MANAGED PORTFOLIO SERVICE

“

When clients select our Managed Portfolio Service

they expect us to take care of their wealth. Over

the past decade we have been proactive and

innovative in expanding our offering to meet the

evolving requirements of clients and their advisers.

Our service continues to offer a client-centric

investment proposition, backed by performance

figures which demonstrate why we are one of the

most popular choices for clients seeking a carefully

managed portfolio investment solution.

_”

MARTIN BAINES

Quilter Cheviot has a heritage that can be traced back to 1771. We are one of the UK’s largest discretionary investment management firms, focusing on providing and managing bespoke investment portfolios for private clients, trusts, charities and pension funds.

We are at the forefront of development and innovation. We led the way in developing professional investment outsourcing solutions for financial advisers, providing access to a range of managed portfolio strategies constructed using carefully researched funds.

Our investment managers are committed to building long-term relationships with financial advisers and their clients, established on a foundation of exemplary personal service and investment expertise.

MANAGED PORTFOLIO SERVICE

The Managed Portfolio Service (MPS) provides a range of discretionary investment portfolios which offer clients diversified exposure to global financial markets.

MPS was launched in 2001 and provides clients with a high level of diversification through investment in collective funds. We offer the choice of seven investment strategies and the flexibility to switch seamlessly between them without charge should an investor’s circumstances or risk appetite change. The success of our service is built upon an adherence to three core principles:

• Follow a robust investment process

• Deliver compelling, risk-adjusted performance • Provide a high level of personal service

Our substantial resource of dedicated research analysts, and an experienced investment team, ensures we are able to identify future trends and select the funds positioned to exploit them. We have a strong performance track record, as demonstrated by the figures outlined for our initial three strategies in the table below:

Strategy performance is shown gross of fees. Benchmarks will not include any charges, whilst the Investment Management Association (IMA) sector returns are net of the underlying fund manager charges. Past performance is not a guarantee of future returns.

Source: Lipper, Quilter Cheviot March 2014. All figures to 31 December 2013

STRATEGY / BENCHMARK / IMA SECTOR PERCENTAGE GROWTH

1 YEAR 5 YEARS 10 YEARS

MPS GROWTH

FTSE WMA Stock Market Growth TR IMA Flexible Investment

18.2 17.0 15.4 78.5 71.0 65.2 128.4 110.4 90.7 MPS BALANCED

FTSE WMA Stock Market Balanced TR IMA Mixed Investment 40-85% Shares

16.3 14.1 14.4 73.4 63.9 60.0 111.3 104.8 86.9 MPS INCOME

FTSE WMA Stock Market Income TR IMA Mixed Investment 20-60% Shares

INVESTMENT PROCESS: OVERVIEW

Rigorous research forms the foundation of our MPS investment process. We endeavour to achieve the highest risk-adjusted return for each strategy.

This is obtained by following a three stage approach to portfolio construction:

STRATEGIC ASSET ALLOCATION

Structuring the portfolios to reflect long-term investment themes.

TACTICAL ASSET ALLOCATION

Portfolio adjustments to exploit short-term market opportunities.

FUND SELECTION

Identify leading specialist managers to target long-term outperformance.

The following pages explain why each of these stages is crucial, and demonstrate how they have contributed to our long-term track record.

GLOBAL GOVT BONDS

JAPANESE EQUITIES GOLD

COMMODITIES ASIA PACIFIC (EX JAPAN) EQUITIES

UK PROPERTY

EUROPEAN (EX UK) EQUITIES EMERGING MARKET DEBT (USD)

US EQUITIES UK EQUITIES GLOBAL HIGH YIELD BONDS

STERLING CORPORATE BONDS

EMERGING MARKETS EQUITIES

GLOBAL HEDGE FUNDS INDEX LINKED GILTS

0 2 4 6 8 10 12 14 0 5 10 15 20 25 ANNUALISED RETURN % ANNUALISED VOLATILITY % GILTS CASH 3M

INVESTMENT PROCESS:

STRATEGIC ASSET ALLOCATION

Long-term ‘strategic’ asset allocation is a key determinant of a portfolio’s investment returns. Our expertise in this area is the product of the structured input of investment professionals from across Quilter Cheviot’s network of regional offices. By utilising this wealth of experience, we forecast long-term returns for a range of asset classes. These are based upon our views over an investment cycle, as well as our extensive analysis of the economic and market environment.

By undertaking this detailed analysis, we seek to achieve the highest level of return possible, harnessing the benefits of diversification and, in turn, smoothing the path of returns.

The following chart highlights the annualised return achieved and volatility experienced across different asset classes and regions over the last 10 years. Identifying the prospects for each of these portfolio components forms the basis of our strategic asset allocation.

INVESTMENT PROCESS:

TACTICAL ASSET ALLOCATION

Markets are volatile and strong performance in one year is no guarantee of strong performance in the next.

As the table below illustrates, there can be a wide variation in asset class returns during a calendar year for a sterling investor.

By maintaining an active approach to asset allocation, we can enhance performance by identifying shorter-term investment opportunities, with the view that at times certain asset classes and markets offer better value than others.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 UK Property 18.8 EM Equities 50.5 European ex UK equities 20.1 EM Equities 37.5 Global Government Bonds 53.4 EM Equities 59.4 Gold 29.4 Gilts 15.6 European ex UK equities 17.8 US Equities 29.9 EM Equities 17.4 Commodities 40.4 UK Property 18.1 Asia Pacific ex Jap Eq 34.9 Gold 42.5 Asia Pacific ex Jap Eq 54.6 EM Equities 22.9 Gold 9.3 Asia Pacific ex Jap Eq 17.2 European ex UK equities 25.2 Asia Pacific ex Jap Eq 14.7 Japanese Equities 39.7 Asia Pacific ex Jap Eq 16.8 Commodities 30.4 Gilts 12.8 UK Equities 30.1 Asia Pacific ex Jap Eq 22.1 UK Property 8.1 EM Equities 13.4 Japanese Equities 25.0 European ex UK equities 13.8 Asia Pacific ex Jap Eq 35.3 UK Equities 16.8 Gold29.3 Cash 3M 5.8 European ex UK equities 20.1 Japanese Equities 19.0 Global Government Bonds 7.1 UK Equities 12.3 UK Equities 20.8 UK Equities 12.8 Gold 32.4 EM Equities 16.3 European ex UK equities 15.7 Japanese Equities -1.1 Gold

16.3 US Equities 18.7 US Equities2.9 US Equities 10.9 UK Property 10.9

Commodities 9.3 European ex UK equities 24.1 Gold 7.9 Global Government Bonds 9.1 US Equities

-12.7 US Equities 12.6 UK Equities 14.5 Cash 3M 0.9 Gold 3.9

Asia Pacific ex Jap Eq 1.7 Japanese Equities 7.9 UK Equities

22.0 Cash 3M 4.9 Cash 3M 6.1 UK Property -22.5 UK Property 2.2 UK Property 14.5 Commodities -0.4

Japanese Equities 3.3 Cash 3M 0.5 Gilts

6.6 UK Property 18.8 US Equities1.6 UK Equities5.3

European ex UK equities

-23.9

Cash 3M

1.3 Commodities 12.5 UK Equities -3.5 Gilts 2.7 Commodities -3.1

Cash 3M

4.7 US Equities 17.3 Gilts 0.7 Gilts 5.3 Commodities -25.9 Commodities 1.0

Global Government Bonds 8.5 Japanese Equities -12.9 UK Property 2.3 Gilts -3.9 US Equities 3.4 Gilts 7.9 Global Government Bonds -6.9 US Equities

3.7 UK Equities -29.9 Gilts -1.2 Gilts 7.2

European ex UK equities -14.7 Cash 3M 0.9 EM Equities -4.1 Global Government Bonds 2.9 Cash 3M 4.9 Japanese Equities -7.4 UK Property -5.5 Asia Pacific ex Jap Eq -33.0 Japanese Equities -5.8 European ex UK equities 5.8 Asia Pacific ex Jap Eq -14.8 Global Government Bonds -2.8 Global Government Bonds -5.8 Gold -2.5 Global Government Bonds Commodities -25.5 Japanese Equities -6.4 EM Equities -35.1 Global Government

This ‘tactical’ rebalancing draws upon the input and experience of Quilter Cheviot’s asset allocation committee. Composed of global and UK strategists, and market leading investment professionals, the committee meets monthly to ensure a dynamic asset allocation overlay is applied across all of our strategies.

The chart below illustrates how the allocation to different asset classes and geographical regions has changed over time.

INVESTMENT PROCESS:

FUND SELECTION

We take an unbiased approach to fund selection and have the resource and expertise required to identify leading specialist managers.

Our highly qualified research team assists in determining the initial and ongoing suitability of each fund for the MPS service.

As part of this process quantitative data is assessed – including performance measures such as alpha generation, beta, information ratios and tracking error. A detailed analysis is also performed on the fund’s underlying holdings to assess its current positioning and key style characteristics.

In order to fully appreciate the fund manager’s investment process and philosophy, significant importance is placed on meeting the individual managers and their teams.

The fund is then subjected to thorough, ongoing analysis, ensuring that it continues to fulfil its purpose within each strategy. The strength of our process is demonstrated in the chart below, which outlines the weighted performance of the UK fund holdings within our MPS Growth Strategy since its inception.

CAPITAL GROWTH EXPECTED RETURN EXPECTED VOLATILITY CONSERVATIVE CAUTIOUS INCOME GLOBAL INCOME BALANCED GROWTH GLOBAL GROWTH CAPITAL PRESERVATION

UK Equity Overseas Equity Alternatives Fixed Interest & Cash

MPS STRATEGIES

Our seven MPS strategies operate within a clear risk-controlled framework. This ensures that the volatility of returns across each strategy is consistent with our expectations and that any deviations outside these boundaries are reviewed.

Our strategies are risk rated by three independent companies. For more details please contact Quilter Cheviot.

MPS INDEX (IDX) STRATEGIES

At Quilter Cheviot we recognise that there is an increasing focus on the cost of investing.

Whilst we can demonstrate our ability to select active fund managers who outperform over the medium and longer-term, we understand that, for some clients, a lower-cost solution delivered through index funds (‘trackers’) can be an attractive proposition.

Our MPS index strategies build upon our tradition of successful and innovative partnership with financial advisers, offering a range of four actively managed, multi-asset portfolios constructed entirely from index funds. Founded upon the success of our MPS investment process, these strategies are constructed utilising our whole of market approach to fund selection,

and driven by our expertise in strategic and tactical asset allocation.

Combining the diversification benefits of a multi-asset portfolio with the disciplined, systematic and low-cost approach of index-tracking funds, the MPS index strategies are a powerful complement to our existing investment services.

MPS OR MPS INDEX

STRATEGIES?

We believe in offering a choice of flexible investment approaches depending on a client’s individual needs. Whether through MPS or the MPS index strategies, we have an offering to satisfy an investor’s unique requirements. MPS:

• Dynamically managed strategic and tactical asset allocation, together with active fund selection of leading specialist managers to target long-term outperformance • Seven strategies

• Strong track record since inception in 2001 MPS index strategies:

• Dynamically managed strategic and tactical asset allocation, together with active selection of index funds

• Four strategies

• Lower-cost investment solution

REPORTING

We pride ourselves on the quality of our reporting, the efficiency of our support services and functionality of our proprietary technology systems.

Clients of our MPS strategies will receive a comprehensive summary every six months. This summary includes a fully itemised portfolio valuation, performance report, transaction schedule, capital and income statements and market commentary. Monthly factsheets are provided for each individual strategy.

Each year, an annual tax summary incorporating a capital gains tax report is also sent to each of our clients or their tax adviser*.

In addition, we offer online access to the portfolio for financial advisers and their clients, which can also be accessed through our iPhone and iPad App.

MEET OUR MPS TEAM

JULIAN MENGES CHARTERED FCSI, DIPPFS JOINT HEAD OF MANAGED PORTFOLIO SERVICE Julian joined Quilter Cheviot in 2010 and is joint head of the Managed Portfolio Service. He is also a member of our asset allocation committee. Prior to moving to Quilter Cheviot, Julian was head of portfolio management at Heartwood Wealth Management. He started his career in investment management in 1986 at Williams de Broë, initially as a gilt dealer and then as a sales trader in the eurobond market. In 1993 he moved to Astaire & Partners where he continued as a bond sales trader before moving to become director of the private client department in 1999.

BENJAMIN MOUNTAIN CFA

JOINT HEAD OF MANAGED PORTFOLIO SERVICE AND HEAD OF INVESTMENT FUND RESEARCH Benjamin graduated with a BSc (Hons) degree in Information Technology for Business from Aston University. Benjamin joined Quilter Cheviot in 1999 and is joint head of the Managed Portfolio Service. He is also head of the investment fund research team, which has responsibility for analysing all third-party managed investments. Benjamin is a member of the company’s asset allocation committee. He is a Chartered Financial Analyst (CFA) Charterholder and a Member of the Chartered Institute for Securities & Investment.

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