CLIMATE ASSETS FUND - FUND IN FOCUS

FUND OBJECTIVETo achieve long term capital appreciation and to provide income by multi-asset allocation and multi-thematic investment. The fund invests around the world with a focus on investment opportunities arising from the convergence of climate change, resource scarcity and population shifts.

SECTOR

IA Mixed Investment 40%-85% Shares

REASONS TO OWN

Positive investment themes are at the heart of the stock selection process as well as a focus on secular growth and beneficiaries of tighter regulation.

• Large opportunity set due to supply/demand imbalance: The team has identified a well-diversified investment universe of around 1,000 listed companies providing solutions to the economics and environmental challenges of serving a growing population with finite resources.

• Double-tier investment approach: A top-down, centralised and mainstream investment process drives the asset class and regional allocation, while a specialist and dedicated bottom-up approach drives stock selection.

• Excellent diversifier from fossil fuels: The Fund typically invests in 50 to 60 securities to underpin investment discipline and ownership accountability but does not invest in oil & gas exploration and distribution, mining or nuclear power.

• Long-term and high conviction investment ideas: Quality bias and long-term investment view results in relatively low portfolio turnover. The fund benefits from the investment team’s proven performance track record and focus on risk adjusted returns.

WHAT TO EXPECT

The Fund is designed for a balanced risk reward client to invest in the growth markets of sustainability and environmental technologies but with lower volatility of returns. The Fund invests in different asset classes, including global equities, fixed interest and alternative investments. Equity exposure ranges from 50% to 75% with a dividend yield of about 2.5%.

The investment focus is on companies offering solutions to the global and emerging challenges of delivering ‘more with less’ for a rapidly growing population with a finite supply of resources and a lower carbon footprint. Current investment examples include companies offering railway transportation, energy efficient solutions, water infrastructure, recycling packaging and organic and natural food - to name but a few.

The team’s investment style is described as ‘defensive quality within a growth universe’, seeking to avoid higher beta and more volatile names by favouring cash generative companies with solid balance sheets. Notably, the team focuses on mid-to- large market cap companies and does not invest in unlisted or blue-sky equities.

CLIMATE ASSETS FUNDFUND IN FOCUS

INVESTMENT PHILOSOPHY

Quilter Cheviot’s team focuses on investments which are expected to outperform the markets driven by high end-market growth, changing consumer demand and practice, new technology, legislation and demographics.

The positive investment themes - Energy, Food, Health, Resource Management and Water - are at the heart of the stock selection process. To be considered for inclusion in the Fund, companies must offer solutions to the global and emerging challenges of delivering ‘more with less’ for a rapidly growing population with a low carbon footprint.

The team does not invest in unlisted equities or the so called blue-sky companies or technologies, as it favours established businesses with leading market positions, a track record in innovation, as well as strong balance sheets and cash flow generation.

The Fund has a pragmatic ethical stance. Thus, the Fund avoids investing in companies directly involved in nuclear power generation, oil exploration, mining, genetic engineering, tobacco, alcohol, gambling, intensive farming, armaments, non-sustainable timber and pornography.

The experience of lifetimes

SUSTAINABLE INVESTMENTINVESTING IN A CLEANER & MORE EFFICIENT ECONOMYPopulation

• Increase of 33% by 2030• Urban needs versus rural

Energy / Climate Change• Need to reduce carbon footprint• Energy security and independence• Increase share of renewable energy and

efficiency gainsWater

• Increase of 50% by 2030• Accessible, reliable, sustainable supply

Food• Increase of 35% by 2030• Solutions to manage and reduce food waste

CLIMATECHANGE

RESOURCESCARCITY

POPULATIONGROWTH

NEWECONOMY

Source: United Nations 2013, 2017.

The experience of lifetimes

STRUCTURAL ECONOMIC GROWTHMULTI - DECADE INVESTMENT THEMES

MACRO ECONOMIC AND ENVIRONMENTAL TRENDS

RESOURCE SCARCITYScarcity driven supply

Energy lost 80% in value chain

CLIMATE CHANGERising temperatures

Rising sea levels

POPULATION SHIFTSAccelerating growth

Rising living standards

SECURITY OF SUPPLY & INDUSTRIALISATION

ENERGY FOOD HEALTH RESOURCES WATERRenewable EnergyEfficient EnginesPublic TransportEfficient HVAC

Organic FarmingAgri SuppliesFood Testing

Food Packaging

HospitalsVaccines & Generics

Med TechnologyDiagnostic

Recycling & WasteSafety & Protection

Data & Cyber Security Robotics & Automation

Water InfrastructureDesalination

Pumps & PipesSmart Metering

INVESTMENT PROCESS

The experience of lifetimes

INVESTMENT STRATEGYBALANCED CLIENT

Investment objectives• capital appreciation and income• smooth volatility of returns over the economic cycle

Risk• medium tolerance to risk• equity exposure range 50-75%

Investment style• global multi-asset• mid and large cap bias• multi-thematic with focus on sustainability

Investment process• top down approach• bottom up approach: fundamental research and stock selection• Ethical overlay

5

Indicative Portfolio Breakdown

Liquidity In All Asset Classes

Fixed interestSovereign debt

Investment grade corporates

EquitiesActive managementGlobal companies

Sector/Theme diversification

Alternative investmentsGreen & Social infrastructure

Gold/Commodity ETF

CASH

Our investment process is both top-down and bottom-up. We aim to reflect our house views on asset and regional allocation through the portfolio and support these with conviction ideas within our five investment themes: Energy (low carbon), Food, Health, Resource Management and Water. The Fund invests globally in 50 to 60 securities to underpin investment discipline and ownership accountability.

A multi-asset approach allows us to actively asset allocate depending on the prevailing economic and interest rate environment. In addition to reducing volatility of returns, a multi-asset fund can offer a higher yield than pure equity funds through a combination of equity dividends and coupons received from the fixed interest investments.

Companies within the investable universe would generate 20% or more of revenues from providing solutions to the economic and environmental challenges of urbanisation, resource scarcity

and population growth. In practice, the actual portfolio holdings generate on average over 50% of revenue from our positive investment themes.

POSITIVE CRITERIA Identifying companies providing solutions to the global economic and environmental challenges of urbanisation, resource scarcity and climate change.

ENERGY – Companies providing solutions to the problems of using fossil fuels and energy scarcity and security, such as those involved in renewable energy generation, green transport, products and technologies for green building design and construction and energy efficiency.

� FOOD – Companies providing solutions to

the food supply/demand imbalance problem, such as those involved in grain production and harvesting, food testing, food processing measurement & control, and high-tech agriculture supplies.

HEALTH – Companies providing solutions to the problems of aging demographics and access to medicines, such as those involved in medical supply & devices, vaccines and products for infectious diseases, minimal invasive surgery and medical analysis & testing.

RESOURCES – Companies providing solutions to the problems of resource scarcity and availability of supply, such as those involved in waste management, production and processing of environmentally friendly materials, waste-to-energy, environmental consultancy services, coastal protection, productivity and efficiency gains and process control.

WATER – Companies providing solutions to water scarcity and access problems, such as those involved in water supply and distribution, water analysis, monitoring and purification, water metering and efficient methods for crop irrigation.

NEGATIVE CRITERIA Avoiding companies generating revenue from controversial sectors of the economy. Both strategic revenue and materiality criteria are considered.

ALCOHOL – Companies whose primary activity is the manufacture or sale of alcoholic drinks.

ENVIRONMENT – Companies will be excluded where their activities have a significant negative environmental impact, such as mining, chemical manufacture and oil production.

FACTORY FARMING – Companies involved in the rearing of animals in intensive conditions.

GAMBLING – Companies whose primary activity is the operation of gambling facilities.

HUMAN RIGHTS – The portfolio will avoid companies with operations in countries regarded as having oppressive regimes where evidence is held of their involvement, either by collusion or complacency, in abuses of human rights.

MILITARY – Companies that manufacture or sell weapons or weapon systems, or provide strategic components or services specifically for military use.

NUCLEAR – Companies that are involved in the generation of nuclear power, or provide nuclear services to the military.

18+

PORNOGRAPHY – Companies involved in the production or distribution of pornographic material.

TOBACCO – Companies whose primary activity is the production or manufacture of tobacco products.

CLIMATE ASSETS FUNDFUND IN FOCUS

The Fund draws from the expertise of Quilter Cheviot’s asset allocation committee to guide the optimum weighting of the different asset classes and regions as appropriate. To select our holdings we use a combination of in-house fundamental research, brokers’ research notes and management meetings.

The breadth of regions and investment themes gives a well-diversified investment universe (around 1,000 companies), which underpins an active investment idea list of about 100 companies (including Funds’ holdings) at all times.

The Fund focuses on companies with a minimum market capitalisation of £300m to ensure liquidity and reduce volatility of returns. As such, at least 2/3 of the portfolio is invested in mid-to-large cap companies.

CLIMATE ASSETS FUNDFUND IN FOCUS

INVESTMENT TEAM

The Fund is managed by Quilter Cheviot’s dedicated Sustainable Investment Team. The team taps into the sector and company expertise of Quilter Cheviot’s ten-person Equity Research Team and various other in-house investment experts and committees. Investment oversight is given by Chief Investment Strategist, Alan McIntosh.

Claudia Quiroz, Caroline Langley and Alan McIntosh have worked together for nine years and have a strong performance track record underpinned by managing various funds and clients’ discretionary portfolios for private clients, trusts, and charities.

CLAUDIA QUIROZ - INVESTMENT DIRECTOR Claudia is the Lead Fund Manager of our award winning sustainable investment strategy, the Climate Assets Fund. She also manages the Quilter Investors Ethical Equity and Libero Balanced Funds as well as segregated portfolios on behalf of private clients, pensions and charities with a focus on sustainable investment. Claudia holds an MBA from Cass Business School in London and joined Quilter Cheviot from Henderson Global Investors in 2009. She has over 18 years’ experience in Sustainable, Ethical & Responsible Investment and is a Chartered member of the Chartered Institute for Securities & Investment. Claudia sits on the International Equities Stock Selection Committee at Quilter Cheviot and she was shortlisted as the Fund Manager of the Year at the Women in Finance Awards 2018.

CAROLINE LANGLEY - INVESTMENT DIRECTOR Caroline first trained as a Chartered Accountant at PricewaterhouseCoopers before spending two years as a consultant in their Sustainable Business Solutions team. She then begun her private client career at J O Hambro before joining the company in 2006. Caroline graduated in Human Sciences from Oxford University and also holds a Masters degree in Environmental Technology (specialising in Global Environmental Change and Policy) from Imperial College.

FELICITY MUTCH - TRAINEE INVESTMENT MANAGER Having completed two summer internships in 2015 and 2016, Felicity joined Quilter Cheviot full time in 2017. Her primary role is assisting Claudia Quiroz and Caroline Langley with the management of portfolios on behalf of private clients, pensions, trusts and charities. She contributes to the ongoing review of portfolios, ensuring they continue to meet our clients’ evolving investment objectives and to reflect the prevailing market conditions.

HARRY GIBBON – INVESTMENT ADMINISTRATOR Harry joined Quilter Cheviot‘s internship programme in May 2018 and joined the sustainable investment team shortly afterwards. He works closely with Claudia Quiroz and Caroline Langley to assist with the management of clients’ portfolios, including the Quilter Cheviot in-house funds, individuals, pensions, trusts and charities. He is currently studying for the Investment Advice Diploma.

ALAN MCINTOSH - CHIEF INVESTMENT STRATEGIST Alan began his career as a fund manager in 1982 at Scottish Life, followed by Municipal Mutual and BZW Investment Management. He joined Credit Suisse Asset Management in 1994 as UK Market Strategist, before moving in 1999 to Laing & Cruickshank Investment Management, where he ran the Model Portfolios and was Senior Equity Strategist. Alan continued in this role at UBS Wealth Management following their acquisition of Laing & Cruickshank in 2004, and was appointed Executive Director. He joined Quilter Cheviot in 2006 as Chief Investment Strategist. Alan provides investment oversight for all Quilter Cheviot in-house funds.

Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London WC2B 6AN. Quilter Cheviot Limited has established a branch in Dublin, Ireland with number 904906, is a member of the London Stock Exchange, is authorised and regulated by the UK Financial Conduct Authority, is regulated by the Central Bank of Ireland for conduct of business rules, under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom.

QUILTER CHEVIOT Head Office One Kingsway London WC2B 6AN

Please contact our Marketing Department on +44 (0)20 7150 4000 or email marketing@quiltercheviot.com

QCS074 (12/2018)