SPECTRUM PORTFOLIOS MANAGING RISK IN A VOLATILE WORLD NOVEMBER 2011

1. SPECTRUMPORTFOLIOS MANAGING RISK IN A VOLATILE WORLD NOVEMBER 2011 iFunds is a registered trade mark used under sub-licence from Raymond James Investment Services Limited (RJIS).  Registered in England and Wales number 3779657. Registered office  77 Cornhill, London, EC3V 3QQ RJIS is authorised and regulated by the Financial Services Authority. www.rjis.co.uk

2. AGENDA

3. OBJECTIVE To obtain the best return from the assets commensurate with the level of risk the customer is prepared to accept

4. RISK IS NOT STATIC VIX (implied volatility) Index. Vertical axis is the 30 day volatility implied by the pricing of S&P 500 index options

5. RISK IS NOT SPECIFIC TO GEOGRAPHY FTSE Japan 40 FTSE 100 S&P 500 FTSE Eurotop 100

6. RISK IS NOT SPECIFIC TO ASSET CLASS UK Government Gilts Down 18% in 1994 Rated Corporate Bonds Down 35% From Jan 06

7. ANNUAL VARIATIONS IN ASSET CLASS PERFORMANCE

8. OBSERVATIONS • Fixing asset allocation will from time to time lead to an allocation to assets underperforming the required rate of return • Exposure through individual shares may be too risky for majority of clients • Exposure through actively managed funds is expensive relative to other vehicles that are now available and it doesn’t guarantee superior results • Risk is traditionally adjusted by increasing the fixed interest content or other perceived low risk assets • Cash is an asset class in its own right

9. iFUNDS APPROACH • Reduce risk through asset diversification • Reduce risk through continuous analysis of relative asset volatility • Use low cost indexed vehicles for stock selection • Aim to deliver an absolute return commensurate with each client’s individual risk profile, while recognising this approach may under perform recognised commercial benchmarks

10. THE INVESTMENT PROCESS • Which asset classes represent the best value? • Allocation to each asset class calculated based on risk • Use index tracking ETFs to manage the portfolio

11. BEST VALUE ASSET CLASS?

12. THE ASSET CLASSES CONSIDERED

13. RANKING THE ASSET CLASSES • Consider everything in sterling return terms • Adjust prices to reflect recent volatility • Compare each asset class with every other asset class • Produce a “league table” of relative positions • Table shows which asset class provides best return for a unit of risk • Calculations run on a daily basis • Material changes in position tend to take place over weeks/months

14. TOP RANKED ASSET CLASSES

15. RISK BASED ASSET ALLOCATION

16. RISK BASED ASSET ALLOCATION • Size of each investment in the portfolio is dependent on its recent historical risk profile, combined with the portfolio type selected i.e. the higher the portfolio risk, the greater the exposure to the riskier assets available • Risk Tolerance is the expected immediate loss (or gain) on the overall fund as a result of the price of one individual holding changing by one standard deviation • Example • £1,000,000 ‘Yellow’ portfolio. Risk tolerance = 0.5%. • (ie expected immediate loss or gain = £5000 (0.5% x £1m)) *200 day moving average standard deviation

17. SPECTRUM PORTFOLIOS • Annual returns are average gross return per annum (transaction costs accounted for but consideration should be given to the impact of management fees) • Volatility: A measure of how risky an asset is – the higher the figure the more risky the asset • Risk Tolerance is the overall fund loss due to expected negative performance per investment (as per example from previous slide)

18. SPECTRUM RETURNS V INFLATION • Note: This chart represents simulated performance and the past results are not indicative of future performance. Figures used are net of transaction costs but gross of annual management fees. Source: iFunds/National Office of Statistics

19. SPECTRUM RETURNS V INFLATION • Note: This chart shows simulated performance of the iFunds Spectrum range and actual performance of the Retail Price Index (RPI).  Spectrum figures used are net of transaction costs but gross of annual management fees.  Past results are not indicative of future performance.  All performance figures shown are annualised (geometric) average three year period returns (ending 31st December for each year shown).  Data sources: iFunds and National Office of Statistics.

20. ASSET ALLOCATION 1 NOVEMBER 2011

21. CHANGES IN ASSET ALLOCATION

22. STOCK SELECTION • USE EXCHANGE TRADED FUNDS • Index Trackers • Low Total Expense Ratios (TERs) of 0.40% versus 1.80% for active managed funds • Low ‘frictional costs’ e.g. Bid/offer spreads • Real time dealing • Liquidity • Low tracking error • Transparency of holdings • Wide range • Suit active management • No outperformance or underperformance relative to index tracked • *Source: Barclays ETF Study, June 2010, European Funds

23. BLUE PORTFOLIO SIMULATED RETURNS SINCE 1997 Price GBP % Change Note: This chart represents simulated performance and the past results are not indicative of future performance. Figures used are net of transaction costs but gross of annual management fees.

24. GREEN PORTFOLIO SIMULATED RETURNS SINCE 1997 Price GBP % Change Note: This chart represents simulated performance and the past results are not indicative of future performance. Figures used are net of transaction costs but gross of annual management fees.

25. YELLOW PORTFOLIO SIMULATED RETURNS SINCE 1997 Price GBP % Change Note: This chart represents simulated performance and the past results are not indicative of future performance. Figures used are net of transaction costs but gross of annual management fees.

26. SUMMARY • A multi- asset class investment process tailored to each customer’s individual risk profile • Use of collective index trackers to reduce stock specific risk • A focus on absolute real returns above RPI • Targeted portfolio risk profiles

27. SUMMARY WHO CAN BENEFIT FROM IFUNDS APPROACH? • Clients with a specific risk/return objective in mind • Clients who are not concerned with performance relative to a commercial benchmark (e.g. FTSE 100), as long as their personal long term risk/reward objective is achieved

28. iFUNDS AND RAYMOND JAMES • iFunds founded 2002 with • Over 60 years combined investment experience • Total iFunds assets under management £140m* • iFunds is a trading name of Raymond James Investment Services Limited, part of Raymond James Financial Inc. (RJF) • RJIS assets £2.6bn* • RJF global assets exceed $278bn* • Relationship provides: • - Platform for active investment management • - Direct stock market access • - Safe custody – all assets held by Pershing Securities Limited. • - Financial stability • Economies of scale • * As at 30 June 2011

29. DISCLOSURES This document is issued by iFunds. Past performance is not a reliable indicator of future results. Quoted yields are not guaranteed. Except where otherwise indicated performance numbers are sourced from iFunds. We reasonably believe that the information contained herein is accurate as at the date of publication. This document must not be relied on for purposes of any investment decisions. This document may include simulations which are based on our current investment processes. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those simulated. The value of investments, and the income from them, can do down as well as up and you may not recover the amount of your original investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down. Performance • Volatility is the annualised standard deviation based on monthly performance figures • Return figures based on bid price at close of business on last day of the month • Returns for simulations are calculated net of transaction costs but gross of annual management fees iFunds is a registered trade mark used under sub-licence from Raymond James Investment Services Limited (RJIS).   Registered in England and Wales number 3779657. Registered office  77 Cornhill, London, EC3V 3QQ. RJIS is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority. www.rjis.co.uk Pershing Securities Limited is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority.