T A T T O N M A N A G E D C O R E C A U T I O U S

Q 2 2 0 1 5 Q U A R T E R L Y R E P O R T S E C O N D Q U A R T E R ( A P R - J U N ) 2 0 1 5 T A T T O N M A N A G E D C O R E C A U T I O U S 1

M O D E L P O R T F O L I O P E R F O R M A N C E Q 2 2 0 1 5 * Cumulative Performance % (years) 1yr 2014 2013 2012 2011 Annualised Tatton Managed Core Cautious (overlay) 7.2 6.4 11.7 - - 8.3 Vanguard (50%) / OBSR (50%) Cautious Model 6.7 7.6 9.7 - - 7.5 IA OE Mixed Investment 20-60% Shares peer group 4.9 5.0 9.2 - - 6.6 Calendar Performance % Month Quarter Year-to-date Since Inception** Tatton Managed Core Cautious (overlay) -3.2-2.4 2.7 21.9 Vanguard (50%) / OBSR (50%) Cautious Model -3.4-2.9 1.6 19.8 IA OE Mixed Investment 20-60% Shares peer group -2.9-2.1 2.2 17.2 Past performance is not a guarantee of future performance. *Source: Morningstar. Please read the Disclosure section at the end of this document. ** The portfolio was launched on 01/01/2013. The above table shows the performance of your portfolio and also the average fund performance of the Investment Association (IA) peer group benchmark that broadly matches its profile. The short-term variances in performance between these are within normally expected ranges. Your portfolio is as a long-term investment and it continues to be on track to achieve its objective, which can be seen from its performance since inception. The table of returns produced later in this report shows the performance of major global indices and highlights the benefit of appropriate diversification. C A U T I O U S P O R T F O L I O C H A R A C T E R I S T I C S T i m e H o r i z o n Minimum of 5 years R i s k P r o f i l e Low to Moderate P o r t f o l i o Y i e l d * * * 2.0% The leading objective of this portfolio is to produce a combination of income and growth. The portfolio gives limited exposure to capital markets through a range of diversified UK and international investments and aims to achieve above inflation investment returns over the longer term. Equity (stock market) exposure will follow the respective Ibbotson strategic asset allocation risk profile target which is currently set to 45%. In the shorter-term Tatton may deviate from this by a maximum of +/-12.5% (currently 32.5-57.5%) to adjust actual portfolios to prevailing market conditions. The ±12.5% comprises a maximum ±10% Tactical Asset Allocation (TAA) decision mandate and a ±2.5% buffer that allows for variation in prices, which can inadvertently drive the chosen allocation higher or lower (i.e. market drift). This portfolio is likely to be suitable for the following type of investor: A investor seeking to maintain capital over the medium to long term. An investor who is prepared to accept a lower investment return than equity markets over the longer term in exchange for trying to minimise potential losses. Someone who accepts that the portfolio will be subject to fluctuations in value. You should contact your adviser if you feel that this profile no longer matches your investment objectives or if your circumstances are likely to change. 2

C U M U L A T I V E P O R T F O L I O R E T U R N S * Past performance is not a guarantee of future performance. *Source: Morningstar. The model portfolio was launched on 01/01/2013. T A T T O N A S S E T A L L O C A T I O N Cash and Cash Proxies, 10% Property, 5% Manager of Managers, 0% UK Gilts, 9% UK Inflation-Indexed, 7% UK Corporate, 12% Global Bond, 12% UK Equity, 22% Europe Equity, 5% North America Equity, 7% Japan Equity, 5% Global Emerging Market Equity, 3% Russia Equity, 0% Latin American Equity, 0% Asia Dev ex Japan Equity, 3% Global Equity, 0% Alternative, 0% The asset allocation of the Tatton Managed Core Cautious Model is correct as at 7/7/2015. 3

P O R T F O L I O A C T I V I T Y Tatton rebalanced the portfolio on 12 June 2015. This was a part of our move to reduce risk in client portfolios and alter the asset allocation by adding in an Index Linked Gilt (fixed income) position with a specific time frame in mind, to help counter potentially increased levels of volatility over the summer months. The Tatton Managed Core Cautious model declined 2.4% while its benchmark was down 2.9%, meaning the Tatton model outperformed its benchmark by 0.5% over the reporting quarter. The best performing fund was BlackRock Mid Cap UK Equity Tracker which returned 3.07% and the worst performing fund was BlackRock Global Property Securities Equity Tracker which fell -12.22%. F U N D C H A N G E S Tatton reduced levels of cash within the portfolio and decreased the weightings of the JP Morgan US Equity Income, Vanguard UK Government Bond Index and the Vanguard US Equity Index and the JP Morgan EU Dynamic funds. Tatton completely sold the holding in Schroder Tokyo Hedged GBP as part of the strategy to reduce risk in the portfolio. Tatton replaced its holding of Schroder Tokyo Hedged GBP with the unhedged share class to avoid taking on further currency risk from Japanese Yen volatility. Tatton increased its weightings of the Templeton Global Total Return, the Henderson European Selected Opportunities, JP Morgan Emerging Market Income, Templeton Global Total Return the Vanguard Global Short-Term Bond fund, the Vanguard Japan Stock Index, the Vanguard Emerging Market Stock Index, the Vanguard UK Government Bond Index and the L&G Index Linked Gilt funds. 4

P E R F O R M A N C E C O M M E N T A R Y After a strong first quarter (Q1) for investors it was disappointing to see asset valuations decline on a very broad front over the second quarter (Q2). At Tatton, we had anticipated the possibility of such a retreat early on, and our up to 9% reduction in equity allocations in favour of cash in mid-april resulted in Tatton managed portfolios weathering the Q2 market setbacks better than the standard risk profile asset allocations would have allowed. This can be particularly observed, when portfolio performance is compared against individual stock and fixed income markets, where regions like Europe (-7.8%) and Global equities (-5.6%) experienced heavy falls. Even relatively safe assets like government bonds were not spared pain, with UK Gilts losing -3.4% and German Bunds fell -4.6%. Interestingly fixed interest bonds recovered towards the end of June as the tensions around the renewed Greek debt crisis approached their climax and once again a general flight to the relative safety of government bonds set in. We had noted during May in our ongoing communications that we believed markets underestimated the probability of the Greek crisis going to the wire. As a consequence we moved from cash to UK government bonds. These may be unloved by us from a longer term perspective for their historically low yields, but they offered an effective counterbalance to the heightened stock market volatility during the last weeks of the quarter. It is important to note that we always considered the equity reduction and government bond increase as a temporary position to secure some of the profits from the 1st quarter and shield investors as much as possible from increased market volatility. However, once the drivers of the heightened volatility have receded and global growth outlook continues to improve, we are minded to return to our earlier pro-growth positioning. This reflects our long term negative outlook for government bonds valuation as interest rates will gradually rise and bond yields normalise which undermines the value of existing bond holdings. At the same time equities will become the only capital growth contributor of significance for investment portfolios. As a result this asset class should then be temporarily over-weighted to its long term risk profile average. 5

P E R F O R M A N C E S U M M A R Y O F M A J O R G L O B A L I N D I C E S Asset Class Index Q2 2015 FTSE 100 (UK) -2.8% 1.4% FTSE4Good 50 (UK Ethical Index) -4.0% -1.0% Equities Dow Jones Euro-Stoxx 50 (Euro-Zone) -7.8% 1.3% Standard & Poors 500 (USA) -5.4% 0.4% Nikkei 225 (Japan) -2.5% 12.7% MSCI All Countries World -5.6% 1.2% FTSE Gilts All Stocks -3.4% -1.3% Bonds IA Sterling Corporate Bond Index -3.6% -0.6% Barclays Global Aggregate Bond Index -6.7% -3.9% Goldman Sachs Commodity Index 2.6% -1.1% Commodities Brent Crude Oil Price 8.9% 10.0% Spot Gold Price -6.0% -2.9% Inflation UK Consumer Price Index (annual rate) 0.4% 0.0% Cash rates Libor 3 month GBP 0.14% 0.3% * Source: Morningstar, all returns in Pounds - Sterling ( - GBP) A B U M P Y Q 2 B U T E C O N O M I C F U N D A M E N T A L S R E M A I N S O L I D Passing through the middle of the year is always an interesting time for investment managers, as it allows them to assess what has happened and what they believe is in store for the next six months. Once a view is formed, positions can be re-adjusted accordingly. After a pleasing 1 st quarter capital markets have had a less satisfying second quarter, as they had to contend with significant headwinds. Fears over a potential Greek exit of the Eurozone (or Grexit ) upset European markets, whereas a 30% fall in Chinese equities caused confidence issues in Asia in what many saw as a stock market bubble. Added into this volatile mix has been less dynamic economic growth in the US, with the expected rebound after the winter slowdown having yet to fully materialise as it did in 2014. This caused confusion around the likely timing of the all-important start of rate rises in the US. Investors have also seen larger than normal value movements in government bonds (both down and up) and a general lack of liquidity, not to mention various geopolitical issues. Despite all of those negative factors, developed market equities as measured by the MSCI Developed Market Index have still gained 3% in the first half of 2015, while emerging markets as tracked by the MSCI Emerging Markets Index were up 1.7%. However, markets took a bit of a beating during Q2, especially fixed income bonds. European bond markets, led by German Bunds, saw a large reversal in early May and even rose back up to levels they were last at before the European Central Bank s (ECB) quantitative easing program (QE) started in February. There were a number of factors behind the fixed income volatility in Q2. A 9% rise in oil prices and better euro-area economic data over the quarter led to an upwards re-rating of inflation expectations in Europe. Along with concerns over receding market liquidity after large quantitative easing purchases (QE; 60 billion a month) of bonds by the ECB, bonds sold off and yields recovered from their historical lows. 6

Greece continued to be one of the major news topics in Q2, particularly as each potential deadline for action passed by without a solution being found. The announcement of the Yes (Nai)/No (Oxi) Greferrendum at the end of June by Prime Minister Alexis Tsipras kicked off another bout of uncertainty. The extent of contagion effects of a potential Greek Eurozone exit had somewhat diminished compared to the first Greek crisis in 2012, thanks to a rebounding European economy and the steadfast actions of the ECB to stem the potential for run on Greek banks amid declining customer deposits. However, markets still expressed their nervousness through equity market falls and bond surges whenever negotiations appeared to falter. Over in the US, the economy has bounced (although not as much as some had hoped) from the Q1 blip and analysts estimate Q2 GDP should expand by around 2.5%, led by resilient US consumer demand. The data backing up the rise in spending looks encouraging, with a decline in the savings rate helping to push spending higher by nearly 1% alone in May, which is the strongest level since the end of 2009. Measures of activity in the US housing market are also getting healthier, with home sales on an apparent upwards trend. The recent rise in long-term Treasury yields appeared not to dampen this positive move. We note that mortgage approvals are on the up and consumers are enjoying improving real wages (wage increases after inflation, as highlighted by the US Central Bank, the Federal Reserve). Rising levels of consumer sentiment and perceived job security should underpin further positive momentum in spending growth. Japan managed to surprise many, with Q2 growth being stronger than forecast and consumers seeing the fastest rate of wage growth in nearly 2 years. Investors foresee a longer-term positive picture emerging for Japanese equities and a possible upwards re-rating of local stocks driven by the ongoing shift in corporate governance and a renewed focus on enhancing shareholder returns as measured by Return on Equity (RoE). Japanese companies are sitting on over $2.3 trillion worth of cash and some of this money should find its way back to shareholders in the longer-run, which should result in increased interest in domestic equities from overseas investors. Turbulences over the bursting of the bubble in Chinese equities have not yet spread into other markets, which may be partly down to the fact that the most affected A-Share stocks can mostly only be invested in by local investors. While the Shanghai Composite had risen 150% in the past 12 months, it has since retreated into bear market territory, falling over 30%, from its highs, although still up more for 2015 than almost any other stock market globally. International investors have come to accept that Chinese equities have disconnected from actual economic fundamentals and appear to be driven more by government intervention and a gambling culture rather than fundamental economic and corporate earnings considerations. Overall, we observe that despite the aforementioned headwinds, actual economic growth and the further outlook remains positive. Company earnings appear solid and consumer spending in developed markets, like US, UK and Europe is rising gradually, which should support further growth. We believe that once the risks to this positive scenario recede, such as a resolution on Greece, stabilising growth rates in China and less fear of a premature first rate rise by the US Central Bank (US- Fed), equity markets will resume their Q1 upwards trend. Tatton has positioned portfolios to benefit from that longer-term growth picture, but has also been mindful of the risks that can impact portfolio values in the shorter-term. 7

G L O S S A R Y O F T E R M S IA Investment Management Association OBSR Old Broad Street Research DFM Discretionary Fund Management (i.e. the Tatton Overlay Service) Disclosure The portfolio returns presented in this document are for information purposes only and should be regarded as indicative of the returns individual clients will have achieved with their actual investment portfolios, which are managed in the same respective investment style and risk profile. While client portfolio returns are expected to be very similar to the returns shown here, they may differ as a result of new monies having been introduced by the client, or withdrawn from the portfolio and/or the specific fee charging arrangements agreed between the client and the adviser. The performance does not account for the differences due to the limitations of a particular platform. Past performance is not a guide to future performance. Please be aware that adjustments to previously reported data can occur. The value of your investments and the income from them can fluctuate and it is possible that investors may not get back the amount they invested. Please note that the performance data does not reflect the performance experienced by clients in the Scottish Friendly Assurance Onshore Bond (Nucleus only) nor the Nucleus Pension APP (Appropriate Pension Plan). All returns are calculated in -Sterling and are shown after fund charges, but before all other fees, like platform, Tatton (DFM) and adviser charges. The Tatton Portfolios were launched on 01/01/2013. The Income Portfolios were launched on 05/12/2014. The period covered in this update is from 01/01/2013 30/06/2015. The charts, data and related performance calculations shown within this report has been obtained from Morningstar and is valid as at 07/07/2015. Asset Allocation: Operational cash of 2% is required by the platform to cover costs and charges, any additional amount is for strategic purposes. *** Portfolio yield is calculated as the rolling 12-month yield. I M P O R T A N T I N F O R M A T I O N Tatton Investment Management Limited is a trading style of Cambridge Investments Limited which is authorised and regulated by the Financial Conduct Authority. The value of your investments and the income from them can fluctuate and it is possible that investors may not get back the amount they invested. The information in this document does not constitute investment advice or a recommendation for any product and you should not make any investment decisions on the basis of it. www.tattoninvestments.com Twitter: @TattonIM 125 Old Broad Street, London EC2N 1AR. Tel: 0207 190 2959 8