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www.fandc.com The Adviser, the Multi-Manager and Income in the new pensions world F&C MM - Authentic Multi-Solutions Multi-Manager Forum May 2015

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Learning outcomes At the end of the F&C session, you will be able to describe: The important role that diversification plays in building any long term investment solution and particularly one focussed on consistent income generation Some of the important considerations behind asset selection and monitoring as well as blending different assets together How a natural income investment approach can help protect against pound cost ravaging during income drawdown The role that a suite of multi asset investment solutions can play when outsourcing, and in retirement planning strategy The importance of a consistent and stable investment team that has a tried and tested history 2

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The Adviser, the Multi-Manager and Income in the new pensions world agenda Do the Pensions Changes suit the Advisor and Multi-Manager markets? Does the Adviser as a G.P. model suit this new world? A trip to the MM Hospital for some Income Replacement Therapy A few words on markets, themes & trends Conclusion 3

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Pensions the Lamborghini question Source: www.thisismoney.com and Lipper from 01.01.2009 to 11.04.2014www.thisismoney.com 4

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Do the Pensions Changes suit the Advisor and Multi-Manager markets? Rising demand for advice Increase need/demand for risk profiling/cash flow modelling Retirement will have different phases determined by age, health and wealth Hybrid structures will need to be developed to deliver the right mix of guarantees, flexibility and access Increased interest in risk managed, multi-asset funds 5 Consequences of change: according to the FCA Source: Technical connection

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Multi-Asset funds are playing an increasing role in retirement planning as part of a core-satellite approach and are seen as vital by more than 2/3rds of advisers Survey information provided by Technical Connection Do the Pensions Changes suit the Advisor and Multi- Manager markets? Some Comments: 6 Henderson Global Investors There has been a large increase in money invested in multi-asset products over the past decade, rocketing from 21,5bn to 126.5bn. The number of funds has also rocketed going from 263 in 2005 to 653. Source:Portfolio Adviser/Henderson Global Investors March 2015 FCA Multi-asset and diversified growth funds are expected to be used to manage volatility and some investment risk for consumers Advisers and providers are expected to use blended solutions which cover differing consumer needs and wants such as an annuity to cover living costs and drawdown exposing customers to investment growth and risk. Source: MS14/3.2 Retirement income market study: Interim Report December 2014

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Do the Pensions Changes suit the Advisor and Multi- Manager markets? In 2013 there was 1 drawdown sale for every 16 annuity sales In 2013: Average pension pot used to buy an annuity = 20,000 .whereas the average pension pot used in drawdown = 80,700 DC pension pots of 50% of those interviewed < 50K* 62% believe their DC pot wont supply all the income they need in retirement (more than 80% have at least one other source of income)* 50% of (existing) retirees chose an annuity (15% chose drawdown)* 32% of those approaching retirement say less likely to chose annuity.* Did you know? 7 Source: Technical connection *GFK CONSUMER Research for FCA DC Defined Contribution

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The Adviser, the Multi-Manager and Income in the new pensions world agenda Do the Pensions Changes suit the Advisor and Multi-Manager markets? Does the Adviser as a G.P. model suit this new world? A trip to the MM Hospital for some Income Replacement Therapy A few words on markets, themes & trends 8

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Advisor ? Top things patients want in a doctor 9 Empathy Listening Skills Recommended Professional Dresser Multi-Manager ? Image: http://en.wikipedia.org/wiki/Up_in_the_Air_(2009_film)

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PensionsISACollectives Insurance Property (buy to let) Cash VCTEISOther A Retirement fund might look a bit like this So where do Multi-Solutions fit in with your clients needs? 10

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Medium-term needs Current needs Long-term needs Short-term bucket: Medium-term bucket: Long-term bucket: So where do Multi-Solutions fit in with your clients needs? Income from all provisions and/or investments: Low risk liquid assets Short dated government bonds Natural income withdrawals from investments Multiple assets could include: Fixed income Property Equity income Multiple assets could include: Predominantly diversified equity portfolio Potential for moderate holdings in other risk assets 11

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F&C MM our Multi-solution range Source: F&C Management Limited & Distribution Technology as at 31.12.2014 * Estimated 4 Navigator funds risk profiles - TBC by Distribution Technology Q2/2015 RP= Risk Profile RP 7*/10 RP 6*/10 RP 5*/10 RP 4/10 Marc Denney RP 7/10 RP 6/10 RP 5/10 RP 4/10 RP 3/10 12

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Performance generated by the Multi-Manager team as constituted from time to time for and on behalf of Credit Suisse from 10.08.2001 up to 28.02.2007. Performance of F&C MM Navigator Funds from 01.10.2007 to 31.03.2015. Source LIM, % growth TR GBP rebased Past performance should not be seen as an indication of future performance. *TER: total expense ratio Absolute performance vs sector averages for three of our funds with performance history dating back to 2001 Team record vs IMA sectors net of full TER* Consistent, steady returns over the long term Paul Green 13

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19103 Days from 10.04.1962 to 31.03.2015. Source: LIM Calendar dates indicate industry start dates. Light blue area indicates time since team was formed F&C MM: team history and experience Lipper 14

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The Adviser, the Multi-Manager and Income in the new pensions world agenda Do the Pensions Changes suit the Advisor and Multi-Manager markets? Does the Adviser as a G.P. model suit this new world? A trip to the MM Hospital for some Income Replacement Therapy A few words on markets, themes & trends 15

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A trip to the MM Hospital for some Income Replacement Therapy 16

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Why is income replacement therapy necessary? Pound cost ravaging: Impact of bad timing (2000) 0 20000 40000 60000 80000 100000 2005200320012007200920112013 5K initial6K initial8K initial10K initial Impact of decumulation based on UK Equity Total returns Given Levels of Starting Income Escalating at 2.5% p.a. Initial starting income levels Source: Cazalet Consulting When Im sixty-four as at September 2014 Value 17

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Pound cost ravaging: 1) Using natural income (2007) Initial investment of 200,000 on the 1 st October 2007 Natural income on multi-asset income of around 5% per annum. Fund performance reflects income paid out Comparable level of yield (2,500 per quarter) taken from sector in the form of withdrawal of capital. Sector performance includes dividends reinvested. Comparable income marked contrasts in capital outcomes Source: Lipper and F&C to 31 January 2015. The illustration was created by F&C and every effort was made to ensure the accuracy of the methodology. It is however included for illustrative purposes only and is not meant to serve as a recommendation nor should it be taken as advice for investment purposes. IMA Mixed Investment 20-60% shares sector F&C MM Navigator Distribution Fund Amount invested200,000 Income received72,50067,517* Capital Value168,818198,420 Total241,318265,937 * F&C MM Navigator Distribution Fund paid first dividend on March 2008 and total paid in 2008 was 2.59% 18

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F&C MM Navigator Distribution the income option % Growth Total Return, Tax Default, in GBP. Source: LIM as at 31.03.2015 *Launch date: 01.10.2007 Lipper 19

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Pharmacy Open-ended funds Closed-ended Passives ETFs Futures Cash 20 Investment tools in our box:

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Plastic surgery Smart Beta Risk Parity 21 A Controversial Area

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A trip to the MM Hospital for some Income Replacement Therapy Start with a sensible industry sector Lowest (% returns) Highest (% returns) Average (% returns) 5%+ returns (% of 1 year outcomes) Inflation 1 1.15.22.94.0 Cash 2 0.63.50.80.0 IMA sector average -16.827.57.562.0 F&C MM Navigator Distribution Fund-13.931.310.471.0 Lowest (% returns) Highest (% returns) Average (% returns) Inflation 1 15.017.916.2 Cash 2 3.87.54.4 IMA sector average8.055.432.8 F&C MM Navigator Distribution Fund17.569.746.2 1. UK Consumer Price Index 2. Moneyfacts average instant access 10,000 account Time periods from 01.10.2007 to 01.10.2014 Analysis of 1 year return IMA Mixed Asset 20-60% Equity Sector Analysis of 5 year return IMA Mixed Asset 20-60% Equity Sector 22

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Sourcing income through broader asset classes Images: http://upload.wikimedia.org; www.pixabay.com; http://no.wikipedia.org; http://www.mobilehomesabroad.org.ukhttp://upload.wikimedia.orgwww.pixabay.comhttp://no.wikipedia.orghttp://www.mobilehomesabroad.org.uk For illustrative purposes only Fixed Income 32.3 UK Equity 23.7 Specialist Funds 18.7 European Equity 6.7 Non-correlated assets4.9 Asian Equity 4.8 Alternatives 3.5 Japanese Equity 2.2 GEM Equity 1.5 Cash 1.7 Sourcing income 23

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Trip to the Multi-Manager Hospital: General Surgery Fund selection Asset allocation Portfolio construction 24 Image: https://s-media-cache-ak0.pinimg.com/236x/85/41/95/8541954b5fe1165fd3dc43f1efc66151.jpg

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Trip to the Multi-Manager Hospital: A&E Assess Control Adjust Communicate 25 Events out of normal control Images: http://upload.wikimedia.org/wikipedia/commons/e/e3/P_Street_-_snow_removal.JPG; https://www.flickr.com/photos/uclmaps/10667999425http://upload.wikimedia.org/wikipedia/commons/e/e3/P_Street_-_snow_removal.JPGhttps://www.flickr.com/photos/uclmaps/10667999425

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Trip to the Multi-Manager Hospital: Tropical diseases Contacting managers in region Portfolio response Communicating to advisors 26

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Trip to the Multi-Manager Hospital: Diagnostic Imaging Style Research output of sample funds 27 For illustrative purposes only

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Trip to the Multi-Manager Hospital : Ear, Nose & Throat 28

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F&C MM Navigator Distribution Fund 29 Current portfolio yield 4.5%* 5.0%** 4.7%*** Data as at 31.03.2015. * Yield on a historic basis (taking the last four payments into account as declared on Lipper) as at 31.03.2015.** Gross yield on a historic basis (taking the last four payments into account as declared on Lipper) as at 31.03.2015. *** Prospective gross yield on the basis of the portfolio invested as at 31.12.2014 assuming maintained dividends by the underlying constituents as at 31.03.2015; this figure is an estimate and is not guaranteed. Estimates and forecasts are provided for illustrative purposes only. They are not a guarantee of future performance and should not be relied upon for any investment decision. Estimates are based on assumptions and subject to change without notice. (prospective) Marc Denney Yield from Anthony Willis Portfolio breakdown RegionSector %Fund holding UK23.14Schroder Income Maximiser J O Hambro Capital Management UK Equity Income Fund PFS Chelverton UK Equity Income Fund RWC Enhanced Income Fund Ardevora UK Income Fund Majedie UK Income Fund Fixed31.05Ashmore Emerging Market Total Return Fund Schroder Strategic Credit Fund GCP Infrastructure Investments Limited GLG Global Strategic Bond Fund PFS TwentyFour Investment Funds - Dynamic Bond Fund Starwood European Real Estate Finance Limited Carador Income Fund plc TwentyFour Income Fund Limited Legg Mason Income Optimiser Fund P2P Global Investments Mutual Fund Henderson Strategic Bond Fund Europe8.58Blackrock Continental European Income Fund Standard Life Investments European Equity Income Fund Japan2.37CC Japan Income & Growth Fund (JPY) CC Japan Income & Growth Fund (GBP) Portfolio breakdown RegionSector %Fund holding Asia5.00Schroder Asian Income Maximiser Prusik Asian Equity Income Fund Specialist18.88Veritas Global Equity Income Fund Lazard Global Equity Income Fund Artemis Global Income Fund Polar Capital Financials Income Fund RWC Enhanced Global Dividend Fund SQN Asset Finance Income Fund Emerging Markets1.39JPM Emerging Markets Income Fund Alternatives2.913i Infrastructure plc Blue Capital Global Reinsurance Fund Limited Non- correlated assets4.30Darwin Leisure Property Fund MedicX Fund Limited Cash2.36 100.00

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And over the long term, time IN the market matters more than TIMING the market matching pension savings needs 30 Source: Business Insider / Morningstar 05.01.2015 1000% 100 %

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Trying to win by not losing Source: Lipper hindsight TR GBP 01.10.2007 31.12.2014 F&C Navigator Distribution has historically outperformed the FT All Share Index 31

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Trying to win by not losing Bear market period FT All Share (%) F&C MM Navigator Distribution (%) Outperformance (%) 1st October 2007 - 28th October 2008-38.8-22.5+16.3 6th April 2010 - 1st July 2010-15.4-5+10.4 5th July 2011 - 4th October 2011-17.8-9.4+8.4 15th March 2012 - 1st June 2012-10.6-2.5+8.1 22nd May 2013 - 24th June 2013-11.3-3.8+7.5 4th September 2014 - 16th October 2014 -9.7-2.6+7.1 Average-17.3-7.6+9.6 Source: F&C Investments 32

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Trip to the Multi-Manager Hospital: Neurology Liquidity Beta Tracking Error 33 Risk management

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Correlation analysis: vital component for income 34 Correlations from 31.12.2012 to 31.12.2014 Source: Lipper as at 31.12.2014 0.5 to 1 Negative correlation 0 to 0.5

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Trip to the Multi-Manager Hospital: Neurology Liquidity Beta Tracking Error Correlation VaR Active Volatility Soft factors Ultimately about avoiding loss of capital 35 Risk management

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Trip to the Multi-Manager Hospital: Morgue Fund closures Company mergers 36

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Trip to the Multi-Manager Hospital: Maternity Unit No track record New home? Resources? Woodford? 37 Assessing new issues

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Trip to the Multi-Manager Hospital: Maternity Unit 38 Source: % Growth Total Return, Tax Default, in GBP. Source: LIM as at 31.03.2015

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Trip to the Multi-Manager Hospital: Maternity Unit 39 Source: % Growth Total Return, Tax Default, in GBP. Source: LIM as at 31.03.2015

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Trip to the Multi-Manager Hospital: Transplants Squad system Timing Tracking and learning 40 Fund switches Images: https://farm9.staticflickr.com/8167/7273444248_bba8c111f5_o.jpg

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Trip to the Multi-Manager Hospital: Urology 41 Fair value

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Trip to the Multi-Manager Hospital: Intensive care Daily intensive management 8 people 140 years experience 42 All of the above, carry out diligently

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F&C MM Navigator Distribution the income option % Growth Total Return, Tax Default, in GBP. Source: LIM as at 31.03.2015 *Launch date: 01.10.2007 Lipper 43

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*Performance of F&C MM Navigator Distribution Fund from 30.05.2008 up to 31.12.2014. Source: Lipper, % growth TR GBP rebased. Distribution represents F&C MM Navigator Distribution A Acc. ** 82 months from 30.05.2008 to 31.03.2015. % Growth Total Return, Tax Default, in GBP. Source: Lipper as at 31.03.2015. 5 Years of 5%+ Income We have been extremely consistent with our results Graph = Lipper Rankings/spliced data = Paul Green / Anthony Willis 44

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The Adviser, the Multi-Manager and Income in the new pensions world agenda Do the Pensions Changes suit the Advisor and Multi-Manager markets? Does the Adviser as a G.P. model suit this new world? A trip to the MM Hospital for some Income Replacement Therapy A few words on markets, themes & trends Conclusion 45

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Current asset allocation USA: Slight Underweight Europe: Slight Overweight UK: Slight Underweight Fixed Income: Underweight Japan: Overweight Emerging Markets: Slight Underweight Asia Pacific ex-Japan: Slight Overweight Positive NeutralNegative Property: Slight Underweight Source: F&C 18.03.2015 46

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The Adviser, the Multi-Manager and Income in the new pensions world agenda Do the Pensions Changes suit the Advisor and Multi-Manager markets? Does the Adviser as a G.P. model suit this new world? A trip to the MM Hospital for some Income Replacement Therapy A few words on markets, themes & trends Conclusion 47

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The Adviser, the Multi-Manager and Income in the new pensions world conclusion Do the Pensions Changes suit the Advisor and Multi-Manager markets? - YES Does the Adviser as a G.P. model suit this new world? - YES A trip to the MM Hospital for some Income Replacement Therapy TAKE THE QUARTERLY DISTRIBUTION COURSE A few words on markets, themes & trends POSITIVE BUT WARY Conclusion CHECK THAT YOUR CHOSEN CLIENTSS SOLUTIONS ARE AUTHENTIC 48 The secret of life is honesty and fair dealing. If you can fake that, youve got it made. - Groucho Marx

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Appendix

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F&C have tried & tested multi-asset solutions F&C MM Navigator Distribution: Delivering consistent income, capital growth & preservation Capital and Income Returns F&C MM Navigator Distribution Fund A Acc 1 Year3 Years5 Years Capital Return Only % Growth* -0.19%13.10%6.40% Cumulative Income Only - Total Received (based on 200,000 invested) 9,493.0833,966.2954,714.49 Total Cumulative Returns Name 1 Year3 Years5 Years Total Return F&C MM Navigator Distribution Fund A Acc 4.60%31.87%39.29% IMA Mixed Investment 20-60% Shares 4.77%23.45%31.40% Source: Lipper as at 31.12.2014, *F&C MM Navigator Distribution Fund A Inc 50

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Learning outcomes At the end of the F&C session, you will be able to describe: The important role that diversification plays in building any long term investment solution and particularly one focussed on consistent income generation Some of the important considerations behind asset selection and monitoring as well as blending different assets together How a natural income investment approach can help protect against pound cost ravaging during income drawdown The role that a suite of multi asset investment solutions can play when outsourcing, and in retirement planning strategy The importance of a consistent and stable investment team that has a tried and tested history 51

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Past performance should not be seen as an indication of future performance. The value of investments and income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested. The information, opinions estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time. F&C Group Companies may from time to time deal in investments mentioned herein on behalf of their clients. The source of information in all graphs is F&C unless otherwise stated. F&C Management Limited is a member of the F&C Group. The F&C Group is wholly owned by BMO Global Asset Management (Europe) Limited, which is itself a wholly owned subsidiary of the Bank of Montreal. (1) Authorised and regulated in the UK by the Financial Conduct Authority. (2) F&C REIT Property Asset Management Plc is a wholly owned subsidiary of F&C REIT Asset Management LLP and is Authorised and regulated by the Financial Conduct Authority. (3) Regulated in the Netherlands by the Autoriteit-FM. (4) Regulated in Portugal by the CMVM and the Bank of Portugal. CM: 05257 Global reach. Regional expertise United Kingdom F&C Management Limited (1) Exchange House, Primrose Street London EC2A 2NY Tel: +44 (0) 20 7628 8000 F&C Management Limited (1) 80 George Street Edinburgh EH2 3BU, Scotland Tel: +44 (0) 20 7628 8000 Thames River Capital LLP (1) Exchange House, Primrose Street London EC2A 2NY Tel: +44 (0) 20 7628 8000 F&C REIT Property Asset Management Plc (2) 5 Wigmore Street London W1U 1PB Tel: +44 (0) 20 7499 2244 Europe Germany F&C Management Limited (1) Oeder Weg 113 60318 Frankfurt Germany Tel: +49 (0) 69 597 9908-0 Germany F&C Management Limited (1) Theatinerstrasse 11 80333 Munich Germany Tel: +49 (0) 89 71042 2033 Germany F&C REIT Property Asset Management GmbH & Co. KG Oberanger 34-36, 80331 Mnchen Germany Tel: +49 (0) 89 61 46 51 0 Ireland F&C REIT Property Asset Management plc (2) Block 5, Harcourt Centre, Harcourt Road Dublin 2 Ireland Tel: +353 (0) 1 436 4000 Netherlands F&C Netherlands B.V. (3) Jachthavenweg 109 e 1081 KM Amsterdam Netherlands Tel: +31 (0) 20 582 3000 Portugal F&C Portugal, Gesto de Patrimnios, S.A. (4) Rua de Campolide, 372 1st floor, 1070-040 Lisboa Portugal Tel: +351 (0) 21 003 3200 Switzerland F&C Management Limited (1) Claridenstrasse 40 8002 Zurich Switzerland Tel: +41 43 344 51 45 F&C is now part of BMO Global Asset Management, which has offices in Canada, United States, Luxembourg, Abu Dhabi, China and Australia. Full details are available at www.bmo.com/gamwww.bmo.com/gam