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Exchange-Traded Funds: The Basics

Hector McNeil, Co-CEO WisdomTree EuropeWWW.WISDOMTREE.COM+44 (0)20 7826 8582

FOR PROFESSIONAL CLIENTS AND SOPHISTICATED INVESTORS ONLY

Disclaimer This document is issued by WisdomTree Europe Ltd (WTE) an appointed representative of Mirabella Financial Services LLP, which is authorised and regulated by the United Kingdom Financial Conduct Authority (FCA). The products discussed in this document are issued by WisdomTree Issuer PLC (Issuer), an umbrella investment company with variable capital having segregated liability between its funds organised under the laws of Ireland as a public limited company and authorised by the Central Bank of Ireland (CBI). The Issuer is organised as an Undertaking for Collective Investment in Transferable Securities (UCITS) under the laws of Ireland and shall issue a separate class of shares ("Shares) representing each fund. Investors should read the prospectus of the Issuer ( Prospectus) before investing and should refer to the section of the Prospectus entitled Risk Factors for further details of risks associated with an investment in the Shares. Any decision to invest should be based on the information contained in the Prospectus. This product may not be available or suitable for you. This document does not constitute investment advice nor an offer for sale nor a solicitation of an offer to buy Shares. This document should not be used as the basis for any investment decision.The price of any Shares may go up or down and an investor may not get back the amount invested. Past performance is not a reliable indicator of future performance. Any historical performance included in this document may be based on back testing. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. The value of the Shares may be affected by exchange rate movements.

For United Kingdom Investors: The Fund is a recognised scheme under section 264 of the Financial Services and Markets Act 2000 and so the Prospectus may be distributed to investors in the United Kingdom. Copies of all documents are available in the United Kingdom from www.wisdomtree.com. Within the United Kingdom, this document is only made available to professional clients and eligible counterparties as defined by the FCA. Under no circumstances should this document be forwarded to anyone in the United Kingdom who is not a professional client or eligible counterparty as defined by the FCA.This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof, where none of the Issuer or the Shares are authorised or registered for distribution and where no prospectus of the Issuer has been filed with any securities commission or regulatory authority. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States. Neither the Issuer nor any securities issued by it have been or will be registered under the United States Securities Act of 1933 or the Investment Company Act of 1940 or qualified under any applicable state securities statutes.

FOR PROFESSIONAL CLIENTS AND SOPHISTICATED INVESTORS ONLY#

WisdomTree at-a-GlanceWisdomTree is a global exchange-traded fund provider and asset manager with approximately $63.4 billion in assets under management as of 26 June 2015WisdomTree is the 6th largest Global ETF issuer and the world's largest issuer of currency-hedged ETFsWisdomTree Europe was founded in April 2014 after the acquisition of Boost ETP$604 million in assets under management as of 26 June 2015WisdomTree focuses on creating innovative and thoughtful ETFs for investors. Its differentiated approach employs a distinct index-based methodology that delivers better risk-adjusted returns over the long termWisdomTree is the only publicly traded asset manager exclusively focused on the ETF industry

Source : Assets under management and rank as global ETF issuer all measured as of 15/06/2015. #4WisdomTree Europe at-a-GlanceWisdomTree Europe was founded in April 2014 after the acquisition of Boost ETP$604 million in assets under management as of 26 June 2015300% growth since the start of the year ($180m to $600m)61 strategies tracked by ETPs and ETFsBoost ETP introduced Europes first platform of 3x short & leveraged ETPs Includes equities, commodities, bonds and FXNow offer short, leveraged and unleveraged ETPs7 oil ETPs with AUM of $96 million, approx. as of 26 June 2015Launched first smart-beta dividend-weighted UCITS ETF strategies in October 20146 ETFs listed in the UK, Italy, Germany and Switzerland First European provider of a platform of dividend weighted smart beta ETFsOwner of Intellectual Property behind the indicesLaunched first currency-hedged ETFs in May 2015Exposure to Japan (DXJ), Europe (HEDJ) and Germany (DXGP). The indices include an export tilt to companies likely to benefit from a weak home currencyAcquired Europes only Irish equity ETF in April 2015

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Global AUM in ETPs and # ETPsAUM of global ETFs have grown 29% p.a. on average since 2000Growth driven initially by low-cost alternative to mutual funds, later by product innovationEquities comprise $2.4 trillion of the $2.9 trillion ETF industry

Source: BlackRock, ETP Landscape, Industry Highlights, April 2015 #6

AUM growth and top 10 providers in US and Europe

Source: BlackRock, ETP Landscape, Industry Highlights, April 2015 #7

What are ETFs?Exchange-traded products (ETPs) is an umbrella term which encompasses Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs) and Exchange Traded Commodities (ETCs). An ETF is similar to a mutual fund, but trades real time on a recognised investment exchange. Key features are:ETFs are open ended fund that creates and redeems to demandETFs trade on a stock exchange and settle the same as an equityETFs have a daily NAV (Net Asset Value)ETFs usually have multiplemarket makerswho compete for flows through tight pricingETFs are arbitrageable, so pricing on the stock exchange should be efficientETFs are usually low cost relative to other similar investment productsETFs are tax efficient usually subject to CGT and stamp duty on Exchange tradingETFs cover the following asset classes: Equities, Fixed income, Commodities, Currency & AlternativesWhat is the difference between ETFs, ETCs and ETNs?ETFs, ETCs, and ETNs are very similar. However, the primary difference is that ETFs provide exposure to indices in a fund structure and are typically UCITS compliant. ETCs are collateralised debt instruments providing exposure to commodities. ETNs provide exposure to multiple asset classes as either collateralised or uncollateralised debt instruments.

#8Key Advantages of using ETFsMutual funds have long been the staple in investor portfolios but this is starting to change with the rise in popularity of ETFs. The table below summarises the key advantages of why investors choose ETFs over mutual funds:Exchange-Traded FundsMutual Funds (passive & active)Transparent with holdings often disclosedHoldings rarely disclosedStrategy is systematically appliedStrategy can deviate and is prone to market sentimentSelective market exposure which aims to match index returns after fees and expensesSeek to outperform market indicesCost efficient with generally lower TER than mutual fundsHigher TERHighly liquid as they are priced throughout the day and traded on exchangePriced at the end of the day after markets close Tax efficient due to low portfolio turnoverLess tax-efficient because of higher portfolio turnover#96 Myths about ETFsMyth 1: All ETFs are the sameFalse - Differences exist based on many different factors such as methodology (screening selection weighting), underlying asset class being tracked and replication method. Myth 2: All ETFs are market-cap weightedFalse Alongside market-cap weighted ETFs are a whole range of ETFs that are weighted based on fundamentals (Smart Beta)Myth 3: All ETFs are passiveFalse Whilst the majority of ETFs are passive, a growing number of ETF issuers are now offering actively-managed ETFs. Myth 4: ETFs are more risky than mutual fundsFalse Risk is mitigated through a broader basket of securities, through transparency and full disclosure, and through liquid primary and secondary markets. Myth 5: Performance of stocks and mutual funds is superior to ETFsFalse After fee performance of most mutual funds is worse than the after fee performance of ETFs.Myth 6: ETFs are more expensive than mutual fundsFalse Whilst it is true that frequent trading of ETFs will incur commission and trading costs, ETFs generally have a significantly lower TER than mutual funds. #10Synthetic vs. PhysicalETFs can track and achieve the return of an underlying index in two different ways physically or synthetically. Physically replicating ETFs are growing in popularity and track their underlying index by buying and owning most, if not all, of the underlying securities or assets in that index. For example, a physical ETF tracking the FTSE 100 will hold the same 100 stocks which make up the FTSE 100. NB. Some issuers of physical ETFs engage in securities lending in order to generate addition revenue. Instead of holding the underlying securities, synthetic ETFs are designed to replicate the return of a selected index through the use of financial derivatives such as swaps. As an ETF provider does not have to buy all the underlying securities in an index, synthetic replication is ideal for providing exposure to exotic or illiquid markets or where you cannot use physical rep. The use of derivatives will involve a counterparty, usually an investment bank. SummaryPhysical ETFsSynthetic ETFsUnderlying HoldingsSecurities that make up the underlying indexSwaps and collateralCostsTransaction CostsManagement FeeSwap FeesManagement FeesTransparencyHighly transparentNon-transparentCounterparty riskLow (but can change due to securities lending)Can be higher than physical ETFsTracking ErrorLarger than synthetic ETFsLow#11Pricing and TradingETFs can be bought and sold on the secondary market, stock exchange and settle in Crest. Shares will be created and redeemed based on supply and demand by authorised participants (APs).ETFs have a Net Asset Value (NAV) which represents the value of the underlying securities and is calculated at the end of each trading day. During the trading day, there will be a bid and offer on the stock exchange where investors can buy and sell the ETF instantaneously. The market price will move based on movements in the underlying markets during the ETF trading day. If the underlying markets are closed then the ETF will act as a price discovery vehicle for the underlying portfolio. ETFs can be and usually are listed in multiple currencies across multiple exchanges (cross listings).#12LiquidityETFs are a wrapper for underlying securities. The true liquidity of an ETF is based on the costs and liquidity of the underlying securities, the cost and accessibility to hedge and any taxes in the underlying markets.ETF Implied Liquidity looks through the ETF at the underlying securities and tells you how many shares of that ETF you can potentially trade in a given day.9.6m shares per day multiplied by 13.79 (best offer) = 132,384,000 notionalThis number being published by various data providers is helping clients globally understand the true untapped liquidity of an ETF

#13Key Considerations when using ETFsJust like any other investments, ETFs can carry some risks. Make sure you understand them (not specific to ETFs)Market Risk (Beta) The value of an ETF will rise and fall just like the underlying indices that they track (not specific to ETFs)Smart beta are strategies that attempt to provide a better risk-adjusted return than a pure beta product (not specific to ETFs)Exotic Exposure Innovation within the ETF industry has created some complex ETFs which can be difficult to understand for non-sophisticated investors. As an investor know your product (not specific to ETFs)Tracking Error ETFs and other exchange-traded products do not always track their underlying index perfectly. Often, the ETF will underperform the index, for whatever reason, and this tracking error puts the investors capital at risk (not specific to ETFs)Total cost of ownership = TER + Bid offer spread + tracking error + custody/commissions (specific to ETFs/ETPs)Physical v synthetic replication. Stock lending, collateral etc. (not specific to ETFs)Liquidity on screen liquidity is not a measure of liquidity. Underlying liquidity is more important! (specific to ETFs/ETPs)Understand the asset you are tracking. For example, US markets better to trade later in the LSE trading day (specific to ETFs/ETPs)

#14Most platforms used by IFAs can facilitate ETFs. However IFAs should conduct due diligence to ensure efficient execution and low costsIFAs and other platform users should consider the following:Many platforms have historically been set up to support mutual fund trading and not securities tradingCan your platform facilitate real time dealing. Some cant and can only do end of day at bestCan the platform facilitate split orders. This is important to allow client orders to be batched and reduce costsWhat currencies can the platform support. If GBP only then check the costs of the FX. Many ETFs have a GBP line or are currency hedgedWhat universe of ETFs does the platform offer. Some dont offer all the choicesOften better to go to a platform that has historically offered access to the LSE

Key Considerations when using ETFs on Platforms#Conclusions ETFs:ETFs are the fastest growing segment in asset management. Recently overtook hedge funds in AUM termsETFs are highly liquid and transparent with a robust structure. These standards are forcing mutual funds to adopt some of these characteristicsETFs are usually low fee and tax efficientETFs offer investors an easy & efficient way to build a self directed or advice led portfolioETFs offer most asset classes an investor would need to create an investment portfolioETFs come in all varieties and innovation will bring even more choice:Beta - matureSmart Beta - growingActive - nascent

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Appendix#Michael Steinhardt, Chairman of WisdomTree InvestmentsRecognized by the Wall Street Journal as one of the greatest investors of all time, Michael Steinhardt is a legend in the hedge fund industry. It was his penchant for beating benchmarksoften by taking a contrarian approachthat led him to embrace the WisdomTree fundamentally-weighted indexing methodology.Jeremy J. Siegel, Senior Investment Strategy Advisor of WisdomTree InvestmentsJeremy J. Siegel is the Russell E. Palmer Professor of Finance at The Wharton School of the University of Pennsylvania. He has long championed the benefits of indexing, but after the tech bubble in the late 90s, he became disenchanted with cap-weighted indexes. When I examined WisdomTrees research, I discovered a sound methodology combined with real-world market wisdom that, I believe, represents a better way to invest.Jonathan Steinberg, CEO of WisdomTree InvestmentsAlong with Luciano Siracusano III, Jonathan Steinberg is the co-creator of WisdomTrees patented Indexing methodology. Prior to establishing WisdomTree, Jonathan founded, and served as Chairman and CEO of Individual Investor Group, Inc.Luciano Siracusano III, Chief Investment Strategist of WisdomTree InvestmentsLuciano Siracusano is WisdomTrees Chief Investment Strategist. He is the co-creator with, CEO Jonathan Steinberg, of WisdomTrees patented Indexing methodology and has led the firms sales force since 2008. Prior to joining WisdomTree, Luciano was an equity analyst at Value Line, Inc. Bruce Lavine, Vice Chairman of WisdomTree InvestmentsBruce Lavine joined WisdomTree in May 2006 as President and COO and presently serves as the Vice-Chairman. Prior to that, he spent 10 years with Barclays Global Investors (BGI), and held various leadership positions including, CFO and Director of New Product Development for Barclays iShares. Most recently, Bruce served as Head of iShares Europe based in London.

WisdomTree is Founded on Strong Leadership (1)#WisdomTree is Founded on Strong Leadership (2)Hector McNeil, Co-CEO of WisdomTree EuropeHector McNeil is a leading specialist in Exchange Traded Products (ETPs) with over 12 years experience in the sector. Hector worked at ETF Securities as a joint managing partner where he headed up Sales and Marketing, and he was a key ingredient in the companys growth from 4 members of staff and $50 mn in AUM, to 70 employees globally and $22 bn in AUM. He co-founded Boost ETP with Nik Bienkowski in late 2011.Nik Bienkowski, Co-CEO of WisdomTree EuropeNik Bienkowski is a leading specialist in Exchange Traded Products (ETPs) with over 12 years experience in the sector. Nik helped Graham Tuckwell found ETF Securities Limited, where he was responsible for the research and product development teams. He helped manage the business from incorporation to over 70 people and $22 bn in AUM. He co-founded Boost ETP with Hector McNeil in late 2011. #WisdomTrees 10 UCITS ETFs

* Dividend Yields as at 31/03/2015, Bloomberg

#Boost ETPs

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Top 10 global ETP providersWisdomTree is the 6th largest ETF sponsor globally

Source: BlackRock, ETP Landscape, Industry Highlights, April 2015 #22

Disclaimer This document is issued by WisdomTree Europe Ltd (WTE) an appointed representative of Mirabella Financial Services LLP, which is authorised and regulated by the United Kingdom Financial Conduct Authority (FCA). The products discussed in this document are issued by WisdomTree Issuer PLC (Issuer), an umbrella investment company with variable capital having segregated liability between its funds organised under the laws of Ireland as a public limited company and authorised by the Central Bank of Ireland (CBI). The Issuer is organised as an Undertaking for Collective Investment in Transferable Securities (UCITS) under the laws of Ireland and shall issue a separate class of shares ("Shares) representing each fund. Investors should read the prospectus of the Issuer ( Prospectus) before investing and should refer to the section of the Prospectus entitled Risk Factors for further details of risks associated with an investment in the Shares. Any decision to invest should be based on the information contained in the Prospectus. This product may not be available or suitable for you. This document does not constitute investment advice nor an offer for sale nor a solicitation of an offer to buy Shares. This document should not be used as the basis for any investment decision.The price of any Shares may go up or down and an investor may not get back the amount invested. Past performance is not a reliable indicator of future performance. Any historical performance included in this document may be based on back testing. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. The value of the Shares may be affected by exchange rate movements.

For United Kingdom Investors: The Fund is a recognised scheme under section 264 of the Financial Services and Markets Act 2000 and so the Prospectus may be distributed to investors in the United Kingdom. Copies of all documents are available in the United Kingdom from www.wisdomtree.com. Within the United Kingdom, this document is only made available to professional clients and eligible counterparties as defined by the FCA. Under no circumstances should this document be forwarded to anyone in the United Kingdom who is not a professional client or eligible counterparty as defined by the FCA.This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof, where none of the Issuer or the Shares are authorised or registered for distribution and where no prospectus of the Issuer has been filed with any securities commission or regulatory authority. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States. Neither the Issuer nor any securities issued by it have been or will be registered under the United States Securities Act of 1933 or the Investment Company Act of 1940 or qualified under any applicable state securities statutes.

FOR PROFESSIONAL CLIENTS AND SOPHISTICATED INVESTORS ONLY#

Defining and using Smart BetaJune 2015Delivering through innovationFor professional investors onlyDefining and using smart betaDefining smart betaUsing smart beta in a portfolioExamples of Source productsBack to basics: what is beta?Buying the marketPassive, long-only exposure to a particular market segmentMarket cap weighted indicesSome examples:FTSE 100, S&P 500, MSCI World, MSCI Emerging Markets, FTSE China A50

Pros and cons:Market cap weighted indices are good at measuring market performanceUsed to benchmarkBut market cap weighted indices may overweight overpriced stocks and underweight undervalued stocks when markets are extended (e.g. AOL in the 2000s)#Smart beta can no longer be ignored

Terrible name, interesting trendThe Economist, July 2013

Is smart beta the latest magic money tree?Financial Times, April 2014

Smart beta offerings too confusingFT Adviser, October 2014

#The terminology could probably be clearer Smart betaStrategic betaEnhanced betaSmart passiveNon-market-cap indicesAdvanced betaBeta plusEnhanced indices

Factor-based indicesAlternative betaNon-traditional indicesAlternative betaAlternatively-weighted indicesEngineered betaSecond generation indices

#Definitions of smart beta are inconsistentBetween alpha and beta (Towers Watson)The middle of the passive-to-active spectrum (Morningstar)Investment strategies based on one or more of the five equity factors (SSgA)Indices that are not weighted by market capitalisation (Russell)

#However you define it, smart beta assets are growingAssets in global strategic beta ETPsData: Morningstar database, Feb 2015Morningstar data suggests US$ 418 bn in strategic beta ETPs globally (16% of ETP assets)Deutsche Bank estimates US$ 410 bn in enhanced beta ETFs (25% of equity ETFs)But still only around 1.3% of global fund assetsMorningstar data from Morningstar database as at Dec 2014. Deutsche Bank data from Deutsche Bank ETF Annual Review & Outlook Reports, Dec 2014. Share of global fund assets is Morningstar strategic beta assets as at Dec 2014, as percentage of total global fund assets from ICI as at Q3 2014. #Dividend and style exposure dominateMorningstar Strategic Beta by sub-category

Deutsche Bank Enhanced Beta assetsData: Morningstar database, Feb 2015Data: Deutsche Bank ETF Annual Review & Outlook Reports, Dec 2014#Does terminology matter? Like it or not, the term smart beta now has a following

Arguing over terminology distracts from more important questionsHow should investors use smart beta?Can it replace traditional beta exposure, or is it something different?Do all smart beta products have similar objectives?

Lets accept smart beta but try and be clearer about what it means#Finding a practical definitionWhat is the universe of products that, in practice, investors / providers call smart beta?What features / characteristics do they share? How do they differ from traditional beta, and active, investments? Can this universe be usefully split into different categories?

#A spectrum of complexitySimple filtering to ensure investabilityMarket cap weightingMore complex filteringe.g. factorsfundamentalsAlternative weighting e.g. factors fundamentalsriskMarket timing / signalsHuman discretion / sophisticated quant process e.g.S&P 500Euro STOXX 50e.g.SectorsSmall/mid cap indicese.g.Man GLG Europe PlusPIMCO Source Short Maturity ETFse.g.Morgan Stanley MEMO PlusJP Morgan Macro Hedgee.g.JPX-Nikkei 400MSCI Europe Value

e.g.FTSE RAFIGoldman Sachs Equity Factor IndicesMSCI Minimum Volatility

Smart betaBetaActive / quantitativeIncreasing complexity#Imagine a spectrum of investment products arranged by complexity [click] First, standard benchmarks. Even these have some rules [click] eg filtering out the smallest/least liquid stocks to ensure investability. Typically weighted by market cap [click] . Lots of examples. [click] Next, we have more complex filtering [click]. Indices that filter stocks using factors like quality, dividends, size, or fundamentals like return on equity. [click for examples] Next, different weighting schemes [click] Weighting by factors, fundamentals again, also equal weight, GDP weight. Examples [click] These can be complicated multi factor models BUT still market exposure. Youre just trying to find a different (ideally better) way to do it, by introducing more complex rules.Risk control is next step. [click] Also complicated (covariance matrices, optimisation constraints). Still market exposure. Good example is MSCI Min Vol [click] . Many investors use this instead of standard benchmark, preferring a lower risk approach. Where to draw line between beta and smart beta? Around here [click] is intuitive. There are grey areas. For example, many people view size as a factor. Where does that put eg the FTSE 250? Is it smart beta? [click] or is it so familiar that it really belongs here? [click] . Is UK small/mid cap a market segment in its own right, or just a different way of getting UK equity exposure?Still a gap on the right. Can things get any more complicated? Yes [click] We see more and more strategies now that have some kind of element of market timing [click], that move in and out of the market, or change their exposure, based on some kind of signal. Youre no longer just trying to capture a particular market segment in a passive way. You have a strategy. Many quant strategies fall into this category [click] May still be rules-based and passive, may not be that complicated, but is it beta? No. Is it even smart beta? No, we think not. This is no longer about buying the market, (however, you choose to do that) its about beating the market. From here, its only a short step to rules so complex they are inside someones head ie active management [click][click]We think theres a clear line here. [click] [click] Whatever you choose to call this category, the key things is that its a different animal, definitely not beta. You couldnt just slot these into your portfolio as alternative to say, FTSE 100 or S&P 500.. So, thats our view on what is, and is not, smart beta. It looks complicated, but actually its simple. Smart beta is passive, market exposure just like beta but a little more complex.

35Smart beta in a portfolioWhat does smart beta mean for investors?More choice of market-type exposureExisting exposure can be sliced and diced in more precise waysMore control over risk and rewardPortfolios can be tweaked to express different views e.g. lower risk, valueBut also more opportunity to underperformUnderstanding how to select and combine products is key#Products are typically tools or strategiesAllow investors to isolate a particular factor / risk premiumOften single factor productsDont specifically target outperformanceMay be used short-term / tacticallyMore likely to be satellite productsExamples include STOXX International Exposure indices and MSCI Europe ValueDesigned to replace traditional beta exposureTypically broad and diversifiedOften multi-factor or multi-asset (i.e. complex)May specifically target outperformance or better risk-adjusted returnsLikely to be core productsExamples include fundamental indices and multi-factor strategies (GS EFI)

ToolsStrategiesCan I use it to generate outperformance in my portfolio?Does it outperform?#Using smart beta toolsWhich of the many factor(s) do I choose?How do I define and calculate my chosen factors?For example, there are many different ways to define qualityWhat kind of exposure do I want? Just a tilt, or more targeted exposure?Factor weighting or market cap weighting? Long only or long/short? Any diversification constraints?Which index / ETF best meets my requirements?How do I monitor my exposure? When in the market cycle should I increase/decrease exposure? How do I combine with my existing portfolio?

You need to be smart!#Using smart beta strategiesWhat is my goal? Outperformance or lower risk?How much risk do I want to take versus traditional benchmarks?Which provider(s) do I trust to decide on the key parameters?How will I monitor performance?Versus traditional market cap benchmarks or active managers, or both?How do I combine with my existing portfolio?The strategy needs to be smart!#ConclusionThere is no single, accepted definition of smart betaIn practice, the term is used for a wide range of passive products with alternative filtering and/or weighting schemesThe key question is where each product fits in a portfolioA tool to isolate specific market characteristics?A broader investment strategy designed to replace beta benchmarks ?Source is a pioneer in smart beta ETFsLong track recordCarefully selected range of productsExpert partners

#Examples of Source products#Goldman Sachs Equity Factor Indices (GS EFI)In simulations, GS EFI World has outperformed MSCI World by 2.8% per annumAim to outperform traditional benchmarks, on an absolute and risk-adjusted basisData: Bloomberg, as at 20 January 2015. Performance prior to 21 October 2013 has been simulated by Goldman Sachs International, using the index rules but at times using different data sources and a slightly different methodology. Past performance (actual or simulated) is not a reliable indicator of future performance. Performance does not include fund costs. Broad, long-only exposureFocused on five well-known factors (low beta, size, value, momentum, quality)Each factor contributes equal risk, taking volatility and correlations into accountSubject to country and sector constraints versus market cap-weighted benchmarksBased on extensive research by Goldman SachsAvailable for global and European equities

#JPX-Nikkei 400 IndexIndex constructionDeveloped in specific response to the Japanese governments Third Arrow1 As at end of February 2015Focuses on companies with the ability to generate shareholder valueSelects stocks using ROE and corporate governance measures as well as sizeIs rapidly gaining acceptanceSelected as a passive benchmark by the Japanese Government Pension Investment FundOver JPY 590 billion in ETFs / investment trusts1Quantitative ranking

Return on Equity 40%

Operating Profit 40%

Market capitalisation 20%Qualitative factors

External directorsAdoption of IFRSEarnings disclosure in EnglishTop 400 companiesWeighted by free-float market capitalisation

#PIMCO EM Advantage Local Bond IndexExposure by countryGDP-weighted exposure to emerging market government debtData: PIMCO, as at 30 January 2015Weights countries by GDP rather than debt issuanceAvoids over-allocation to highly indebted countriesIncludes India and China (excluded from other major benchmarks)Uses currency forwards where local bond markets are inaccessible#Key risks of Source smart beta ETFsNo capital protection: you may not get back the amount you investNo guarantee that smart beta indices will outperform traditional market capitalisation weighted indices

#Important informationInvestors in Source products should note that the price of your investment may go down as well as up. As a result you may not get back the amount of capital you invest.This presentation contains information that is for discussion purposes only, and is intended for institutional investors (professional clients) pursuant to Directive 2004/39/EC (MIFID) Annex II Section I. This presentation is not for distribution to, or for the attention of, US or Canadian persons. Without limitation, this presentation does not constitute an offer or a recommendation to enter into any transaction. When making an investment decision, you should rely solely on the final documentation and any prospectus relating to the transaction and not this summary. Investment strategies involve numerous risks. Any calculations and charts set out herein are indicative only, make certain assumptions and no guarantee is given that future performance or results will reflect the information herein.Investors should consult their own business, tax, legal and accounting advisors with respect to this proposed transaction and they should refrain from entering into a transaction unless they have fully understood the associated risks and have independently determined that the transaction is appropriate for them. In no way should Source UK Services Limited (Source) be deemed to be holding itself out as a financial adviser or a fiduciary of the recipient hereof.The prospectus, supplements and KIIDs for the Source ETFs are available at www.source.info. German investors may obtain the offering documents in paper or electronic form free of charge from the German information agent (Marcard, Stein & Co AG, Ballindamm 36, 20095 Hamburg, Germany).The representative and paying agent in Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. The prospectus, the key investor information documents (KIIDs), the articles of incorporation as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland. Both the place of performance and the place of jurisdiction for shares in the sub-funds of the above umbrella funds offered or distributed in or from Switzerland shall be the seat of the Swiss representative.This presentation has been communicated by Source UK Services Limited, 110 Cannon Street, London, EC4N 6EU, authorised and regulated by the Financial Conduct Authority. 2015 Source UK Services Limited. All rights reserved.

#Source UK Services Limited110 Cannon Street, London EC4N 6EU

T +44 (0)20 3370 1100F +44 (0)20 3370 1101www.source.info

Authorised and regulated by the Financial Conduct Authority

Income opportunities June 2015Delivering through innovationFor professional investors onlyp.3Overview of interest ratesp.4Map of fixed income themesIncome opportunities:p.7US Short-term HYp.13QUID as a cash alternative

ContentsInterest rates in perspective

Source: Global Financial Data, Datastream and Source Research. Past performance is not a reliable indicator of future returns. #Important considerations for fixed income investors interest rates where are we headingWe had 35 years of a great bull market from beginning of 80s (post-Iranian revolution oil from $10 to $30)35 years of disinflation / low inflation (Better monetary policies increased productivity and globalisation)What now ? the zero-bound means it wont go much lower but central banks have telegraphed a rate normalisation So much higher no: - demographics - high debt level

52Bank of England Base Lending Rate since 1694

Source: Global Financial Data, Datastream and Source Research. Past performance is not a reliable indicator of future returns. #More perspective if we take the BOE rate since the creation of the bank in 1694 the Old Lady of Threadneedle StreetImpact for asset prices for fixed incomeFI has a fundamental place in a portfolio as a yield dampenerUK GILTS in the last 30 years you would have generated an annualised 33% returnThe total return was obviously boosted by capital gains which going forward will be possibly negative TOTAL RETURN is : Coupon + capital gain => going forward we need to focus on coupon

53Map of fixed income themes

Source: Bloomberg and Bank of America Merrill Lynch as of 15/06/2015Sterling yield curve#So you want to focus on those asset classes which start with higher coupons simply because your starting point is higherUS HY / EM LCL and EM hard sov. You want to do it in a smart way for ex. in EM local we recommend you focus on those countries with higher income / or GDP54Two opportunities

Source: Source, Bloomberg and Bank of America Merrill Lynch as of 15/06/2015#In the HY space we look at the Short-term HY segment In cash by focusing on the high coupons high quality credit you can deliver higher yield 55Income opportunities: US Short-term HY US fundamentalsUS auto sales and housing starts (annualised)

Source: Datastream and Source Research#US HY valuationsUS High yield excess spread over credit lossesSource: BofAML , using G0BC Index, data as of end of May 2015. Past performance is not be a reliable indicator of future returns.#Why short end of the HY curve?HY yield curve: long duration does not compensate investorsSource: BofAML, using H0A0 Index, data as of end of May 2015 #The short-term HY index versus other US HY mutual funds & ETFs

Historical risk-return profile Data: as of end of March 2015. US HY Short Duration: HUCD Index. Peer group includes US HY mutual funds and ETFs as provided using Morningstar. Past performance is not an indicator of future returns.6 years3 years#A risk factor-based approach to replication

Decompose index into risk factors (Duration, spread duration, etc.)Optimise a sub-set of bonds to match risk factors. Adjust portfolio based on market intelligence from speciality deskEstimate portfolio by high yield desk, leverage PIMCOs bond trading expertiseFundamental credit analysis: leveraging PIMCOs internal traffic light systemCriteriaRating systemGreen lightRisk relative to rating is stable to improving. Operational or event risk is unlikely to lead to a significant credit deterioration.Yellow lightPresence of operating or event risk that could lead to a significantly weaker credit profileRed lightViability of the issuer as a going concern is in serious question#Income opportunities: QUID as a cash alternativeCash tiering framework: Better matching cash outflows

Source: PIMCOTIER II+Primary objective:Grow cash balance over long-termTIER IIPrimary objective:Enhance returns to cash, liquidityTIER IPrimary objective:Principal preservation, liquidityTraditionalcash-liquidmoney marketEnhanced cashshort termReturn drivercore fixed income#Sterling MINT: Composition and performance

Sector diversification

Maturity breakdown

Data: Bloomberg, PIMCO as of 31 May 2015. Figures include reinvestment of dividends and are net of fees. Past performance is not a reliable indicator of future returnsRelative performance

Key metrics

Effective duration (yrs):0.36YTM:1.05%Distribution yield:0.49%Current yield:1.69%

Since inception (06/2011)12M6M3MPIMCOSterling MINT ETF3.08%0.64%0.27%0.14%LIBID GBP 3 Month index2.16%0.50%0.25%0.12%Excess return0.92%0.14%0.02%0.02%#Historical performance Annualised performance versus peer groupPerformance comparison with money market funds1 Peer group: A custom universe of the EAA OE GBP Money Markets Morningstar peer group with a select group of money market funds above 100 million in AUM and a track record above three years, equally weighted. Source: PIMCO, Morningstar Direct data as of end of May 2015 net of fees. *YTD performance is annualised. Past performance is not indicative of future returns. Performance comparison20132014YTD*PIMCO Sterling Short Maturity Source UCITS ETF0.53%0.70%0.65%Peer group10.30%0.28%0.32%#Appendix

Source fixed income product offering

Smart PassiveActiveEM Advantage Local Bond Index UCITS ETFTickers: EMLB (USD)EMLP (GBP)EMLI (distributing)High YieldAshmore SourcePIMCO SourceEmerging Market DebtCovered BondsCash ManagementEM CorporateDebt ETFTicker: ACDF

EM Total Return ETFTicker: ATRFShort-Term High Yield Corporate Bond Index UCITS ETFTickers: STHY (USD)SSHY (GBP)STHE (EUR-hedged)Covered Bond UCITS ETFTicker: COVR

Euro Short Maturity ETFTicker: PJS1

US Dollar Short Maturity ETF Ticker: MINT

Sterling Short Maturity ETF Ticker: QUID Low riskHigher riskCorporate BondsLow Duration Euro Corporates UCITS ETFTicker: LDCE

Low Duration US Corporates UCITS ETFTicker: LDCU #Comparing features of main investment vehicles

ETFs combine the advantages of direct investments, segregated accounts and mutual fundsInitially the vehicle of choice for passive benchmark exposure, ETFs are a compelling way to provide access to market leading strategies

ETFs combine advantages of direct investments, seg. accounts and mutual fundsData: Morningstar as of 30 September 2014. YTD numbers have been annualised for the calculation of the growth rateDirect investmentSegregated accountsTraditional fundETFsMin investment sizeVariableHighLowVery lowTERNone LowVery wide rangeGenerally lowTransaction costUpfront (bid/ask)VariableGenerally no upfront fee Transaction cost embedded in performanceUpfront (bid/ask)ExecutionMarket priceVariableFuture NAVMarket price or future NAVTransparencyFullFullLowFull#Important information and risks

Investors in Source products should note that the price of your investment may go down as well as up. As a result you may not get back the amount of capital you invest.

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Without limitation, this presentation does not constitute an offer or a recommendation to enter into any transaction. When making an investment decision, you should rely solely on the final documentation and any prospectus relating to the transaction and not this summary. Investment strategies involve numerous risks. Any calculations and charts set out herein are indicative only, make certain assumptions and no guarantee is given that future performance or results will reflect the information herein.

Investors should consult their own business, tax, legal and accounting advisors with respect to this proposed transaction and they should refrain from entering into a transaction unless they have fully understood the associated risks and have independently determined that the transaction is appropriate for them. In no way should Source UK Services Limited (Source) be deemed to be holding itself out as a financial adviser or a fiduciary of the recipient hereof.

PIMCO Source ETF Funds information is not for use within any country or with respect to any person(s) where such use could constitute a violation of the applicable law. The information contained in this communication is intended to supplement information contained in the prospectus for these Funds and must be read in conjunction therewith. Investors should consider the investment objectives, risks, charges and expenses of these Funds carefully before investing. This and other information is contained in the Funds prospectus. Please read the prospectus carefully before you invest or send money. Past performance is not a guarantee or a reliable indicator of future results and no guarantee is being made that similar returns will be achieved in the future. Returns are net of fees and other expenses and include reinvestment of dividends. The performance data represents past performance and investment return and principal value will fluctuate so that the PIMCO Source ETF Funds shares, when redeemed, may be worth more or less than the original cost. Potential differences in performance figures are due to rounding. Certain Funds may invest in non-U.S. or non-Eurozone securities which involves potentially higher risks including non-U.S. or non-Euro currency fluctuations and political or economic uncertainty, please refer to the individual Funds prospectus for more information. The information contained within this document is for informational purposes only. For additional information and/or a copy of a Funds prospectus, please contact the Administrator: Brown Brothers Harriman Fund Administration Services (Ireland) Limited, Telephone +353 1 6036200, Fax +353 1 6036300.

BofA Merrill Lynch and The BofA Merrill Lynch 0-5 Year US High Yield Constrained Index are reprinted with permission. Copyright 2012 Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofA Merrill Lynch). All rights reserved. BofA Merrill Lynch and The BofA Merrill Lynch 0-5 Year US High Yield Constrained Index are service marks of BofA Merrill Lynch and/or its affiliates and have been licensed for use for certain purposes by PIMCO on behalf of the PIMCO Short-Term High Yield Corporate Bond Index Source ETF that is based on The BofA Merrill Lynch 0-5 Year US High Yield Constrained Index, and is not issued, sponsored, endorsed or promoted by BofA Merrill Lynch and/or BofA Merrill Lynchs affiliates nor is BofA Merrill Lynch and/or BofA Merrill Lynchs affiliates an adviser to the PIMCO Short-Term High Yield Corporate Bond Index Source ETF. BofA Merrill Lynch and BofA Merrill Lynchs affiliates make no representation, express or implied, regarding the advisability of investing in the PIMCO Short-Term High Yield Corporate Bond Index Source ETF or The BofA Merrill Lynch 0-5 Year US High Yield Constrained Index and do not guarantee the quality, accuracy, timeliness or completeness of The BofA Merrill Lynch 0-5 Year US High Yield Constrained Index, index values or any index related data included herein, provided herewith or derived therefrom and assume no liability in connection with their use. As the index provider, BofA Merrill Lynch is licensing certain trademarks, The BofA Merrill Lynch 0-5 Year US High Yield Constrained Index and trade names which are composed by BofA Merrill Lynch without regard to PIMCO, the PIMCO Short-Term High Yield Corporate Bond Index Source ETF or any investor. BofA Merrill Lynch and BofA Merrill Lynchs affiliates do not provide investment advice to PIMCO or the PIMCO Short-Term High Yield Corporate Bond Index Source ETF and are not responsible for the performance of the PIMCO Short-Term High Yield Corporate Bond Index Source ETF.

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The Amsterdam, Italy and Munich Branches are additionally regulated by the AFM, CONSOB in accordance with Article 27 of the Italian Consolidated Financial Act, and BaFin in accordance with Section 53b of the German Banking Act, respectively. PIMCO Europe Ltd services and products are available only to professional clients as defined in the Financial Conduct Authoritys Handbook and are not available to individual investors, who should not rely on this communication. | PIMCO Deutschland GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany) is authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 32 of the German Banking Act (KWG). The services and products provided by PIMCO Deutschland GmbH are available only to professional clients as defined in Section 31a para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. Ashmore SICAV (socit dinvestissement capital variable) is a Luxembourg-domiciled UCITS (Undertaking for Collective Investment in Transferable Securities) recognised in the UK under Section 264 of the Financial Services and Markets Act 2000. All or most of the protection provided by the UK regulatory system does not apply to investments in the fund and compensation will not be available under the UK Financial Services Compensation Scheme. The information contained in this document has been compiled in good faith, but no representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. Save to the extent (if any) that exclusion of liability is prohibited by any applicable law or regulation, Ashmore, its officers, employees, representatives and agents expressly advise that they shall not be liable in any respect whatsoever for any loss or damage, whether direct, indirect, consequential or otherwise however arising (whether in negligence or otherwise) out of or in connection with the contents of or any omissions from this document. This document does not constitute and may not be relied upon as constituting any form of investment advice or inducement to invest and prospective investors are advised to ensure that they obtain appropriate independent professional advice before making any investment in the fund. All prospective investors must obtain a copy of the current KIID and full prospectus prior to making any decision to invest. Subscriptions will only be received and shares issued on the basis of the current KIID and full prospectus. Copies of the KIID, full prospectus and financial statements can be obtained from AIML at the address below. Copies of the constitutional documents may be inspected at the offices of the Management Company, Ashmore SICAV, 2, rue Albert Borschette, L-1246 Luxembourg. Shares in Ashmore SICAV are not available for sale in any jurisdiction in which such a sale would be prohibited. Thus, this document is not available for distribution in those jurisdictions. The funds shares are not registered under the US Securities Act of 1933 (1933 Act), nor has the fund been registered as an investment company under the US Investment Company Act of 1940 (1940 Act). Offers and sales of fund shares will be made in the US only on a private placement basis, and only to persons who qualify as accredited investors as defined under the 1933 Act and as qualified purchasers as defined under the 1940 Act. RISK: Investing in the bond market is subject to certain risks, including market, interest rate, issuer, credit and inflation risk; investments may be worth more or less than the original cost when redeemed. Covered bonds are generally affected by changing interest rates and credit spread; there is no guarantee that covered bonds will be free from counterparty default. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. All investments contain risk and may lose value. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not.

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Trading ETFs And their role in portfolio constructionDavid Hazelton/ Jason CherrimanBusiness Development73Trading ETFsAgendaETFs role in portfolio constructionBenefits of ETFsTrends at Raymond JamesTrading considerations Platform considerations Market timing advisory vs. discretionary

Product Due diligenceInvestor and Adviser education Building your investment processETPs and Investment Trusts: Why consider? Trends at Raymond JamesTrading considerations Practical Tips for Trading the Dos and Donts! Market timing advisory vs. discretionaryAccess via a platform Due Diligence - Questions to ask your Platform ProviderWhat next?Investment Process Implementation Platform checklist

74ETFs role in portfolio constructionWhat is your Investment Philosophy? What is your Investment Management and Investment Advice process? How will you use this to meet your clients objectives?

How many have a documented investment proposition?

A robustly documented Investment Proposition should answer the following:

What is your Investment Philosophy? What are your fundamental investment beliefs and why are they relevant?What is your Investment Management and Investment Advice process? How do you arrive at an investment recommendation, maintain an Investment Buy List and keep an historical record of investment decisions? Who is your target market, what criteria do you apply and how do you deliver investment advice to your clients?

75

Core Beliefs Growth/ValueMarket/Absolute returnDiversificationAsset classesPassive, active or combinationInternational exposure?Market timingTax PlanningCosts/ChargesMaybe include some of the stuff from Abraham?76ETFs potential benefits Low CostAccess to the market, intra day pricingTrading flexibility Diversification exposure to range of asset classes,

What about FSCS Cover? This should be last resort you shouldnt buy a product thinking that its safe because the FSCS will bail the investor outIts all about product due diligence, and investor education Weigh up the benefitsWould we miss out on an opportunity and associated benefits simply because there isnt 100% cover should it go wrong? 77ETFs need to considerMultiple layers Liquidity Bid/Offer SpreadsTrading when primary market is closedTracking error Research

If it offers exposure and does what you wantthen why not? Look at least liquid underylerWhat is the secondary market? be aware

78ETFs Trends at Raymond James ETFs - exposure to many markets and asset typesActive/Blending StrategiesGrowing market for ETFs70% of our practices hold ETFs1147+ ETFs currently on the platform

Average Trade 30kUse of Currency ETFs to hedge FX movementsSpecialist Brokers for larger trades6% of RJs AUM Data as at 25 June 2015Source: Raymond JamesSpecialist brokers for larger ETF trades when liquidity is tight on the LSE dont get that with other platforms!!!! other category for ETFs includes alternatives and currency ETFs.79ETF Sector BreakdownData as at 25 June 2015Source: Raymond James

Fixed Income: 50%Equity: 38%Property: 6%Commodities: 4%Other: 2%

Other includes alternatives and currency ETFs80Inflows and Outflows ETFs / ETCsEstimated Net Outflows ()SSGA SPDR ETFS E I S&P UK DIVIDEND ARISTOCRATS4,882,338ISHARES CORE CORP BOND UCITSETF GB4,051,746HSBC ETFS PLC FTSE 100 UCITS ETF3,158,307ETFs / ETCsEstimated Net Inflows ()ISHARES GBP CORP BND 1-5YR UCITS GB5,784,455FIRST TRUST GLOBAL UK KINGDOM ALPHADEX R UCITS3,572,885ISHARES ISHARES CORE FTSE 100 UCITS3,136,701Data from: 1 March to 24 June 2015Source: Raymond JamesInflowsOutflowsTop three Inflows and Outflows81

Trading ConsiderationsListed equity different to OEIC/UTLiquidity multiple layersSpread can vary LSE membership Trading with Authorised ParticipantsElectronic trading for immediate executionBest execution Trading in bulk

Trading in bulk (if running a model and trading for 10 clients, will they all get the same price if you submit at the same time?)

They trade like any listed equityThey trade at the price given at the time the order is receivedThe spread varies at different times of the day depending on the underlying market. So for example, trading a US based commodity ETF in the morning UK time, will likely have a wider spread than when that market is open given the price will be based on futures pricesAs a member firm of the LSE we trade directly with the market and market makers for UK listedFor overseas listed we use agents and will pay brokerage for accessMajority of our trades are retail size and go through the RSP request for quote system (currently via Proquote)We get some fairly large tickets probably range from 1m to 10mWhere we cannot trade via the RSP we will trade directly with the Market ParticipantsWe will always try to trade inside the spread shown on the screen (touch quote) where possible.To fulfil best execution, if we cannot trade at the touch or better, we will obtain several quotes from these Market Participants and will trade on the best.As they are open ended we can always trade, though the price will widen if the size is greatly beyond what is shown on screenTo my knowledge we have never needed to create or cancel units in the primary market if asked. (this is for very large orders if the liquidity to trade is not there if creation/cancellation has occurred we have not been made aware).Also:We are looking at trading Deutsche bank ETFs at NAV through EMX the same way we might trade OEICs / Unit Trusts. This is currently under review and we should be live soon but it is not definite yet so probably not something to say unless you are asked about it.ETPs can source liquidity from the underyling assets being tracked 82Practical Tips when trading ETFsDont: Place orders near the open and closeIgnore transaction costsBe tempted to trade simply because you can DoBe cautious during volatile marketsBe patient Use Limit Orders to limit impactConsider ETFs with good liquidity Look at the number of market makers market makers help to add liquidity Trade when the underlying market is open Example of a US Nickel ETF83Access via a platform One of the benefits of ETFs is that they offer immediate access to the market, up to the minute pricing and trading flexibility.

Does your platform offer you the same?

The ability to access ETFs via a platform only has value if that platform can itself allow you to trade via the exchange directly. Market timing can have a real impact on an ETFs market price, which will in turn impact the performance your client will receive. This means that it is important that your platform provides you with the ability to buy and sell ETFs throughout the day, and control when the ETF order is sent through to avoid the risk of price spreads.

84Platforms and ETFsCompanyCofunds FundsNetwork Old Mutual Wealth AJ Bell James Hay Standard Life Transact Seven IM Ascentric Elevate Nucleus Raymond James Alliance Trust Novia Aviva James Brearley Praemium Parmenion Avalon Zurich CompanyHold ETFs?Cofunds NoFundsNetwork YesOld Mutual Wealth YesAJ Bell YesJames Hay YesStandard Life YesTransact YesSeven IM YesAscentric YesElevate YesNucleus Yes (limited range)Raymond James YesAlliance Trust YesNovia YesAviva YesJames Brearley YesPraemium YesParmenion NoAvalon YesZurich YesCompanyHold ETFs?Trade ETFs?Cofunds NoNoFundsNetwork YesExternal Old Mutual Wealth YesExternal?AJ Bell YesYes?James Hay YesExternal?Standard Life YesExternal Transact YesExternal Seven IM YesYesAscentric YesYes?Elevate YesExternal?Nucleus Yes (limited range)ExternalRaymond James YesYesAlliance Trust YesYes?Novia YesExternal Aviva YesExternal?James Brearley YesExternalPraemium YesExternal?Parmenion NoNoAvalon YesExternal?Zurich YesExternalPlatform Due DiligenceDoes your platform offer access to ETFs? If so, HOW? Questions should include: Q: Will your platform buy ETFs in multiple currencies? Can you buy them in other currencies? Q: What is their best execution policy? Do they offer immediate execution or is there a time delay if via a third party broker? Q: Does your platform allow you to place limit orders? Q: Does your platform have direct market access, or do they use a third party firm?Q: Does your platform have access to Authorised Participants?Q: Can you buy and sell on the same day? Or wait until the sale has settled? Q: Can you bulk together trades? Q: Does your platforms trading system allow you to see a live price, allowing you to decide whether to accept or reject the deal? Q: Does your platform provide a contract note showing time of deal and exact price achieved? Q: How are ETPs reported in the clients valuation report and online?

Discretionary Investment ManagementControl of the investment processOpportunity to differentiate Capture more of the value chainDeeper relationships with clients increased retention Scalability Enhanced administration and efficiency for you and your clients Potential for increased value of your business Increase referrals from professionalsRemove clients from the emotionHNW clients in particular tend to delegateHow many have their own in-sourced discretionary service? How many have thought/are thinking of it?

Benefits of discretionary you can deliver your investment solution more efficiently!

for example, not having to write to each client every time you want to execute a change to the portfolio

87SummaryETFs can enhance risk adjusted returns and lower costsThere are pros and consPlatform choice is crucialDiscretionary investment aids efficiencies

88Thank you for your time!

www.RJIS.co.uk89

ETFs and PlatformsETF Securities26 June 2015

Historically distribution has been product ledIn the future we aim to make distribution process driven

Product based businesses get lucky. Process based businesses get better.

A distribution process needs to deliver:

ConsistentRepeatableEver Improving

Capability to UNDERSTAND and INFLUENCE investment DECISION-MAKERS. (That is, distribution is about UNDERSTANDING and INFLUENCE over DMs)

To be clear:

Ever improving means delivering higher and higher RoI on each dollar spent on distribution.91Understand Costs.Administration and Custody Fees for listed securities: Same as funds?Different structure?None at all?Discount for bulk or regular trading i.e. rebalance or cross account transactions?29 June, 2015KEY MESSAGE: We structure activity to make the performance of sales jobs consistent, concrete (?) and correct.

There are four key layers to setting in place the required structure:

Target Coverage Who holds our ETFs? Who is likely to hold ETFs?

Segmentation understanding the various business models adopted by different types of decision makers and segmenting the market such that our strategies can be intentional, relevant and persuasive.

Tiering within segments using share register and miraqle data at the highest level, able to tier clients clients, develop alternative strategies and provide some performance expectations for sales people.

Allocating sales coverage a form of allocation that re-orientates sales processes and activities to the client and needs. Sales activities are not done for the sake of them being done. They are done to understand and influence specific decision makers. 92Understand Logistics.Trading capabilitiesIntra-day or once-a-day aggregatedIn-house dealing desk, large trade pricingPosition handling, managementExecuting automatic rebalance, re-allocation tradesOn platform product data quality29 June, 2015KEY MESSAGE: We structure activity to make the performance of sales jobs consistent, concrete (?) and correct.

There are four key layers to setting in place the required structure:

Target Coverage Who holds our ETFs? Who is likely to hold ETFs?

Segmentation understanding the various business models adopted by different types of decision makers and segmenting the market such that our strategies can be intentional, relevant and persuasive.

Tiering within segments using share register and miraqle data at the highest level, able to tier clients clients, develop alternative strategies and provide some performance expectations for sales people.

Allocating sales coverage a form of allocation that re-orientates sales processes and activities to the client and needs. Sales activities are not done for the sake of them being done. They are done to understand and influence specific decision makers. 93Understand Availability.Limited appetite for product on-boardingLimited to GBP linesLimited to physically backed productsLimited to a specific set of issuers29 June, 2015KEY MESSAGE: We structure activity to make the performance of sales jobs consistent, concrete (?) and correct.

There are four key layers to setting in place the required structure:

Target Coverage Who holds our ETFs? Who is likely to hold ETFs?

Segmentation understanding the various business models adopted by different types of decision makers and segmenting the market such that our strategies can be intentional, relevant and persuasive.

Tiering within segments using share register and miraqle data at the highest level, able to tier clients clients, develop alternative strategies and provide some performance expectations for sales people.

Allocating sales coverage a form of allocation that re-orientates sales processes and activities to the client and needs. Sales activities are not done for the sake of them being done. They are done to understand and influence specific decision makers. 94Thank you.95

An eye for investmentETF Masterclass

IFA Magazine Seminar

A low cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth. Warren BuffettTodays agendaHow ETFs are being used in portfolio construction a DFMs perspectiveUsing an ETF overlay to implement tactical asset allocation

ETF asset allocation strategies: what is driving demand?

Blending ETFs and Active funds: Core-Satellite portfolio construction

Controlling costs through the integration of ETFs

Migrating assets to an ETF based proposition

An eye for investmentUsing an ETF overlay for tactical callsThe trading flexibility of ETFs makes them an excellent tool for implementing tactical asset allocation decisionsAn eye for investmentExposure to an asset class is achieved mainly via a range of active funds / managers

An ETF overlay is added to the asset class exposure

Short-term tactical asset allocation calls can then be implemented by selling / buying the overlay

Advantage 1: ETFs can be traded at any time of day thus improving speed of reaction to a market event

Advantage 2: By using the neutral overlay the active management strategies are not disrupted

ETF asset allocation strategiesOver the last decade there has been a huge rise in demand for asset allocation strategies delivered entirely via a diversified portfolio of ETFs why?An eye for investmentETF asset allocation strategiesOver the last decade there has been a huge rise in demand for asset allocation strategies delivered entirely via a diversified portfolio of ETFs why?An eye for investment

Core-Satellite portfolio constructionFunds are selected across the passive and active universes, blending them using an institutional Core-Satellite approach to portfolio constructionCore holdings of ETFs account for around 70% of the portfolio

These deliver low cost, diversified exposure to various asset classes

Satellite holdings are specialised actively managed investment funds

Combines the merits of potential active returns with market returns

An eye for investmentAn eye for investmentDetermining the ETF / active split

Factors to considerNature of the asset classIs the asset class deemed efficient?Availability of active and ETF optionsPerformance of active funds vs. benchmarkWhere are we in the business cycle?Costs of the active and ETF optionsTracking difference of the ETFs

Other considerationsProduct provider diversificationMaximum weighting to a fundSize of the fund & liquidity Availability on wrap platforms

103Using ETFs to control overall costs Costs are one of the only factors that you can control... An eye for investmentAdvisory Portfolio(Active)Adviser Fee0.75%Platform Fee0.25%DFM Fee-OCF0.75% - 1.0%TER1.75% - 2.0%DFM Portfolio (Active)0.75%0.25%0.35%0.75% - 1.0%2.10% - 2.35%DFM Portfolio(Blended)0.75%0.25%0.35%0.25% - 0.35%1.60% - 1.70%You get what you dont pay for...!Compound interest has an evil twin...compound costs!An eye for investmentCase Example

150k SIPP

6% annualised growth

25 years

Reducing OCF by 0.5% saves 65k over 25 yearsMigrating assets to an ETF-based propositionBuild a range of ETF-based portfolios via wrap platform to sit alongside your current proposition. Legacy business can be transferred over time and new business invested immediately. An eye for investment

ETF-BasedPortfoliosContact usMike Mount, Director Intermediary SolutionsT 02920 558 803M 07587 773 800E mike.mount@jmfinn.com

An eye for investmentLondon4 Coleman St.LondonEC2R 5TAT 020 7600 1660F 020 7600 1661Bristol31 Great George St.BristolBS1 5QDT 0117 921 0550F 0117 921 0475Leeds33 Park PlaceLeedsLS1 2RYT 0113 220 6240F 0113 220 6262Bury St Edmunds60 Abbeygate St.Bury St EdmundsSuffolkIP33 1LBT 01284 770700F 01284 763241IpswichKnapton CourtTurret LaneOff Lower Brook St.IpswichIP4 1DLT 01473 228100F 01473 228150Cardiff14 St Andrews CrescentCardiffCF10 3DDT 02920 558800F 02920 228989OUR OFFICESAppendixAn eye for investmentRegional CoverageJM Finn & Co: Key factsWith regional offices across the UK, we manage assets on behalf of private clients, trusts and charities. We do not offer financial planning but work closely with intermediaries who do.An eye for investment7.8bn of funds under management and administration (FUMA)67% of FUMA in discretionary accountsOver 23,000 client accounts312 staff, of which 90 are investment managersWe hold Tier 1 capital at 2:1 times the FCA suggested levelWe do not have any debtJM Finn & Co is a profitable businessAs a specialist investment manager, we do not offer financial planning

Data as at 31st December 2014Source: JM Finn & CoImportant information This document is for professional advisers only. It is not to be given to retail clients. Investment involves risk. The investments discussed in this document may not be suitable for all investors. The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Where investment is made in currencies other than the investors base currency, the value of those investments, and any income from them, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable.The description of the investment management services and processes in this document is a general one and detailed terms and conditions are available separately.This document should not be copied or otherwise reproduced.This document is issued by JM Finn & Co which is the trading name of J.M. Finn & Co Ltd, authorised and regulated by the Financial Conduct Authority, member of the London Stock Exchange and the WMA.An eye for investment