F&C High Income Fund Interim Report and Financial Statements For the period ended:

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1 Interim Report and Financial Statements For the period ended:

2 Contents Page 1 Directory 2 Authorised Status* 3 Certification of Financial Statements by Directors of the Manager* 4 Manager's Investment Report* 5 Portfolio Statement 9 Material Portfolio Changes 10 Performance Record Financial Statements of F&C High Income Fund 11 Statement of Total Return 11 Statement of Change in Net Assets Attributable to Unitholders 12 Balance Sheet 13 Notes to the Financial Statements Authorised Fund Manager's Report* and Financial Statements for: *The Authorised Corporate Director s Report in accordance with the Investment Management Association (IMA) SORP (2014) and the Collective Investment Schemes Sourcebook comprises those items denoted above along with the Fund Objective, Market Review, Activity, Outlook, Performance Summary, Portfolio Statement and Material Portfolio Changes of the Fund.

3 Directory Manager F&C Fund Management Limited Exchange House Primrose Street London EC2A 2NY Telephone: , Facsimile: (0207) Registration No: England The Manager is authorised and regulated in the UK by the Financial Conduct Authority and is a member of the Investment Management Association. Directors B. Apfel D. Logan M. Smith N. Parry M. Tonkin R. Watts T Watts Trustee State Street Trustees Limited Registered Office 20 Churchill Place London E14 5HJ Head Office and Principal Place of Business 525 Ferry Road Edinburgh EH5 2AW Fund Accounting and Unit pricing State Street Bank and Trust Company 525 Ferry Road Edinburgh EH5 2AW Company Secretary F&C Asset Management plc Investment Advisor F&C Managers Limited Exchange House Primrose Street London EC2A 2NY Registration No: England Authorised and regulated in the UK by the Financial Conduct Authority Independent Auditors PricewaterhouseCoopers LLP Level 4 Atria One 144 Morrison Street Edinburgh EH3 8EX Administrator and Registrar International Financial Data Services (UK) Limited IFDS House St Nicholas Lane Basildon Essex SS15 5FS Legal Advisors Eversheds LLP One Wood Street London EC2V 7WS 1

4 Authorised Status Authorised Status This Fund is an authorised unit trust scheme under Section 243 of the Financial Services and Markets Act 2000 and is a UCITS scheme within the meaning of the FCA s Collective Investment Schemes sourcebook (COLL). Other Information The Ongoing Charges Figure can be found in the Fund s Performance Record. With effect from 1 January 2015 the Investment Management Association (IMA) was replaced by the Investment Association (IA). As of 6 July 2015, BMO Global Asset Management is the trading name of F&C Fund Management Limited, following the acquisition of F&C Asset Management plc. There were no cross holdings in the F&C High Income Fund as at 31 October

5 Certification of Financial Statements by Directors of the Manager This report contains the information required by the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued in May 2014, and FCA's Collective Investment Schemes sourcebook (COLL) in the case of interim financial statements and was approved for publication on 11 December 2015 Director On behalf of F&C Fund Management Limited Manager 11December

6 Manager's Investment Report for the period ended 31 October 2015 (unaudited) Fund Objective The Fund aims to provide a high monthly income whilst maintaining the value of the property of the Scheme. The Fund will hold structured debentures and derivatives, equities, fixed interest securities, collective investment schemes and other permitted investments. The equity exposure may be held in shares or securities, which qualify as an investment within an Individual Savings Account or for any other tax purposes as defined from time to time. Synthetic Risk and Reward Indicator The Synthetic Risk and Reward Indicator is calculated in accordance with the Key Investor Information Regulations and is disclosed in a fund's KIIDs (Key Investor Information Documents). It is calculated from the last five years' performance data and shows the historic volatility of the Fund and is updated periodically. The SRRI is reported against standard bands ranging from 1 (lower risk/reward) to 7 (higher risk/reward). This classification is intended as a general indication of the overall level of risk of a Fund in order to facilitate comparisons between funds. The most recent value of the SRRI for the Fund was 3, published on 18 August From the most recent review it has been determined that this is still appropriate. A fuller explanation of the SRRI and the risk and reward profile of the Fund is contained in the Fund's KIIDs. Fund manager Fund size Launch date Market Review Chris Childs 95.9 million 26 January 1993 The six months to 31 October 2015 was a difficult time for risk assets generally and equities specifically. Growing concerns over a hard landing in China, the impact of the ongoing commodity price falls, particularly on emerging economies, and the potential for the first upward turn in US interest rate policy since 2004 led investors to become increasingly risk averse. Over the six months global equities fell almost 5%. The UK equity market was one of the weaker developed economies equity markets, falling over 8%, hindered by the weakness in the oil & gas sector as well as the more than 30% fall in basic resource stocks, with Glencore grabbing the headlines. Typically, a period of weakness in the equity markets is accompanied by a compensating rally in the government bond market, however, this failed to materialise and other areas of the fixed income market suffered. In short, there was no safe haven. Activity The principal equity exposure within the Fund remains the UK equity market, although the Fund continues to hold exposure to both the European and Japanese equity markets - two markets which we believe offer better value than other developed equity markets. The Fund has also increased its exposure to good quality corporate bonds, reducing its exposure to UK Gilts. A move that targets an increase in the level of income generated by the fund s core assets. With yields at historically low levels generally and the Fund constrained as to how much credit risk (riskier bonds tend to pay a higher yield) it is permitted to take, the use of derivative instruments within the portfolio continues to be a significant element of the fund s strategy. Outlook We remain positive on the outlook for global growth but continue to be mindful of the deflationary pressures that are still present, particularly in light of the likely rise in US interest rates. However, the European Central Bank and other central banks continue to pursue very accommodative monetary policies and the recent pull back in markets offers better value. Performance Summary The F&C High Income Fund continued to make a monthly distribution of 5% on an annualised basis. The total return of the Fund was -3.1% over the six month period. All figures are net of fees, on a total return basis and in sterling F&C Fund Management Limited 1 November

7 Portfolio Statement as at 31 October 2015 (unaudited) Holdings Market Value 000 Total Net Assets % EQUITIES (34.31%*) 29, BASIC MATERIALS (2.43%*) 1, Industrial Metals & Mining South32 52, Mining Anglo American 30, BHP Billiton 52, Glencore Xstrata 222, Lonmin 1, Rio Tinto 27, CONSUMER GOODS (4.74%*) 4, Automobiles & Parts GKN 75, Rolls-Royce Preference 'C' Shares 6,085, Beverages Diageo 48, SABMiller 9, Household Goods & Home Construction Barratt Developments 44, Persimmon 14, Taylor Wimpey 37, Personal Goods Unilever (London listing) 23, Tobacco British American Tobacco 39,289 1, Imperial Tobacco 16, CONSUMER SERVICES (2.93%*) 2, Food & Drug Retailers Sainsbury (J) 9, Tesco 7, Wm Morrison Supermarkets 32, General Retailers Kingfisher 72, Marks & Spencer 49, Media British Sky Broadcasting 3, ITV 29, Pearson 19, Reed Elsevier 19, WPP 43, Travel & Leisure Carnival 1, Compass 40, easyjet 5, International Consolidated Airlines 38,

8 Portfolio Statement as at 31 October 2015 (unaudited) Holdings Market Value 000 (continued) Total Net Assets % FINANCIALS (11.52%*) 10, Banks Barclays 318, HSBC 374,951 1, Lloyds Banking 529, Standard Chartered 39, Equity Investment Instruments GAM Star CAT Bond Institutional USD Acc 132,303 1, Renewables Infrastructure 960, Riverstone Energy 70, Twelve-Falcon Insurance Linked Strategy Fund T USD 15,778 1, Financial Services Aberdeen Asset Management 37, Hargreaves Lansdown 1, Schroders Life Insurance Aviva 69, Legal & General 260, Old Mutual 165, Prudential 57, St James's Place 26, Standard Life 69, HEALTH CARE (2.76%*) 2, Pharmaceuticals & Biotechnology AstraZeneca 22, GlaxoSmithKline 105,125 1, Shire 1, INDUSTRIALS (2.03%*) 1, Aerospace & Defence BAE Systems 57, Rolls-Royce 26, Rolls-Royce Preference shares 2,490, Construction & Materials CRH 11, General Industrials Smiths 17, Industrial Engineering Weir 7, Industrial Transportation Royal Mail 2, Support Services Aggreko 2, Ashtead 8, Capita 2, Experian 7, G4S 8, Wolseley 7,

9 Portfolio Statement as at 31 October 2015 (unaudited) Holdings or Nominal Values Market Value 000 (continued) Total Net Assets % OIL & GAS (4.75%*) 4, Oil & Gas Producers BG 28, BP 450,444 1, Royal Dutch Shell 'A' Shares 72,779 1, Royal Dutch Shell 'B' Shares 55, Tullow Oil 21, TECHNOLOGY (0.22%*) TELECOMMUNICATIONS (1.80%*) 1, Fixed Line Telecommunications BT 90, Mobile Telecommunications Vodafone 478,761 1, UTILITIES (1.13%*) Electricity SSE 19, Gas, Water & Multiutilities Centrica 103, National Grid 42, DEBT SECURITIES (62.99%*) 65, FIXED INTEREST (50.84%*) 47, FCE Bank 4.825% 15/02/2017 GBP500, GKN 6.75% 28/10/2019 GBP500, Goldman Sachs 6.125% 14/02/2017 GBP500, ITV 2.125% 21/09/2022 EUR 191, Lloyds Bank 6.75% 24/10/2018 GBP750, Santander Consumer Finance 1.5% 12/11/2020 EUR 100, UK Treasury 8% 07/12/2015 GBP5,500,000 5, UK Treasury 2% 22/01/2016 GBP6,000,000 6, UK Treasury 4% 07/09/2016 GBP8,000,000 8, UK Treasury 1.75% 22/01/2017 GBP10,000,000 10, UK Treasury 8.75% 25/08/2017 GBP1,000,000 1, UK Treasury 1% 07/09/2017 GBP5,650,000 5, UK Treasury 5% 07/03/2018 GBP7,600,000 8, FLOATING RATE (12.15%*) 17, Apple (FRN) % 07/02/2020 USD 800, Bank of Nova Scotia (FRN) 0.345% 10/09/2018 EUR 800, Carrefour Banque (FRN) 0.828% 21/10/2019 EUR 700, Commonwealth Bank of Australia (FRN) % 26/10/2018 GBP300, Deutsche Bank (FRN) % 20/08/2020 USD 500, Goldman Sachs (FRN) % 15/09/2020 USD 300, Home Depot (FRN) % 15/09/2017 USD 1,000, Nationwide Building Society (FRN) 0.432% 02/11/2018 EUR 700, Nederlandse Gasunie (FRN) 0.321% 16/10/2018 EUR 400, New York Life Global Funding (FRN) % 28/09/2017 GBP700, Nordea Bank (FRN) % 17/09/2018 USD 800, NRW Bank (FRN) % 21/03/2016 GBP5,000,000 5,

10 Portfolio Statement as at 31 October 2015 (unaudited) Holdings or Nominal Values Market Value 000 (continued) Total Net Assets % Rabobank Netherland (FRN) 0.202% 12/10/2017 EUR 900, Royal Bank of Canada (FRN) % 09/10/2018 GBP600, Sanofi (FRN) 0.263% 22/03/2019 EUR 700, Svenska Handelsbanken (FRN) % 01/10/2020 USD 500, UBS Group Funding Jersey (FRN) % 24/09/2020 USD 570, Yorkshire Building Society (FRN) % 23/03/2016 GBP5,000,000 5, DERIVATIVES (0.45%*) Futures Euro Stoxx 50 Futures December (22) (0.02) FTSE 100 Index Futures December 2015 (208) (594) (0.62) S&P 500 E Mini Futures December Options Euro Stoxx 50 Index Futures 3575 Call December 2015 (300) (58) (0.06) Euro Stoxx 50 Index Futures 3450 Call December Euro Stoxx 50 Index Futures 3550 Call December 2015 (300) (71) (0.07) FTSE 100 Index 6125 Call November FTSE 100 Index 6500 Call December 2015 (100) (54) (0.06) FTSE 100 Index 6650 Call December FTSE 100 Index 6700 Cal December FTSE 100 Index 6000 Put November 2015 (150) (17) (0.02) Nikkei 225 Index Call June Nikkei 225 Index Call June 2016 (110) (110) (0.11) Price Return Swap Bank of America Merrill Lynch: MLIEIFCLS - USD - Price Return Index September 2015 USD 10,025, Total Return Swap JPMorgan: F&C Global Equity Absolute Return Index - USD - Total Return Index December 2015 USD 19,600,797 (8) (0.01) FORWARD CURRENCY CONTRACTS (0.19%*) Euro Sold EUR2,993,198 for GBP2,168,333 Settlement 30/11/ Sold EUR700,000 for GBP511,071 Settlement 18/12/ Sold EUR698,181 for GBP501,811 Settlement 30/11/ US Dollar Sold USD4,463,218 for GBP2,920,323 Settlement 30/11/ Sold USD2,606,273 for GBP1,687,749 Settlement 18/12/2015 (10) (0.01) Portfolio of investments^ 95, Net other assets Total net assets 95, Collective Investment Schemes are regulated within the meaning of the FCA rules, Debt securities and Equity Investment Instruments are traded on a regulated market, unless otherwise stated. Derivative contracts can be Exchange Traded on a regulated market or Over the Counter (OTC). * Comparative figures shown in brackets relate to 30 April 2015 ^ Including derivative liabilities. Summary of portfolio by credit ratings Rating block Investment grade (AAA to BBB-) 65, Total bonds 65, Other 30, Total net assets 95,

11 Material Portfolio Changes for the period ended 31 October 2015 (unaudited) Major purchases Cost 000 Major sales Proceeds 000 Euro Stoxx 50 Futures September ,900 Euro Stoxx 50 Futures September ,747 FTSE 100 Index Futures June ,251 FTSE 100 Index Futures September ,401 FTSE 100 Index Futures September ,418 Euro Stoxx 50 Futures June ,844 Euro Stoxx 50 Futures June ,207 FTSE 100 Index Futures December ,600 Euro Stoxx 50 Futures December ,203 FTSE 100 Index Futures June ,120 UK Treasury 5% 07/03/2018 3,343 UK Treasury 4.75% 07/09/2015 7,252 UK Treasury 8% 07/12/2015 2,037 UK Treasury 8.75% 25/08/2017 7,174 UK Treasury 2% 22/01/2016 2,011 Euro Stoxx 50 Futures December ,101 S&P E Mini Futures September2015 1,332 Nikkei 225 Index Futures June ,553 S&P E Mini Futures December ,264 Clydesdale Bank (FRN) 08/06/2015 3,000 Purchases and sales of Futures have been included at the value of their exposure. 9

12 Performance Record as at 31 October 2015 (unaudited) Net Asset Value and Ongoing Charges Figure Net Asset Value of unit class ( ) Units in issue Net Asset Value per unit (p) *Ongoing Charges Figure (%) Unit Class Income 30/04/13 Income 30/04/14 Income 30/04/15 Income 31/10/15 149,462, ,932, ,821,933 95,918, ,577, ,002, ,457, ,647, *The Ongoing Charges Figure (OCF) is calculated in accordance with the Key Investor Information Regulations and for each accounting period shows the total expenses paid by each unit class in the period, annualised, against its average net asset value. The OCF can fluctuate as underlying costs change. Unit Price History and Revenue Record Calendar year Highest published unit price (p) Lowest published unit price (p) Net Revenue( ) per share (p) Unit Class Income Income Income Income 2013 Income Income 2015* ( ) Distributed for income units. Past performance is not necessarily a guide to future performance. The price of units, and the revenue from them, may go down as well as up. * To 31 October

13 Statement of Total Return for the period ended 31 October 2015 (unaudited) 01/05/15 to 31/10/15 01/05/14 to 31/10/ Income Net capital losses (5,674) (4,079) Revenue 3,827 4,442 Expenses (925) (1,109) Interest payable and similar charges - - Net revenue before taxation 2,902 3,333 Taxation (2) (4) Net revenue after taxation 2,900 3,329 Total return before distributions (2,774) (750) Distributions (2,752) (3,239) Change in net assets attributable to unitholders from investment activities (5,526) (3,989) Statement of Change in Net Assets Attributable to Unitholders for the period ended 31 October 2015 (unaudited) Opening net assets attributable to unitholders Amounts receivable on creation of units Amounts payable on cancellation of units Change in net assets attributable to unitholders from investment activities Unclaimed distributions Closing net assets attributable to unitholders 01/05/15 to 31/10/15 01/05/14 to 31/10/ , , (6,835) (8,315) (6,378) (7,968) (5,526) (3,989) , ,996 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. 11

14 Balance Sheet as at 31 October 2015 (unaudited) Assets Investments Current assets Debtors Cash and bank balances Total assets Liabilities Investment liabilities Creditors Bank overdrafts Distribution payable* Other creditors* Total liabilities Net assets attributable to unitholders *Prior period figures have been updated as a result of the 2014 IMA SORP. 31/10/15 30/04/ , , ,672 3,593 98, ,208 (944) (1,270) (335) (1,085) (413) (609) (939) (422) (2,631) (3,386) 95, ,822 12

15 Notes to the Financial Statements Accounting Policies The interim financial statements for the Fund have been prepared on the same basis as the audited financial statements for the year ended 30 April They are in accordance with the historical cost basis, as modified by the revaluation of investments, and the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the Investment Management Association (IMA) in May 2014 (the IMA SORP 2014), and United Kingdom Generally Accepted Accounting Practice. Adoption of the IMA SORP 2014 Changes in accounting policies There have been no changes to the accounting policies as detailed in the audited financial statements for the year ended 30 April Changes in presentation The presentation of these financial statements has been changed from the previous period to comply with the requirements of the IMA SORP These changes include: The inclusion of details on any cross holdings within the ICVC; Amendments to labelling of line items within the Financial Statements. 13