EXAMPLE. It was a bumpy period for global government bonds, with prices in the US, Germany and the UK falling

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1 This summary provides market commentary from our investment experts, and details any changes made to Portfolio 1 during the second quarter of The commentary is intended to give you a general overview of the market, and does not constitute advice. In brief: Most global equity markets rebounded in Q2, driven by robust US economic data and a raft of better-than-expected corporate earnings results The oil price surpassed a four-year high in May It was a bumpy period for global government bonds, with prices in the US, Germany and the UK falling UK commercial real estate delivered modest capital growth during the quarter Environment Following a challenging first quarter, most global equity markets rebounded in Q2, driven by robust US economic data and a raft of better-than-expected corporate earnings results. The former allowed the US Federal Reserve (Fed) to raise rates in June, with two more hikes likely this year. Meanwhile, the oil price surpassed a four-year high in May on supply concerns. Perhaps the biggest talking point, though, was the deterioration in trade relations between the US and China, after each announced a series of new tariffs. Along with the rising US dollar, this meant emerging markets returns were down for the quarter. It was a bumpy period for global government bonds, with prices in the US, Germany and the UK falling on indications that US interest rates could rise more quickly than previously expected. Thereafter, political uncertainty in Italy and Spain fuelled demand for core government bonds, driving prices higher. Corporate bonds began well but struggled to make headway Commentary 2nd Quarter 2018 as the quarter progressed, with volatility in financial markets picking up as the spectre of global trade wars returned. UK commercial real estate delivered modest capital growth during the quarter, but there was further divergence in sector performance. While industrials continued to outperform the wider UK real estate market, there was further distress on the high street. Mothercare and House of Fraser were the latest retailers to resort to company voluntary arrangements (CVAs), while others like M&S looked to rationalise their physical portfolios. In this environment, real estate investors remained focused on assets in good locations, offering resilient income. 01

2 02 Activity We review the Strategic Asset Allocation (SAA) for each of the 1825 funds every quarter, with the aim of ensuring that we continue to meet investors long-term interests. At the most recent review, we made no changes to the SAA model. We continue to seek growth opportunities and are mindful of the need for income in a world of low yields. By historical standards, global growth remains low but we still see opportunities as economic activity broadens out to a wide range of countries. Some political risks have reduced but others could still surprise investors, positively or negatively. Furthermore, we do not see the need for monetary policy to tighten aggressively as underlying inflation remains restrained. In light of this, we continue to tactically favour equity risk assets plus selected high-yielding fixed income assets. During the second quarter of 2018, we made the following Tactical Asset Allocation (TAA) changes: We reduced the overweight allocation to European equities due to our concerns over greater political risk. We reduced the UK equity underweight allocation, although we still retain an underweight position versus the SAA. We added a modest overweight position to emerging market local currency debt, as we believe the drivers of negative performance, year to date, are abating. There were no fund changes over the review period.

3 Outlook Performance The story of the equity market this year has been the reintroduction of risk and volatility. Higher interest rates and the removal of monetary policy are causing a slow tightening of liquidity conditions, which is creating stress in some emerging market currencies and bond yields. In addition, populist politics are challenging the status quo, threatening global free trade and the euro. However, the most important drivers for stocks economic data and corporate earnings remain solid, providing reasons to remain supportive. As we move through 2018, stock prices will have to be justified by the merits of the underlying company cashflows, rather than by interest-ratedriven valuation. The path and speed of interest rate changes will continue to determine the short-term outlook for bond markets. Central banks have made it clear they believe economic growth and employment levels now argue for an unwinding of emergency monetary policies, despite consistently low inflation. As a result, they are steering towards a tighter monetary policy stance. Meanwhile, the fundamental picture for corporate bonds remains sound, which was reflected in the first quarter earnings season. Uncertainty around the ultimate economic impact of Brexit continues to affect sentiment towards UK commercial real estate. We envisage a period of low returns over the next five years, with the forecast annual total return being slightly below the market income return. With income expected to be the main driver of returns, the degree of income risk from potential tenant default or the ability to maintain income at lease events will be key to performance. Equity markets in the UK, US and Europe all ended the quarter in positive territory, despite political uncertainty and concerns over a potential trade war between China and the US. The portfolio experienced a positive return over the quarter, attributable to our SAA and, in the main, our allocations to UK and US equities. The contribution from the TAA was flat, whilst fund manager selection detracted from performance, with disappointing returns from our absolute return bond managers. The tables below show the performance of the 1825 Portfolio 1 over individual 12-month periods (year-onyear performance), and cumulative growth. Year-on-year performance 30/06/14 30/06/15 30/06/16 30/06/17 30/06/18 N/A N/A 3.5% 6.4% 2.1% Cumulative growth 6 months 1 year 2 years 3 years Since launch (1/07/15) -0.4% 2.1% 8.6% 12.4% 12.4% Performance figures shown are based on representative model portfolios. They are provided by Bloomberg and are calculated net of all fund costs, but do not include product or specific adviser charges. Values are subject to change. Actual returns may differ slightly, for example, as a result of cash inflows or withdrawals. The figures above refer to the past. Past performance is not a guide to the future. As with any investment, the value of your portfolio can fall as well as rise - you may get back less than you pay in. 03

4 Fund selection: Fund selection as at end June 2018 as at end March 2018 Change +/ TwentyFour Corporate Bond 7.62% 7.62% 0.00% T. Rowe Price Funds OEIC Dynamic Global Bond 7.15% 7.15% 0.00% SLI Absolute Return Bond 7.15% 7.15% 0.00% Royal London Short Duration Credit 7.10% 7.10% 0.00% Vanguard Short Term Investment Grade Bond Index 7.10% 7.10% 0.00% PIMCO Global Investment Grade Credit 6.30% 6.30% 0.00% SLI Global Index Linked Bond 5.50% 5.50% 0.00% Vanguard UK Investment Grade Bond Index 5.08% 5.08% 0.00% Royal London Short Duration Global Index Linked 4.00% 4.00% 0.00% Vanguard US Equity Index 3.58% 3.58% 0.00% Henderson Institutional Cash 3.30% 2.80% 0.50% Robeco Global Credits - Short Maturity 3.00% 3.00% 0.00% Robeco Global Credits 2.70% 2.70% 0.00% SLI Global Absolute Return Strategies (GARS) 2.28% 2.28% 0.00% Vanguard FTSE UK All Share Index 2.15% 1.90% 0.25% TM Fulcrum Diversified Absolute Return 1.99% 1.99% 0.00% L&G Japan Index 1.86% 1.86% 0.00% Fidelity Index US 1.62% 1.62% 0.00% Nomura US High Yield Bond 1.60% 2.00% -0.40% L&G Emerging Markets Local Government Bond Index 1.60% 1.10% 0.50% Henderson UK Property 1.56% 1.56% 0.00% Majedie UK Equity 1.51% 1.33% 0.18% Invesco Perpetual Global Targeted Returns 1.43% 1.43% 0.00% Old Mutual North American Equity 1.30% 1.30% 0.00% CF Morant Wright Nippon Yield 1.24% 1.24% 0.00% Invesco Perpetual Emerging Countries 1.15% 1.15% 0.00% Vanguard Emerging Markets Stock Index 1.15% 1.15% 0.00% Ignis UK Property Feeder 1.04% 1.04% 0.00% Cash ( ) 1.00% 1.00% 0.00% BlackRock Continental European Equity Tracker 0.99% 1.60% -0.61% Hermes Asia Ex Japan Equity Fund 0.90% 0.90% 0.00% Mirae Asset Asia Sector Leader Equity 0.90% 0.90% 0.00% First State Global REITS 0.90% 0.90% 0.00% Invesco Perpetual European Equity Income 0.66% 0.96% -0.30% SLI UK Equity Income Unconstrained 0.64% 0.57% 0.07% SLI European Equity Income 0.55% 0.64% -0.09% Baring European High Yield 0.40% 0.50% -0.10% % % ETF15_WEB_P Standard Life Aberdeen. All rights reserved. 04

5 1825 is the brand for Standard Life group s UK financial planning and advice business is a trading name used by Pearson Jones plc, which is part of Standard Life Aberdeen group (Standard Life Aberdeen plc and its subsidiaries). Pearson Jones plc ( ) is registered in England at 14th Floor, 30 St Mary Axe, London EC3A 8BF and is authorised and regulated by the Financial Conduct Authority is a trading name used by Baigrie Davies & Company Limited, which is part of Standard Life Aberdeen group (Standard Life Aberdeen plc and its subsidiaries). Baigrie Davies & Company Limited ( ) is registered in England at 14th Floor, 30 St Mary Axe, London EC3A 8BF and is authorised and regulated by the Financial Conduct Authority is a trading name used by The Munro Partnership Limited, which is part of Standard Life Aberdeen group (Standard Life Aberdeen plc and its subsidiaries). The Munro Partnership Limited (SC219557) is registered in Scotland at Citadel House, 6 Citadel Place, Ayr, KA7 1JN and is authorised and regulated by the Financial Conduct Authority is a trading name used by Jones Sheridan Financial Consulting Limited, which is part of Standard Life Aberdeen group (Standard Life Aberdeen plc and its subsidiaries). Jones Sheridan Financial Consulting Limited ( ) is registered in England at Datum House, Electra Way, Crewe, Cheshire, CW1 6ZF and is authorised and regulated by the Financial Conduct Authority. 05