Citywire montreux new brand (tmv 11 may 2011)

Standard Life Investments

This document is intended for investment professionals only and must not be relied on by anyone else

May 2011

Ways to take risk that rewards in different scenarios

2

Standard Life Investments

• Premier investment house responsible for €183.1bn of assets

• Third party assets of €83.6bn

• Strong active management track record in traditional asset classes

• Heritage of active asset allocation expertise

Source: Standard Life Investments, 31 December 2010An exchange rate of £1:€1.16745 as at 31 December 2010 has been used

Focus on delivering consistent and repeatable outperformance

3

• Objective Cash benchmark* Benchmark +5%p.a. (gross of fees) performance target over rolling 3 year basis*

• Low volatility Expect 1/3 to 1/2 the risk of equity investment Expected range: 4% to 8% Robust and comprehensive risk controls

• Strategy track record from 2006

• UCITS III funds: UK Unit Trust - £7.3bn** Lux SICAV - € 796m**

Portfolio benchmark is UK 6mth Libor . Performance target is 6mth Libor +5% p.a. (gross of fees) over a rolling 3 year basis.** as at 31st March

Global Absolute Return Strategies Portfolio

4

A complicated outlook

Markets will be volatile in the face of policy decisions and political events

Yes …..

• Global economic recovery has positive momentum

• Companies making profits and putting cash flow to work

But …..

• Policy makers still dealing with aftershocks of the financial crisis

• Both monetary and fiscal policy risks remain high

5Source: RiskMetrics, 28 February 2011

Understanding risk is key

Historical Stresses as of end of February 2011

-30 -28 -26 -24 -22 -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20

Bank Meltdown 2008 (September 12 - October 15, 2008)

Subprime Debacle 2007 (July 15 - August 15, 2007)

Emerging Market Sell-Off 2006 (May 1 - June 8,2006)

Bond Sell-Off (June 14 - July 31, 2003)

Bond Rally (May 1 - June 13, 2003)

Gulf War 2 (March 1-21,2003)

Equity Rally (October 10 - November 27,2002)

Equity Sell-Off (August 23 - October 9, 2002)

Sept 11th

Tech Wreck (April 7- 14, 2000)

Russian/LTCM

Asian Crisis 1997

Mexican Crisis 1995

Rate Rise 94

Gulf War 1990

Black Monday 1987

% Move

Gars SP 500 move over same period


-30 -28 -26 -24 -22 -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20

Bank Meltdown 2008 (September 12 - October 15, 2008)

Subprime Debacle 2007 (July 15 - August 15, 2007)

Emerging Market Sell-Off 2006 (May 1 - June 8,2006)

Bond Sell-Off (June 14 - July 31, 2003)

Bond Rally (May 1 - June 13, 2003)

Gulf War 2 (March 1-21,2003)

Equity Rally (October 10 - November 27,2002)

Equity Sell-Off (August 23 - October 9, 2002)

Sept 11th

Tech Wreck (April 7- 14, 2000)

Russian/LTCM

Asian Crisis 1997

Mexican Crisis 1995

Rate Rise 94

Gulf War 1990

Black Monday 1987

% Move

Gars SP 500 move over same period


6

Correlations that were low …

Pre-crisis correlations low

Source: HSBC

7

… are now harder to hedge

Post-crisis correlations remain high

Source: HSBC

8

Global Absolute Return Strategies SICAV performance

Source: Standard Life Investments, gross performance from 12/6/2006 to 31/03/2011* Source: Standard Life Investments simulated € performance of £, institutional pooled pension portfolio to the 26 January 2011. GARS SICAV portfolio performance from the 27 January 2011 ** Source: Thomson Datastream, 6 month Euribor and MSCI World (£)

55

60

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

140

145

150

155

Jun/

06

Aug/0

6

Oct/0

6

Dec/0

6

Feb/0

7

Apr/0

7

Jun/

07

Aug/0

7

Oct/0

7

Dec/0

7

Feb/0

8

Apr/0

8

Jun/

08

Aug/0

8

Oct/0

8

Dec/0

8

Feb/0

9

Apr/0

9

Jun/

09

Aug/0

9

Oct/0

9

Dec/0

9

Feb/1

0

Apr/1

0

Jun/

10

Aug/1

0

Oct/1

0

Dec/1

0

Feb/1

1

€ GARS (gross) * Global Equities ** Cash (Euribor) ** Target Return (gross)

VolatilityGlobal Equities 15.6%GARS SICAV 6.2%(annualised, using monthly data from 01/07/2006 to 31/03/2011)

9

Global Absolute Return Strategies performance

Source: Standard Life Investments, gross performance from 12/6/2006 to 31/03/2011* Source: Standard Life Investments simulated € performance of £, institutional pooled pension portfolio to the 26 January 2011. GARS SICAV portfolio performance from the 27 January 2011 ** Source: Thomson Datastream, 6 month Euribor and MSCI World

2.34.8

-0.6

0.2 0.6 0.2

6.7

15.3

10.07.8

11.3

20.1

-4.5

7.3

0.2 0.3 0.3 0.3 0.1 0.3 1.2 1.2 2.2 2.81.1 1.5

4.9 4.5

-3.3

2.2

11.0

-0.8-3.6

-0.8

8.7

27.9

4.1

-2.0

20.1

26.7

-37.2

-1.2

-50

-40

-30

-20

-10

0

10

20

30

40

Q2 '10 Q3 '10 Q4'10 Q1'11 Mar'11 YTD 1 Year(p.a.)

2 Years(p.a.)

3 Years(p.a.)

4 Years(p.a.)

2010 2009 2008 2007

% R

etu

rn

GARS (gross)* 6 Month Euribor ** Global Equities (€) **

10

• Many investors have a short time horizon

• Markets inefficient on time horizons greater than 1 year

• Exploitable only by those who are: Diligent Creative Patient

• A broad range of investment ideas remains important

Our Investment Philosophy

11

GARS investment approach

Market returns

• Equities, Bonds and Property

• Good long term return expectations

• But can be negative returns over shorter periods

Stock selection

• Active stock selection

• Added value through our approach

Relative value

• Assess asset allocation relationships

• Where their relative valuation is strained

• We exploit their realignment

Directional

• Specific directional investment ideas

• In markets with little or no long term risk premium

• With significant return potential on a 3 yr view

TRADITIONAL

ADVANCED

Enduring diversity – through a wider opportunity set

A broad range of return opportunities

12

Market returns

Directional

Relative Value

Stock Selection

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Mar-11

Source: Standard Life Investments UK GARS portfolio, 31 December 2006 - 31 March 2011

Dynamic diversification

13

Being paid to wait

4.5

5

5.5

6

6.5

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11

Australian 2Y 2Y rates Australian 2y rates

Rolling down a steep Australian interest rate curve


Source: Bloomberg

14

Holding risk efficiently

Source: Bloomberg, 04 May 2011

70

75

80

85

90

95

100

105

110

115

120

125

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11

Implementation date Kospi * Eurostoxx 600 ** 03/11/10=100

Source: Bloomberg


Kospi vs Eurostoxx

15Understanding the risks shows the potential rewards

Diverse pool of return-seeking positions

A more informative view

Share of physical allocation

Share of market risk exposure

Source: Standard Life Investments UK GARS portfolio, 31 March 2011* Please note that the strategy Relative Variance Income is an amalgamation of three strategies previously listed individually as Eurostoxx vs. S&P variance, Nikkei vs. S&P Variance, Nikkei vs. FTSE Variance and DAX vs. S&P Variance

Cash & Other34.17%

UK Equity13.97%

European Equity9.22%

Global Index-Linked Bonds8.17%

UK Corporate Bonds8.14%

EU Corporate Bonds8.09%

Global Equity7.33%

HY Credit4.68%

Russian Equity3.27%

US Equity2.95% Global Equity

High Yield Credit

Russian Equity

US Equity

European Equity

UK Equity

UK corporate bonds

Global Inflation-linked Bonds

European Investment Grade Corporate Bonds

US Long Bond Yields (Forward Start)

Long US Dollar vs EuroLong Equity Variance

Japanese Interest Rates

Long US Dollar vs Japanese Yen

Australian short-term interest rates

Swedish short-term interest rates

Long Polish Zloty vs Czech Koruna

European Bond Yield steepener

Financial Sector vs Broad Credit

Australian vs Japanese Medium-term Interest Rates

Korean Equity vs European Equity

Broad vs Financial Sector Equity

US Equity Large vs Small Cap

Relative Variance Income

China Equity vs UK Equity Volatility

Stock Selection

FTSE 100 DividendsFX Hedging

16

Risk profile of multi-market return strategy

• The portfolio is exposed to multiple diversified market risks

• 26.0% is total stand-alone investment risk chasing returns

• Equivalent equity volatility is 20.6%

• Independent risk analysis shows the benefits of investment diversification


To

tal

stan

d-a

lon

e ri

sk

20.1%

5.9%

1%

6%

11%

16%

21%

26%

Glo

bal E

quity

Hig

h Y

ield

Cre

dit

Rus

sian

Equ

ityU

S E

quity

Eur

opea

n E

quity

UK

Equ

ity

UK

Inve

stm

ent G

rade

Cor

pora

te B

onds

Glo

bal I

nfla

tion-

linke

d B

onds

EU

Inve

stm

ent G

rade

Cor

pora

te B

onds

US

Lon

g B

ond

Yie

lds

(For

war

d S

tart)

Long

US

Dol

lar v

s E

uro

Long

Equ

ity V

aria

nce

Japa

nese

Inte

rest

Rat

es

Long

US

Dol

lar v

s Ja

pane

se Y

en

Aus

tralia

n S

hort-

term

Inte

rest

Rat

es

Sw

edis

h S

hort-

term

Inte

rest

Rat

es

Long

Pol

ish

Zlot

y vs

Cze

ch K

orun

a FX

Hed

ging

Eur

opea

n B

ond

Yie

ld S

teep

ener

FTS

E 1

00 D

ivid

ends

Aus

tralia

n vs

Jap

anes

e M

ediu

m-te

rm In

tere

st R

ates

Fina

ncia

l Sec

tor v

Bro

ad C

redi

t

KO

SP

IKor

ean

Equ

ity v

s E

urop

ean

Equ

ity

Bro

ad v

Fin

anci

al S

ecto

r Equ

ity

US

Equ

ity L

arge

vs

Sm

all C

ap

Rel

ativ

e V

aria

nce

Inco

me

Chi

nese

Equ

ity v

s U

K E

quity

Vol

atili

tyS

tock

Sel

ectio

nD

iver

sific

atio

n

Exp

ecte

d V

olat

ility

Market returns

Directional

Stock selection

Diversification benefits

Relative value

Expected volatility

17

Portfolio outlook / themes

• Interest rates continue to remain low – but increasingly differentiated outlook Aus vs. Japan relative interest rates US long bond yields (forward starting)

• Balance sheet strength US Large Cap v Small Cap High Yield

• Income from carry Investment Grade Credit High Yield

• Financial crisis has created imbalances that persist and recur Financial Credit v Main Credit Short Euro Korea Equity v European Equity

Source: Standard Life Investments UK GARS portfolio, 31 March 2011

18

Summary

• Investors are warned about continued market volatility, long-running aftershocks of the financial crisis, high correlation between assets especially the risks of policy errors and political disturbances in a world of debt deleveraging.

• Investors need to take risk that is rewarding in a number of different scenarios

• This investment philosophy gives more certainty of return with a fraction of the traditional ‘beta’ risk

Appendices

20

Strategic Research and Idea Generation

• Asset Class Team Views• Fundamental Economic Analysis

• Quantitative Modelling• Valuation Modelling

MAI Risk Analysis

• Position sizing• Diversification measurement

• Scenario analysis

Multi-Asset Management

• Strategy implementation• Final position size

• Execution

Independent Governance and OversightIndependent Risk Management, Counterparty Risk Management, Investment Governance

• Debate• Review• Approve

Strategic Investment Group (SIG)

GARS - Conviction, Diversification and Liquidity

Investment Process

21

Team 6

Ave. Yrs in Industry 20

Ave. Years at Company 12

Team 5



Strategic Research and Idea Generation

MAI Risk Analysis

Multi-Asset Management

(Andrew Milligan)(Dr Brian Fleming)

Multi Asset Investing Team - Euan Munro

Team 13



Asset Class

Teams

Independent Governance & Risk Oversight

An integrated, experienced and well resourced team extracting maximum value from investment strategies

(Guy Stern)GARS Portfolio ManagersEuan MunroGuy SternDavid MillarDavid Jubb

Team

22

Strategic Investment Group

Key attributes: Foremost strategic thinkers Diversity of backgrounds Regular meetings to discuss portfolio Assess new ideas from across the asset class desks Forum to examine, test and approve multi-asset strategies

An experienced and proven team

Source: Standard Life Investments, 31 March 2011

Name Position Investment experience (years)

Euan Munro (Chair) Director of Multi-Asset Investing and Fixed Income 19

Guy Stern Head of Multi-Asset Management 28

Andrew Milligan Head of Global Strategy 32

Stan Pearson Head of European Equities 27

Andrew Sutherland Head of Credit and Aggregate 30

Neil Matheson Senior Vice-President, Investment Strategy 29

Dr Brian Fleming Head of Multi-Asset Risk and Structuring 9

Dr Richard Batty Global Investment Strategist 16

Frances Hudson Global Thematic Strategist 25

David Jubb Investment Director, Multi-Asset Investing 21

David Millar Investment Director, Multi-Asset Investing 22

Jason Hepner Investment Director, Global Strategy 13

23

Risk management

• Convention is to constrain risk by setting asset allocation limits

• This restrictive approach is superseded by our risk based approach

• Portfolio risk restrictions: Strategy risk limit, 40% of aggregate stand alone risk Sub-strategy risk limit, 30% of aggregate stand alone risk

• Benefits: Widest possible investment universe / more scope for finding returns and diversity Only hold assets where we have conviction / insight All strategies can contribute significantly to returns

24

Individual strategies risk, 31 March 2011Overall TE: 5.94% 0.29 x MSWORLD equity vol (20.6%)

VaR: 292,341,175 (99%, 1 year) ExposureRisk Categories Stand-alone Position-removal 30.00% Limit Nominal Int. rates (yr) Infln. (yr) Credit (yr) VegaUS forward-start duration 2.03% 0.48% 7.80% 15.32% -1.4 0.0 0.0 0.00%Long USD v EUR 1.90% 0.02% 7.29% 14.68% 0.0 0.0 0.0 0.00%

Global equity 1.81% 0.49% 6.94% 8.19% 0.0 0.0 0.0 0.00%

Australian v Japanese medium-term duration 1.48% 0.37% 5.68% 25.41% 0.0 0.0 0.0 0.00%

High yield credit 1.47% 0.45% 5.64% 11.20% -0.2 0.0 -0.5 0.00%

Russian Equity 1.43% 0.36% 5.48% 3.27% 0.0 0.0 0.0 0.00%

Financial sector v broad credit 1.22% 0.03% 4.69% 20.12% 0.0 0.0 0.1 0.00%

Long equity variance 1.17% -0.22% 4.50% 0.13% 0.0 0.0 0.0 0.13%

KOSPI v Eurostoxx 1.15% 0.05% 4.41% 4.72% 0.0 0.0 0.0 0.00%

Broad v financial sector equity 1.14% -0.21% 4.36% 4.43% 0.0 0.0 0.0 0.00%

US equity large v small cap 1.13% -0.25% 4.34% 9.31% 0.0 0.0 0.0 0.00%

Relative variance income 1.12% 0.10% 4.29% 0.14% 0.0 0.0 0.0 0.01%

US equity 1.05% 0.36% 4.03% 4.54% 0.0 0.0 0.0 0.00%

Japanese duration 1.05% -0.06% 4.02% 8.82% -1.5 0.0 0.0 0.00%

European equity 1.02% 0.31% 3.91% 3.96% 0.0 0.0 0.0 0.00%

UK equity 0.90% 0.31% 3.45% 4.29% 0.0 0.0 0.0 0.00%

Long USD v JPY 0.69% 0.00% 2.63% 5.79% 0.0 0.0 0.0 0.00%

Stock Selection 0.66% 0.04% 2.52% 0.00% 0.0 0.0 0.0 0.00%

Australian short-term interest rates 0.64% 0.06% 2.44% 29.25% -0.5 0.0 0.0 0.00%

UK corporate bonds 0.63% 0.20% 2.42% 8.14% -0.5 0.0 -0.5 0.00%

Global index-linked bonds 0.59% 0.14% 2.25% 8.17% -0.8 0.8 0.0 0.00%

Swedish short-term interest rates 0.46% 0.05% 1.75% 30.24% -0.5 0.0 0.0 0.00%

Long PLN v CZK 0.45% 0.10% 1.71% 4.64% 0.0 0.0 0.0 0.00%

EU corporate bonds 0.34% 0.12% 1.31% 8.09% -0.3 0.0 -0.3 0.00%

FX Hedging 0.26% 0.04% 0.99% 6.62% 0.0 0.0 0.0 0.00%

HSCEI v FTSE Variance 0.24% 0.00% 0.92% 0.02% 0.0 0.0 0.0 -0.01%

European swaption steepener 0.03% 0.01% 0.11% 2.47% 0.0 0.0 0.0 0.00%

FTSE dividends 0.03% 0.00% 0.11% 0.00% 0.0 0.0 0.0 0.00%

Cash 0.00% 0.00% 0.00% 36.66% 0.0 0.0 0.0 0.00%

Total: 26.07% 3.36% Gross ex cash: 241.95% -5.9 0.8 -1.3 0.13%

MSWORLD multiple: 1.26 Benchmark: 0.0 0.0 0.0 0.00%

Diversification: 20.13%

Barrier: 2.58%


25Source: Standard Life Investments UK GARS portfolio, 31 March 2011

Strategy groupings risk, 31 March 2011

Overall TE: 5.94% 0.29 x MSWORLD equity vol (20.6%)VaR: 292,341,175 (99%, 1 year) Exposure

Risk Categories Key Stand-alone Position-removal 40.00% Limit Nominal Int. rates (yr) Infln. (yr) Credit (yr) VegaEquities 4.99% 0.28% 29.98% 24.56% 0.0 0.0 0.0 0.00%Duration 4.25% 0.04% 25.51% 67.98% -4.0 0.0 0.0 0.00%FX 2.36% 0.06% 14.16% 57.49% 0.0 0.0 0.0 0.00%Credit 2.17% 0.79% 13.01% 27.44% -1.0 0.0 -1.3 0.00%Volatility 1.64% -0.12% 9.87% 0.13% 0.0 0.0 0.0 0.13%Stock Selection 0.66% 0.04% 3.95% 0.00% 0.0 0.0 0.0 0.00%Inflation 0.59% 0.14% 3.52% 8.17% -0.8 0.8 0.0 0.00%Cash 0.00% 0.00% 0.00% 36.66% 0.0 0.0 0.0 0.00%

Total: 16.65% 1.24% Gross ex cash: 185.76% -5.9 0.8 -1.3 0.13%MSWORLD multiple: 0.81 Benchmark: 0.0 0.0 0.0 0.00%

Diversification: 10.71%

Barrier: 4.71%

Stand-alone contributions

4.99%

4.25%

2.36%

2.17%

1.64%

0.66%0.59%

Equities

Duration

FX

Credit

Volatility

Stock Selection

Inflation5.94%

10.71%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Equitie

s

Durat

ion FXCre

dit

Volatili

ty

Stock

Sele

ction

Infla

tion

Divers

ificat

ion

Track

ing E

rror

26

V-Masks for individual positions and overall

Source: Standard Life Investments,11 April 2011

UK equity

90

95

100

105

110

115

120

125

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

European equity

889398

103108113118123128

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Russian equity

8797

107117127137147157167177

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

US equity

95100105110115120125130135

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

US equity large v small cap

82

87

92

97

102

107

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

KOSPI v Eurostoxx

90

95

100

105

110

115

120

125

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Financial sector v broad credit

93949596979899

100101102103

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Global index-linked bonds

93

95

97

99

101

103

105

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

UK corporate bonds

9092949698

100102104106108

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

EU corporate bonds

93949596979899

100101102

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Australian short-term interest rates

9798989999

100100101101

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Swedish short-term interest rates

9696979798989999

100100101

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

European swaption steepener

98

98

99

99

100

100

101

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Australian v Japanese medium-term duration

92

94

96

98

100

102

104

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

US forward-start duration

8486889092949698

100102104

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Long PLN v CZK

899193959799

101103105

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Long USD v JPY

90

95

100

105

110

115

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

HSCEI v FTSE variance

9193959799

101103105107109

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Nikkei v S&P variance

93

95

97

99

101

103

105

107

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Nikkei v FTSE variance

92

94

96

98

100

102

104

106

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Broad v financial sector equity

869196

101106111116121126

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

High yield credit

95

100

105

110

115

120

125

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Long USD v EUR

82

87

92

97

102

107

112

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Long equity variance

83

88

93

98

103

108

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

Global Absolute Return Strategies Fund

88

93

98

103

108

12

/10

/10

12

/11

/10

12

/12

/10

12

/01

/11

12

/02

/11

12

/03

/11

27

Regular liquidity monitoring

Liquidity Report

Calculated:on:

Fund U222Valuation date 31/03/2011

Total fund value 7,324,225,673Available cash 2,385,399,741

Value of eligible securities 0

5 day 1 month

VolatilityFund 5.94% 61,563,167 125,665,288

Exchange traded derivatives Standalone Risk 5 day 1 month

Required margin (VaR) 5.92% 142,629,202 291,140,639Available cash

Remaining cash 2,242,770,540 2,094,259,103

OTC derivatives Standalone Risk 5 day 1 month

Required collateral (VaR) 3.37% 81,099,531 165,543,725Value of OTC derivatives

Net Requirement 313,056,721 397,500,915 (Cash)Available cash 2,242,770,540 2,094,259,103

Remaining cash 1,929,713,818 1,696,758,188

VaR calculated at 99.0% confidence level, over stated periods (no additional safety factor).

Gross derivative VaR 456,684,364 sum of OTC and ET VaR

Cash cover for 1m VaR 4.7 Cash includes value of OTC derivatives

RAG Status GREEN

-231,957,190

1 std dev

20/04/2011 11:35

2,385,399,741

Considerable cash buffer beyond 99% VaR stress

28

Correlation analysis

• Low correlation to other asset classes

• Good diversification

• Reduces portfolio risk

MS World FTA Govt Libor Eurostoxx SP500 UK Gilts 25+UK Gilts 1-

10Index

Linked Gilts

Sterling Non Gilts AA-

BBB

Em Mkt Bonds

HY BondsLehmans

GlobalGARS

All Share 0.87 -0.29 -0.11 0.89 0.74 -0.22 -0.37 -0.10 -0.06 0.27 0.31 -0.37 0.59

MS World -0.26 -0.09 0.89 0.95 -0.23 -0.30 -0.10 -0.07 0.51 0.58 -0.02 0.50

FTA Govt 0.02 -0.23 -0.26 0.94 0.91 0.73 0.70 0.00 -0.05 0.30 0.20

Libor -0.06 -0.08 0.00 0.06 -0.04 -0.20 -0.09 -0.15 0.07 -0.07

Eurostoxx 0.75 -0.20 -0.28 -0.06 -0.05 0.34 0.38 -0.21 0.47

SP500 -0.23 -0.28 -0.17 -0.11 0.57 0.62 0.14 0.39

UK Gilts 25+ 0.74 0.69 0.67 -0.08 -0.12 0.16 0.24

UK Gilts 1-10 0.65 0.63 0.07 0.01 0.43 0.13

Index Linked Gilts 0.60 0.01 0.12 0.15 0.27

Sterling Non Gilts AA-BBB 0.12 0.18 0.13 0.37

Em Mkt Bonds 0.75 0.54 0.14

HY Bonds 0.56 0.28

Lehmans Global -0.14

Source: Standard Life Investments, correlations calculated from weekly returns from 29 September 2006 to 25 March 2011

29

GARS Q1 2011 share of risk by strategy type

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Equities Duration FX Credit Volatility StockSelection

Inflation Property

% s

hare

of t

otal

ris

k

Quarter 1 2011


30

Global Absolute Return Strategies performance

• Positively biased outcomes

• Much lower spread of outcomes – lower risk during a period of extreme uncertainty

Source: Standard Life Investments, gross performance from 12/6/2006 to 28/02/2011Portfolio performance is based on the £, institutional pooled pension portfolio* Source: Thomson Datastream, MSCI World (£)

-15%

-10%

-5%

0%

5%

10%

15%

-15% -10% -5% 0% 5% 10% 15%

Source: Standard Life Investments, gross performance from 12/6/2006 to 28/02/2011* Source: Thomson Datastream, UK 6 month LIBOR and MSCI World (£)Fund performance is based on the institutional pooled pension fund

+ Equities / + GARS

+ Equities / - GARS

- Equities / + GARS

- Equities / - GARS

GARS performing differently to Equity

October 2008

September 2008

Monthly returns

31

Distribution of weekly returns of GARS v MSCI Global Equities

0

20

40

60

80

100

120

Weekly % return

No

of

ob

se

rva

tio

ns

GARS (net)

MSCI *

WORSTthree equity weeks

Equity GARS-16.6% -5.5%-9.3% -3.1%-7.1% -3.0%

BESTthree equity weeks

Equity GARS+9.9% +4.3%+8.3% +3.1% +7.6% +3.1%

-7 -6 -5 -4 -3 -2 -1 2 3 4 5 6 7 810

Source: Standard Life Investments, net performance from 12/6/2006 to 31/03/2011* Source: Thomson Datastream (net of tracker fund fee)Fund performance is based on the institutional pooled pension fund

9 10 1--9-10

GARS avoids the extreme returnsof equity investing

Source: Standard Life Investments, net performance from 12/6/2006 to 31/03/2011Portfolio performance is based on the £, institutional pooled pension portfolio* Source: Thomson Datastream, MSCI World (£) (net of tracker fund fee)

Returns positively biased

32

Cumulative performance attributionQuarter Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Number of strategies 13 14 14 15 16 18 22 23 30 34 37 36 35 30 31 35 33 32 34

Stock selection -0.2% 1.4% 1.2% 0.7% -0.3% -0.6% 0.0% 0.8% -0.9% -0.5% 1.4% -1.2% -1.0% -0.1% -0.3% -0.6% 0.2% 0.3% -0.5% -0.2%UK Equity 0.6% 0.7% 0.2% 0.6% -0.1% 0.1% -1.0% -0.3% -0.5% 0.1% -0.4% 0.8% 0.9% 0.2% 0.2% -0.3% 0.6% 0.3% 0.2% 2.9%Global Equity 0.5% 0.7% 0.2% 0.7% 0.0% -0.4% -1.3% 0.0% -0.8% -1.1% -0.9% 1.4% 1.1% 0.3% 0.4% -0.8% 0.7% 0.8% 0.4% 1.8%European Equity 0.5% 0.3% 0.7% 1.0% -0.1% -0.2% -1.4% -0.4% -1.1% -1.4% -0.8% 1.2% 1.0% 0.1% 0.1% 0.0% 0.4% 0.4% 0.2% 0.4%US Equity -0.7% -1.1% -0.9% 1.0% 0.8% 0.3% 0.2% -0.2% 0.3% 0.3% 0.2% 0.2%Russian Equity 0.0% 0.0%Investmetn Grade Corporate Bonds 0.3% 0.3% 0.1% -0.2% 0.3% 0.2% -0.1% -0.1% -0.4% -0.3% -0.7% 3.0% 2.6% 0.4% 1.1% 0.2% 0.9% -0.4% 0.2% 7.5%Financial Sector Credit 0.8% 0.4% -0.3% 0.3% -0.9% 0.8% 1.1% -0.1% 2.1%High Yield Credit -0.3% 0.2% 0.2% 0.1% 0.2%Global Inflation-Linked Bonds 0.4% -0.1% 0.1% -0.1% 0.4% 0.4% 0.4% 0.1% 0.0% -0.3% 0.1% 0.2% 0.3% 0.2% 0.1% 0.2% 0.3% -0.1% 0.1% 2.7%Cash 0.3% 0.2% 0.3% 0.5% 0.3% 0.3% 0.4% 0.4% 0.4% 0.3% 0.2% 0.1% 0.1% 0.1% 0.0% 0.0% 0.1% 0.0% 0.1% 4.1%European Property 0.0% -0.2% -0.1% -0.7% -0.4% -1.4%Japanese Property -0.1% -0.7% 0.0% -0.3% -0.3% -0.1% -0.2% -1.7%UK Short-term Interest Rates -0.5% 0.8% 0.4% 0.1% 0.3% 0.8% 0.1% -0.6% 0.2% 0.1% 0.7% 0.4% 2.8%European Short-term Interest Rates -0.1% 0.1% -1.1% 0.6% 1.8% 1.0% -0.7% 0.2% 0.0% 0.2% 0.0% 2.0%Australian Short-term Interest Rates 0.0% -0.4% 0.1% 0.2% 0.0% 0.3% 0.0% 0.2%Swedish Short-term Interest Rates 0.1% 0.0% -0.1% 0.0%European Bond Yield Steepener 0.0% 0.0% 0.0%US Long Bond Yields (Forward-Start) 0.3% -1.1% -0.1% -0.9%Medium-term European Interest Rates 2.4% 0.9% -0.1% 0.8% 4.0%Medium-term Australian Interest Rates -0.4% 1.1% 0.0% 0.7%Medium-term UK Interest Rates 0.2% -0.3% -0.1% -0.2%Long-term European Interest Rates 0.3% -0.3% -0.3% -0.6% 0.1% 0.0% 0.0% -0.7% 0.7% 2.7% -0.9% -0.5% 0.5% -0.2% 0.5% 0.8% 0.3% 2.4%Long-term US Interest Rates 0.2% -0.2% -0.6% 0.5% -0.8% 0.1% -0.8%Long-term Japanese Interest Rates 1.0% 0.8% 0.3% -0.2% 1.0% 0.5% 0.5% 0.6% 0.9% -0.5% 0.3% 0.4% 0.2% 5.9%Japanese Interest Rates -0.2% -0.2%UK Inflation Linked Asset Swap 0.5% 0.1% 0.6%Short UK Inflation 0.2% -0.2% 0.0% -0.3% 0.4% -0.4% 1.2% -0.1% -0.4% -0.1% 0.3%UK Equity Volatility 0.3% 0.2% 0.1% 0.2% 0.4% 0.1% 1.3%FTSE 100 Dividends 0.0% -0.3% -0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -0.2%Nikkei Dividends -0.1% 0.0% 0.2% 0.1% 0.1% 0.3%Long Equity Variance -0.1% -0.1%Long Sterling vs Euro 0.1% -3.1% 1.0% 1.3% -0.6% 0.2% 0.2% 0.4% -0.2% -0.1% -0.9%Long Sterling vs South African Rand 0.0% -0.1% 0.0% 0.0% 0.0% -0.1%Long US Dollar vs Sterling 0.1% -0.2% 0.0% -0.2% -0.1% 0.5% 0.0% 0.0% 0.5% 0.6%Long US Dollar vs Euro 0.3% 0.8% 0.8% -0.4% -0.3% 0.2% 0.6% 0.7% -1.0% 0.5% -0.9% 1.3%Long US Dollar vs Japanese Yen -0.2% 0.2% 0.0% -0.8% 0.5% -0.1% -0.3% 0.3% 0.1% -0.2% -0.2% -0.1% 0.1% -0.7%Long US Dollar vs South African Rand -0.2% -0.2%Long Swedish Krona vs Euro -0.2% 0.5% 0.0% 0.5% 0.0% 0.8%Long Brazilian Real vs Chilean Peso 0.2% -0.1% 0.1% 0.2% -0.2% -0.1% 0.1%Long Turkish Lira vs Canadian Dollar -0.2% 0.1% -0.1% -0.2%Long Polish Zloty vs Czech Koruna -0.3% 0.4% 0.2% -0.2% 0.0% 0.2% -0.2% 0.1%Long Brazilian Real vs Japanese Yen -0.4% 1.0% -0.9% -1.3% 0.5% 0.9% 0.3% 0.1%Long Turkish Lira vs South Aftrican Rand -0.6% 0.3% -0.3%Long Turkish Lira vs Sterling 0.2% 0.0% 0.2%Other FX 0.1% 0.0% 0.1% 0.0% 0.1% 0.0% 0.2% 0.0% 0.0% -0.5% -0.2% -0.2% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1% 0.0% 0.1%UK Large v Mid Cap UK equity -0.4% -0.9% -0.3% 0.6% 0.3% 0.3% -0.5% 0.5% 0.2% 0.5% -0.9% -0.6% -1.2%Swiss Equity vs German Equity 0.0% -0.3% 0.2% -0.1% 0.2% 0.0% 0.1% -0.3% -0.1% -0.1% 0.1% -0.6% -0.1% -1.0%Korean Equity vs Japanese Equity 0.0% 0.1% 0.1%Korean Equity vs European Equity 0.3% -0.1% 0.2%US Large vs US Small Cap Equity 0.1% -0.2% 0.0% -0.7% -0.1% -0.9%Credit Curve Steepener 0.0% 0.1% 0.0% 0.1%Financial Sector vs Broad Credit -0.6% -0.4% 1.0% 0.3% 0.2% 0.3% 0.0% 0.2% -1.1% 0.7% 0.6%Broad vs Financial Sector Equity 0.1% 0.1%High Yield vs Equity -0.3% -0.6% 1.2% 0.0% -0.1% -0.3% -0.1%UK Curve Steepener 0.4% 0.3% 0.7%European vs Japanese Medium Term Interest Rates -0.4% 0.9% 0.4% 0.9%US vs Japanese Medium Term Interest Rates 0.6% 0.9% 1.5%Australian vs Japanese Medium Term Interest Rates 0.1% -0.6% 0.2% -0.3%Japanese vs European Forward-Start Interest Rates 0.5% -0.1% 0.4%US Short-term Swap Spread 0.9% 0.9%UK vs German Short-rates 0.1% 0.5% 0.2% 0.8%Australian vs German Short-rates 0.1% 0.1% 0.2%Australian vs US Short-rates -0.2% -0.1% 0.1% -0.2%Swedish vs German Short-rates 0.0% 0.0% 0.0%Swedish vs US Short-rates -0.2% -0.2% -0.4%US Inflation vs UK Inflation -0.5% -1.5% 0.0% 0.3% -1.7%USD vs GBP Volatility Spread 0.1% 0.0% 0.1% 0.2%European Equity Volatility 0.2% 0.0% 0.0% -0.1% 0.0% 0.1%S&P Call Calendar Spread 0.1% 0.1%German Equity vs UK Equity Relative Volatility -0.2% 2.0% -0.1% -0.1% 0.1% 1.7%China Equity vs UK Equity Volatility 0.0% 0.1% -0.5% 0.2% 0.0% 0.0% -0.2%Relative Variance Income -0.2% 1.2% 0.2% 0.1% 0.4% -0.3% -0.7% 0.1% 0.5% 0.4% 1.7%Residual 0.0% 0.6% -0.5% -0.1% 0.2% 0.4% 0.0% 0.1% 0.0% 0.0% -0.2% -0.2% 0.2% 0.2% 0.0% 0.0% 0.2% 0.0% -0.1% 0.8%TOTAL 3.7% 3.7% 2.1% 2.3% 2.7% 1.7% -3.7% 0.9% -4.2% 3.4% 0.8% 5.5% 11.3% 1.5% 4.6% 2.2% 4.8% -0.7% 0.2% 42.7%

Cumulative contribution


33

Strategy activity in recent quarters

Q2 2010 Q4 2010

Altered RV Swedish Short Term Rates vs. Schatz to vs. US 2 year note futures

HY credit altered to physical holdings

Added European Swaption Steepener 5yr vs. 10yr, 3 years forward

KOPSI vs. Eurostoxx RV Equity

RV credit increased

Added Japanese vs. European long term forward duration

Closed Brazilian Real vs. Chilean Peso

Added Long high Yield Credit (US High Yield CDX, 4.72%)

Euro Short Term Duration altered to Swedish 2yr, 2yrs forward

Relative Value Credit re-entered (Financials vs. Main @ 120bps spread)

Relative Value Duration evolved Bund Future closed (2.87%) and US 10yr future opened (3.64%)

UK short 10yr Inflation position closed (3.42%)

Swedish vs. EUR closed – reached target (9.56%)

Altered Australian Short Term Rates (2yr, 2yr fwd @ 5.53%) to Relative Value Short Term Rates against Schatz futures (2yr German rates, 0.5%)

Q3 2010

Relative Value Equity SMI vs. DAX closed

Long Duration evolved; Buxl 30yr replaced with US Forward Start Duration (30yr vs. 10yr note futures)

Relative Value Short Term Rates evolved; sold US 2yr note futures to pair with Australian 2yr. UK and Swedish Short Term Rates now relative to Schatz

Increased Relative Value Credit

Relative Value Duration evolved again; US 10yr note futures closed, Australian 10yr now paired with Japanese Yen 10yr

Q1 2011

We first took off the short leg of our Japanese v European interest rate strategy before exiting completely

Increased US equity exposure and..

..balanced this by removing short equity variance within the portfolio to produce a long equity variance strategy

We took off short US interest rate legs of Swedish and Australian interest rate strategies to produce directional interest rate positions…

…and moved the Swedish starting 2 year swap position into a spot 2 year swap

We also switched our Short South African Rand position to versus US Dollars from Turkish Lira before exiting

In March we introduced a Russian Equity strategy using ADRs and GDRs…

…and implemented a broad v financial equity strategy to complement our reverse position in the credit markets


34

US$ vs. Euro

• The recent euro strength against the dollar is expected to be temporary as the euro economy fundamentals remain worse than in the US

• ECB is perceived to be behind the curve and longer term concerns regarding the peripheral economies fiscal position have not gone away

• Despite the move up in the USD in recent years the euro remains expensive

Source: Bloomberg, 29 April 2011

Directional strategy

0.60

0.65

0.70

0.75

0.80

0.85

Jan-

08

Apr-0

8

Jul-0

8

Oct-08

Jan-

09

Apr-0

9

Jul-0

9

Oct-09

Jan-

10

Apr-1

0

Jul-1

0

Oct-10

Jan-

11

Apr-1

1

Implementation date € per $

35

Long European Equity Volatility


• The path of stock market performance is likely to be more variable than that priced into Variance for both the DAX and EuroStoxx50

• We believe that our central scenario of slow economic growth will be accompanied by periods of market volatility.

• By buying equity variance contracts at historically low levels of volatility, the fund will benefit from a return to average levels, and more so from any temporary move to more extreme levels if for example equity markets correct

• The strategy is implemented by buying Dec 2012 variance contracts on the Eurostoxx and German DAX equity markets

• We use these positions in the more cyclical markets as volatility is most likely increase further during periods of market stress

20.0

25.0

30.0

35.0

40.0

45.0

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

Eurostoxx variance DAX variance Implementation date

Directional Strategy

36

Australian vs. Japanese 10 year Duration

• A position was initially established in US vs. Japanese 10 year bonds which performed well as the market started to price in QE from the Fed

• Consequently the US leg of this relative value trade was taken out of the fund and switched into Australian 10 year bonds (an existing position) which offered more value and yield pick-up

• Economic data suggests Australia is starting to see some economic headwinds driven by a strengthening currency, rising interest rates and higher raw material prices. This suggests much "good news" on the economy is priced into bond yields

• The danger in Japan is that too much issuance is placing pressure on the JGB market


3.0

3.5

4.0

4.5

5.0

5.5

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

Australian-Japanese 10-year spread Implementation date%

Source: Bloomberg

Relative value strategy

37

Financial Sector vs. Main Index Credit


Relative value strategy

-50

0

50

100

150

200

250

Reimplementation date iTraxx Financials spread over Main bp

• Financial credit ordinarily trades at a premium to other bonds

• The euro sovereign crisis has hit financials particularly badly recently

• Our expectation is that financials will recover

• This means the spread between iTraxx Sub Financials and iTraxx Main will narrow

• Trade reintroduced in May 2010 at a spread of 110bp

38

Short Bank Equity vs. Long European Equity


55

60

65

70

75

80

85

90

Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

Implementation date European banks relative to European equities

Relative value strategy• This strategy will benefit from the

underperformance of financial stocks versus the broad stock market in Europe

• In our central slow growth economic scenario we believe that European bank stocks will underperform as additional capital is required to be issued to satisfy new regulatory requirements

• But in our risk case of Eurozone sovereign restructuring the strategy will significantly benefit the fund as bank stocks will underperform even more due to write-downs on their large sovereign debt exposures

• The strategy is implemented by buying Eurostoxx 50 (SX5E) index futures and selling Eurostoxx bank (SX7E) index futures

39

Global Absolute Return Strategies

Benchmark

Performance target

Robust risk control

Charges

Assets under management

Bloomberg

• 6 month Euribor

• 6 month Euribor + 5 % (Gross of fees) over a 3 year rolling basis

• Expected tracking error range: 4% to 8%*

• Sophisticated portfolio

• Retail 1.60% AMC, 1.65% TER**

• Institutional 0.85% AMC, 0.90% TER**

• SICAV €895.0m^

• SLIGARS LN Eq

• SLGLDIA LX Eq

* NB - tracking error is measured relative to 6mth Euribor. The actual tracking error can be higher or lower at any time** Estimated TER^ As at 31 March 2011, using an exchange rate of £1:€1.129553

40

The information shown relates to the past. Past performance is not a guide to the future. The value of investment can go down as well as up.

For full details of the fund's objective, policy, investment and borrowing powers and details of the risks investors need to be aware of please refer to the full prospectus which can be found on www.standardlifeinvestments.com

Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life**. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.

**Standard Life means the relevant member of the Standard Life group, being Standard Life plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time."

Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL.The Standard Life Investments group includes Standard Life Investments (Mutual Funds) Limited, SLTM Limited, Standard Life Investments(Corporate Funds) Limited, SL Capital Partners LLP and AIDA Capital Limited.

Standard Life Investments Limited is authorised and regulated by the Financial Services Authority.Calls may be monitored and/or recorded to protect both you and us and help with our training.

www.standardlifeinvestments.com

© 2011 Standard Life, images reproduced under licence

Citywire montreux new brand (tmv 11 may 2011)

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