Reasons Why Document

Transcription

1 October 2016 Review prepared by Morningstar Investment Management Europe 1 Oliver s Yard, City Road, London EC1Y 1HQ Example Portfolios for Tenet Growth Reasons Why Document

2 Contents 2 Contents... 2 Introduction... 5 About Morningstar Investment Management Europe Limited... 5 Model Portfolio 2 - Overview... 6 Key Facts... 6 Model Portfolio 2 Overview Corporate Bond... 7 UK... 7 US... 7 European... 7 Japanese... 7 Asia Pacific... 7 Model Portfolio 3 - Overview... 8 Key Facts... 8 Model Portfolio 3 Overview Corporate Bond... 9 UK... 9 US... 9 European... 9 Japanese... 9 Asia Pacific... 9 Model Portfolio 4 - Overview Key Facts Model Portfolio 4 Overview Corporate Bond UK US European Japanese Asia Pacific Model Portfolio 5 Overview Key Facts

3 3 Model Portfolio 5 Overview Corporate Bond UK US European Model Portfolio 5 Overview Japanese Asia Pacific Model Portfolio 6 Overview Key Facts Model Portfolio 6 Overview Corporate Bond UK US European Model Portfolio 6 Overview Japanese Asia Pacific Model Portfolio 7 Overview Key Facts Model Portfolio 7 Overview Corporate Bond UK US European Model Portfolio 7 Overview Japanese Asia Pacific Model Portfolio 8 Overview Key Facts Model Portfolio 8 Overview UK US

4 4 European Japanese Asia Pacific Model Portfolio 8 Overview Emerging Model Portfolio 9 Overview Key Facts Model Portfolio 9 Overview UK US European Japanese Asia Pacific Model Portfolio 9 Overview Emerging Model Portfolio 10 Overview Key Facts Model Portfolio 10 Overview UK US European Japanese Asia Pacific Emerging Model Portfolios Fund Descriptions UK Corporate Bond UK US European Japanese Asia Pacific Emerging

5 Introduction to Morningstar Investment Management Europe and the Model Portfolios 5 Introduction The Example Growth and the Example Income Portfolios are featured on the Tenet extranet site and are available to Tenet Connect Advisers and directly regulated Tenet Select advisors. Moody s (previously called B&H) is the asset allocation provider and Morningstar Investment Management Europe advises upon the fund selection for the Example Portfolios, drawing from Tenet s panel of funds. While the Example Portfolios are continuously monitored, a formal quarterly review takes place following which updated Portfolios are posted to the Tenet website. The rationale for any recommendations to fund selection and/or portfolio construction changes is included in this quarterly report, along with explanation of the performance of the Example Portfolios. About Morningstar Investment Management Europe Limited Morningstar Investment Management Europe Limited provides comprehensive investment advisory and portfolio management services for financial institutions and financial advisers. Morningstar Investment Management Europe Limited applies the independent qualitative investment research from Morningstar, Inc. analysts to provide asset allocation, investment selection and portfolio construction services to life, pension and fund-of-funds providers. Our investment research approach has been in place since 1994 and is forward-looking in nature, which leads to a strong emphasis on the qualitative aspects of research. Morningstar Investment Management Europe s aim is to recommend a relatively small number of funds that are of the highest quality and deliver risk and return outcomes that support various investment objectives...

6 6 Model Portfolio 2 - Overview Key Facts The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Moody s Asset Allocation (Q4 2016) UK 4.0% Corporate Bond 4.5% US 5.0% European 1.5% Japanese 1.5% Asia Pacific 1.0% Moody s Asset Allocation ex Cash (Q4 2016) European 6.3% Japanese 6.3% Asia Pacific 4.2% 27.0% 6.5% Cash 76.0% US 20.8% UK 16.6% Corporate Bond 18.8% Model Portfolio - Q Asset Classes Fund % Asset Allocation Suggested Fund Weight (%) % Asset Allocation (Ex Cash) Cash Suggested Fund Weight (%) (Ex Cash) Morningstar Analyst Rating n/a n/a L&G UK Trust n/a M&G Feeder of Portfolio n/a Corporate Bond Fidelity Moneybuilder Income Gold Invesco Perpetual Corporate Bond Gold UK CF Woodford Income Silver Investec UK Alpha Bronze US HSBC American Index Gold JPM US Silver European JOHCM Continental European Silver Japanese Schroder Tokyo Gold Asia Pacific Fidelity Asia Bronze

7 Model Portfolio 2 Overview 7 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. Corporate Bond For the UK Corporate Bond exposure, we have recommended two funds, Fidelity MoneyBuilder Income and Invesco Perpetual Corporate Bond. These two funds, which are located in the Corporate Bond sector, have differing mandates and are managed with different styles. Both funds have experienced managers and teams at the helm. Fidelity MoneyBuilder Income is a more conservative fund in terms of its mandate and investment approach. The manager is extremely experienced and seeks to deliver consistent, above average returns in a risk controlled manner, which he believes will lead to competitive returns over the longerterm. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by a team of three portfolio managers, including two renowned fixed income practitioners. They tend to reflect greater conviction views in this fund, which has proven relatively rewarding over time. UK European For the European portion of the Portfolio we have selected the JOHCM Continental European fund. The fund aims to achieve consistent, above average results in a riskcontrolled manner and it is considered a core larger-cap offering within the European sector. The manager, Paul Wild, has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his topdown view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmark-aware exposure to the European equity markets. Japanese For the Japanese portion of the Portfolio we have selected the Schroder Tokyo fund. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected the Fidelity Asia fund. The manager, Teera Chanpongsang, is a benchmark-aware rather than benchmark-driven investor. He seeks to identify companies where the market has not fully appreciated the earnings growth potential. He will primarily invest in well-managed industry leaders that are well positioned to benefit from changes in industry dynamics and that trade on attractive valuations. He also aims to identify companies that trade below their intrinsic value and that can benefit from improving fundamentals, growth potential that is not fully understood by the market, turnaround opportunities or a cyclical turning point being reached in certain industries. For the UK portion of the Portfolio, we have recommended to blend CF Woodford Income and Investec UK Alpha. The Investec UK Alpha fund is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with top-down analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. We believe Woodford s excellent track record through numerous market cycles over the last 25 years should serve the portfolio well. US For the US portion of the Portfolio we have selected JPM US and HSBC American Index. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market.

8 8 Model Portfolio 3 - Overview Key Facts The new Example Growth Portfolios were issued on 1st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Moody s Asset Allocation (Q4 2016) US 9.5% European 3.0% Japanese 3.0% Asia Pacific 2.0% Moody s Asset Allocation ex Cash (Q4 2016) European 6.3% Japanese 6.3% Asia Pacific 4.2% 28.4% UK 8.0% Corporate Bond 8.5% 13.5% Cash 52.5% US 20.0% UK 16.8% Corporate Bond 18.0% Model Portfolio - Q Asset Classes Fund % Asset Allocation Suggested Fund Weight (%) % Asset Allocation (Ex Cash) Cash Suggested Fund Weight (%) (Ex Cash) Morningstar Analyst Rating n/a n/a L&G UK Trust n/a M&G Feeder of Portfolio n/a Corporate Bond Fidelity Moneybuilder Income Gold Invesco Perpetual Corporate Bond Gold UK CF Woodford Income Silver Investec UK Alpha Bronze US HSBC American Index Gold JPM US Silver European JOHCM Continental European Silver Japanese Schroder Tokyo Gold Asia Pacific Fidelity Asia Bronze

9 Model Portfolio 3 Overview 9 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. Corporate Bond For the UK Corporate Bond exposure, we have recommended two funds, Fidelity MoneyBuilder Income and Invesco Perpetual Corporate Bond. These two funds, which are located in the Corporate Bond sector, have differing mandates and are managed with different styles. Both funds have experienced managers and teams at the helm. Fidelity MoneyBuilder Income is a more conservative fund in terms of its mandate and investment approach. The manager is extremely experienced and seeks to deliver consistent, above average returns in a risk controlled manner, which he believes will lead to competitive returns over the longerterm. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by a team of three portfolio managers, including two renowned fixed income practitioners. They tend to reflect greater conviction views in this fund, which has proven relatively rewarding over time. UK European For the European portion of the Portfolio we have selected the JOHCM Continental European fund. The fund aims to achieve consistent, above average results in a riskcontrolled manner and it is considered a core larger-cap offering within the European sector. The manager, Paul Wild, has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his topdown view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmark-aware exposure to the European equity markets. Japanese For the Japanese portion of the Portfolio we have selected the Schroder Tokyo fund. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected the Fidelity Asia fund. The manager, Teera Chanpongsang, is a benchmark-aware rather than benchmark-driven investor. He seeks to identify companies where the market has not fully appreciated the earnings growth potential. He will primarily invest in well-managed industry leaders that are well positioned to benefit from changes in industry dynamics and that trade on attractive valuations. He also aims to identify companies that trade below their intrinsic value and that can benefit from improving fundamentals, growth potential that is not fully understood by the market, turnaround opportunities or a cyclical turning point being reached in certain industries. For the UK portion of the Portfolio, we have recommended to blend CF Woodford Income and Investec UK Alpha. The Investec UK Alpha fund is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with top-down analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. We believe Woodford s excellent track record through numerous market cycles over the last 25 years should serve the portfolio well. US For the US portion of the Portfolio we have selected JPM US and HSBC American Index. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market.

10 Model Portfolio 4 - Overview 10 Key Facts The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Moody s Asset Allocation (Q4 2016) US 14.0% European 5.0% Japanese 4.5% Asia Pacific 3.5% Cash 33.5% Moody s Asset Allocation ex Cash (Q4 2016) Japanese Asia Pacific 6.8% 5.2% European 7.5% 22.6% UK 12.5% Corporate Bond 12.0% 15.0% US 21.1% UK 18.8% Corporate Bond 18.0% Model Portfolio - Q Asset Classes Fund % Asset Allocation Suggested Fund Weight (%) % Asset Allocation (Ex Cash) Cash Suggested Fund Weight (%) (Ex Cash) Morningstar Analyst Rating n/a n/a L&G UK Trust n/a M&G Feeder of Portfolio n/a Corporate Bond Fidelity Moneybuilder Income Gold Invesco Perpetual Corporate Bond Gold UK CF Woodford Income Silver Investec UK Alpha Bronze US Franklin US Opportunities Bronze HSBC American Index Gold JPM US Silver Legg Mason US Income Bronze European JOHCM Continental European Silver Japanese Schroder Tokyo Gold Asia Pacific Fidelity Asia Bronze

11 Model Portfolio 4 Overview 11 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. Corporate Bond For the UK Corporate Bond exposure, we have recommended two funds, Fidelity MoneyBuilder Income and Invesco Perpetual Corporate Bond. These two funds, which are located in the Corporate Bond sector, have differing mandates and are managed with different styles. Both funds have experienced managers and teams at the helm. Fidelity MoneyBuilder Income is a more conservative fund in terms of its mandate and investment approach. The manager is extremely experienced and seeks to deliver consistent, above average returns in a risk controlled manner, which he believes will lead to competitive returns over the longerterm. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by a team of three portfolio managers, including two renowned fixed income practitioners. They tend to reflect greater conviction views in this fund, which has proven relatively rewarding over time. The Franklin US Opportunities fund has been managed by the duo of Grant Bowers and Conrad Herrmann since launch in They apply a fundamental bottom-up approach to stock picking and their investment approach focuses on the companies growth prospects, quality of management, financial strength and valuation characteristics. Although the fund is fairly diversified relative to other options in the US equity space, the managers can and do take large sector bets, which can add to its volatility. The Legg Mason US Income invests in companies with solid balance sheets and sustainable dividends. However, the managers are also pragmatic in terms of balancing high dividend yielders with dividend growers depending on their respective valuations. The income approach typically leads to a portfolio with a low beta and defensive characteristics, which we believe complements the other funds in the blend. European For the European portion of the Portfolio we have selected the JOHCM Continental European fund. The fund aims to achieve consistent, above average results in a riskcontrolled manner and it is considered a core larger-cap offering within the European sector. The manager, Paul Wild, has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his topdown view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmark-aware exposure to the European equity markets. Japanese For the Japanese portion of the Portfolio we have selected the Schroder Tokyo fund. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term. UK For the UK portion of the Portfolio, we have recommended to blend CF Woodford Income and Investec UK Alpha. The Investec UK Alpha fund is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with top-down analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. We believe Woodford s excellent track record through numerous market cycles over the last 25 years should serve the portfolio well. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected the Fidelity Asia fund. The manager, Teera Chanpongsang, is a benchmark-aware rather than benchmark-driven investor. He seeks to identify companies where the market has not fully appreciated the earnings growth potential. He will primarily invest in well-managed industry leaders that are well positioned to benefit from changes in industry dynamics and that trade on attractive valuations. He also aims to identify companies that trade below their intrinsic value and that can benefit from improving fundamentals, growth potential that is not fully understood by the market, turnaround opportunities or a cyclical turning point being reached in certain industries. US For the US portion of the Portfolio we have selected four funds, HSBC American Index, JPM US, Franklin US Opportunities and Legg Mason US Income. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias.

12 12 Model Portfolio 5 Overview Key Facts The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Moody s Asset Allocation (Q4 2016) European 6.5% US 18.5% Japanese 6.0% UK 17.5% Asia Pacific 4.5% Cash 16.0% 15.0% Corporate Bond 16.0% Moody s Asset Allocation ex Cash (Q4 2016) Japanese 7.2% European 7.8% US 22.0% Asia Pacific 5.4% 17.8% UK 20.8% Corporate Bond 19.0% Model Portfolio - Q Asset Classes Fund % Asset Allocation Suggested Fund Weight (%) % Asset Allocation (Ex Cash) Cash Suggested Fund Weight (%) (Ex Cash) Morningstar Analyst Rating n/a n/a L&G UK Trust n/a M&G Feeder of Portfolio n/a Corporate Bond Fidelity Moneybuilder Income Gold Invesco Perpetual Corporate Bond Gold Kames Investment Grade Bond Silver UK AXA Framlington UK Select Opportunities Gold CF Woodford Income Silver Investec UK Alpha Gold M&G Recovery Bronze US Franklin US Opportunities Bronze HSBC American Index Gold JPM US Silver Legg Mason US Income Bronze European Henderson European Selected Opportunities Silver JOHCM Continental European Silver Japanese Man GLG Japan CoreAlpha Gold Schroder Tokyo Gold Asia Pacific Fidelity Asia Bronze

13 Model Portfolio 5 Overview 13 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. Corporate Bond For the UK Corporate Bond exposure, we have recommended three funds, namely Kames Investment Grade Bond, Fidelity MoneyBuilder Income and Invesco Perpetual Corporate Bond. These three funds, which are located in the Corporate Bond sector, have differing mandates and are managed with a range of styles. All three funds have experienced managers and teams at the helm. Fidelity MoneyBuilder Income is the most conservative fund in terms of its mandate and investment approach. The manager is extremely experienced and seeks to deliver consistent, above average returns in a risk controlled manner, which he believes will lead to competitive returns over the longerterm. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by a team of three portfolio managers, including two renowned fixed income practitioners. They tend to reflect greater conviction views in this fund, which has proven relatively rewarding over time. Kames Investment Grade Bond is a younger fund but is run by an experienced duo supported by a well-resourced team; the fund s mandate has been designed to provide the managers with greater flexibility in terms of credit and duration positioning and instrument types. Furthermore, the fund uses derivatives actively both for efficient portfolio management and investment purposes. This includes overlay strategies through which the managers look to take advantage of cross-market opportunities. UK For the UK portion of the Portfolio, we have recommended the following funds, Investec UK Alpha, CF Woodford Income, M&G Recovery and AXA Framlington UK Select Opportunities. The Investec UK Alpha fund forms the bedrock of the Portfolio s UK equity blend and is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with topdown analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. spectrum by Nigel Thomas, a very experienced fund manager. The portfolio tends to have a growth bias and has no constraints in its positioning relative to the index. US For the US portion of the Portfolio we have selected four funds, HSBC American Index, JPM US, Franklin US Opportunities and Legg Mason US Income. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. The Franklin US Opportunities fund has been managed by the duo of Grant Bowers and Conrad Herrmann since launch in They apply a fundamental bottom-up approach to stock picking and their investment approach focuses on the companies growth prospects, quality of management, financial strength and valuation characteristics. Although the fund is fairly diversified relative to other options in the US equity space, the managers can and do take large sector bets, which can add to its volatility. The Legg Mason US Income invests in companies with solid balance sheets and sustainable dividends. However, the managers are also pragmatic in terms of balancing high dividend yielders with dividend growers depending on their respective valuations. The income approach typically leads to a portfolio with a low beta and defensive characteristics, which we believe complements the other funds in the blend. European For the European portion of the Portfolio we have selected JOHCM Continental European and Henderson European Selected Opportunities. The JOHCM Continental European fund aims to achieve consistent, above average results in a risk-controlled manner and it is considered a core largercap offering within the European sector. The manager has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his top-down view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmarkaware exposure to the European equity markets. The Henderson European Selected Opportunities fund offers investors exposure to a large-cap biased portfolio of European stocks. The manager s focus is on companies with attractive track records and the ability to surprise in the future. The investment approach is primarily bottom-up but the manager is also relatively pragmatic in utilizing top-down inputs to deliver a more consistent performance profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. Furthermore, we believe that income strategies are likely to be rewarded where the dividend remains a significant element of an equity investor s total return moving forward. The M&G Recovery and AXA Framlington UK Select Opportunities funds are higher alpha funds which are featured as complementary holdings. The M&G fund is a rather unique multi-cap proposition and the manager focuses on companies that are out of favour, in difficulty or whose future prospects are not fully recognised by the market. This approach should add diversity to the fund blend. The AXA Framlington fund is invested across the market cap

14 Model Portfolio 5 Overview 14 Japanese For the Japanese portion of the Portfolio we have selected Schroder Tokyo and Man GLG Japan CoreAlpha, with a lower weighting to the latter fund given its relatively more volatile performance profile. The Schroder Tokyo fund offers investors a large-cap orientated equity fund run by an experienced manager, Andrew Rose, who is supported by a wellresourced team. The investment style is flexible however the manager favours established profitable companies with attractive relative valuations. Man GLG Japan Core Alpha is a more specialist mandate, which should act as a strong complement to the Schroder Tokyo fund. The fund has been managed by industry veterans Stephen Harker and Neil Edwards since January The experience of the team in managing Japanese money has enabled them to remain focused and disciplined. The managers adopt a distinct value and contrarian bottom-up investment approach which requires patience. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected the Fidelity Asia fund. The manager, Teera Chanpongsang, is a benchmark-aware rather than benchmark-driven investor. He seeks to identify companies where the market has not fully appreciated the earnings growth potential. He will primarily invest in well-managed industry leaders that are well positioned to benefit from changes in industry dynamics and that trade on attractive valuations. He also aims to identify companies that trade below their intrinsic value and that can benefit from improving fundamentals, growth potential that is not fully understood by the market, turnaround opportunities or a cyclical turning point being reached in certain industries.

15 Model Portfolio 6 Overview 15 Key Facts The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Moody s Asset Allocation (Q4 2016) European 8.0% Asia Pacific Japanese 5.5% 7.0% Cash 1.0% 15.0% Corporate Bond 19.5% Moody s Asset Allocation ex Cash (Q4 2016) European 8.1% Japanese 7.1% Asia Pacific 5.5% 15.2% Corporate Bond 19.7% US 22.5% UK 21.5% US 22.7% UK 21.7% Model Portfolio - Q Asset Classes Fund % Asset Allocation Suggested Fund Weight (%) % Asset Allocation (Ex Cash) Cash Suggested Fund Weight (%) (Ex Cash) Morningstar Analyst Rating n/a n/a L&G UK Trust n/a M&G Feeder of Portfolio n/a Corporate Bond Fidelity Moneybuilder Income Gold Invesco Perpetual Corporate Bond Gold Kames Investment Grade Bond Silver UK AXA Framlington UK Select Opportunities Gold CF Woodford Income Silver Investec UK Alpha Bronze M&G Recovery Bronze US Franklin US Opportunities Bronze HSBC American Index Gold JPM US Silver Legg Mason US Income Bronze European Henderson European Selected Opportunities Silver JOHCM Continental European Silver Japanese Man GLG Japan CoreAlpha Gold Schroder Tokyo Gold Asia Pacific Fidelity Asia Bronze

16 Model Portfolio 6 Overview 16 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. Corporate Bond For the UK Corporate Bond exposure, we have recommended three funds, namely Kames Investment Grade Bond, Fidelity MoneyBuilder Income and Invesco Perpetual Corporate Bond. These three funds, which are located in the Corporate Bond sector, have differing mandates and are managed with a range of styles. All three funds have experienced managers and teams at the helm. Fidelity MoneyBuilder Income is the most conservative fund in terms of its mandate and investment approach. The manager is extremely experienced and seeks to deliver consistent, above average returns in a risk controlled manner, which he believes will lead to competitive returns over the longerterm. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by a team of three portfolio managers, including two renowned fixed income practitioners. They tend to reflect greater conviction views in this fund, which has proven relatively rewarding over time. Kames Investment Grade Bond is a younger fund but is run by an experienced duo supported by a well-resourced team; the funds mandate has been designed to provide the managers with greater flexibility in terms of credit and duration positioning and instrument types. Furthermore, the fund uses derivatives actively both for efficient portfolio management and investment purposes. This includes overlay strategies through which the managers look to take advantage of cross-market opportunities. UK For the UK portion of the Portfolio, we have recommended the following funds, Investec UK Alpha, CF Woodford Income, M&G Recovery and AXA Framlington UK Select Opportunities. The Investec UK Alpha fund forms the bedrock of the Portfolio s UK equity blend and is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with topdown analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. spectrum by Nigel Thomas, a very experienced fund manager. The portfolio tends to have a growth bias and has no constraints in its positioning relative to the index. US For the US portion of the Portfolio we have selected four funds, HSBC American Index, JPM US, Franklin US Opportunities and Legg Mason US Income. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. The Franklin US Opportunities fund has been managed by the duo of Grant Bowers and Conrad Herrmann since launch in They apply a fundamental bottom-up approach to stock picking and their investment approach focuses on the companies growth prospects, quality of management, financial strength and valuation characteristics. Although the fund is fairly diversified relative to other options in the US equity space, the managers can and do take large sector bets, which can add to its volatility. The Legg Mason US Income invests in companies with solid balance sheets and sustainable dividends. However, the managers are also pragmatic in terms of balancing high dividend yielders with dividend growers depending on their respective valuations. The income approach typically leads to a portfolio with a low beta and defensive characteristics, which we believe complements the other funds in the blend. European For the European portion of the Portfolio we have selected JOHCM Continental European and Henderson European Selected Opportunities. The JOHCM Continental European fund aims to achieve consistent, above average results in a risk-controlled manner and it is considered a core largercap offering within the European sector. The manager has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his top-down view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmarkaware exposure to the European equity markets. The Henderson European Selected Opportunities fund offers investors exposure to a large-cap biased portfolio of European stocks. The manager s focus is on companies with attractive track records and the ability to surprise in the future. The investment approach is primarily bottom-up but the manager is also relatively pragmatic in utilizing top-down inputs to deliver a more consistent performance profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. Furthermore, we believe that income strategies are likely to be rewarded where the dividend remains a significant element of an equity investor s total return moving forward. The M&G Recovery and AXA Framlington UK Select Opportunities funds are higher alpha funds which are featured as complementary holdings. The M&G fund is a rather unique multi-cap proposition and the manager focuses on companies that are out of favour, in difficulty or whose future prospects are not fully recognised by the market. This approach should add diversity to the fund blend. The AXA Framlington fund is invested across the market cap

17 Model Portfolio 6 Overview 17 Japanese For the Japanese portion of the Portfolio we have selected Schroder Tokyo and Man GLG Japan CoreAlpha, with a lower weighting to the latter fund given its relatively more volatile performance profile. The Schroder Tokyo fund offers investors a large-cap orientated equity fund run by an experienced manager, Andrew Rose, who is supported by a wellresourced team. The investment style is flexible however the manager favours established profitable companies with attractive relative valuations. Man GLG Japan Core Alpha is a more specialist mandate, which should act as a strong complement to the Schroder Tokyo fund. The fund has been managed by industry veterans Stephen Harker and Neil Edwards since January The experience of the team in managing Japanese money has enabled them to remain focused and disciplined. The managers adopt a distinct value and contrarian bottom-up investment approach which requires patience. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected the Fidelity Asia fund. The manager, Teera Chanpongsang, is a benchmark-aware rather than benchmark-driven investor. He seeks to identify companies where the market has not fully appreciated the earnings growth potential. He will primarily invest in well-managed industry leaders that are well positioned to benefit from changes in industry dynamics and that trade on attractive valuations. He also aims to identify companies that trade below their intrinsic value and that can benefit from improving fundamentals, growth potential that is not fully understood by the market, turnaround opportunities or a cyclical turning point being reached in certain industries.

18 Model Portfolio 7 Overview 18 Key Facts The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Moody s Asset Allocation (Q4 2016) European 10.5% Japanese 7.5% US 27.0% Asia Pacific 7.5% 15.0% Corporate Bond 8.5% UK 24.0% Model Portfolio - Q Asset Classes Fund % Asset Allocation 15.0 Suggested Fund Weight (%) Morningstar Analyst Rating L&G UK Trust 7.00 n/a M&G Feeder of Portfolio 8.00 n/a Corporate Bond 8.5 Invesco Perpetual Corporate Bond 4.00 Gold Kames Investment Grade Bond 4.50 Silver UK 24.0 AXA Framlington UK Select Opportunities 4.50 Gold CF Woodford Income 6.20 Silver Investec UK Alpha 8.50 Bronze M&G Recovery 4.80 Bronze US 27.0 Franklin US Opportunities 5.00 Bronze HSBC American Index 8.00 Gold JPM US 7.00 Silver Legg Mason US Income 7.00 Bronze European 10.5 Henderson European Selected Opportunities 5.25 Silver JOHCM Continental European 5.25 Silver Japanese 7.5 Man GLG Japan CoreAlpha 3.50 Gold Schroder Tokyo 4.00 Gold Asia Pacific 7.5 Fidelity Asia 3.75 Bronze Investec Asia ex Japan 3.75 Silver

19 Model Portfolio 7 Overview 19 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. Corporate Bond For the UK Corporate Bond exposure, we have recommended two funds, Invesco Perpetual Corporate Bond and Kames Investment Grade Bond. These two funds, which are located in the Corporate Bond sector, have experienced managers at the helm and typically run the funds with conviction, flexing duration and investing in lower-rated credits where deemed appropriate. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by a team of three portfolio managers, including two renowned fixed income practitioners. They tend to reflect greater conviction views in this fund, which has proven relatively rewarding over time. Kames Investment Grade Bond is a younger fund but is run by an experienced duo supported by a well-resourced team; the fund s mandate has been designed to provide the managers with greater flexibility in terms of credit and duration positioning and instrument types. Furthermore, the fund uses derivatives actively both for efficient portfolio management and investment purposes. This includes overlay strategies through which the managers look to take advantage of cross-market opportunities. UK For the UK portion of the Portfolio, we have recommended the following funds, Investec UK Alpha, CF Woodford Income, M&G Recovery and AXA Framlington UK Select Opportunities. The Investec UK Alpha fund forms the bedrock of the Portfolio s UK equity blend and is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with topdown analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. US For the US portion of the Portfolio we have selected four funds, HSBC American Index, JPM US, Franklin US Opportunities and Legg Mason US Income. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. The Franklin US Opportunities fund has been managed by the duo of Grant Bowers and Conrad Herrmann since launch in They apply a fundamental bottom-up approach to stock picking and their investment approach focuses on the companies growth prospects, quality of management, financial strength and valuation characteristics. Although the fund is fairly diversified relative to other options in the US equity space, the managers can and do take large sector bets, which can add to its volatility. The Legg Mason US Income invests in companies with solid balance sheets and sustainable dividends. However, the managers are also pragmatic in terms of balancing high dividend yielders with dividend growers depending on their respective valuations. The income approach typically leads to a portfolio with a low beta and defensive characteristics, which we believe complements the other funds in the blend. European For the European portion of the Portfolio we have selected JOHCM Continental European and Henderson European Selected Opportunities. The JOHCM Continental European fund aims to achieve consistent, above average results in a risk-controlled manner and it is considered a core largercap offering within the European sector. The manager has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his top-down view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmarkaware exposure to the European equity markets. The Henderson European Selected Opportunities fund offers investors exposure to a large-cap biased portfolio of European stocks. The manager s focus is on companies with attractive track records and the ability to surprise in the future. The investment approach is primarily bottom-up but the manager is also relatively pragmatic in utilizing top-down inputs to deliver a more consistent performance profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. Furthermore, we believe that income strategies are likely to be rewarded where the dividend remains a significant element of an equity investor s total return moving forward. The M&G Recovery and AXA Framlington UK Select Opportunities funds are higher alpha funds which are featured as complementary holdings. The M&G fund is a rather unique multi-cap proposition and the manager focuses on companies that are out of favour, in difficulty or whose future prospects are not fully recognised by the market. This approach should add diversity to the fund blend. The AXA Framlington fund is invested across the market cap spectrum by Nigel Thomas, a very experienced fund manager. The portfolio tends to have a growth bias and has no constraints in its positioning relative to the index.

20 Model Portfolio 7 Overview 20 Japanese For the Japanese portion of the Portfolio we have selected Schroder Tokyo and Man GLG Japan CoreAlpha, with a lower weighting to the latter fund given its relatively more volatile performance profile. The Schroder Tokyo fund offers investors a large-cap orientated equity fund run by an experienced manager, Andrew Rose, who is supported by a wellresourced team. The investment style is flexible however the manager favours established profitable companies with attractive relative valuations. Man GLG Japan Core Alpha is a more specialist mandate, which should act as a strong complement to the Schroder Tokyo fund. The fund has been managed by industry veterans Stephen Harker and Neil Edwards since January The experience of the team in managing Japanese money has enabled them to remain focused and disciplined. The managers adopt a distinct value and contrarian bottom-up investment approach which requires patience. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected Fidelity Asia and Investec Asia ex Japan. The Fidelity Asia fund is managed with a flexible and active approach and the manager is prepared to back his views with conviction. This can result in greater volatility but this has been rewarded with strong relative returns over the longer-term. The Investec Asia ex Japan fund offers investors exposure to a diversified portfolio of mid and large-cap Asian equities (ex Japan). The manager, Greg Kuhnert, combines bottom-up research and Investec s 4Factor process with a level of pragmatism that acknowledges the limitations of the quantitative 4Factor process. The manager s market awareness and pragmatic approach is complementary to the rigorous bottom-up approaches undertaken by the First State Asia Pacific Leaders and Fidelity Asia funds.

21 21 Model Portfolio 8 Overview Key Facts Moody s Asset Allocation (Q4 2016) The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Asia Pacific 10.0% Japanese 7.0% Emerging 5.0% 15.0% UK 17.0% European 17.0% US 29.0% Model Portfolio - Q Asset Classes Fund % Asset Allocation 15.0 Suggested Fund Weight (%) Morningstar Analyst Rating L&G UK Trust 7.00 n/a M&G Feeder of Portfolio 8.00 n/a Corporate Bond 0.0 n/a 0.00 n/a UK 17.0 AXA Framlington UK Select Opportunities 4.00 Gold CF Woodford Income 4.00 Silver Investec UK Alpha 5.00 Bronze M&G Recovery 4.00 Bronze US 29.0 Franklin US Opportunities 5.50 Bronze HSBC American Index 7.75 Gold JPM US 8.00 Silver Legg Mason US Income 7.75 Bronze European 17.0 BlackRock Continental European 5.00 Silver Henderson European Selected Opportunities 6.00 Silver JOHCM Continental European 6.00 Silver Japanese 7.0 Man GLG Japan CoreAlpha 3.00 Gold Schroder Tokyo 4.00 Gold Asia Pacific 10.0 Fidelity Asia 5.00 Bronze Investec Asia ex Japan 5.00 Silver Emerging 5.0 JPM Emerging Markets 3.00 Bronze M&G Global Emerging Markets 2.00 Bronze

22 Model Portfolio 8 Overview 22 For the property portion of the Portfolio, we recommend the L&G UK Trust and the M&G Feeder of Portfolio. Both funds provide exposure primarily to the UK commercial property market. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. The L&G UK Trust benefits from experienced co-managers and the resources of a wider team. They have also shown the ability to use the derivative market to the benefit of investors. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. UK For the UK portion of the Portfolio, we have recommended four funds, Investec UK Alpha, CF Woodford Income, AXA Framlington UK Select Opportunities and M&G Recovery. The Investec UK Alpha fund forms the bedrock of the Portfolio s UK equity blend and is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with topdown analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. The CF Woodford Income fund typically offers a relatively lower risk way of accessing the equity market through astute top-down calls and a robust valuation discipline. Furthermore, we believe that income strategies are likely to be rewarded where the dividend remains a significant element of an equity investor s total return moving forward. The M&G Recovery and AXA Framlington UK Select Opportunities funds are higher alpha funds. The M&G fund is a specialist, multi-cap proposition and the manager focuses on companies that are out of favour, in difficulty or whose future prospects are not fully recognised by the market. This approach should add diversity to the fund blend. The AXA Framlington fund is invested across the market cap spectrum by Nigel Thomas, a very experienced fund manager. The portfolio tends to have a growth bias and has no constraints in its positioning relative to the index. US For the US portion of the Portfolio we have selected four funds, HSBC American Index, JPM US, Franklin US Opportunities and Legg Mason US Income. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. The Franklin US Opportunities fund has been managed by the duo of Grant Bowers and Conrad Herrmann since launch in They apply a fundamental bottom-up approach to stock picking and their investment approach focuses on the companies growth prospects, quality of management, financial strength and valuation characteristics. Although the fund is fairly diversified relative to other options in the US equity space, the managers can and do take large sector bets, which can add to its volatility. depending on their respective valuations. The income approach typically leads to a portfolio with a low beta and defensive characteristics, which we believe complements the other funds in the blend. European For the European portion of the Portfolio we have selected three funds, JOHCM Continental European, Henderson European Selected Opportunities and BlackRock Continental European. The JOHCM Continental European fund aims to achieve consistent, above average results in a risk-controlled manner. The manager has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his top-down view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmarkaware exposure to the European equity markets. The Henderson European Selected Opportunities fund offers investors exposure to a large-cap biased portfolio of European stocks. The manager s focus is on companies with attractive track records and the ability to surprise in the future. The investment approach is primarily bottom-up but the manager is also relatively pragmatic in utilizing top-down inputs in order to deliver a more consistent performance profile. The BlackRock Continental European fund offers investors a large cap biased portfolio of European equities managed in a pragmatic fashion using a teambased approach that combines rigorous stock selection with in-depth topdown analysis. Japanese For the Japanese portion of the Portfolio we have selected Schroder Tokyo and Man GLG Japan CoreAlpha, with a lower weighting to the latter fund given its relatively more volatile performance profile. The Schroder Tokyo fund offers investors a large-cap orientated equity fund run by an experienced manager, Andrew Rose, who is supported by a wellresourced team. The investment style is flexible however the manager favours established profitable companies with attractive relative valuations. Man GLG Japan Core Alpha is a more specialist mandate, which should act as a strong complement to the Schroder Tokyo fund. The fund has been managed by industry veterans Stephen Harker and Neil Edwards since January The experience of the team in managing Japanese money has enabled them to remain focused and disciplined. The managers adopt a distinct value and contrarian bottom-up investment approach which requires patience. Asia Pacific For the Asia Pacific portion of the Portfolio we have selected Fidelity Asia and Investec Asia ex Japan. The Investec Asia ex Japan fund offers investors exposure to a diversified portfolio of mid and large-cap Asian equities (ex Japan). The manager, Greg Kuhnert, combines bottom-up research and Investec s 4Factor process with a level of pragmatism that acknowledges the limitations of the quantitative 4Factor process. The manager s market awareness and pragmatic approach is complementary to the rigorous bottom-up approaches undertaken by the First State Asia Pacific Leaders and Fidelity Asia funds. The Fidelity Asia fund is managed with a flexible and active approach and the manager is prepared to back his views with conviction. This can result in greater volatility but this has been rewarded with strong relative returns over the longer-term. The Legg Mason US Income invests in companies with solid balance sheets and sustainable dividends. However, the managers are also pragmatic in terms of balancing high dividend yielders with dividend growers

23 Model Portfolio 8 Overview 23 Emerging For the Emerging portion of the portfolio we have recommended two funds, JPM Emerging Markets and M&G Global Emerging Markets, with the former bringing a growth bias and the latter a value bias. The JPM fund is managed according to a disciplined stock-picking process that is based upon qualitative and quantitative analysis. There is an overt bias to higher quality companies and the manager has a relatively long-term investment time horizon. Nevertheless, he is aware of relative risks as well as absolute risks in the aggregate portfolio. The holding is complemented by M&G Global Emerging Markets, which is managed in a disciplined manner according to the process that has been employed by the global equity team at M&G for several years. The manager is willing to deviate from the benchmark in constructing a portfolio of stocks that meet his requirements. We believe his differentiated approach, which often results in a fund with more of a value style bias than many other funds in the peer group, makes it an attractive complement in the emerging markets equity fund blend.

24 Model Portfolio 9 Overview 24 Key Facts Moody s Asset Allocation (Q4 2016) The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Asia Pacific 12.5% Japanese 5.0% European 24.0% Emerging 9.5% 8.5% UK 9.5% US 31.0% Model Portfolio - Q Asset Classes Fund % Asset Allocation 8.5 Suggested Fund Weight (%) Morningstar Analyst Rating M&G Feeder of Portfolio 8.50 n/a Corporate Bond 0.0 n/a 0.00 n/a UK 9.5 AXA Framlington UK Select Opportunities 4.00 Gold Investec UK Alpha 5.50 Bronze US 31.0 Franklin US Opportunities 6.00 Bronze HSBC American Index 8.00 Gold JPM US 9.00 Silver Legg Mason US Income 8.00 Bronze European 24.0 BlackRock Continental European 6.00 Silver Henderson European Selected Opportunities 6.00 Silver JOHCM Continental European 6.00 Silver Jupiter European Special Situations 6.00 Silver Japanese 5.0 Schroder Tokyo 5.00 Gold Asia Pacific 12.5 Fidelity Asia 6.00 Bronze Investec Asia ex Japan 6.50 Silver Emerging 9.5 JPM Emerging Markets 5.50 Bronze M&G Global Emerging Markets 4.00 Bronze

25 Model Portfolio 9 Overview 25 For the property portion of the Portfolio, we recommend the M&G Feeder of Portfolio. M&G Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. *In January 2013, the M&G Portfolio was reconstructed into the M&G Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms are unable to support PAIF. UK For the UK portion of the Portfolio, we have recommended Investec UK Alpha and AXA Framlington UK Select Opportunities. The Investec UK Alpha fund is run by Simon Brazier, who was previously running a similar mandate at Threadneedle before moving to Investec at the beginning of The process blends fundamental, bottom-up stock research with top-down analysis. Brazier is mindful of the risk/reward dynamics of the fund and aims to provide investors with a consistent return profile. The AXA Framlington UK Select Opportunities fund is a higher alpha fund with greater mid-cap weightings. The AXA Framlington fund is invested across the market cap spectrum by Nigel Thomas, a very experienced fund manager. The portfolio tends to have a growth bias and has no constraints in its positioning relative to the index. US For the US portion of the Portfolio we have selected four funds, HSBC American Index, JPM US, Franklin US Opportunities and Legg Mason US Income. We view the HBSC American Index as an anchor within the mix. The fund also reduces the relative risks within the blend and is a cost-effective way of gaining broad exposure to the US market. The JPM US fund offers exposure to a portfolio of US equities through a longstanding behavioural finance philosophy that seeks to capitalise on valuation and momentum anomalies. The fund is diversified and sector deviations tend to be minimal but the portfolio has tended to have a value bias. The Franklin US Opportunities fund has been managed by the duo of Grant Bowers and Conrad Herrmann since launch in They apply a fundamental bottom-up approach to stock picking and their investment approach focuses on the companies growth prospects, quality of management, financial strength and valuation characteristics. Although the fund is fairly diversified relative to other options in the US equity space, the managers can and do take large sector bets, which can add to its volatility. European For the European portion of the Portfolio, which represents a large allocation, we have selected four funds, JOHCM Continental European, Henderson European Selected Opportunities, BlackRock Continental European and Jupiter European Special Situations. The JOHCM Continental European fund aims to achieve consistent, above average results in a risk-controlled manner. The manager has a strong awareness of the positioning of the index and expresses his conviction ideas in a very proactive manner, whilst remaining very pragmatic given the importance of his top-down view in the process. We see this fund as an attractive proposition for investors wishing to obtain broad and benchmarkaware exposure to the European equity markets. The Henderson European Selected Opportunities fund offers investors exposure to a large-cap biased portfolio of European stocks. The manager s focus is on companies with attractive track records and the ability to surprise in the future. The investment approach is primarily bottom-up but the manager is also relatively pragmatic in utilizing top-down inputs in order to deliver a more consistent performance profile. The BlackRock Continental European fund offers investors an all-cap portfolio of European equities. The fund is managed in a pragmatic fashion using a team-based approach that combines rigorous stock selection with in-depth top-down analysis. Jupiter European Special Situations is an actively managed stock-picking fund with a bias towards quality growth companies. The manager pays little attention to the index in positioning the fund but is responsive to market dynamics. Japanese For the Japanese portion of the portfolio we have selected the Schroder Tokyo fund. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term. Asia Pacific For the Asia Pacific portion of the portfolio we have selected three funds, Fidelity Asia and Investec Asia ex Japan. The Fidelity Asia fund is managed with a flexible and active approach and the manager is prepared to back his views with conviction. This can result in greater volatility but this has been rewarded with strong relative returns over the longer-term The Investec Asia ex Japan fund offers investors exposure to a diversified portfolio of mid and large-cap Asian equities (ex Japan). The manager, Greg Kuhnert, combines bottom-up research and Investec s 4Factor process with a level of pragmatism that acknowledges the limitations of the quantitative 4Factor process. The manager s market awareness and pragmatic approach is complementary to the rigorous bottom-up approaches undertaken by the First State Asia Pacific Leaders and Fidelity Asia funds. The Legg Mason US Income invests in companies with solid balance sheets and sustainable dividends. However, the managers are also pragmatic in terms of balancing high dividend yielders with dividend growers depending on their respective valuations. The income approach typically leads to a portfolio with a low beta and defensive characteristics, which we believe complements the other funds in the blend.

26 Model Portfolio 9 Overview 26 Emerging For the Emerging portion of the portfolio we have recommended two funds, JPM Emerging Markets and M&G Global Emerging Markets, with the former bringing a growth bias and the latter a value bias. The JPM Emerging Markets fund is managed according to a disciplined stock-picking process that is based upon qualitative and quantitative analysis. There is an overt bias to higher quality companies and the manager has a relatively long-term investment time horizon. Nevertheless, he is aware of relative risks as well as absolute risks in the aggregate portfolio. The holding is complemented by M&G Global Emerging Markets, which is managed in a disciplined manner according to the process that has been employed by the global equity team at M&G for several years. The manager is willing to deviate from the benchmark in constructing a portfolio of stocks that meet his requirements. We believe his differentiated approach, which often results in a fund with more of a value style bias than many other funds in the peer group, makes it an attractive complement in the emerging markets equity fund blend.

27 Model Portfolio 10 Overview 27 Key Facts Moody s Asset Allocation (Q4 2016) The new Example Growth Portfolios were issued on 1 st March Asset allocation is provided by Moody s (previously called B&H). Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitativelydriven research process. The objective is to deliver a risk and return profile in each of the asset classes that is commensurate with the underlying markets, whilst seeking outperformance over the long-term. At Tenet s request, the Portfolios are populated and reported on based upon the asset allocation excluding cash. Asia Pacific 14.5% Emerging 13.0% UK 6.0% US 33.0% Japanese 4.0% European 29.5% Model Portfolio - Q Asset Classes Fund % Asset Allocation UK 6.0 Suggested Fund Weight (%) Morningstar Analyst Rating Investec UK Alpha 6.00 Bronze US 33.0 Franklin US Opportunities 6.50 Bronze HSBC American Index 7.50 Gold JPM US 8.00 Silver Legg Mason US Income 7.00 Bronze Legg Mason US Smaller Companies 4.00 Bronze European 29.5 BlackRock Continental European 7.50 Silver Henderson European Selected Opportunities 7.50 Silver JOHCM Continental European 7.00 Silver Jupiter European Special Situations 7.50 Silver Japanese 4.0 Schroder Tokyo 4.00 Gold Asia Pacific 14.5 Fidelity Asia 7.25 Bronze Investec Asia ex Japan 7.25 Silver Emerging 13.0 JPM Emerging Markets 6.50 Bronze M&G Global Emerging Markets 6.50 Bronze