INFORMED INVESTOR. CRUDE AWAKENING How are the markets digesting the shock of cheaper oil? Keeping you up to date on your F&C multi-manager investment

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1 I S S U E 15 S PR I N G INFORMED INVESTOR Keeping you up to date on your F&C multi-manager investment Rob Burdett and Gary Potter F&C multi-manager team co-heads CRUDE AWAKENING How are the markets digesting the shock of cheaper oil? REVIEW OF THE WORLD S MARKETS INVESTMENT ACTIVITY AND STRATEGY YOUR QUESTIONS ANSWERED

2 ECONOMIC AND STOCK MARKET REVIEW AND OUTLOOK 1 SEPTEMBER FEBRUARY 2015 Here we discuss some of the key events and themes affecting global equity and bond markets over the statement period and explain where things are likely to head from here. Anthony Willis Investment Manager, F&C multi-manager team UK Mixed economic data Election causing uncertainty Rate rises not imminent ECONOMY LOSING STEAM The UK stock market has performed disappointingly in global terms, despite the relative strength of its economy. Investors have focused instead on the increasing threat of deflation and growing political uncertainty in the run-up to May s general election. The slump in the price of oil has hit the performance of the oil majors but at the same time has boosted consumerfacing sectors. The weak performance of the eurozone economy and a strengthening of sterling against the single currency have combined to frustrate exporters. Overall the corporate sector is in reasonable shape and services companies have made a strong start to the year. However there has been a noticeable pick-up in profit warnings in the last few months. UNCERTAINTY ABOUNDS The UK economy is growing but productivity, business investment and exports remain sluggish. Interest rates will stay low and, with the economy losing traction, there is no immediate pressure on the Bank of England to raise them. Political risk will be greater than economic risk in 2015 given the general election and more uncertainty over the UK s relationship with the European Union. Structurally, the UK is still beset by a growing budget deficit as austerity measures have thus far failed to have the desired effect. NORTH AMERICA Economy in good shape Central bank still watchful Little traction in the market MARKET LOSING MOMENTUM? The US economy continues to power ahead, with job creation accelerating and growth data remaining robust. Despite this strength, the US Federal Reserve continues to be hesitant about raising interest rates given the general weakness of the global economy. The central bank may also have one eye on the consumer, who remains cautious as the last great recession is still painfully fresh in the memory. The fall in crude oil prices is having a positive impact on growth overall, even if it is disrupting the nascent shale boom and paring back the profits of oil-related companies. The market has seen a measure of volatility of late as investors have reacted to patchy economic data from China and fears that Greece would leave the eurozone. SHARES TO BE VOLATILE Economic data continues to improve but with the market close to record levels and the current earnings season proving to be a little disappointing we believe that the scope for further share price rises in the near term is limited. In the short term we expect more volatility as investors adjust to the end of quantitative easing and the prospect of tighter monetary policy as inflationary pressures increase in response to the strengthening economy. UK US % /14 10/14 12/14 02/15 % /14 10/14 12/14 02/15 FTSE All-Share Index S&P 500 Index Percentage growth, total return to , in Sterling, source: Lipper. Percentage growth, total return to , in Sterling, source: Lipper. 2 INFORMED INVESTOR ISSUE 15 SPRING 2015

3 EUROPE Significant quantitative easing is starting Weaker euro is a boost to growth Political challenges remain ECB TO THE RESCUE? The injection of greater-than-expected stimulus funding into the economy by the European Central Bank has boosted the market after a lacklustre Share prices had felt the impact of deteriorating economic data but the ECB s decision to buy up to 60 billion a month of government bonds has increased confidence that deflation can be eradicated, at the same time as helping shield the eurozone from contagion from the Greece crisis. The bank s action has also helped weaken the euro, which is giving a shot in the arm to the region s exporters. Recent data issued by the OECD (Organisation for Economic Cooperation and Development) suggested that a revival was in the offing for the eurozone. A WEAK EURO WILL HELP Of the major world stock markets, Europe looks best placed to perform well as the ultra-easy monetary policy of the ECB begins to revive the economy. We believe that the market is being too pessimistic about Europe s prospects for growth, so there is plenty of scope for positive surprises. The euro is weakening and this should boost the global competitiveness of European companies. By the same token, however, it will also erode returns for overseas investors converting euro returns into currencies such as US dollars and sterling. ASIA AND EMERGING MARKETS India performing well Restructuring is ongoing Oil exporters suffering OIL SLUMP HAS CONTRASTING IMPACT Emerging markets are experiencing differing fortunes both in terms of their economies and their asset markets. Whilst India has been recovering well as restructuring and infrastructure initiatives start to bear fruit, other leading emerging nations in transition such as Russia and Brazil have lagged well behind. Export earnings for these countries have been hit hard by slumping commodity prices but their domestic economies have not been in a position to pick up the slack. Asia is the region generating the fastest growth globally as favourable monetary policies and robust demand from the US keeps manufacturing buoyant. Rock bottom bond yields in the US have also pushed investors towards Asia and the emerging markets as they search for better returns. CHINESE SLOWDOWN A WORRY Asian markets still offer good value although stock market progress may hinge on China s ability to keep annual economic growth above 7%. Asia stands to benefit from lower commodity prices as the region is a major importer of raw materials but exporting nations elsewhere in the emerging markets will continue to suffer. Until bond yields in the US start to rise, emerging market shares should be relatively well supported. FIXED INCOME Yields sliding to new lows Central bank policy remains loose Falling inflation is supportive BOND MARKETS STILL ON THE UP Bonds have taken the winding up of quantitative easing in the US in their stride. Instead of selling off as many investors had expected, the markets have strengthened further in reaction to increasing worries about deflation across the main developed markets. Fragile global growth and slowing price rises have boosted bonds by extending the expected timeline for the next hike in interest rates. Eurozone markets have also drawn strength from the announcement of major quantitative easing stimulus by the European Central Bank. Corporate bonds have generated weaker returns as company profits have come under pressure in some sectors, notably oil. Overall, bonds look able to continue to make gains, as long as the main central banks keep interest rates on hold. Once they start to rise, however, a sharp correction is likely. A FLEXIBLE APPROACH At the moment we think that being successful in fixed income means being flexible in your approach. As a result we continue to favour well-managed strategic bond funds capable of targeting the select pockets of value that do exist within bond markets whilst avoiding those areas that appear vulnerable or fail to offer a sufficient level of return for the risk being taken. Europe % /14 10/14 12/14 02/15 FTSE AW Developed Europe ex UK Index Percentage growth, total return to , in Sterling, source: Lipper. Asia and Emerging Markets % /14 10/14 12/14 02/15 IA Global Emerging Markets IA Asia Pacific Excluding Japan IA Japan Percentage growth, total return to , in Sterling, source: Lipper. Fixed Income % /14 10/14 12/14 02/15 IA Global Bonds sector IA High Yield sector IA Corporate Bond sector Percentage growth, total return to , in Sterling, source: Lipper. ISSUE 15 SPRING 2015 INFORMED INVESTOR 3

4 YOUR QUESTIONS ANSWERED H e re we re s p o n d to a se le ctio n of the m ost f re q u e ntl y as ke d qu e stio ns by ou r inve sto rs ove r re ce nt m o nths. 1. W H Y H AS T H E O I L PR ICE S L U M P E D A N D W H AT I S T H E I M PA C T? The oil price has fallen sharply recently as worries about supply disruption in the Middle East eased last summer and the focus turned to the ever-increasing supply of oil from new shale projects in the USA. Thanks to record production from Russia and Iraq and the refusal of OPEC to cut supply, the oil price slide continued to accelerate and indeed halved over the second half of The oil price is yet to settle at a new level but expectations are for lower prices for a significant time. Oil at a level of around $60-70 a barrel for a sustained period will act as a massive economic stimulus, equivalent to over 2% of global GDP. In economies other than the oil producers this should lead to an 4 INFORMED INVESTOR ISSUE 15 SPRING 2015 increase in consumer spending which should boost economic growth. Whilst oil producers will face more difficult economic times, their accumulated financial reserves should act as a shock absorber. Some countries such as Russia, however, face a deep recession. 2. C A N Y O U T E L L U S W H AT S H A L E O I L I S A N D W H AT I S FR ACKING? Shale oil is an unconventional form of oil produced from shale rock fragments. The largest reserves are in the United States and, thanks to huge technology gains and falling costs over recent years, the supply of oil produced from shale has increased significantly to the extent that it is the main driver of oil supply growth globally. Fracking describes the process of hydraulic fracturing which is a technique to recover gas and oil from shale rock. This involves drilling into the earth and then injecting a water, sand and chemical mix at high pressure which forces the oil/gas out of the well. Fracking has been most widely adopted in the USA, hence the significant boost to both oil and gas supplies in the country. 3. W H AT I S T H E O U T L O O K F O R U K I N T E R E S T R AT E S? We are not expecting UK interest rates to rise this year, which is a change in our views from six months ago. The reason is the lack of inflationary pressure thanks to falling oil prices and low wage growth. The UK economy remains in reasonable health but for the moment the Bank of England is under very little pressure to raise rates. This is positive for the likes of equities but means continued pain for savers.

5 Oil at a level of around $60-$70 a barrel for a sustained period will act as a massive economic stimulus. The US economy is performing well but the good news could already be reflected in share prices. 4. SHOULD I BE WORRIED ABOUT DEFLATION? We expect UK inflation to be negative at some point in 2015, which is technically deflation. Deflation is the opposite of inflation in that prices are falling over time as opposed to rising. Economists and central banks see deflation as bad news, not least because in theory consumers and companies delay purchases in the expectation of lower prices in the future. This acts as a drag on economic growth. The biggest issue is that without inflation, the huge debt excesses that built up both before and after the financial crisis will worsen rather than be gradually eroded by inflation. Hence extremely loose monetary policies (low interest rates and quantitative easing) from central banks are likely to be in place until such time as inflation recovers to a level of around 2%. 5. ARE YOU WORRIED ABOUT A SLOWDOWN IN CHINA? We think a slowdown in economic growth in China is inevitable but do not expect a slump. The Chinese authorities are trying to rebalance their economy towards consumption rather than investment and construction. This rebalancing will likely see growth of around 7% for 2015, which is well below the boom years, and there will be an impact on the commodity exporters which have benefited from the stellar growth China has enjoyed over the past 15 years. What is positive is that with inflation under 1%, there is plenty of scope for further monetary easing to support the economy. 6. WHAT IS QUANTITATIVE EASING AND WHY IS THE EUROPEAN CENTRAL BANK DOING IT NOW? Quantitative easing is a policy designed to boost economic growth through creating money which is used to buy bonds from the banks. It is the intention that these banks will then lend the money to consumers and businesses and boost economic growth. The policy has been used in the UK and US, is currently being implemented in Japan and it has now been adopted by the European Central Bank. Their policy is designed to weaken the euro to make Europe more competitive and encourage credit to flow into the economy to boost growth and increase inflation. We do think this policy is likely to be effective over the long term and there are signs that European economic growth is beginning to pick up. The ECB has made it clear that structural economic reforms are also needed to complement their monetary stimulus. However, the political will to embark on such reforms appears to be lacking in some European countries. 7. IF YOU LIKE THE US ECONOMY SO MUCH WHY ARE YOUR PORTFOLIOS UNDERWEIGHT? We do think the US economy is set for another decent year of economic growth on the back of a strong Unemployment has fallen sharply and the US consumer is a significant beneficiary of lower oil prices this is already showing up in strong consumer confidence data. However, with corporate earnings showing signs of slowing, rising wages expected to put pressure on profit margins and the US central bank likely to raise interest rates at some point later this year, we feel there is less value left in US equities relative to other markets such as Japan and Asia, and even Europe. Hence we like the US economy but we feel its strength is already reflected in share prices that have risen strongly. 8. WHY ARE YOU TAKING A LESS POSITIVE VIEW ON THE UK? The UK economy looks to be in reasonable shape, though a pickup in our main trading partner the eurozone would inject some added momentum. Our main concern regarding the UK is political risk with another hung parliament being a real possibility following May s general election. Even following the election there may be prolonged uncertainty if there is to be a referendum on the UK s continued membership of the European Union. We will watch the election outcome closely but for the moment there is less risk and better opportunities in markets elsewhere. ISSUE 15 SPRING 2015 INFORMED INVESTOR 5

6 INFORMED INVESTOR FUND STRATEGY AND PORTFOLIO REVIEWS H e re we t a ke a closer look at por t folio positioning, investment activit y and per formance. OIL SHOCK A significant and wholly unexpected development to influence the global economy and asset markets since the last edition of Informed Investor has been the sharp fall in the price of oil. From $110 in July, the price of a barrel of Brent crude plunged to below $50 in January. The first effect of the sell-off has been to boost the countries or sectors of economies that consume large amounts of oil and hit those that produce or export it. The second has been to raise the threat of deflation as lower input costs are reflected in the prices of energy, goods and services. Our aggregate view is that, assuming oil prices stay lower for longer, the global economy will benefit. A telling statistic is that if oil prices were to remain around $60 a barrel for 12 months, it would bring about a redistribution of $1.3 trillion from oil producers to oil consumers. This represents a financial boost to the global economy that is greater than the entirety of quantitative easing since the financial crisis in INFORMED INVESTOR ISSUE 15 SPRING 2015 KEY THEMES IN OUR PORTFOLIOS We remain positive on the prospects for economies and stock markets We prefer markets in the earlier stages of recovery, such as Europe and Japan Markets need to readjust to cheaper oil Asset prices are vulnerable to volatility We maintain a flexible stance on fixed income The expectation that the world s central banks will maintain their loose monetary policies underpins our optimism. The US and UK are unlikely to raise interest rates for some months yet, while the authorities in the eurozone, Japan and China are still pumping large-scale stimulus funding into their respective economies. This is fundamentally supportive of riskier assets such as equities. V O L AT I L I T Y I S A T H R E AT Investors can expect volatility to be a feature of the markets, however. Elections in the UK Assuming oil prices stay lower for longer, the global economy will benefit.

7 INFORMED INVESTOR IN CONTEXT In this section we discuss some of the key investment themes within our Navigator and Lifestyle s with the aim of giving you an insight into how our views on the world are reflected in the portfolios we manage. The asset allocation of each Lifestyle is determined by Distribution Technology (DT) who create a blend of equities, fixed income, property and cash that is appropriate to defined risk profiles. Around these neutral asset allocations we then have the flexibility to adjust weightings in accordance with our assessment of economies, markets and the relative merits of individual asset classes and geographies. The extent of any adjustments (or tilts) away from DT s recommendations are tightly controlled (within +/-5%) to ensure that portfolios remain aligned with their specific risk profile. We have a greater degree of flexibility within the Navigator s but always remain mindful of our long-term aims and the broader composition of comparable products run by other companies. and Europe are a source of uncertainty, as is the ongoing conflict in Ukraine. The nervousness that was triggered in January over Greece s new anti austerity government also served to remind investors that crisis continues to stalk the eurozone. Given this broadly positive backdrop, we continue to prefer equities over bonds. Within our equity exposure, the biggest move since the last edition has been to move underweight from overweight in the UK and vice versa for Europe. The UK economy may be on a much firmer footing than Europe s but we are concerned about the potential path of policy, in other words government spending, following May s general election. Growth is also looking less robust than it has been. Europe, by contrast, is expected to enjoy improved performance, with activity being supported by huge monetary support from the European Central Bank. Recent policy moves have weakened the euro and this should prove to be a shot in the arm for the eurozone s exporters. Already we are seeing brighter prospects for Germany. The US and UK are unlikely to raise interest rates for some months yet. J A PA N O N T H E REBOUND Another market that appears to be on an upward trajectory is Japan. Like the eurozone, Japan is a key beneficiary of central bank stimulus and a lower oil price. At the policy level, prime minister Abe now has an improved electoral mandate to continue his restructuring programme. With corporate profits growth being stronger than any other developed market thanks to cheap oil and a weak yen, we continue to favour Japan. L I T T L E VA L U E I N B O N D S The currently fragile foundations of the bond markets mean that we will remain flexible in our allocation. For the moment, bonds are underpinned by quantitative easing policies in Europe and Japan and disinflation almost everywhere. However, once improving growth translates into rising inflation, the central banks will be obliged to cut interest rates. At that moment, the long and lucrative bull market in bonds is expected to reverse. We will be watching carefully for signs of a more hawkish stance from the monetary custodians. Strategic bond funds remain our favoured vehicle for exploiting opportunities in what is now a richly valued market. PERFORMANCE TRENDS Markets made reasonable progress over the period with low interest rates and continued quantitative easing in Japan and Europe providing support. This backdrop was reflected in positive returns for our funds. Being underweight the US detracted slightly as the US economy continued to perform well and this gave share prices positive impetus. Being overweight Japan and preferring Asian over emerging market equities was positive however. ISSUE 15 SPRING 2015 INFORMED INVESTOR 7

8 F&C MM NAVIGATOR FUNDS Our range of traditional multimanager funds are actively managed portfolios of what we believe to be the best available funds blended to achieve defined investment objectives, with a flexible approach to asset allocation. F&C MM NAVIGATOR DISTRIBUTION FUND UK Schroder Income Maximiser 4.23 J O Hambro Capital Management UK Equity Income 5.01 PFS Chelverton UK Equity Income 3.04 RWC Enhanced Income 2.93 Ardevora UK Income 5.21 Majedie UK Income 3.01 Fixed Income Ashmore Emerging Market Total Return 4.31 Cazenove Strategic Bond 4.19 GCP Infrastructure Investments Limited 3.40 GLG Global Strategic Bond 4.49 PFS TwentyFour Investment s - Dynamic Bond 4.28 Starwood European Real Estate Finance Limited 1.56 Carador Income plc 2.34 TwentyFour Income Limited 2.87 Legg Mason Income Optimiser 3.76 P2P Global Investments Mutual 1.25 Europe 7.12 BlackRock Continental European Income 4.51 Standard Life Investments European Equity Income 2.61 Japan 2.33 CC Japan Income & Growth (JPY) 1.53 CC Japan Income & Growth (GBP) 0.80 Asia 4.85 Schroder Asian Income Maximiser 3.03 Prusik Asian Equity Income 1.83 Specialist Veritas Global Equity Income 3.44 Lazard Global Equity Income 2.56 Artemis Global Income 4.07 Polar Capital Financials Income 2.42 RWC Enhanced Global Dividend 4.78 SQN Asset Finance Income 1.19 Emerging Markets 1.48 JPM Emerging Markets Income 1.48 Alternatives i Infrastructure plc 1.82 Blue Capital Global Reinsurance Limited 1.62 Non-correlated assets 4.79 Darwin Leisure Property 3.19 MedicX Limited 1.60 Cash 1.63 F&C MM NAVIGATOR MODERATE FUND UK Old Mutual UK Dynamic Equity 2.57 J O Hambro Capital Management UK Growth 2.93 Majedie UK Equity 5.12 Standard Life Investments UK Equity Income Unconstrained 2.65 Schroder UK Alpha Plus 3.56 Threadneedle UK Extended Alpha 4.11 Fixed Income Liontrust Global Strategic Bond 2.72 Henderson Strategic Bond 3.97 Invesco Perpetual Tactical Bond 4.81 GLG Global Strategic Bond 2.46 Fidelity Strategic Bond 3.91 PFS TwentyFour Investment s - Dynamic Bond 4.70 Legg Mason Income Optimiser 2.96 GCP Infrastructure Investments Limited 2.56 Carador Income plc 2.00 Europe 9.65 J O Hambro Capital Management Continental European 5.29 BlackRock Continental European Income 4.36 Japan 4.48 CC Japan Alpha JPY 0.80 CC Japan Alpha GBP 1.58 Schroder International Selection - Japanese Opportunities 2.10 North America 6.89 Findlay Park American 3.37 Brown Advisory American 3.52 Asia 4.75 Prusik Asian Equity Income 2.72 Schroder Asian Alpha Plus 2.03 Specialist 8.52 JPM Global Consumer Trends 2.54 Majedie Tortoise 4.27 Custodian REIT plc 1.71 Alternatives i Infrastructure plc 3.47 Global Macro 9.31 CF Odey Absolute Return 2.48 Legg Mason Western Asset Macro Opportunities Bond 4.10 Morgan Stanley Investment s Diversified Alpha Plus 2.73 Cash 1.90 Data as at INFORMED INVESTOR ISSUE 15 SPRING 2015

9 F&C MM NAVIGATOR PROGRESSIVE FUND UK CF Miton UK Smaller Companies 1.82 Old Mutual UK Dynamic Equity 4.86 Majedie UK Focus 5.11 J O Hambro Capital Management UK Growth 2.97 Schroder UK Alpha Plus 5.10 GLG UK Select 2.76 GLG Undervalued Assets 2.92 Threadneedle UK Extended Alpha 3.58 Fixed Income PFS TwentyFour Investment s - Dynamic Bond 3.08 Henderson Strategic Bond 2.71 GLG Global Strategic Bond 1.92 GCP Infrastructure Investments Limited 2.48 Carador Income plc 1.49 Europe Edinburgh Partners European Opportunities 4.06 J O Hambro Capital Management Continental European 6.03 Verrazzano Advantage European 3.85 Japan 6.39 Schroder International Selection - Japanese Opportunities 2.30 CC Japan Alpha GBP 3.27 CC Japan Alpha JPY 0.82 North America Findlay Park American 3.22 Brown Advisory American 3.01 Iridian U.S. Equity 3.94 Conventum - Lyrical 3.23 Asia 6.67 CC Asia Alpha 2.06 Prusik Asian Equity Income 2.43 BGF Asian Growth Leaders 2.18 Emerging Markets 2.86 Hermes Global Emerging Markets 2.86 Specialist 6.83 JPM Global Consumer Trends 2.53 Majedie Tortoise 4.30 Global Macro 4.59 Legg Mason Western Asset Macro Opportunities Bond 4.59 Cash 4.50 F&C MM NAVIGATOR SELECT FUND UK CF Miton UK Smaller Companies 1.90 J O Hambro Capital Management UK Growth 3.00 Old Mutual UK Dynamic Equity 3.60 Majedie UK Focus 4.21 The Heronbridge United Kingdom Equity 5.69 River and Mercantile UK Micro Cap Investment Company Limited 2.44 Threadneedle UK Extended Alpha 3.10 Fixed Income 2.73 GCP Infrastructure Investments Limited 2.73 Europe Edinburgh Partners European Opportunities 3.46 J O Hambro Capital Management Continental European 6.08 Verrazzano Advantage European 3.99 Japan Nomura s Ireland - Japan Strategic Value 3.00 CC Japan Alpha GBP 5.53 Schroder International Selection - Japanese Opportunities 1.58 North America Findlay Park American 3.86 Iridian U.S. Equity 4.80 Artemis Extended US Alpha 3.49 Brown Advisory American 3.63 Conventum - Lyrical 3.39 Asia CC Asia Alpha 3.16 BGF Asian Growth Leaders 3.77 Schroder Asian Alpha Plus 3.71 Emerging Markets 3.40 Hermes Global Emerging Markets 3.40 Specialist 6.38 JPM Global Consumer Trends 2.01 Majedie Tortoise 4.37 Global Macro 7.11 Legg Mason Western Asset Macro Opportunities Bond 4.08 Morgan Stanley Investment s Diversified Alpha Plus 3.03 Cash 3.01 F&C MM NAVIGATOR BOUTIQUES FUND UK 9.88 Majedie UK Focus 3.36 Old Mutual UK Dynamic Equity 2.78 CF Miton UK Smaller Companies 1.20 The Heronbridge United Kingdom Equity 2.55 Europe Edinburgh Partners European Opportunities 3.75 Henderson European Special Situations 5.07 J O Hambro Capital Management Continental European 6.12 Verrazzano Advantage European 4.49 Japan 9.36 CF Morant Wright Nippon Yield 3.64 CC Japan Alpha GBP 4.76 M&G Japan 0.96 North America Artemis Extended US Alpha 5.26 Findlay Park American 6.39 Conventum - Lyrical 6.20 Polar Capital s plc - North American 4.95 Iridian U.S. Equity 5.86 Brown Advisory American 5.05 Edgewood Select US Growth 3.43 Asia 9.80 Hermes Asia Ex Japan Equity 3.23 Prusik Asian Equity Income 3.69 CC Asia Alpha 2.88 Emerging Markets 3.23 Hector SICAV-Eagle Emerging Market Equity 3.23 Specialist 5.51 Rathbone Global Opportunities 1.95 Majedie Tortoise 3.56 Global Macro 4.02 CF Odey Absolute Return 1.95 Odey Odyssey 2.06 Cash 1.62 Data as at ISSUE 15 SPRING 2015 INFORMED INVESTOR 9

10 F&C MM LIFESTYLE FUNDS Our range of multimanager funds with strategic asset allocations designed to deliver returns appropriate to five specific attitudes to risk. The funds are rebalanced on a regular basis to ensure they match your attitude to risk at the time you invest and on an ongoing basis. F&C MM LIFESTYLE FOUNDATION FUND UK F&C FTSE All-Share Tracker 3.65 Majedie UK Income 4.18 River and Mercentile UK Equity Income 3.70 Schroder UK Alpha Plus 3.38 Europe ex UK 2.26 BlackRock Continental European Income 2.26 Japan 1.50 ishares MSCI Japan GBP Hedged UCITS ETF 1.50 North America 8.23 Brown Advisory American 2.48 HSBC S&P 500 UCITS ETF 5.75 Property F&C UK Property 1.90 Darwin Leisure Property 1.89 GCP Student Living 2.23 Aberdeen Property Trust 0.57 F&C Real Estate Securities 2.22 Custodian REIT plc 1.67 UK Corporate Bonds Fidelity Strategic Bond 3.74 Henderson Strategic Bond 4.77 Invesco Sterling Bond 3.77 Legg Mason Income Optimiser 3.50 PFS TwentyFour Investment s Monument Bond 2.27 Royal London Sterling Credit 4.73 International Bonds Legg Mason Western Asset Macro Opportunities Bond 4.07 Liontrust GF Global Strategic Bond 2.70 M&G Global Macro Bond 3.27 Pacific Ex Japan 0.96 BlackRock Pacific Ex Japan Equity Tracker 0.96 Gilts ishares UK Gilts 0-5yr UCITS ETF 3.28 ishares UK Gilts UCITS ETF 7.94 UK Index Linked Bonds 2.07 ishares Index-Linked Gilts UCITS ETF 2.07 Hedge s 2.80 Majedie Asset Management Tortoise 2.80 Global High Yield Bonds 2.84 F&C Maximum Income Bond 2.84 Cash 9.93 F&C MM LIFESTYLE DEFENSIVE FUND UK GLG Undervalued Assets 3.38 F&C FTSE All-Share Tracker 5.30 Majedie UK Income 4.54 River and Mercantile UK Equity Income 4.28 Schroder UK Alpha Plus 3.79 Europe ex UK 7.16 BlackRock Continental European Equity Tracker 1.58 BlackRock Continental European Income 3.53 F&C Portfolios F&C European SmallCap 2.04 Japan 6.81 BlackRock Japan Equity Tracker 1.99 Nomura s Ireland- Japan Strategic Value 2.80 Tokio Marine Japanese Equity Focus 2.02 North America 7.05 HSBC S&P 500 UCITS ETF 4.86 Iridian U.S. Equity 2.19 Property F&C UK Property 2.23 F&C Real Estate Securities 2.12 GCP Student Living 1.73 Darwin Leisure Property 1.83 Aberdeen Property Trust 1.65 Custodian REIT plc 1.83 UK Corporate Bonds Baillie Gifford Corporate Bond 3.71 Fidelity Strategic Bond 4.85 Henderson Strategic Bond 5.00 Invesco Sterling Bond 4.02 Legg Mason Income Optimiser 4.03 PFS TwentyFour Investment s Monument Bond 3.18 Royal London Sterling Credit 5.58 International Bonds 3.06 Legg Mason Western Asset Macro Opportunities Bond 3.06 Pacific Ex Japan 1.05 ishares MSCI AC Far East ex-japan UCITS ETF 1.05 Gilts 3.10 ishares UK Gilts UCITS ETF 3.10 Hedge s 2.70 Majedie Asset Management Tortoise 2.70 Global High Yield 3.00 F&C Maximum Income Bond 3.00 Cash 3.01 Data as at INFORMED INVESTOR ISSUE 15 SPRING 2015

11 F&C MM LIFESTYLE CAUTIOUS FUND UK GLG Undervalued Assets 4.28 F&C FTSE All-Share Tracker 6.81 Majedie UK Income 5.86 River and Mercantile UK Equity Income 5.52 Schroder UK Alpha Plus 4.77 Europe ex UK 7.32 BlackRock Continental European Equity Tracker 1.86 BlackRock Continental European Income 3.60 F&C Portfolios F&C European SmallCap 1.86 Japan 6.75 BlackRock Japan Equity Tracker 1.94 Tokio Marine Japanese Equity Focus 2.03 Nomura s Ireland Japan Strategic Value 2.78 North America Brown Advisory American 1.97 HSBC S&P 500 UCITS ETF 8.26 Iridian U.S. Equity 1.93 Property 9.13 F&C UK Property 2.02 F&C Real Esatate Securities 1.85 GCP Student Living 1.92 Darwin Leisure Property 1.56 Custodian REIT plc 1.78 UK Corporate Bonds Fidelity Strategic Bond 5.06 Henderson Strategic Bond 5.44 Invesco Sterling Bond 4.49 PFS TwentyFour Investment s Monument Bond 3.39 Royal London Sterling Credit 6.54 Pacific Ex Japan 7.33 BGF Asian Growth Leaders 1.59 Hermes Asia ex-japan Equity 1.57 ishares MSCI AC Far East ex-japan UCITS ETF 2.35 Schroder Asian Alpha Plus 1.83 Hedge s 2.23 Majedie Asset Management Tortoise 2.23 Global High Yield 2.99 F&C Maximum Income Bond 2.99 F&C MM LIFESTYLE BALANCED FUND UK GLG Undervalued Assets 3.52 F&C FTSE All-Share Tracker 6.95 Majedie UK Income 5.61 River and Mercantile UK Equity Income 4.47 Schroder UK Alpha Plus 3.94 Standard Life Investments UK Equity Income Unconstrained 3.45 Europe ex UK 9.01 BlackRock Continental European Equity Tracker 2.72 BlackRock Continental European Income 3.84 F&C Portfolios F&C European SmallCap 2.45 Japan 8.42 BlackRock Japan Equity Tracker 2.44 Tokio Marine Japanese Equity Focus 2.49 Nomura s Ireland Japan Strategic Value 3.50 North America 8.85 Brown Advisory American 1.70 HSBC S&P 500 UCITS ETF 5.48 Iridian U.S. Equity 1.67 Property 5.98 F&C UK Property 1.95 Custodian REIT plc 1.95 F&C Real Estate Securities 2.08 UK Corporate Bonds Fidelity Strategic Bond 3.00 Henderson Strategic Bond 4.45 Invesco Sterling Bond 2.96 Royal London Sterling Credit 4.54 Pacific Ex Japan BlackRock Pacific Ex Japan Equity Tracker 1.26 BGF Asian Growth Leaders 2.26 Hermes Asia ex-japan Equity 2.33 ishares MSCI AC Far East ex-japan UCITS ETF 2.53 Schroder Asian Alpha Plus 2.50 Emerging Markets 7.94 BlackRock Emerging Markets Equity Tracker 3.98 Standard Life Investments Global Emerging Markets Equity 3.95 Hedge s 2.73 Majedie Asset Management Tortoise 2.73 Global High Yield 1.97 F&C Maximum Income Bond 1.97 Cash 1.33 F&C MM LIFESTYLE GROWTH FUND UK F&C FTSE All-Share Tracker 8.20 GLG Undervalued Assets 4.25 Majedie UK Income 6.27 River and Mercantile UK Equity Income 5.22 Schroder UK Alpha Plus 4.76 Standard Life Investments UK Equity Income Unconstrained 4.25 Europe ex UK 8.30 BlackRock Continental European Equity Tracker 2.49 BlackRock Continential European Income 3.58 F&C Portfolios - F&C European SmallCap 2.23 Japan 7.75 BlackRock Japan Equity Tracker 2.26 Tokio Marine Japanese Equity Focus 2.52 Nomura s Ireland- Japan Strategic Value 2.97 North America 6.98 HSBC S&P 500 UCITS ETF 4.81 Iridian US Equity 2.17 Property 5.82 F&C UK Property 1.90 F&C Real Estate Securities 1.96 Custodian REIT plc 1.96 Pacific Ex Japan BlackRock Pacific Ex Japan Equity Tracker 1.70 BGF Asian Growth Leaders 3.27 Hermes Asia ex-japan Equity 3.68 ishares MSCI AC Far East ex-japan UCITS ETF 3.63 Schroder Asian Alpha Plus 3.80 Emerging Markets BlackRock Emerging Markets Equity Tracker 4.49 Hector SICAV - Eagle Emerging Markets Equity 3.89 Standard Life Investments Global Emerging Markets Equity 5.11 Hedge s 2.99 Majedie Asset Management Tortoise 2.99 Global High Yield Bond 1.97 F&C Maximum Income Bond 1.97 UK Corporate Bonds 3.05 Henderson Strategic Bond 3.05 Cash 0.62 Data as at ISSUE 15 SPRING 2015 INFORMED INVESTOR 11

12 CONTACT US If you have any queries about your investment please contact us. Please remember to quote your account number on all communications to us (weekdays 9am-5pm, calls may be recorded for training and monitoring purposes) F&C Management Limited PO Box 9040 Chelmsford Essex CM99 2XH For existing investors only. Articles in this newsletter are only intended to provide a general outline of the subject and should not be considered comprehensive nor a sufficient basis for making decisions. Investors requiring advice on their individual circumstances should consult their financial adviser. Prospective investors should consult the Key Investor Information Document for the relevant share class available from their financial adviser or F&C Management Limited. F&C Management Limited Exchange House Primrose Street London EC2A 2NY The F&C MM Lifestyle s are sub-funds of the F&C MM Lifestyle s ICVC. The F&C MM Navigator s are sub-funds of the F&C Multi-Capital s ICVC. Issued and approved by F&C Management Limited which is authorised and regulated by the Financial Conduct Authority FRN: and is a member of the F&C Group. The ultimate parent company of the F&C Group is the Bank of Montreal. CM /15 RESPECT ACCOUNTABILITY CLIENTS FIRST INNOVATION