Friends Provident International Portfolio Strategy January 2018 Investment Objective To obtain long-term growth through an actively-managed diversified portfolio that may invest in equities, real estate, commodities, bonds or absolute return products. The fund manager does not have a set-benchmark but makes decisions and changes to where the portfolio is invested, that are deemed to be appropriate for the market situation. Given this, the fund manager may choose (depending on the market situation and term of the portfolio) to invest in the different regions, asset classes or companies to achieve an optimal return. About F&C BMO Global Asset Management is the trading name of F&C Management Ltd, which is wholly owned by BMO Global Asset Management (Europe) Ltd. BMO Global Asset Management (Europe) Ltd is in turn part of BMO Financial Group, which is ultimately owned by the Bank of Montreal - Canada s second larget bank, and the eighth largest financial institution in in North America. How The Portfolio Strategy Works The Portfolio Strategy is a professionally managed portfolio by F&C Asset Management, designed to progressively reduce the risk of your investment as you get closer to retirement. Investing in the Portfolio Strategy means that the fund allocation of your policy will change automatically as you approach retirement according to the following schedule below:- Year(s) to selected retirement date Policy 100% invested in 19 years + FPI Dynamic Portfolio 10-19 years FPI Growth 4 10 years FPI Balanced 1-4 Years FPI Cautious Portfolio 1 Year FPI Preservation J26446_PSFFSTEMP_HL08020_0218.indd 1
FPI Dynamic (>19 Years*) Fund Update as at 31/12/2017 The asset allocation below shows the percentage weighting of a fund broken down by asset class 4,36% 2,48% 10,22% 3,70% 45,72% 31,24% 0,69% 1,59% Equity Property Private Equity/Infra Govt Bond Credit Risk Premia Insurance Linked Securities Money Market Other Fund Aim The fund aims to offer capital growth over the long term (9-25 years) by investing in a balanced portfolio of equities. Although the fund will be global in outlook, it will be weighted towards European markets. The fund will also include an exposure to property securities. Please note, there may be instances where allocations do not total 100% due to the rounding of the figures used to compile these breakdowns. there may also be instances where a negative weighting is shown in the breakdown in order to accurately reflect a fund s holdings. This is usually associated with a cash-holding, where a fund may be awaiting completion of outstanding transactions that affect this weighting in the short term. The performance information shown below refers to the past. Past performance is not a guide to future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. Performance information has been calculated on a bid to bid basis with income reinvested and is net of all charges applicable to the primary series of the Aviva fund. The primary unit series reflects the charge that applies to the largest number of policyholders or customers. Figures quoted below are based on units which contain an Annual Management Charge (AMC) of 1.75% and Additional Expenses of 0.00%, which gives a total fund charge of 1.75%. These may or may not be the same as your policy. Further information on the AMC and Additional Expenses can be found on page 8. Discrete annual performance to last quarter end (as at 31/12/2017) Discrete performance shows percentage growth over rolling 12-month periods, aligned to the end of the last full quarter. Year to Year performance 31/12/2012 31/12/2013 31/12/2013 31/12/2014 31/12/2014 31/12/2015 31/12/2015 31/12/2016 31/12/2016 31/12/2017 FPI - Dynamic 4.06% -4.85% -1.84% 15.19% 7.96% Fund performance figures in this factsheet are sourced from Financial Express. Fund Report Figures are provided by F & C Investments *Years before selected retirement date Base Data Currency Euro Risk Rating 4 Special Risk Warning A, B, C, E, G,N Annual Management Charge 1.75% Additional Expenses 0.23% Further information on the terms used in these sections can be found from page 8 onwards J26446_PSFFSTEMP_HL08020_0218.indd 2
FPI Growth (10-19 Years*) Fund Update as at 31/12/2017 The asset allocation below shows the percentage weighting of a fund broken down by asset class 3,31% 1,88% 7,76% 3,29% Equity Property 58,31% 33,99% 23,72% 0,53% 1,20% Private Equity/Infra Govt Bond Credit Risk Premia Insurance Linked Securities Money Market Other Fund Aim The fund aims to offer capital growth over the long term (6-8 years) by investing in a balance of equities and fixed interest securities. Although the fund will be global in outlook, it will be weighted towards European markets. Fixed interest securities and cash will normally comprise around 20-25% of the fund. The fund will also include an exposure to property securities Please note, there may be instances where allocations do not total 100% due to the rounding of the figures used to compile these breakdowns. there may also be instances where a negative weighting is shown in the breakdown in order to accurately reflect a fund s holdings. This is usually associated with a cash-holding, where a fund may be awaiting completion of outstanding transactions that affect this weighting in the short term. The performance information shown below refers to the past. Past performance is not a guide to future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. Performance information has been calculated on a bid to bid basis with income reinvested and is net of all charges applicable to the primary series of the Aviva fund. The primary unit series reflects the charge that applies to the largest number of policyholders or customers. Figures quoted below are based on units which contain an Annual Management Charge (AMC) of 1.75% and Additional Expenses of 0.00%, which gives a total fund charge of 1.75%. These may or may not be the same as your policy. Further information on the AMC and Additional Expenses can be found on page 8. Discrete annual performance to last quarter end (as at 31/12/2017) Discrete performance shows percentage growth over rolling 12-month periods, aligned to the end of the last full quarter. Year to Year performance 31/12/2012 31/12/2013 31/12/2013 31/12/2014 31/12/2014 31/12/2015 31/12/2015 31/12/2016 31/12/2016 31/12/2017 FPI - Growth 3.23% 0.80% -2.22% 17.68% 6.23% Fund performance figures in this factsheet are sourced from Financial Express. Fund Report Figures are provided by F & C Investments *Years before selected retirement date Base Data Currency Euro Risk Rating 3 Special Risk Warning A, B, C, E, G, N Annual Management Charge 1.75% Additional Expenses 0.24% Further information on the terms used in these sections can be found from page 8 onwards J26446_PSFFSTEMP_HL08020_0218.indd 3
FPI Balanced (4-10 Years*) Fund Update as at 31/12/2017 The asset allocation below shows the percentage weighting of a fund broken down by asset class 1,27% 2,81% 5,21% 2,23% 15,94% 71,38% 0,35% 0,81% Equity Property Private Equity/Infra Govt Bond Credit Risk Premia Insurance Linked Securities Money Market Other Fund Aim The fund aims to offer capital growth over the medium term (4-5 years) by investing in a balance of equities and fixed interest securities. Although the fund will be global in outlook, it will be weighted towards European markets. Fixed interest securities and cash will normally comprise around 40-50% of the fund. Please note, there may be instances where allocations do not total 100% due to the rounding of the figures used to compile these breakdowns. there may also be instances where a negative weighting is shown in the breakdown in order to accurately reflect a fund s holdings. This is usually associated with a cash-holding, where a fund may be awaiting completion of outstanding transactions that affect this weighting in the short term. The performance information shown below refers to the past. Past performance is not a guide to future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. Performance information has been calculated on a bid to bid basis with income reinvested and is net of all charges applicable to the primary series of the Aviva fund. The primary unit series reflects the charge that applies to the largest number of policyholders or customers. Figures quoted below are based on units which contain an Annual Management Charge (AMC) of 1.75% and Additional Expenses of 0.00%, which gives a total fund charge of 1.75%. These may or may not be the same as your policy. Further information on the AMC and Additional Expenses can be found on page 8. Discrete annual performance to last quarter end (as at 31/12/2017) Discrete performance shows percentage growth over rolling 12-month periods, aligned to the end of the last full quarter. Year to Year performance 31/12/2012 31/12/2013 31/12/2013 31/12/2014 31/12/2014 31/12/2015 31/12/2015 31/12/2016 31/12/2016 31/12/2017 FPI - Balanced 3.30% -0.85% -3.57% 16.44% 5.22% Fund performance figures in this factsheet are sourced from Financial Express. Fund Report Figures are provided by F & C Investments *Years before selected retirement date Base Data Currency Euro Risk Rating 2 Special Risk Warning A, B, C, E, G, N Annual Management Charge 1.75% Additional Expenses 0.24% Further information on the terms used in these sections can be found from page 8 onwards J26446_PSFFSTEMP_HL08020_0218.indd 4
FPI Cautious (1-4 Years*) Fund Update as at 31/12/2017 The asset allocation below shows the percentage weighting of a fund broken down by asset class 0,64% 1,94% 0,18% Equity 8,07% 0,41% 2,64% 1,13% 84,99% Property Private Equity/Infra Govt Bond Credit Risk Premia Insurance Linked Securities Money Market Other Fund Aim The fund aims to protect against short to medium-term market volatility (2-3 years) by investing in a balance of equities and fixed interest securities. Although the fund will be global in outlook, it will be weighted towards European markets. Fixed interest and cash will normally comprise 70-75% of the fund. Please note, there may be instances where allocations do not total 100% due to the rounding of the figures used to compile these breakdowns. there may also be instances where a negative weighting is shown in the breakdown in order to accurately reflect a fund s holdings. This is usually associated with a cash-holding, where a fund may be awaiting completion of outstanding transactions that affect this weighting in the short term. The performance information shown below refers to the past. Past performance is not a guide to future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. Performance information has been calculated on a bid to bid basis with income reinvested and is net of all charges applicable to the primary series of the Aviva fund. The primary unit series reflects the charge that applies to the largest number of policyholders or customers. Figures quoted below are based on units which contain an Annual Management Charge (AMC) of 1.75% and Additional Expenses of 0.00%, which gives a total fund charge of 1.75%. These may or may not be the same as your policy. Further information on the AMC and Additional Expenses can be found on page 8. Discrete annual performance to last quarter end (as at 31/12/2017) Discrete performance shows percentage growth over rolling 12-month periods, aligned to the end of the last full quarter. Year to Year performance 31/12/2012 31/12/2013 31/12/2013 31/12/2014 31/12/2014 31/12/2015 31/12/2015 31/12/2016 31/12/2016 31/12/2017 FPI - Cautious 2.57% -6.72% -5.13% 14.29% 3.18% Fund performance figures in this factsheet are sourced from Financial Express. Fund Report Figures are provided by F & C Investments *Years before selected retirement date Base Data Currency Euro Risk Rating 2 Special Risk Warning A, B, C, E, G, N Annual Management Charge 1.75% Additional Expenses 0.16% Further information on the terms used in these sections can be found from page 8 onwards J26446_PSFFSTEMP_HL08020_0218.indd 5
FPI Preservation (<1 Year*) Fund Update as at 31/12/2017 The asset allocation below shows the percentage weighting of a fund broken down by asset class 100% Equity Property Private Equity/Infra Govt Bond Credit Risk Premia Insurance Linked Securities Money Market Other Fund Aim The fund aims to protect against short term market volatility (0-1 year) by investing in a balance of equities and fixed interest securities. Although the fund will be global in outlook, it will be weighted towards European markets. Fixed interest securities and cash will normally comprise around 90% of the fund Please note, there may be instances where allocations do not total 100% due to the rounding of the figures used to compile these breakdowns. there may also be instances where a negative weighting is shown in the breakdown in order to accurately reflect a fund s holdings. This is usually associated with a cash-holding, where a fund may be awaiting completion of outstanding transactions that affect this weighting in the short term. The performance information shown below refers to the past. Past performance is not a guide to future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. Performance information has been calculated on a bid to bid basis with income reinvested and is net of all charges applicable to the primary series of the Aviva fund. The primary unit series reflects the charge that applies to the largest number of policyholders or customers. Figures quoted below are based on units which contain an Annual Management Charge (AMC) of 1.75% and Additional Expenses of 0.00%, which gives a total fund charge of 1.75%. These may or may not be the same as your policy. Further information on the AMC and Additional Expenses can be found on page 8. Discrete annual performance to last quarter end (as at 31/12/2017) Discrete performance shows percentage growth over rolling 12-month periods, aligned to the end of the last full quarter. Year to Year performance 31/12/2012 31/12/2013 31/12/2013 31/12/2014 31/12/2014 31/12/2015 31/12/2015 31/12/2016 31/12/2016 31/12/2017 FPI - Preservation 0.59% -9.17% -7.28% 12.88% 1.41% Fund performance figures in this factsheet are sourced from Financial Express. Fund Report Figures are provided by F & C Investments *Years before selected retirement date Base Data Currency Euro Risk Rating 1 Special Risk Warning A, B, C, E, G, N Annual Management Charge 1.75% Additional Expenses 0.00% Further information on the terms used in these sections can be found from page 8 onwards J26446_PSFFSTEMP_HL08020_0218.indd 6
Market Review UK equities generated strongly positive returns over the quarter. UK economic data continued to be mixed, with the service sector appearing to be held back by elevated inflation but the manufacturing sector continuing to benefit from sterling weakness. UK equities were supported by buoyant risk appetite and a generally robust global growth picture. Sterling was relatively little impacted by news that EU leaders had agreed to allow Brexit talks to move to the trade negotiation phase as the UK and EU reached compromises on the financial settlement, the Irish border and post-brexit citizens rights. In terms of sectors, leisure goods (25.7%), industrial transportation (14.3%) and mining (13.0%) outperformed while aerospace & defence (-7.1%), gas water & multiutilities (-6.8%) and electricity (-6.1%) lagged. Money Market In the money markets, the fund s benchmark, GBP 7-day LIBID, rose after the Bank of England (BoE) rate hike, ending the fourth quarter at 0.355%. The GBP 3-month LIBOR also rose, ending the year at 0.52%. The BoE raised interest rates from 0.25% to 0.50% for the first time in ten years, reversing the post-brexit vote cut from the previous year. The comments that accompanied the move and the benign market reaction gave the BoE the dovish hike it craved. UK Consumer Price Inflation (CPI) reached 3.1% in November, driven by continued sterling weakness and higher oil prices. The BoE s Quarterly Inflation Report highlighted lower trend growth and continued to forecast inflation falling back to its target. Outlook Data has continued to point to underlying strength in the US economy, with the Federal Reserve continuing its interest rate tightening cycle as expected. US exports have benefitted from a weaker dollar and accelerating global growth. At the same time, US unemployment is low and the labour market tight. Overall, we believe the recently approved package of US tax cuts should add further stimulus to what is already a robust domestic growth picture. While the eurozone s growth outlook remains positive and economic data shows the recovery retains momentum, inflation has been subdued. The European Central Bank s (ECB) decision to reduce asset purchases from the beginning of 2018, from 60bn to 30bn, was widely expected. Notably, however, the ECB left the end date of its quantitative easing programme open. With global economic data continuing to be generally supportive, equity markets have proved resilient to the combination of rate rises in the US, a pickup in geopolitical tensions and some pockets of valuation concerns as the second longest equity bull market in history continues. We don t envisage any change to this in the short term; earnings growth remains steady, if not spectacular, while a healthy dose of mergers and acquisitions activity is supporting sentiment as well. Although global equities certainly aren t cheap by traditional measures, given the continued favourable backdrop we do not view stocks in general as particularly expensive either. As we enter 2018, we perceive slightly better value in Europe compared with the US, while also seeing good prospects in Japan. In line with expectations, the US Federal Reserve raised interest rates to 1.5% at its December meeting, its third rate hike of 2017. The European Central Bank (ECB) announced it would scale back its quantitative easing programme from the beginning of 2018, reducing monthly asset purchases to 30bn from 60bn. Important Information This factsheet is for information purposes only and does not constitute investment advice. The actual performance depends on the market performance and may therefore be lower or higher. Past performance is no indication of future returns. Fund prices and performance fees are reduced by the annual fees. Although every effort is made to ensure the correctness of the information, buying and selling decisions should not be based on it. J26446_PSFFSTEMP_HL08020_0218.indd 7
Special risk warning The assigned warnings highlight the risks that the fund can be exposed to, but at any given point in time the fund may not have exposure to all of these risks. A General Investment is not guaranteed: The value of an investment is not guaranteed and can go down as well as up. You could get back less than you have paid in. Price: At times, a fund may need to change the way its price is calculated to ensure that those moving into and out of the fund and existing unitholders/shareholders are treated fairly and are not disadvantaged by any large cashflows. Suspend trading: Fund managers have the ability, in certain circumstances, to suspend trading in their funds for as long as necessary. When this occurs we will need to delay the cashing in or switching of units in the relevant fund. You may not be able to access your money during this period. The circumstances in which we may delay a switch, withdrawal or transfer can include but are not limited to the following: if a large number of customers want to take money out of the same fund at the same time; if there are practical problems selling the assets in which a fund is invested; if the fund (or part of it) is managed by an external company, they may insist on a delay. Stock Lending: Where a fund is involved in the temporary transfer of securities, there is a risk that the borrower may not be able to return the security to its owner. This may have a negative effect on the performance of the fund. Derivatives: Most funds can invest in derivatives for the purpose of efficient portfolio management or risk reduction. For funds that also use derivatives for investment purposes we apply an additional risk warning due to the possible increase in the risk and volatility of the fund. B - Currency Risk: Where a fund invests in share classes or securities priced in currencies other than the fund s base currency, changes in exchange rates can contribute to the value of the investment going up or down. C - Emerging Markets: Where a fund invests in emerging markets, it is likely to be more volatile than one that invests in developed markets. These markets may not be as strictly regulated and securities may be harder to buy and sell than those in more developed markets. These markets may also be politically unstable which can result in the fund carrying more risk. D - Smaller Companies: Where a fund invests in the shares of smaller companies, these shares can be more volatile and may be harder to buy and sell than larger company shares which can result in the fund carrying more risk. E - Fixed Interest: Where a fund invests in fixed interest securities, such as corporate or government bonds, changes in interest rates can contribute to the value of the investment going up or down. If interest rates rise, the value is likely to fall. Bonds with a lower credit rating are known as sub-investment grade or junk bonds. These carry an increased risk that the issuer of the bond will be unable to continue the interest payments or return the capital at maturity. F - Specialist: Where a fund invests only in a specific or limited range of industry sectors, it may carry more risk than funds that invest across a broader range or variety of sectors. These funds can be more volatile and carry higher risk due to their lack of diversification. G - Derivatives: Where a fund uses derivatives for investment purposes, there may be an increase in the risk and volatility of the fund. Some derivative investments also expose investors to counterparty or default risk where another party is unable to meets its obligations and pay what is due, which could result in the loss of the value of the derivative itself. H - Cash Funds: These are not cash deposit accounts but invest in money market instruments and short-term bonds and can fall in value. In a low interest rate environment, the charges applied to a cash fund may be greater than its return, so you could get back less than you have paid in. I - Direct Property: Where a fund invests in physical property, these properties are not easy to buy or sell. In exceptional circumstances, we may need to delay the cashing in or switching of units in the fund and you may not be able to access your money during this period. The value of properties held is generally a matter of the valuer s opinion rather than fact. J - Index-Linked: Where a fund invests in index-linked bonds, changes in inflation rates can contribute to the value of the investment going up or down. If inflation falls, the value is likely to fall. K - High Cash Levels: Due to the way some funds are managed there may be periods when they have large cash holdings. This can be a deliberate asset allocation decision or while suitable investment opportunities are researched and selected. A fund s growth potential may be less during this period. L - Reinsured Funds: Where a fund invests in an underlying fund operated by another insurance company through a reinsurance agreement, if the other insurance company were to become insolvent, you could lose some or all of the value of your investment in this fund. M - Ethical: Where a fund invests only in sectors and securities that meet its agreed ethical criteria, it may carry more risk than funds which are free from these restrictions. The ethical companies invested in can be involved in new and innovative technologies or new markets and can therefore have a higher risk profile than organisations involved in more mainstream activities. N - Alternative Investments: Where a fund invests in alternatives, it may carry more risk as these instruments are generally priced less regularly and may be harder to buy and sell than investments in more conventional asset classes. Alternatives include commodities, hedge funds, private equity, real estate investment trusts (REITS), venture capital and currencies. J26446_PSFFSTEMP_HL08020_0218.indd 8
O - Convertible Bonds: Where a fund invests in convertible bonds, it will experience the risks associated with holding bonds until conversion at which point it will experience the risks associated with holding equities. To compensate for having additional value through the option to convert from a bond to an equity, a convertible bond typically has a coupon rate lower than that of a similar, non-convertible bond. P - High Yield Bonds: The fund invests in high yield (non investment grade) bonds. This means bonds that have a Credit Quality rating of BB or less. High yield bonds carry a greater risk than investment grade bonds that the issuer may not be able to pay interest or return capital. In addition, economic conditions and interest rate movements will have a greater effect on their price. There may be times when these bonds are not easy to buy or sell. In exceptional circumstances, we may need to delay the cashing in or switching of units in the fund and you may not be able to access your money during this period. Annual Management Charge (AMC) The annual fee, expressed as a percentage, which is charged by the product provider. This covers both the costs of running the fund and any product charges which may be applicable. Additional Expenses Charged by the fund managers to cover expenses, such as fees to auditors, trustees and valuers. The value is an indicative figure, which is reviewed regularly and can change. Additional expenses are added to the AMC to give the total fund charge. For full details of our contract fees contact our customer services helpline. Friends Provident International Fund Risk Rating Each fund s risk rating is reviewed annually, according to risk and volatility, and may change over time. The time at which you make your investment decision is extremely important and you should consult a financial advisor. It should be noted that these categories represent a spectrum of risk within a fund range and no attempt has been made to compare them with other investments. Volatility means the ups and downs in an investment value over a period of time. Risk grades and descriptions Grade 1 Funds offering conservative return similar to money market rates. Grade 2 Low - Medium risk funds offering some possibility for potential growth. Grade 3 These funds take a balanced approach to investment by holding a diverse portfolio of assets. Grade 4 A more focused asset exposure provides good growth potential with the risk of short-term volatility. Grade 5 These aggressive funds balance the risk of high volatility with the potential for high capital growth. J26446_PSFFSTEMP_HL08020_0218.indd 9
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Friends Provident International is a business name of Aviva Life & Pensions UK Limited for business conducted outside the United Kingdom. Aviva Life & Pensions UK Limited. Registered in England No. 3253947. Registered office: Aviva, Wellington Row, York, YO90 1WR. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number 185896. Friends Provident International is a registered trade mark of the Aviva group. PSFFSTEMP HL08020 02/2018 J26446_PSFFSTEMP_HL08020_0218.indd 12