HBOS Specialised Investment Funds ICVC

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2 Contents Introduction 1 Director's Report and Statement 2 Statement of the Authorised Corporate Director's (ACD's) Responsibilities 4 Aggregated Interim Financial Statements 5 Notes to the Aggregated Interim Financial Statements 7 Investment markets overview, Performance record, Portfolio statement and Financial statements: Cautious Managed Fund 8 Ethical Fund 44 Fund of Investment Trusts 54 Smaller Companies Fund 63 Special Situations Fund 74 Distribution Tables 85 Additional Information 88

3 Introduction We are pleased to present the for the HBOS Specialised Investment Funds ICVC ( the Company ) for the six month period ended 30 November The financial statements have been prepared on an aggregated basis including all Funds as permitted by the Financial Conduct Authority's (''the FCA'') Collective Investment Schemes sourcebook ( the COLL sourcebook ). As required by the COLL sourcebook, information for each of the five Funds has also been included. About the Company The HBOS Specialised Investment Funds ICVC is an Open-Ended Investment Company ( OEIC ) with variable capital incorporated in England and Wales since 27 September 2000 and authorised by the Financial Services Authority (which has since been succeeded by the Financial Conduct Authority the FCA ) with effect from 20 September The Company is managed by HBOS Investment Fund Managers Limited, the Authorised Corporate Director ( the ACD ), who is responsible for the day to day running of the Company including the preparation of interim and annual reports. The property of the Company is entrusted to State Street Trustees Limited ("the Depositary"). The objective of the Company is to invest the Scheme Property in transferable securities, money market instruments, cash and near cash, derivatives and forward transactions, deposits and units (as defined in the COLL sourcebook) of collective investment schemes in accordance with the COLL sourcebook with the aim of spreading investment risk and giving its shareholders the benefit of the results of the management of that property. The Shareholders have no interest in the scheme property, and are not liable for the debts of the Company. The Company is a UCITS scheme operating in accordance with the COLL sourcebook and is structured as an umbrella company, as defined in the Open-Ended Investment Company Regulations 2001 ( the OEIC Regulations ), in that it currently contains five Funds, each with different investment objectives. New Funds may be established from time to time by the ACD with the approval of the FCA. Within the financial statements there is an investment review for each Fund, which includes details of the investment objectives. The Cautious Managed Fund was launched on 6 April The following four Funds were launched on 3 November 2000 following the conversion of four existing unit trusts: Ethical Fund Fund of Investment Trusts Smaller Companies Fund Special Situations Fund 1

4 Director's Report and Statement Director's Report HBOS Investment Fund Managers Limited is the Authorised Corporate Director ( the ACD ) and Registrar for the HBOS Specialised Investment Funds ICVC. HBOS Investment Fund Managers Limited is authorised and regulated by the Financial Conduct Authority ( the FCA ). The ACD is the sole director. The HBOS Specialised Investment Funds ICVC is an Open-Ended Investment Company with variable capital under Regulation 12 (Authorisation) of the Open-Ended Investment Companies Regulations It is a UCITS retail scheme and is structured as an umbrella scheme with five Funds. The shareholders are not liable for any debts of the Company. As the Funds are not legal entities, if the assets attributable to any Fund were insufficient to meet the liabilities attributable to it, the shortfall might have to be met out of the assets attributable to one or more other Funds of the HBOS Specialised Investment Funds ICVC. The investment objective for each of the five Funds, together with the ACD's policy for achieving those objectives and a review of the investment activities during the period, is set out in the respective investment market overview in this report. During the period there have been a number of changes to the Company: These changes are detailed below in the section Prospectus changes. Prospectus changes During the 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 HBOS Specialised Investment Funds ICVC: With effect from 1 October 2013, for certain share classes of the Scheme (as detailed below) the existing fee charges were changed to allow the fees of auditors, tax, legal and other professional advisors (the Expense) to be paid out of the Scheme property. For share classes A, Institutional and Scottish Widows Share Class 1 for all sub-funds of the Scheme, the ACD amended the Prospectus of the Scheme to allow it to pay the Expense out of the scheme property. The ACD has deemed it necessary to make the changes due to increasing costs associated with management of the Scheme where such costs are primarily incurred as a result of investing in and operating in certain overseas jurisdictions where filing of overseas tax returns and reclaims is required through agents in order to provide the optimum returns for the potential benefit of Shareholders in the Scheme. As a result, the costs will be aligned with the benefits accruing to the Scheme. With effect from 1 October 2013, the investment and borrowing powers of the Cautious Managed Fund were amended to allow for wider investment in other collective investment schemes (as notified to Shareholders in August 2013). The Cautious Managed Fund may now invest up to 20 the value of its scheme property in other regulated collective investment schemes. Under the FCA rules, the Cautious Managed Fund could be permitted to invest all of its scheme property in other collective investment schemes but, until this change, the Fund was restricted to investing only 10 its assets in this way. However, we believe that the Fund should take only the flexibility we view as being in the best interests of shareholders, considering the investment objective and policy of the Fund and so we raised the permitted level of investment to 20%. This change is not intended to have any impact on the risk profile of the Fund. A copy of the Prospectus is available on request. 2

5 Director's Report and Statement (continued) Important information Amendments to the UK Regulations governing Open-Ended Investment Companies and the *FCA s Collective Investment Schemes sourcebook which require limitation of liability between sub-funds of the Company came into effect on 21 December The new segregated liability regime is mandatory and it is our intention to apply to the FCA within the transitional period for approval to amend the Company s Prospectus and Instrument of Incorporation which will provide for this change. The transitional implementation period is open until 20 December *FSA was replaced by the Financial Conduct Authority (FCA) on 1 April In the future, the Company may launch further Funds. The ultimate parent undertaking of the ACD is Lloyds Banking Group plc. The statement of the ACD's Responsibilities is set out on page 4 of this report. The names and addresses of the ACD, the Depositary, the Investment Adviser, the Registrar and the Auditors can be found on page 88 of this report. Director's Statement In accordance with the rules in the Collective Investment Schemes sourcebook as issued and amended by the Financial Conduct Authority, I hereby approve the report and financial statements on behalf of the Authorised Corporate Director of the HBOS Specialised Investment Funds ICVC. Robert Fletcher Director HBOS Investment Fund Managers Limited 30 January

6 Statement and Reports Statement of the Authorised Corporate Director's (ACD's) Responsibilities The rules in the Collective Investment Schemes sourcebook issued by the Financial Conduct Authority ("the FCA") require the ACD to prepare financial statements for each accounting period which give a true and fair view of the financial position of the Company and of the net revenue and net gains and losses on the property of the Company for the period then ended. In preparing the financial statements the ACD is required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; comply with the disclosure requirements of the Statement of Recommended Practice relating to the Financial Statements of Authorised Funds issued by the Investment Management Association in October 2010; follow generally accepted UK accounting principles and applicable UK accounting standards; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in operation. The ACD is responsible for keeping proper accounting records and for the management of the Company in accordance with its Instrument of Incorporation, the Prospectus and the FCA Rules. The ACD has general responsibility for taking such steps as are reasonably open to it to prevent and detect fraud and other irregularities. 4

7 Aggregated Interim Financial Statements Statement of total return Income 30 November November 2012 Net capital gains 57, ,896 Revenue 72,435 72,252 Expenses (12,393) (11,672) Finance costs: Interest (2) (7) Net revenue before taxation 60,040 60,573 Taxation (4,698) (4,685) Net revenue after taxation 55,342 55,888 Total return before distributions 112, ,784 Finance costs: Distributions (53,073) (52,960) Change in net assets attributable to shareholders from investment activities 59, ,824 Statement of change in net assets attributable to shareholders 30 November November 2012 Opening net assets attributable to shareholders 4,516,168 4,036,050 Amounts receivable on issue of shares 81, ,136 Amounts payable on cancellation of shares (243,741) (275,353) (162,407) (169,217) Stamp duty reserve tax (77) (124) Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 59, ,824 Retained distributions on accumulation shares 46,764 46,996 Closing net assets attributable to shareholders 4,460,140 4,254,529 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. 5

8 Aggregated Interim Financial Statements Balance sheet (unaudited) 30 November May 2013 ASSETS Portfolio of investments 4,370,619 4,445,127 Debtors 46,214 43,367 Cash and bank balances 66,817 56,142 Total other assets 113,031 99,509 Total assets 4,483,650 4,544,636 LIABILITIES Derivative liabilities 1, Creditors 16,525 16,509 Distribution payable on income shares 5,139 11,548 Total other liabilities 21,664 28,057 Total liabilities 23,510 28,468 Net assets attributable to shareholders 4,460,140 4,516,168 6

9 Notes to the Financial Statements Accounting Policies The aggregated financial statements represent the summation of the financial statements for each of the sub-funds. The interim financial statements for each of the sub-funds have been prepared in accordance with the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Management Association (IMA) in October 2010 (the IMA SORP 2010). The accounting and distribution policies applied are consistent with those of the financial statements for the year ended 31 May 2013 and are described in those annual financial statements. 7

10 Cautious Managed Fund Investment markets overview Investment objective The investment objective of the Cautious Managed Fund is to achieve long term growth by investing in a managed portfolio of equities investing mainly in the UK and fixed interest investments such as corporate bonds and gilts. Investment policy The Fund will actively manage a balanced mixture of assets between equities and fixed interest investments. The core of the equity assets within the Fund will tend to be invested in large companies whilst maintaining a reasonable presence in medium and small sized companies with above average potential for growth. However, the Fund is not restricted to the choice of company either by size or industry. The fixed interest assets will be invested primarily in a wide range of Sterling and Euro dominated investment grade interest bearing securities. UCITS scheme The Fund would qualify as a UCITS scheme operating under Chapter 5 of the COLL sourcebook if it were in itself an Open-Ended Investment Company in respect of which an authorisation order made by the FCA were in force. Not more than 20 the scheme property may consist of units in collective investment schemes. Synthetic risk and reward profile 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 the fund Risk Profiles we used to determine our investment portfolios (where we used our own methodology to take an overall look at the funds' risks and aims and group our funds into Cautious/Medium, Medium, Medium/Adventurous, Adventurous Profiles). This Fund is ranked at 5 because it has experienced medium to high levels of volatility over the past 5 years. The synthetic risk and reward indicator shown above is accurate and there have been no changes to this ranking to date. Investment review Performance 01/06/13 01/06/12 01/06/11 01/06/10 01/06/09 01/06/08 to 30/11/13 to 31/05/13 to 31/05/12 to 31/05/11 to 31/05/10 to 31/05/09 % % % % % % Cautious Managed Fund (1.74) (11.36) Benchmark* (11.79) Source: Financial Express for Cautious Managed Fund after 1 June 2013, Morningstar between 1 June 2011 and 31 May 2013 and Lipper for previous periods. Basis: Percentage growth, total return Share Class C (gross of tax and charges) at 12.00pm. *51% FTSE All Share Index, 39.2% iboxx Sterling Non-Gilt All Stocks Index and 9.8% FTSE Actuaries Government Securities UK Gilts All Stocks Index. Source: Scottish Widows Investment Partnership. Basis: Revenue reinvested and gross of expenses at close of business. Past performance is not a guide to future performance. The value of an investment and the revenue from it may go up and down and you may get back less than invested. 8

11 Cautious Managed Fund Investment markets overview (continued) Investment review (continued) The period under review produced mixed returns, although on the whole equities outperformed. The Fund adopts a comparatively cautious approach, which means it did not participate in the equity rally to the same extent as funds that are focussed purely on equities. It generated a gross return of 1.16% over the six months under review. Looking first at fixed income markets, both government and corporate bonds struggled over the last six months. Yields on government bonds rose, and prices fell throughout much of the reporting period. The initial causes were stronger-than-usual economic data and signs that central banks might start to withdraw their monetary stimulus policies, which have involved the purchase of bonds. However, after the Federal Reserve (Fed) reassured investors that its extraordinary stimulus measures would remain in place for the time being, a large part of the earlier falls were reversed. Corporate bonds outperformed their government-issued equivalents, as investors continued on their search for higher yield investments. The Fund s bond holdings are mainly concentrated within corporate bonds, which helped shield investors from some of the losses incurred in the government bond sector. The Fund s equity holdings produced stronger returns. The Fund s main equity position is in the UK equity market, which performed well. The main driver of sentiment stemmed from overseas and the ongoing extraordinary support from the world s central bankers. The US Fed, for example, has been ploughing $85 billion-a-month into the world s largest economy in order to spur growth. But it wasn t only events in the US that occupied UK investors. News that the economy is starting to recover was well received. This proved particularly beneficial for stocks that are sensitive to economic conditions. Looking ahead, we expect that stock markets will continue to receive support from modest economic improvements, combined with ongoing stimulus measures from central banks. As a result, the Fund retains a comparatively high weighting in equities. However, gains in the coming year appear unlikely to be of the magnitude experienced over the last year and a half and markets looks set for further volatility. For this reason, maintaining a cautiously managed portfolio of diversified holdings remains a sensible strategy. Scottish Widows Investment Partnership Limited December

12 Cautious Managed Fund Performance record Calendar Highest Lowest Net revenue year price price per share p p p 2008 Share Class C Share Class F Share Class G Share Class I Share Class C Share Class F Share Class G Share Class I Share Class C Share Class F Share Class G Share Class I Share Class C Share Class F Share Class G Share Class I Share Class C Share Class F Share Class G Share Class I * Share Class C Share Class F Share Class G Share Class I * Up to 30 November

13 Cautious Managed Fund Performance record (continued) Net asset Net asset value of value Shares share class per share in issue p as at 31 May 2011 Share Class C 1,218,013, ,703,712,000 Share Class F 280,178, ,816,000 Share Class G 11,599, ,807,000 Share Class I 2,156,309, ,079,896,000 as at 31 May 2012 Share Class C 1,043,396, ,287,812,000 Share Class F 333,098, ,219,181,000 Share Class G 10,358, ,612,000 Share Class I 1,839,994, ,310,521,000 as at 31 May 2013 Share Class C 1,114,425, ,962,067,000 Share Class F 449,324, ,384,471,000 Share Class G 12,701, ,747,000 Share Class I 1,989,752, ,785,991,000 Share Class C 1,072,460, ,826,642,000 Share Class F 474,546, ,448,486,000 Share Class G 13,074, ,472,000 Share Class I 1,925,756, ,565,675,000 Ongoing charges figure The ongoing charges figure (OCF) is the total expenses paid by each share class for the period, annualised, against its average net asset value. It excludes the cost of buying or selling assets for the Fund (unless these assets are shares of another fund). The OCF can fluctuate as underlying costs change. as at 31 May 2013 % % Share Class C Share Class F Share Class G Share Class I # # Fees are payable by institutional investors in this share class to the ACD outside the Fund. 11

14 Cautious Managed Fund Portfolio statement UNITED KINGDOM (72.33%, 31/05/ %) BASIC MATERIALS (2.88%, 31/05/ %) 2.88 Chemicals Alent 180, Carclo 32, Croda International 108,234 2, Elementis 413,892 1, Johnson Matthey 165,104 5, Synthomer 220, Victrex 65,838 1, , Forestry & Paper Mondi 295,699 2, , Industrial Metals & Mining Evraz 409, Ferrexpo 115, Mining Anglo American 1,049,116 14, Antofagasta 297,043 2, BHP Billiton 1,695,759 31, Eurasian Natural Resources 200, Fresnillo 136,078 1, Hochschild Mining 131, Kazakhmys 134, Lonmin 360,854 1, Petropavlovsk 148, Rio Tinto 1,001,711 32, Vedanta Resources 80, , TOTAL BASIC MATERIALS 100, CONSUMER GOODS (6.31%, 31/05/ %**) 6.31 Automobiles & Parts GKN 1,307,709 4, , Beverages A.G. Barr 69, Britvic 192,615 1, Diageo 2,022,248 39, Fuller Smith & Turner 15, SABMiller 753,091 23, ,

15 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) CONSUMER GOODS (continued) 6.31 Food Producers Anglo-Eastern Plantations 10, Associated British Foods 279,791 6, Cranswick 38, Dairy Crest 111, Devro 136, Hilton Food 24, Premier Foods 26, Tate & Lyle 371,203 2, Unilever 961,080 23, , Household Goods & Home Construction Barratt Developments 798,421 2, Bellway 98,886 1, Berkeley 99,976 2, Bovis Homes 109, Headlam 197, McBride 61, Persimmon 242,682 2, Reckitt Benckiser 513,913 25, Redrow 178, Taylor Wimpey 2,606,389 2, , Leisure Goods Games Workshop 40, Personal Goods Burberry 352,923 5, PZ Cussons 245, SuperGroup 26, , Tobacco British American Tobacco 1,540,406 50, Imperial Tobacco 782,234 18, , TOTAL CONSUMER GOODS 219, CONSUMER SERVICES (4.32%, 31/05/ %**) 4.32 Food & Drug Retailers Booker 1,266,443 2, Greggs 83, J Sainsbury 1,112,591 4, Ocado 347,280 1, Tesco 6,400,405 22, WM Morrison Supermarkets 1,737,760 4, ,

16 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) CONSUMER SERVICES (continued) 4.32 General Retailers Carpetright 41, Darty 69, Debenhams 1,015, Dixons Retail 2,968,208 1, Dunelm 80, Findel 11, Halfords 117, Home Retail 672,268 1, Howden Joinery 504,700 1, Inchcape 381,145 2, JD Sports Fashion 7, Kingfisher 1,901,881 7, Lookers 285, Marks & Spencer 1,290,156 6, Mothercare 17, N Brown 125, Next 121,269 6, Pendragon 867, Photo-Me International 41, Sports Direct International 168,214 1, Ted Baker 20, Topps Tiles 135, WH Smith 96, , Media Bloomsbury Publishing 36, British Sky Broadcasting 774,936 6, Chime Communications 34, Cineworld 103, Euromoney Institutional Investor 30, Huntsworth 69, ITE 194, ITV 2,935,903 5, Johnston Press 134, Moneysupermarket.com 294, Pearson 652,830 8, Perform 81, Reed Elsevier 953,751 8, Rightmove 79,672 2, St Ives 8, Trinity Mirror 34, Wilmington 7, ,

17 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) CONSUMER SERVICES (continued) 4.32 Travel & Leisure Betfair 75, Carnival 146,512 3, Compass 1,448,641 13, Domino's Pizza 114, easyjet 199,468 2, Enterprise Inns 415, Firstgroup 988,787 1, Go-Ahead 30, Greene King 178,065 1, InterContinental Hotels 211,150 4, JD Wetherspoon 73, Ladbrokes 727,683 1, Marston's 353, Millennium & Copthorne Hotels 122, Mitchells & Butlers 191, National Express 281, Restaurant 163, Spirit Pub 526, Stagecoach 348,922 1, Thomas Cook 1,172,300 2, TUI Travel 369,566 1, Whitbread 144,770 5, William Hill 692,607 2, , TOTAL CONSUMER SERVICES 150, FINANCIALS (16.15%, 31/05/ %) Banks Bank of Georgia 20, Barclays 12,907,100 35, HSBC 14,818, , Investec 411,331 1, Lloyds Banking Group 38,828,029 29, Royal Bank of Scotland 1,669,450 5, Standard Chartered 1,587,331 23, , Equity Investment Instruments Aberdeen Asian Smaller Companies Investment Trust 19, Aberdeen New Dawn Investment Trust 63, Aberdeen UK Tracker Trust 142, Aberforth Smaller Companies Trust 84, Alliance Trust 461,006 2, Artemis Alpha Trust 21, Asian Total Return Investment Company 37, Baillie Gifford Japan Trust 32, Bankers Investment Trust 91, Baring Emerging Europe 10, Biotech Growth Trust 17, BlackRock Commodities Income Investment Trust 47,

18 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (continued) Equity Investment Instruments (continued) BlackRock Emerging Europe Trust 19, BlackRock Greater Europe Investment Trust 59, BlackRock Latin American Investment Trust 19, BlackRock Smaller Companies Trust 90, BlackRock World Mining Trust 158, British Assets Trust 146, British Empire Securities and General Trust 124, Brunner Investment Trust 15, Caledonia Investments 27, Candover Investments 69, City Natural Resources High Yield Trust 33, Dunedin Income Growth Investment Trust 76, Ecofin Water & Power Opportunities 56, Edinburgh Dragon Trust 160, Edinburgh Worldwide Investment Trust 24, Electra Private Equity 29, European Investment Trust 21, F&C Capital & Income Investment Trust 44, F&C Global Smaller Companies 22, F&C Private Equity Trust 36, F&C US Smaller Companies 12, Fidelity Asian s 84, Fidelity European s 34, Fidelity Special s 27, Finsbury Growth & Income Trust 39, Foreign & Colonial Investment Trust 468,640 1, Henderson European Focus Trust 8, Henderson EuroTrust 42, Henderson Global Trust 20, Henderson High Income Trust 50, Henderson Smaller Companies Investment Trust 107, Henderson Trust 24, Herald Investment Trust 70, HgCapital Trust 34, Invesco Asia Trust 45, Invesco Income Growth Trust 29, Invesco Perpetual UK Smaller Companies Investment Trust 47, JPMorgan American Investment Trust 43, JPMorgan Asian Investment Trust 53, JPMorgan Chinese Investment Trust 38, JPMorgan Claverhouse Investment Trust 27, JPMorgan Emerging s Investment Trust 107, JPMorgan European Investment Trust 48, JPMorgan European Smaller Companies Trust 18, JPMorgan Japanese Investment Trust 82, JPMorgan Mid Cap Investment Trust 48, JPMorgan Overseas Investment Trust 11, JPMorgan Russian Securities 67, JPMorgan Smaller Companies Investment Trust 9, Jupiter European Opportunities Trust 40, Keystone Investment Trust 6,

19 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (continued) Equity Investment Instruments (continued) Law Debenture 79, Lowland Investment Company 13, Martin Currie Pacific Trust 21, Martin Currie Portfolio Investment Trust 52, Mercantile Investment Trust 88,955 1, Merchants Trust 84, Monks Investment Trust 186, Montanaro UK Smaller Companies Investment Trust 16, Murray Income Trust 55, Murray International Trust 102,190 1, North American Income Trust 15, Pacific Assets Trust 59, Pantheon International Participations 42, Perpetual Income and Growth Investment Trust 193, Personal Assets Trust Polar Capital Technology Trust 104, RCM Technology Trust 12, RIT Capital Partners 104,052 1, Schroder AsiaPacific Fund 142, Schroder Income Growth Fund 34, Schroder Japan Growth Fund 63, Schroder UK Growth Fund 81, Schroder UK Mid Cap Fund 143, Scottish Investment Trust 93, Scottish Mortgage Investment Trust 220,054 2, Scottish Oriental Smaller Companies Trust 16, Securities Trust of Scotland 56, Standard Life Equity Income Trust 19, Standard Life European Private Equity Trust 41, Standard Life UK Smaller Companies Trust 92, SVG Capital 210, Temple Bar Investment Trust 50, Templeton Emerging s Investment Trust 283,240 1, The City of London Investment Trust 212, The Edinburgh Investment Trust 172,845 1, Throgmorton Trust 108, TR European Growth Trust 25, TR Property Investment Trust 261, Troy Income & Growth Trust 120, and Income Trust 19, Witan Investment Trust 155,978 1, Witan Pacific Investment Trust 33, Worldwide Healthcare Trust 37, ,

20 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (continued) Financial Services 3i 789,067 2, Aberdeen Asset Management 760,627 3, Ashmore 350,218 1, Brewin Dolphin 214, Close Brothers 120,806 1, Crest Nicholson 102, esure 208, F&C Asset Management 470, Fidelity China Special Situations 492, Hargreaves Lansdown 175,180 2, Hogg Robinson 124, ICAP 439,105 1, IG 323,191 1, Impax Environmental s 219, Intermediate Capital 322,897 1, International Personal Finance 202,056 1, IP 300, Jupiter Fund Management 253, London Stock Exchange 154,676 2, Man 1,339,882 1, Paragon 244, Provident Financial 111,275 1, Rathbone Brothers 37, Schroders 90,735 2, Tullett Prebon 145, , Life Insurance Aviva 2,346,116 10, Chesnara 27, Legal & General 4,706,129 10, Old Mutual 3,893,229 7, Partnership Assurance 135, Prudential 2,032,710 26, St James's Place 352,813 2, Standard Life 1,929,064 6, , Non-Equity Investment Instruments Greencoat UK Wind 277, Greencoat UK Wind Rights 18/12/ , Scottish Widows UK Smaller Companies Fund X Acc 2,092,482 7, Scottish Widows Fundamental Index UK Equity Fund X Acc 166,164, , ,

21 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (continued) Non-Life Insurance Admiral 154,666 1, Amlin 378,801 1, Direct Line Insurance 885,774 2, Jardine Lloyd Thompson 100,128 1, Novae 58, RSA Insurance 2,934,625 3, , Real Estate Investment & Services Capital & Counties Properties 536,543 1, CLS 8, Countrywide 64, Development Securities 92, Grainger 336, Helical Bar 50, LSL Property Services 42, Quintain Estates & Development 231, Savills 101, ST Modwen Properties 135, Unite 193, , Real Estate Investment Trusts Big Yellow 130, British Land 801,606 4, Derwent London 74,908 1, Great Portland Estates 281,632 1, Hammerson 568,105 2, Hansteen 523, Intu Properties 566,378 1, Land Securities 630,287 6, Londonmetric Property 465, Mucklow A & J 8, Primary Health Properties 47, Segro 607,333 2, Shaftesbury 204,690 1, Workspace 85, , TOTAL FINANCIALS 563,

22 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FIXED INCOME (23.25%, 31/05/ %) Corporate Bonds Abbey National Treasury Services 5.75% 02/03/2027 5,753,000 6, Abbey National Treasury Services 5.25% 16/02/2030 8,332,000 9, Amlin 6.5% 19/12/2026 5,903,000 6, Anglian Water Services Financing 6.293% 30/07/2030 2,184,000 2, Arqiva Financing 4.882% 31/12/2032 5,860,000 5, Artesian Finance 6% 30/09/2033 9,559,000 11, Aviva 6.125% 14/11/2036 3,840,000 4, Aviva 6.875% 20/05/2058 6,068,000 6, Aviva 6.125% Perpetual 5,490,000 5, Bank of Scotland 6.375% 16/08/2019 5,535,000 6, Barclays Bank 10% 21/05/2021 6,822,000 8, Barclays Bank 4.25% 12/01/2022 3,478,000 3, Barclays Bank 5.75% 14/09/2026 4,856,000 5, Barclays Bank 6.375% Perpetual 4,116,000 4, Barclays Bank 14% Perpetual 3,895,000 5, BAT International Finance 6.375% 12/12/2019 4,432,000 5, BAT International Finance 6% 29/06/2022 6,100,000 7, BG Energy Capital 5% 04/11/2036 3,888,000 4, BG Energy Capital 6.5% 30/11/2072 5,147,000 5, BP Capital s 4.325% 10/12/2018 8,819,000 9, British Telecommunications 5.75% 07/12/ ,916,000 13, BUPA Finance 5% 25/04/2023 6,867,000 6, Centrica 6.375% 10/03/2022 9,853,000 11, Centrica 4.25% 12/09/2044 2,978,000 2, Circle Anglia Social Housing 5.2% 02/03/2044 4,454,000 4, Clydesdale Bank 4.625% 08/06/2026 8,177,000 8, Coventry Building Society 4.625% 19/04/2018 6,786,000 7, CTRL Section 1 Finance 5.234% 02/05/2035 8,436,000 9, EE Finance 4.375% 28/03/2019 4,817,000 5, Experian Finance 4.75% 23/11/2018 5,739,000 6, Firstgroup 6.125% 18/01/2019 5,067,000 5, Friends Life 8.25% 21/04/2022 4,517,000 5, G4S 7.75% 13/05/2019 2,790,000 3, GKN 6.75% 28/10/2019 3,382,000 3, Great Rolling Stock 6.5% 05/04/2031 4,622,000 5, Hammerson 6.875% 31/03/2020 3,334,000 4, Hammerson 7.25% 21/04/2028 2,406,000 3, Heathrow Finance 7.125% 01/03/2017 1,790,000 1, HSBC 6.5% 20/05/2024 2,612,000 3, HSBC 5.375% 22/08/2033 4,612,000 4, HSBC 7% 07/04/2038 8,550,000 10, Hutchison Whampoa Finance 'B' 5.625% 24/11/2026 5,850,000 6, Imperial Tobacco Finance 7.75% 24/06/2019 4,924,000 6, Imperial Tobacco Finance 8.125% 15/03/2024 7,503,000 9, Integrated Accommodation Services 6.48% 31/03/ , InterContinental Hotels 3.875% 28/11/2022 5,724,000 5, Jaguar Land Rover Automotive 8.125% 15/05/2018 3,678,000 3, Lloyds TSB Bank % 29/05/2020 6,149,000 6, Lloyds TSB Bank 10.75% 16/12/2021 3,533,000 4, Lloyds TSB Bank % 12/02/2024 3,019,000 3, Lloyds TSB Bank 7.5% 15/04/2024 3,694,000 4,

23 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FIXED INCOME (continued) Corporate Bonds (continued) Lloyds TSB Bank 5.75% 09/07/2025 7,687,000 7, Lloyds TSB Bank 6.5% 17/09/2040 3,298,000 4, London & Quadrant Housing Trust 4.625% 05/12/2033 4,098,000 4, London Power Networks 5.125% 31/03/2023 3,820,000 4, London Stock Exchange 6.125% 07/07/2016 2,047,000 2, Marks & Spencer 4.75% 12/06/2025 6,090,000 6, Mitchells & Butlers Finance 5.965% 15/12/2025 2,128,972 2, Motability Operations 5.625% 29/11/ ,737,000 13, National Grid Electricity Transmission 6.5% 27/07/2028 4,194,000 5, National Grid Electricity Transmission 7.375% 13/01/2031 8,141,000 11, National Grid Gas 6.375% 03/03/2020 2,500,000 2, National Westminster Bank 6.5% 07/09/2021 4,210,000 4, Nationwide Building Society 6.75% 22/07/2020 6,662,000 6, Northumbrian Water Finance 5.125% 23/01/2042 5,262,000 5, Octagon Healthcare Funding 5.333% 30/06/2036 7,484,162 8, Pearson Funding One 6% 15/12/2015 1,428,000 1, Pennon 6.75% Perpetual 4,612,000 4, Provident Financial 8% 23/10/2019 4,550,000 5, Prudential 6.875% 20/01/2023 5,125,000 6, RMPA Services 5.337% 30/09/2038 6,187,310 6, Royal Bank of Scotland 7.5% 29/04/2024 7,141,000 9, RSA Insurance 9.375% 20/05/2039 2,832,000 3, RSA Insurance 8.5% Perpetual 6,304,000 6, Sanctuary Capital 5% 26/04/2047 2,800,000 3, Santander UK 9.625% 30/10/2023 5,710,000 6, Santander UK 7.5% Perpetual 4,395,000 4, Segro 5.625% 07/12/2020 3,183,000 3, Severn Trent Utilities Finance 6% 22/01/2018 2,286,000 2, Severn Trent Utilities Finance 6.125% 26/02/2024 4,601,000 5, Smiths 4.125% 05/05/2017 5,103,000 4, Society of Lloyd's 6.875% 17/11/2025 4,474,000 4, Society of Lloyd's 7.421% Perpetual 3,859,000 4, South Eastern Power Networks 5.5% 05/06/2026 4,149,000 4, Southern Electric Power Distribution 4.625% 20/02/2037 4,100,000 4, Southern Gas Networks 4.875% 21/12/2020 5,179,000 5, SPD Finance UK 5.875% 17/07/2026 4,395,000 4, SSE 5.875% 22/09/2022 9,019,000 10, SSE 5.025% Perpetual 3,760,000 3, Standard Chartered Bank 7.75% Perpetual 11,660,000 13, Standard Life 6.75% Perpetual 8,715,000 9, Tesco 5% 24/03/ , Thames Water Kemble Finance 7.75% 01/04/2019 4,304,000 4, Thames Water Utilities Finance 5.125% 28/09/2037 7,593,000 8, THFC Funding No 3 5.2% 11/10/2043 4,297,000 4, Transport for London 2.25% 09/08/2022 3,260,000 3, United Utilities Water 5.75% 25/03/2022 4,951,000 5,

24 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FIXED INCOME (continued) Corporate Bonds (continued) UPP Bond 1 Issuer % 28/02/2040 4,535,475 4, Vodafone 5.9% 26/11/2032 4,095,000 4, Western Power Distribution South West 5.75% 23/03/ ,000 1, Western Power Distribution West Midlands 5.75% 16/04/2032 9,594,000 10, WM Morrison Supermarkets 4.625% 08/12/2023 2,834,000 2, Yorkshire Building Society 4.75% 12/04/2018 4,612,000 5, , Government Bonds UK Treasury 2.25% 07/03/ ,592,000 26, UK Treasury 5% 07/09/2014 8,052,000 8, UK Treasury 2% 22/01/2016 9,910,000 10, UK Treasury 4% 07/09/ ,930,000 11, UK Treasury 1.75% 22/01/2017 3,192,000 3, UK Treasury 1.25% 22/07/ , UK Treasury 4.5% 07/03/2019 7,094,000 8, UK Treasury 3.75% 07/09/ , UK Treasury 3.75% 07/09/ ,000 1, UK Treasury 5% 07/03/2025 5,162,000 6, UK Treasury 4.25% 07/12/ ,381,000 13, UK Treasury 6% 07/12/2028 1,968,000 2, UK Treasury 4.25% 07/06/2032 1,001,000 1, UK Treasury 4.5% 07/09/ ,015,000 25, UK Treasury 4.25% 07/03/2036 3,763,000 4, UK Treasury 4.75% 07/12/2038 3,969,000 4, UK Treasury 3.75% 22/07/2052 2,055,000 2, UK Treasury 4% 22/01/2060 1,990,000 2, , Mortgage Backed Securities Annington Finance No % 10/01/2023 1,550,000 1, Aspire Defence Finance Series A 4.674% 31/03/2040 3,556,000 3, Aspire Defence Finance Series B 4.674% 31/03/2040 5,303,000 5, Canary Wharf Finance II 6.455% 22/10/2033 3,545,102 4, Canary Wharf Finance II 5.952% 22/10/2037 5,060,000 6, Dignity Finance 8.151% 31/12/2031 3,440,000 4, Equity Release Funding 5.05% 26/04/2033 7,742,000 8, Fosse Master Issuer 4.635% 18/10/2054 7,174,000 7, Holmes Master Issuer FRN % 3,800,000 3, Land Securities Capital s 4.875% 29/09/2025 1,355,000 1, Land Securities Capital s 5.376% 30/09/2029 3,055,000 3, Land Securities Capital s 5.396% 31/07/2032 3,242,000 3, Land Securities Capital s 5.125% 07/02/2036 1,105,000 1, Meadowhall Finance 4.986% 12/07/2037 5,485,130 6, Meadowhall Finance 4.988% 12/07/2037 2,145,813 2,

25 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) FIXED INCOME (continued) Mortgage Backed Securities (continued) Telereal Securitisation % 10/12/2033 4,226,343 4, Telereal Securitisation % 10/12/2033 3,825,932 4, Tesco Property Finance % 13/07/2039 7,630,854 10, Tesco Property Finance % 13/10/ , Tesco Property Finance % 13/07/2044 3,384,000 3, , TOTAL FIXED INCOME 809, HEALTH CARE (3.17%, 31/05/ %) 3.17 Health Care Equipment & Services Al Noor Hospitals 41, Dignity 43, Optos 36, Smith & Nephew 719,919 5, Synergy Health 40, , Pharmaceuticals & Biotechnology AstraZeneca 1,001,567 34, BTG 309,121 1, Dechra Pharmaceuticals 71, Genus 49, GlaxoSmithKline 3,954,730 63, Hikma Pharmaceuticals 109,063 1, Vectura 169, , TOTAL HEALTH CARE 110, INDUSTRIALS (3.82%, 31/05/ %**) 3.82 Aerospace & Defence BAE Systems 2,604,666 11, Cobham 918,814 2, Meggitt 630,255 3, QinetiQ 521,302 1, Rolls-Royce 1,502,811 18, Rolls Royce Preference Shares 129,241, Ultra Electronics 56,932 1, ,

26 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) INDUSTRIALS (continued) 3.82 Construction & Materials Balfour Beatty 563,578 1, Carillion 352,324 1, Costain 19, Galliford Try 56, Keller 52, Kier 43, Low & Bonar 150, Marshalls 99, Morgan Sindall 4, , Electronic & Electrical Equipment Dialight 23, Domino Printing Sciences 88, E2V Technologies 31, Laird 238, Morgan Crucible 220, Oxford Instruments 43, Renishaw 29, Spectris 104,353 2, TT Electronics 211, Xaar 61, , General Industrials British Polythene Industries 12, DS Smith 797,326 2, Rexam 623,491 3, RPC 135, Smiths 314,763 4, Vesuvius 216,924 1, , Industrial Engineering Bodycote 156, Chemring 159, Fenner 157, Halma 300,019 1, Hill & Smith 97, IMI 253,915 3, Melrose Industries 1,016,960 2, Rotork 76,253 2, Senior 337, Severfield-Rowen 149, Spirax-Sarco Engineering 62,859 1, Weir 170,616 3, ,

27 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) INDUSTRIALS (continued) 3.82 Industrial Transportation BBA Aviation 385,019 1, Clarkson 6, James Fisher & Sons 33, UK Mail 11, Wincanton 14, , Support Services Aggreko 202,401 3, Ashtead 443,942 3, Babcock International 288,279 3, Berendsen 133,712 1, Brammer 64, Bunzl 265,677 3, Capita 528,139 5, De La Rue 81, Diploma 92, Electrocomponents 359,262 1, Filtrona 188,212 1, G4S 1,245,758 3, Hays 1,137,558 1, HellermannTyton 163, Homeserve 224, Interserve 80, Intertek 129,061 3, John Menzies 32, Lavendon 269, Mears 49, Michael Page International 236,485 1, Mitie 292, Northgate 97, PayPoint 53, Premier Farnell 301, Rentokil Initial 1,482,255 1, Ricardo 61, RPS 179, Safestore * 60, Serco 396,001 1, Shanks 75, SIG 459, Speedy Hire 92, Sthree 185, Travis Perkins 194,308 3, WS Atkins 69, Xchanging 67, , TOTAL INDUSTRIALS 133,

28 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) OIL & GAS (6.65%, 31/05/ %) 6.65 Oil & Gas Producers Afren 889,918 1, BG 2,732,496 34, BP 14,943,178 72, Cairn Energy 493,269 1, EnQuest 589, Essar Energy 234, John Wood 297,189 2, Ophir Energy 414,151 1, Premier Oil 414,970 1, Royal Dutch Shell 'A' 3,022,136 62, Royal Dutch Shell 'B' 2,019,173 43, Salamander Energy 103, Soco International 160, Tullow Oil 725,688 6, , Oil Equipment, Services & Distribution AMEC 256,767 2, Hunting 111, , TOTAL OIL & GAS 231, TECHNOLOGY (0.69%, 31/05/ %**) 0.69 Software & Computer Services Anite 253, Aveva 51,803 1, Computacenter 63, Fidessa 30, Innovation 493, Invensys 561,874 2, Kofax 34, Micro Focus International 101, NCC 99, Sage 891,023 3, SDL 54, Telecity 164,396 1, , Technology Hardware & Equipment ARM 1,121,399 11, CSR 128, Imagination Technologies 198, Pace 267, Spirent Communications 527, Wolfson Microelectronics 54, , TOTAL TECHNOLOGY 25,

29 Cautious Managed Fund Portfolio statement (continued) UNITED KINGDOM (continued) TELECOMMUNICATIONS (3.41%, 31/05/ %) 3.41 Fixed Line Telecommunications BT 6,272,452 23, Cable & Wireless Communications 2,070, Kcom 419, TalkTalk Telecom 371,630 1, Telecom Plus 43, Telecom Plus New Ordinary Shares Rights 05/12/2013 1, , Mobile Telecommunications Inmarsat 339,148 2, Vodafone 39,104,699 89, , TOTAL TELECOMMUNICATIONS 118, UTILITIES (1.68%, 31/05/ %) 1.68 Electricity Drax 315,839 2, SSE 769,463 10, , Gas, Water & Multiutilities Centrica 4,136,509 14, National Grid 2,994,697 23, Pennon 296,612 1, Severn Trent 189,750 3, United Utilities 547,407 3, , TOTAL UTILITIES 58, TOTAL UNITED KINGDOM 2,520, AUSTRALIA (0.99%, 31/05/ %) 0.99 FIXED INCOME (0.99%, 31/05/ %) 0.99 Corporate Bonds BHP Billiton Finance 4.3% 25/09/2042 3,472,000 3, Commonwealth Bank of Australia 3% 04/09/ ,492,000 11, National Australia Bank 5.125% 09/12/2021 6,149,000 6, Origin Energy Finance 7.875% 16/06/2071 4,715,000 4, QBE Insurance 6.125% 28/09/2015 4,307,000 4, Santos Finance 8.25% 22/09/2070 4,265,000 3, , TOTAL FIXED INCOME 34, TOTAL AUSTRALIA 34,

30 Cautious Managed Fund Portfolio statement (continued) BELGIUM (0.22%, 31/05/ %) 0.22 FIXED INCOME (0.22%, 31/05/ %) 0.22 Corporate Bonds Anheuser-Busch InBev 9.75% 30/07/2024 3,148,000 4, Anheuser-Busch InBev 4% 24/09/2025 2,900,000 2, , TOTAL FIXED INCOME 7, TOTAL BELGIUM 7, BERMUDA (0.15%, 31/05/ %) 0.15 BASIC MATERIALS (0.01%, 31/05/ %) 0.01 Mining Aquarius Platinum 27, Petra Diamonds 335, TOTAL BASIC MATERIALS FINANCIALS (0.14%, 31/05/ %) 0.14 Non-Life Insurance Catlin 276,040 1, Hiscox 308,456 2, Lancashire 148,706 1, , TOTAL FINANCIALS 4, TOTAL BERMUDA 5, BRAZIL (0.15%, 31/05/ %) 0.15 FIXED INCOME (0.15%, 31/05/ %) 0.15 Corporate Bonds Votorantim Cimentos 5.25% 28/04/2017 5,771,000 5, , TOTAL FIXED INCOME 5, TOTAL BRAZIL 5, BRITISH VIRGIN ISLANDS (0.00%, 31/05/ %) 0.00 BASIC MATERIALS (0.00%, 31/05/ %) 0.00 Mining Gem Diamonds 23, TOTAL BASIC MATERIALS TOTAL BRITISH VIRGIN ISLANDS

31 Cautious Managed Fund Portfolio statement (continued) CANADA (0.10%, 31/05/ %) 0.10 CONSUMER SERVICES (0.01%, 31/05/ %) 0.01 Media Entertainment One 163, TOTAL CONSUMER SERVICES FIXED INCOME (0.09%, 31/05/ %) 0.09 Corporate Bonds Xstrata Finance Canada 7.375% 27/05/2020 2,521,000 3, , TOTAL FIXED INCOME 3, TOTAL CANADA 3, CAYMAN ISLANDS (1.13%, 31/05/ %) 1.13 FINANCIALS (0.03%, 31/05/ %) 0.03 Life Insurance Phoenix 152,644 1, , TOTAL FINANCIALS 1, FIXED INCOME (1.10%, 31/05/ %) 1.10 Corporate Bonds Dwr Cymru Financing 6.907% 31/03/2021 3,215,000 3, Hutchison Whampoa Europe Finance % Perpetual 7,125,000 5, South East Water Finance % 30/09/2019 4,840,000 5, Thames Water Utilities Cayman Finance 5.5% 11/02/2041 3,920,000 4, Yorkshire Water Services Bradford Finance 6% 24/04/2025 6,252,000 6, Yorkshire Water Services Odsal Finance 6.454% 28/05/2027 1,745,000 2, Yorkshire Water Services Odsal Finance % 17/04/2031 7,814,000 9, , TOTAL FIXED INCOME 38, TOTAL CAYMAN ISLANDS 39, DENMARK (0.41%, 31/05/ %) 0.41 FIXED INCOME (0.41%, 31/05/ %) 0.41 Corporate Bonds Danske Bank 5.375% 29/09/2021 6,837,000 7, DONG Energy 4.875% 12/01/2032 3,306,000 3, DONG Energy 5.75% 09/04/2040 3,430,000 3, , TOTAL FIXED INCOME 14, TOTAL DENMARK 14,

32 Cautious Managed Fund Portfolio statement (continued) FINLAND (0.27%, 31/05/ %) 0.27 BASIC MATERIALS (0.00%, 31/05/ %) 0.00 Industrial Metals & Mining Talvivaara Mining 605, TOTAL BASIC MATERIALS FIXED INCOME (0.27%, 31/05/ %) 0.27 Corporate Bonds Nordea Bank Finland 6.25% Perpetual 9,280,000 9, , TOTAL FIXED INCOME 9, TOTAL FINLAND 9, FRANCE (2.35%, 31/05/ %) 2.35 FIXED INCOME (2.35%, 31/05/ %) 2.35 Corporate Bonds AXA 5.25% 16/04/2040 4,850,000 4, AXA % Perpetual 5,443,000 5, BNP Paribas 7.436% Perpetual 4,100,000 4, Bouygues 5.5% 06/10/2026 8,100,000 8, Cie de St-Gobain 5.625% 15/12/ , Cie de St-Gobain 5.625% 15/11/2024 1,200,000 1, CNP Assurances 7.375% 30/09/2041 1,800,000 1, Electricite de France 5.875% 18/07/2031 5,247,000 6, Electricite de France 6.125% 02/06/2034 2,600,000 3, Electricite de France 5.5% 17/10/2041 6,000,000 6, Electricite de France 5.125% 22/09/2050 2,950,000 3, Electricite de France 6% Perpetual 6,300,000 6, GDF Suez 6.125% 11/02/2021 1,950,000 2, Lafarge 10% 30/05/2017 3,830,000 4, Orange 7.25% 10/11/2020 3,280,000 4, Orange 5.25% 05/12/2025 3,907,000 4, Orange 8.125% 20/11/2028 5,855,000 7, Reseau Ferre de France 5.5% 01/12/2021 1,755,000 2, Veolia Environnement 4.625% 30/03/2027 3,900,000 3, , TOTAL FIXED INCOME 81, TOTAL FRANCE 81, GERMANY (0.19%, 31/05/ %) 0.19 FIXED INCOME (0.19%, 31/05/ %) 0.19 Corporate Bonds KFW 2.75% 07/09/2015 2,814,000 2, Unitymedia Hessen 5.625% 15/04/2023 4,715,000 3, , TOTAL FIXED INCOME 6, TOTAL GERMANY 6,

33 Cautious Managed Fund Portfolio statement (continued) GIBRALTAR (0.02%, 31/05/ %) 0.02 CONSUMER SERVICES (0.02%, 31/05/ %) 0.02 Travel & Leisure Bwin.Party Digital Entertainment 567, TOTAL CONSUMER SERVICES TOTAL GIBRALTAR GUERNSEY (0.51%, 31/05/ %) 0.51 FINANCIALS (0.34%, 31/05/ %) 0.34 Equity Investment Instruments AcenciA Debt Strategies 59, Advance Developing s Fund 32, BH Global 30, BlueCrest AllBlue 362, Dexion Trading 48, Genesis Emerging s Fund 110, HICL Infrastructure 971,935 1, International Public Partnerships 609, Ruffer Investment Company 63, Schroder Oriental Income Fund 110, , Financial Services BH Macro 22, Medicx Fund 132, Life Insurance Resolution 1,093,040 3, , Non-Equity Investment Instruments BACIT 269, BH Macro 34, John Laing Infrastructure Fund 538, NB Global Floating Rate Income Fund 678, , Real Estate Investment & Services F&C UK Real Estate Investment 105, Raven Russia 186, UK Commercial Property Trust 333, Real Estate Investment Trusts F&C Commercial Property Trust 405, Picton Property Income 174, Schroder Real Estate Investment Trust 180, TOTAL FINANCIALS 11,

34 Cautious Managed Fund Portfolio statement (continued) GUERNSEY (continued) 0.51 FIXED INCOME (0.02%, 31/05/ %) 0.02 Corporate Bonds UK Care 6.3% 01/10/ , TOTAL FIXED INCOME INDUSTRIALS (0.00%, 31/05/ %) 0.00 Industrial Transportation Stobart 57, TOTAL INDUSTRIALS OIL & GAS (0.15%, 31/05/ %) 0.15 Oil & Gas Producers Indus Gas 592,339 5, , TOTAL OIL & GAS 5, TECHNOLOGY (0.00%, 31/05/ %) 0.00 TOTAL GUERNSEY 17, INDIA (0.03%, 31/05/ %) 0.03 OIL & GAS (0.03%, 31/05/ %) 0.03 Oil & Gas Producers Great Eastern Energy GDR 546, TOTAL OIL & GAS TOTAL INDIA IRELAND (4.67%, 31/05/ %) 4.67 BASIC MATERIALS (0.01%, 31/05/ %) 0.01 Mining Kenmare Resources 2,233, TOTAL BASIC MATERIALS CONSUMER GOODS (0.02%, 31/05/ %) 0.02 Food Producers Greencore 328, TOTAL CONSUMER GOODS

35 Cautious Managed Fund Portfolio statement (continued) IRELAND (continued) 4.67 FINANCIALS (3.42%, 31/05/ %) 3.42 Non-Equity Investment Instruments SWIP Global Liquidity Fund 20,713,336 20, SWIP Sterling Short Term Fund X Acc 773,904 98, , TOTAL FINANCIALS 119, FIXED INCOME (0.88%, 31/05/ %) 0.88 Corporate Bonds Ardagh Packaging Finance 7.375% 15/10/2017 3,048,000 2, Freshwater Finance 5.182% 20/04/ , Freshwater Finance 4.607% 17/10/2036 6,763,000 6, GE Capital UK Funding 5.125% 24/05/2023 4,076,000 4, GE Capital UK Funding 5.875% 18/01/2033 3,571,000 4, GE Capital UK Funding 8% 14/01/2039 7,994,000 12, , TOTAL FIXED INCOME 30, HEALTH CARE (0.02%, 31/05/ %) 0.02 Health Care Equipment & Services UDG Healthcare 190, TOTAL HEALTH CARE INDUSTRIALS (0.32%, 31/05/ %) 0.32 Construction & Materials CRH 583,416 9, , General Industrials DCC 71,555 2, , TOTAL INDUSTRIALS 11, TOTAL IRELAND 162, ISLE OF MAN (0.07%, 31/05/ %) 0.07 CONSUMER SERVICES (0.02%, 31/05/ %) 0.02 Travel & Leisure Playtech 122, TOTAL CONSUMER SERVICES

36 Cautious Managed Fund Portfolio statement (continued) ISLE OF MAN (continued) 0.07 OIL & GAS (0.01%, 31/05/ %) 0.01 Oil & Gas Producers Exillon Energy 55, Hardy Oil & Gas 66, Oil Equipment, Services & Distribution Lamprell 48, TOTAL OIL & GAS UTILITIES (0.04%, 31/05/ %) 0.04 Electricity KSK Power Ventur 874,273 1, , TOTAL UTILITIES 1, TOTAL ISLE OF MAN 2, ITALY (0.51%, 31/05/ %) 0.51 FIXED INCOME (0.51%, 31/05/ %) 0.51 Corporate Bonds Enel 5.75% 22/06/2037 1,392,000 1, Enel 7.75% 10/09/2075 4,137,000 4, Eni 4.25% 03/02/2020 3,048,000 2, Pirelli 5.125% 22/02/2016 3,984,000 3, Telecom Italia 5.875% 19/05/2023 6,000,000 5, , TOTAL FIXED INCOME 17, TOTAL ITALY 17, JERSEY (3.97%, 31/05/ %) 3.97 BASIC MATERIALS (0.81%, 31/05/ %) 0.81 Industrial Metals & Mining Centamin 861, Polymetal International 159, , Mining Glencore Xstrata 7,662,207 24, Randgold Resources 73,180 3, , TOTAL BASIC MATERIALS 28,

37 Cautious Managed Fund Portfolio statement (continued) JERSEY (continued) 3.97 CONSUMER SERVICES (0.54%, 31/05/ %) 0.54 Media Informa 492,082 2, UBM 206,268 1, WPP 1,070,276 14, , TOTAL CONSUMER SERVICES 18, FINANCIALS (0.11%, 31/05/ %) 0.11 Equity Investment Instruments 3i Infrastructure 483, Aberdeen Asian Income Fund 96, Henderson Far East Income 52, Financial Services Henderson 851,427 1, , Non-Equity Investment Instruments City Merchants High Yield Trust 36, Non-Life Insurance Beazley 331, TOTAL FINANCIALS 3, FIXED INCOME (1.56%, 31/05/ %) 1.56 Corporate Bonds AA Bond 6.269% 02/07/2043 4,356,000 4, AA Bond 9.5% 31/07/2043 4,496,000 4, ASIF III Jersey 5.375% 14/10/2016 6,119,000 6, Gatwick Funding 5.75% 23/01/2039 4,098,000 4, Heathrow Funding 5.225% 15/02/ ,052,000 11, Heathrow Funding 6.75% 03/12/2028 5,183,000 6, Porterbrook Rail Finance 5.5% 20/04/2019 6,144,000 6, QBE Capital Funding 7.5% 24/05/2041 4,506,000 4, WPP 6% 04/04/2017 3,544,000 3, , TOTAL FIXED INCOME 54, HEALTH CARE (0.35%, 31/05/ %) 0.35 Pharmaceuticals & Biotechnology Shire 440,699 12, , TOTAL HEALTH CARE 12,

38 Cautious Managed Fund Portfolio statement (continued) JERSEY (continued) 3.97 INDUSTRIALS (0.51%, 31/05/ %) 0.51 General Industrials Wolseley 219,201 7, , Industrial Engineering Kentz 78, Support Services Experian 804,581 9, Regus 506,481 1, , TOTAL INDUSTRIALS 17, OIL & GAS (0.09%, 31/05/ %) 0.09 Oil & Gas Producers Heritage Oil 165, Oil Equipment, Services & Distribution Cape 24, Petrofac 219,514 2, , TOTAL OIL & GAS 3, TOTAL JERSEY 138, LUXEMBOURG (0.89%, 31/05/ %) 0.89 BASIC MATERIALS (0.02%, 31/05/ %) 0.02 Chemicals AZ Electronic Materials 266, TOTAL BASIC MATERIALS FINANCIALS (0.00%, 31/05/ %) 0.00 Non-Equity Investment Instruments Bilfinger Berger Global Infrastructure 118, Bilfinger Berger Global Infrastructure Rights 11/12/ , TOTAL FINANCIALS

39 Cautious Managed Fund Portfolio statement (continued) LUXEMBOURG (continued) 0.89 FIXED INCOME (0.86%, 31/05/ %) 0.86 Corporate Bonds CNH Industrial Finance Europe 6.25% 09/03/2018 4,373,000 4, European Investment Bank 8.75% 25/08/2017 8,066,000 10, European Investment Bank 5.375% 07/06/2021 3,051,000 3, Gaz Capital (Gazprom) 6.605% 13/02/2018 2,314,000 2, Glencore Finance Europe 6.5% 27/02/2019 5,400,000 6, HeidelbergCement Finance 8.5% 31/10/2019 3,690,000 3, , TOTAL FIXED INCOME 30, TELECOMMUNICATIONS (0.01%, 31/05/ %) 0.01 Fixed Line Telecommunications Colt 262, TOTAL TELECOMMUNICATIONS TOTAL LUXEMBOURG 31, MEXICO (0.43%, 31/05/ %) 0.43 FIXED INCOME (0.43%, 31/05/ %) 0.43 Corporate Bonds America Movil 5.75% 28/06/2030 7,282,000 8, America Movil 6.375% 06/09/2073 6,847,000 7, , TOTAL FIXED INCOME 15, TOTAL MEXICO 15, NETHERLANDS (3.21%, 31/05/ %) 3.21 FIXED INCOME (3.21%, 31/05/ %) 3.21 Corporate Bonds ABN AMRO Bank 7.125% 06/07/2022 5,606,000 5, BMW Finance 3.375% 14/12/2018 4,356,000 4, Deutsche Bahn Finance 1.375% 30/10/2017 5,637,000 5, Deutsche Telekom International Finance 6.5% 08/04/2022 6,458,000 7, Deutsche Telekom International Finance 8.875% 27/11/2028 3,872,000 5, E.ON International Finance 6% 30/10/2019 5,150,000 6, E.ON International Finance 5.875% 30/10/2037 6,850,000 8, Enel Finance International 5.625% 14/08/2024 2,460,000 2, Enel Finance International 5.75% 14/09/2040 4,333,000 4, Highbury Finance 7.017% 20/03/2023 5,160,264 6, ING Bank 5.375% 15/04/2021 5,125,000 5, ING Bank 6.875% 29/05/2023 7,781,000 8, Koninklijke KPN 5% 18/11/2026 3,977,000 4, Linde Finance 8.125% 14/07/2066 5,338,000 6, OI European 6.75% 15/09/2020 2,537,000 2, Petrobras Global Finance 5.375% 01/10/2029 5,125,000 4, RWE Finance 5.625% 06/12/ , RWE Finance 6.25% 03/06/2030 2,634,000 3,

40 Cautious Managed Fund Portfolio statement (continued) NETHERLANDS (continued) 3.21 FIXED INCOME (continued) 3.21 Corporate Bonds (continued) RWE Finance 6.125% 06/07/2039 3,350,000 3, Siemens Financieringsmaatschappij 6.125% 14/09/2066 5,888,000 6, Swiss Reinsurance % Perpetual 7,150,000 7, Ziggo Bond 8% 15/05/2018 3,075,000 2, , TOTAL FIXED INCOME 112, TOTAL NETHERLANDS 112, SINGAPORE (0.00%, 31/05/ %) 0.00 INDUSTRIALS (0.00%, 31/05/ %) 0.00 Electronic & Electrical Equipment XP Power 7, TOTAL INDUSTRIALS TOTAL SINGAPORE SPAIN (0.56%, 31/05/ %) 0.56 CONSUMER SERVICES (0.16%, 31/05/ %) 0.16 Travel & Leisure International Consolidated Airlines 1,525,885 5, , TOTAL CONSUMER SERVICES 5, FIXED INCOME (0.40%, 31/05/ %) 0.40 Corporate Bonds Iberdrola Finanzas 7.375% 29/01/2024 1,650,000 1, Santander International Debt 3.16% 01/12/2015 2,600,000 2, Telefonica Emisiones 5.375% 02/02/2018 5,226,000 5, Telefonica Emisiones 5.289% 09/12/2022 3,500,000 3, , TOTAL FIXED INCOME 13, TOTAL SPAIN 19, SWEDEN (0.14%, 31/05/ %) 0.14 FIXED INCOME (0.14%, 31/05/ %) 0.14 Corporate Bonds Svenska Handelsbanken 3% 20/11/2020 5,000,000 5, , TOTAL FIXED INCOME 5, TOTAL SWEDEN 5,

41 Cautious Managed Fund Portfolio statement (continued) SWITZERLAND (0.53%, 31/05/ %) 0.53 CONSUMER GOODS (0.08%, 31/05/ %) 0.08 Beverages Coca-Cola 158,483 2, , TOTAL CONSUMER GOODS 2, FIXED INCOME (0.45%, 31/05/ %) 0.45 Corporate Bonds UBS 6.625% 11/04/ ,267,000 15, , TOTAL FIXED INCOME 15, TOTAL SWITZERLAND 18, UNITED STATES (3.79%, 31/05/ %) 3.79 FIXED INCOME (3.79%, 31/05/ %) 3.79 Corporate Bonds Amgen 4% 13/09/ ,249,000 9, AT&T 5.875% 28/04/2017 2,500,000 2, AT&T 5.5% 15/03/2027 4,050,000 4, AT&T 7% 30/04/2040 2,200,000 2, Bank of America 7% 31/07/2028 5,700,000 7, Citigroup 5.875% 01/07/2024 4,427,000 4, Citigroup 4.5% 03/03/2031 3,075,000 2, Citigroup 6.8% 25/06/2038 6,970,000 9, General Electric Capital 5.5% 07/06/2021 4,884,000 5, General Electric Capital 4.875% 18/09/ ,248,000 13, General Electric Capital 6.5% 15/09/2067 6,761,000 7, Goldman Sachs 7.125% 07/08/2025 6,490,000 8, Merrill Lynch 7.75% 30/04/2018 7,350,000 8, MetLife 5.25% 29/06/2020 5,696,000 6, National Capital Instruments FRN 1.171% Perpetual 12,250,000 9, Pfizer 6.5% 03/06/2038 3,400,000 4, Rabobank 5.556% Perpetual 7,744,000 7, Time Warner Cable 5.75% 02/06/2031 5,502,000 4, Verizon Wireless Capital 8.875% 18/12/2018 1,084,000 1, Wal-Mart Stores 5.625% 27/03/2034 2,919,000 3, Wal-Mart Stores 4.875% 19/01/2039 6,160,000 6, , TOTAL FIXED INCOME 131, TOTAL UNITED STATES 131,

42 Cautious Managed Fund Portfolio statement (continued) DERIVATIVES (0.01%, 31/05/ %) 0.01 Forward Currency Contracts Bought EUR596,000 for GBP497,354 Settlement 23/12/ (1) 0.00 Bought EUR1,201,000 for GBP1,004,012 Settlement 23/12/ (3) 0.00 Bought EUR1,059,000 for GBP885,795 Settlement 23/12/ (4) 0.00 Bought EUR4,483,000 for GBP3,778,797 Settlement 23/12/ (44) 0.00 Bought EUR118,610,298 for GBP100,484,865 Settlement 23/12/ (1,672) (0.05) Sold EUR104,690,600 for GBP88,035,372 Settlement 23/12/ Sold EUR4,429,000 for GBP3,776,006 Settlement 23/12/ Sold EUR3,589,000 for GBP3,014,581 Settlement 23/12/ Sold EUR3,858,000 for GBP3,228,490 Settlement 23/12/ Sold EUR1,236,698 for GBP1,042,163 Settlement 23/12/ Sold EUR314,000 for GBP264,022 Settlement 23/12/ Sold EUR167,000 for GBP141,142 Settlement 23/12/ Sold EUR326,000 for GBP272,981 Settlement 23/12/ Sold EUR23,000 for GBP19,501 Settlement 23/12/ (764) (0.02) Futures Contracts Euro Bobl Futures December 2013 (40) Euro Bund Futures December (20) 0.00 FTSE 100 Index Futures December FTSE 250 Index Futures December , TOTAL DERIVATIVES Investment assets^ 3,403, Net other assets 82, Total net assets 3,485, All holdings are ordinary shares or stock units and admitted to official stock exchange listings unless otherwise stated. s are denominated in Sterling unless otherwise stated. Stocks shown as GDR's represent Global Depositary Receipts. ^ Including derivative liabilities. * Real Estate Investment Trust. ** Prior period comparatives have been restated. Related party. Scottish Widows Investment Partnership (SWIP). This investment is a related party. 40

43 Cautious Managed Fund Portfolio statement (continued) Rating Block Investment grade (AAA to BBB-) 1,365, Non-Investment grade (BB+ to C) 54, Unrated 18, Total bonds 1,438, Other 2,047, Total net assets 3,485, The credit ratings used in the above table have been supplied by Standard & Poor's, Moody's or Fitch Ratings. 41

44 Cautious Managed Fund Statement of total return Income 30 November November 2012 Net capital (losses)/gains (7,310) 257,997 Revenue 62,856 62,663 Expenses (10,985) (10,434) Finance costs: Interest - (2) Net revenue before taxation 51,871 52,227 Taxation (4,613) (4,555) Net revenue after taxation 47,258 47,672 Total return before distributions 39, ,669 Finance costs: Distributions (47,257) (47,680) Change in net assets attributable to shareholders from investment activities (7,309) 257,989 Statement of change in net assets attributable to shareholders 30 November November 2012 Opening net assets attributable to shareholders 3,566,205 3,226,848 Amounts receivable on issue of shares 42,498 50,570 Amounts payable on cancellation of shares (161,871) (191,307) (119,373) (140,737) Stamp duty reserve tax (55) (92) Change in net assets attributable to shareholders from investment activities (see Statement of total return above) (7,309) 257,989 Retained distributions on accumulation shares 46,371 46,633 Closing net assets attributable to shareholders 3,485,839 3,390,641 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. 42

45 Cautious Managed Fund Balance sheet (unaudited) 30 November May 2013 ASSETS Portfolio of investments 3,404,950 3,502,733 Debtors 40,523 39,420 Cash and bank balances 52,309 36,276 Total other assets 92,832 75,696 Total assets 3,497,782 3,578,429 LIABILITIES Derivative liabilities 1, Creditors 10,199 12,133 Total other liabilities 10,199 12,133 Total liabilities 11,943 12,224 Net assets attributable to shareholders 3,485,839 3,566,205 43

46 Ethical Fund Investment markets overview Investment objective The investment objective of the Ethical Fund is to achieve capital growth in the long term by investing in companies whose activities are considered ethical, both in terms of their primary activities as well as in the means of achieving them. Investment policy To select an international portfolio of companies with an above average potential for growth. The majority of the portfolio will be invested in the following areas: a. Pollution control b. Environmental protection c. Efficient utilisation of material and energy resources d. Clean fuels and alternative energy systems e. Healthcare services and medical technology f. Enabling technologies considered to be beneficial to society Additionally, the Fund will strive to avoid investments in companies involved in any of the following areas: Alcohol, animal testing, armaments, banking, child labour, fur trade, gambling, links with undemocratic regimes, nuclear power production, polluting the environment, pornography and tobacco. UCITS scheme The Fund would qualify as a UCITS scheme operating under Chapter 5 of the COLL sourcebook if it were in itself an Open-Ended Investment Company in respect of which an authorisation order made by the FCA were in force. Not more than 10 the scheme property may consist of units in collective investment schemes. Synthetic risk and reward profile 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 the fund Risk Profiles we used to determine our investment portfolios (where we used our own methodology to take an overall look at the funds' risks and aims and group our funds into Cautious/Medium, Medium, Medium/Adventurous, Adventurous Profiles). This Fund is ranked at 6 because it has experienced high levels of volatility over the past 5 years. The synthetic risk and reward indicator shown above is accurate and there have been no changes to this ranking to date. 44

47 Ethical Fund Investment markets overview (continued) Investment review Performance 01/06/13 01/06/12 01/06/11 01/06/10 01/06/09 01/06/08 to 30/11/13 to 31/05/13 to 31/05/12 to 31/05/11 to 31/05/10 to 31/05/09 % % % % % % Ethical Fund (2.15) (20.42) FTSE World Index (5.95) (19.59) Source: Financial Express for Ethical Fund and FTSE World Index after 1 June 2013, Morningstar between 1 June 2011 and 31 May 2013 and Lipper for previous periods. Basis: For Ethical Fund, percentage growth, total return Share Class C (gross of tax and charges) at 12.00pm. Basis: For FTSE World Index, revenue reinvested and gross of expenses at close of business. Past performance is not a guide to future performance. The value of an investment and the revenue from it may go up and down and you may get back less than invested. The period under review has been positive for the world s stock markets, with share prices rising over the course of the last six months. Actions by central banks have given investors the confidence to move away from the safe havens of cash and government bonds in favour of assets that carry a slightly higher level of risk. Investors were also emboldened by signs of improvement in the global economy. The Fund produced a gross return of 2.90% over the review period. The comparable return from its benchmark, the FTSE World Index, was 1.66%. In the UK, the economy is performing better than many had forecast, with most areas on the rise. The housing sector in particular has rebounded strongly, leading many to fear a bubble may be forming. However, the Bank of England has acted, removing its Funding for Lending scheme for mortgage buyers. The Bank has also initiated forward guidance. This will see interest rates remain low until unemployment hits 7% (currently 7.4%). Meanwhile, US equities underwent a period of volatility following the Federal Reserve s (the Fed) announcement that it plans to slow its current $85 billion a month quantitative easing programme. Investors have therefore treated some recent positive economic announcements with suspicion, fearing that they may hasten the cuts to the scheme. In November, focus fell on a much better-thanexpected jobs report. This time however, the good news failed to dampen investor confidence. Instead, market participants looked to Janet Yellen, the soon-to-be-head of the Fed, for reassurance. She commented that the US jobs market and its wider economy are both performing far short of their potential. US equity markets surged, reaching a series of record highs before closing for the Thanksgiving holiday. European equities also delivered robust gains over the period. Forward-looking indicators have improved, but unemployment remains a concern, while credit conditions are poor. Elsewhere, Japanese stocks did well, partly on the back of Tokyo s successful bid for the 2020 Olympics. As a whole, emerging markets lagged behind their developed peers. At asset level, the holding in ITV made a strongly positive contribution. The stock s performance was boosted by management investment in improving the quality of ITV s television programmes for subsequent distribution to the US and other markets. Orix, a Japanese real estate company, also had a positive influence on returns. We added the stock to the portfolio in June. Throughout 2013, the Fund has been overweight in the industrials sector, which has continued to benefit from improved spending and industrial activity in domestic US and UK markets. Regionally, we remain overweight in UK equities which have performed well despite concerns amid wider developed equity markets. The US and eurozone look set to end 2013 on a weak note, but the similarities end there. For the US, this is mainly a technical correction following a strong third quarter. Congress has struck a deal preventing another government shutdown next year. The debt ceiling remains an issue for spring 2014, but is not expected to derail a recovery underpinned by improving consumer spending, accelerating business investment and a stronger housing market. Nor is asset-purchase tapering, which the Fed has announced will begin in January The eurozone s problems are more enduring, and we expect a weak expansion next year. Growth will continue to be largely accounted for by exports, leaving the recovery vulnerable to any unexpected euro appreciation. Scottish Widows Investment Partnership Limited December

48 Ethical Fund Performance record Calendar Highest Lowest Net revenue year price price per share p p p 2008 Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW1* Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW ** Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW * From launch on 24 November ** Up to 30 November With effect from 6 December 2010, Clerical Medical (CM) Share Class 1 was rebranded Scottish Widows (SW) Share Class 1. 46

49 Ethical Fund Performance record (continued) Net asset Net asset value of value Shares share class per share in issue p as at 31 May 2011 Share Class A 4,841, ,741,233 Share Class C 13,340, ,840,000 Share Class F 2,429, ,090,000 Share Class G 69, ,000 Share Class I 150,715, ,605,373 Share Class SW1 70, ,000 as at 31 May 2012 Share Class A 4,401, ,471,233 Share Class C 11,473, ,485,000 Share Class F 3,212, ,425,000 Share Class G 78, ,000 Share Class I 135,391, ,545,373 Share Class SW1 104, ,000 as at 31 May 2013 Share Class A 5,055, ,051,233 Share Class C 13,423, ,370,000 Share Class F 4,773, ,535,000 Share Class G 167, ,000 Share Class I 158,852, ,220,373 Share Class SW1 41, ,000 Share Class A 5,246, ,016,233 Share Class C 13,431, ,370,000 Share Class F 5,268, ,385,000 Share Class G 197, ,000 Share Class I 155,699, ,850,373 Share Class SW1 42, ,000 Ongoing charges figure The ongoing charges figure (OCF) is the total expenses paid by each share class for the period, annualised, against its average net asset value. It excludes the cost of buying or selling assets for the Fund (unless these assets are shares of another fund). The OCF can fluctuate as underlying costs change. as at 31 May 2013 % % Share Class A Share Class C Share Class F Share Class G Share Class I # Share Class SW # Fees are payable by institutional investors in this share class to the ACD outside the Fund. 47

50 Ethical Fund Portfolio statement BRAZIL (0.00%, 31/05/ %) 0.00 CANADA (0.00%, 31/05/ %) 0.00 CHINA (2.29%, 31/05/ %) 2.29 Technology Baidu ADR 41,332 4, , TOTAL CHINA 4, DENMARK (0.00%, 31/05/ %) 0.00 FRANCE (0.00%, 31/05/ %) 0.00 GERMANY (9.13%, 31/05/ %) 9.13 Basic Materials Bayer 57,524 4, , Consumer Goods Continental 49,714 6, , Health Care Fresenius Medical Care 126,326 5, , TOTAL GERMANY 16, HONG KONG (4.91%, 31/05/ %) 4.91 Oil & Gas Kunlun Energy 2,468,000 2, , Utilities CIMC Enric 2,898,000 2, GCL-Poly Energy 15,261,000 3, , TOTAL HONG KONG 8, IRELAND (0.00%, 31/05/ %) 0.00 ISLE OF MAN (2.21%, 31/05/ %) 2.21 Utilities Greenko 2,698,555 3, , TOTAL ISLE OF MAN 3,

51 Ethical Fund Portfolio statement (continued) JAPAN (8.97%, 31/05/ %) 8.97 Consumer Goods Toyota Motor 140,700 5, , Financials Mitsubishi Estate 278,000 4, ORIX 542,500 6, , TOTAL JAPAN 16, NORWAY (0.00%, 31/05/ %) 0.00 SWITZERLAND (9.74%, 31/05/ %) 9.74 Consumer Goods Swatch 4,820 1, , Financials UBS 431,928 5, , Health Care Roche 27,208 4, , Industrials Adecco 58,275 2, Pentair 70,528 3, , TOTAL SWITZERLAND 17, TAIWAN (1.62%, 31/05/ %) 1.62 Financials Cathay Financial 3,031,345 2, , TOTAL TAIWAN 2, UNITED KINGDOM (15.39%, 31/05/ %) Basic Materials Johnson Matthey 132,953 4, , Consumer Services ITV 2,321,729 4, ,

52 Ethical Fund Portfolio statement (continued) UNITED KINGDOM (continued) Financials Aon 87,848 4, Prudential 378,764 4, , Industrials Melrose Industries 1,057,181 3, Travis Perkins 68,394 1, , Oil & Gas BG 171,621 2, , Telecommunications BT 839,707 3, , TOTAL UNITED KINGDOM 27, UNITED STATES (45.33%, 31/05/ %) Consumer Goods Beacon Roofing Supply 186,198 4, Mead Johnson Nutrition 73,094 3, TripAdvisor 66,707 3, , Consumer Services LKQ 156,192 3, O'Reilly Automotive 29,600 2, , Financials American Express 91,935 4, American International 169,078 5, SolarWinds 92,554 1, , Health Care Cooper 56,380 4, McKesson 56,345 5, UnitedHealth 60,105 2, , Industrials Danaher 101,556 4, Hexcel 200,184 5, Roadrunner Transportation Systems 267,790 4, ,

53 Ethical Fund Portfolio statement (continued) UNITED STATES (continued) Oil & Gas Halliburton 79,699 2, , Technology ANSYS 56,315 2, EMC 186,041 2, F5 Networks 56,014 2, Google 11,195 7, Solera 85,535 3, Teradata 116,976 3, , TOTAL UNITED STATES 81, Investment assets 179, Net other assets Total net assets 179, All investments are ordinary shares or stock units and are admitted to an official stock exchange listing unless otherwise stated. s are denominated in Sterling unless otherwise stated. Stocks shown as ADR's represent American Depositary Receipts. 51

54 Ethical Fund Statement of total return Income 30 November November 2012 Net capital gains 7,860 13,268 Revenue 760 1,123 Expenses (145) (124) Finance costs: Interest (1) (1) Net revenue before taxation Taxation (81) (126) Net revenue after taxation Total return before equalisation 8,393 14,140 Finance costs: Equalisation (30) (25) Change in net assets attributable to shareholders from investment activities 8,363 14,115 Statement of change in net assets attributable to shareholders 30 November November 2012 Opening net assets attributable to shareholders 182, ,661 Amounts receivable on issue of shares 3,505 10,043 Amounts payable on cancellation of shares (14,296) (13,916) (10,791) (3,873) Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 8,363 14,115 Closing net assets attributable to shareholders 179, ,903 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. 52

55 Ethical Fund Balance sheet (unaudited) 30 November May 2013 ASSETS Portfolio of investments 179, ,758 Debtors Cash and bank balances 684 2,239 Total other assets 993 2,688 Total assets 180, ,446 LIABILITIES Creditors Distribution payable on income shares - 2,215 Total other liabilities 262 3,133 Net assets attributable to shareholders 179, ,313 53

56 Fund of Investment Trusts Investment markets overview Investment objective The investment objective of the Fund of Investment Trusts is to achieve capital growth in the long term by investing mainly in investment trust companies. Investment policy To select investment trust companies which the managers believe are investing in attractive markets and having a manager expected to outperform the relevant asset category. The portfolio will also include trusts that are likely to benefit from reconstruction. UCITS scheme The Fund would qualify as a UCITS scheme operating under Chapter 5 of the COLL sourcebook if it were in itself an Open-Ended Investment Company in respect of which an authorisation order made by the FCA were in force. Not more than 10 the scheme property may consist of units in collective investment schemes. Synthetic risk and reward profile 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 the fund Risk Profiles we used to determine our investment portfolios (where we used our own methodology to take an overall look at the funds' risks and aims and group our funds into Cautious/Medium, Medium, Medium/Adventurous, Adventurous Profiles). This Fund is ranked at 6 because it has experienced high levels of volatility over the past 5 years. The synthetic risk and reward indicator shown above is accurate and there have been no changes to this ranking to date. Investment review Performance 01/06/13 01/06/12 01/06/11 01/06/10 01/06/09 01/06/08 to 30/11/13 to 31/05/13 to 31/05/12 to 31/05/11 to 31/05/10 to 31/05/09 % % % % % % Fund of Investment Trusts (10.17) (27.88) Benchmark* (6.59) (20.38) Source: Financial Express for Fund of Investment Trusts after 1 June 2013, Morningstar between 1 June 2011 and 31 May 2013 and Lipper for previous periods. Basis: Percentage growth, total return Share Class C (gross of tax and charges) at 12.00pm. *50% FTSE All Share Index and 50% FTSE World ex UK Index. Source: Scottish Widows Investment Partnership. Basis: Revenue reinvested and gross of expenses at close of business. Past performance is not a guide to future performance. The value of an investment and the revenue from it may go up and down and you may get back less than invested. 54

57 Fund of Investment Trusts Investment markets overview (continued) Investment review (continued) The period under review has been positive for the world s stock markets, with share prices rising over the course of the last six months. Actions by central banks have given investors the confidence to move away from the safe havens of cash and government bonds in favour of assets that carry a slightly higher level of risk. Investors were also energised by signs of improvement in the global economy. The Fund produced a gross return of 4.55% over the period. This compares to a benchmark* return of 3.40%. In the UK, the economy is performing better than many had forecast, with most areas on the rise. The housing sector in particular has rebounded strongly, leading many to fear a bubble may be forming. However, the Bank of England has acted, removing its Funding for Lending scheme for mortgage buyers. The Bank has also initiated forward guidance. This will see interest rates remain low until unemployment hits 7% (currently 7.4%). The pick up in the domestic economy was reflected in the strong performance of the Fund s small and mid cap-focussed holdings. Trusts such as BlackRock Smallers, Herald and Diverse Income were notable contributors to returns. We locked in profits in these and other UK-oriented funds and, as a result, net exposure to the UK market edged up only slightly during the period. Meanwhile, US equities underwent a period of volatility following the Federal Reserve s announcement that it plans to slow its current $85 billion a month quantitative easing programme. s surged towards the end of the period, however, reaching a series of record highs before closing for the Thanksgiving holiday. There was little movement in the Fund s US allocation during the period. Riverstone Energy, BACIT and JPMorgan Global Convertibles Income Fund, all of which were acquired via initial public offering (IPO) during the period, offer unique exposure to attractive asset classes with a focus on US securities. IPOs (and secondary fund raisings) were a particular feature of the six months under review, as investors sought higher returns than those available on bonds and cash. We participated in a number of issues with a focus on those funds which offer attractive yields, based on our view that this should help prevent them from trading at too wide a discount in the event of a market correction. European equities also delivered robust gains over the period. Forward-looking indicators have improved, but unemployment remains a concern, while credit conditions are poor. We took advantage of a narrowing of discounts to net asset value in a number of European funds to lock in profits but, even so, the Fund s European allocation increased modestly during the period. Elsewhere, Japanese stocks did well, partly on the back of Tokyo s successful bid for the 2020 Olympics. As a whole, emerging markets lagged behind their developed peers. We made a further reduction in BlackRock World Mining as part of a lessening of the Fund s emerging market exposure. After another good period for investors in investment trusts (buoyed by narrowing discounts and some IPO enthusiasm), it is natural to be a little cautious in terms of outlook. Nevertheless, equities continue to offer good value relative to bonds and cash. Stock market bulls will be further encouraged by the fact that we are starting to see a pick up in take-over activity. On balance, we feel it is appropriate to remain fully invested with a continuing focus on growth-oriented trusts, a stance that has served us well throughout the year. *50% FTSE All Share Index and 50% FTSE World ex UK Index. Scottish Widows Investment Partnership Limited December

58 Fund of Investment Trusts Performance record Calendar Highest Lowest Net revenue year price price per share p p p 2008 Share Class A Share Class C Share Class F Share Class G Share Class I Share Class A Share Class C Share Class F Share Class G Share Class I Share Class A Share Class C Share Class F Share Class G Share Class I Share Class A Share Class C Share Class F Share Class G Share Class I Share Class A Share Class C Share Class F Share Class G Share Class I * Share Class A Share Class C Share Class F Share Class G Share Class I * Up to 30 November

59 Fund of Investment Trusts Performance record (continued) Net asset Net asset value of value Shares share class per share in issue p as at 31 May 2011 Share Class A 19,058, ,496,260 Share Class C 49,060, ,756,000 Share Class F 11,416, ,042,000 Share Class G 277, ,000 Share Class I 318,428, ,415,540 as at 31 May 2012 Share Class A 16,016, ,336,260 Share Class C 35,869, ,131,000 Share Class F 11,857, ,082,000 Share Class G 210, ,000 Share Class I 248,986, ,865,540 as at 31 May 2013 Share Class A 19,137, ,151,260 Share Class C 38,614, ,116,000 Share Class F 16,129, ,317,000 Share Class G 559, ,758,000 Share Class I 283,758, ,715,540 Share Class A 19,872, ,106,260 Share Class C 38,554, ,156,000 Share Class F 17,310, ,137,000 Share Class G 735, ,183,000 Share Class I 287,841, ,980,540 Ongoing charges figure The ongoing charges figure (OCF) is the total expenses paid by each share class for the period, annualised, against its average net asset value. It excludes the cost of buying or selling assets for the Fund (unless these assets are shares of another fund). The OCF can fluctuate as underlying costs change. as at 31 May 2013 % % Share Class A Share Class C Share Class F Share Class G Share Class I # # Fees are payable by institutional investors in this share class to the ACD outside the Fund. 57

60 Fund of Investment Trusts Portfolio statement UNITED KINGDOM (99.97%, 31/05/ %) FINANCIALS (99.37%, 31/05/ %) Equity Investment Instruments Aberforth Smaller Companies Trust 360,894 3, Alliance Trust 638,571 2, BACIT 3,600,000 3, Baillie Gifford Japan Trust 385,000 1, Bankers Investment Trust 350,000 2, Biotech Growth Trust 1,483,415 6, BlackRock British Smaller Companies Trust 1,075,335 8, BlackRock Frontier Investment Trust 1,848,375 2, BlackRock Greater Europe Investment Trust 1,500,000 3, BlackRock Latin American Investment Trust 161, BlackRock World Mining Trust 975,643 4, British Empire Securities and General Trust 1,676,557 8, Caledonia Investments 122,981 2, Edinburgh Dragon Trust 839,867 2, Edinburgh UK Tracker Trust 1,738,584 5, Electra Private Equity 569,238 13, Finsbury Growth & Income Trust 2,035,000 10, Foreign & Colonial Investment Trust 3,676,587 13, Hansa Trust 140,000 1, Hansa Trust 'A' 663,917 5, Henderson Eurotrust 502,115 3, Henderson International Income Trust 2,000,000 2, Henderson Smaller Companies Investment Trust 700,000 3, Henderson Trust 2,625,039 6, Herald Investment Trust 1,052,137 7, HgCapital Trust 600,000 6, Invesco Asia Trust 2,400,000 3, JPMorgan American Investment Trust 943,884 11, JPMorgan Claverhouse Investment Trust 460,000 2, JPMorgan Emerging s Investment Trust 184,000 1, JPMorgan Japanese Investment Trust 3,160,000 7, JPMorgan Mid Cap Investment Trust 1,133,708 8, JPMorgan Overseas Investment Trust 591,800 5, JPMorgan Overseas Investment Trust Subscription Shares 118, Law Debenture Corporation 517,170 2, Martin Currie Portfolio Investment Trust 1,716,623 2, Mercantile Investment Trust 613,096 9, Monks Investment Trust 3,960,902 15, Murray International 614,082 6, North American Income Trust 1,620,000 13, Pantheon International Participations 298,912 3, Pantheon International Participations 'Redeemable' 158,662 1, Perpetual Income and Growth Investment Trust 1,000,000 3, Personal Assets Trust 20,216 6, Polar Capital Global Financials Trust 3,250,000 3, Polar Capital Global Financials Trust Subscription Shares 650, Polar Capital Technology Trust 375,000 1, Polar Capital Technology Trust Subscription Shares 75, RIT Capital Partners 466,039 5, Ruffer Investment 1,600,000 3, Schroder AsiaPacific Fund 2,657,539 6,

61 Fund of Investment Trusts Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (continued) Equity Investment Instruments (continued) Schroder UK Growth Fund 4,505,000 8, Schroder UK Mid Cap Fund 1,037,879 4, Scottish American Investment Company 1,072,352 2, Scottish Investment Trust 1,337,217 7, Scottish Mortgage Investment Trust 1,211,754 12, Templeton Emerging s Investment Trust 1,061,054 5, The Edinburgh Investment Trust 216,075 1, The European Investment Trust 319,963 2, TR Property Investment Trust 3,330,872 7, Troy Income & Growth Trust 8,250,000 4, Witan Investment Trust 1,222,395 7, Worldwide Healthcare Trust 317,108 3, , Financial Services Foresight Solar Fund 750, Impax Environmental s 1,768,114 2, LMS Capital 2,284,683 1, The Cayenne Trust 2,400,000 3, , Non-Equity Investment Instruments Better Capital 3,500,000 3, Better Capital Fund II 2,146,605 3, BlackRock North American Income Trust 3,000,000 3, Damille Investment II* 3,200,000 2, Diverse Income Trust 9,583,700 7, Harbourvest Senior Loans Europe 1,000, JPMorgan Global Convertibles Income Fund 2,200,000 2, Riverstone Energy 200,000 1, , TOTAL FINANCIALS 362, FIXED INCOME (0.60%, 31/05/ %) 0.60 Electra Private Equity 5% Convertible Bond ,800 2, , TOTAL FIXED INCOME 2, TOTAL UNITED KINGDOM 364,

62 Fund of Investment Trusts Portfolio statement (continued) SWITZERLAND (0.14%, 31/05/ %) 0.14 HEALTH CARE (0.14%, 31/05/ %) 0.14 Pharmaceuticals & Biotechnology BB Biotech 5, TOTAL HEALTH CARE TOTAL SWITZERLAND DERIVATIVES ((0.01%), 31/05/ %) (0.01) Forward Currency Contracts Bought USD6,523,600 for GBP4,095,488 Settlement 30/12/ (102) (0.02) Sold USD6,523,600 for GBP4,039,731 Settlement 30/12/ (56) (0.01) Futures Contracts FTSE 100 Index Futures December TOTAL DERIVATIVES (47) (0.01) Investment assets^ 364, Net other liabilities (361) (0.10) Total net assets 364, All investments are ordinary shares or stock units and are admitted to an official stock exchange listing unless otherwise stated. s are denominated in Sterling unless otherwise stated. ^ Including derivative liabilities. * Offshore Fund. 60

63 Fund of Investment Trusts Statement of total return Income 30 November November 2012 Net capital gains 18,705 24,682 Revenue 3,350 3,287 Expenses (445) (392) Finance costs: Interest (1) (3) Net revenue before taxation 2,904 2,892 Taxation - - Net revenue after taxation 2,904 2,892 Total return before distributions 21,609 27,574 Finance costs: Distributions (2,904) (2,892) Change in net assets attributable to shareholders from investment activities 18,705 24,682 Statement of change in net assets attributable to shareholders 30 November November 2012 Opening net assets attributable to shareholders 358, ,939 Amounts receivable on issue of shares 7,131 7,977 Amounts payable on cancellation of shares (19,844) (23,529) (12,713) (15,552) Stamp duty reserve tax (7) (7) Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 18,705 24,682 Retained distributions on accumulation shares Closing net assets attributable to shareholders 364, ,219 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. 61

64 Fund of Investment Trusts Balance sheet (unaudited) 30 November May 2013 ASSETS Portfolio of investments 364, ,945 Debtors 3,169 1,372 Cash and bank balances 3,265 14,189 Total other assets 6,434 15,561 Total assets 371, ,506 LIABILITIES Derivative liabilities Creditors 4,077 1,083 Distribution payable on income shares 2,718 2,902 Total other liabilities 6,795 3,985 Total liabilities 6,897 4,305 Net assets attributable to shareholders 364, ,201 62

65 Smaller Companies Fund Investment markets overview Investment objective The investment objective of the Smaller Companies Fund is to achieve long term capital growth through investing mainly in smaller companies, principally in the UK. Investment policy To concentrate the core of the portfolio on smaller companies with above average potential for growth. UCITS scheme The Fund would qualify as a UCITS scheme operating under Chapter 5 of the COLL sourcebook if it were in itself an Open-Ended Investment Company in respect of which an authorisation order made by the FCA were in force. Not more than 10 the scheme property may consist of units in collective investment schemes. Synthetic risk and reward profile 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 the fund Risk Profiles we used to determine our investment portfolios (where we used our own methodology to take an overall look at the funds' risks and aims and group our funds into Cautious/Medium, Medium, Medium/Adventurous, Adventurous Profiles). This Fund is ranked at 6 because it has experienced high levels of volatility over the past 5 years. The synthetic risk and reward indicator shown above is accurate and there have been no changes to this ranking to date. Investment review Performance 01/06/13 01/06/12 01/06/11 01/06/10 01/06/09 01/06/08 to 30/11/13 to 31/05/13 to 31/05/12 to 31/05/11 to 31/05/10 to 31/05/09 % % % % % % Smaller Companies Fund (7.24) (27.16) Benchmark* (9.36) (27.61) Source: Financial Express for Smaller Companies Fund after 1 June 2013, Morningstar between 1 June 2011 and 31 May 2013 and Lipper for previous periods. Basis: Percentage growth, total return Share Class C (gross of tax and charges) at 12.00pm. *Numis Smaller Companies ex Investment Trusts Index after 1 July 2012 and FTSE Smaller Companies ex Investment Trusts Index up to 30 June Source: Scottish Widows Investment Partnership. Basis: Revenue reinvested and gross of expenses at close of business. Past performance is not a guide to future performance. The value of an investment and the revenue from it may go up and down and you may get back less than invested. 63

66 Smaller Companies Fund Investment markets overview (continued) Investment review (continued) UK smaller companies delivered robust returns over the six month review period. Driving sentiment was the ongoing extraordinary support from the world s central banks and the improving economic landscape. In the former camp, the US Federal Reserve has been particularly active, buying $85 billion-a-month of bonds and other securities. This programme is designed to keep long-term interest rates subdued, while flooding the market with liquidity. As a result of these measures, equity markets in the developed world have been on a mostly upward trajectory as yield-hungry investors have sought superior returns. This policy has been so influential that fears that it could be curtailed or tapered created pockets of turbulence in the market throughout the review period. Indeed, shares dropped dramatically in June after the idea was first mooted by US Federal Reserve (Fed) Chairman Ben Bernanke. At the time of writing, Mr Bernanke announced that the scheme would be reduced by $10 billion a month, starting in January s took the news in their stride. Closer to home, the UK economic recovery is taking hold so confirmed an upbeat Mark Carney as he delivered his second quarterly Inflation Report as governor of the Bank of England (BoE). Growth was revised higher, with 1.6% now pencilled in for this year, up from the 1.4% predicted in August. Inflation, meanwhile, is under control. Small-caps, which tend to perform better when an economy is resurgent, were the main beneficiaries of this improving landscape. Turning to performance, a position in Sports Direct boosted the Fund s showing. The company s share price hit an all-time high after it announced excellent annual earnings and delivered an upbeat outlook statement. Elsewhere, fashion retailer Ted Baker also saw its shares in demand after delivering excellent first-half results. Pre-tax profits were almost double for the period, while sales were up a third year-on-year. The firm attributed the strong performance to its ongoing international expansion. Positions in Howden Joinery, Robert Walters and Topps Tiles also did well. By contrast, international recruitment firm SThree had a tough six months. Its stock sold off after the company updated the market with a disappointing set of results, with SThree reporting softness in the technology sector as a negative factor. Meanwhile, the Fund s lack of exposure to Atkins, BTG and Ocado Group relative to the benchmark was a drag on performance. The latter, an online grocer, saw its stock price soar on booming sales. Looking ahead, after several false starts the UK economy is finally gathering momentum, with growth in 2014 expected to reach a sevenyear high. We anticipate UK GDP of 2.4% next year, up from 1.4% in So far, the recovery has been narrowly focused on the consumer sector and housing market. A recent flattening off of retail sales points to continued pressure on household incomes from weak wage growth, emphasising the need for a broadening out of activity next year to investment and exports. Meanwhile, the BoE has launched forward guidance. This stipulates that rates will remain low until unemployment reaches 7%. But with the jobless rate falling faster than the Bank had forecast (currently 7.4%), some think this could arrive earlier than expected, thereby undermining the policy. That said, Mr Carney has said time and again that the 7% level was a way station at which point policy would be rethought, rather than an automatic trigger for action. Nonetheless, UK plc looks in good shape as we head into As for the portfolio, as we approached year-end we continued to take profits from those stocks that will no longer be constituents in the Numis Smaller Companies Index in To that end, we have sold our shareholdings in Close Brothers and Playtec. We are currently reviewing those stocks that will come into the benchmark index on 1 January 2014 in order to identify any undervalued companies. Scottish Widows Investment Partnership Limited December

67 Smaller Companies Fund Performance record Calendar Highest Lowest Net revenue year price price per share p p p 2008 Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW1* Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW ** Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW * From launch on 24 November ** Up to 30 November With effect from 6 December 2010, Clerical Medical (CM) Share Class 1 was rebranded Scottish Widows (SW) Share Class 1. 65

68 Smaller Companies Fund Performance record (continued) Net asset Net asset value of value Shares share class per share in issue p as at 31 May 2011 Share Class A 5,718, ,542,516 Share Class C 25,703, ,513,000 Share Class F 7,153, ,288,000 Share Class G 322, ,155,000 Share Class I 162,390, ,996,702 Share Class SW1 647, ,000 as at 31 May 2012 Share Class A 4,789, ,222,516 Share Class C 20,496, ,573,000 Share Class F 8,184, ,563,000 Share Class G 357, ,395,000 Share Class I 137,740, ,431,702 Share Class SW1 552, ,000 as at 31 May 2013 Share Class A 6,026, ,907,516 Share Class C 24,570, ,324,000 Share Class F 12,107, ,838,000 Share Class G 632, ,785,000 Share Class I 174,449, ,086,702 Share Class SW1 50, ,000 Share Class A 6,742, ,787,516 Share Class C 26,953, ,394,000 Share Class F 14,565, ,043,000 Share Class G 853, ,070,000 Share Class I 187,573, ,321,702 Share Class SW1 58, ,000 Ongoing charges figure The ongoing charges figure (OCF) is the total expenses paid by each share class for the period, annualised, against its average net asset value. It excludes the cost of buying or selling assets for the Fund (unless these assets are shares of another fund). The OCF can fluctuate as underlying costs change. as at 31 May 2013 % % Share Class A Share Class C Share Class F Share Class G Share Class I # Share Class SW # Fees are payable by institutional investors in this share class to the ACD outside the Fund. 66

69 Smaller Companies Fund Portfolio statement UNITED KINGDOM (89.18%, 31/05/ %) BASIC MATERIALS (1.43%, 31/05/ %) 1.43 Chemicals Victrex 209,470 3, , TOTAL BASIC MATERIALS 3, CONSUMER GOODS (4.07%, 31/05/ %) 4.07 Food Producers Cranswick 373,375 4, , Household Goods & Home Construction Redrow 1,897,325 5, , TOTAL CONSUMER GOODS 9, CONSUMER SERVICES (27.77%, 31/05/ %) Food & Drug Retailers Booker 1,900,406 3, , General Retailers Dixons Retail 5,009,580 2, Howden Joinery 1,384,564 4, Lookers 3,100,761 3, Sports Direct International 341,992 2, Ted Baker 228,193 4, Topps Tiles 2,077,352 2, WH Smith 389,549 3, , Media Chime Communications 871,664 2, Euromoney Institutional Investor 391,311 4, InternetQ 421,634 1, ITE 1,431,492 4, STV 587,620 1, , Travel & Leisure Marston's 948,716 1, National Express 1,945,445 5, Restaurant 840,140 4, Spirit Pub 5,249,548 3, Sportech 2,408,404 2, Thomas Cook 2,299,878 4, William Hill 567,339 2, , TOTAL CONSUMER SERVICES 65,

70 Smaller Companies Fund Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (15.65%, 31/05/ %) Financial Services F&C Asset Management 51, Jupiter Fund Management 955,206 3, Liontrust Asset Management 614,333 1, Paragon 1,763,741 6, , Non-Life Insurance Novae 570,402 3, , Real Estate Investment & Services Development Securities 742,107 1, Grainger 2,257,068 4, LSL Property Services 796,616 3, Savills 703,973 4, , Real Estate Investment Trusts Hansteen 5,199,800 5, Shaftesbury 415,513 2, , TOTAL FINANCIALS 37, HEALTH CARE (1.61%, 31/05/ %) 1.61 Pharmaceuticals & Biotechnology Dechra Pharmaceuticals 556,712 3, , TOTAL HEALTH CARE 3, INDUSTRIALS (27.61%, 31/05/ %) Construction & Materials Kier 348,250 6, , Electronic & Electrical Equipment Acal 631,563 2, Domino Printing Sciences 331,420 2, E2V Technologies 1,465,585 2, TT electronics 1,776,839 3, Xaar 234,425 2, , General Industrials RPC 963,844 4, ,

71 Smaller Companies Fund Portfolio statement (continued) UNITED KINGDOM (continued) INDUSTRIALS (continued) Industrial Engineering Fenner 1,392,571 6, Melrose 1,526,226 4, Senior 1,301,459 3, , Support Services Interserve 691,034 4, John Menzies 266,120 2, Lavendon 1,289,002 2, Northgate 766,371 3, PayPoint 409,691 4, Robert Walters 1,451,253 4, SIG 2,011,827 4, Sthree 664,238 2, , TOTAL INDUSTRIALS 65, OIL & GAS (2.57%, 31/05/ %) 2.57 Oil & Gas Producers Afren 1,114,861 1, EnQuest 3,091,835 4, , TOTAL OIL & GAS 6, TECHNOLOGY (4.90%, 31/05/ %) 4.90 Software & Computer Services Fidessa 157,584 3, Micro Focus International 585,792 4, , Technology Hardware & Equipment Pace 1,109,576 3, , TOTAL TECHNOLOGY 11, TELECOMMUNICATIONS (3.57%, 31/05/ %) 3.57 Fixed Line Telecommunications Kcom 3,718,590 3, , Mobile Telecommunications Carphone Warehouse 1,685,449 4, , TOTAL TELECOMMUNICATIONS 8, TOTAL UNITED KINGDOM 211,

72 Smaller Companies Fund Portfolio statement (continued) CANADA (0.44%, 31/05/ %) 0.44 OIL & GAS (0.44%, 31/05/ %) 0.44 Oil & Gas Producers Caracal Energy 244,013 1, , TOTAL OIL & GAS 1, TOTAL CANADA 1, GUERNSEY (1.75%, 31/05/ %) 1.75 FINANCIALS (0.85%, 31/05/ %) 0.85 Financial Services Sherborne Investors (Guernsey) 'B' 2,226,127 2, , TOTAL FINANCIALS 2, OIL & GAS (0.90%, 31/05/ %) 0.90 Oil & Gas Producers Indus Gas 242,259 2, , TOTAL OIL & GAS 2, TOTAL GUERNSEY 4, IRELAND (3.17%, 31/05/ %) 3.17 CONSUMER GOODS (1.11%, 31/05/ %) 1.11 Food Producers Greencore 1,374,142 2, , TOTAL CONSUMER GOODS 2, INDUSTRIALS (2.06%, 31/05/ %) 2.06 Support Services Grafton 782,020 4, , TOTAL INDUSTRIALS 4, TOTAL IRELAND 7, ISLE OF MAN (0.18%, 31/05/ %) 0.18 TECHNOLOGY (0.00%, 31/05/ %)

73 Smaller Companies Fund Portfolio statement (continued) ISLE OF MAN (continued) 0.18 UTILITIES (0.18%, 31/05/ %) 0.18 Electricity KSK Power Ventur 283, TOTAL UTILITIES TOTAL ISLE OF MAN JERSEY (3.35%, 31/05/ %) 3.35 FINANCIALS (2.78%, 31/05/ %) 2.78 Non-Life Insurance Beazley 2,674,416 6, , TOTAL FINANCIALS 6, OIL & GAS (0.57%, 31/05/ %) 0.57 Oil Equipment, Services & Distribution Cape 494,223 1, , TOTAL OIL & GAS 1, TOTAL JERSEY 7, SINGAPORE (0.45%, 31/05/ %) 0.45 INDUSTRIALS (0.45%, 31/05/ %) 0.45 Electronic & Electrical Equipment XP Power 73,144 1, , TOTAL INDUSTRIALS 1, TOTAL SINGAPORE 1, DERIVATIVES (0.01%, 31/05/ %) 0.01 Future Contracts FTSE 250 Index Futures December TOTAL DERIVATIVES Investment assets 233, Net other assets 3, Total net assets 236, All investments are ordinary shares or stock units and are admitted to an official stock exchange listing unless otherwise stated. s are denominated in Sterling unless otherwise stated. 71

74 Smaller Companies Fund Statement of total return Income 30 November November 2012 Net capital gains 33,330 23,126 Revenue 3,146 2,547 Expenses (297) (239) Finance costs: Interest - (1) Net revenue before taxation 2,849 2,307 Taxation - (4) Net revenue after taxation 2,849 2,303 Total return before distributions 36,179 25,429 Finance costs: Distributions (2,849) (2,303) Change in net assets attributable to shareholders from investment activities 33,330 23,126 Statement of change in net assets attributable to shareholders 30 November November 2012 Opening net assets attributable to shareholders 217, ,121 Amounts receivable on issue of shares 22,539 32,212 Amounts payable on cancellation of shares (37,214) (34,843) (14,675) (2,631) Stamp duty reserve tax (10) (17) Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 33,330 23,126 Retained distributions on accumulation shares Closing net assets attributable to shareholders 236, ,805 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. 72

75 Smaller Companies Fund Balance sheet (unaudited) 30 November May 2013 ASSETS Portfolio of investments 233, ,381 Debtors 1,538 1,093 Cash and bank balances 5,691 1,863 Total other assets 7,229 2,956 Total assets 240, ,337 LIABILITIES Creditors 1,323 1,868 Distribution payable on income shares 2,421 2,632 Total other liabilities 3,744 4,500 Net assets attributable to shareholders 236, ,837 73

76 Special Situations Fund Investment markets overview Investment objective The investment objective of the Special Situations Fund is to achieve capital growth by active investment in UK companies with above average potential for growth. Investment policy To select and actively manage a portfolio of large, medium and small sized companies with above average potential for capital growth. Advantage will be taken of opportunities offered by management pressures, recovery situations and market anomalies. UCITS scheme The Fund would qualify as a UCITS scheme operating under Chapter 5 of the COLL sourcebook if it were in itself an Open-Ended Investment Company in respect of which an authorisation order made by the FCA were in force. Not more than 10 the scheme property may consist of units in collective investment schemes. Synthetic risk and reward profile 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 the fund Risk Profiles we used to determine our investment portfolios (where we used our own methodology to take an overall look at the funds' risks and aims and group our funds into Cautious/Medium, Medium, Medium/Adventurous, Adventurous Profiles). This Fund is ranked at 6 because it has experienced high levels of volatility over the past 5 years. The synthetic risk and reward indicator shown above is accurate and there have been no changes to this ranking to date. Investment review Performance 01/06/13 01/06/12 01/06/11 01/06/10 01/06/09 01/06/08 to 30/11/13 to 31/05/13 to 31/05/12 to 31/05/11 to 31/05/10 to 31/05/09 % % % % % % Special Situations Fund (16.99) (26.72) FTSE All Share Index (8.00) (23.37) Source: Financial Express for Special Situations Fund and FTSE All Share Index after 1 June 2013, Morningstar between 1 June 2011 and 31 May 2013 and Lipper for previous periods. Basis: For Special Situations Fund, percentage growth, total return Share Class C (gross of tax and charges) at 12.00pm. Basis: For FTSE All Share Index, revenue reinvested and gross of expenses at close of business. Past performance is not a guide to future performance. The value of an investment and the revenue from it may go up and down and you may get back less than invested. 74

77 Special Situations Fund Investment markets overview (continued) Investment review (continued) UK equity markets recorded modest gains over the period, with the FTSE up a mere 1%. Sentiment has been driven by extremely accommodative central bank monetary policy (such as quantitative easing, historically low interest rates, etc.) and improving economic conditions. In the former camp, the US Federal Reserve (Fed) has been particularly active, buying $85 billion-a-month of bonds and other securities. This programme is designed to keep long-term interest rates subdued, while flooding the market with liquidity. As a result of these measures, equity markets in the developed world have been on a mostly upward trajectory as yield-hungry investors have sought superior returns. This policy has been so influential that fears that it could be curtailed or tapered created pockets of turbulence in the market throughout the review period. Indeed, shares dropped dramatically in June after tapering was first mooted by Fed Chairman Ben Bernanke. Closer to home, the UK economic recovery is taking hold so confirmed an upbeat Mark Carney as he delivered his second quarterly Inflation Report as governor of the Bank of England (BoE). Growth was revised higher, with 1.6% now pencilled in for this year, up from the 1.4% predicted in August. Inflation, meanwhile, is under control. On the markets, consumer discretionaries had a good second half of By contrast, mining and industrial metal firms struggled. Turning to the portfolio, programme maker and broadcaster ITV continued its remarkable turnaround since its low point in March The firm is starting to find success with its production business, ITV Studios, which is internationalising ITV s revenues and reducing the company s reliance on cyclical advertising. Elsewhere, a holding in GKN, the car and aerospace engineer, did well. The company delivered better-than-expected profits for the second quarter, prompting a series of upgrades. Other highlights included Whitbread and Resolution. By contrast, KSK Power and Great Eastern Energy had another difficult six months thanks to ongoing challenges in the domestic Indian power market. Meanwhile, our relative lack of exposure to Vodafone was a negative for the portfolio. Shares in the firm climbed strongly after it announced it was selling its US wireless stake to partner Verizon for $124 billion. Looking ahead, while equity markets have struggled to push meaningfully higher in recent months, they are still predominantly in economic-recovery mode. Indeed, latest surveys suggest the UK economy is gaining momentum. Corporate confidence is also strengthening, as surveys report an improving export outlook (helped by the EU finally exiting recession) and increasing investment intentions. There is talk that some cyclical stocks may have run a bit too far and that valuations are becoming stretched. Investors, though, are loath to miss the next leg of the rally, which continues to drive momentum. As for Fed tapering, at the time of writing Mr Bernanke announced that the scheme would be reduced by $10 billion-a-month, starting January s took the news in their stride. In general, we remain relatively upbeat about the prospects for UK markets. That said, the economic landscape remains fragile and susceptible to shocks. As such, clear communication from the world s central bankers will remain of primary importance into Scottish Widows Investment Partnership Limited December

78 Special Situations Fund Performance record Calendar Highest Lowest Net revenue year price price per share p p p 2008 Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW1* Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW ** Share Class A Share Class C Share Class F Share Class G Share Class I Share Class SW * From launch on 24 November ** Up to 30 November With effect from 6 December 2010, Clerical Medical (CM) Share Class 1 was rebranded Scottish Widows (SW) Share Class 1. 76

79 Special Situations Fund Performance record (continued) Net asset Net asset value of value Shares share class per share in issue p as at 31 May 2011 Share Class A 6,005, ,111,123 Share Class C 65,580, ,258,000 Share Class F 16,263, ,484,000 Share Class G 367, ,380,000 Share Class I 139,824, ,720,877 Share Class SW1 52, ,000 as at 31 May 2012 Share Class A 4,599, ,921,123 Share Class C 45,333, ,618,000 Share Class F 16,243, ,309,000 Share Class G 386, ,775,000 Share Class I 102,864, ,695,877 Share Class SW1 53, ,000 as at 31 May 2013 Share Class A 5,333, ,716,123 Share Class C 48,515, ,783,000 Share Class F 22,303, ,904,000 Share Class G 794, ,915,000 Share Class I 114,634, ,835,877 Share Class SW1 31, ,000 Share Class A 5,453, ,666,123 Share Class C 47,445, ,808,000 Share Class F 23,671, ,229,000 Share Class G 1,009, ,585,000 Share Class I 115,741, ,585,877 Share Class SW1 32, ,000 Ongoing charges figure The ongoing charges figure (OCF) is the total expenses paid by each share class for the period, annualised, against its average net asset value. It excludes the cost of buying or selling assets for the Fund (unless these assets are shares of another fund). The OCF can fluctuate as underlying costs change. as at 31 May 2013 % % Share Class A Share Class C Share Class F Share Class G Share Class I # Share Class SW # Fees are payable by institutional investors in this share class to the ACD outside the Fund. 77

80 Special Situations Fund Portfolio statement UNITED KINGDOM (78.07%, 31/05/ %) BASIC MATERIALS (6.12%, 31/05/ %) 6.12 Chemicals Johnson Matthey 188,515 6, , Mining Rio Tinto 176,776 5, , TOTAL BASIC MATERIALS 11, CONSUMER GOODS (6.05%, 31/05/ %) 6.05 Automobiles & Parts GKN 882,006 3, , Beverages Diageo 50, Household Goods & Home Construction Berkeley 195,472 4, , Personal Goods Burberry 181,993 2, , TOTAL CONSUMER GOODS 11, CONSUMER SERVICES (13.66%, 31/05/ %) General Retailers Next 80,447 4, Sports Direct International 348,227 2, , Media ITV 2,333,123 4, Reed Elsevier 577,995 5, , Travel & Leisure easyjet 303,776 4, Whitbread 154,069 5, , TOTAL CONSUMER SERVICES 26, FINANCIALS (18.46%, 31/05/ %) Banks Barclays 2,794,477 7, HSBC 1,213,085 8, ,

81 Special Situations Fund Portfolio statement (continued) UNITED KINGDOM (continued) FINANCIALS (continued) Financial Services F&C Asset Management 1,139,374 1, Tullett Prebon 456,896 1, , Life Insurance Legal & General 1,716,867 3, Prudential 509,451 6, , Non-Life Insurance RSA Insurance 3,343,642 3, , Real Estate Investment Trusts Hammerson 654,735 3, , TOTAL FINANCIALS 35, HEALTH CARE (8.58%, 31/05/ %) 8.58 Pharmaceuticals & Biotechnology AstraZeneca 148,233 5, GlaxoSmithKline 706,573 11, , TOTAL HEALTH CARE 16, INDUSTRIALS (8.72%, 31/05/ %) 8.72 Aerospace & Defence BAE Systems 1,053,582 4, Meggitt 533,403 2, , Industrial Engineering IMI 188,128 2, Melrose Industries 1,223,613 3, , Support Services Travis Perkins 182,471 3, , TOTAL INDUSTRIALS 16,

82 Special Situations Fund Portfolio statement (continued) UNITED KINGDOM (continued) OIL & GAS (7.34%, 31/05/ %) 7.34 Oil & Gas Producers BG 531,518 6, Black Lion Resources* 33, Royal Dutch Shell 'B' 348,716 7, , TOTAL OIL & GAS 14, TECHNOLOGY (1.39%, 31/05/ %) 1.39 Technology Hardware & Equipment ARM 262,253 2, , TOTAL TECHNOLOGY 2, TELECOMMUNICATIONS (4.44%, 31/05/ %) 4.44 Fixed Line Telecommunications BT 2,288,680 8, , TOTAL TELECOMMUNICATIONS 8, UTILITIES (3.31%, 31/05/ %) 3.31 Electricity Drax 923,360 6, , TOTAL UTILITIES 6, TOTAL UNITED KINGDOM 150, GUERNSEY (5.27%, 31/05/ %) 5.27 FINANCIALS (1.49%, 31/05/ %) 1.49 Financial Services Sherborne Investors (Guernsey) 'A' 3, Life Insurance Resolution 835,771 2, , TOTAL FINANCIALS 2, OIL & GAS (3.78%, 31/05/ %) 3.78 Oil & Gas Producers Indus Gas 830,346 7, , TOTAL OIL & GAS 7,

83 Special Situations Fund Portfolio statement (continued) GUERNSEY (continued) 5.27 TECHNOLOGY (0.00%, 31/05/ %) 0.00 TOTAL GUERNSEY 10, INDIA (1.04%, 31/05/ %) 1.04 OIL & GAS (1.04%, 31/05/ %) 1.04 Oil & Gas Producers Great Eastern Energy GDR 1,218,930 2, , TOTAL OIL & GAS 2, TOTAL INDIA 2, ISLE OF MAN (1.13%, 31/05/ %) 1.13 UTILITIES (1.13%, 31/05/ %) 1.13 Electricity KSK Power Ventur 1,460,994 2, , TOTAL UTILITIES 2, TOTAL ISLE OF MAN 2, JERSEY (11.97%, 31/05/ %) BASIC MATERIALS (0.00%, 31/05/ %) 0.00 CONSUMER SERVICES (3.84%, 31/05/ %) 3.84 Media WPP 547,041 7, , TOTAL CONSUMER SERVICES 7, FINANCIALS (1.46%, 31/05/ %) 1.46 Real Estate Investment Trusts LXB Retail Properties 2,352,139 2, , TOTAL FINANCIALS 2, HEALTH CARE (3.80%, 31/05/ %) 3.80 Pharmaceuticals & Biotechnology Shire 267,501 7, , TOTAL HEALTH CARE 7,

84 Special Situations Fund Portfolio statement (continued) JERSEY (continued) INDUSTRIALS (1.33%, 31/05/ %) 1.33 Construction & Materials Breedon Aggregates 7,085,297 2, , TOTAL INDUSTRIALS 2, OIL & GAS (1.54%, 31/05/ %) 1.54 Oil & Gas Producers Genel Energy 284,026 2, , TOTAL OIL & GAS 2, TOTAL JERSEY 23, Investment assets 188, Net other assets 4, Total net assets 193, All investments are ordinary shares or stock units and are admitted to an official stock exchange listing unless otherwise stated. s are denominated in Sterling unless otherwise stated. Stock shown as GDR's represent Global Depositary Receipts. * Suspended security. 82

85 Special Situations Fund Statement of total return Income 30 November November 2012 Net capital gains 4,838 18,823 Revenue 2,323 2,632 Expenses (521) (483) Net revenue before taxation 1,802 2,149 Taxation (4) - Net revenue after taxation 1,798 2,149 Total return before equalisation 6,636 20,972 Finance costs: Equalisation (33) (60) Change in net assets attributable to shareholders from investment activities 6,603 20,912 Statement of change in net assets attributable to shareholders 30 November November 2012 Opening net assets attributable to shareholders 191, ,481 Amounts receivable on issue of shares 5,661 5,334 Amounts payable on cancellation of shares (10,516) (11,758) (4,855) (6,424) Stamp duty reserve tax (5) (8) Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 6,603 20,912 Closing net assets attributable to shareholders 193, ,961 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. 83

86 Special Situations Fund Balance sheet (unaudited) 30 November May 2013 ASSETS Portfolio of investments 188, ,310 Debtors 675 1,033 Cash and bank balances 4,868 1,575 Total other assets 5,543 2,608 Total assets 194, ,918 LIABILITIES Creditors Distribution payable on income shares - 3,799 Total other liabilities 664 4,306 Net assets attributable to shareholders 193, ,612 84

87 Distribution tables Cautious Managed Fund Gross revenue Tax credit Net revenue Equalisation Distribution payable Distribution paid 31 Jan Jan Jan Jan Jan Jan 2013 pence per share pence per share pence per share pence per share pence per share pence per share Interim Distribution Group 1: Shares purchased prior to 1 June 2013 Group 2: Shares purchased on or after 1 June 2013 Share Class C Group Group Share Class F Group Group Share Class G Group Group Share Class I Group Group The above distributions for share classes C, F, G and I will be accumulated to the capital of the Fund on or before 31 January Corporate Tax A shareholder liable to corporation tax receives this distribution, excluding equalisation, as follows: the dividend together with the tax credit is received as franked investment income the dividend is received as an annual payment (non foreign element) received after the deduction of income tax at the lower rate and is liable to corporation tax. The tax deemed to be deducted is treated as income tax the dividend is received as an annual payment (foreign element) received after the deduction of income tax at the lower rate and is liable to corporation tax. It is treated as foreign income in the hands of the corporate investor and is liable to corporation tax. The associated deemed tax is treated as foreign tax in the hands of the investor, who may be able to claim double tax relief. Investors cannot reclaim any of this deemed tax on the foreign element from HM Revenue & Customs. 85

88 Distribution tables (continued) Fund of Investment Trusts Gross revenue Tax credit Net revenue Equalisation Distribution payable Distribution paid 31 Jan Jan Jan Jan Jan Jan 2013 pence per share pence per share pence per share pence per share pence per share pence per share Interim Distribution Group 1: Shares purchased prior to 1 June 2013 Group 2: Shares purchased on or after 1 June 2013 Share Class A Group Group Share Class C Group Group Share Class F Group Group Share Class G Group Group Share Class I Group Group The above distributions for share classes C, F and G will be accumulated to the capital of the Fund on or before 31 January The above distributions for share classes A and I will be payable on or before 31 January Corporate Tax A shareholder liable to corporation tax receives this distribution, excluding equalisation, as follows: the dividend together with the tax credit is received as franked investment income the dividend is received as an annual payment (non foreign element) received after the deduction of income tax at the lower rate and is liable to corporation tax. The tax deemed to be deducted is treated as income tax the dividend is received as an annual payment (foreign element) received after the deduction of income tax at the lower rate and is liable to corporation tax. It is treated as foreign income in the hands of the corporate investor and is liable to corporation tax. The associated deemed tax is treated as foreign tax in the hands of the investor, who may be able to claim double tax relief. Investors cannot reclaim any of this deemed tax on the foreign element from HM Revenue & Customs. 86

89 Distribution tables (continued) Smaller Companies Fund Gross revenue Tax credit Net revenue Equalisation Distribution payable Distribution paid 31 Jan Jan Jan Jan Jan Jan 2013 pence per share pence per share pence per share pence per share pence per share pence per share Interim Distribution Group 1: Shares purchased prior to 1 June 2013 Group 2: Shares purchased on or after 1 June 2013 Share Class A Group Group Share Class C Group Group Share Class F Group Group Share Class G Group Group Share Class I Group Group Share Class SW1 Group Group The above distributions for share classes C, F, G and SW1 will be accumulated to the capital of the Fund on or before 31 January The above distributions for share classes A and I will be payable on or before 31 January Corporate Tax A shareholder liable to corporation tax receives this distribution, excluding equalisation, as follows: the dividend together with the tax credit is received as franked investment income the dividend is received as an annual payment (non foreign element) received after the deduction of income tax at the lower rate and is liable to corporation tax. The tax deemed to be deducted is treated as income tax the dividend is received as an annual payment (foreign element) received after the deduction of income tax at the lower rate and is liable to corporation tax. It is treated as foreign income in the hands of the corporate investor and is liable to corporation tax. The associated deemed tax is treated as foreign tax in the hands of the investor, who may be able to claim double tax relief. Investors cannot reclaim any of this deemed tax on the foreign element from HM Revenue & Customs. 87

90 Additional Information HBOS Specialised Investment Funds ICVC is an Open-Ended Investment Company with variable capital and the shareholders are not liable for the debts of the Company. Where applicable, Scottish Widows Share Class 1 is referenced as SW1. In the future there may be other Funds launched. The Prospectus and the Instrument of Incorporation of the Company are available from the ACD upon request. The value of an investment and the revenue from it may go up and down and you may get back less than invested. Past performance is not a guide to future performance. This Report and Financial Statements should not be regarded as an offer to sell or an invitation to buy investment products. Directory HBOS Specialised Investment Funds ICVC Trinity Road Halifax West Yorkshire HX1 2RG Authorised Corporate Director (ACD) and Registrar* Depositary* HBOS Investment Fund Managers Limited Trinity Road Halifax West Yorkshire HX1 2RG Regulatory Body The Financial Conduct Authority 25 The North Colonnade Canary Wharf London E14 5HS Investment Adviser* Scottish Widows Investment Partnership Limited 33 Old Broad Street London EC2N 1HZ Address of Register of Shareholders HBOS Investment Fund Managers Limited 1 Lovell Park Road Leeds West Yorkshire LS1 1NS State Street Trustees Limited 20 Churchill Place Canary Wharf London E14 5HJ Auditors PricewaterhouseCoopers LLP Erskine House Queen Street Edinburgh EH2 4NH Investment Adviser* 0 * Authorised and regulated by the Financial Conduct Authority. 88

91 HBOS Investment Fund Managers Limited (Registered in England No ). Registered Office: Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Services Authority. HBOS Investment Fund Managers Limited. Registered Office: Trinity Road, Halifax, West Yorkshire HX1 2RG. Registered in England No RANDA 09/11 Authorised and regulated by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS RANDA 01/14