Aberdeen Diversified Growth Fund

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1 Aberdeen Diversified Growth Fund Annual short report for the year ended 31 October 2016 Investment objective and policy To achieve long term total return with lower volatility than equities. Note: The term total return means a combination of income and capital growth and no positive return is implied. The Portfolio will include investments in collective investment schemes, including funds managed by the Investment Manager and/or its associated group companies, investing directly or indirectly in a range of asset classes including equities, bonds, property, hedge funds, private equity, infrastructure, commodities and currency across global emerging markets and developed markets. The Portfolio may also invest in a wide range of other investments, including, but not limited to, transferable securities, structured notes, money market instruments, near cash, cash and deposits. The Portfolio may also invest in derivatives for hedging and/or for investment purposes. Performance review For the year ended 31 October 2016, the value of Diversified Growth Fund - Z Accumulation Units increased by 6.21%, compared to an increase of 4.95% in the benchmark, 1 Month GBP LIBOR + 4.5%. Source: Lipper, BNP Paribas, Total Return, published NAV to NAV, UK net income reinvested, GBP. Please remember that past performance is not a guide to future returns. The price of shares and the revenue from them may fall as well as rise. Investors may not get back the amount originally invested. Market review Stock markets around the world produced diverse returns over the review period. While the US, UK and some Asian markets posted positive returns, Europe and Japan struggled. Concerns over slowing growth in China and rising US interest rates resulted in markets falling steeply from December to early February. Subsequently, the UK s decision to leave the European Union sent shockwaves through financial markets. However, most markets rebounded quickly as global central banks pledged further stimulus measures. Meanwhile, government bond yields moved sharply lower, and prices rose. However, sterling weakness following Brexit has flattered overseas returns for British investors as the currency has fallen by 20% against both the dollar and the euro, and by 30% versus the yen.

2 On the economic front, the past 12 months saw divergence in policies among the world s central banks. Last December, the US Federal Reserve (Fed) hiked interest rates for the first time in a decade. However, the Bank of England (BoE), the Bank of Japan and the European Central Bank pursued loose monetary policies, keeping rates at record lows or even at sub-zero, and engaging in bond-buying programmes, which benefited bond markets in these regions. Meanwhile, the 10-year UK gilt yield moved sharply lower in the wake of the Brexit vote. In the run-up to the referendum, demand for German gilts was stoked as momentum built on the pro-brexit campaign. Later on, investors worries over a hard Brexit sent sterling to new lows. The likelihood of further monetary easing also receded as inflation expectations rose. Elsewhere, UK corporate bonds were supported by the strength of the underlying companies and BoE s 10 billion-stimulus package over the next 18 months. However, the rally faltered towards the end of the period due to the correction in the underlying yield of government bond markets, along with economic uncertainty post Brexit. Portfolio review The Fund performed well delivering a 6.21% return over the review period. Infrastructure, emerging market bonds, special opportunities and loans contributed the most to performance, while absolute return funds and property were key detractors. During the year, we increased the Fund s exposure to emerging market debt, reflecting the attractive yields on offer, as well as a rebound in commodity prices in early Further, our positive view on emerging market currencies, and the yield premium on local currency debt underpinned our decision. We also raised our exposure to the Aberdeen Global - Indian Bond Fund as we believe India s large and liquid bond market is supported by structural reform and improving central bank liquidity. These top-ups were funded by a reduction in high-yield bonds and a sale of our Australian government bond holding on attractive valuation. We trimmed the property allocation in our Fund, given potential downside risks ahead of the Brexit referendum, and further lowered our exposure after the vote. We continue to hold around 30% of the Fund in listed equities, in an enhanced low-volatility equity strategy (ELVES), which aims to outperform the MSCI World Index with just 75% of the volatility. We believe that this is the best way of maximising the equity portfolio s risk-return trade-off and is aligned with the Fund s overall objective. 2 Aberdeen Diversified Growth Fund

3 Outlook Looking ahead, political uncertainty, which dominated the global economy over the course of the year, looks set to continue into We believe global growth will moderate to a slower pace, given the debt burdens in developed economies, ageing populations in key countries and lower productivity growth. On a positive note, inflation in the UK has picked up, while domestic consumption remained robust, helped by upbeat household spending. The BoE s latest survey also showed a recovery in business sentiment post referendum, whereas populist politicians gaining ground in Europe could result in a more difficult economic environment. Against this backdrop, we believe that a well-diversified portfolio will help mitigate the impact of rising political uncertainty. Portfolio breakdown Portfolio of investments As at 31 October 2016 % As at 31 October 2015 % Equities Open Ended Investment Funds Government Bonds Corporate Bonds Derivatives (2.38) 0.43 Total investments # Other net assets Total net assets # Including derivative liabilities. Fund facts Interim/annual accounting dates Income payment date 30 April, 31 October 31 December Ongoing charges figure % as at 31 October 2016 Ongoing charges figure % as at 31 October 2015 I Units R Units Z Units The Ongoing Charges Figure is based on an estimate of the future charges. It excludes the costs of buying or selling assets for the Fund (unless these assets are shares of another fund). Where the Fund invests in a collective investment scheme which is operated or managed by the Authorised Fund Manager or an associate of the Authorised Fund Manager, no additional annual management charge will be incurred by the Fund on such an investment. It is inclusive of the Aberdeen annual management charge, other operating expenses and any synthetic element to incorporate the ongoing charges of any underlying fund investments. aberdeen-asset.co.uk 3

4 Distribution summary Total distribution (p) for the year to 31 October 2016 Total distribution (p) for the year to 31 October 2015 I Accumulation I Income R Accumulation R Income Z Accumulation Performance summary Net asset value as at 31/10/2016 pence per unit Net asset value as at 31/10/2015 pence per unit Net asset value % change I Accumulation I Income R Accumulation R Income Z Accumulation Net of tax and expenses. Performance record Accounting year ended Highest price pence per unit Lowest price pence per unit 2014 I Accumulation Z Accumulation A I Accumulation AB I Income AB R Accumulation AB R Income A Z Accumulation I Accumulation I Income R Accumulation R Income Z Accumulation A Aberdeen Diversified Assets Fund, a sub-fund of Aberdeen Multi-Manager (Fund of Funds) ICVC, merged with Aberdeen Diversified Growth Fund, a sub-fund of Aberdeen Funds on 11 September B I Income, R Accumulation and R Income unit classes launched on 11 September Aberdeen Diversified Growth Fund

5 Risk profile The Risk and Reward Indicator table demonstrates where the Fund ranks in terms of its potential risk and reward. The higher the rank the greater the potential reward but the greater the risk of losing money. It is based on past data, may change over time and may not be a reliable indication of the future risk profile of the Fund. The shaded area in the table below shows the Fund s ranking on the Risk and Reward Indicator. Typically lower rewards, lower risk Typically higher rewards, higher risk Risk and reward indicator table as at 31 October This Fund is ranked at 4 because funds of this type have experienced average rises and falls in value in the past. Please note that even the lowest risk class can lose you money and that extreme market circumstances can mean you suffer severe losses in all cases. The indicator does not take into account the following risks of investing in this Fund: Investing globally can bring additional returns and diversify risks. However, currency exchange rate fluctuations may have a positive or negative impact on the value of your investment. Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. This may mean your money is at greater risk. Bonds are affected by changes in interest rates, inflation and any decline in creditworthiness of the bond issuer. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may not be able to pay the bond income as promised or could fail to repay the capital amount used to purchase the bond. Where a bond market has a low number of buyers and/or a high number of sellers, it may be harder to sell particular bonds at an anticipated price and/or in a timely manner. This Fund can use derivatives in order to meet its investment objectives. This may result in gains or losses that are greater than the original amount invested. A full list of risks applicable to this Fund can be found in the Prospectus. The latest risk and reward profile can be found on the Key Investor Information Document (KIID) for this Fund which is available on our website at aberdeen-asset.co.uk. aberdeen-asset.co.uk 5

6 Other information Consumers rights and protections, including any derived from EU legislation, are currently unaffected by the result of the UK referendum to leave the European Union, and will remain unchanged unless and until the UK Government changes the applicable legislation. What if I have a complaint? If you need to complain about any aspect of our service, you should write to the Complaints Team, Aberdeen Fund Managers Limited, 10 Queen s Terrace, Aberdeen, AB10 1YG, who will initiate our formal complaints procedure. If you prefer, you may call the Complaints Team on or complaints@aberdeen-asset.com in the first instance. A leaflet detailing our complaints procedure is available on request. If the complaint is not resolved by us to your satisfaction then you may take your complaint to the Financial Ombudsman Service. In order to contact the Financial Ombudsman Service or obtain details of the compensation scheme you should write to The Financial Ombudsman Service, Exchange Tower, London, E14 9SR or telephone or Literature and Fund information Our website contains a wealth of information on our funds and investment approach, including Key Investor Information Documents (KIIDs) for all of the funds available for investment. We also publish a Supplementary Information Document which contains Application forms and additional information, such as Terms and Conditions. You can invest online and access fund performance and pricing information. Please visit: aberdeen-asset.co.uk Alternatively please contact our Customer Services Team on: Tel: customer.services@aberdeen-asset.com Report and accounts Copies of the annual and half-yearly long report and accounts for this Fund are available free of charge on request to Aberdeen Fund Managers Limited. Aberdeen Diversified Growth Fund is a sub-fund of Aberdeen Funds, an authorised unit trust scheme classified as a non-ucits retail scheme and structured as an umbrella scheme under the COLL Sourcebook and was established by a trust deed entered into between the Manager and the Trustee dated 3 July 2001 (as amended) ( the Trust Deed ) and was authorised by the FSA (replaced by the Financial Conduct Authority on 1 April 2013) on 5 July Aberdeen Diversified Growth Fund

7 Appointments Authorised Fund Manager Aberdeen Fund Managers Limited Bow Bells House 1 Bread Street London EC4M 9HH (authorised and regulated by the Financial Conduct Authority in the United Kingdom) Trustee BNP Paribas Securities Services 10 Harewood Avenue London NW1 6AA Investment Adviser Aberdeen Asset Managers Limited 10 Queens Terrace Aberdeen AB10 1YG Contact us Phone (Lines are open 9:00am to 5:00pm, Mondays to Fridays, excluding bank holidays) Dealing Customer Services Broker Desk Post All enquiries Aberdeen Fund Managers Limited, PO Box 9029, Chelmsford, CM99 2WJ For more information on Aberdeen Asset Management PLC and our product range please visit aberdeen-asset.com Registrar International Financial Data Services (UK) Limited IFDS House St Nicholas Lane Basildon Essex SS15 5FS Auditors KPMG LLP 15 Canada Square Canary Wharf London E14 5GL

8 Important Information The above document is strictly for information purposes only and should not be considered as an offer, investment recommendation or solicitation, to deal in any of the investments or funds mentioned herein and does not constitute investment research as defined under EU Directive 2003/125/EC. Aberdeen Asset Managers Limited ( Aberdeen ) does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials. Any research or analysis used in the preparation of this document has been procured by Aberdeen for its own use and may have been acted on for its own purpose. The results thus obtained are made available only coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make their own assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations, as they may consider necessary or appropriate for the purpose of such assessment. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither Aberdeen nor any of its employees, associated group companies or agents have given any consideration to nor have they or any of them made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document. Aberdeen reserves the right to make changes and corrections to any information in this document at any time, without notice. The naming of specific investments is not a recommendation to deal in them. The views expressed are those of Aberdeen Fund Managers Limited and should not be construed as advice either to buy, retain, or sell a particular investment. Investment in the Funds should generally be viewed as a long-term investment. Aberdeen Fund Managers Limited only provides information about its own products and will not give individual financial advice. If you are in any doubt about the suitability of a product to meet your financial needs, then you should seek the advice of a Financial Adviser. Issued by Aberdeen Fund Managers Limited, authorised and regulated by the Financial Conduct Authority in the United Kingdom. A member of the Aberdeen Asset Management group of Companies /17