Investment Management Process

Our investment process

HCL Investment Services Ltd

A simple and disciplined investment process

Asset Allocation is Key

Ensuring you take on the right amount of risk

Market Timing• Equities are good for the

long term but the ride can be bumpy

• It usually pays to stay in the market but remember that there are risks involved with any stockmarket investment

• Time not timing is key to successful long-term investing

If you had remained fully invested throughout the period, you would have achieved a strong positive return of 226%, significantly higher than the 128% return from cash. However, if you had missed the ten best days each year, you would actually have lost most of your money over the period with a return of -84%.

Stock market Investment

•The stockmarket can be a great place to invest if you are looking for long-term growth but remember there are risks involved•The longer you invest in the stockmarket, the higher the chance that you will get a strong return and the lower the chance you will lose money •If you can only invest for a short period, the stockmarket is generally best avoided

Inflation•To make a real return on your money the first challenge is to beat inflation •Inflation can have a damaging impact on your spending power - if you don’t protect yourself against it •Over the long term, there is no risk you will lose money if you leave it in a saving account but you may not be protected against inflation •Stockmarket investments have the potential to protect you against inflation and provide a good real return but remember your capital is at risk

Asset Allocation is Key

• In determining the risk and return characteristics of a portfolio ‘asset allocation is key’

• But what asset allocation is the right one for you given your return needs and tolerance to risk?

Determinants of portfolio returns – Brinson et al, 1995

Our Asset Allocation Consultants• We have engaged the services of Ibbotson consultants to guide our asset allocation

decisions

• Ibbotson’s key attributes:

Focus on Asset Allocation - managing asset allocation since foundation in 1977. Academic Underpinnings – have a strong foundation of academic research.Independence – they create customised innovative solutions but donot offer theirown investment products.Experience and Expertise – over 30 years of experience and an accomplishedstaff, Ibbotson is a leader in asset allocation.

• Created five key portfolios matched to your attitude to risk

• These will be reviewed annually

Our Portfolios

The Income Portfolio

The Income Portfolio is designed for an investor that

require income from the portfolio immediately. It is

targeted toward the investor seeking investment

stability and liquidity from their investable assets. The

main objective of the individual in the income risk

range is to preserve capital while providing income.

Fluctuations in the values of portfolios within this

range are minor.

The Cautious Portfolio

The Cautious Portfolio is designed for the investor

who seeks both modest capital appreciation and

income from their portfolio. While this range is still

designed to preserve the investor's capital,

fluctuations in the values of portfolios may occur

from year to year.

Cash15%

Fixed Interest

55%

Equity30%

Cash6%

Property2%

Fixed Interest

45%

Equity44%

Other3%

Our Portfolios - Continued

The Balanced Portfolio

The Balanced Portfolio will best suit the investor who

seeks relatively stable growth from their investable

assets offset by a low level of income. An investor in

the balanced risk range will have a higher tolerance

for risk and/or a longer time horizon than either of

the income or cautious investors. The main objective

of an individual within this range is to achieve steady

portfolio growth while limiting fluctuations to less

than those of the overall stock markets.

The Active Portfolio

The Active Portfolio is designed for investors with a

relatively high tolerance for risk and a longer time

horizon. These investors have little need for current

income and seek above-average growth from their

investable assets. The main objective of this portfolio

is capital appreciation, and its investors should be

able to tolerate moderate fluctuations in their

portfolio values.

Cash5%

Property2%

Fixed Interest

31%

Equity59%

Other3%

Property3%

Fixed Interest

21%

Equity72%

Other4%

Our Portfolios - Continued

The Aggressive Portfolio

This Aggressive portfolio is appropriate for investors

who have both a high tolerance for risk and a long

investment time horizon. The main objective of the

aggressive portfoliio is to provide high growth for the

investor's assets without providing current income.

Portfolios in this range may have substantial

fluctuations in value from year to year, making this

category unsuitable for those who do not have an

extended investment horizon.

Property4%

Fixed Interest

5%

Equity86%

Other5%

Our Fund Selection

Choosing the best funds from the entire market

Our Fund Selection Consultants• We have engaged the services of Old Broad Street Research Ltd to guide our fund

selection decisions

• What Old Broad Street look for in a fund:

– Strength of investment process and length of time it has been in place– Continuity of investment personnel– Investment style that has proven durable over time– Clearly defined investment objectives– Strong and consistent past performance record– Favourable risk adjusted returns.

• Based on the asset allocation provided by Ibbotson, Old Broad Street have provided us with five model portfolios

• These will be reviewed quarterly

http://www.obsr.co.uk/

Our Income PortfolioPortfolio 1 - Income

Asset Classes% Asset

AllocationSuggested % Fund Weight Check

Current yields

Cash 15 Fidelity Cash / deposit 15 15 3.89 0.58

Property 0 n/a 0 0 0.00 0.00

Fixed InterestUK Gilts 25 Royal London UK Government Bond 12.5 3.98 0.50

Schroder Gilt & Fixed Interest 12.5 3.90 0.49UK Corporate 9 M&G Strategic Corporate Bond 5 5.20 0.26

Fidelity Moneybuilder Income 4 5.10 0.20UK Inflation-Indexed 12 L&G All Stocks Index-Linked Gilt Index 12 2.00 0.24

Global ex UK Fixed Income 9 Invesco Perpetual Global Bond 9 55 5.46 0.49

UK Equity16% UK Equity - Large Cap 16 Artemis Income 6 6.50 0.39

0% UK Equity - Mid Cap Invesco Perpetual Income 5 16 4.92 0.250% UK Equity - Small Cap Threadneedle UK Equity Income 5 6.70 0.34

Global Equity* 14 Newton Global Higher Income 10 10 6.20 0.62Jupiter Merlin Income 4 4 4.40 0.18

Europe Equity 6* n/a 0 0 0.00 0.00

North America Equity 6* n/a 0 0 0.00 0.00

Emerging Markets Equity 0 n/a 0 0 0.00 0.00

Asia Dev ex Japan Equity 0 n/a 0 0

Japan Equity 0 n/a 0 0 0.00 0.00

Commodities 2* n/a 0 0 0.00 0.00

100 100 4.53

*The 14% allocated to Global Equity is a combination of North America, Europe and Commodities based upon the original Morningstar asset allocation output.Paradigm agreed to this adjustment in order to enhance the yield of this income portfolio.

Our Cautious PortfolioPortfolio 2 - Cautious



Cash 6 Fidelity Cash / deposit 6 6

Property 2 Threadneedle UK Property Trust 2 2

Fixed InterestUK Gilts 17 Royal London UK Government Bond 8.5

Schroder Gilt & Fixed Interest 8.5UK Corporate 8 M&G Strategic Corporate Bond 8

UK Inflation-Indexed 12 L&G All Stocks Index-Linked Gilt Index 12Global ex UK Fixed Income 8 Invesco Perpetual Global Bond 8 45

UK Equity18% UK Equity - Large Cap 24 BlackRock UK Dynamic 6

4% UK Equity - Mid Cap Newton Income 62% UK Equity - Small Cap Invesco Perpetual Income 6 24

Standard Life Investments UK Equity Growth 6

Europe Equity 8 Cazenove European 8 8

North America Equity 9 Threadneedle American 5M&G American 4 9

Emerging Markets Equity 0 n/a 0 0

Asia Dev ex Japan Equity 1 First State Asia Pacific Leaders 1 1

Japan Equity 2 Schroder Tokyo 2 2

Commodities 3 BlackRock Gold & General 3 3

100 100

Our Balanced PortfolioPortfolio 3 - Balanced



Cash 5 Fidelity Cash / deposit 5 5


Fixed InterestUK Gilts 12 Royal London UK Government Bond 6

Schroder Gilt & Fixed Interest 6UK Corporate 6 M&G Strategic Corporate Bond 6

UK Inflation-Indexed 7 L&G All Stocks Index-Linked Gilt Index 7Global ex UK Fixed Income 6 Invesco Perpetual Global Bond 6 31


5% UK Equity - Mid Cap Newton Income 73% UK Equity - Small Cap AXA Framlington UK Select Opportunities 7 28

Standard Life Investments UK Equity Growth 7

Europe Equity 11 Cazenove European 6Jupiter European Special Situations 5 11

North America Equity 12 Threadneedle American 6M&G American 6 12

Emerging Markets Equity 3 First State Global Emerging Markets Leaders 3 3

Asia Dev ex Japan Equity 2 Fidelity South East Asia 2 2



100 100

Our Active PortfolioPortfolio 4 - Active



Cash 0 n/a 0 0



UK Corporate 5 M&G Optimal Income 5UK Inflation-Indexed 3 L&G All Stocks Index-Linked Gilt Index 3

Global ex UK Fixed Income 5 Invesco Perpetual Global Bond 5 21


6% UK Equity - Mid Cap AXA Framlington UK Select Opportunities 84% UK Equity - Small Cap Newton Income 8

M&G Recovery 8 32

Europe Equity 14 Cazenove European 7Jupiter European Special Situations 7 14

North America Equity 16 Threadneedle American 6M&G American 6Schroder US Mid & Small Cap 4 16

Emerging Markets Equity 3 First State Global Emerging Markets Leaders 3 3




100 100

Our Aggressive PortfolioPortfolio 5 - Aggressive



Cash 0 n/a 0 0



UK Corporate 0 n/a 0UK Inflation-Indexed 0 n/a 0

Global ex UK Fixed Income 0 n/a 0 5


7% UK Equity - Mid Cap AXA Framlington UK Select Opportunities 96% UK Equity - Small Cap Newton Income 7

M&G Recovery 8Standard Life Investments UK Smaller Companies 4 37

Europe Equity 18 Cazenove European 6Jupiter European Special Situations 6Neptune European Opportunities 6 18

North America Equity 19 Threadneedle American 7AXA Framlington American Growth 7Schroder US Mid & Small Cap 5 19

Emerging Markets Equity 4 Gartmore Emerging Markets Opportunities 4 4




100 100

Our Administration System

Ensuring your investments are tax and administratively efficient

Administering your investments – the old model

Our New Model – Taking Back Control for your Benefit

Our Investment Platform of Choice• We have chosen the Paradigm Nucleus Wrap, an investment platform that we can

influence, as our investment platform of choice

• The Paradigm Nucleus Wrap offers you:

– Ease of transactions - one point of entry to access your portfolio and arrange transactions. – Reduced administration – consolidated income and capital gains tax statements from one source to

help simplify the tax year end reporting for tax return purposes. – Control – as your adviser we will be able to report, arrange transactions and monitor your portfolio

from one, centralised online platform. – Enhanced choice – providing the investment and/or security are tradable it can be accessed through

the wrap provider. – Access – you will be able to access your portfolio online via our website to get an up to date

valuation.– Cost and Economies of scale - The avoidance of marketing and sales costs for the fund management

groups and the purchasing power of the wrap provider equates to favourable discounts on initial and annual management charges of individual funds chosen.

Other Key Elements of our Service

Tax efficiency & Rebalancing

Other value added benefits• We have designed other elements of our service to ensure that your portfolio remains as

efficient as possible, these are all included within our fee:

– Our Rebalancing Service- as you know investments naturally grow at different rates with the more volatile investments such as equities growing differently that relatively predictable investments such as cash. Our rebalancing service ensures that your investments remain invested in the proportion that you originally intended this controls the risk and ensures that you follow that important principle of buying funds at low prices and selling when high.

– Our Tax Efficiency Service – we will always ensure that your portfolio is as tax efficient as possible through the use of our:

• General Investment Account• ISA• Pensions• Bonds

– As part of this service we are happy to offer you our ‘bed and ISA’ service in which we transfer some of your tax yielding assets into their tax free ISA equivalent. Over time this will provide you with an income and capital gains tax free portfolio.

A portfolio not rebalancedExample Only

A portfolio rebalancedExample Only

A portfolio not rebalancedExample Only

A portfolio rebalancedExample Only

Summary• The Benefits of our service:

• An asset allocation provided by and reviewed by world class actuaries• Fund selected and reviewed by well respected fund research company• Consolidated and cost controlled administration• Review and rebalance to ensure the portfolio continues to meet your needs• Complete tax efficiency

This presentation is for information only. You must seek advice before embarking on a course of action

Economy & Finance

Investment Management Process