WEALTH MANAGEMENT – CASE STUDY

BACKGROUND
The proposal was for an offshore client who had an investment time horizon of 5-10yrs. Having taken the decision to dis-invest
from the markets in late 2010, earning little deposit interest in the interim, the client was now keen to re-engage with a bias
towards using a multi asset style of manager who seeks to produce a real total return, as opposed to one which is benchmarked
relative to an index. This is particularly important for private clients because the returns of the latter can be somewhat
indifferent especially if the reference market of the strategy in question has declined during the period. As often stated, you can
spend a real return but it’s not always the case with a relative one. An initial sum of £1.5mln was available for investment with a
nominal gross income target of just 2%p.a. to meet annual school fees. The client also wanted the efficiency of investing via
funds, as opposed to direct investment, with offshore reporting status funds preferred.

The clients real return goal was further supported by our own philosophy because unlike the last two decades of the 1900’s,
when the trend indicated that it was just a question of being invested and staying for the ride, the global investment climate
since 2000 has changed significantly and has certainly become more challenging. As a team we have been expressing this view
for more than 15 years by seeking out such multi asset managers and using these widely within our Wealth Management (WM)
client portfolios. This type of proactive manager will seek returns from a range of asset classes with the aim of minimizing any
drawdowns and the volatility of returns. Perhaps more importantly, they also aim to preserve wealth by targeting a real return
over the infamous investment cycle and ideally over shorter periods too. The good news is there are now more multi asset funds
available when compared to the mid 1990’s, when it would have been commonplace to appoint a single discretionary manager -
albeit many of those were still managing and reporting performance relevant to an APCIM’s index or a similar relative measure.

Our wealth management consultancy and advice service was attractive to the client because (a) as an independent owner
managed investment boutique our own interests are more clearly aligned with their own (b) we avoid any potential conflicts by
only using 3rd party investment managers, (c) the client was keen to be involved in the management of their wealth, albeit at
arms length, and (d) the client really liked the discipline of having regular dialogue with our wealth manager and in respect of
any proposed transaction checking its suitability versus their own personal circumstances.

INVESTMENT OBJECTIVE
Our wealth management investor profile form was completed, to help us gain a better knowledge of the client’s asset base and
experience, along with the 18 questions of the DPZC risk tolerance fact find. The conclusion of the latter indicated the client’s
ability to invest in the moderate investment risk area (a 4 in our 1 low-6 higher risk classification range) but there was also a
strong client desire to be more conservative than this. The beauty of the output from our fact find is that it forms a basis for
discussion, as opposed to positioning a specific product sale, and after a lengthy conversation a decision to base our draft
proposal around a conservative profile (score 3) was agreed as historically this had produced an acceptable annualised volatility
range. We regard conservative as “having a modest growth component to protect against inflation with a focus on capital
preservation and targeting a lower volatility range of between 5%-9%”.

WM STRATEGY & ASSET CLASSIFICATION SCHEME

Our 1-6 risk rating scale has evolved over the years and we have found it really helpful when categorising the typical
characteristics of the common investment strategies. We have also applied the same methodology to a range of individual main
stream asset classes but for the purpose of this client case study just the broader definitions are shown below.

Risk Rating 1 2 3 4 5 6

Investment Strategy Cash Defensive Conservative Moderate Aggressive High Risk

Also commonly known as Fixed Income Capital Preservation Balanced Capital Growth
Investment characteristics High Liquidity, Capital Preservation Modest growth Blend between Focus on primarily Strategies tend to be
Low Risk with a slight growth component to protect capital preservation growth assets, with highly volatile or may
component. against inflation, and growth. capital preservation suffer from illiquidity
Portfolios are biased focus is on capital Strategies tend to as a secondary or a lack of
toward lower preservation. Lower have medium objective. Strategies transparency
volatility investments volatility volatility of returns have higher volatility
of returns

Expected volatility across each 0% 3%-7% 5%-9% 6%-13% 10%-19% 19%+

MANAGER SELECTION
Experience has shown that it’s highly unusual for any one investment manager or asset class to perform in all conditions and for
this very reason diversification by manager, strategy or asset type makes complete sense. The art is researching and finding the
right stable of managers but the science is combining these in such a way to optimise their performance characteristics when
blended together. In effect we are trying to make the projected investment outcome boring as opposed to the alternative of
investing in just one strategy or manager and hoping for the best.

That said, over time boring can be very beneficial due to the compounding effect of nominal/positive returns without
experiencing large drawdowns and the inevitable recovery periods. Our investment research team continuously scan the wider
investment universe for suitable and appealing managers and our current stable now includes some 45 such firms that provide
over 75 strategies to help us meet the portfolio construction needs of our clients. These predominantly include multi asset and
sector specific strategies as opposed to those which may invest in just one particular asset class type or country, albeit we do
have a number of specialist funds on our approved list too.

THE RECOMMENDED PORTFOLIO

A portfolio consisting of five offshore funds was recommended with over 50% of the sum available being directed towards
Ruffer, Newton and Troy as these all provide the top down thematic multi asset style of investing that the client requested. The
M&G Corporate Bond fund generates a useful income yield and gives the portfolio exposure to this diversified and interesting
sector of the credit markets. The Standard Life absolute return fund is the most technical of the five but has the unusual benefit
for such a strategy of providing daily dealing/liquidity.

In order to bring the proposal to life the latest fact sheets for each fund recommendation accompanied our initial investment
proposal and we also provided a summary of their objective and role within the overall portfolio construction. Thereafter
quarterly fund updates will be provided with the client’s regular portfolio valuation and report.

DPZ Capital Limited - Wealth Management Service Proposal 01-Nov-12

Client Name New Client#
Account Value £1,500,000 Estimated Gross Yield % 2.22%
Value Change on the Quarter N/A Latest Risk Rating Score 3.1

Investment Manager Classification Fund, Direct Gross Est Cash Defensive Conservative Moderate Aggressive High Risk Other Total
or Strategy or Portfolio Yield % Gross Est Yield £
DPZC Risk Rating Assessment : (1= Low, 6 = High) 1 2 3 4 5 6

Cash : DPZ Dealing Account Direct 0.25% £30,000 £75 £30,000

M&G Strategic Corporate Bond Fund 3.21% £420,000 £13,482 £420,000

Newton Global Real Return Fund 2.93% £225,000 £6,593 £225,000

Standard Life Global Absolute Return Fund 0.94% £225,000 £2,115 £225,000

Troy Trojan Fund Fund 0.98% £300,000 £2,940 £300,000

Ruffer International Total Return Fund 2.71% £300,000 £8,130 £300,000

Total value (£) £30,000 £645,000 £0 £825,000 £0 £0 £0 £33,335 £1,500,000

Total (%) 2.00% 43.00% 0.00% 55.00% 0.00% 0.00% 0.00% 100.00%
Contribution to portfolio risk 0.02 0.86 0.00 2.20 0.00 0.00 0.00 3.1
1 High Liquidity, Low Risk
2 Capital preservation with a slight growth component. Portfolios are biased toward lower volatility investments
3 Modest growth component to protect against inflation, focus is on capital preservation. Lower volatility
Investment characteristics by DPZC risk rating assessment 4 Blend between capital preservation and growth. Strategies tend to have medium volatility of returns
5 Focus on primarily growth assets, with capital preservation as a secondary objective. Strategies have higher volatility of returns
6 Strategies tend to be highly volatile or may suffer from illiquidity and a lack of transparency
Other
Exchange rates used (if applicable) GBP/USD GBP/EUR GBP/CHF
 Manager Allocation Risk Rating

2.0%
20.0% 2%
Cash : DPZ
28.0% Cash
M&G
Defensive 43%
Newton
20.0% Moderate 55%
Standard Life
Troy 15.0%
15.0%
Ruffer

PORTFOLIO OPTIMISATION AND RETURN ANALYSIS

An important starting point for us when evaluating the appropriate solution for a client is volatility and how much capital they
are comfortable losing. There are a number of questions within our risk fact find which focus on this and once this theoretical
pain threshold range is established the proposed optimal solution can be designed and performance metrics calculated. As
many of our client solutions are bespoke in nature there is no one WM model that suits all but as you would expect a number of
our approved funds feature widely across many client portfolios.

Using four key metrics the following table illustrates how the client’s Optimal Allocation performed over the somewhat
interesting period of February 2008 – August 2012. The FTSE is shown purely for comparative purposes but out of interest
during the same period annualised “real return” measures such as UK RPI or UK RPI +3% were 3.31% and 6.40% respectively.

Selected Investment Statistics (Gbp) Annualised Standard Maximum

February 2008 - August 2012 Return Deviation Sharpe Ratio Drawdown
Optimal Allocation (TW) 9.03% 6.07% 1.19 -5.51%
Newton Real Return A 6.14% 9.56% 0.45 -11.96%
CF Ruffer Total Return O Inc 9.16% 8.82% 0.83 -7.72%
Standard Life Global Abs Ret Strat Instl 7.77% 6.55% 0.91 -6.58%
M&G Strategic Corporate Bond A Acc 10.90% 5.82% 1.56 -5.46%
Troy Trojan 9.60% 8.30% 0.94 -6.84%
FTSE All-Share 3.69% 17.63% 0.11 -35.60%

Our research team get very excited about their ability to produce numerous charts and analysis but from a user perspective the
table below best summarizes the performance returns across each of the proposed funds as well as the Optimal Allocation and
FTSE All Share. This aspect of our research could be a twenty page presentation in itself so we’re always happy to tailor this
accordingly.

Trailing and Calendar Year Return (Gbp)

February 2008 - August 2012 (not annualized if less than 1 year)
1 month 3 months YTD 1 year 3 years 2011 2010 2009
Optimal Allocation (TW) 0.44% 3.14% 4.45% 7.26% 8.42% 4.40% 10.94% 15.23%
Newton Real Return A 0.99% 4.29% 4.33% 4.95% 6.62% -0.75% 9.29% 10.14%
CF Ruffer Total Return O Inc 0.50% 0.98% -0.82% 3.00% 5.93% 0.91% 13.61% 10.76%
Standard Life Global Abs Ret Strat Instl 0.34% 2.52% 6.04% 10.75% 7.77% 2.77% 10.49% 19.18%
M&G Strategic Corporate Bond A Acc 0.42% 4.87% 8.40% 11.72% 9.24% 7.87% 8.24% 22.53%
Troy Trojan 0.09% 2.80% 3.61% 5.12% 12.19% 8.52% 14.40% 11.62%
FTSE All-Share 2.21% 8.56% 7.01% 10.18% 9.33% -3.46% 14.51% 30.12%
This is where the art of fund selection and science of quantitative analysis combine. The blue star indicates the optimal
risk/return asset mix across the five funds and this analysis generates the recommended % exposure to each fund as shown in
the recommended portfolio on Page 2.

Risk/Return
February 2008 - August 2012 (Single Computation)

12%

10%

8%
Return

6%

4%

2%

0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Standard Deviation

Optimal Allocation (TW) Newton Real Return A CF Ruffer Total Return O Inc Standard Life Global Abs Ret Strat Instl
Market Benchmark:
M&G Strategic Corporate Bond A Acc Troy Trojan
FTSE All-Share

FEES
Fees and portfolio transaction charges can be a real drag on performance so our goal is to minimize these. By typically using
funds our approach is to try and reduce trading activity as changes to asset allocation by the individual managers will occur
within the underlying funds themselves. In this way after their initial purchase our clients benefit from pro-active management
and diversification of assets without any additional expense at their portfolio level. However, on an on-going basis we continue
to seek out new managers/strategies and keep our existing approved managers and funds under constant review to ensure
there are no quantitative or qualitative surprises along the way.

Where possible we will invest on behalf of our clients via Institutional class funds as these tend to have lower costs for the
investor when compared to the Retail class fund equivalent. However, if for investment reasons we buy a Retail class fund any
commission that we can negotiate and receive is rebated back to our client. The ethos of our business model is to get the best
deal for our clients and then charge a fee for our service which includes the initial financial planning, portfolio construction, the
on-going monitoring and review of the client portfolio and underlying funds, custody, quarterly reporting and pro-active
advice/review throughout the year.

All of this client’s investments were in Institutional classes and the average annual fund management charge (AMC) across the
WM portfolio was 0.84% plus our 0.60%p.a. fee so just 1.44%p.a overall. Our own fee is based on a tiered scale and above
£2mln it reduces in steps down to 0.30%p.a. above £10mln. The average Total Expense Ratio (TER) across the fund holdings is
also interesting and for this solution it only adds an estimated +0.14% to the funds average AMC i.e. 0.98%. We aim to be as
transparent as possible in respect of fees.
WEALTH MANAGEMENT REPORTING
Our standard WM reporting pack includes the usual valuation of all holdings, some performance numbers, a transaction
schedule and cash account statements which show details of any income or capital flows in/out of the portfolio. Our
commentary and the latest fund fact sheets complete the picture along with a WM Strategic Asset Allocation Schedule (SAA). An
example of the latter is shown on the final page.

If appropriate the client SAA can also include non advised assets and when completing the client WM Investor Profile at the
outset we were aware that other significant assets were held as part of the client’s overall wealth. This included residential
property, a fixed term bank deposit with Lloyds and a private company equity holding, so in order to help the client capture an
overview of their total balance sheet we were happy to reflect these assets. Whilst the on-going values will be provided by the
client we do attempt to risk score any such non advised investments and include this on the SAA along with an adjusted risk
score - which is often the case.

With clients actively chasing investment returns we are conscious that many alternative forms of investment now feature
regularly within personal balance sheets, albeit due to their characteristics many of these are not as liquid as the more
traditional forms of wealth. In respect of this client the nature of these assets edged the overall risk score 0.4 higher to 3.5 but
still comfortably within the conservative to moderate evaluation that was discussed at the outset following the completion of
our initial risk fact find.

Oh yes, one final point, our fee is naturally only charged on the value of the advised assets so for this client it’s based on £1.5mln
not the £3.5mln.

OUTCOME AND KEEPING IN TOUCH

By taking time at the outset to fully explore and discuss the client goals and long term objective we produced a wealth
management proposal that was accepted without change. Having five fund holdings is within our recommended 4-8 holdings
range and as each fund is on our “approved” list they are fully supported from an on-going monitoring perspective.

An active watching brief over the portfolio will be maintained and we will be prepared to recommend new managers or
strategies to the client as appropriate. A quarterly valuation and report will be produced and unless requested to the contrary
this will also be followed up with a regular telephone call. As this client travels frequently he is happy just to receive the usual
reporting and was pleased with our ability to give him 24/7 secure internet access to his portfolio information.

Finally, our procedures require that wealth managers review the needs of each client on a minimum 12 month rolling basis in
case of any change in their needs or financial circumstances - so this date has been diarised accordingly. That said, with regular
contact throughout the year we don’t envisage any surprises on the next or future anniversary dates.

PRIMARY CONTACTS

Adrian Kemp 01534 620472 akemp@dpzcapital.com Managing Director

Tim Watts 01534 620470 twatts@dpzcapital.com Executive Director
Joe Donohoe 01534 620471 jdonohoe@dpzcapital.com Principal

Disclaimer
This document is provided for information and illustration purposes only. It does not constitute a solicitation, recommendation or offer to buy or sell any specific
investment product or subscribe to any specific investment management or advisory service. The value of investments and any income from them can go up as
well as down and you may not get back the amount originally invested. Investments in emerging markets are by their nature higher risk and potentially more
volatile than those in established markets. Where overseas investments are held the rate of exchange may cause the value of such investments to go down as
well as up. There are additional risks associated with commodities and specific alternative investments such as private equity, and hedge funds within the
portfolios; these investments may be less readily realisable than others and it may therefore be difficult to sell in a timely manner at a reasonable price or to
obtain reliable information about their value; there may also be greater potential for significant price movements. This document is issued by DPZ Capital
Limited. DPZ Capital Limited is licensed and regulated as an investment business by the Jersey Financial Services Commission.
DPZ Capital Limited - Wealth Management Service Date 01-Nov-12
Client Name New Client
Overall Asset Value £3,500,000 DPZC Advised £1,500,000 Estimated Gross Yield % 1.81%
Value Change on the Quarter N/A Latest Risk Rating Score 3.5

Investment Manager Classification Fund, Direct Gross Est Cash Defensive Conservative Moderate Aggressive High Risk Other Total
or Strategy or Portfolio Yield % Gross Est Yield £
DPZC Risk Rating Assessment : (1= Low, 6 = High) 1 2 3 4 5 6

Cash : Lloyds Fixed Deposit - 2015 Direct 4.00% £500,000 £20,000 £500,000

Cash : DPZ Dealing Account Direct 0.25% £30,000 £75 £30,000

M&G Strategic Corporate Bond Fund 3.21% £420,000 £13,482 £420,000

Newton Global Real Return Fund 2.93% £225,000 £6,593 £225,000

Standard Life Global Absolute Return Fund 0.94% £225,000 £2,115 £225,000

Troy Trojan Fund Fund 0.98% £300,000 £2,940 £300,000

Ruffer International Total Return Fund 2.71% £300,000 £8,130 £300,000

Property Residential Direct 0.00% £1,000,000 £0 £1,000,000

XYZ Company Ltd Private Equity Holding Direct 2.00% £500,000 £10,000 £500,000

Total value (£) £530,000 £645,000 £0 £1,825,000 £0 £500,000 £0 £63,335 £3,500,000

Total (%) 15.14% 18.43% 0.00% 52.14% 0.00% 14.29% 0.00% 100.00%
Contribution to portfolio risk 0.15 0.37 0.00 2.09 0.00 0.86 0.00 3.5
1 High Liquidity, Low Risk
2 Capital preservation with a slight growth component. Portfolios are biased toward lower volatility investments
3 Modest growth component to protect against inflation, focus is on capital preservation. Lower volatility
Investment characteristics by DPZC risk rating assessment 4 Blend between capital preservation and growth. Strategies tend to have medium volatility of returns
5 Focus on primarily growth assets, with capital preservation as a secondary objective. Strategies have higher volatility of returns
6 Strategies tend to be highly volatile or may suffer from illiquidity and a lack of transparency
Other