Dynamic Tracker Securities

1. Dynamic Tracker Securities CLS Winter Conference 2014

2. Dynamic tracker securities • Bespoke ETF like securities that allow you the discretionary to change the composition of the underlying investments exposure. • Can be linked to stocks, bonds, mutual funds, dividend futures…..combination of and hedge overlays. • Like a fund, whilst the underlying investment exposure changes, based upon you the discretionary ’s instructions, the security that investors hold remains the same. • Unlike a fund, the costs and size constraints of issuing such a security are significantly lower with denominations down to £1. • There are advantageous tax benefits to executing stock strategies in this manner rather than as direct investments or via a fund. • You are accessing bank’s global execution and custody platforms. If they can trade and settle it, you can access it.

3. How do they work? Asset construction Basket Returns Basket Returns Basket Returns Issuer Security Stock Basket Bank physically purchases stock as a hedge

4. How do they work? Asset construction Revised Basket Returns Issuer Security Revised Basket Returns Revised Basket Returns Stock Basket Bank adjusts its physical stock holding, based upon instructions Revised basket composition instructions Discretionary

5. Dynamic tracker securities in numbers

6. Benefits of and to whom? • End Investor • Lower TER • Access BPS style stock picking • Tax efficient • Potentially access new stocks • Portfolio Manager • Lower TER; better performance • Efficient implementation of BPS style stock picking • Tax efficient; better performance and can be tailored to each investor • Access to all stocks banks can trade and clear • The Firm • Ability to strategically roll out BPS to MPS style clients • Efficiency gains both in terms of both PM and BO time • Potential savings for custody costs and access to new markets

7. DISCLAIMER The information in this document is derived from sources believed to be reliable but which have not been independently verified. Catley Lakeman Securities makes no guarantee of its accuracy and completeness and is not responsible for errors of transmission of factual or analytical data, nor is it liable for damages arising out of any person’s reliance upon this information. All charts and graphs are from publicly available sources or proprietary data. The opinions in this document constitute the present judgment of Catley Lakeman Securities, which is subject to change without notice. This document is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This document is intended for the use of institutional and professional customers and is not intended for the use of private customers. This document is not intended for distribution in the United States of America or to US persons. This document is intended to be distributed in its entirety. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Catley Lakeman Securities is a LLP registered in England and Wales, Registered Office : One Eleven Edmund Street, Birmingham, B3 2HJ. Registration Number: OC336585, FSA Reference: 484826