I N V E S T M E N T S

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I M M EDI AT E I NCOM E PORT FOL IO U PDAT E– OC TOB E R 2018 –

%

The Investment Committee continually monitors our range of fund managers and considers the opportunities and challenges presented by an ever-changing macroeconomic and market environment. This due diligence extends to our range of Growth and Income Portfolios.

This update provides a summary of the recent performance of the Immediate Income Portfolio.

M A R K E T OV E RV I E W

I N V E S T M E N T S

The surprise votes of 2016 echoed through the quarter, as the extended US bull run passed two milestones.

The Brexit and Trump votes in 2016 hinged on promises of major change – the third quarter saw some of those promises beginning to be delivered, albeit in fits and starts.

In the UK, the prime minister finally published her ‘Chequers plan’ for a withdrawal deal with the European Union ahead of the UK’s formal exit in 2019. While she succeeded in pushing it through parliament, EU leaders then warned her that it would not work. “We are at an impasse”, she told the press.

Sterling suffered its sharpest one-day drop against the dollar in a year, although remained significantly up for the year and even ended the quarter slightly higher. Its rise did not help the internationally-oriented FTSE 100. Labour’s leadership then indicated the party was likely to vote against Chequers too. Faced with looming Brexit pressures and deadlines, the Chancellor brought the Budget date forward to 29 October.

Although the Bank of England introduced one interest rate rise in the period, headline growth was sluggish in the UK and across much of Europe too. European stocks ended the period little changed, but the EU did sign the largest bilateral trade deal in history with Japan.

In the US, however, this pattern was reversed, as growth accelerated to 4.2% (annualised) and trade relationships fractured; manufacturing, employment and productivity figures all came in strong.

UK equities

European equities

US equities

Asia Pacific equities

Emerging Markets equities

Japanese equities

Global equities

Gilts

UK corporate bonds

Property

Cash

6.1%

2.6%

20.6%

8.1%

2.0%

20.8%

14.4%

0.6%

0.2%

9.2%

0.7%

Source: Financial Express. Performance figures to 30 September 2018, expressed in sterling on a total return basis. The investment returns in the table above, reflect the performance of the relevant market indices. Please be aware that past performance is not indicative of future performance. The value of an investment may fall as well as rise. Returns on equities cannot be guaranteed. Equities do not provide the security of capital characteristic of a deposit with a bank or building society.

M A R K E T R E T U R NS (one year to 30 September 2018)

I N V E S T M E N T S

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The Immediate Income Portfolio was launched 31 January 2011

-20%

0%

20%

40%

60%

31/01/11 31/01/12 31/01/13 31/01/14 31/01/15 31/01/16 31/01/17

Immediate Income Portfolio ARC Cautious PCI

-20%

0%

20%

40%

60%

31/01/11 31/01/12 31/01/13 31/01/14 31/01/15 31/01/16 31/01/17

Immediate Income Portfolio ARC Cautious PCI

-20%

0%

20%

40%

60%

31/01/11 31/01/12 31/01/13 31/01/14 31/01/15 31/01/16 31/01/17

Immediate Income Portfolio ARC Cautious PCI

-20%

0%

20%

40%

60%

31/01/11 31/01/12 31/01/13 31/01/14 31/01/15 31/01/16 31/01/17

Immediate Income Portfolio ARC Cautious PCI

60%

50%

40%

30%

20%

10%

0%

-10%

-20%

C U MU L AT I V E PE R FOR M A NCE

Since launch (AGR)

Immediate Income Portfolio

3 months

1.70%

0.00% ARC Sterling Cautious PCI

6 months

2.39%

1.55%

1 year

1.60%

0.89%

3 years

18.68%

11.18%

5 years

29.16%

17.22%

5.87%

3.32%

Source: Financial Express/St. James’s Place. Data to 30 September 2018. Performance figures shown assume investment into the Portfolio was made on 31 January 2011 and reflect the performance of the individual funds based on the sequence of underlying fund allocations as determined by St. James’s Place. Past performance of the current fund allocation is shown on the table overleaf. Performance figures since launch have been used where funds are less than one year old. The ARC Sterling Cautious Private Client Index (PCI) provides a representative peer group for the Immediate Income Portfolio. ARC PCI prices are reported monthly.

Portfolio fund allocations are not rebalanced automatically. Client Portfolios are likely to have different fund allocations and, therefore, individual investment experience may vary.

PORT FOL IO PE R FOR M A NC E (UNIT TRUST/ISA – LAUNCH TO 30 SEPTEMBER 2018)

Immediate Income Portfolio

ARC Sterling Cautious PCI

The S&P 500 struck a new record high. More significantly, as the ten-year anniversary of Lehman’s collapse came and went, the S&P clocked what was – by some definitions – the longest bull run in its history.

Little wonder, then, that inflation struck a six-year high, and that the Fed continued its rate rises, delivering its third hike of 2018. Meanwhile, the US imposed sanctions on both Russia and Iran, as well as imposing two rounds of tariffs on billions of dollars’ worth of Chinese imports. The US also signed a NAFTA successor deal with Mexico and cut an 11th hour deal with Canada to make it a true North American affair.

Japan’s economy reported positive momentum, as GDP growth in the second quarter came in at 3% (annualised) and Shinzo Abe won a third term as leader of Japan’s Liberal Democratic Party. The Topix performed strongly, while the Nikkei 225 struck its highest level since 1991.

In market terms, the most obvious victims of recent White House policies – or at least of the rising dollar – have been emerging markets (EMs), and EM fortunes worsened through the period, most notably via political or financial crises in Turkey, Argentina and Brazil.

Jan 11 Sep 17 Sep 18Sep 16Sep 15Sep 14Sep 13Sep 12Sep 11

I N V E S T M E N T S

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PORT FOL IO COM M E N TA RY

The Immediate Income Portfolio achieved a positive return over the period, buoyed by the performance of corporate bonds and, more significantly, global equities.

The Monetary Policy Committee (MPC) of the Bank of England felt sufficiently confident in the state of the economy to raise interest rates by 0.25% during the period, but not confident enough to yet begin tapering off its post-crisis programme of quantitative easing, as the Federal Reserve has begun to do.

Although some UK indicators remained relatively robust, growth was sluggish and business investment fell, while the odds rose on the UK departing the EU without a deal. Government bonds suffered through the period, not least in the UK. The Gilts fund, managed by Wellington, weighed slightly on Portfolio returns.

Corporate bonds enjoyed a stronger quarter. The Corporate Bond fund, managed by Invesco Perpetual, performed well; the fund has exposure to Softbank, which in August announced second-quarter profits of 49%. The Diversified Bond fund, co-managed by Payden & Rygel, Brigade and TwentyFour, was another contributor to returns. It benefited from exposure to the industrial and telecoms sectors.

The Strategic Income fund, co-managed by Schroders, TwentyFour, MidOcean and Bluebay, also enjoyed a strong quarter, TwentyFour Asset Management benefited from its corporate bond exposure to the banking sector, and specifically to Deutsche Pfandbriefbank, a leading German bank focused on real estate and public investment.

Although stocks in some parts of the world struggled through the period, the US’s S&P 500 clocked yet another record high and extended its bull run to 9.5 years – by some counts, the longest in its history. Performance was boosted by strong corporate earnings, which some investors credited to Donald Trump’s package of corporate tax cuts.

The Global Equity Income and Worldwide Income funds both delivered strong returns over the period on the back of US stock market rises. The Global Equity Income fund, managed by Manulife, was aided by its allocation to healthcare but also by specific stock selection. Johnson & Johnson, the 132-year old US pharmaceutical company, posted record profits for the second quarter.

The Property fund, managed by Orchard Street, made a marginal contribution to Portfolio returns over the period. In August, the fund completed the purchase of a 30,000 square foot office-and-retail space in central London.

The price of funds and the income from them may go down as well as up. You may get back less than the amount invested.

I M M E DI AT E I NCOM E PORT FOL IO F U N D A L LOCAT ION

Diversified Bond 20%

Strategic Income 15%

Global Equity Income 10%

Corporate Bond 10%

Gilts 10%

International Corporate Bond 10%

Investment Grade Corporate Bond 10%

Property 10%

Worldwide Income 5%

FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

© S&P Dow Jones LLC 2018. All rights reserved.

I N V E S T M E N T S

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Historic fund performance data and history of the underlying fund allocation for each of the Portfolios is available from your St. James’s Place Partner.• The Portfolio fund split shown overleaf applies to investments made from 22 May 2017. Some funds within your

Portfolio will perform better than others so, over time, those funds will make up a larger proportion of your investments. Consequently, the weighted average yield and average fund charges on your investments will also fluctuate over time. The Portfolio fund allocation will not be rebalanced automatically. You should review your investments regularly to ensure that the balance of risks remains appropriate to your circumstances. Your St. James’s Place Partner will help you to do this.

• Equities do not provide the security of capital characteristic of a deposit with a bank or building society. • The prices of funds and the income from them may go down as well as up. You may not get back the amount invested. • All data is quoted as at 30 September 2018.• This Portfolio has been rated as lower-medium risk. The St. James’s Place ‘A Guide to understanding the balance between

risk and reward including the St. James’s Place Portfolios and funds’, explains investment risk in detail and is available from your St. James’s Place Partner.

Source: Financial Express. Fund performance data to 30 September 2018. All figures are percentage growth on a bid to bid basis for accumulation units, income reinvested and in fund currency. Please be aware that past performance is not indicative of future performance. The price of units and the income from them may go down as well as up. You may not get back as much as you invested.

The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.Members of the St. James’s Place Partnership in the UK represent St. James’s Place Wealth Management plc, which is authorised and regulated by the Financial Conduct Authority.

St. James’s Place Wealth Management plc Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom.Registered in England Number 4113955.

CONS T I T U E N T F U N D PE R FOR M A NC E

The table below shows the past performance of the underlying funds that are currently in the Portfolio.Performance 12 months ending (%)

Source: Financial Express. This chart shows the proportion of total returns from income and capital growth over the previous five rolling 12 month periods to the 30 September 2018. Please be aware that past performance is not indicative of future performance. The price of units and the income from them may go down as well as up. You may not get back as much as you invested.

I M M E DI AT E I NCOM E PORT FOL IO – I N V E S T M E N T R E T U R NS F ROM I NCOM E A N D CA PI TA L GROW T H

Sep 2014 Sep 2015 Sep 2016 Sep 2017 Sep 2018

12%

10%

8%

6%

4%

2%

0%

-2%

-4%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%IncomeCapital Return

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%IncomeCapital Return

FUNDS CURRENTLY IN THE PORTFOLIO

Corporate Bond

Diversified Bond

Gilts (Class L)

Global Equity Income

International Corporate Bond

Investment Grade Corporate Bond

Property

Strategic Income

Worldwide Income

30 September 2018

0.1

0.0

-0.7

7.5

-0.2

0.7

5.2

-0.6

9.0

09/95

11/15

03/09

04/12

04/10

04/09

01/07

11/15

10/16

30 September 2017

6.7

4.5

-3.0

11.3

3.8

4.9

6.3

8.8

-

30 September 2016

7.3

-

5.4

28.2

7.2

2.8

1.5

- -

30 September 2015

-0.1

-

3.8

-1.4

0.6

1.6

7.5

-

-

30 September 2014

5.5

-

1.2

9.2

4.5

3.0

13.2

-

-

Launch Date