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

AGENDA Investment SolutionsiFunds’ Investment ProcessExchange Traded Funds (ETFs)Current PortfoliosSummary

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

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

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

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

Green=FTSE All Share (ex divs, source: Sharescope) Orange=MSCI Emerging Markets (ex Divs, source: MSCI) Blue=MSCI World (ex divs, source: MSCI) Mauve= Cash (BOE Base month average, source Bank of England) Black=UK Govt Gilts 5-15 yrs (source: Barclays Capital) Grey=UK Corporate BBB 5-15yrs (source: Barclays Capital) Red=RJ CRB Total Return (source: Reuters Jefferies) ANNUAL VARIATIONS IN ASSET CLASS PERFORMANCE

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 OBSERVATIONS

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 iFUNDS APPROACH

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

Look at 41 different asset classes Rank the asset classes based on performance and volatility Invest in the top eight ranked classes (plus a two asset class buffer zone) BEST VALUE ASSET CLASS?

EQUITIESCOMMODITIESREAL ESTATE CORPORATE BONDS UK FIXED GILTS INDEX LINKED GILTS CASH AND SHORT GILTS UK US Europe Asia Pacific Latin America Energy Grains Industrial Metals Livestock Precious Metals Softs All Commodities Asia Europe America UK >15 yrs Cash UK Gilts 1-5 yrs Large Cap Mid Cap Small Cap Long Short Long Short----- Currency (USD, GBP, Euro) THE ASSET CLASSES CONSIDERED

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 RANKING THE ASSET CLASSES

RANKING 1 st AUGUST 2011 RANKING 01/07/11 1 UK Gilts (Short Dated)(1) 2 UK Gilts (Inflation Linked)(2) 3 European Large Cap Equities (Inverse)(17) 4 Precious Metals(8) 5 Asia Equities (Dividend)(14) 6 US Property(3) 7 UK Gilts (Long Dated)(5) 8 UK Corporate Bonds (Long Dated)(22) BUFFER ZONE 9 Japanese Small Cap Equities(23) 10 Asia Large Cap Equities (Emerging Markets)(25) TOP RANKED ASSET CLASSES

Identify how much risk a client wishes to take Calculate current risk for each asset class Allocate so that expected impact of any one asset on overall performance is equal Hold any balance in cash and/or short term gilts 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)) Volatility*Position Size 20%£5000 / 0.2 = £25,000 15%£5000 / 0.15 = £33,333 10%£5000 / 0.1 = £50,000 *200 day moving average standard deviation RISK BASED ASSET ALLOCATION

PORTFOLIO ANNUAL RETURNS ANNUAL VOLATILITY RISK TOLERANCE ORANGE10.7% pa8.4% pa0.65% YELLOW9.5% pa7.4% pa0.50% GREEN8.6% pa6.3% pa0.40% BLUE8.0% pa5.8% pa0.35% INDIGO6.8% pa4.6% pa0.25% 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) SPECTRUM FUNDS

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 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 31 st December for each year shown). Data sources: iFunds and National Office of Statistics. SPECTRUM RETURNS V INFLATION

ASSET ALLOCATION 1 AUGUST 2011

CHANGES IN ASSET ALLOCATION

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 STOCK SELECTION

BLUE PORTFOLIO SIMULATED RETURNS SINCE 1997 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.

GREEN PORTFOLIO SIMULATED RETURNS SINCE 1997 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.

YELLOW PORTFOLIO SIMULATED RETURNS SINCE 1997 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.

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 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 SUMMARY

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 iFUNDS AND RAYMOND JAMES

 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 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. Performance 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. DISCLOSURES