 2021 0.4% Close Brothers 2% 2026 0.6% BAE Systems 4.125% 2022 0.9% CYBG 4% 2026 1.0% Aviva 6.125% 2022 0.2% BAA 6.75% 2026 1.0% Northumbrian 6.875% 2023 1.3% Credit Agricole 1.874% 2026 0.9% BAA 5.225% 2023 0.2% Scotland Gas 3.25% 2027 0.4% London Power 5.125% 2023 0.2% BP 4.25% 2027 1.5%

18 18 – TOP 100 HOLDINGS – 30 JUNE 2021

Security Weight Security Weight

Short-Dated Bonds (cont.) Medium-Dated (cont.) Whitbread 2.375% 2027 0.9% Whitebread Green 3% 2031 0.7% Shaftesbury 2.348% 2027 0.8% M&G 5.625% 2031 2.0% Enel Sustainable 1% 2027 0.6% Phoenix Group 5.625% 2031 1.1% Pension Ins. 4.625% 2031 0.5% Medium-Dated Bonds Lloyds Banking 1.985% 2031 0.9% Workspace 2.25% 2028 0.9% Prudential 6.125% 2031 1.0% Heathrow 2.625% 2028 1.0% Experian 3.25% 2032 0.7% Goldman Sachs 7.25% 2028 2.4% Direct Line 4% 2032 0.5% HSBC 3% 2028 0.8% Pension Ins 3.625% 2032 0.6% Bank of America 7% 2028 2.5% JP Morgan 1.895% 2033 0.6% Rothesay Life 6.875% 2028 1.3% Tritax BigBox 1.5% 2033 0.3% Yorkshire B/S 3.375% 2028 0.7% Standard Chart. 5.125% ‘34 0.6% National Grid 2.125% 2028 0.8% Aviva 4% 2035 0.6% IHG 3.375% 2028 0.8% New York Life 0.75% 2028 0.3% Long-Dated Bonds Diageo 2.875% 2029 1.0% Aster HA 1.405% 2036 0.5% Leeds B/S 3.75% 2029 0.6% III Group 3.75% 2040 1.0% Goldman 3.125% 2029 1.0% Eversholt 2.742% 2040 1.2% Aviva 4.375% 2029 1.3% Motability 1.5% 2041 1.0% British Land 2.375% 2029 0.7% Segro 2.375% 2029 1.2% UK Treasury Stock BAA 2.75% 2029 0.6% Long-Gilt Future - short 0.5% Rio Tinto 4% 2029 0.9% Gatwick Funding 2.5% 2030 0.6% Infrastructure Holdings Tesco 2.75% 2030 0.7% International Public Part. 1.2% Pearson 3.75% 2030 0.3% GCP Infrastructure 1.7% Aviva 5.125% 2030 0.7% HICL Infrastructure Co. 1.5% Close Bros 1.625% 2030 0.9% Legal & Gen. 5.625% 2031 1.5% Cash deposits 0.9%

19 19 CHURCH HOUSE UK EQUITY GROWTH

30 Jun 2021 31 Mar 2021 Quarter

CH UK Equity Growth* 201.8 187.7 +7.5% FTSE 100 Index 7037.5 6713.6 +4.8% FTSE All-Share Index 4014.7 3831.1 +4.8% * Bid price to bid price, excluding distributions of income (capital performance) Management fees are charged to income.

After lagging in the first quarter as cyclical stocks recovered, the UK Equity Growth portfolio had a good second quarter. The disposition has edged more towards bigger companies: CH UK Equity Growth – Disposition – 30 June 2021

Source: Church House

Rory Campbell-Lamerton writes: Our Industrials have performed well, in particular Diploma, Halma and Spirax-Sarco Engineering. These UK-listed companies are global leaders in their fields. Diploma and Spirax-Sarco especially helped by the fact they operate across sectors, and are in the sweet spot of industrial recovery. Similarly positioned, Halma boosted its dividend as it reported full-year profit growth, even though revenue edged down over the financial year. In May, Diageo resumed their share buy-back as recovery for the global drinks manufacturer gathered pace, they saw good recovery across all regions, particularly North America, whilst off-trade sales in Europe remained robust. Roche, one of our international holdings, had a strong quarter, with their shares up 15% on the back of strong phase III trial data for a drug targeting Alzheimer’s disease. One of the lagging sectors in the UK over the quarter has been Technology; we initiated a position in , a leading, up and coming, UK technology business focussed on the provision of digital services to many of the UK government’s agencies and the NHS. If you have recently renewed your passport or driving licence, you will have done so via Kainos developed and powered systems.

20 20 Another new position is in Genus, a Top 15 - 30 June 2021 mid-cap business focusing on animal Diploma 4.8% genetics. Genus was founded pre- RELX 4.2% WWII by the Milk Marketing Board, Diageo 4.2% but was spun out in 1994. It is unique Halma 4.0% as the only truly scalable animal Unilever 3.7% genetics business in the world, with Roche 3.6% most of its rivals much more home Spirax-Sarco Engineering 3.5% market focussed and lacking Genus’s Smith & Nephew 3.3% R&D capacity. We funded these Croda International 3.1% acquisitions by selling our holding in 3.0% Clinigen, which had performed well Investor AB 2.8% for the Fund over its five-year stint in Microsoft 2.6% the portfolio. We sold to diversify Schroders 2.4% into more specialised animal AstraZeneca 2.4% healthcare (Genus) to complement London Stock Exchange Group 2.2% our other healthcare names.

Calendar Year Performance: YTD 2020 2019 2018 2017 2016 +9.2% 0.4% 15.7% -5.1% 9.0% 17.6% Source: Church House - bid price to bid price, accumulation units.

CH UK Equity Growth vs FTSE Equity Indices Bid Prices, excluding income – Capital Performance

Source: Church House, Bloomberg 21 21 CHURCH HOUSE UK EQUITY GROWTH PORTFOLIO –

Sector Sector Weight Shareholding Weight Shareholding

Oil Prod. & Services 0% Staple Goods & Services 15.1% Diageo 4.2% Mining & Materials 4.4% Heineken 1.6% Rio Tinto 1.3% A.G. Barr 1.3% Croda International 3.1% Coca-Cola HBC 0.9% Fevertree 2.0% Industrials 18.0% L’Oreal 1.5% Halma 4.0% Unilever 3.7% Melrose 1.7% Spirax Sarco 3.5% Pharma. & Healthcare 14.7% TT Electronics 1.3% Smith & Nephew 3.3% Judges Scientific 1.5% Roche Holdings 3.6% Diploma 4.8% AstraZeneca 2.4% RWS Holdings 1.3% Arix Bioscience 1.0% Bioventrix 0.9% Technology 5.2% 2.2% Microsoft 2.6% BB Healthcare 1.5% Avast 1.5% Kainos 0.3% Craneware 0.8%

Portfolio Breakdown: FTSE 100 Companies 52.4% FTSE Mid 250 Companies 21.0% UK Small Cap and AIM Cos 8.7% Companies Listed Overseas 15.8% Cash Deposits 2.1%

22 22 – 30 JUNE 2021

Sector Sector Shareholding Weight Shareholding Weight

Consumer Discretionary 11.4% Banks & Other Financial 15.9% Berkeley Group 1.3% Barclays 1.6% Compass Group 1.9% Close Bros. 1.4% Greggs 3.0% Berkshire Hathaway 1.9% JD Sports 1.8% Beazley 1.4% 1.5% Integrafin Holdings 1.3% Intercontinental Hotels 2.0% Hargreaves Lansdown 1.6% Schroders 2.4% Media & Telco’s 7.9% London Stock Exchange 2.2% RELX 4.2% Experian 2.1% Alphabet 1.9% Auto Trader Group 1.7% Property 2.4% 1.1% Shaftesbury 1.3% Utilities 0% Equity Investment Cos. 2.8% Investor AB 2.8%

Other Portfolio Statistics:

Number of holdings 48 Portfolio Value £91.0m Volatility* (past year) 13.5% Beta (to FTSE All-Share) 0.92 Income Yield 0.2%

*Volatility is annual standard deviation of monthly capital returns expressed as a percentage

23 23 CHURCH HOUSE BALANCED EQUITY INCOME 30 Jun 2021 31 Mar 2021 Quarter CH Balanced Equity Income* 187.6 180.1 +4.2% FTSE All-Share Index 4014.7 3831.1 +4.8% FTSE Higher Yield Index 3209.8 3106.5 +3.3% FTSE Index-Linked All Stocks 726.9 702.5 +3.5% Composite Benchmark** 112.1 107.8 +4.0% *Bid price to bid price, excluding income payments (capital performance) **44% FTSE All-Share, 37% FTSE Higher Yield, 19% FTSE Index-Linked All-Stocks Indices. The management fee in CHBE is split 50/50 between capital and income.

This was a quieter period for the Balanced Equity Income portfolio after the strategic moves of the previous six months, which had seen us moving away from oil stocks altogether, along with a number of smaller companies. The unit price also went ‘ex’ the half-year dividend, which was paid at the end of May. The pie chart reflects the continuing move towards bigger companies, though this is now largely complete: CH Balanced Equity Income – Disposition – 30 June 2021

Source: Church House

The bulk of purchases during the period were additions to existing holdings, many of which feature in the Top 15 holdings opposite. Amongst the major companies we added to were Aviva, Reckitt Benckiser, Smith & Nephew and Unilever. Land Securities, the leading property company is a new addition, we have been reducing Primary Health Properties, trading at a significant premium to the value of its underlying assets, in favour of Land Securities, at a discount. 24 24 Top 15 - 30 June 2021 We have also been active in the mid-cap area, twice adding to the holding in AstraZeneca 4.6% , which reported good figures for Unilever 3.9% new housing reservations, and to Diageo 3.2% Rathbone Bros. We continue to like Croda International 3.0% DS Smith, the cardboard packaging Halma 2.9% company (actually a FTSE 100 company, Smith & Nephew 2.7% albeit in the bottom 10%), which reported GlaxoSmithkline 2.7% full-year results during the quarter, and Relx 2.7% added to this holding in April. We sold the Aviva 2.6% remainder of the holding in HICL Barclays 2.6% Infrastructure, switching to an increased Schroders 2.5% holding in GCP Infrastructure, which look Reckitt Benckiser 2.5% rather better value. Barclays FRN 2.5% Virgin Money UK 2.625% stock due in 2031 is a new holding BBGI Global 2.4% Target Healthcare REIT 2.4% in fixed interest, maintaining the overall weighting in the area at 10%.

Calendar Year Performance: YTD 2020 2019 2018 2017 2016 9.4% -7.0% 14.2% -3.6% 8.3% 10.3% Source: Church House, bid price to bid price, accumulation units

CH Balanced Equity Income vs Composite Index* & Higher Yield Bid Prices, excluding Income – Capital Performance

Source: Church House *43% All-Share, 37% FTSE Higher Yield, 20% Index-Linked All-Stocks 25 25 CHURCH HOUSE BALANCED EQUITY INCOME PORTFOLIO –

Sector Sector Weight Weight Shareholding Shareholding

Oil Prod. & Services 0% Pharma. & Healthcare 10.0% Smith & Nephew 2.7% Astra Zeneca 4.6% Mining & Materials 7.3% GlaxoSmithKline 2.7% BHP Group 0.4% Rio Tinto 2.3% Croda International 3.0% Consumer Discretionary 7.7% D S Smith 1.6% Berkeley Group 1.5% Bellway 1.9% Industrials 8.9% Compass 2.3% BAE Systems 1.9% Greggs 2.0% Halma 2.9% Howden Joinery 1.2% Utilities 2.2% Rentokil 0.9% National Grid 2.2% Bunzl 2.0% Media & Telcos 4.8% Staple Goods & Services 13.3% BT Group 2.1% Diageo 3.2% RELX 2.7% 2.1% Unilever 3.9% Technology 3.1% Reckitt Benckiser 2.5% Sage Group 2.1% Cranswick 1.6% Sensyne 1.0%

Portfolio Breakdown: FTSE 100 Companies 58.7% FTSE 250 Companies 18.9% Smaller Companies 1.0% Infrastructure 6.7% Social Housing 4.2% Fixed Interest 9.9% Cash 0.6%

26 26 – 30 JUNE 2021

Sector Sector Weight Weight Shareholding Shareholding

Banks & Other Financial 13.5% Infrastructures Cos. 6.7% Barclays 2.6% BBGI 2.4% Aviva 2.6% GCP Infrastructure 1.7% Phoenix 1.7% SDCL Energy Efficiency 1.8% Close Bros. 2.1% Triple Point Energy Eff. 0.8% Rathbone Bros 2.0% Schroders 2.5%

Property 5.1% Land Securities 1.8% Shaftesbury 1.0% FIXED INTEREST Tritax Big Box 1.1% Primary Health 1.2% Index-Linked Issues 4.2% Nat Grid I-L 2021 0.7% Equity Investment Cos. 2.6% Treasury I-L 2030 2.0% South. Water I-L 2034 0.9% BB Healthcare 1.2% Heathrow I-L 2039 0.6% Hipgnosis Songs 1.4% Other Fixed Interest 5.6% Social Housing Cos 4.2% SSE 3.74% 2026 0.8% 1.8% Phoenix 5.75% 2028 0.8% Target Healthcare 2.4% Barclays 3.75% 2030 2.5% Virgin Bank 2.625% 2031 1.5%

Other Portfolio Statistics: Number of holdings 52 Portfolio Value £65.6m Volatility* (past year) 12.3% Beta (to FTSE All-Share) 0.80 Income Yield 2.1%

*Volatility is annual standard deviation of monthly capital returns expressed as a percentage

27 27 CH UK SMALLER COMPANIES 30 Jun 2021 31 Mar 2021 Quarter CH UK Smaller Companies* 162.1 158.0 +2.6% FTSE All-Share Index TR 7852.4 7435.6 +5.6% FTSE Small Cap (ex I.T.) TR 10424.1 9428.5 +10.6% FTSE AIM All-Share TR 1439.7 1377.8 +4.5% *Bid-to-Bid ‘A’ Accumulation Shares in CH Smaller Cos, the Indices are all Total Return

A quieter period for the UK Smaller Companies portfolio saw little change to the overall disposition: CH UK Smaller Companies – Disposition – 30 June 2021

Source: Church house

Fred Mahon writes: During a quarter of generally favourable markets for UK smaller companies, we were happy to keep portfolio activity to a minimum and to let the steady economic recovery that we are seeing work its magic. All of our portfolio companies have reported results in 2021 and the tone is overwhelmingly optimistic.

To cherry-pick examples from across a few sectors: house builder Bellway reported that housing reservations are up 51% on 2020 and are essentially back to pre-COVID levels; consumer review platform Trustpilot grew revenue by 31% and are on track to exceed the guidance given at their initial public offering (IPO) in March by a healthy margin; and pub company Young and Co.’s Brewery managed to get sales back to 85% of 2019 levels in the first few months of the year, when people were only allowed to use their pub gardens. Of course, we have not seen the end of COVID, but the economy has adapted and we are optimistic for continued good news ahead.

28 28 As noted in the UK Growth report, the Top 15 - 30 June 2021 technology sector had a rare period of Liontrust Asset Management 5.0% underperformance after a strong Diploma 4.6% 2020, we took this opportunity to add Young's Brewery 4.1% two new names to the Fund. The first Bellway 4.0% was Kainos, discussed earlier, this is a Greggs 3.9% fast-growing business that we believe Ideagen 3.9% has a bright future. The second was 3.7% Frontier Developments, who develop Somero Enterprises 3.7% games such as Jurassic World 3.7% Evolution and the upcoming Judges Scientific 3.4% Warhammer: Chaos Gate. Love it or Cranswick 3.3% hate it, gaming is a huge growth Beazley 3.1% market, and Frontier Developments 3.1% gives the Fund exposure, in addition IntegraFin 2.9% to what we already have through RWS Holdings 2.8% Keywords Studios.

Calendar Year Performance: YTD 2020 9.2% 5.1% Source: Church House - bid price to bid price, ‘A’ accumulation shares

CH UK Smaller Companies vs FTSE Equity Indices Bid Prices, including income – Total Return

*The chart shows the performance of the Deep Value Investments portfolio initially. We commenced changes to the portfolio in late February 2020, the new name and policy was formally adopted in August. Source: Church House, Bloomberg 29 29 CH ESK GLOBAL EQUITY 30 Jun 2021 31 Mar 2021 Quarter CH Esk Global Equity* 394.2 357.9 +10.1% CH Global Index in £ 1255.5 1173.7 +7.0% FTSE 100 Index 7037.5 6713.6 +4.8% * Bid price to bid price, excluding distributions of income (capital performance)

Though it has been an interesting period for the companies in our Esk Global Equity portfolio, it has been a quiet period for transactions. The international disposition is broadly similar to the position at the end of March: Esk Global Equity Constituents by City of Listing – 30 June 2021

Source: Church House *Amsterdam, Paris, Frankfurt **Copenhagen, Stockholm

We sold two holdings over the quarter, both of which had been disappointing. The first was Essity, the Swedish personal care company, and the second was JDE Peet’s, the coffee and tea company. There were no new investments but several additions to existing holdings. In Japan, we topped up our position in Sony, which had slipped, along with their domestic and international peers. Aside from their highly successful Playstation platform, Sony generates revenues from electronics, music and media. The business is aiming to bolster its customer base across gaming, music and films to over 1bn users globally, a five-fold rise. In Europe, we had an opportunity to add to our (new) holding in the Danish hearing aid manufacturer GN Store Nord and also to add to Euronext, along with taking-up our rights in their issue of stock to pay for Borsa Italiana. The business generates a return on equity of c.35% and with Brexit and further potential headwinds for the City of London, Euronext has the potential to consolidate and tighten its grip on pan-European trading.

30 30 Top 15 - 30 June 2021 Our top holdings have contributed well this quarter, notably the technology Microsoft 3.9% names: Alphabet, Intuit, Amazon and Alphabet 3.7% Apple, though, in other sectors, Illumina LVMH Moet Hennesy 3.4% has also been strong recently along with Intuit 2.8% LVMH. Outside the top holdings Hermès L'Oréal 2.8% International, have been exceptional, the Amazon.com 2.8% quality/rarity value of this company (and Stryker 2.8% its products) has pushed their share price Illumina 2.8% to a rich valuation. Poor performance has T Rowe Price Group 2.8% mainly been focussed on the financials Roche Holding 2.7% where Swiss RE has fallen, Everest RE Euronext 2.6% marked time and Sumitomo Mitsui Morgan Stanley 2.6% drifted down again; Euronext, was the Rio Tinto 2.6% pleasing exception, making progress Unilever 2.5% again after their rights issue. Apple 2.5%

Calendar Year Performance: YTD 2020 2019 2018 2017 2016 10.9% 18.1% 20.2% -5.6% 13.9% 23.1% Source: Church House - bid price to bid price, accumulation units

Esk Global Equity vs Equity Indices

Source: Church House Bid prices of income units (i.e. capital return, excluding income)

31 31 CH ESK GLOBAL EQUITY –

Country/Region & Listing Country/Region & Listing Weight Weight Shareholding Shareholding USA 45.6% Europe – eurozone 12.6% New York Amsterdam 4.4% Nordson Corp 1.8% Heineken NV 1.8% Paccar Inc. 1.3% Euronext 2.6% Stryker Corp. 2.8% Illumina 2.8% Paris 8.2% Gilead Sciences 1.2% L’Oréal SA 2.8% Johnson & Johnson 2.4% LVMH 3.4% McDonald’s Corp 1.9% Hermès 2.0% Amazon.com 2.8% Alphabet Inc ‘A’ 3.7% Apple Inc 2.5% Nordic 8.0% Ansys 2.0% Copenhagen 3.7% Intuit Inc 2.8% Novozymes A/S B 1.7% Mastercard 2.4% GN Store Nord A/S 2.0% Microsoft Corp 3.9% Verisign 1.1% Stockholm 4.3% Oracle Corp 1.9% Investor AB 2.4% Morgan Stanley 2.6% Industrivarden AB 1.9% Berkshire Hathaway ‘B’ 1.6% Everest Re Group 1.3% T Rowe Price 2.8%

Broad Industry Split of Direct Investments Oil Production & Services 0% Utilities 0% Mining & Materials 5.8% Media & Telcos 5.8% Industrials 7.0% Technology 16.7% Staple Goods & Services 9.7% Banks & Other Financials 14.7% Pharma & Healthcare 16.5% Property 2.1% Consumer Discretionary 12.4% Investment Cos 5.0%

32 32 – 30 JUNE 2021

Country/Region & Listing Country/Region & Listing Weight Weight Shareholding Shareholding Switzerland 8.0% United Kingdom 11.1% Zurich 8.0% London 11.1% Nestlé 2.5% RELX 2.2% Roche Holding AG 2.7% Rio Tinto 2.6% Lonza Group 1.2% 0.8% Swiss RE 1.6% Unilever 2.5% Tritax Eurobox 2.1% Experian 0.9%

Far East 8.0% Emerging Markets 2.3% Tokyo 8.0% London Shin-Etsu. 1.4% Mobius IT 2.3% M3 Inc. 1.4% Nidec Corp 1.6% Sony Group 2.3% Cash Deposits 4.3% Sumitomo Mitsui Fin. 1.3% GBP 0.1% USD 0.7% EUR 1.6% CHF 0.0% DKK 0.0% SEK 1.1% JPY 0.8%

Other Portfolio Statistics:

Number of holdings 45 Portfolio Value £62.4m Volatility* 11.0% Income yield 0.2%

*Annual standard deviation of monthly capital returns expressed as a percentage, past year

33 33 CH TENAX ABSOLUTE RETURN STRATEGIES

30 Jun 2021 31 Mar 2021 Quarter CH Tenax Absolute Return 164.2 162.1 +1.3%

The asset mix in our Tenax Fund has not shifted to any dramatic extent over this quarter, overall it has been a quiet period for transactions. On balance, we continue to edge-up the proportion in floating rate notes at the expense of fixed interest and the overall life (duration is the correct terminology) edges steadily lower - for reasons that must be apparent to anyone reading this far! CH Tenax Fund – Allocation to Asset Classes 2021 31-Dec-20 31-Mar-21 30-Jun-21

Cash 3.0% 2.1% 3.4% Treasury / T-Bill 0.0% 0.0% 0.0% FRN (AAA) 31.1% 34.5% 35.2% Floating Rate 1.8% 1.7% 1.2% Fixed Interest 36.5% 33.3% 33.0% Index-Linked 1.0% 1.1% 1.3% Infrastructure 5.9% 5.9% 5.2% Convert / ZDP 7.9% 7.5% 7.4% Alternative / Hedge 0.8% 0.9% 0.9% Property / Real 2.4% 2.9% 2.8% Equity 9.6% 9.9% 9.6%

Source: Church House

Our floating rate exposure dropped a shade at the outset as an LBBW (Landesbank Baden-Wuerttemberg) note that we had held since 2018 reached maturity. We re- built exposure with an addition to an existing note from Royal Bank of Canada, due in 2025. We were also happy to take a new floating-rate issue from the CPPIB (Canadian Pension Plan Investment Board), which came to market in June. This latter was particularly satisfactory as it enabled us to switch out of the same issuer’s fixed rate 2029 issue (reducing our duration without changing the credit exposure).

We have taken a few new issues in ‘ordinary’ fixed interest securities. One from Natwest Group, due in 2031, but here we sold an equivalent higher coupon issue of theirs to fund the purchase. There was also a small issue from Virgin Money UK and one from the Danish utility Orsted, this latter being a ‘green bond’ whose payments are linked to their ability to reduce emissions.

34 34 Within our infrastructure investments, it has been a good period for the energy storage and efficiency holdings, so we have reduced these marginally. We have recently held a catch-up meeting with the management of SDCL Energy Efficiency, who continue to impress. In a similar vein, we have been gradually selling-down our holding in the European warehousing logistics company, Tritax Eurobox, as this area has done well and is heading for ‘fashionable’. We are more interested in some of the (still unloved) areas of property investment, notably central London offices and leisure. There also some interesting convertible securities in this area, notably the Derwent London convertible that we hold and the Capital & Counties convertible (into part of their stake in Shaftesbury), which we have been acquiring post this period end.

The equity exposure shows little change overall, though we have markedly reduced exposure to smaller companies, which have done well for us, in both the UK and internationally. Our focus is now much more on UK larger companies where we still think that there is value to be found, though we did take some stock in a placing of shares in Rathbone Bros recently (a mid-cap company), which we felt were attractively priced.

CH Tenax Absolute Return – Rolling 12-Month Returns

Source: Church House, NAV to NAV, ‘B’ accumulation shares

Calendar Year Performance:

YTD 2020 2019 2018 2017 2016 0.9% 3.8% 3.4% -1.7% 2.5% 7.6% Source: Church House, NAV to NAV, ‘A’ accumulation shares - Portfolio value: £508m 35 35 Donald Rumsfeld 1932 – 2021

© Getty Images

Donald Rumsfeld became a controversial figure in his later years in office under George W. Bush. What is less well known is that he had previously served in the White House between 1969 and 1977 under Presidents Nixon and Ford, prior to returning to the private sector. He was awarded the Presidential Medal of Freedom in 1977, the US’ highest civilian award. He is probably best known though for his ‘known unknowns’ quote: “Reports that say that something hasn’t happened are always interesting to me, because, as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.” Donald Rumsfeld February 2002 Church House Investment Management 36