Why Choose the Portfolio Funds Why Choose the Portfolio Funds? The Portfolio funds, launched at the end of January 2002 were very well received by the IFA market. This was the first of many successful fund ranges launched by Scottish Widows using Russell Investments' multi-manager approach. The following information outlines the features of each portfolio and highlights the robustness of the proposition for risk controlled investing. Russell Investments Russell pioneered the manager of managers approach over thirty years ago and now manage over £92 billion* in their Multi Asset Multi Style Multi Manager™ funds. Russell’s clients include NSPCC, Civil Aviation Authority, United Airlines and Shell (USA) to name a few. They won PlanSponsor’s Best in class Multi-Manager of the year 2007 and Global Pensions’ Manager of Managers of the year in 2007 and 2008 respectively *Source: Russell Investments, 30 June 2009. Access to managers Russell Investments has one of the largest manager research units in the world, with over 720 investment professionals researching 5,000 manager products from over 3,000 firms globally. They monitor who they believe are the best 400 and of those, approximately 60 are hand picked to manage investments within each one of the Scottish Widow’s Multi Manager funds. Forward Looking Portfolio Construction There are now more funds available to investors than there are quoted companies on the Worlds' stockmarkets. This provides a bewildering array of choice to the investor. Unfortunately the most common practice and one of the most unreliable is to choose based on past performance. Research across different asset classes and time periods continually proves that past performance provides no predictive value for future performance. A disciplined and rigorous approach to manager selection is needed, one that focuses on the factors influencing their future performance and then constantly monitors the managers. The best way to construct a diversified portfolio of good specialist investment managers with complementary styles is to use proven institutional procedures to decide on,   Appropriate asset allocation, Suitable style approach A rigorous approach to manager selection focusing on the factors that influence the managers' future performance, and then Constantly monitor the managers, remove and replace as necessary Risk Management Risk management through diversification is the key focus of the multi manager funds; there are three levels of diversification used to achieve this. Multi Asset is diversification at a total portfolio level to offer exposure into the UK, International equity markets and bond markets. Multi Style diversification aims for consistent performance relative to the market regardless of whether the value or growth styles are out/underperforming. Finally, Multi Manager diversification offers exposure to the best specialist managers within a geography/sector/etc. rather than using a single generalist investment manager for every area. Russell’s rigorous investment process only exposes funds to risk which is rewarded. When looking at the fund’s risk levels since launch and compare it to the median manager within each fund’s sector, they are found to be comfortably outperforming their median manager. Cautious The Cautious Portfolio offers access to approximately 60 world class investment managers. Each manager is specifically selected to contribute different skills and features to the portfolio and they are structured together to deliver consistent returns. The holdings of the Cautious Portfolio are split 85% to Global Bonds (hedged to sterling), 6% UK and 9% to International Equities. The Cautious Portfolio is in the IMA Global Bond sector. Nearly all funds within this sector only invest in bonds, while the Cautious portfolio has a 15% allocation to equities. These equity holdings are included to provide a degree of long-term growth within the portfolio and to protect the fund in times when bond returns are weak. In addition, the fund’s bond holdings are highly diversified and are all investment grade (BBB or higher), while many other funds in the sector are more specialist, such as Emerging Markets Debt or European High Yield. The consequence of this is that the fund is likely to experience a degree of volatility within its peer group. This does not subtract from the fact that this fund has been designed to deliver consistent modest returns with low volatility in a wide spectrum of economic and investment conditions. Balanced The Balanced Portfolio offers access to approximately 60 world class investment managers. Each manager is specifically selected to contribute different skills and features to the portfolio and they are structured together to deliver consistent returns. The holdings of the Balanced Portfolio are split 50% to Global Bonds (hedged to sterling), 20% to UK and 30% to International Equities. The Balanced Portfolio is in the IMA Cautious Managed sector. This sector allows funds to have a maximum equity exposure of 60%. Balanced portfolio has a 50% allocation to equities. The equity and bond holdings are equally allocated to provide long-term growth within the portfolio and to offer the protection of bonds during the various market cycles. In addition, the fund’s bond holdings are highly diversified and are all investment grade (BBB or higher). 60% of the equity portion is held in international equities, the remaining 40% being invested in UK stocks; the consequence of this is that the fund is likely to experience a degree of volatility within its peer group. This does not subtract from the fact that this fund has been designed to deliver consistent returns with low volatility in a wide spectrum of economic and investment conditions. Progressive The Progressive Portfolio offers access to approximately 60 world class investment managers. Each manager is specifically selected to contribute different skills and features to the portfolio and they are structured together to deliver consistent returns. The holdings of the Progressive Portfolio are split 25% to Global Bonds (hedged to sterling), 30% to UK and 45% to International Equities. The Progressive Portfolio is in the IMA Balanced Managed sector. This sector allows funds to have a maximum equity exposure restricted to 85% of the Fund. Progressive portfolio has a 75% allocation to equities. The equity and bond holdings are allocated to provide long-term growth within the portfolio and to offer the protection of bonds during the various market cycles. In addition, the fund’s bond holdings are highly diversified and are all investment grade (BBB or higher). 60% of the equity portion is held in international equities, the remaining 40% being invested in UK stocks; the consequence of this is that the fund is likely to experience a degree of volatility within its peer group. This does not subtract from the fact that this fund has been designed to deliver consistent returns with low volatility in a wide spectrum of economic and investment conditions. Opportunities The Opportunities Portfolio offers access to approximately 60 world class investment managers. Each manager is specifically selected to contribute different skills and features to the portfolio and they are structured together to deliver consistent returns. The holdings of the Opportunities Portfolio are split 10% to Global Bonds (hedged to sterling), 36% to UK and 54% to International Equities. The Opportunities Portfolio is in the IMA Global Growth sector. This sector specifies funds should have at least 80% of their assets in equities. Opportunities portfolio has a 90% allocation to equities. The equity and bond holdings are allocated to provide long-term growth within the portfolio and to offer a marginal degree of protection through bonds during the various market cycles. In addition, the fund’s 10% bond holdings are highly diversified and are all investment grade (BBB or higher). 60% of the equity portion is held in international equities, the remaining 40% being invested in UK stocks; the consequence of this is that the fund is likely to experience a degree of volatility within its peer group. This fund has been designed to deliver consistent returns with low volatility in a wide spectrum of economic and investment conditions.

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