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Cautious Model

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					                                                                                                                                                             Cautious Model
                                                                                                                                                                 as at 30 November 2009

  Investment Objective                                                                                                                        Model manager                                   Martin Perry

Achieve the returns of a diversified portfolio of securities with moderate downside risk.                                                     Inception date                                   August 2004
  Investment Policy                                                                                                                           Funds under management                                 £269.0m
The Cautious model is highly diversified across a wide range of traditional and alternative asset                                             Index comparator                                     1M LIBOR
classes. Asset allocation is based around a central position which aims to provide returns of cash
                                                                                                                                              Yield                                                       2.54%
plus 2% per annum over the long term whilst seeking to limit losses in any year. The actual
portfolio exposure will be varied in pursuit of the objective, subject to defined limits. Reducing                                            Total expense ratio             1.68%
the chance and scale of loss, when compared with traditional equity-oriented portfolios, is                                                   (based on an annual management charge
fundamental to the asset mix and requires the use of investments that may have some                                                           of 1%)
illiquidity, complexity and regulatory risk, such as hedge funds. When appropriate, the portfolio
may invest up to half its assets in cash. Investment fund selection follows the ‘best of breed’
multi-manager approach to identify exceptional fund managers capable of delivering consistent
added value. Direct securities and passive fund investment may be used where appropriate.

  Commentary
          We have entered a period of greater volatility, for both data and markets.
          Property (quoted) was a little weaker over the month, though overseas property exposure was firmer.
          Bonds, especially index-linked, supported performance.
          The model has benefited from a progressive increase in risk over the summer.

  Performance Summary
                                  1 Mth        3 Mths         6 Mths          1 Yr        3 Yrs       5 Yrs          Since Inc   YTD          2008          2007            2006       2005           2004


Model                              0.9%          3.0%          9.6%           16.8%       14.1%       42.3%           45.7%      13.2%         -7.0%        7.3%            7.8%       15.5%              -
Central Position                   1.7%          3.9%         11.9%           14.7%        6.8%       30.7%           36.5%      10.4%         -9.6%        6.6%            5.1%       15.8%              -

FTSE All Share Index                3.0%         5.9%          19.7%          29.3%        -4.9%      34.9%            43.8%     24.7%        -29.9%         5.3%           16.8%          22.0%          -
FTSE All Stocks Gilts Index         0.9%         0.8%           4.7%           6.8%        19.2%      31.9%            36.1%      1.5%         12.8%         5.3%            0.7%           7.9%          -
1 month LIBOR Index                 0.0%         0.1%           0.3%           1.1%        13.2%      24.5%            26.0%      0.8%          5.5%         6.0%            4.9%           4.8%          -
FTSE APCIMS Income Index            2.1%         3.5%          12.2%          17.5%         4.4%      30.8%            36.8%     12.6%        -12.9%         5.0%            8.2%          15.1%          -


                    Cumulative Performance since inception                                                                       Calendar Year Performance
     160                                                                                                      20%

     150                                                                                                      15%
     140
                                                                                                              10%
     130
     120                                                                                                       5%

     110                                                                                                       0%
     100                                                                                                                   YTD       2008            2007            2006           2005           2004
                                                                                                               -5%
      90
      80                                                                                                      -10%

           Aug-04       Aug-05        Aug-06             Aug-07           Aug-08            Aug-09            -15%
                     Model                 Central Position                     1 month LIBOR Index
                                                                                                                                 Model            Central Position             1 month LIBOR Index



  Asset Allocation Summary
                                 Current Asset Allocation                                                                           Central Asset Allocation
                                                                       Cash                                                                                                 Cash

                                               6%                      Bonds                                                                      2%                        Bonds
                                   30%                                                                                                    26%
                                                                       Property                                                                                             Property
                                                        43%                                                                                                  48%
                                                                       Hedge Funds                                                       8%                                 Hedge Funds
                                    13%                                                                                                   8%
                                           8%
                                                                       Commodities                                                                                          Commodities
                                                                                                                                                8%
                                                                       Equity                                                                                               Equity




Model performance data is calculated by FactSet based on valuation data from Invantage. Indices are also sourced from FactSet. The Cautious model
performance figures show investment returns after the deduction of all dealing and other operating costs, as well as an annual management fee of 1%. Past
performance is not a reliable indicator of future performance.
  Asset Allocation Breakdown

 Current Equity Exposure                             Current Bond Exposure                                                                                  Top 10 Holdings
                                                                3.7%
                         UK                                                                                                                   7.42%         2.5% IL Treasury 2013
                                                                               UK Gilts                                                       6.71%         Bluebay Euro Inv Grade Bond
         14.2%           US                                     14.0%                                                                         6.71%         2.5% IL Treasury 2016
                                                                               UK Index-Linked Gilts                                          6.50%         iShares £ Corporate Bond Fund
                         Japan
                                                                                                                                              6.18%         Pimco Global Inv Grade Bond
                                                                               Corporate Credit                                               5.51%         Blackrock UK Income Fund
                         Europe ex UK
         7.4%                                                                                                                                 5.25%         Invesco Perpetual Corp Bond Fund
                                                                               Global High Yield
                                                                                                                                              4.82%         iShares PLC FTSE 100
                         Pacific ex Japan
         2.1%                                                                                                                                 3.84%         F&C Commercial Property Trust
                                                                               Emerging Markets
                         Emerging Markets                                                                                                     3.83%         Blackrock UK Emerging I60
         4.5%



  Risk Analysis – Since Inception
                              Rolling 1 Yr Volatility                                                                            Risk Characteristics
                                                                                8%                                      0.8                                         0%
  30%
                                                                                                                                                                    -2%
  25%                                                                                                                                                               -4%
                                                                                6%                                      0.6
                                                                                                                                                                            -11.1%
                                                                                                                                      0.7                           -6%
  20%
                                                                                                                                                                    -8%
                                                                                4%                                      0.4                                                          -17.3%
  15%                                                                                                          7.3%
                                                                                                                                                                   -10%
                                                                                           5.3%                                                                    -12%
  10%
                                                                                2%                                      0.2                           0.3
                                                                                                                                                                   -14%
  5%
                                                                                                                                                                   -16%
  0%                                                                            0%                                      0.0                                        -18%
     Sep-05             Sep-06         Sep-07        Sep-08          Sep-09                       Volatility                           Sharpe Ratio                       Maximum Drawdown
                Model             Central Position      FTSE All Share Index
                                                                                                                              Model         Central Position



  Glossary
Annual Management Charge (AMC):                                                                           Sharpe Ratio:
A charge levied for the management of the portfolio.                                                      A statistic to measure the risk-adjusted performance. It is calculated
Central Position:                                                                                         by subtracting the risk-free rate (1 Month Libor Index) from the rate of
A central position is created for each of our strategies. Each is                                         return for the portfolio and dividing the result by the standard
comprised of a number of asset classes and is designed to deliver an                                      deviation of the portfolio returns. The Sharpe ratio tells us whether a
appropriate long term return for a given level of risk. This level of risk                                portfolio’s returns are due to smart investment decisions or a result of
varies across the strategies. We use the central positions as starting                                    excess risk. The greater a portfolio’s Sharpe ratio, the better its risk-
points for our investment decisions.                                                                      adjusted performance has been.
Maximum Drawdown:                                                                                         Total Expense Ratio (TER):
A measure of the downside risk of a portfolio. It is the percentage                                       This measures the total cost of investment and includes fees such as
drop from any peak in a portfolio value to any bottom. It can be                                          the management fee, custodian fee, and commission. The TER is
applied directly to the size of the portfolio giving an “estimate” of how                                 calculated by dividing the total cost by the value of the fund.
much money you could lose at some intermediate point in time during                                       Volatility:
the life of the investment strategy.                                                                      A statistical measure of the dispersion of returns for a given security
Yield:                                                                                                    or fund. It is the annualised standard deviation of the monthly total
The annual rate of return on an investment, expressed as a                                                return. If the return moves up and down rapidly over a short period
percentage of the money invested.                                                                         of time, the portfolio has a high volatility.



Risk Warning
Heartwood Wealth Management Limited is authorised and regulated by the Financial Services Authority in the conduct of investment business.
This document has been prepared by Heartwood Wealth Management for clients and/or potential clients who may have an interest in its
services. It is not intended to be a definitive analysis of equity or other markets. Nothing herein constitutes advice to undertake a transaction in
a particular share or other security and professional advice should be taken before any course of action is pursued. Cautious portfolios may
include individual investments in structured products, foreign currencies, and funds (including funds not regulated by the Financial Services
Authority) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private
equity funds and other funds which may have limited liquidity. The value of any investment and the income from it is not guaranteed and can
fall as well as rise, so that you may not realise the amount originally invested. Where an investment is denominated in a currency other than
sterling, changes in exchange rates between currencies may cause investments/income to go up or down. While we aim to follow a disciplined
model portfolio approach, any individual portfolio is unlikely to be identical to that of the relevant model portfolio as a result of (inter alia) the
time of commencement of the portfolio, the precise mandate or risk profile you may have given us (including any investment preferences
and/or restrictions), tax constraints, the tax status of any investment vehicles used, and the availability of certain funds or other investments.

Heartwood Wealth Management Ltd, Amadeus House, 27b Floral Street, Covent Garden, London, WC2E 9DP. Tel: 020 7812 7030
Registered head office: 77 Mount Ephraim, Tunbridge Wells, Kent, TN4 8BS. Tel: 01892 701804. Registered in England Number: 4132340

				
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