MANAGED INVESTMENT FUNDS ICVC INTERIM LONG REPORT FOR THE SIX MONTH PERIOD ENDED 31ST OCTOBER 2017 (UNAUDITED)

Transcription

1 MANAGED INVESTMENT FUNDS ICVC INTERIM LONG REPORT FOR THE SIX MONTH PERIOD ENDED 31ST OCTOBER 2017 (UNAUDITED)

2 Scottish Widows Managed Investment Funds ICVC The Company and Head Office Scottish Widows Managed Investment Funds ICVC 15 Dalkeith Road Edinburgh EH16 5WL Incorporated in Great Britain under registered number IC Authorised and regulated by the Financial Conduct Authority. Authorised Corporate Director (ACD), Alternative Investment Fund Manager (AIFM) and Registrar* Scottish Widows Unit Trust Managers Limited Registered Office: Head Office: Charlton Place 15 Dalkeith Road Andover Edinburgh SP10 1RE EH16 5WL Authorised and regulated by the Financial Conduct Authority and a member of The Investment Association. Investment Adviser* Aberdeen Asset Investments Limited Registered Office: Correspondence Address: Bow Bells House 40 Princes Street 1 Bread Street Edinburgh London EH2 2BY EC4M 9HH Authorised and regulated by the Financial Conduct Authority and a member of The Investment Association. Depositary* State Street Trustees Limited Registered Office: 20 Churchill Place Canary Wharf London E14 5HJ Authorised and regulated by the Financial Conduct Authority. Correspondence Address: 525 Ferry Road Edinburgh EH5 2AW Independent Auditors* PricewaterhouseCoopers LLP Level 4, Atria One 144 Morrison Street Edinburgh EH3 8EX *The Company names and addresses form part of the Authorised Corporate Director's Report.

3 Contents Page 2 About the Company* 4 Report of the Authorised Corporate Director* 5 Summary of Significant Accounting Policies applicable to all sub-funds Investment Markets Overview*, Portfolio Statement*, Material Portfolio Changes*, Comparative Table and Financial Statements for: 6 Balanced Growth Portfolio 14 Balanced Portfolio Fund 21 Cash Fund 29 Cautious Portfolio Fund 39 Dynamic Income Portfolio 50 International Equity Tracker Fund 59 Managed Income Portfolio 68 Momentum Income Portfolio 78 Opportunities Portfolio Fund 85 Progressive Portfolio Fund 92 Stockmarket Growth Portfolio 100 Strategic Growth Portfolio 108 General Information *Collectively, these comprise the Authorised Corporate Director's Report.

4 About the Company Welcome to the Interim Long Report for the Scottish Widows Managed Investment Funds ICVC (the "Company") covering the six month period ended 31st October 2017 (the "Report"). The Authorised Corporate Director (the "ACD") and Authorised Fund Manager of the Company is Scottish Widows Unit Trust Managers Limited, a private company limited by shares which was incorporated in England and Wales on 19th April Its ultimate holding company is Lloyds Banking Group plc ("Lloyds"), which is incorporated in Scotland. The Company is an Open-Ended Investment Company ("OEIC") with variable capital, incorporated in Great Britain under registration number IC and is authorised and regulated by the Financial Conduct Authority ("the FCA") under regulation 12 of the Open-Ended Investment Companies Regulations 2001 (SI2001/1228) ("the OEIC Regulations"), with effect from 19th April Shareholders are not liable for the debts of the Company. The Company is a non-ucits retail scheme which complies with the rules contained in the Financial Conduct Authority's Collective Investment Schemes Sourcebook (the "COLL Sourcebook") and the Investment Funds Sourcebook (the "FUND Sourcebook"). The Company is structured as an umbrella fund, inthat the scheme property of the Company is currently divided among 12 sub-funds, each with different investment objectives. The assets of each sub-fund will be treated as separate from those of every other sub-fund and will be invested in accordance with the investment objective and investment policy applicable to the sub-fund. The investment objective, policies and a review of the investment activities during the six month period are disclosed in the Investment Markets Overview of the individual sub-funds. New sub-funds may be established from time to time by the ACD with the approval of the FCA and Depositary. Each sub-fund would, if it were a separate investment company with variable capital, also be a non-ucits retail scheme which complies with Chapter 5 of the COLL Sourcebook. The assets of each Fund belong exclusively to that sub-fund and shall not be used or made available to discharge (directly or indirectly) the liabilities of, or claims against, any other person or body, including the Company and any other sub-fund and shall not be available for such purpose. Whilst the provisions of the OEIC Regulations provide for segregated liability between Funds, the concept of segregated liability is relatively new. Accordingly, where claims are brought by local creditors in foreign courts or under foreign law contracts, it is not yet known whether a foreign court would give effect to the segregated liability and cross-investments provisions contained in the OEIC Regulations. Therefore, it is not possible to be certain that the assets of a Fund will always be completely insulated from the liabilities of another Fund of the Company in every circumstance. The Financial Statements have been prepared on an individual basis including the 12 sub-funds in existence during the six month period covered by this Interim Long Report, as permitted by the OEIC Regulations and the COLL Sourcebook. As required by the OEIC Regulations and the COLL Sourcebook, information for each of the 12 sub-funds has also been included. The Report of the Authorised Corporate Director is defined as those items highlighted in the contents page in accordance with paragraph of the COLL Sourcebook. During the six month period there have been a number of changes to the Company. These changes are detailed in the section Prospectus changes below. Prospectus changes During the six month period and up to the date of this report, the following changes were made to the Company and therefore the following changes were reflected in the Prospectus of Scottish Widows Managed Investment Funds ICVC: For the purposes of backdating a reduction in annual management charges for top-ups made to certain sub-funds of the Company between 1st October 2012 and 19th February 2017, the Instrument and Prospectus of the Company were amended with effect from 18th May 2017 to include a power to effect a compulsory conversion of certain shares issued between 1st October 2012 and 31st March 2017 in (i) Class A of the Balanced Growth Portfolio, Balanced Portfolio Fund, Cautious Portfolio Fund, Dynamic Income Portfolio, Managed Income Portfolio, Momentum Income Portfolio, Opportunities Portfolio Fund, Progressive Portfolio Fund, Stockmarket Growth Portfolio and Strategic Growth Portfolio to shares in Class P of such sub-funds; and (ii) Class B of the Dynamic Income Portfolio and Strategic Growth Portfolio, to shares in Class P of such sub-funds (the Conversions ). The Conversions only apply for certain impacted shareholders whose investment product(s) were arranged and advised via a Lloyds Banking Group authorised representative. With effect from 10th July 2017, the Prospectus of the Company was updated to include: - additional information and regulatory disclosures with respect to stock lending, repo, total return swaps and collateral as required by the Securities Financing Transaction Regulation; - clarification that purchases and redemptions of shares can take place electronically through messaging platforms such as Calastone/EMX where this is available for certain investors (in line with industry practice for institutional investors/platforms); - updates to list of ACD directors; and - insertion of regulatory disclosure regarding potential conflicts of interest applicable to the Depositary in accordance with the requirements of the FCA Handbook. 2

5 About the Company Prospectus changes (continued) (continued) With effect from 29th September 2017, the Prospectus of the Company was updated to include further insertion of regulatory disclosure regarding any use of government and public securities by the Funds in accordance with the requirements of the FCA Handbook. The Prospectus of the Company has been updated to explain that we will no longer produce short reports for the Funds which were previously issued twice a year. A copy of the Prospectus is available on request. Important information As part of its Smarter Consumer Communications initiative, the Financial Conduct Authority (FCA) has now removed the requirement for firms such as the ACD to prepare and issue short reports. Investors in the Company will therefore no longer receive short reports and the references to short reports have been removed from the Prospectus of the Company. You can contact us for copies of the interim or annual Long Reports. These are available free of charge and can also be downloaded from our website at: Holdings in other Sub-Funds of the Company As at 31st October 2017 there were no shares in sub-funds of the Scottish Widows Managed Investment Funds ICVC held by other sub-funds of the Company. 3

6 Report of the Authorised Corporate Director In accordance with the requirements of the COLL Sourcebook as issued and amended by the Financial Conduct Authority, I hereby certify the Report on behalf of Scottish Widows Unit Trust Managers Limited, the Authorised Corporate Director. Ronald Taylor Director Scottish Widows Unit Trust Managers Limited 20th December

7 Summary of Significant Accounting Policies applicable to all sub-funds The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with applicable law, United Kingdom Generally Accepted Accounting Practice (UK GAAP), the Statement of Recommended Practice (SORP) for UK Authorised Funds issued by the Investment Management Association (IMA) in May 2014 and the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102). The accounting and distribution policies applied are consistent with those of the financial statements for the year ended 30th April 2017 and are described in those annual financial statements. 5

8 Balanced Growth Portfolio Investment Markets Overview Investment Objective and Policy The Fund aims to provide long term growth by mainly investing in regulated collective investment schemes which are currently and/or which have been managed or operated within the Lloyds Banking Group. The Fund will primarily invest in a balance of fixed interest and equity funds. Important Note: Aberdeen Asset Management PLC acquired Scottish Widows Investment Partnership Limited (SWIP) (previously a company within the Lloyds Banking Group) and its subsidiaries on 31st March It is intended that the Fund will continue to invest in those regulated collective investment schemes which had been managed or operated by entities which were within the Lloyds Banking Group immediately prior to the acquisition but which are now managed or operated by entities within the Aberdeen Asset Management Group. The Fund will provide exposure to UK and overseas equities, sterling denominated fixed interest securities and overseas bonds. The Fund may also invest in other investments permitted by FCA Rules for this type of scheme that are consistent with the Fund s objectives. Non-sterling investments may be hedged back to sterling. Derivatives may be used for efficient portfolio management purposes only. Synthetic Risk and Reward Indicator There are several different ways of measuring risk. The table below uses an industry standard measure of fund risk based on measuring a fund's volatility using its returns over the past five years. Volatility is generated by both rising and falling prices. Volatility doesn't tell you how much a fund has lost or gained; it indicates how volatile its returns were historically. The Fund's ranking may change over time and may not be a reliable indication of its future risk profile. This is a separate measure to Scottish Widows' Investment Approaches (where we use our own methodology to take an overall look at funds' risks and aims and categorise our funds as Secure, Cautious, Balanced, Progressive, Adventurous or Specialist). You can read more about them at The Fund is ranked at 4* because it has experienced medium levels of volatility over the past 5 years. *As disclosed in the key investor information document dated 24th August Investment Review Performance Balanced Growth Portfolio A Accumulation Typically lower rewards, lower risks Typically higher rewards, higher risks /05/17 01/05/16 01/05/15 01/05/14 01/05/13 01/05/12 to 31/10/17 to 30/04/17 to 30/04/16 to 30/04/15 to 30/04/14 to 30/04/13 % % % % % % (2.98) Source: Lipper. Basis: Net revenue reinvested and net of expenses. Past performance is not a reliable indicator of future results. The value of an investment and any revenue from it is not guaranteed and can go down as well as up depending on investment performance and currency exchange rates. The Balanced Growth Portfolio invests in a blend of bonds and equities. Equity markets rose in value over the six-month period, however some bond markets declined. The UK stock market produced a positive return, although it underperformed most of its global peers. The pound rallied sharply in the autumn after falling to a seven-year low against the euro in August. This came as the Bank of England indicated that interest rates might rise in the near future. A stronger pound tends to have a negative effect on the share prices of the UK s largest companies, as it reduces the earnings of overseas operations. Overseas equity markets performed well over the period, with the Japanese market notably strong. This was based largely on hopes that weakness in the yen will boost sales of the country s market-leading exporters. The US market performed well too. Although its rally stalled in late summer on concerns that the Trump administration might be unable to push its economic stimulus plans through Congress, strong corporate earnings allowed the market to resume its upward trajectory in the autumn. European equities produced positive returns too, helped by optimism about greater political stability after the centrist Emmanuel Macron s victory in the French presidential election. 6

9 Balanced Growth Portfolio Investment Markets Overview (continued) Investment Review (continued) UK government bonds declined in value over the period. There was a particularly sharp spike in yields (and fall in prices) in September, as the Bank of England took an increasingly hawkish tone in its pronouncements on interest rates. Earlier, bond investors had to contend with the snap election called by Theresa May in June and its unexpected outcome: the loss of her parliamentary majority. Investors also had to absorb the implications of Mrs May s weakened position for the Brexit negotiations. The reaction in bond markets was relatively muted, however. In June, the US Federal Reserve raised interest rates again, although the move was widely expected and had little impact on the markets. A more significant market reaction came in July, after President Trump s failure to repeal the Obamacare bill cast further doubt on his ability to deliver tax reforms, and US consumer-price inflation disappointed for the fourth time in a row, at a year-on-year rate of 1.6%. The Federal Open Markets Committee left interest rates unchanged at its policy meeting and adjusted its tone on inflation. In response, US 10-year yields fell by nearly 6 basis points and the dollar weakened significantly. Corporate bonds underperformed equities over the review period but still produced modestly positive returns. The Fund has some investments in high-yield corporate bonds which are judged to be at a higher risk of defaulting on payments to investors, however offer a higher yield to compensate. This part of the market produced positive returns as investors became less risk-averse in the latter part of the period. The Fund produced a return of 3.53% over the six months under review. Both asset allocation and stock selection had positive effects over the period. Holdings in global equities in particular helped to boost returns. The Fund held relatively large positions in European and Japanese equities which helped performance, as both markets produced strong gains. We favour equities from these regions, as companies are benefiting from economic stimulus measures and equity valuations are not as expensive as in some other countries. The Fund s holding in low-volatility UK equities had a detrimental effect on relative performance over the period. However, the allocation to lowvolatility emerging-market equities more than compensated for this. By the end of the review period, the Fund held relatively small allocations in UK and Pacific ex-japan equities and comparatively large positions in Europe and Japan, which we think contain some attractively valued investment opportunities. Our main concern about the UK market is the uncertainty faced by the economy and companies ahead of the country s exit from the European Union. Within bond markets, high-yield corporate bonds currently appear the most attractive part of the market. Yields on investment-grade corporate bonds have fallen so far that they no longer represent good value. Although high-yield corporate bonds represent a higher risk, we think they offer comparatively good value and that the companies issuing the bonds will not fail to make payments to investors (or default ) in significant numbers. Overall, we think the portfolio is well positioned to participate in any future stock-market gains, while potentially offering some protection via its holdings in bond markets. Aberdeen Asset Investments Limited November

10 Balanced Growth Portfolio Portfolio Statement as at 31st October 2017 (unaudited) Market Total Value Net Assets Holdings 000 % FINANCIALS (98.47%*) 898, Collective Investment Schemes Aberdeen Corporate Bond Fund A Inc 35,631,460 41, Aberdeen European Corporate Bond Fund I Inc 3,110,107 4, Aberdeen Global High Yield Bond Fund Z Acc 45,292,216 74, Aberdeen Liquidity Fund (Lux) - Sterling Fund Z-3 Inc 44,370 44, Aberdeen Liquidity Fund (Lux) - Ultra Short Duration Sterling Fund Z-2 Acc 409,383 53, HBOS International Growth Fund I Inc 20,493,210 89, HBOS UK FTSE All-Share Index Tracking Fund I Inc 107,109,486 75, Scottish Widows Corporate Bond Fund W Gross Acc 109,224, , Scottish Widows Emerging Markets Fund X Acc 2,785,006 6, Scottish Widows Fundamental Index Emerging Markets Equity Fund X Acc 15,299,341 19, Scottish Widows Fundamental Index Global Equity Fund X Acc 12,583,861 22, Scottish Widows Fundamental Index UK Equity Fund X Acc 29,366,920 42, Scottish Widows Fundamental Low Volatility Index Emerging Markets Equity Fund X Acc 2,729,208 4, Scottish Widows Fundamental Low Volatility Index UK Equity Fund X Acc 39,656,575 42, Scottish Widows Gilt Fund W Gross Acc 8,237,320 9, Scottish Widows Global Growth Fund X Acc 53,981, , Scottish Widows International Bond Fund W Gross Acc 10,418,295 13, Scottish Widows UK All Share Tracker Fund X Acc 31,747,755 87, Scottish Widows UK Index-Linked Tracker Fund W Acc 12,601,795 17, DERIVATIVES (-0.01%*) (5,431) (0.60) Forward Currency Contracts Australian Dollar Bought AUD8,700,000 for GBP5,312,912 Settlement 14/12/2017 (265) (0.03) Euro Sold EUR5,000,000 for GBP4,592,825 Settlement 14/12/ US Dollar Bought USD12,885,000 for GBP9,513,719 Settlement 21/12/ Sold USD6,903,000 for GBP5,250,128 Settlement 14/12/ Sold USD43,200,000 for GBP32,237,002 Settlement 21/12/2017 (408) (0.04) Futures Contracts Australian 10 Year Treasury Note Futures December (78) (0.01) Dow Jones E Mini Index Futures December EURO STOXX 50 Index Futures December FTSE 100 Index Futures December FTSE 250 Index Futures December 2017 (118) (85) (0.01) German Euro Bund Futures December 2017 (63) (32) 0.00 Japanese Government Bond 10 Year Futures December 2017 (5) MSCI Pacific Ex Japan Index Futures December 2017 (225) (7) 0.00 NASDAQ 100 E Mini Index Futures December 2017 (103) (426) (0.05) S&P 500 E Mini Index Futures December 2017 (52) (208) (0.02) TOPIX Index Futures December , UK Long Gilt Bond Futures December 2017 (58)

11 Balanced Growth Portfolio Portfolio Statement as at 31st October 2017 (unaudited) (continued) Market Total Value Net Assets Holdings 000 % Options Contracts FTSE 100 Index 6975 Call Option December 2017 (written option) (671) (3,291) (0.36) FTSE 100 Index 7775 Call Option December FTSE 100 Index 6100 Put Option December 2017 (written option) (671) (17) 0.00 FTSE 100 Index 6675 Put Option December S&P 500 Index 2300 Call Option December 2017 (written options) (262) (5,381) (0.60) S&P 500 Index 2525 Call Option December , S&P 500 Index 2000 Put Option December 2017 (written option) (262) (15) 0.00 S&P 500 Index 2200 Put Option December Portfolio of investments^ 892, Net other assets 9, Total net assets 901, All holdings are in Collective Investment Schemes or represent securities quoted on a Listed Securities Market, unless otherwise stated. Derivatives can be exchange traded or Over the Counter (OTC) contracts. *Comparative figures shown in brackets relate to 30th April ^Including investment liabilities. This investment is a related party. Cash equivalents. Asset managed by the Investment Adviser or a related party of the Investment Adviser. 9

12 Balanced Growth Portfolio Material Portfolio Changes Cost 000 Proceeds 000 Major purchases Major sales Aberdeen Liquidity Fund (Lux) - Sterling Fund Z-3 Inc 32,478 UK Long Gilt Bond Futures September ,906 UK Long Gilt Bond Futures September ,133 Aberdeen Liquidity Fund (Lux) - Sterling Fund Z-3 Inc 23,845 EURO STOXX 50 Index Futures December ,386 TOPIX Index Futures June ,534 TOPIX Index Futures September ,514 TOPIX Index Futures September ,462 Australian 10 Year Treasury Note Futures December ,276 UK Long Gilt Bond Futures June ,866 Australian 10 Year Treasury Note Futures September 17,074 Australian 10 Year Treasury Note Futures September 17, EURO STOXX 50 Index Futures September ,706 Australian 10 Year Treasury Note Futures June ,101 German Euro Bund Futures September ,422 EURO STOXX 50 Index Futures September ,037 FTSE 100 Index Futures September ,891 EURO STOXX 50 Index Futures June ,741 German Euro Bund Futures June ,794 FTSE 100 Index Futures June ,010 Purchases and sales of Futures have been included at the value of their exposure. Cash equivalents. Asset managed by the Investment Adviser or a related party of the Investment Adviser. 10

13 Balanced Growth Portfolio Comparative Table as at 31st October 2017 (unaudited) Share Class A - Accumulation Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 30/04/16 474, , , ,912, ,309, ,839, % 1.60% 1.59% Share Class G - Accumulation Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 10,110 9,975 9,230,645 9,451, % 0.95% Share Class P - Accumulation Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 18,821 1,173 18,039,900 1,166, % 1.10% 31/10/17 30/04/17 30/04/16 Share Class T - Accumulation Closing net asset value ( 000) 398, , ,711 Closing number of shares 202,800, ,821, ,653,350 Closing net asset value per share (p) Operating charges#* 0.15% 1.05% 1.50% #Operating charges are representative of the ongoing charges figure. Share Class G Accumulation was launched on 25th November Share Class P Accumulation was launched on 21st February *With effect from 4th January 2017, the ACD fee of Share Class T Accumulation was reduced from 1.50% to 0.15%. 11

14 Balanced Growth Portfolio Statement of Total Return 01/05/17 to 31/10/17 01/05/16 to 31/10/ Income Net capital gains 24,683 84,157 Revenue 12,787 11,994 Expenses (3,951) (6,190) Interest payable and similar charges (15) (7) Net revenue before taxation 8,821 5,797 Taxation (346) (77) Net revenue after taxation 8,475 5,720 Total return before equalisation 33,158 89,877 Equalisation (49) (83) Change in net assets attributable to shareholders from investment activities 33,109 89,794 Statement of Change in Net Assets Attributable to Shareholders Opening net assets attributable to shareholders Amounts receivable on creation of shares Less: Amounts payable on cancellation of shares Change in net assets attributable to shareholders from investment activities Closing net assets attributable to shareholders 01/05/17 to 31/10/17 01/05/16 to 31/10/ , ,639 9,357 7,876 (23,638) (31,161) (14,281) (23,285) 33,109 89, , ,148 Comparative information is provided for the Statement of Change in Net Assets Attributable to Shareholders. Since this information is for the prior interim period, the net assets at the end of that period do not correspond to the net assets at the start of the current period. 12

15 Balanced Growth Portfolio Balance Sheet as at 31st October 2017 (unaudited) Assets Fixed assets Investments (excluding cash equivalents) Current assets Debtors Cash and bank balances Cash equivalents Total assets Liabilities Investment liabilities Creditors Bank overdrafts Other creditors Total liabilities Net assets attributable to shareholders 31/10/17 30/04/ , , ,652 10,268 11,857 98,305 89, , ,131 (10,213) (4,140) (218) (78) (1,568) (1,851) (11,999) (6,069) 901, ,062 Cash equivalents have been disclosed separately from the portfolio of investments for the current period and comparative year to comply with the Alternative Investment Fund Managers Directive (AIFMD) requirements. 13

16 Balanced Portfolio Fund Investment Markets Overview Investment Objective and Policy To provide long term capital growth by investing mainly in multi-manager regulated collective investment schemes. The Fund will invest in a balance of Fixed Income and Equity funds (up to a maximum of 60% in Equity funds). These investments will be diversified across a number of geographic areas including the United Kingdom and other international markets. The Fund will invest mainly in both multi-manager Equity funds and multi-manager Fixed Income funds. The Equity funds that are selected will aim to provide capital growth by investing primarily in equity securities and will be chosen to provide a broad diversification by country, sector and companies. The Fixed Income funds that are selected will aim to provide income and capital growth by investing primarily in investment grade bonds issued from a number of international markets and denominated in a variety of currencies. Non-sterling fixed income investments may be hedged back to sterling. Derivatives may be used for efficient portfolio management purposes only. Synthetic Risk and Reward Indicator There are several different ways of measuring risk. The table below uses an industry standard measure of fund risk based on measuring a fund's volatility using its returns over the past five years. Volatility is generated by both rising and falling prices. Volatility doesn't tell you how much a fund has lost or gained; it indicates how volatile its returns were historically. The Fund's ranking may change over time and may not be a reliable indication of its future risk profile. This is a separate measure to Scottish Widows' Investment Approaches (where we use our own methodology to take an overall look at funds' risks and aims and categorise our funds as Secure, Cautious, Balanced, Progressive, Adventurous or Specialist). You can read more about them at The Fund is ranked at 4* because it has experienced medium levels of volatility over the past 5 years. *As disclosed in the key investor information document dated 24th August Investment Review Performance Balanced Portfolio Fund A Accumulation Mixed Investment 20-60% Shares Sector Average Return Typically lower rewards, lower risks Typically higher rewards, higher risks /05/17 01/05/16 01/05/15 01/05/14 01/05/13 01/05/12 to 31/10/17 to 30/04/17 to 30/04/16 to 30/04/15 to 30/04/14 to 30/04/13 % % % % % % (1.42) (2.14) Source: Lipper for Balanced Portfolio Fund and Sector Average Return. Basis: Net revenue reinvested and net of expenses. Mixed Investment 20-60% Shares Sector - Funds investing in a range of assets with the maximum equity exposure restricted to 60% of the Fund and with at least 30% invested in fixed interest and cash. There is no specific requirement to hold a minimum % of non-uk equity within the equity limits. Assets must be at least 60% in US Dollar/Sterling/Euro of which 30% must be in Sterling and equities are deemed to include convertibles. Past performance is not a reliable indicator of future results. The value of an investment and any revenue from it is not guaranteed and can go down as well as up depending on investment performance and currency exchange rates. Global equity markets rose over the period. US second quarter gross domestic product (GDP) growth came in strong at 3.1% (QoQ) - this informed upon the US Federal Reserve s (Fed) rhetoric which became increasingly hawkish. The Fed added that it would start unwinding its $4.5 trillion balance sheet in October but left monetary policy unchanged. Investors were also concerned about escalating geopolitical tension in the Korean peninsula, North America s tropical hurricanes and pondered whether Trump s administration could effectively implement changes. In the UK, Prime Minister Theresa May announced the UK would honour its EU budget commitments and other contributions during a possible two-year Brexit transition period after Bond markets rose in aggregate over the period. In Germany, Angela Merkel won a fourth term as German chancellor, while Japanese Prime Minister Shinzo Abe won convincingly in the national election. In central bank action, the European Central Bank kept interest rates unchanged but reduced its quantitative easing scheme to a monthly pace of 30 billion from January with the option of extending it beyond September Meanwhile, The Bank of England kept interest rates unchanged in September but hinted it would raise rates in the coming months in order to curb inflation. 14

17 Balanced Portfolio Fund Investment Markets Overview (continued) Investment Review (continued) The Balanced Portfolio Fund is constructed from 13 underlying Scottish Widows and Russell funds. Over the period there was a manager change within 1 of these Russell Pacific Basin Equity Fund. The Balanced Portfolio Fund holds 50% equities and 50% bonds. The Fund returned 3.37% over the period. In our 2017 Global Market Outlook Annual report, we forecast equities to modestly outperform fixed income and cash. The US is expensive and profit growth is likely to be at best, mid-single digits. Fundamental support for US equities looks mediocre, however there is the risk of an extended overbought period on euphoria over an anticipated Trump stimulus. Japan and Europe seem better placed for equity returns. Both have much better value than the US, less political uncertainty and central banks that are likely to continue with supportive policy settings. The outlook for emerging markets is less clear cut. It looks good in value terms as an asset class but faces cycle headwinds from the Fed and the US dollar. Russell Investments Limited November

18 Balanced Portfolio Fund Portfolio Statement as at 31st October 2017 (unaudited) Market Total Value Net Assets Holdings 000 % FINANCIALS (99.65%*) 384, Collective Investment Schemes Aberdeen Liquidity Fund (Lux) - Sterling Fund Z-3 Inc 3,700 3, Russell Asia Pacific Ex Japan Fund I Acc 131,175 6, Russell Continental European Equity Fund I Acc 701,067 21, Russell Euro Fixed Income Fund I Inc 3,655,477 41, Russell Global Bond Euro Hedged Fund I Inc 3,775,952 40, Russell Global Bond Fund A Acc 2,323,684 39, Russell Japan Equity Fund I Acc 370,608 10, Russell Sterling Bond Fund I Acc 1,327,171 28, Russell US Bond Fund I Inc 3,671,853 37, Russell US Equity Fund I Acc 2,634,697 74, Russell US Small Cap Equity Fund I Acc 113,155 3, Scottish Widows Multi-Manager UK Equity Focus Fund A Acc 14,574,571 34, Scottish Widows Multi-Manager UK Equity Growth Fund A Acc 15,230,319 34, Scottish Widows Multi-Manager UK Equity Income Fund A Acc 3,145,532 7, DERIVATIVES (0.05%*) Forward Currency Contracts Australian Dollar Bought AUD1,160,000 for GBP708,388 Settlement 14/12/2017 (35) (0.01) Euro Sold EUR1,400,000 for GBP1,242,515 Settlement 14/12/ Japanese Yen Sold JPY153,200,000 for GBP1,082,143 Settlement 14/12/ US Dollar Sold USD1,582,000 for GBP1,203,202 Settlement 14/12/ Futures Contracts Australian 10 Year Treasury Note Futures December (22) (0.01) Dow Jones E Mini Index Futures December EURO STOXX 50 Index Futures December FTSE 100 Index Futures December FTSE 250 Index Futures December 2017 (51) (37) (0.01) German Euro Bund Futures December 2017 (82) (56) (0.01) Japanese Government Bond 10 Year Futures December 2017 (4) MSCI Pacific Ex Japan Index Futures December 2017 (34) (1) 0.00 NASDAQ 100 E Mini Index Futures December 2017 (13) (54) (0.01) S&P 500 E Mini Index Futures December 2017 (14) (56) (0.01) TOPIX Index Futures December UK Long Gilt Bond Futures December (184) (0.05) Portfolio of investments^ 384, Net other assets Total net assets 384, All holdings are in Collective Investment Schemes or represent securities quoted on a Listed Securities Market, unless otherwise stated. Derivatives can be exchange traded or Over the Counter (OTC) contracts. *Comparative figures shown in brackets relate to 30th April ^Including investment liabilities. This investment is a related party. Cash equivalents. Asset managed by the Investment Adviser or sub Investment Adviser. 16

19 Balanced Portfolio Fund Material Portfolio Changes Cost 000 Proceeds 000 Major purchases Major sales Aberdeen Liquidity Fund (Lux) - Sterling Fund Z-3 Inc 13,937 Aberdeen Liquidity Fund (Lux) - Sterling Fund Z-3 Inc 12,988 German Euro Bund Futures September ,304 German Euro Bund Futures December ,106 German Euro Bund Futures June ,670 German Euro Bund Futures September ,790 UK Long Gilt Bond Futures September ,177 UK Long Gilt Bond Futures September ,212 UK Long Gilt Bond Futures December ,140 UK Long Gilt Bond Futures June ,941 Australian 10 Year Treasury Note Futures December ,812 Australian 10 Year Treasury Note Futures September 4, Australian 10 Year Treasury Note Futures September 4,756 Australian 10 Year Treasury Note Futures June , TOPIX Index Futures September ,629 TOPIX Index Futures September ,636 Japanese Government Bond 10 Year Futures September 4,257 TOPIX Index Futures June , Japanese Government Bond 10 Year Futures June ,235 Japanese Government Bond 10 Year Futures December ,252 Purchases and sales of Futures have been included at the value of their exposure. Cash equivalents. Asset managed by the Investment Adviser or sub Investment Adviser. 17

20 Balanced Portfolio Fund Comparative Table as at 31st October 2017 (unaudited) Share Class A - Accumulation Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 30/04/16 65,359 68,438 66,084 32,306,866 34,975,066 38,117, % 2.00% 2.02% Share Class P - Accumulation Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 3, ,397, , % 1.50% 31/10/17 30/04/17 30/04/16 Share Class X - Accumulation Closing net asset value ( 000) 315, , ,233 Closing number of shares 131,603, ,718, ,862,500 Closing net asset value per share (p) Operating charges# #Operating charges are representative of the ongoing charges figure. Share Class P Accumulation was launched on 21st February % 0.60% 0.62% Prices for Share Class X Accumulation are not published externally, as this is an internal share class. 18

21 Balanced Portfolio Fund Statement of Total Return 01/05/17 to 31/10/17 01/05/16 to 31/10/ Income Net capital gains 11,486 33,364 Revenue 4,624 4,869 Expenses (1,049) (1,045) Interest payable and similar charges (2) (1) Net revenue before taxation 3,573 3,823 Taxation (429) (466) Net revenue after taxation 3,144 3,357 Total return before equalisation 14,630 36,721 Equalisation (50) (65) Change in net assets attributable to shareholders from investment activities 14,580 36,656 Statement of Change in Net Assets Attributable to Shareholders Opening net assets attributable to shareholders Amounts receivable on creation of shares Less: Amounts payable on cancellation of shares Change in net assets attributable to shareholders from investment activities Closing net assets attributable to shareholders 01/05/17 to 31/10/17 01/05/16 to 31/10/ , ,317 1,633 3,196 (15,685) (22,401) (14,052) (19,205) 14,580 36, , ,768 Comparative information is provided for the Statement of Change in Net Assets Attributable to Shareholders. Since this information is for the prior interim period, the net assets at the end of that period do not correspond to the net assets at the start of the current period. 19

22 Balanced Portfolio Fund Balance Sheet as at 31st October 2017 (unaudited) Assets Fixed assets Investments (excluding cash equivalents) Current assets Debtors Cash and bank balances Cash equivalents Total assets Liabilities Investment liabilities Creditors Bank overdrafts Other creditors Total liabilities Net assets attributable to shareholders 31/10/17 30/04/ , , , ,700 2, , ,641 (445) (248) (128) (221) (752) (821) (1,325) (1,290) 384, ,351 Cash equivalents have been disclosed separately from the portfolio of investments for the current period and comparative year to comply with the Alternative Investment Fund Managers Directive (AIFMD) requirements. 20

23 Cash Fund Investment Markets Overview Investment Objective and Policy To provide a level of income which is compatible with a high level of capital security through investment in financial instruments in which a non- UCITS retail scheme equivalent to a money market scheme (see Note 1) is authorised to invest. Note 1: Being a scheme which is dedicated to investment in deposits and debentures which are not transferable securities. This type of scheme may also invest in transferable securities but not more than 5% of the scheme property can be invested in warrants, not more than 10% can be invested in appropriate collective investment schemes and the use of derivatives is restricted to efficient portfolio management. The Fund will invest in short dated gilts, treasury bills and money market instruments such as bank and building society deposits, local authority bonds, local authority deposits, and certificates of deposit. Synthetic Risk and Reward Indicator There are several different ways of measuring risk. The table below uses an industry standard measure of fund risk based on measuring a fund's volatility using its returns over the past five years. Volatility is generated by both rising and falling prices. Volatility doesn't tell you how much a fund has lost or gained; it indicates how volatile its returns were historically. The Fund's ranking may change over time and may not be a reliable indication of its future risk profile. This is a separate measure to Scottish Widows' Investment Approaches (where we use our own methodology to take an overall look at funds' risks and aims and categorise our funds as Secure, Cautious, Balanced, Progressive, Adventurous or Specialist). You can read more about them at The Fund is ranked at 1* because it has experienced very low levels of volatility over the past 5 years. *As disclosed in the key investor information document dated 24th August Investment Review Performance Cash Fund A Accumulation Short Term Money Market Sector Average Return Typically lower rewards, lower risks Typically higher rewards, higher risks /05/17 01/05/16 01/05/15 01/05/14 01/05/13 01/05/12 to 31/10/17 to 30/04/17 to 30/04/16 to 30/04/15 to 30/04/14 to 30/04/13 % % % % % % (0.17) (0.23) 0.00 (0.11) (0.17) Source: Lipper for Cash Fund and Sector Average Return. Basis: Gross revenue reinvested and net of expenses. Short Term Money Market Sector - Funds which invest their assets in money market instruments and comply with the definition of a Short Term Money Market Fund set out in the COLL Sourcebook. Past performance is not a reliable indicator of future results. The value of an investment and any revenue from it is not guaranteed and can go down as well as up depending on investment performance and currency exchange rates. The world s major economies did well in the review period, enjoying its best growth spurt since the turn of the decade. The UK economy remained resilient despite Theresa May s snap June general election ending in a hung parliament. Cracks are beginning to appear however, and Brexitrelated uncertainty and political infighting among the ruling Conservative party resulted in mixed economic data. There was a rise in the services sector Purchasing Managers Index (PMI) from 53.2 in August to However, the manufacturing and construction PMIs released were both weaker than forecast. In the US, the Federal Reserve (Fed) continued to tighten its monetary policy stance, despite softer-than-expected inflation data. The Fed is expected to raise interest rates again in December. Eurozone growth was strong as political risk continued to recede and in spite of stubbornly low inflation. Europe s economy is in cruise control having successfully meandered its way through a year of potential political banana skins. Strong financial conditions and a positive global backdrop should see further growth this year. With third quarter Eurozone growth faster than that in the US, the European Central Bank (ECB) is now expected to begin tapering its asset purchases in January Emerging markets were largely positive throughout the review period, benefiting from a weak US dollar and an increase in commodity prices. Looking ahead, consumers and business investment in the UK are increasingly likely to feel the pinch of rising inflation. The economy is expected to slow in the final quarter of the year as the rising inflation erodes consumers purchasing power. A still ultra-loose Bank of England (BoE) should help soften any slowdown, although there have been hawkish messages from the central bank and the underlying resilience of the UK economy, coupled with rising inflation pressure, makes a compelling case for a first interest rate rise in a decade. 21

24 Cash Fund Investment Markets Overview (continued) Investment Review (continued) With the BoE signalling the first rate hike in 10 years at the September meeting of the Monetary Policy Committee, the decision was taken to pull the Fund as short as possible within the given parameters - allowing the Fund yield to the new market level quickly. Looking forward we will also be focussed on the rhetoric surrounding the rate announcement and the upcoming inflation report in terms of its implications for future rate hikes and its impact on the sterling money market curve. The outlook for the UK economy is to the downside given recent data and the prospect of Brexit fuelling future investment concerns. With that in mind we are likely to lengthen the duration of the Fund in the coming months to take advantage of improved levels in the longer end of the curve. If we do see a hike in November we do not anticipate the commencement of an aggressive rate hiking cycle. The current recovery has been built largely on consumer credit and a sharp rise in interest rates will put the man on the street under significant pressure. The significant uncertainty surrounding Brexit negotiations is likely to hit investment in the UK economy over the next 18 months or so, and this is likely to dampen concerns over inflationary pressures. Aberdeen Asset Investments Limited November

25 Cash Fund Portfolio Statement as at 31st October 2017 (unaudited) Market Total Nominal Value Net Assets Values 000 % CASH EQUIVALENTS (100.18%*) 91, Certificate of Deposits Abbey National Treasury Services 0.155% 01/11/2017 GBP4,000,000 4, Bank of America 0.38% 15/03/2018 GBP2,000,000 1, Bank of Nova Scotia 0.01% 02/01/2018 GBP4,000,000 3, Bank of Tokyo-Mitsubishi 0.22% 13/11/2017 GBP1,500,000 1, Bank of Tokyo-Mitsubishi 0.34% 30/11/2017 GBP2,500,000 2, Banque Federative du Credit Mutuel 0.01% 07/11/2017 GBP4,000,000 4, BNP Paribas Fortis 0.01% 14/11/2017 GBP4,000,000 4, Citibank 0.23% 06/11/2017 GBP3,500,000 3, Danske Bank 0.24% 08/11/2017 GBP4,000,000 4, Den Norske Bank 0.001% 22/01/2018 GBP4,000,000 3, Goldman Sachs 0.535% 23/03/2018 GBP2,000,000 2, Indosuez Wealth Management 0.27% 01/12/2017 GBP3,000,000 3, KBC Bank 0.22% 22/11/2017 GBP4,000,000 4, Mizuho Corporate Bank 0.21% 08/11/2017 GBP4,000,000 4, Mizuho Corporate Bank 0.22% 01/11/2017 GBP4,000,000 4, National Bank of Abu Dhabi 0.3% 08/11/2017 GBP4,000,000 4, Nationwide Building Society 0.27% 10/01/2018 GBP4,000,000 4, Nordea Bank 0.3% 29/01/2018 GBP4,000,000 3, Norinchukin Bank London 0.01% 18/01/2018 GBP2,000,000 1, Societe Generale 0.38% 01/12/2017 GBP4,000,000 4, Standard Chartered Bank 0.34% 27/11/2017 GBP4,000,000 4, Sumitomo Mitsui Banking 0.3% 02/01/2018 GBP4,000,000 4, Sumitomo Mitsui Trust Bank 0.22% 01/11/2017 GBP6,860,000 6, Svenska Handelsbanken 0.24% 28/12/2017 GBP4,000,000 3, Commercial Paper Natixis 0.32% 01/11/2017 GBP4,000,000 4, Portfolio of investments 91, Net other liabilities (4,073) (4.67) Total net assets 87, *Comparative figures shown in brackets relate to 30th April

26 Cash Fund Material Portfolio Changes Total purchases Cost 000 Total sales Proceeds 000 Sumitomo Mitsui Trust Bank 752,647 Sumitomo Mitsui Trust Bank 753,022 Mizuho Corporate Bank 459,355 Mizuho Corporate Bank 458,355 ING Bank 130,898 ING Bank 132,898 Credit Agricole 41,087 Credit Agricole 38,087 Sumitomo Mitsui Banking 10,000 Norinchukin Bank London 10,000 Standard Chartered Bank 8,003 Bank of Tokyo-Mitsubishi 8,000 Danske Bank 8,000 BNP Paribas Fortis 8,000 KBC Bank 8,000 KBC Bank 8,000 Macquarie Bank 8,000 Macquarie Bank 8,000 National Bank of Abu Dhabi 8,000 National Bank of Abu Dhabi 8,000 Nationwide Building Society 8,000 Nationwide Building Society 8,000 Natixis 8,000 Natixis 8,000 Societe Generale 8,000 Nordea Bank 8,000 Bank of Tokyo-Mitsubishi 7,999 Standard Chartered Bank 8,000 Nordea Bank 7,998 Sumitomo Mitsui Banking 8,000 Norinchukin Bank London 7,995 Citibank 7,500 BNP Paribas Fortis 7,994 Credit Agricole Investment Bank 6,000 Citibank 7,000 ABN AMRO Bank 4,000 Bank of Nova Scotia 6,995 Credit Industriel et Commercial 4,000 Abbey National Treasury Services 4,000 Danske Bank 4,000 Den Norske Bank 4,000 DZ Bank 4,000 Svenska Handelsbanken 4,000 Qatar National Bank 4,000 Banque Federative du Credit Mutuel 3,997 Societe Generale 4,000 Indosuez Wealth Management 3,000 Abu Dhabi Commercial Bank 3,000 Bank of America 2,000 Bank of Nova Scotia 3,000 Goldman Sachs 2,000 Bank of America 2,000 National Bank of Canada 2,000 Wells Fargo 2,000 Indosuez Wealth Management 1,000 All of the above are the cumulative value of rolling short term deposits. 24

27 Cash Fund Comparative Table as at 31st October 2017 (unaudited) Share Class A - Accumulation (Gross) Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 30/04/ , , , % 0.63% 0.62% Share Class A - Income (Gross) Closing net asset value ( 000) Closing number of shares Closing net asset value per share (p) Operating charges# 31/10/17 30/04/17 30/04/ , , , % 0.63% 0.62% 31/10/17 30/04/17 30/04/16 Share Class X - Accumulation (Gross) Closing net asset value ( 000) 86,444 85,940 84,941 Closing number of shares 48,136,500 47,893,500 47,471,500 Closing net asset value per share (p) Operating charges# #Operating charges are representative of the ongoing charges figure. 0.13% 0.13% 0.12% Share Classes A Accumulation (Gross), A Income (Gross) and X Accumulation (Gross) converted from net to gross on 1st February Prices for Share Class X Accumulation (Gross) are not published externally, as this is an internal share class. 25