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					the magazine for Chelsea investors                                          issue 27   October 2010




Locating income
                                     the search continues...


                                     Emerging markets
                                     – too big to ignore

                                     With Profits
                                     – time for an exit?




                 WRITTEN BY                      THE UK’S LEADING DISCOUNT BROKER
                       Welcome                                     with income, but emerging market debt is becoming increasingly
                                                                   popular. Investec introduce us to this asset class and their fund
                                                                   on pages 32 and 33.
                  Welcome to our Autumn                                 Income is once again a major feature of Viewpoint. Negative
                                                                   real interest rates are continuing to frustrate us all and we are
                  edition of Viewpoint.                            aware that many of you need to find ways to boost your income.
                  Markets are buoyant, despite                     AEGON’s High Yield Bond fund (page 34) offers a strong yield on
DR JOHN M HOLDER  some gloomy economic data                        a monthly basis. An alternative way to produce income is via a
Chairman                                                           multi-asset portfolio, which is explained by UBS on page 35.
                  and our coalition government                          If you hold a with profits bond, I do recommend that you
                  seems to be rolling up its                       take a look at pages 36 and 37 – you will find some helpful tips
                                                                   on why and how you should review your holdings. We have
sleeves to tackle the deficit. So far, so good,
                                                                   conducted an extensive survey, the results of which can be found
but what of the future? Market view opposite                       within the article and make for startling reading.
tackles this thorny question.                                           Looking back at our last Viewpoint, Europe was really in the
                                                                   doldrums, but since then Germany has emerged like a phoenix
The regular readers of Viewpoint will notice a change to the       as the powerhouse of Europe. The manager of Baring German
sectors covered in our Chelsea Leaders’ panel. This alteration,    Growth talks to us on page 38 about why the economic recovery
namely the introduction of an Equity Income sector covering        there has been so strong.
both the UK and overseas, was made after much deliberation.             I hope you find Viewpoint both informative and useful.
The thinking behind this is explained on page 10.
    Emerging markets continue to dominate the headlines, but
should they play a role in your portfolio and, if so, is now the
time to invest? We discuss these issues on page 29. Following
that, we look at two of the BRIC economies that seem to get less
coverage, namely Brazil and India.                                 Dr John M Holder
    Emerging markets are also featured in our coverage of          Chairman, Chelsea Financial Services Plc
income funds. Investors tend not to associate emerging markets




Contents
3     Market view
                                                                                                         Emerging Markets


                                                                                                         29
4     Would you recommend us?
5     ISA update
6     The Chelsea Easy ISA                                           The search for
8     Spotlight: J O Hambro UK Opportunities                         income continues
                 First State Greater China Growth
10    The changing face of Chelsea Leaders
11    Chelsea Leaders                                                32
19    Funds Focus
20    The benefits of our fund supermarket
22    Re-registration form
                                                                   Important Notice
23    ISA application form
25    ISA transfer authority form                                  Past performance is not necessarily a guide to the future. The
27    Investment funds application form                            value of investments and the income from them can fall as well
29    Emerging Markets                                             as rise as a result of market and currency fluctuations and you
30    The forgotten BRICS: Allianz Brazil                          may not get back the amount originally invested. All the
                              Fidelity India Focus                 investments in this Viewpoint should be regarded as medium to
32    The search for income continues:                             long-term investments. Tax assumptions are subject to statutory
      Investec Emerging Markets Debt                               change and the value of any tax relief will depend on your
34    Monthly income: AEGON High Yield Bond                        individual circumstances.
35    Multi-asset income: UBS Multi-Asset Income                        Chelsea Financial Services offers a direct offer/execution-only
36    Without profits ...time to head for the exit?                service. If you require individual investment guidance you should
38    Germany: Europe’s economic powerhouse:                       seek expert advice. Whilst we may draw attention to certain
      Baring German Growth Trust                                   investment products we cannot know which of them, if any, is
39    STOP PRESS: Chelsea champions income alternatives            best for your particular circumstances and must leave that
40    Tax-efficient investing                                      judgement to you. Nor can we accept liability to clients who
41    Chelsea funds-only SIPP                                      purchase two ISAs in one fiscal year, or otherwise do not comply
42    Premier League                                               with ISA rules.
44    Relegation Zone                                                   Discounts are subject to receipt of commission and may be
46    Cofunds key features                                         subject to change if commission levels are altered. Chelsea
                                                                   Financial Services is authorised and regulated by the Financial
        Freephone Brochure Line: 0800 071 3333
                                                                   Services Authority. Cofunds is the ISA Plan Manager for the
              Main Office: 020 7384 7300
                                                                   Chelsea Portfolio.


2    Chelsea Financial Services Viewpoint October 2010
Market view
                        I have a confession to make – I’m confused. I understand the current economic
                        backdrop and the various ways in which it could pan out. But here’s the problem:
                        never before have possible future scenarios been quite so far apart. For instance,
                        are we heading towards inflation or deflation? I am fortunate enough to speak
                        to many highly-respected macroeconomic experts, yet they too are divided on
                        the outlook for the global economy and stock markets. I will elaborate on these
DARIUS MCDERMOTT
Managing Director
                        various possibilities, but as they say “Prediction is very difficult, especially about
                        the future” and now, more than ever, these words ring true.

The FTSE 100, reflecting the indecision of investor sentiment,
see-saws between negativity and optimism. The last few months
have seen it drop to 4805 (1/07/10), a low for 2010, before
recent bullishness pushed it back up to 5602 on 20th September.
    The world has moved on from the dark days of 2008, but a
question mark still hangs over the strength of the global recovery
and whether the policy of quantitative easing (QE) has worked.
The most pertinent question is whether developed economies
with large fiscal deficits can implement the necessary cuts in
government spending without slipping back into recession?

China holds the key
The global economy is increasingly reliant on China’s growth.
China continues to announce positive GDP growth at around
9%, but can we rely on these numbers? Investment spending
accounts for a large proportion of GDP (45%). Consumer
spending needs to increase but, until there is more of a
welfare state, savings rates are likely to remain high.
    The US housing market is faltering again and this impacts on
consumer confidence. At the same time the labour market is very
weak. With inflation still low, this week the Fed were hinting at a
second round of QE – avoidance of the perils of deflation its
utmost concern. QE may be just the prescription for an ailing
economy but the side effects remain to be seen. Surely the
printing of more dollars must lead to its devaluation and hence
strong inflation?                                                     Which way for markets?
    Asian economies are largely in a better state than those of       I apologise if the above makes for rather dismal reading.
developed markets, with stronger domestic demand and intra-           On a more positive note we must remind ourselves that poor
regional trade. Governments, banks and consumers are far less         economic growth does not necessarily go hand-in-hand with
indebted than their Western counterparts. But if the US slides        gloomy stock market performance. Markets are forward-looking
back into recession, Asia will still feel the effect – decoupling     and fundamentally about companies’ performance and whether
largely wishful thinking.                                             they are over- or under-priced given their prospective earnings.
    Europe continues to worry me – the disparities in growth          Since, like myself, investors are struggling with the opaque
rates between economies are widening. Germany, as a large             outlook, markets are largely not overvalued at current levels. So,
exporter, still benefits from the weakness of the euro and it’s       should some of the mist clear and a more stable picture of global
experiencing strong GDP growth. At the other end of the               growth emerge, markets will undoubtedly move upwards. But in
spectrum Greece is in recession, with growth declining for seven      the meantime, the question is how do you position yourself in
successive quarters. Can the region continue in its current form      the midst of so much uncertainty? The temptation is to turn to
with such disparity?                                                  cash in times of trouble but, with punitively low interest rates
    In the UK we nervously await the Autumn Spending Review.          and the prospect of higher inflation, it has become less of a safe
We all know that the deficit needs to be tackled. This requires       haven. Furthermore, if you exit the stock market, awaiting clarity,
cuts in spending and we expect higher taxes, but as ever we take      you will miss out on any bounce in markets.
a ‘not in my backyard’ view. So I think we can look forward to             At the risk of repetition, diversification is key: across asset
more strikes here, and many high earners choosing to relocate         classes and across regions. Resist the temptation to avoid or
overseas. I fail to see how this will not have a knock-on effect on   overweight and opt for experienced, strong stock-picking fund
consumer spending, the housing market and thereby GDP                 managers – the ability of a manager to seek out those stocks
growth, or rather lack of it. Although inflation is higher here       which should weather any economic climate, whatever sector or
than the US, further QE is still under consideration.                 region they cover, has never been more important.




                                                                                    October 2010 Viewpoint Chelsea Financial Services    3
                                                                                                                                   !
Would you
                                             recommend us?
If you recommend us to a friend, we’ll send you up to £50
worth of Marks & Spencer vouchers to say thank you.

                                                            Many of our clients come to us having been recommended
                                                            by an existing client. We are very pleased and grateful
                                                            that many people are so happy with our service that they
                                                             feel confident enough to recommend us to their friends
                                                              and family.
                                                                   If you recommend a friend – someone who is new to
                                                               Chelsea Financial Services – we will send them details of our
                                                                services and if they invest over £5,000 we will send you
                                                                 £25 worth of Marks & Spencer vouchers. If they invest or
                                                                 move to Chelsea over £25,000, we’ll send you £50 of
                                                                  Marks & Spencer vouchers. Your friend must retain their
                                                                  investment with us for at least 12 months.
                                                                         All you need to do is fill in the form below and return
                                                                    it to us. You can recommend as many people as you like
                                                                     – there’s no limit. If you wish to recommend more people,
                                                            simply attach their details on a separate sheet of paper and
                                                            return it along with the form below.



    Your details
    Name:

    Address:



                                                                                   Postcode:



    Friend’s details                                          Friend’s details
    Title:                          First name:               Title:                           First name:

    Surname:                                                  Surname:

    Address:                                                  Address:



                                    Postcode:                                                  Postcode:



    Friend’s details                                          Friend’s details
    Title:                          First name:               Title:                           First name:

    Surname:                                                  Surname:

    Address:                                                  Address:



                                    Postcode:                                                  Postcode:




4       Chelsea Financial Services Viewpoint October 2010
ISA update...
increased ISA limits for all
                       You can now invest up                      Market leading discounts
                       to £10,200 into your                       – save £££s
                       Stocks & Shares ISA.                       Every fund in Viewpoint is available at zero initial charge
                                                                  within your ISA. Saving you up to £561 on an investment of
                                                                  £10,200.
                   Stocks & Shares ISAs are a
                   great way to save and we at
SAM HOLDER
Head of Operations
                   Chelsea Financial Services                     Fed up with derisory returns
                   believe that they are an                       from Cash ISAs?
essential part of an investor’s portfolio.                        Transfer your Cash ISA into a Stocks & Shares ISA

                                                                  n An increasing number of our clients are taking advantage
                                                                     of the new ISA rules and transferring their Cash ISAs to
Give yourself a tax break                                            Stocks & Shares ISAs.
Our tax burden is increasing and ISAs are now more                n With interest rates likely to remain low for the foreseeable
attractive than ever. There are still many tax benefits of           future, corporate bond and equity income funds have
Stocks & Shares ISAs as follows:                                     become more and more attractive for those who can
                                                                     forego capital security.
n   Free of capital gains tax.                                    n The transfer is done without the loss of your ISA wrapper and
n   No higher rate tax on dividends                                  will not affect your annual ISA allowance. Simply complete the
    (saving up to 32.5%).                                            ISA transfer form on page 25 and return it to us.
                                                                  n Please note that Cash ISAs and Stocks & Shares ISAs are very
n   Interest from corporate bonds is tax free                        different and once you have transferred to a Stocks & Shares
    (saving up to 50% tax).                                          ISA you cannot transfer back to a Cash ISA.
n   All income is paid without any further liability
    to tax (unlike income from pensions).
n   Ease of administration – ISAs do not have
                                                                  Estate planning – don’t leave
    to be declared on your tax return.                            your investments in a mess
                                                                  If your investments are consolidated within Cofunds it is much
                                                                  easier for your executors to administer for the following reasons:
Easy to manage                                                    n The death certificate and grant of probate only has to be sent

n   Manage your ISA online or via post.                              to one place.
                                                                  n The investments do not have to be sold. Your funds will remain
n   Online valuations available 24 hours a day,                      invested and can be moved into the beneficiaries’ names at no
    7 days a week.                                                   charge.
n   Two clear statements a year with                              n You can have multiple beneficiaries.
    market updates and fund commentary                            n Chelsea Financial Services will assist your family members,
    on many of the investments you hold.                             your executors or your solicitors with the probate valuations
                                                                     and stock transfer at no charge.
n   Need help? Call 020 7384 7300 to talk to
                                                                  n To consolidate your portfolio simply complete and return
    one of our experienced and helpful staff.
                                                                     the form on page 22 or call 020 7384 7300 to discuss.



    THREE EASY WAYS TO BUY YOUR ISA:

                 1   By telephone                            2    Online                                      3    By post
                Simply call 020 7384 7300                    Visit our website,                              Complete the form
                Please have your                             www.chelseafs.co.uk,                            on page 23
                debit card to hand                           and click on ‘Invest Online’




                                                                                 October 2010 Viewpoint Chelsea Financial Services   5
The Chelsea Easy                                                                                                           ISA
investing made easy
– with no initial charges
                     When it comes to considering                                                      EASY ISA CHANGES
                     funds for your ISA, the range is
                                                                                                      Aggressive Growth – Aberdeen Emerging Markets replaces
                     vast and the task of choosing just
                                                                                                      Ignis HEXAM Global Emerging Markets.
                     a few for your portfolio can be
                     daunting. So we have selected
                     funds for the Chelsea Easy ISA
 JULIET SCHOOLING    and put them together within                                                      PLEASE NOTE:
 LATTER
 Head of Research    four different portfolios. All you
                                                                                                      We are not able to manage these portfolios for you.
                     have to do is choose one of the
four options based upon your own requirements and                                                     It is up to you to switch funds if you wish, either online or by
                                                                                                      simply writing to us. You may wish to sign up to our regular
attitude to risk: Cautious; Balanced; Aggressive or
                                                                                                      e-Viewpoint to keep in touch with any fund manager changes
Income. Your ISA investment will then be spread                                                       or simply check the portfolios to see if we have made any
equally across the corresponding six funds, within our                                                alterations each time a new Viewpoint comes out.
fund supermarket the Chelsea Portfolio (for more                                                      We select the funds for the Chelsea Easy ISA, but it is up to
details see page 20).                                                                                 you to decide whether this selection will suit your investment
                                                                                                      requirements. Returns cannot be guaranteed, and your
Once you have selected your preferred Easy ISA option, simply fill
                                                                                                      attention is drawn to the Important Notice on page 2.
in the ISA application form on page 23, ticking one box only to
select either Cautious, Balanced, Aggressive or Income, and send
the application back to us in the pre-paid envelope enclosed.


n   The Chelsea Easy ISA is also available for ISA transfers.
n If you would like to know more about the funds we have
    chosen, details are provided on pages 11-18.
n Please note that the minimum investment is £3,000 lump sum
    or £200 per month into any Easy ISA.



    CAUTIOUS GROWTH
    (Average Chelsea Risk Rating 3.66)*
    Application form on page 23
                                                                                                                                      BlackRock Continental European
    Cautious Growth is for those who feel uncomfortable
    with a higher level of risk. This aims to provide a
    steady level of growth with limited volatility.                                                                                   BlackRock UK Absolute Alpha**
    Approximately one third of the portfolio is in
    corporate bonds, which lowers the exposure to
                                                                                                                                      Henderson Strategic Bond
    equities and thus stock-market volatility. A large
    proportion of your investment will be in the UK,
    thereby reducing any fluctuations in foreign                                                                                      Invesco Perpetual High Income
    markets and there is a bias towards large-cap
    stocks, which tend to be less volatile.                                                                                           Legal & General Dynamic Bond

    Average initial charge after discount: 0.00%
    Average annual management charge: 1.46%**                                                                                         CF Miton Special Situations Portfolio




Note: *The Chelsea Risk Rating denotes a fund’s risk profile, where 1 is the least risky and 10 has the highest risk.
      **A performance fee may be applied – See page 18 for more details.



6       Chelsea Financial Services Viewpoint October 2010
 BALANCED GROWTH
 (Average Chelsea Risk Rating 5.33)*
 Application form on page 23
                                                                                                                                                Artemis UK Special Situations
 This offers you a medium level of risk. It gives
 broader exposure to developed foreign markets to
 provide diversification outside the UK and has a                                                                                               J O Hambro UK Opportunities
 slightly more aggressive UK stance, with some
 exposure to smaller companies. This is balanced                                                                                                Jupiter European Special Situations
 with lower risk corporate bond and equity income
 holdings. With approximately 60% in the UK,
 foreign exposure is limited to approximately                                                                                                   Legal & General Dynamic Bond
 16% in the US and 16% in Europe.
                                                                                                                                                Martin Currie North American
 Average initial charge after discount: 0.00%
 Average annual management charge: 1.42%†
                                                                                                                                                M&G Recovery




 AGGRESSIVE GROWTH
 (Average Chelsea Risk Rating 7.75)*
 Application form on page 23
                                                                                                                                                Aberdeen Emerging Markets
 If you have a sufficiently long time horizon and
 feel comfortable with a certain amount of risk,
 you may wish to choose Aggressive Growth.                                                                                                      AXA Framlington UK Select Opps
 This encompasses a greater degree of volatility with
 the prospect of higher long-term growth.                                                                                                       First State Asia Pacific Leaders
 It offers a broad-based portfolio, with global
 exposure, enabling you to take advantage of any
                                                                                                                                                Neptune European Opportunities
 upturn in markets worldwide. It combines large,
 medium and small-cap companies.
                                                                                                                                                Neptune US Opportunities
 Average initial charge after discount: 0.00%
 Average annual management charge: 1.60%
                                                                                                                                                Schroder UK Alpha Plus




 INCOME
 (Average Chelsea Risk Rating 3.16)*
 Application form on page 23
                                                                                                                                                AEGON Investment Grade Bond
 If your priority is income, the Chelsea Easy ISA
 Income option could suit your requirements.
                                                                                                                                                Invesco Perpetual Monthly
 A combination of corporate bond and equity                                                                                                     Income Plus
 income funds provides a regular income with an
 element of capital appreciation. This should                                                                                                   M&G Global Dividend
 enable you to maintain the real value of both
 your capital and income. The average yield
 for this portfolio is 4.96%+.                                                                                                                  M&G Optimal Income


                                      Yield+      Paid out                                                                                      Schroder Income Maximiser
 AEGON Investment
 Grade Bond                           4.44% Jan, Apr, Jul, Oct
                                                                                                                                                Standard Life UK Equity
 Invesco Perpetual
                                                                                                                                                High Income
 Monthly Income Plus                  6.78% Monthly
 M&G Global Dividend                  3.26% Mar, Jun, Sep, Dec
 M&G Optimal Income                   4.48% Jun, Dec
 Schroder                                                                                                                        Average initial charge after discount: 0.00%
 Income Maximiser                     7.00% Feb, May, Aug, Nov                                                                   Average annual management charge: 1.38%
 Standard Life
 UK Equity High Income                3.79% May, Nov                                                                             +
                                                                                                                                 Source: Financial Express 15th September 2010




Note: *The Chelsea Risk Rating denotes a fund’s risk profile, where 1 is the least risky and 10 has the highest risk.
      †
       A performance fee may be applied – See page 12 for more details.



                                                                                                                        October 2010 Viewpoint Chelsea Financial Services             7
SPOTLIGHT
                                                                                 Here we take a more in-depth look
                                                                                 at some of our Chelsea Leaders.
                                                                                 Fund managers talk about their
                                                                                 investment process and their asset class,
                                                                                 to give you a more comprehensive view
                                                                                 of how your money is managed.




J O Hambro                                                                JOHCM UK OPPORTUNITIES FUND PERFORMANCE
                                                                           40%
UK Opportunities                                                           35%
                                                                           30%
                                                                           25%
                                                                           20%
                        I joined investment boutique                       15%
                                                                           10%
                        J O Hambro Capital Management                       5%
                                                                            0%
                        (JOHCM) in 2005 and the UK                         -5%
                                                                          -10%
                        Opportunities fund was launched                   -15%
                        on the 30th November of that                      -20%
                                                                          -25%                        IMA UK All Companies (IN)
                        year. Prior to joining JOHCM,                     -30%
                                                                          -35%
                                                                                                      JOHCM UK Opportunities Ret Acc GBP (MF)

                        I ran the Newton UK opportunities                 -40%
 JOHN WOOD
                                                                                 Nov 05




                                                                                                                                                                                                                                                            Aug 10
                                                                                          Feb 06
                                                                                                   May 06

                                                                                                            Aug 06

                                                                                                                     Nov 06

                                                                                                                              Feb 07
                                                                                                                                       May 07

                                                                                                                                                Aug 07

                                                                                                                                                         Nov 07

                                                                                                                                                                  Feb 08

                                                                                                                                                                           May 08

                                                                                                                                                                                    Aug 08
                                                                                                                                                                                             Nov 08

                                                                                                                                                                                                      Feb 09
                                                                                                                                                                                                               May 09

                                                                                                                                                                                                                        Aug 09

                                                                                                                                                                                                                                 Nov 09

                                                                                                                                                                                                                                          Feb 10
                                                                                                                                                                                                                                                   May 10
 Fund Manager,          fund from its inception in 2002
 JOHCM UK Opportunities
                        to July 2005. I was attracted by
                                                                        Source: Lipper.
                        JOHCM’s entrepreneurial style
and focus on performance. JOHCM’s policy of capping
fund sizes to prevent its funds from getting too big
                                                                        Avoiding short-term thinking
was also very appealing.
                                                                        My team and I believe that stocks represent shares in a
Limiting fund size increases the prospect of outperformance as it       company’s underlying cash flows; they are not just pieces of
means as a fund manager you have fewer problems buying or               paper to buy and sell. Markets consistently underestimate the
selling shares due to market liquidity. When you run multi-billion      value created by well-managed companies in growth niches that
pound funds it can restrict how nimble you are as an investor.          reinvest their cash wisely. In a market dominated by short-
     I manage this fund with an absolute return philosophy,             termism, the key advantage to a buy-and-hold investor is the
meaning every stock held is held with the expectation that it will      passage of time.
gain in value over the mid to long term, rather than thinking                We look for businesses which benefit from long-term
about performance in terms of how the fund has fared                    tailwinds or themes, and which can regularly generate higher
compared to a benchmark, such as the FTSE All-Share Index, as           returns than cash in the medium term. These themes help the
many fund managers do. It also means that I do not base                 idea generation process, although not every stock held in the
investment decisions upon the weighting of a stock in an index.         portfolio necessarily has to be linked directly to a theme as this
     This means that every stock held in the fund is held for a         would limit our flexibility. We invest in companies with strong
positive reason; if I do not like a stock I do not hold it within the   balance sheets that consistently generate high levels of cash,
fund. And if something changes to undermine my positive                 avoiding companies with high levels of debt. The quality of a
conviction in a stock then I will sell out of that position entirely.   company’s senior management team is also important. We look
This is the way I have managed money over the past five years at        for companies run by credible management teams that can think
JOHCM and at my previous firm, Newton.                                  creatively and anticipate rather than react to events in their
                                                                        industry. Lastly, to guard against holding overvalued stocks, we
                                                                        exercise strict absolute valuation controls within the portfolio.
                                                                        In following this approach we build a fund of typically 30-40
                                                                        stocks, aiming for equal weightings in each stock.

                                                                        Consistent, market-leading performance
                                                                        We believe the success of our approach is confirmed by the
                                                                        fund’s consistent performance since its launch, placing it in the
                                                                        top 10% of funds within the IMA UK All Companies sector.
                                                                        Our preference for investing in companies that are capable of
                                                                        generating growth, regardless of the economic weather, has
                                                                        particularly helped the fund over recent years. Despite the
                                                                        sluggish performance of the UK economy in recent times our
                                                                        stocks have still been able to record decent growth in their
                                                                        revenues and profits. By continuing to invest in well-managed
                                                                        companies with solid balance sheets, we hope to continue the
                                                                        fund’s strong performance regardless of how the UK economy
                                                                        fares over the months and years to come.



8     Chelsea Financial Services Viewpoint October 2010
First State                                                           FIRST STATE CHINA GROWTH PERFORMANCE

Greater China Growth                                                                       300 –
                                                                                           275 –     ––––– First State China Growth A GBP Acc (MF)

                                                                                           250 –     ––––– IMA Asia Pacific Excluding Japan
                            I have managed the First State                                           ––––– MSCI Golden Dragon
                                                                                           225 –
                            Greater China fund since 2003.                                 200 –




                                                                       Percentage growth
                            The fund has a very strong long-                               175 –

                            term performance record, having                                150 –

                            returned 263.5% in sterling terms                              125 –
                                                                                           100 –
                            since inception, against a
                                                                                            75 –
                            benchmark return of 125.5%.                                     50 –
MARTIN LAU
Fund Manager, First State                                                                   25 –
Greater China Growth       I graduated from Cambridge University
                                                                                             0–
                           with a Bachelor of Arts and Masters in
                                                                                           -25 – I
                           engineering and started my investment                                       I     I     I     I     I     I        I   I    I     I     I     I     I
                                                                                               01/04 07/04 01/05 07/05 01/06 07/06 01/07 07/07 01/08 07/08 01/09 07/09 01/10 07/10

career with BZW in London in 1995 as part of their risk
management team. I then spent six years with Invesco as a fund      Source: Lipper.
manager responsible for the Greater China funds and regional
portfolios.
    I joined First State in 2002 as a senior portfolio manager,     concerns we focus on how much companies are worth and buy
responsible for the management of First State’s Greater China       them when they are undervalued.
and regional funds. In 2003 I was appointed director, Greater            We believe that Greater China offers a larger variety of
China equities following the merger of the Edinburgh-based Asia     companies which can benefit from the overall growth of China.
Pacific team with the Asian teams in Singapore and Hong Kong,       For example, there are many competitive technology companies
where I am based.                                                   in Taiwan which use Taiwanese expertise combined with the low
                                                                    cost advantage of China, e.g. Delta Electronics. A closer
Process                                                             relationship between China and Taiwan will open up
At First State we are bottom-up stock pickers and our investment    opportunities for many Taiwanese companies.
approach is heavily research focused. We employ a rigorous
process, which combines regular company visits with extensive       Outlook
fundamental analysis. Our research identifies companies with        We remain very positive about the long-term potential for equity
sustainable long-term earnings per share growth and focuses         investment in the Greater China markets. We expect mainland
on those stocks which we believe are incorrectly priced.            China to continue growing at levels well above Western
    We utilise a fundamental, qualitative approach, while we        economies, providing companies with opportunities for robust
also draw on quantitative techniques to supplement our own          sales and earnings growth. The quality of mainland management
research. The most important part of the process is the             continues to improve as companies become more focused on
qualitative analysis which we use to determine the factors          long-term shareholder value.
underpinning companies’ growth profiles.                                Taiwan is a technological powerhouse with world-leading IT
    We get our investment ideas from extensive company visits,      companies and Hong Kong companies provide a variety of well-
research trips, industry contacts, ongoing communication            managed businesses in a number of sectors. Both Hong Kong
between our UK and regional offices in Hong Kong and                and Taiwanese companies are in a very strong position to take
Singapore, ad hoc interaction with our global sector analysts       advantage of the vast mainland Chinese market with its
and broker research.                                                burgeoning consumption growth.
    However, the most significant source of ideas and research          However, over the short term we are concerned about the
comes from country and company visits, as well as an extensive      indebtedness of Western economies, which could result in a
network of industry contacts. There is no better way to             period of slower global growth. As a result, we are less
understand the drivers of a business than sitting down with         enthusiastic about sectors geared into the world economy, such as
company management and getting their perspective.                   energy, industrials and materials. An exception is the information
    Strong attachment to fundamental bottom-up research and         technology sector which is generating good cash flows.
understanding the companies is important because in China               Weaker Chinese economic data over the short term should
there is a lot of background noise in the market as investors       ease the pressure on the government to tighten policy further.
switch focus between different stories. For example in 2007 the     We remain positive about companies exposed to domestic
market was worried about inflation, in 2008 deflation and in        consumption in China and continue to seek investments that
2009 inflation again. Rather than responding to short-term          generate steady cash flow and pay good dividends.



                                                                                                      October 2010 Viewpoint Chelsea Financial Services                              9
CHELSEA LEADERS



The changing face
of Chelsea Leaders
Our Chelsea Leaders’ panel has been in                              Why change what has worked for years?
place now for almost 10 years. It is renowned                       A number of factors has led us to make this change:

in the financial industry as a panel on which                          A greater demand for equity income
it is notoriously difficult for a fund to be                        With interest rates at 0.5% and inflation tipping the scales at
                                                                    over six times that, we are now in the unenviable position of
awarded a place.
                                                                    negative real returns on our savings accounts. So many of our
We look at a fund’s performance, both against its peer group        investors are moving money from poorly-performing savings
and its benchmark and throughout all stages of an economic          accounts and cash ISAs into equities or fixed interest funds,
cycle. Then we interview the fund manager on a one-to-one           to boost their income.
basis, analysing their investment process, their experience,
checking the resources that they have available to them and their      Increasing concentration within the
commitment to the company. Once on our panel, we have a                UK equity income sector
meeting at least once a year with the manager to keep up-to-        At the same time as increased demand for higher yielding stocks,
date with the running of the fund. We are always reluctant to       there has been a worrying decline in higher yielding equities.
remove a fund from our panel, as we know that consistency is        As I’m sure you are well aware the banks used to be a main part
important to you and all fund managers go through periods of        of equity income portfolios: now just five companies account for
underperformance at one time or another. Often investors switch     nearly 40% of the total annual dividend distribution of the UK
out of a fund just as it turns a corner and this can be a costly    stock market. So whilst investors might think they were
mistake. However, as you scan through the following pages,          diversifying their risk by investing in several different UK equity
viewing the few funds that have won a coveted place as a            income funds, there is an increased risk that many of their top
Chelsea Leader, this time you may notice some changes.              holdings would be the same. This problem was brought into the
                                                                    limelight with BP’s crisis – not only were many popular UK equity
                                                                    income funds suffering a loss as the share price plummeted, but
Our new Equity Income sector                                        their yields were hit too as BP suspended dividend payments.
As you may remember, previously our UK funds were split into
UK Aggressive and UK Core. UK Aggressive contained funds with          The UK stock market has suffered more than most
higher risk ratings, such as special situations and UK smaller      Our market had a large financial sector, so the curtailment of
companies funds. UK Core funds, on the other hand, were             bank dividends hit us quite hard. Whilst the larger end of the UK
those with a Chelsea Risk Rating below 6, typically large-cap       stock market has international exposure, wouldn’t it be a good
UK funds and UK equity income funds. However, we now have           idea for UK income investors to gain more exposure to faster-
a UK Growth sector, which includes all UK funds that are            growing non-UK economies?
focusing on capital growth rather than income, whatever their
risk rating. We also have a new sector called Equity Income and
this includes all equity funds that focus on producing an income    All these considerations prompted us to do some research
wherever they invest, so you will see UK equity income funds        Did you know that 97% of our investors in equity income
alongside non-UK funds, such as global equity income.               concentrate solely on the UK?
                                                                         So in order to encourage our clients to look elsewhere for
                                                                    income we are launching our new Equity Income sector and in
                                                                    it you will find all your old favourites, but alongside them are
                                                                    some newcomers to consider – Newton Asian Income and M&G
                                                                    Global Dividend.
                                                                         We felt so strongly about this need for diversification that we
                                                                    invited some journalists to a debate with the managers of the
                                                                    above funds (more details about this can be found on page 39)
                                                                    in order to get the message out to investors everywhere.
                                                                    Personal finance editor of the Mail on Sunday, Jeff Prestridge,
                                                                    wrote about the discussion afterwards ‘Good investing, after all,
                                                                    is all about diversification and the need for income seekers to
                                                                    diversify has never been greater. If there are income
                                                                    opportunities to be obtained from international equities,
                                                                    investors should seize them’.




10   Chelsea Financial Services Viewpoint October 2010
UK Growth (funds focusing on capital growth rather than income)
  ARTEMIS UK SPECIAL SITUATIONS
  This fund targets long-term capital appreciation through investment                             Yield*                                             1.80%
  in UK equities. Derek Stuart and Ruth Keattch seek companies in                                 Standard and Poor’s fund rating                    –
  special situations, such as those requiring funding, in recovery or                             OBSR fund rating                                   AAA
  stocks that are currently unloved by the market. The fund tends                                 Standard initial charge                            5.25%
  to have a small to mid-cap bias, though the managers are not                                    ISA charge after Chelsea discount                  0%
  constrained on this basis. Focus is on stocks in which the managers                             Annual management charge                           1.50%
  have the most conviction and this will lead to a relatively                                     Chelsea Risk Rating†                               7
  concentrated portfolio.                                                                         Unit type                                          Acc




All Chelsea Leaders available at zero initial charge within an ISA. For performance statistics please refer to pages 42-43.

Notes:
                                                             †
We always strive to reduce your costs to a minimum. Units     The Chelsea Risk Rating denotes a fund’s risk profile,   These discounts apply to new ISA purchases only.
bought with No Initial Charge are described as being         where 1 is the least risky and 10 has the highest risk.   ISA transfers will also attract the same discounts. Please
bought at the Creation/NAV. You can see from our table of    Standard & Poor’s ratings taken from Money Management,    telephone 020 7384 7300 for further details.
funds that we have secured this Creation/NAV on all of the   September 2010.                                           OBSR ratings taken from website, September 2010.
funds highlighted in the tables.                             Fund charges are taken from Cofunds Consolidation         *Yield Financial Express 06/09/10.
                                                             Service Key Features Schedule, September 2010.



                                                                                                              October 2010 Viewpoint Chelsea Financial Services                     11
Re-registration:
Getting it together
Life is so much easier with all your investments in one place: no more endless
pieces of paper from different fund providers; no more time-consuming
transfers and no more having to stick to one provider per tax year.

One major advantage is our online valuation
service. We know from speaking to many of
you that using websites can be daunting.
However, we have done everything we can to
make our website as user-friendly as possible.
All you need to do is to register on our home
page and, once enabled, you can buy, switch or
top-up your investments or simply look up their
current value. We thought that you might like
to take a look at a snapshot of our website (see
right) and what your portfolio might look like.
Chelsea Portfolio investors’ experience
More and more of our clients are re-registering
their investments to the Chelsea Portfolio.
Here’s three interesting case studies:

Robert and Margaret Lloyd from London:
“Just a note to say how much we both appreciate
 the excellent support you have provided us with in
 connection with our Cofunds ISA accounts. Your
 customer service has always been excellent in every
 respect, and we would like you to know how important
 that is to us, as well as being extremely rare in
 today’s world!”


Mr Graham Cooper from Pinner decided that the
ongoing files of paperwork from his portfolio of
unit trusts would ultimately overwhelm his wife
should it for any reason become her responsibility.
“I had investments with 11 different fund managers and felt
 concerned that should I die, my wife as the executor would
 have to track down the investments, send off the death
 certificate, grant of probate and application forms to each
 individual company.”

“As my investments are now with Cofunds, she would
 only have to send the forms to one place, enabling an
 easy transfer of investments into her name, at no charge.
 Furthermore, I have peace of mind knowing she would have
 access to the uncompromising assistance of the Chelsea
 Financial team.”


Bridget Quirke from Datchet:
“My ISAs have been with Chelsea/Cofunds for a while,
 but I also had several personal pensions from a number of
 insurance companies. I wanted to be able to keep track
 of their performance and make changes online at no cost.
 So I moved my pensions to Cofunds, it’s so handy being able
 to access the same wide variety of funds as in my ISA. I also
 find your Fund Review so helpful.”


This is a genuine valuation for one of our clients, whose
name has been changed to protect their identity.


                                                                 October 2010 Viewpoint Chelsea Financial Services   21
Consolidate your portfolio
Re-registration Form
Move all your fund investments to ONE account. This will reduce the amount of paperwork you currently receive, provide you
with ONE valuation statement twice yearly, and give you the information necessary to CONTROL your portfolio.
Please list below all your ISA and/or unit trust/OEIC investments that were purchased outside Cofunds and return to Chelsea Financial
Services. We can then print the necessary transfer forms and send them to you for your review and signature.

Personal Details           – Please complete this section in full and in block capital letters

Full name
of unit holder(s)                                                                                                           Title

Current address

                                                                                                                            Postcode

e-mail address                                                                                                                           Male             Female

                                                                                            National Insurance
Date of birth                                                                               number
                                                                                            Existing Cofunds
Daytime telephone                                                                           number (if applicable)


ISA investments – Please complete in block capital letters
Fund Provider                              Fund Name                                             Account Number/         Unit Type     Tick if             Tick if
                                                                                                 Plan Reference          ACC/INC       current tax year    saving monthly

 SAMPLE FUND MANAGERS LIMITED              SAMPLE HIGH INCOME FUND                                      12345            INC




Unit Trusts/OEICs outside an ISA wrapper – Please complete in block capital letters
Fund Provider                                  Fund Name                                       Account Number/         Account designation      No of          Unit Type
                                                                                               Plan Reference          (if applicable)          Units          ACC/INC

 SAMPLE FUND MANAGERS LIMITED                   SAMPLE UK GROWTH FUND                           56789                                           ALL            ACC




        Please photocopy this form if you require additional space.                                                                                                CFSFLF 08.03
        Issued by Chelsea Financial Services, which is authorised and regulated by the Financial Services Authority.
        Registered Office: St James’ Hall, Moore Park Road, London SW6 2JS. Registered in England No. 1728085.


        22      Chelsea Financial Services Viewpoint October 2010
                                 The Chelsea Portfolio, in association with
    Investment ISA (stocks and shares) 2010/2011 Tax Year
    The Key Features of the Cofunds Platform and Fund Key Features that accompanies this application form is:                           1 1 0 8
    Cofunds Intermediary Authorisation Code             7 7           Intermediary Client/Deal Ref.                              VP27              % Initial Commission waived                                  100%
    This application form is used to subscribe to a stocks and shares ISA with Cofunds. By completing this application, you agree to subscribing to a 2010/2011 tax year stocks and shares ISA
    and each subsequent year until further notice. You are not obliged to invest in subsequent tax years unless you choose to do so.

     New ISA limits
     The ISA limit for all investors is £10,200 for the year 2010/2011.
    Please complete using black ink and BLOCK CAPITALS and return to: Chelsea Financial Services PLC, St James’ Hall, Moore Park Road, London SW6 2JS.

1         Personal Details                  Please complete this section in full
    Existing Cofunds Client Reference
                                                                                                                    Current Permanent Residential Address
    Did you receive advice from an Intermediary in relation to this investment?

            Advised              Not Advised

     Mr/Mrs/Ms/Miss/Other                                                                                                                                        Postcode
     Surname
                                                                                                                 Time at this Address                                                     yrs                       mths
     Full First Name(s)
                                                                                                                    If at current address for less than 2 years, please supply previous address and time there
     Email Address

     Phone Number

    Male              Female                       /_ _ /_ _ _ _
                                           Date of Birth _ _
                                                         D D              M     M       Y     Y     Y     Y                                                      Postcode

    National Insurance Number           _ _ /_ _ /_ _ /_ _ /_
                                                                                                                 Time at this Address                                                     yrs                      mths
    If you do NOT have a National Insurance Number, please tick here.
                                                                                                                 (If more than one previous address in the last 2 years, please provide full details including the time at
    You should be able to find your NI number on a payslip, form P45 or P60, a letter from the                   each address on a separate sheet of paper and staple securely to this application form.)
    HM Revenue & Customs, a letter from the DWP, or pension order book.

2         Investment Selection
    Your total ISA subscription for each tax year must not exceed your ISA allowance. For details refer to the Key Features of the Cofunds Platform on pages 46-55.
    I wish to invest in the Chelsea Easy ISA (please choose one of the portfolios below). See pages 6 & 7 for details.                                            Lump Sum                       Monthly
                                                                                                                                                                  Min portfolio                  Min investment
    Minimum Portfolio investment lump sum £3,000; Minimum regular savings £200 per month.                                                                         investment £3,000              £200 per month
     Either        Cautious Growth Easy ISA                                                                                                                      £                              £
     Or            Balanced Growth Easy ISA                                                                                                                      £                              £
     Or            Aggressive Growth Easy ISA                                                                                                                    £                              £
     Or            Income Easy ISA (please complete income payment overleaf)                                                                                     £                              £

    Or select your own funds and complete this section below:
    I wish to invest in the funds indicated (for further details of the funds available, please refer to the Fund Key Features Schedule).      Type of
    If investing in an OEIC fund, your investment will be made in the Retail Share Class of the fund.                                          Unit/Share
                                                                                                                                               (Delete as        Lump Sum                Monthly
    Fund Manager and Fund Name                                                                                                                 appropriate)*     (Minimum £500 per fund) (Minimum £50 per fund)
                                                                                                                                                ACC / INC        £                               £
                                                                                                                                                ACC / INC        £                               £
                                                                                                                                                ACC / INC        £                               £
                                                                                                                                                ACC / INC        £                               £
                                                                                                                                                ACC / INC        £                               £
                                                                                                                                                ACC / INC        £                               £
                                                                                                                                                ACC / INC        £                               £
     †
      Cash Reserve (if required)                                                                                                                                 £                              £
     TOTAL INVESTMENT AMOUNT                                                                                                                                     £                               £
    *If you do not specify ACC or INC in this column, and/or have not completed Section 3 and, if applicable, Section 4, Cofunds will invest into accumulation units/shares where applicable.
    †
      Cash Reserve Monies may be held for short periods in the Cash Reserve. Such holdings are deemed ‘destined for investment’.


    Investment by Direct Debit for Monthly Savers
    Instruction to your Bank or Building Society to pay Direct Debits
    Please fill in the whole form and send it to: Chelsea Financial Services PLC, St James’ Hall, Moore Park Road, London SW6 2JS.
    Name and full postal address of your Bank or Building Society                                                 Name(s) of Account Holder(s)

     To the Manager                                                           Bank or Building Society
                                                                                                                  Branch Sort Code                                     Bank/Building Society Account Number
         Address
                                                                                                                                _                  _

                                                                                                                  Reference Number (office use only)

                                                    Postcode
                                                                                                                  Originator’s Identification No. (office use only)
    Instruction to your Bank or Building Society
    Please pay Cofunds Limited Direct Debits from the account detailed on this instruction subject to               6      0      0     2      6       7
    the safeguards assured by The Direct Debit Guarantee. I understand that this instruction may remain
    with Cofunds Limited and, if so, will be passed on electronically to my Bank/Building Society.                  Signature                                                         Date
    Banks and Building Societies may not accept Direct Debit instructions for some types of account.

                                                                                                                                        October 2010 Viewpoint Chelsea Financial Services                    23

306331 CFNDS Chelsea DTY CFS001 AW.indd 1                                                                                                                                                                         27/9/10 11:18:41
    Investment ISA (stocks and shares)                                                                    Continued

3      Nominated Bank Account
    Complete this section if you have not provided us with your nominated bank account details. If you are an existing customer, only complete this section if you would like to change your nominated bank account
    details. Any change to your nominated bank account will not be applied to your regular monthly investments.
    You can only have one nominated bank account at any given time.
    Name(s) of Account Holder(s)                                                                                   Branch Sort Code
                                                                                                                                 _                 _

    Bank or Building Society Name and Address
                                                                                                                   Bank/Building Society Account Number



                                                                                                                   Building Society Roll Number

                                              Postcode


4      Income
    Please only complete this section if you have chosen income units/shares (‘INC’). The option you choose will be applied to all income units/shares on this application.
    You do not need to select an income option if you would like to continue an income instruction previously provided (for ISA and Investment Funds within your platform account).
    Please refer to the Questions and Answers section of the Key Features of the Cofunds Platform for more information.
    Please tick one option
    Income options:                                                                                                                                     OR if you wish to reinvest:
           Consolidated Natural Income                                               Cofunds Cash Account                                                       Retain in the fund
           Income generated from your platform account will be                       Income generated will be paid to your cash account                         Income generated will be retained in the fund.
           consolidated into your Cofunds Cash Account and paid to                   to be held on platform for withdrawals or future investment.
           your Nominated Bank Account on a monthly basis.

5      Declaration and Authorisation
    I declare that:                                                                                                  I declare that the information contained in this application form is correct to the best of my knowledge
                                                                                                                     and belief.


                                                                                                                     Signature                                                                Date
     a cash ISA and a stocks and shares ISA in the same tax year.

     that I subscribe to this stocks and shares ISA.                                                               Data Protection
                                                                                                                   Cofunds Limited will use your information for the administration and servicing of your investments
     either perform duties which, by virtue of Section 28 of Income Tax (Earnings & Pensions) Act 2003             and other related activities. We may disclose your information to our agents and service providers for
     (Crown employees serving overseas), are treated as being performed in the United Kingdom,                     these purposes. We may also disclose your information to organisations for compliance with legal and
     or I am married to or in a civil partnership with a person who performs such duties. I will inform            regulatory requirements.
     Cofunds Limited if I cease to be so resident and ordinarily resident or to perform such duties, or be         With the exception of the preceding provisions, we will not pass on your information to any other third
     married to or in a civil partnership with a person who performs such duties.                                  party without your permission, but we will disclose information concerning your investment to your
                                                                                                                   Nominated Intermediary.
    I authorise Cofunds Limited to:                                                                                Cofunds may transfer your information to countries outside of the EEA for the servicing of your
     Hold my cash subscription, ISA investments, interest, dividends and any other rights or proceeds
                                                                                                                   investments. In such cases, contracts will be put in place to ensure that the service providers protect
     in respect of those investments and any other cash.
                                                                                                                   your information in accordance with the requirements of the Data Protection Act.

    I confirm that:                                                                                                Email address and telephone number
                                                                                                                   If you provide your email address and telephone number on this form, Chelsea will keep a record of it.
                                                                                                                   Chelsea may use it to contact you occasionally about products and services, which may be of interest
       – Your guide to investing with Cofunds, including the Key Features of the Cofunds Investment ISA            to you. However, if you prefer not to receive such information, you may withdraw your consent by
       – Key Features of the funds available on the Cofunds Platform                                               contacting Chelsea client services department on 020 7384 7300. If you require a fund prospectus,
       – Terms and Conditions of the Cofunds Platform, including the Cofunds Investment ISA                        please contact your Intermediary or Fund Manager directly.
         Terms and Conditions                                                                                      If you wish to attend/vote at unit holder or shareholder meetings, please tick this box.
     My signed application form (provided that my application is accepted by Cofunds), together with the
     Key Features and Terms, constitute my customer agreement with Cofunds Limited. I understand that
     the commencement of my ISA may be delayed or rejected if this application form is not complete in all         If you wish to receive report and accounts, please tick this box.
     respects. You may undertake a search with a reference agency for the purposes of verifying my identity.       To receive report and accounts or attend/vote at unit holder or shareholder meetings, these services
     To do so, the reference agency may check the details I supply against any particulars on any database         are subject to a charge of £20.00 per communication. However, report and accounts can be obtained
     (public or otherwise) to which they have access. They may also use my details in the future to assist         free of charge from the Cofunds website at www.cofunds.co.uk.
     other companies for verification purposes. A record of the search will be retained as an identity search.
    Your cheque payment Cheques must either be drawn on your own or your joint account. The cheque must be made payable to Cofunds Limited. For a Building Society cheque or banker’s draft your name
    must appear on the front of the cheque, or on the back of the cheque accompanied by the Building Society’s or bank’s official stamp and signature. We do not accept payments from other third parties.
    We do not accept payment by any other method.
    Your monthly savings For monthly savings we will automatically collect on or just after the 25th day of each month. For applications received up until the last day in any month, the first direct debit collection will
    be made on or just after the 25th day of the following month.
    Direct Debit Guarantee Please refer to the Key Features for details of the Direct Debit Guarantee.
    The funds included in the application form represent a selection of funds
    available in a Cofunds ISA. Neither Cofunds nor Chelsea Financial Services
    can advise on which funds to choose or whether the funds selected are                                          Issued and approved by Cofunds Limited,
    appropriate for you.                                                                                           First Floor, 1 Minster Court, Mincing Lane, London EC3R 7AA
    Please note that no advice has been given in this offer. If you are                                            Registered in England and Wales No. 3965289.
    in any doubt about the suitability of this investment for you, please                                          Authorised and regulated by the Financial Services Authority (FSA)
    contact an expert adviser.                                                                                     under FSA Registration No. 194734


6      Completed Application Forms Check List
    Completed Application Forms should be returned to: Chelsea Financial Services PLC, St. James’ Hall, Moore Park Road, London SW6 2JS.
    Have you:

                  Completed your National Insurance number?                                                                      Completed your Bank/Building Society details if you have chosen
                                                                                                                                 to receive income payments?
                  Completed your date of birth?
                  (This will be necessary to validate your Plan)                                                                 Enclosed your personal cheque(s) made payable to Cofunds
                                                                                                                                 Limited if investing a lump sum? – for full details of acceptable
                  Completed the investment selection section?
                                                                                                                                 forms of payment please refer to the Cofunds Key Features.
                  Completed the Direct Debit mandate if saving monthly?
                                                                                                                                 Signed the declaration?



                                                                                                                                                                                                       CO 198\CFS001 09/10
                 24      Chelsea Financial Services Viewpoint October 2010
                                The Chelsea Portfolio, in association with
    Investment ISA (stocks and shares) Transfer Application
    The Key Features of the Cofunds Platform that accompanies this application form is:

    Cofunds Intermediary Authorisation Code             7 7                                                                      VP27               % Initial Commission waived                                 100%
     New ISA limits

    Please ensure you have read the accompanying ISA Terms & Conditions and Key Features document (see pages 46-55) before completing this application form.
    Please complete using black ink and BLOCK CAPITALS and return to: Chelsea Financial Services PLC, St James’ Hall, Moore Park Road, London SW6 2JS.

1      Personal Details                    Please complete this section in full


    Did you receive advice from an Intermediary in relation to this investment?

          Advised               Not Advised

                                                                                                                                                                 Postcode
     Surname
                                                                                                                 Time at this Address                                                     yrs                       mths
     Full First Name(s)
                                                                                                                   If at current address for less than 2 years, please supply previous address and time there
     Daytime Tel No.

                      Female                      /_ _ /_ _ _ _
                                          Date of Birth _ _
                                                                                                    Y     Y

    National Insurance Number          _ _ /_ _ /_ _ /_ _ /_                                                                                                     Postcode

    If you do NOT have a National Insurance Number, please tick here.                                            Time at this Address                                                     yrs                      mths

                                                                                                                 (If more than one previous address in the last 2 years, please provide full details including the time at
                                                                                                                 each address on a separate sheet of paper and staple securely to this application form.)

2      Nominated Bank Account
    Complete this section if you have not provided us with your nominated bank account details. If you are an existing customer, only complete this section if you would like to change your nominated bank account
    details. Any change to your nominated bank account will not be applied to your regular monthly investments.
    You can only have one nominated bank account at any given time.
                                                                                                                  Branch Sort Code
                                                                                                                                _                   _

    Bank or Building Society Name and Address
                                                                                                                  Bank/Building Society Account Number




                                              Postcode


3      Income
    Please only complete this section if you have chosen income units/shares (‘INC’). Your total ISA subscription for each tax year must not exceed your ISA allowance, For details refer to the Key Features of the
    Cofunds Platform on pages 46-55. You do not need to select an income option if you would like to continue an income instruction previously provided (for ISA and Investment Funds within your platform account).
    Please refer to the Questions and Answers section of the Key Features of the Cofunds Platform for more information.
    Please tick one option
    Income options:                                                                                                                                     OR if you wish to reinvest:
         Consolidated Natural Income                                                 Cofunds Cash Account                                                      Retain in the fund
         Income generated from your platform account will be                         Income generated will be paid to your cash account                        Income generated from this investment
         consolidated into your Cofunds Cash Account and paid                        to be held on platform for withdrawals or future investment.              will be retained in the fund.
         to your Nominated Bank Account on a monthly basis.


4      Declaration and Authorisation
    I declare that:                                                                                                 database (public or otherwise) to which they have access. They may also use my details in the future to
                                                                                                                    assist other companies for verification purposes. A record of the search will be retained as an identity
                                                                                                                    search. I declare that the information contained in this application form is correct to the best of my
                                                                                                                    knowledge and belief.
     a cash ISA and a stocks and shares ISA in the same tax year.
                                                                                                                    Signature                                                               Date
     that I subscribe to this stocks and shares ISA.
                                                                                                                  Data Protection
                                                                                                                  Cofunds Limited will use your information for the administration and servicing of your investments
     or I am married to or in a civil partnership with a person who performs such duties. I will inform           and other related activities. We may disclose your information to our agents and service providers for
     Cofunds Limited if I cease to be so resident and ordinarily resident or to perform such duties, or be        these purposes. We may also disclose your information to organisations for compliance with legal and
     married to or in a civil partnership with a person who performs such duties.                                 regulatory requirements.
    I authorise Cofunds Limited to:                                                                               With the exception of the preceding provisions, we will not pass on your information to any other third
                                                                                                                  party without your permission, but we will disclose information concerning your investment to your
                                                                                                                  Nominated Intermediary.
     in respect of those investments and any other cash.
                                                                                                                  investments. In such cases, contracts will be put in place to ensure that the service providers protect
    I confirm that:                                                                                               your information in accordance with the requirements of the Data Protection Act.

       – Your guide to investing with Cofunds, including the Key Features of the Cofunds Investment ISA           If you wish to attend/vote at unit holder or shareholder meetings, please tick this box
       – Key Features of the funds available on the Cofunds Platform
       – Terms and Conditions of the Cofunds Platform, including the Cofunds Investment ISA                       If you wish to receive report and accounts, please tick this box
         Terms and Conditions
                                                                                                                  To receive report and accounts or attend/vote at unit holder or shareholder meetings, these services
     Key Features and Terms, constitute my customer agreement with Cofunds Limited. I understand that             free of charge from the Cofunds website at www.cofunds.co.uk.
     the commencement of my ISA may be delayed or rejected if this application form is not complete in
     all respects. You may undertake a search with a reference agency for the purposes of verifying my
     identity. To do so, the reference agency may check the details I supply against any particulars on any

                                                                                                                                       October 2010 Viewpoint Chelsea Financial Services                     25

306331 CFNDS Chelsea InvestISA_CFS002 AW.indd 1                                                                                                                                                                   27/9/10 11:19:35
    ISA Transfer Authority
    This transfer authority should only be used for either the transfer of a stocks and shares ISA or a cash ISA into a Cofunds stocks and shares ISA. Please note that a separate
    authority will be required for each Plan/Account Manager. If transferring from more than one Plan/Account Manager, please request more Transfer Authority Forms
    from your Intermediary. Please ensure that you have signed both the Transfer Application Form and the Transfer Authority Form.


                                                                                                         Limited or liquidate the assets within my ISA with immediate effect, and forward the proceeds
                                                                                                                                                                    Cofunds Limited, PO Box 1103,
    Please complete all details requested                                                                Chelmsford CM99 2XY. This transfer should include, where relevant, all former ISA
                                                                                                         and PEP investments. I confirm that the re-registration of the funds listed will not change
                                                                                                         the beneficial ownership from the current holder. I confirm that this transaction is exempt



            Address
                                                                                                          Surname

                                                                                                          Full First Name(s)

                                                       Postcode                                           Signature                                                        Date

1            Funds that you wish to KEEP via re-registration (stock transfer)
                                                                                                                                                                                        Please tick if
                                                                                                                                                                                        subscriptions
                                                                                                                                                                                         made this
                                                                                                                                                             (delete as appropriate)*     tax year
                                                                                                                                                                 ACC / INC

                                                                                                                                                                 ACC / INC

                                                                                                                                                                 ACC / INC

                                                                                                                                                                 ACC / INC
                                                                                                                                                                 ACC / INC
    *If you do not specify ACC or INC in this column, Cofunds will not be able to process your application. If you have chosen income units/shares, please ensure you complete


2            Funds that you wish to SELL (cash transfer)

                                                                                                Please ensure the funds you choose are available through Cofunds.                       Please tick if
                                                                                                                                                                                        subscriptions
                                                                                                                                                     A/C or Plan Nos.                    made this
                                                                                                                                                                                          tax year




3            Cash ISA Transfer
    If applicable, please indicate either of the following to be transferred
    into your Cofunds stocks and shares ISA:                                                A/C or Plan Nos. (This must be completed)

    All my cash ISA                       OR         An amount of my cash ISA      £             .            Is there any notice period for you to transfer your cash ISA?                     Days

4            Transfer Investment Choices                                 Please refer to the fund charge schedule and complete in full

                                                                for details.                                                                                                                      ( )




                                                                                                                                                (ACC/INC)*                        Transfer %

                                                                                                                                               ACC / INC

                                                                                                                                               ACC / INC

                                                                                                                                               ACC / INC

                                                                                                                                               ACC / INC

                                                                                                                                               ACC / INC
        †


    *                                                                                                                                                                  Total 100%
            Cofunds will invest into accumulation units/shares where applicable.
    †       Cash Reserve Monies



                      26     Chelsea Financial Services Viewpoint October 2010
                                 The Chelsea Portfolio, in association with
    Investment Funds Application Form (non-ISA)
    The Key Features of the Cofunds Platform and Fund Key Features that accompanies this application form is:                               1 1 0 8
    Cofunds Intermediary Authorisation Code                                                                                          VP27
                                                          7 7           Intermediary Client/Deal Ref.
    Please ensure you have read the accompanying Customer Agreement for Investment Funds and Key Features document (see pages 46-55) before completing this application form.
    Please complete using black ink and BLOCK CAPITALS and return to: Chelsea Financial Services PLC, St. James’ Hall, Moore Park Road, London SW6 2JS.

1      Personal Details                      Please complete this section in full
    First named (‘Primary’) holder. (Please see section 6 to add an additional holder)
                                                                                                                       Current Permanent Residential Address
    Existing Cofunds Client Reference

    Did you receive advice from an Intermediary in relation to this investment?
           Advised                Not Advised
                                                                                                                                                                      Postcode
     Mr/Mrs/Ms/Miss/Other
                                                                                                                    Time at this Address                                                        yrs                         mths
     Surname
                                                                                                                       If at current address for less than 2 years, please supply previous address and time there
     Full First Name(s)

     Email Address

     Phone Number
                                                                                                                                                                      Postcode
    Male              Female                Date of Birth _ _
                                                          D D
                                                                         /_ _ /_ _ _ _
                                                                            M     M        Y     Y     Y    Y       Time at this Address                                                        yrs                         mths

    (If more than one previous address in the last 2 years, please provide full details including the time at       (If more than one previous address in the last 2 years, please provide full details including the time at
    each address on a separate sheet of paper and staple securely to this application form.)                        each address on a separate sheet of paper and staple securely to this application form.)

2      Designations                    You can designate an account here using a maximum of 8 alpha/numeric characters
    If you wish to specify a unique designation for this account, please ensure that the designation reference does not make a meaningful word. Only the
    named applicants of this investment will be recognised as owners. If this section is not completed we will not designate this account. If you are funding
    this investment from a Cofunds Cash Account please ensure this designation is identical to that of the Cash Account.

3      Funding your investment
    I will be funding my investment by (tick all that apply):
                                                                                        Cofunds                                                                       Monthly Direct Debit (please ensure you
            Cheque         £                      .           Amount                    Cash            £                      .           Amount                     complete the ‘Investment by Direct Debit for
                                                                                        Account                                                                       Monthly Savers’ on below).
                                                                                Please ensure that all the joint holders and the designation
                                                                                (if specified) on this application form match this Cash Account.

4      Investment Selection
    I wish to invest in the fund(s) indicated (for further details of the funds available, please refer to the Fund Key Features Schedule). Minimum Lump Sum Investment £500 per
    fund. Minimum Monthly Investment £50 per fund. If investing in an OEIC fund, your investment will be made in the Retail Share Class of the fund.
                                                                                                                                                   Type of
                                                                                                                                                   Unit/Share
                                                                                                                                                   (Delete as         Lump Sum                Monthly
    Fund Manager and Fund Name                                                                                                                     appropriate)*      (Minimum £500 per fund) (Minimum £50 per fund)
                                                                                                                                                    ACC / INC         £                                £
                                                                                                                                                    ACC / INC         £                                £
                                                                                                                                                    ACC / INC         £                                £
                                                                                                                                                    ACC / INC         £                                £
                                                                                                                                                    ACC / INC         £                                £
                                                                                                                                                    ACC / INC         £                                £
                                                                                                                                                    ACC / INC         £                                £
     TOTAL INVESTMENT AMOUNT                                                                                                                                          £                                £
    *If you do not specify ACC or INC in this column, and/or have not completed Section 5 and,                       Your monthly savings For monthly savings we will automatically collect on or just after the 25th day of
    if applicable, Section 6, Cofunds will invest into accumulation units/shares where applicable.                   each month. For applications received up until the last day in any month, the first direct debit collection
    Your cheque Cheques must be drawn on your own or your joint account. The cheque must be made                     will be made on or just after the 25th day of the following month.
    payable to Cofunds Limited. For a Building Society cheque or bankers draft your name must appear on              Direct Debit Guarantee Please refer to the Key Features document
    the front of the cheque, or on the back of the cheque accompanied by the Building Society’s or bank’s            for details of the Direct Debit Guarantee.
    official stamp and signature. We do not accept payments by any other method. If joint holder, cheques            Issued and approved by Cofunds Limited, First Floor, 1 Minster Court,
    should be drawn by the individual joint primary holder or a named additional holder. We can only accept          Mincing Lane, London EC3R 7AA Registered in England and Wales No. 3965289.
    direct debit forms from the primary holder’s account.                                                            Authorised and regulated by the Financial Services Authority (FSA) under FSA Registration No. 194734



    Investment by Direct Debit for Monthly Savers
    Instruction to your Bank or Building Society to pay Direct Debits
    Please fill in the whole form and send it to: Chelsea Financial Services PLC, St James’ Hall, Moore Park Road, London SW6 2JS.
    Name and full postal address of your Bank or Building Society                                                    Name(s) of Account Holder(s)

     To the Manager                                                             Bank or Building Society
                                                                                                                     Branch Sort Code                                       Bank/Building Society Account Number
      Address
                                                                                                                                    _                  _

                                                                                                                     Reference Number (office use only)

                                                      Postcode
                                                                                                                     Originator’s Identification No. (office use only)
    Instruction to your Bank or Building Society
    Please pay Cofunds Limited Direct Debits from the account detailed on this instruction subject to                  6      0      0      2      6       7
    the safeguards assured by The Direct Debit Guarantee. I understand that this instruction may remain
    with Cofunds Limited and, if so, will be passed on electronically to my Bank/Building Society.                     Signature                                                          Date
    Banks and Building Societies may not accept Direct Debit instructions for some types of account.

                                                                                                                                           October 2010 Viewpoint Chelsea Financial Services                       27

306331 CFNDS Chelsea DTY CFS003 AW.indd 1                                                                                                                                                                               27/9/10 11:16:18
    Investment Funds Application Form (non-ISA)                                                                                  Continued

5      Nominated Bank Account
    Complete this section if you have not provided us with your nominated bank account details. If you are an existing customer, only complete this section if you would like to change your nominated bank account
    details. Any change to your nominated bank account will not be applied to your regular monthly investments.
    You can only have one nominated bank account at any given time.
    Name of Account Holder                                                                                        Branch Sort Code
                                                                                                                                  _                 _

    Bank or Building Society Name and Address
                                                                                                                  Bank/Building Society Account Number



                                                                                                                  Building Society Roll Number

                                              Postcode


6      Income
    Please only complete this section if you have chosen income units/shares (‘INC’). Your total ISA subscription for each tax year must not exceed your ISA allowance. For details refer to the Key Features of the
    Cofunds Platform on pages 46-55.
    You do not need to select an income option if you would like to continue an income instruction previously provided (for ISA and Investment Funds within your platform account).
    Please refer to the Questions and Answers section of the Key Features of the Cofunds Platform for more information.
    Please tick one option:
    Income options:                                                                                                                                    OR if you wish to reinvest:
           Consolidated Natural Income                                               Cofunds Cash Account                                                      Retain in the fund
           Income generated from your platform account will be                       Income generated will be paid to your cash account                        Income generated will be retained in the fund.
           consolidated into your Cofunds Cash Account and paid to                   to be held on platform for withdrawals or future investment.
           your Nominated Bank Account on a monthly basis.

7      Joint Holders                  You can nominate one additional holder
    Please include the full name and address of this additional holder. All Correspondence will be sent to the ‘Primary’ holder.
    Second named holder
     Mr/Mrs/Ms/Miss/Other                                                                                         Date of Birth _ _
                                                                                                                                      D    D
                                                                                                                                                /_ _ / _ _ _ _
                                                                                                                                                   M     M          Y     Y      Y     Y
                                                                                                                                                                                                Male               Female
     Surname
                                                                                                                   If at current address for less than 2 years, please supply previous address and time there
     Full First Name(s)
     Current Permanent Residential Address

                                                                                                                                                              Postcode

                                             Postcode                                                             Time at this Address                                                                 yrs                   mths

    Time at this Address                                                          yrs                  mths       (If more than one previous address in the last 2 years, please provide full details including the time at each
                                                                                                                  address on a separate sheet of paper and staple securely to this application form.)

8      Declaration and Authorisation
    I/We confirm that:                                                                                            Data Protection
    I/We agree to be bound by:                                                                                    Cofunds Limited will use your information for the administration and servicing of your investments and
        – Your guide to investing with Cofunds, including the Key Features of Investment Funds                    all other related activities. We may disclose your information to our agents and service providers for
        – Key Features of the funds available on the Cofunds Platform                                             these purposes. We may also disclose your information to organisations for compliance with legal and
                                                                                                                  regulatory requirements.
        – Terms and Conditions of the Cofunds Platform, including the Investment Funds Customer Agreement
                                                                                                                  With the exception of the above provisions, we will not pass on your details to any other third
    I/We understand that instructions may be delayed or rejected if this application form is not complete
                                                                                                                  party without your permission, but we will disclose information concerning your investment to your
    in all respects.
                                                                                                                  Nominated Intermediary.
    You may undertake a search with a reference agency for the purposes of verifying my/our identity.
    To do so, the reference agency may check the details I/we supply against any particulars on any               Cofunds may transfer your information to countries outside the EEA for the servicing of your
    database (public or otherwise) to which they have access. They may also use my/our details in the             investments. In such cases, contracts will be put in place to ensure that the service providers protect
    future to assist other companies for verification purposes. A record of the search will be retained as        your information in accordance with the requirements of the Data Protection Act.
    an identity search.                                                                                           Cofunds may transfer your information to countries outside the EEA for the servicing of your
    I/We declare that the information contained in this application form is correct to the best of my/our         investments. In such cases, contracts will be put in place to ensure that the service providers protect
    knowledge and belief.                                                                                         your information in accordance with the requirements of the Data Protection Act.
    I am/We are aged 18 or over.                                                                                  Email address and telephone number
                                                                                                                  If you provide your email address and telephone number on this form, Chelsea will keep a record of it.
    Please note that all joint holders must sign this application.
                                                                                                                  Chelsea may use it to contact you occasionally about products and services, which may be of interest
    Where there are two signatories for a corporate investor, please delete reference to primary and
                                                                                                                  to you. However, if you prefer not to receive such information, you may withdraw your consent by
    second holder.
                                                                                                                  contacting Chelsea client services department on 020 7384 7300. If you require a fund prospectus,                 CO 198\CFS003 09/10
                                                                                                                  please contact your Intermediary or Fund Manager directly.


     Primary Holder Signature                                                     Date                             Second Holder Signature                                                             Date
     Capacity (if applicable)                                                                                      Capacity (if applicable)

    If you are completing this as a company you must include a copy of the Articles of Association.




                 28      Chelsea Financial Services Viewpoint October 2010
Emerging Markets
                  Many of our clients have
                  been investing in emerging
                  markets (EMs) for some years
                  and there is an increasing
                  demand for EM funds. With
                  GDP growth due to be low,
DARIUS MCDERMOTT
Managing Director
                  at best, in Western
                  economies for the next one
to five years it makes sense to look at faster
growing parts of the world.                                                    WAYS OF INVESTING IN EMERGING MARKETS
This year GDP in the UK is forecast at 1.6% and in the US at
2.8%, while in China it is forecast to be 9.7%* and 8.3%* in                   1 General emerging market funds – global emerging market
                                                                                 funds invest across the full spectrum of emerging markets,
India. GDP growth does not always lead to good stock-market
                                                                                 keeping sector and country weightings sensible for
returns but it is helpful to have a growing economy.                             diversification e.g. Ignis HEXAM Global Emerging Markets
                                                                                 or Aberdeen Emerging Markets.
Increasing allocations
EMs have historically been viewed as a geared play on Western                  2 EM debt – this subject is introduced on pages 32-33 by
markets and their consumers’ ability to buy the EMs’ exports.                    Investec.
They have also been extremely volatile and prone to long periods               3 Single country funds – for those looking for single country
of underperformance of Western markets. But EMs have led the                     exposure (higher risk) there is now a reasonable number of
way over the last decade and as such are maturing as investment                  funds to chose from e.g. First State Greater China Growth,
markets. In fact 20 years ago EMs were only 2.3% of the                          Neptune Russia and Greater Russia and some of those
                                                                                 featured on the following two pages.
world stock market, now they are approximately 15%.
EM companies are adhering to far greater standards of corporate                4 Packaged markets funds such as Allianz RCM BRIC Stars.
governance. There is greater consumption and a growing high-                   5 General funds which have EM exposure e.g. M&G Global
spending middle class that will continue to drive the economies                  Basics invests in global brands that are expanding into EM
once the ‘natural resource and urbanisation’ play is over.                       markets.
Also currencies in many EMs are at low valuations against
Western currencies and investing in EM equities or bonds is a
way to gain from the long-term trend of that revaluation.                    Monthly savings
                                                                             We are strong believers in monthly savings as a way of investing
  GENERAL GUIDE TO EMERGING MARKET ALLOCATION
                                                                             into equities and this is never more important than when dealing
 Very low risk           0%                                                  with more volatile markets. Timing the market is not easy, so we
 Low risk                1-3 %      via a general EM fund                    believe that ‘pound cost averaging’ will help smooth out your
                                                                             entry prices and remove the worry of attempting to time your
 Medium risk             5-10%      via a general EM fund
                                                                             entry point. This was best highlighted in the extremely volatile
 High risk               10%+       via general EM funds
                                                                             markets during 08-09 when, had you invested monthly in Allianz
                                    and single country funds
                                                                             RCM BRIC Stars fund between June 08 and May 09, you would
                                                                             have made a gain of 12.8%**, whereas a lump sum investment
     Although these markets are traditionally viewed as                      made on 25/06/08 would have been down 26.4%**.
investments for higher risk clients, I now feel that more clients
should have at least a small allocation to EMs going forward.                Risks in emerging markets
The ride will no doubt be bumpy and there may be periods of                  In aggregate the risks are still higher in EMs than they are in
underperformance, but if you have not already made an                        developed markets. Corporate governance (i.e. accounting
allocation to an EM fund then I ask you to look at it.                       standards) are accepted to be lower but improving. There is also
     In fact many commentators are now so keen on EMs that they              considerable political risk where governments can make policy
feel many should have over 20% of their portfolios invested in that          changes that have a dramatic effect on their stock markets.
area. While I agree that may be appropriate for a few, I do believe               EMs are still more volatile than Western markets, particularly
that they are too volatile to be a large part of most clients’ portfolios.   in times of risk aversion. Currency risk should also be considered.

Valuations                                                                   Summary
Following the very poor returns from EM equity funds in 2008                 While not for those with very low risk tolerances or shorter
there was a strong rally from the end of 2008 through to the                 investment horizons, clients are generally underinvested in EMs.
third quarter of 2009. Most EMs currently look fairly valued                 I believe that in future investors should look at increasing their
against their long-term average so I am not advocating                       allocation to this area, whilst being aware of the greater
moving a large portion of your portfolio into them at this                   risk/returns that they offer.
moment, just that long term I believe that most investors should                                                             *Source: Credit Suisse.
                                                                                                                                    **Source: CFS.
have some access to the fastest growing parts of the world.

                                                                                           October 2010 Viewpoint Chelsea Financial Services     29
The forgotten BRICs
BRIC is the acronym coined by Goldman Sachs in 2001 when they asserted that global economic
power was shifting from developed markets to those of Brazil, Russia, India and China. However,
more often than not, when you read about these economies the focus will be on China and
Russia. So we thought that we would take a look at the less discussed markets of Brazil and India.


                         Allianz Brazil                                 buoyant middle class, are underpinning the long-term growth
                                                                        prospects for Brazil.
                        Fund manager Michael                                 What makes Brazil different from other emerging markets is
                        Konstantinov, who also runs the                 the large variety of different sectors listed on the local stock
                        Allianz RCM BRIC Stars fund, talks to           exchange, including domestic demand orientated sectors, such
                        us about his newly launched Allianz             as the housing and property market related companies. Over the
                        Brazil fund.                                    last four years, there has also been very intensive IPO (Initial
                            There are essentially four reasons          Public Offering) activity which has created a lot of new areas
MICHAEL KONSTANTINOV
Fund Manager,           why I believe Brazil is on the cusp of          which have come to market. This IPO activity is what
Allianz Brazil                                                          differentiates the Brazilian market from many other emerging
                        finally unleashing its vast untapped
                        potential. These can be summarised as a         markets, as it has grown in terms of its depth and its investment
buoyant middle class, high growth, low inflation and a stable           opportunities and they are still being issued at attractive
banking system.                                                         valuation levels. We think we can pick out the very best names
                                                                        from this investment universe. Along with its wealth of natural
What’s happening in Brazil                                              commodities this leads us to believe that there is a compelling
The combination of a large, mainly young population, a strong           case to invest in Brazil.
growing economy, falling interest rates and growing credit
availability, is creating a vibrant domestic growth story, with         Process
many Brazilian companies set to profit hugely from this new             The stock-picking process is the same tried and tested process
affluence. In sectors such as finance, healthcare, housing,             used with our BRIC Stars fund. Top-down considerations help
education and transport, opportunities abound for the astute            determine the selection and allocation of assets to a specific
investor. From an investment point of view there are a number of        sector within the investment universe while the bottom-up
interesting and relevant themes.                                        research process helps select the individual companies.
     An example of how Brazilian companies are benefiting from              Although we have structured the fund in such a way that we
the increasingly wealthy middle class can be illustrated by Brazil      have to invest at least 70% within Brazil, we also want to capture
Foods. We believe Brazil Foods will benefit from the rising             some of the interesting investment opportunities within Latin
propensity of the middle classes to consume more protein.               America that come to our attention in addition to Brazil itself.
Brazil Foods is a world class company and now the 7th largest
food company in the world, with 58% of its sales coming from             ALLIANZ RCM BRAZIL
the domestic market. It is the largest poultry exporter in the
                                                                         n Managed by Michael Konstantinov, who also runs
world, slaughtering over 6.7 million chickens and 39,000
                                                                            Allianz RCM BRIC Stars and is based in Frankfurt
pigs/cattle a day.
     Another theme is the government’s wish to increase the              n Up to 30% can be invested in other Latin American
availability of low-cost housing. MRV is one of Brazil’s largest real       countries
estate developers and builders in the low income residential             n Multi-cap, but likely to be slightly overweight mid and
segment. MRV will benefit from the increased government                     small cap stocks
spending on the provision of low-cost housing through                    n A focused portfolio of approximately 40 stocks
government sponsored programmes such as the ‘Minha Casa
                                                                         n Michael is aided by an extensive emerging markets team
Minha Vida’ programme, which has substantially increased the
availability and affordability of mortgage loans. This has led to a      n Launched on 7th October 2010
boom in this segment of the housing market. These are the type
of companies the fund will focus on, as we believe that this is
where the best long-term opportunities exist.                           Chelsea View
                                                                        Michael has a good track record with his Allianz BRIC
Investing in Brazil                                                     Stars fund. Brazil presents an interesting investment
We want to access the part of the Brazilian economy, which              opportunity, with an abundance of soft and hard
     is thriving. The drivers Brazil has in place are exciting,         commodities and a growing economy. It is for those
         including high growth, an era of lower inflation and           who have a higher risk tolerance.
             interest rates, and a stable banking system. Also,
              in contrast to other emerging markets, returns in         Chelsea Risk Rating: 10
               Brazil are expected to be generated from both            Standard initial charge: 4%
               the stock market and expected currency                   ISA initial charge after discount: 0%
                appreciation. Indicators such as rising wages           Annual management charge: 1.75%
                and employment levels, which are creating a very



30   Chelsea Financial Services Viewpoint October 2010
                          Fidelity                                         has not increased enough to satiate strong domestic demand.

                          India Focus                                      However, the proactive approach of the Reserve Bank of India,
                                                                           which has raised the key interest rates and increased the reserve
                          India seems to have taken a back                 requirement for banks, should help prevent asset bubbles
                          seat in the BRIC story, with the                 without hampering growth. Additionally meteorological
                          spotlight firmly trained on China. So            predictions of normal rainfall levels should mean a good crop
                          we asked Teera Chanpongsang,                     and so subdue food price inflation.
 TEERA CHANGPONGSANG      portfolio manager of the Fidelity
 Fund Manager,
                          India Focus fund, to shed some light
                                                                           What we do
 Fidelity India Focus
                          on the interesting investment story              Fidelity India Focus offers investors access to a myriad of exciting
                          of this forgotten BRIC.                          investment opportunities in India. The fund aims to provide long-
       While many investors fear the possibility of a double-dip           term growth principally through investment in equity securities
recession in the advanced nations, India strives onwards with a            listed in India, as well as securities in non-Indian companies that
healthy expected growth rate of 9% annually. Despite the                   derive a significant proportion of earnings from India.
concerns of rising inflation and a high fiscal deficit, the economy             I employ a bottom-up stock selection approach favouring
promises handsome rewards for long-term investors.                         companies with the potential to deliver earnings growth over a
                                                                           one to two year horizon and across a variety of sectors. I look for
What is driving India’s growth?                                            stocks that will benefit from structural growth opportunities in
Domestic consumption will continue to be a key growth driver in            domestic consumption, infrastructure development and software
the Indian economy. A young, ambitious and fast-growing                    services exporters.
population continues to boost the country’s workforce and
consumer base, a trend which is expected to continue into the                FIDELITY INDIA FOCUS
future. At the same time, there is significant potential for
                                                                            n Teera Chanpongsang took over the fund in
demand to increase further thanks to a low penetration of
                                                                               March 09, since when he has strongly
durable goods, a rising level of affluence and a high savings rate.
                                                                               outperformed the benchmark
     Aggressive investment in infrastructure is at the forefront of
government plans to sustain high economic growth into the                   n Bottom-up style
future. $1 trillion is earmarked to spend on infrastructure over            n Multi-cap fund
the next five years with plans to build 20 kilometres of road per
                                                                            n The fund manager is based in Hong Kong,
day and increase the country’s installed power capacity by 50%.                with six analysts based in India
Importantly, the private-public sector partnership model has
                                                                            n Low turnover i.e. a buy and hold strategy
proven itself to be very potent with many successfully built metro
rail networks, ports, toll roads and power plants. A recent                 n Number of holdings 80-120, currently 76
success story is Delhi’s new international airport developed in just
37 months by a consortium of private companies in unison with
the state-owned airports authority.
                                                                           Chelsea View
Are there any pitfalls?                                                    Since Teera took over this fund its performance has
Despite the fanfare, some investors wonder whether India’s high            improved markedly and he has a good longer-term track
fiscal deficit will affect its ambitious infrastructure projects and its   record with his Emerging Asia fund. This fund is an
future economic growth. Worryingly the central government’s                excellent way to gain exposure to India, but is only for
deficit rose to 6.7% of GDP in the financial year ending March             investors with a higher risk tolerance as part of a larger
2010 which increases to 10% when combined with state                       portfolio.
government deficits. However, the February budget proposed to
cut the central deficit to 5.5% in 2011 with the help of a higher          Chelsea Risk Rating: 10
GDP base and growth in tax and non-tax revenue.
                                                                           Standard initial charge: 3.5%
     Critical to these attempts are key structural reforms which
                                                                           ISA initial charge after discount: 0%
the government is pushing forward. There are two main areas of
                                                                           Annual management charge: 1.5%
reform. The first is fiscal consolidation through a reduction in
subsidies and the raising of funds by divesting state-owned firms.
For example, petrol prices have been deregulated. The second
area of reform is tax reform. A new Goods and Services Tax will
replace the current jumble of indirect taxation systems at the
state and central level. These bold reforms have caused
ratings agencies such as Standard & Poor’s to now expect
that the fiscal situation will recover and growth
to remain strong.
     Another issue is inflation, with the
benchmark Wholesale Price Inflation reaching
nearly 10% in July. This has been caused by a
rise in global commodity prices and the lack
of excess capacity in the economy, which

                                                                                         October 2010 Viewpoint Chelsea Financial Services   31
The search for income
                         With interest rates languishing at 0.5% and inflation at either 3.1%, if you look
                         at CPI, or 4.7% if you prefer RPI, whatever savings account you choose it will be
                         offering a negative real rate of return. This is a very serious concern for many
                         of you relying on your savings and investments to supplement your income.
PETER EERDMANS           Over the next four pages we look at some interesting alternatives – they do
Fund Manager, Investec
Emerging Markets Debt    carry a higher risk but they offer much needed income.

                                                                         resilience throughout this timeframe and during the recent
Emerging Market Debt                                                     financial crisis. The levels of public and private debt in the
Peter Eerdmans, manager of Investec’s Emerging Markets                   developed world is at all-time highs and the de-leveraging of
Debt fund, talks to us about this interesting asset class and            consumers and governments is likely to be a drawn-out process.
the opportunities it affords.                                            It is likely that redressing the imbalances (deficits) will require
     Emerging markets are currently at the centre of investors’          more currency adjustment (i.e. US dollar/sterling/euro weakness).
attention and rightly so. Many emerging countries boast strong                 Against this backdrop, relative to a number of different asset
economic fundamentals, having undergone positive reforms                 classes, local emerging market debt has been one of the top-
over recent years. In addition, they have advantageous                   performing asset classes over the last fifteen years from December
demographics, wealth in resources and sound banking systems.             1993 to December 2009. Annual returns of 10.9% in US dollar
All these developments have been widely publicised and are               terms are around double that of EM equities, and in addition have
understandably attracting investor interest.                             been achieved with around half the volatility of EM equities. This is
     But how can investors access this investment opportunity?           illustrated in the table below.
One area of emerging market (EM) investing that many investors                 Over the last few years the debt issued by emerging
have generally overlooked is fixed income. In our view, investors        countries, and more recently companies within these countries,
looking to improve the risk-return profile of their portfolios may       has begun carving out a significant niche for itself as a strategic
consider looking beyond traditional equity and bond asset classes        asset class. Initially, investments were largely confined to the debt
to emerging market debt – yet until fairly recently, few investors       issued by emerging market governments in hard currency (i.e.
had identified it as an asset class. In fact debt is the emerging        denominated in US dollar or euros). Here the yields earned by
market asset class that has delivered the best risk-adjusted             investors and any subsequent capital gains or losses have been
returns historically*, in particular local emerging market debt, or      driven primarily by the ‘credit story’.
bonds issued by emerging market institutions in their own                      However, more recently investors have begun to recognise an
currencies.                                                              attractive, complementary investment to traditional dollar-
      The past three years have seen most so-called ‘risk assets’        denominated government debt in the form of local currency
       take a roller-coaster ride. Many reached all-time highs in        emerging market debt (i.e. denominated in the currency of the
          2007 or 2008, but then crashed to multi-year lows              issuer). This investment behaves in a different way from hard
           during the credit crisis, before rebounding in 2009.          currency debt and has the added benefit of giving the investor
           However, emerging market debt demonstrated                    exposure to the underlying local currency markets.



 RETURNS FROM EMERGING MARKET DEBT AND EMERGING MARKET EQUITIES
                                           ANNUAL                     STANDARD                  SHARPE             CORRELATION WITH
                                           RETURN                     DEVIATION                  RATIO              LOCAL EM DEBT
  Local EMD                                 10.3%                      10.3%                      1.00                      1.00
  Dollar EMD                                 9.7%                      15.9%                      0.61                      0.69
  Global developed property                  8.3%                      17.5%                      0.48                      0.52
  Global high yield                          6.7%                      11.8%                      0.57                      0.64
  UK equities                                6.5%                      14.3%                      0.45                      0.43
  UK bonds                                   6.4%                       5.4%                      1.18                      0.20
  Global credit                              5.9%                       7.7%                      0.77                      0.58
  Global equities                            5.8%                      15.7%                      0.37                      0.61
  EM equities                                5.8%                      24.9%                      0.23                      0.66
  Global bonds                               5.7%                       8.1%                      0.70                      0.53
  Commodities                                4.3%                      21.7%                      0.20                      0.13
*Data from 31 December 1993 to 31 December 2009, standard deviation and correlation of monthly returns in GBP, Local EM: ELMI+ until
 31 December 2001, GBI EM Global to December 2002 and Global Diversified thereafter. Sources: JP Morgan Citigroup, Merrill Lynch, MSCI,
 Goldman Sachs and Investec Asset Managers.




32    Chelsea Financial Services Viewpoint October 2010
continues...
  Where do we invest?
  We aim to generate long-term total returns by investing primarily
  in local currency emerging markets debt. This primarily includes
  public sector, sovereign and corporate bonds issued by borrowers
  from emerging markets. While the focus is on local currency
  bond markets, allocations may also be made to major currency
  bonds where such opportunities are identified.

    INVESTEC EMERGING MARKETS DEBT PORTFOLIO
                                      Indonesia 6%
                      Mexico 6%                 Colombia 6%
                                                    Russian Federation 3%
            Thailand 7%
                                                       Chile 3%
                                                          Others 3%

        Turkey 8%                                                           Outlook
                                                                            Whilst it is true that recent years have seen local emerging
                                                                            market debt deliver strong returns, what does the future hold?
                                                              Poland 18%    Favourable demographics and higher growth prospects are just
       Hungary 9%
                                                                            two of the factors that are likely to underpin emerging markets
                                                                            as a growing asset class in the coming decade. Emerging
                                                                            markets account for an increasingly large proportion of total
            Malaysia 9%
                                                                            global GDP; in fact in purchasing power parity terms, the
                                               South Africa 13%
                          Brazil 9%                                         International Monetary Fund forecasts that the emerging
                                                                            market share of global GDP should overtake that of developed
  Source: Investec Asset Management, September 2010.
                                                                            economies by 2014. As emerging markets increase in
                                                                            significance in the global arena, asset allocations are likely to
      The universe of markets encompassed is large and diverse,             change to reflect this dynamic. Furthermore, because US dollar
  ranging from large benchmark countries such as Mexico, Poland,            weakness appears to be required to address global imbalances,
  South Africa and Malaysia to small frontier markets like Uganda,          emerging market currencies are likely to be beneficiaries of such
  Ghana, Vietnam and Kazakhstan. Our approach recognises that               a move. With this growth should come attractive capital gains
  fixed income market valuations are driven by economic                     from both local bonds and currencies.
  fundamentals over the long term. However, in the short term                    While investment risks can be significant in an asset class like
  market prices vary considerably from fair value, providing                this, we believe that attractive returns are likely to be delivered
  opportunities for an active manager to outperform. A thorough             against continued comparatively low volatility. The diversity of the
  analysis of three ‘Compelling Forces’ – economic fundamentals,            asset class, the high quality of the issuers and importantly the
  valuations and market price behaviour – can highlight                     complementary nature of the two key sources of returns, bonds
  opportunities and associated risks.                                       and currencies, underpin this belief.
      Currency plays can also offer great potential for additional
  returns. As emerging markets travel the path from emergence to
  development, their currencies are likely to strengthen. Therefore,          INVESTEC EMERGING MARKETS DEBT
  by investing in locally-denominated debt, investors can access
  returns from two sources – there is the potential for capital gains        n Manager Peter Eerdmans is backed by a strong team
  on both bonds and currencies. It is this dual source that is a                and has run the fund since June 2006
  factor in contributing to both good returns and the relative               n Invests in emerging market debt, both sovereign and
  stability of these returns for investors.                                     corporate
      An added advantage is that bonds and currencies tend to
                                                                             n Currently yields 6%
  react differently from changes in the economic cycle; 2008, for
  example, saw local bonds posting positive returns due to their             n Dividends are paid quarterly in February, May, July
                                                                                and October
  favourable reaction to lower inflation, slower growth and central
  bank rate cuts, yet currencies struggled in the risk-averse                n A-rated by OBSR
  environment. Furthermore, during the recent financial crisis, a
  number of EMD markets actually rallied. For example, while the
  Mexican peso and the South African rand sold off, local bonds in
                                                                            Chelsea View
  countries such as Malaysia, Thailand and Slovakia rallied along
  with US Treasuries as part of the flight to quality.                      This fund provides a strong yield and good diversification
      Within the Investec Emerging Markets Debt strategy,                   within a fixed income portfolio. Investec have a strong
  bottom-up decisions have delivered the bulk of the                        fixed interest team and a robust process.
  outperformance against the index, as opposed to top-down
                                                                            Chelsea Risk Rating: 2
  macro decisions. The latter choices are notoriously difficult to
  make as they involve a fair amount of market timing. Therefore,           Standard initial charge: 4.5%
  we scale our investments so that the main contributions to                ISA initial charge after discount: 0%
  performance should result from relative bond and currency ideas.          Annual management charge: 1.5%


                                                                                          October 2010 Viewpoint Chelsea Financial Services   33
Monthly income
         As many of you have spoken to us about your need for monthly income, particularly
         in this period of very low interest rates, we wanted to highlight AEGON High Yield
         Bond. Phil Milburn has been managing this fund since November 2003 and he talks
         to us here about his process and the fixed interest market.

                          High yield bonds are sometimes                 AEGON HIGH YIELD BOND
                          referred to as ‘speculative grade
                                                                        n Yield: 6.7%
                          bonds’ or, somewhat more
                          disparagingly titled ‘junk bonds’.            n Income paid monthly
                          The adjective ‘junk’ stems from               n AA rated by OBSR
                          the fact that within the high yield           n Invests in corporate debt - predominantly in high yield,
                          universe you expect to experience                with selected investment grade bonds and cash
                          a certain number of defaults
 PHIL MILBURN
 Fund Manager,            on bonds.
 AEGON High Yield Bond
                          However, this risk of default is often
                          overstated; bear in mind that bonds          the capital structure and the covenants (legal debt agreements)
remain senior to equities i.e. you are only likely to suffer a         attached to it.
permanent reduction in value on a bond if the equity is all but             An advantage we have over many peers is that we invest in
wiped out. If you can carefully mitigate default risk, then the        dollar denominated bonds as well as sterling and euro issues; this
return on high yield is very compelling with the asset class           gives us a far wider universe from which to choose good
having averaged a 9.7% index return per annum over the                 investments. Currency risk is hedged into sterling and the fund
last 25 years.*                                                        sticks to bond investment, avoiding convertibles, preference
     When managing the AEGON High Yield Bond, I aim to                 shares and other equity-like instruments. Each investment for the
maximise total return. Put succinctly, I am not in the business of     fund has to pass the test – “would I own it myself?” As a holder
sacrificing capital in order to inflate income. However, by the very   of units in the fund myself, this seems obvious but many fund
nature of the asset class, the fund does generate a very healthy       managers can forget this mantra by tying themselves to indices
income. The fund’s net distribution yield has averaged over            rather than seeking total return.
0.50% per month for the last two years.**                              Looking forward
What do I look for?                                                    The outlook for high yield as an asset class is still relatively
I started my career on equities, hence I have strong opinions          benign. My view is that we will see a long period of subdued
about which companies are good equity investments, which are           growth as Western economies work through their debt
suitable for bond investments and which are applicable for both.       problems. Unless one expects a further global recession
The sort of company that should issue high yield debt has              then high yield default rates should remain low; and, if
relatively stable earnings with a high degree of predictability        one anticipates the said recession, bonds will still fare better
about them, thus mitigating unpleasant surprises. Examples             than equities.
include cable companies who, provided they retain their                     High yield has generated very strong returns in the last 18
customers, have great visibility over their expected revenue and       months and the majority of the total return now will come from
profits.                                                               the yield on the asset class. I strive to add to this by generating
     Other worthy traits that we actively seek out include high        relative outperformance with a strong focus on stock selection
margins, good cash generation and the ability to pay down debt.        and importantly avoiding the real junk. For those with a long
I tend to like the gaming sector, cable, telecommunications,           enough time horizon to tolerate any shorter-term fluctuations,
utilities, healthcare, support services, and packaging. Cyclical       then I believe high yield deserves your attention as both a total
companies, by definition, see much larger swings in their              return investment and an income generator.
profitability. Obvious sectors that we vehemently avoid include
semiconductors, autos, heavy industrials, airlines and most            Chelsea View
chemical companies.                                                    AEGON have a strong fixed income team and Phil
     The fund is predominantly a stock-picking fund with an            has a good long-term track record with this fund.
estimated 70-80% of the relative outperformance through the            We particularly like the fact income is paid monthly.
cycle coming from stock selection. A lot more work goes into
our stock selection than simply picking the sectors. We do             Chelsea Risk Rating: 2
detailed company analysis focusing on the competitive position
                                                                       Standard initial charge: 4.5%
and key drivers, before then focusing on the balance sheet and
                                                                       ISA initial charge after discount: 0%
cash flow as well as the profit and loss account. Equity analysts
                                                                       Annual management charge: 1%
are very good at modelling the profit and loss account, but we
can add value by examination of cash flow trends. One then             *Source: Bank of America Merrill Lynch.
also needs to look at the individual bond, how senior it is within     **Source: AEGON Asset Management.




34   Chelsea Financial Services Viewpoint October 2010
Multi-asset income
                          The UBS Multi-Asset Income fund                   CURRENT INVESTMENT STRATEGY
                          is managed by UBS Global Asset
                          Management’s Global Investment
                          Solutions (GIS) team, who have been
                          managing multi-asset portfolios
                          for over 28 years. The team draw
                          upon extensive resources from
                          both within GIS and from other
DAVID BUCKLE
Fund Manager,             investment teams globally. Lead
UBS Multi-Asset Income
                          manager David Buckle talks to us
                          about this alternative income fund.

With interest rates languishing at historic lows and inflation
impacting spending power, never has the search for a stable and
regular income stream been more important. The concept of
ensuring investors have a diversified portfolio of investments has
been an accepted principle for many years. However, more
recently, with traditional sources of income under pressure, this
concept is being adapted and applied to investors seeking more
stable and diversified sources of income. This has led to the             Source: UBS Global Asset Management, 9 August 2010.
emergence of ‘multi-asset income funds’.

Income under pressure                                                     being too heavily reliant on investment opportunities in one part
When investors think of income they traditionally think of the            of the globe. Whilst it is not a primary objective, the fund also
interest received from savings, dividend payments received from           has the potential for capital growth.
investing in equities or the payment received from a bond,                     Importantly UBS attempts to manage against the damaging
sometimes called a coupon. All three sources, however, are currently      effects of inflation through holding index-linked securities (where
under pressure; for example, UK interest rates remain at a historically   coupons and the eventual capital payment are adjusted in line
low level of just 0.5% and dividends globally have been cut by            with inflation) and real estate investment trusts (where income is
companies wanting to preserve cash. This has forced many investors        often linked explicitly or implicitly to inflation).
to search for additional and more diversified sources of income.               Since launching in October 2009, the fund has achieved
     It’s not just these pressures on income that investors should        a yield of around 5% (distribution yield, gross of all fees and
be concerned about, there is also the issue of inflation. In post-        expenses). This compares favourably to the FTSE-ALL Share
war Britain, the average rate of inflation is close to 6%. In day-        which currently has a dividend yield of around 3.4%.*
to-day terms this means that a loaf of bread that costs £1 today
                                                                          Investment flexibility
will cost £1.34 in five years time. For investors this means that
the ‘real value’ of your income will be eroded over time and              The fund can invest in a wide range of assets, focusing on
should therefore be taken into consideration.                             income whilst maximising the diversification of the portfolio.
                                                                          It has a broad set of investment ranges which allows the team
Introducing UBS Multi-Asset Income                                        greater freedom to express the conviction in their views, in order
UBS Multi-Asset Income is aimed at helping solve the income               to benefit fully from the opportunities available.
puzzle. The fund aims to provide investors with a stable, regular              The current positioning, shown in the chart, reflects our
income stream (with flexibility to pay investors this income on           views with regard to specific asset classes. For example, we
a quarterly basis). To achieve its aim, it invests in a globally          reduced the equity allocation in early August, following a sharp
diversified portfolio of investments. Being broadly diversified           rally, in favour of greater exposure to corporate bonds. In our
reduces the risk of relying on individual stocks, asset classes or        view, corporate bonds are attractive on a risk-adjusted basis and
                                                                          in terms of the level of income provided – this is reflected in the
  UBS MULTI-ASSET INCOME                                                  fund’s allocation. We are also currently overweight real estate as
                                                                          we believe it provides a measure of inflation protection and is
 n A multi-asset fund focussed on generating income                       more attractive than index-linked gilts in terms of valuations.
 n Income paid quarterly in March, June, September and
    December                                                              Chelsea View
                                                                          We like the diversification across asset classes that this
 n AA rated by Standard and Poor’s
                                                                          fund offers to income investors. There is a strong team
 n Actively managed and broadly diversified both                          behind this process.
    geographically and across asset classes
 n Managed by an experienced and well-resourced team                      Chelsea Risk Rating: 3

 n Aiming to achieve a stable yield with lower risk to                    Standard initial charge: 4%
    capital than a traditional equity fund                                ISA initial charge after discount: 0%
 n Yield: 5.30%                                                           Annual management charge: 1.25%

                                                                          *Source: Datastream, as at 26 August 2010.


                                                                                          October 2010 Viewpoint Chelsea Financial Services   35
Without profits
...time to head for the exit?
Since we last discussed with profits bonds in 2006, the level of annual bonuses remains depressed.
Four years ago, over half of the life offices surveyed were paying annual bonuses of 1% or below,
none of whom have since increased their rates, indeed six companies are still paying 0% annual bonuses.

If you consider the management charges of the fund and                  are unlikely to rise dramatically as our research shows that with
the effects of inflation, monies held in these funds are                profits funds have become more cautious in the past four years,
not just standing still, they are being eroded. Hence, if               reflecting the wider uncertain economic outlook and fears of a
you are an investor in a with profits bond from one of                  ‘double dip’. Prudential, which runs over £60 billion in its with
the following companies, AEGON, Britannic, NPI, Scottish                profits fund has reduced its equity exposure by a quarter to 40%,
Mutual, Scottish Provident and Scottish Widows, it would                which is now the average with profits fund exposure to equities.
be wise to review your investment and consider                          Exposure to commercial property, traditionally a popular asset
encashing your bond, taking into account exit penalties                 class among with profits funds due to yield, has remained steady
and potential tax liabilities.                                          with an average weighting of 11%, whilst nearly every fund has
     If you are looking to exit any with profits fund, whether it be    increased its fixed interest weighting, some by as much as 100%.
in a bond, pension or endowment, you need to be aware there                  There are some large insurance companies still committed to
could be an exit charge imposed, called an MVR. The MVR, or             with profits and actively taking on new business, such as
Market Value Reduction, acts as a correcting mechanism to give          Prudential, Aviva and Legal & General who are paying out
the individual policy its ‘true value’. Without them, some              relatively strong annual bonuses with the potential for
policyholders would be able to leave with more than their fair          respectable final pay-outs. However, many insurance companies
share and thereby deprive other policyholders. This seems a             closed their with profits funds to new business around 2002
reasonable premise but the problem lies in the fact that the MVR        to prevent taking on further liabilities and invested a large
level, when it is removed or reduced, is entirely at the discretion     proportion of the fund in fixed interest securities. This increased
of the life company.                                                    the stability of the funds but limited future returns. Nearly half of
     However, it’s important to note that MVRs have been                the funds examined are closed to new business and have little
steadily coming down over the past few years, including some of         exposure to equities or commercial property limiting the upside
the closed with profits funds, with Royal & Sun Alliance currently      potential of the funds and hence reducing the chances of
not imposing an MVR at all. This is unusual as most companies           increased future bonus payments.
don’t apply a ‘blanket’ MVR policy and tend to look at each                  Investors may wish to consider other multi-asset funds
policy individually and calculate the MVR depending on when             within the Chelsea Portfolio, such as CF Miton Special Situations
you bought the policy and how the fund has performed since              or HSBC Open Global Return, as a home for the proceeds.
then. Investors should check Table 2 and if the annual bonus is         Alternatively, the Chelsea Income Portfolio (featured on page 7)
low but the MVR is also low, serious consideration should be            currently yields just under 5% p.a and can be held within an
given to exiting the fund.                                              ISA. What’s more there would no initial charges to pay for
     The reason for this is we believe payouts from these bonds         investing in the portfolio within an ISA.

  TABLE 1: CURRENT ASSET ALLOCATION OF WITH PROFIT BOND FUNDS
  INSURANCE COMPANY                                          EQUITIES (%)      COMMERCIAL               FIXED             OTHER (CASH)
                                                                               PROPERTY (%)          INTEREST (%)             (%)
  AEGON Scottish Equitable (closed 10/02)                          56                 0                    41                    3
  Aviva (formerly Norwich Union)                                   39                 18                   34                    9
  AXA (closed 05/02)                                               55                 13                   26                    6
  Britannic Assurance (closed 03/03)*                              46                 6                    47                    1
  Clerical Medical                                                 38                 12                   35                   15
  Friends Provident                                                22                 8                    50                   20
  Legal & General                                                  38                 14                   48                    0
  LV= (Liverpool Victoria)                                         46                 13                   34                    7
  NPI (closed 06/03)*                                              0                  13                   80                    7
  Prudential                                                       38                 12                   40                  10**
  Royal & Sun Alliance (closed 08/01)*                             45                 25                   28                    2
  Scottish Mutual (closed 12/02)*                                  39                 0                    50                   11
  Scottish Provident (closed 1999)*                                49                 0                    41                   10
  Scottish Widows                                                  44                 12                   41                    3
  Standard Life                                                    44                 16                   30                   10

(Source: Data from respective insurance companies 08/10)                *Now administered by Phoenix Life Group (www.phoenixlifegroup.co.uk)
                                                                        **Includes 5% of ‘alternative assets’ such as private equity and hedge funds.
36   Chelsea Financial Services Viewpoint October 2010
If you decide to encash your with                                                                                         assume it to be correct
profits bond, there are two                                                                                               however this cannot be
possible ways to gain access to                                                                                           guaranteed. Check with
your money with no charge.                                                                                                each life office personally
Firstly, some with profits bonds                                                                                          to confirm the details of
have clauses in their contracts                                                                                           your own policy.
which allow investors to exit the                                                                                             Finally, before
bond on a certain date with no                                                                                            surrendering any policy,
penalty. This is known as an MVR                                                                                          you should also take
free date. Please note that not all                                                              into account other potential charges, the effect
life offices notify clients of any                                            encashment will have on your tax position and also whether
MVR free anniversaries in advance so check your policy                        continued membership of a mutual organisation means you
documents and make a note of any impending MVR free dates.                    could benefit from any possible demutualisation.
     Secondly, nearly all with profits providers allow investors to               Chelsea Financial Services cannot enter into discussions of
take a certain percentage of their original investment (usually not           specific contracts; this article does not constitute personal
the current fund value) as a regular withdrawal from their bond               investment advice. If you are in doubt, please contact a
without an MVR applying. This is normally between 5% and                      financial adviser.
10% per annum. Whilst not ideal, it enables investors to access
some of their money penalty free and invest it elsewhere, such as               KEY POINTS
a stakeholder pension or a regular savings ISA. However, be
                                                                               n Returns from with profits funds likely to remain derisory
warned that if you leave a with profits fund to invest directly into
equities, then you are taking a greater risk with your capital.                n Find out if there is an MVR in place
     Below is a table of major with profits bond providers and                 n Consider selling and reinvesting the proceeds into a
details of any MVR free clauses. In addition, it also lists the                   multi-asset unit trust (use the forms on pages 23-24
current annual bonuses being paid to investors.                                   and 27-28 to reinvest)
     This information has come from the product providers so we


  TABLE 2: ANNUAL BONUS RATES AND MVRS OF WITH PROFITS FUNDS
  INSURANCE COMPANY              CURRENT ANNUAL CURRENT EXIT                     EXIT FREE DATES                   PENALTY FREE
                                 BONUS RATE     PENALTY (MVR)                                                      ANNUAL WITHDRAWAL
  AEGON                          0.00%                  Policy specific but      For the Performance Bond          Up to 7.5% of initial investment
  Scottish Equitable                                    can be zero              (Version 7) – 10th Anniversary
  Aviva                          2.75%                  Average 8%               From 2000, MVR free date on       Up to 5% of initial investment
                                                                                 10th Anniversary and every
                                                                                 subsequent 5th Anniversary
  AXA                            2.25%                  Policy specific          None                              Up to 7.5% of initial investment

  Britannic Assurance*           0.00%                  Policy specific          Series 4-7 on the 10th            Up to 7.5% of initial investment
                                                                                 Anniversary
  Clerical Medical               0.50%                  No maximum               10th Anniversary for policies     Up to 7.5% of initial investment
                                                        depends on policy        taken out before 2000 so no
                                                                                 longer applicable
  Friends Provident              0.75%                  Removed for almost None                                    Up to 7.5% of initial investment
                                                        all policies
  Legal & General                3.25% but does         Policy specific          For bonds between 1989-1993       Regular withdrawals equivalent
                                 depend on policy       ranging from zero        – 10th Anniversary so no longer   to or less than the interim bonus
                                                        to 12%                   applicable                        rate applicable at time of
                                                                                                                   withdrawal
  LV= (Liverpool Victoria)       2.25% but does         Policy specific          For WP Investment Bond            WP Investment Bond up to 7.5%
                                 depend on policy                                (to 07/03/01) 10th Anniversary    of original investment. All other
                                                                                 or chosen later date              bonds up to 5% or natural
                                                                                                                   bonus rate (WP Income Bond)
  NPI*                           0.00%                  No maximum               Series 5-7 on the 10th            Up to 10% of current fund value
                                                        depends on policy        Anniversary
  Prudential                     3.00%                  Average 2% but           None                              £25,000 can be taken MVR free
                                                        most zero                                                  as a one-off withdrawal every
                                                                                                                   12 months (after policy has been
                                                                                                                   in force for at least 5 years)

  Royal & Sun Alliance*          0.50%                  None currently           On the 10th Anniversary           Up to 7.5% of the original
                                                                                                                   investment
  Scottish Mutual*               0.00%                  Policy specific          For the WP Investment Bond        Up to 7.5% of initial investment
                                                                                 (1998-2001) – 10th Anniversary
  Scottish Provident*            0.00%                  Policy specific          None                              Up to 7.5% of initial investment
                                                                                                                   as a regular withdrawal
  Scottish Widows                0.00%                  Policy specific but      For policies taken out before     7.5% of initial investment. From
                                                        can be zero              2000 – 10th Anniversary           07/2002 5%.
  Standard Life                  2.10%                  Up to 10%                None                              The lower of the originally
                                                                                                                   selected withdrawal amount or
                                                                                                                   prevailing bonus rate (currently
                                                                                                                   2.1%)

*Now administered by Phoenix Life Group (www.phoenixlifegroup.co.uk).

                                                                                             October 2010 Viewpoint Chelsea Financial Services      37
Germany: Europe’s
economic powerhouse
                      Whilst European equity markets                       companies: their balance sheet strength. At a time when there is
                      and the euro dropped sharply in                      so much uncertainty in investment markets, companies such as
                      response to worries over the size of                 services provider SAP, cosmetics company Beiersdorf, as well as
                      budget deficits in several Southern                  the carmakers we have already mentioned, have significant net
                      European countries, a northern star                  positive cash on their balance sheets, giving them both the ability
                      has continued to shine. Germany’s                    to take advantage of opportunities to grow the business as they
                      equity market has outperformed                       arise, and a degree of protection in the event of any deterioration
                      as the economic recovery there is                    in market conditions.
 ROBERT SMITH
 Fund Manager,        becoming well established and the
 Baring German Growth
                      weakness of the euro has helped to                   Fund positioning
                      give German exporters a significant                  I have rebuilt the fund’s exposure to solar power stocks.
competitive advantage. Robert Smith, manager of Baring                     We sold several holdings in this sector in 2009 after a period
German Growth, examines this interesting economy.                          of outperformance. Since then, the shares have fallen sharply
                                                                           amid concern that demand for solar power products in
In the second quarter of 2010 gross domestic product growth                Germany could weaken. With governments around the world
(GDP) in Germany accelerated to 2.2%, outperforming the Euro               encouraging the use of renewable energy, we believe that
Area. In contrast, the other large European economies of France,           growing overseas demand will more than offset the impact
Italy and Spain grew by less than 1%. So why is Germany’s                  of weaker domestic demand.
economy outperforming?                                                         Whilst doubts about the health of the US economy persist,
                                                                           equity markets everywhere could be in for a volatile period. In
Germany’s competitive advantage                                            recognition of this, I have gradually increased the fund’s
We believe the labour market holds the key. Germany holds a                exposure to stocks with more defensive characteristics. Medical
considerable competitive advantage relative to its European                technology company Draegerwerk is a new holding in this
peers. Over the last decade, whilst labour costs have been rising          category. The company is a global leader in the manufacturing of
across much of Europe, labour costs in Germany have been kept              respiratory care machines. Radioactive isotope manufacturer
in check. Labour costs have risen only marginally during that              Eckert & Ziegler is another interesting holding. The company has
time, whilst the UK’s have increased by almost 50%.                        pioneered an innovative treatment for prostate cancer and
     In view of Germany’s superior economic fundamentals,                  recently won a contract to provide the technology to treat brain
growing numbers of investors are looking to increase their                 tumours at the Helsinki University Central Hospital in Finland.
exposure to funds which have either a significant, or an exclusive,        Finally, as we have become somewhat cautious, the fund’s
focus on Germany. I believe this stance could be well rewarded.            exposure to ultra-cyclical stocks has been eliminated.
I expect the German equity market to continue to outperform
European equity markets as a whole over the medium term.
                                                                            BARING GERMAN GROWTH TRUST
     Over the last few months, the euro has recovered some lost
ground, however we expect it come under renewed pressure.                   n 50-65 holdings
Approximately 65% of the Baring German Growth Trust is
                                                                            n Focused on stocks with undervalued growth prospects
invested in companies that benefit from a weak euro. Daimler and
BMW are prime examples. Neither company is seeing the pullback              n A mid and small-cap bias

in sales that mass market manufacturers are facing now that car             n Managed by Robert Smith since November 2008,
scrappage schemes have ended. In fact, sales growth at both                    who has 11 years of investment experience
Daimler and BMW has been impressive, partly due to increased                n Smith is part of a small entrepreneurial team where
demand from Chinese consumers who have acquired the taste for                  individuals rather than committees take decisions
luxury goods.
     China is now the world’s biggest car market, overtaking the US
                       last year, and continuing to grow at a rapid
                                                                           Chelsea Risk Rating: 7
                        pace. German carmakers have a strong brand
                         in China and are well positioned to benefit       Chelsea View
                          from this. BMW already sells twice as many       This fund would be a good addition to a diversified
                           of its top of the range 7 Series in China       portfolio, allowing investors to gain greater exposure to
                            than anywhere else, while China was            the strongest European economy than they would get via
                             Daimler’s third-largest sales market in the   a general European fund. Smith has a strong track record
                              first three months of this year.             with this fund, outperforming his benchmark.
                                     Germany’s three top carmakers –
                                BMW, Daimler and Volkswagen – are          Standard initial charge: 3.25%
                               good examples of another attractive         ISA initial charge after discount: 0%
                             feature of many of Germany’s leading          Annual management charge: 1.5%




38    Chelsea Financial Services Viewpoint October 2010
       Chelsea champions
       income alternatives
                        Under the media glare has been one recurring story: savings – and for good reason.
                        A number of words spring to mind when considering the rates of interest offered to
                        savers by banks: paltry, derisory to name just a couple. Factor in tax and inflation and
                        any further adjectives become unpublishable by any editor of a civilized title.
                        Even rates offered by building societies for their top-paying cash ISAs would
JOHN KELLY
                        not stay ahead of inflation.
Head of
Communications
                         This has meant that income-starved savers and       Further campaigns
                         investors have either moved or increased their      Commenting on the dinner, Mail on Sunday personal finance
        exposure to the UK equity market in search of a cash-beating         editor, Jeff Prestridge, said:
        rate of return. As a strategy, it could not be more simple; the      “I left [the dinner] believing that Chelsea Financial Services had hit
        FTSE has always provided a fertile bank of dividends, supplied by     a sound investment chord. Good investing, after all, is all about
        a steady stream of cash-rich blue chip dividend-payers. Well, that    diversification and the need for income seekers to diversify has
        was the theory until the onset of the Credit Crunch in 2008.          never been greater.”
             Near financial collapse drained the traditional dividend        This is where we want to position our on-going media
        streams that once flowed gushingly from the banks, while a           campaigns. Bringing awareness to our clients and the investing
        number of other sectors, including housebuilders and high street     public of key shifts and trends in the investment world via the
        retailers, reduced or put a freeze on payments to shareholders.      personal finance press. The next Chelsea investment dinner will
        The misery continued into 2009, the annus horribilis for income      debate alternative low-risk strategies. Many of the traditional
        investors, when £10bn was slashed in dividends paid out by UK        so-called cautious funds have not done ‘what it said on the tin’
        companies – UK companies paid out £56.9bn to investors in            and as a result we have been researching new strategies to
        2009, 15% less than in 2008. And this year, just when it             protect capital. The most successful of these have been absolute
        appeared the plight of income investors could get no worse, a        return and multi-asset funds. We intend to bring this debate to
        slick of black unctuous misery seeped into the Gulf of Mexico;       the fore among the country’s national newspapers so keep an eye
        BP’s shareholders would have to wait.                                out for our spokespeople in the press over the coming weeks, as
                                                                             well as commentary on the forthcoming dinner on our website.
        From feast to famine
                                                                                  And it is not just our media spokespeople who have
        For yield-hungry investors the once dividend feast turned            appeared in the national press but a number of our clients too.
        famine; now just five companies account for just under 40%           We are inundated by requests for ‘client case studies’ from
        of the total annual dividend distribution of the UK stock            journalists. Every week national newspapers require real clients
        market. Unfortunately this lack of diversity is reflected in many    to air their investment views and thoughts.
        income portfolios. Hence we decided to shine the torch of
        enlightenment under the dark bushel of investment ignorance.         Your 15 minutes of fame
        In June of this year, we hosted an investment dinner attended by     So, if you are excited by the prospect of opening the weekend
        the finest personal finance hacks to pick the bones of this meaty    papers only to see yourself staring right back, then simply fill in
        issue. After Darius McDermott, our managing director, outlined       the slip below, return it to me in the pre-paid envelope provided
        our concerns about the over reliance by Chelsea investors on         and I will contact you in due course.
        traditional income streams, selected Chelsea Premier League
        fund managers propounded their strategies on tapping into            What YOU get: we will send you £50 M&S vouchers when the
        alternative income sources.                                          article appears. You will also, of course, have the pleasure of
             Jason Pidcock of Newton Asian Income argued that eastern        appearing in several million homes throughout the country.
        markets are now maturing and providing a new hunting-ground
        for income investors; Stuart Rhodes, fund manager of the M&G         What WE get: we receive a mention in the national press,
        Global Dividend fund pointed out that currently the US exhibits      which increases our nationwide profile and affirms our status as
        a far better dividend-payout discipline than the UK.                 the UK’s leading discount broker.

                                                                                                                                                                                    !
             The debate was subsequently covered in the FT, Mail on
        Sunday, Times, Telegraph and Observer, among other titles.
        And this is where we hope to continue to position ourselves;
                                                                             I’d like Chelsea to consider me for a case study
        informing our clients and the investing public of the major issues
        affecting the ever-changing landscape of fund management.
                                                                             in the national press – please contact me.
                                                                             Title ......................... Surname ...................................................
                                                                             First name ...................................................................................
                                                                             Address .......................................................................................
                                                                             ....................................................................................................
                                                                             ...................................................... Postcode ..............................
                                                                             Telephone number ......................................................................

                                                                                               form in 2010 Viewpoint Chelsea Financial Services
                                                                             Please return thisOctoberthe envelope provided with this issue of Viewpoint.39
Tax-efficient investing
                          With many of us suffering from the austere fiscal measures introduced by
                          the coalition government and some people even losing half of their
                          income due to the new 50% top rate of income tax it is more important
MATTHEW WOODBRIDGE        than ever to make use of the tax breaks available. Hence, here are two tax
Head of
Investment Products       efficient products for your consideration:

1. Venture Capital Trusts (VCTs)                                      2. Start a pension for your child
The first VCTs were launched in 1995 so some managers now             With the recent changes to Child Trust Funds, we have seen a
have 15 year track records, longer than many high profile unit        number of parents investing in a stakeholder pension on behalf
trusts. Managers such as Northern, Albion and ISIS Equity             of their child. Although the child won’t have access to the fund
Partners (who run the Baronsmead VCTs) have all been running          until they are 55 at the earliest, it allows a long-term view to be
VCT money since then and generated some excellent returns for         taken on the investment strategy and gives the child a head start
investors. For example, founder shareholders in the Baronsmead        with their pension savings. This is hugely important at a time
VCT have received cumulative dividends of over 100p since their       when state retirement benefits in the future are likely to be
original investment in 1995, equivalent to an average annual          greatly reduced from their current level. Children born today will
dividend of 7.2p per share. The current yield on the VCT is 9.2%,     not receive a state pension before the age of 68 and this is likely
which equates to a gross equivalent tax-free yield of 12.4% for a     to be raised before they get there!
50% taxpayer. Although such stellar returns are not guaranteed             You can put a maximum of £2,880 into a personal pension
in the future you may like to know there will be an opportunity       for a child each year. The taxman adds £720 in tax relief, making
to invest in one of the other Baronsmead VCTs later this year.        a total of £3,600 invested. Furthermore, inside the fund your
If you are interested, please telephone us 020 7384 7300 for          money grows free of capital gains tax and personal income tax.
a Securities Note.                                                    You can pay into a plan for as many children as you want. You
                                                                      can make payments for your own children, grandchildren, nieces,
  AS A REMINDER HERE ARE THE                                          nephews and godchildren or even children of family friends.
  CURRENT TAX BENEFITS OF VCTS:                                       What’s more is that the annual allowance is below the annual
                                                                      gift limit of £3,000 which means the contribution is placed
 n Initial income tax relief of 30% (subject to the
                                                                      outside of your estate for inheritance tax purposes.
     investment being held for a minimum of five years)
                                                                           There are no initial charges to pay on stakeholder pension
 n Tax-free dividends                                                 contracts so 100% of your contribution is invested. What’s more
 n Capital gains tax exemption on sale of VCT shares                  the annual charges are in the region of just 1% for most funds.

                                                                      Special Offer! If you invest the full allowance of £2,880
The income paid out from VCTs as tax-free dividends is a very         (£3,600 gross) or set up monthly savings of £150 (net) or more
attractive feature of these investments, particularly for those who   in a Standard Life or Aviva Stakeholder Pension via Chelsea
are going to have to pay 42.5% tax on their dividends from            Financial Services before the end of 2010, we will send you
elsewhere. Hence, it is worth looking for a VCT run by a              £25 worth of Marks & Spencer gift vouchers for using our
manager that has a history of paying out a good level of              services. Please telephone us on 020 7384 7300 for an
dividends whilst trying to maintain the capital of the VCT.           application form.
Northern, YFM Group (British Smaller Companies), Albion
and Matrix all have VCTs that fit this bill and some will
be offering top-up offers in the coming months.
    In fact we expect a large number of VCTs to be
issued in the coming months from a wide variety of
managers, some offering the potential for immediate
dividends from established portfolios, some offering a
‘Planned Exit’ after the minimum five-year holding
period and some new issues looking to take
advantage of the Feed in Tariffs introduced by
the UK Government to support small
scale renewable energy projects. Please
check the VCT pages on our website
for details of the latest issues
(www.chelseafs.co.uk) or call our office
on 020 7384 7300 to receive details of
our favoured offerings.




40    Chelsea Financial Services Viewpoint October 2010
Chelsea funds-only SIPP:

Wake up to a more
flexible pension
An alarming research study* recently conducted by Barings Asset Management indicated
that almost half of people in work in Britain (48%) had never reviewed their pension plans.
Of those who had reviewed their pension, 38% (the equivalent of seven million people)
went with the default option available to them.
Perhaps now is the time to review your pension and decide
whether your retirement fund could be better served elsewhere?

Imagine a simpler way to control your pension fund. Shouldn’t it
be treated just like any other investment vehicle?
    We believe so and that’s why we introduced the Chelsea
Flexible Retirement Plan, giving you flexibility and control
over your pension. Online access means you can check your
pension’s value each day and make changes if required.


 WHY CHOOSE THE
 CHELSEA FLEXIBLE RETIREMENT PLAN?

 n NO initial charges on all funds, saving you up to 5.5%

 n NO charge for switching between funds

 n NO set-up charge (usually £120)

 n Low annual charge

 n Online access via the Chelsea Financial Services website
    – ability to view your pension online and switch
    between funds
 n Ability to consolidate – you may have personal pensions
    with more than one provider
 n Likely to be a wider choice of funds available than
    within your existing contract
 n Consolidated bi-annual statements together with your
                                                                   Naturally, many of you will have accumulated several private
    ISAs and investment funds (if held on Cofunds)
                                                                   pensions over your working life, often run by different insurance
 n Reduce paperwork and time taken to monitor                      companies. In many cases these will offer just a limited range of
    performance                                                    funds, often with higher charges. Before you decide to transfer
 n Opportunity to invest in the Chelsea Easy Retirement            into the Chelsea Flexible Retirement Plan, do check that there
    Portfolios – carefully constructed by our research team        isn’t a comparable investment choice for the same cost where
 n Access to the Chelsea Fund Review – commentary on               your Protected Rights are, or indeed a stakeholder plan that may
    funds held by you on Cofunds with Buy/Hold/Switch              suit your needs better. In addition, please consider any
    recommendations                                                guarantees you may be giving up by moving the plan(s) as well
                                                                   as any surrender penalties your current provider may levy. If you
*Research conducted online by ICM research on behalf of            are still unsure of whether to make a transfer after making these
 Barings Asset Management in July 2010.                            checks give us a call on 020 7384 7300 to see if we can help.
                                                                        To apply for the Chelsea Flexible Retirement Plan, please call
                                                                   0800 071 3333 for an application form and key features.
                                                                        Alternatively, if you have over £50,000 worth of assets in
                                                                   Cofunds and are looking to consolidate your personal pensions
                                                                   into one place OR you simply wish to make a lump sum payment
                                                                   of £20,000 or more, please call us on 020 7384 7300 for
                                                                   information about a new Cofunds pension.




                                                                                 October 2010 Viewpoint Chelsea Financial Services   41
      The Chelsea
      Premier League
                                                      ithin an ISA.
                                     initial charge w
                     available at 0%
                                                                        †
                                                                   ance.
All these funds
                 are                             10/11 ISA allow
                                  within your 20
                to 5.5% or £561
Saving you up
                                                                                   6 MONTHS             1 YEAR          3 YEAR            5 YEAR            10 YEAR
                                                                 Yield  Fund       %                 %                %                 %                  %
                                                                   %     size*   Growth Position   Growth Position   Growth Position   Growth Position   Growth Position


         UK ALL COMPANIES
         Artemis UK Special Situations                            1.8   1051.9    2.06     84       6.22      231     -9.25 130        18.56     91      105.41 5
         AXA Framlington UK Select Opps                           1.6   1685.9    6.71     21      16.82       20      0.65  30        31.23     36       56.58 16
         BlackRock UK Dynamic                                    1.17   1521.4   -3.27    296       5.02      258    -10.17 148         13.7    134         -    -
         BlackRock UK Special Situations                         1.29    967.3   8.11      12      18.91       16     -0.35  43         35.4     26       96.48  8
         Fidelity Special Situations                             0.61    3026    1.73      97       0.06      309      -2.7  56        30.82     37      139.57 2
         J O Hambro UK Opportunities                             2.95    624.8   2.57      71      14.73       31      4.36  20           -       -         -    -
         Jupiter UK Growth                                         1      818    1.05     116       6.27      228    -16.82 236        26.44     52       27.61 35
         Legal & General Growth                                   0.9    205.6   -3.49    301      11.51       61     -8.29 109          40      16         -    -
         Legal & General UK Alpha                                  -     91.7    6.62      23      19.49       14     18.17   3        62.93      2         -    -
         Legal & General UK Index                                 2.8   3761.7    -0.6    202       8.13      157     -7.93 105         16.9     99        12.1 68
         M&G Recovery                                            0.96   5346.5   -1.42    243       8.62      138     2.35   27         44.4     11       73.74 12
         Newton Income                                           3.53   1269.2   1.14     110      11.23       67      2.67  25        26.39     53       38.43 24
         Rensburg UK Select Growth Trust                         1.58    265.7   -1.44    244       6.13      236    -16.22 229        12.94    142         -    -
         Schroder UK Alpha Plus                                  0.57    2039    2.98      68       8.66      137     -2.64  54        44.17     12         -    -
         Sector average and number in sector                       -       -     0.83     317      8.73       314    -11.14 292        14.27    245       8.56 163


         UK EQUITY INCOME
         Artemis Income                                           4.8   3168.4 2.33        23      10.01       22     -5.18    17      22.69     21      87.91       6
         BlackRock UK Income                                     3.61    443.8 0.79        50      9.97        24      1.29     8      24.51     16      60.23      16
         Invesco Perpetual High Income                           3.92   9510.5 0.97        49      9.72        31     -6.29    20      36.65      2      129.6       2
         J O Hambro UK Equity Income                             3.86    428.1 0.21        65      6.71        72      0.1      9      28.61      9        -         -
         Neptune Income                                          4.78    941.4 0.15        69      9.22        38     -7.44    27      23.59     17        -         -
         Rathbone Income                                         4.51    463.1 1.63        32      10.92       15    -20.44    77       6.76     55      82.89       8
         Schroder Income Maximiser                               6.53    673.4 3.42        12      4.95        90      4.26     5         -       -        -         -
         Standard Life UK Equity High Income                     3.79    831.9 -1.35       96      4.11        96    -13.58    53      14.52     30      53.28      21
         Threadneedle UK Equity Alpha Income                      5.5    188.1 1.56        33      4.51        94     -7.75    28         -       -        -         -
         Sector average and number in sector                       -       -   1.08       105      8.19       104     -12.7    91      10.86     81      37.95      58


         UK SMALLER COMPANIES
         BlackRock UK Smaller Companies                          0.62   334.4    8.43      18      15.25      23     -12.91    23      23.26     16      98.51       6
         Investec UK Smaller Companies                           0.55    154     10.41      7      18.42      14      1.37      4      54.06      4      145.41      2
         Marlborough Special Situations                          0.93   184.4      0       53        0        56     -34.53    54       -5.3     40       93.6       7
         Old Mutual UK Select Smaller Companies                   0.1    432     7.33      24      12.24      34       -6.3    13      54.58      2        -         -
         Standard Life UK Smaller Companies                      0.56   613.2    19.3       2      34.88       2      9.27      2      79.57      1      107.11      5
         Sector average and number in sector                       -      -      5.19      60      13.65      60     -15.57    57      14.44     49      17.53      38


         FIXED INCOME CORPORATE
         AEGON Investment Grade Bond                             4.43     196    7.21      71      15.68      25      17.8     30         -       -        -         -
         AEGON Sterling Corporate Bond                            4.9     391    8.36      44      20.11       5     10.59     61       9.88     54      62.16      13
         Invesco Perpetual Corporate Bond                        5.15   5749.4   6.39      80      13.63      45     25.21     11      27.28      7      85.69       2
         M&G Strategic Corporate Bond                            4.08   2774.4   8.73      32      14.07      40     45.78      1      46.49      1        -         -
         Old Mutual Corporate Bond                               5.71    761.9    9.4      17      20.05       6      7.96     72       9.5      56      66.04       9
         Sector average and number in sector                       -       -     8.21      90      13.99      87     16.26     80      15.12     72      56.44      42


         FIXED INCOME HIGH YIELD
         AEGON High Yield Bond                                   6.66   262.9    7.03       3      22.42       5     21.31      3      31.38      4        -         -
         Threadneedle High Yield Bond                            8.4    636.9    5.04      15      16.43      14     19.23      8      31.72      3      70.36       4
         Sector average and number in sector                       -      -      5.5       21      17.93      21     19.54     20      27.32     20      70.73      12


         FIXED INCOME STRATEGIC
         AEGON Strategic Bond                                    4.07    336.2   5.27      51       16.6      24     21.67     11      24.83      6        -         -
         Artemis Strategic Bond                                   5.8    472.2   5.04      54       16.8      22     14.81     28      24.32      9        -         -
         Henderson Strategic Bond                                 6.9    898.5   1.68      66      15.18      26     19.69     17      26.62      4      63.88       8
         Invesco Perpetual Monthly Income Plus                   7.02   2876.3   6.33      35      21.17       6     20.63     15       35.9      1      93.46       1
         Investec Strategic Bond                                 4.69     261    5.91      42      10.86      52      25        8      23.88     11      65.31       7
         Legal & General Dynamic Bond                             5.5   1068.8   6.82      27      18.62      16     55.49      1        -        -        -         -
         M&G Optimal Income                                      4.49   2437.1   5.79      45       12.9      39     39.46      2        -        -        -         -
         Sector average and number in sector                       -       -     6.9       66      14.76      65     15.66     55      17.69     45      61.54      22




       42    Chelsea Financial Services Viewpoint October 2010
                                                                                                   6 MONTHS             1 YEAR          3 YEAR             5 YEAR            10 YEAR
                                                                               Yield    Fund       %                 %                %                  %                  %
                                                                                %       size*    Growth Position   Growth Position   Growth Position    Growth Position   Growth Position


 EUROPE EX UK
 BlackRock Continental European                                                1.21    288.3    -2.07      9        4.26       16      9.65      4      53.6       5      27.67       7
 BlackRock European Dynamic                                                    0.78    372.1     0.33      3        7.31       8     17.72       2     66.72       2        -         -
 Fidelity European Opportunities                                               0.05     608     -6.45      74       0.59       23     -9.79     31     25.47      28      21.87      11
 Henderson European Growth                                                       -     695.4    -3.26      21       6.04       11     -3.83     17      38.3      11        -         -
 Ignis Argonaut European Alpha                                                 1.01    306.1    -2.46      13      -0.62       33     -0.73      8     43.78       6        -         -
 Ignis Argonaut European Income                                                5.46    397.4    -6.83      82      -4.99       86    -13.44     50       -         -        -         -
 Jupiter European Special Situations                                            0.9     466     -4.92      47       0.49       25     -3.62     16     40.77       9      72.83       3
 Neptune European Opportunities                                                1.35    987.1    -2.09      11      -0.19       27     -0.74      9     60.44       3        -         -
 Schroder European Alpha Plus                                                  0.84    661.3    -2.33      12       4.74       14     -4.91     19     39.83      10        -         -
 Sector average and number in sector                                             -       -      -5.44     113      -1.54      110      -13      95     20.57      82      5.24       59


 JAPAN
 GLG Japan Core Alpha                                                          0.61    763.9 -4.99         15        -2.5     44     25.44       2     46.94       2       -6.43      1
 Invesco Perpetual Japan                                                         -      362 -10.35         63        -6.3     60     20.01       3      37.1       3       -7.32      2
 Jupiter Japan Income                                                           2       214  -5.01         16         1.9      7      3.51      10       -         -         -        -
 Neptune Japan Opportunities                                                     -     94.4 -12.48         65      -23.53     65     54.98       1     51.51       1         -        -
 Sector average and number in sector                                             -       -   -6.31         66       -1.65     65     -8.19      58     -4.84      51      -37.81     37


 NORTH AMERICA
 Gartmore US Opportunities                                                       -      198.4     -8.9     88      8.28       41     -4.54      53     -0.19      53      -21.15      9
 Investec American                                                             0.49     670.2    -9.43     89      4.72       81     -4.15      52     11.05      27         -        -
 M&G American                                                                    -     1652.1    -6.53     49      8.24       42     -0.66      34     16.61      14      -33.08     22
 Martin Currie North American                                                    -       654     -4.71     20      6.49       68     -5.49      56     11.16      26      -27.34     17
 Neptune US Opportunities                                                        -      581.3    -4.63     18      3.55       89      21.4       2     48.41       1         -        -
 Schroder US Mid Cap                                                             -      537.8    -4.24     16      11.84      13     17.17       4     39.34       2         -        -
 Threadneedle American Select                                                    -     1302.8   -11.67     96      0.46       95     -1.11      37     15.81      18      -37.88     32
 Sector average and number in sector                                             -        -      -6.22     97      7.71       97     -1.66      83     6.54       71      -33.98     46


 ASIA PACIFIC EX JAPAN
 Aberdeen Asia Pacific                                                          0.6    2000     9.19       10      27.87       10    44.86       5     107.63     19      222.75 6
 Fidelity South East Asia                                                      0.17    2057     5.29       27      23.87       17    24.43      23     151.7      5       162.19 12
 First State Asia Pacific Leaders                                              0.67    4468     8.75       13      20.29       39    45.72       4     125.7      13        -     -
 Newton Asian Income                                                           4.77    458.7    8.53       15       31.5       5     34.3       11       -         -        -     -
 Newton Oriental                                                               0.63    840.9      9        11      23.68       18     34.2      12     105.52     22      153.91 15
 Sector average and number in sector                                             -       -      3.62       92      19.92       9     18.7        -     93.24       -      117.86 -


 EMERGING MARKETS**
 Aberdeen Emerging Markets                                                       -      1700     9.46      7/42    30.32     5/41    59.28      1/30 153.34      1/27 254.99 1/20
 Allianz RCM BRIC Stars                                                        0.37     858.4   -0.73     99/164    22.5    51/155    9.18     62/114   -          -    -       -
 Fidelity India Focus                                                            -     1928.1   11.64    12/164    41.15    5/155     19.9    43/114 101.37     25/77   -       -
 First State Greater China Growth                                              0.4       478    11.23      4/92    32.31     4/90    40.65      6/82   173      3/70    -       -
 Gartmore China Opportunities                                                  0.25      753     2.53     49/92    22.83    21/90    12.64     59/82 158.14      4/70 226.95 5/56
 Ignis HEXAM Global Emerging Markets                                           0.47     99.1     1.25     36/42    14.47    38/41       -         -     -          -    -       -
 JPM New Europe                                                                0.07     256.2    4.32    40/164    32.85    24/155     7.1    68/114 78.79      28/77 294.81 13/41
 Jupiter Emerging European Opportunities                                         -       526     -0.3    94/164    25.41    42/155   -13.1    101/114 40.17     43/77   -       -
 Neptune Russia & Greater Russia                                                 -      354.3   -1.26    110/164   32.47    26/155    7.15     67/114 126.22    18/77   -      -z



 ABSOLUTE RETURN
 BlackRock UK Absolute Alpha                                                     -     2043.1 -2.62        39      -1.99      31     11.69      13     34.64       4                  -
 Gartmore UK Absolute Return                                                     -      357.6 0.41         24       1.04      24       -         -       -         -         -        -
 Jupiter Absolute Return                                                         -       629   -3.5        40         -        -       -         -       -         -         -        -
 Standard Life Global Absolute Return Strategies                               0.66     4092 8.49           2      15.32       4       -         -       -         -         -        -
 Threadneedle Absolute Return Bond                                               -       619  -0.02        29       0.06      26     21.48       8       -         -         -        -
 Sector average and number in sector                                             -        -   0.26         47      3.01       39     7.37       18     21.7        7         -        -


 MISCELLANEOUS**
 Artemis Strategic Assets                                                      0.65     603.7   -0.59     57/133   14.08 6/130          -         -     -          -      -           -
 BlackRock Gold & General                                                        -      2365    16.47      5/164   37.41 12/155      76.27     5/114 217.32      3/77  842.04      1/41
 City Financial Strategic Gilt                                                 0.94      88     4.66      30/31     2.24 30/31       24.15     18/27    -          -      -           -
 CF Eclectica Agriculture                                                      3.35     98.7    -3.72    131/164   15.45 77/155      -4.98    89/114    -          -      -           -
 CF Miton Special Situations Portfolio                                           -      480.4    1.73     18/153     6.37 105/150    23.44      4/119 52.31      3/98  119.71      1/61
 Henderson Global Technology                                                     -      351.7   -4.15       8/12    15.05 8/12       15.62      4/11 43.21       3/11  -68.17       7/7
 HSBC Open Global Return                                                         -      132.5    0.45    125/159     5.54 123/151     8.49     21/111   -          -      -           -
 JPM Natural Resources                                                         5.31    2075.2    3.33     52/164    29.42 32/155     20.46    41/114 111.34     23/77  577.76      2/41
 Jupiter Financial Opportunities                                               2.24     1070    -9.73    162/164   -10.96 154/155    12.56     53/114 51.97     40/77  187.09      18/41
 M&G Global Basics                                                             1.85    4432.7    0.29     28/205    13.91 20/197      9.82     10/175 57.8      4/147  169.98       1/91
 M&G Global Dividend                                                           3.27     254.7    -1.6     63/205   14.79 13/197         -         -     -          -      -           -
 Newton Global Higher Income                                                   0.29    1159.3   -0.36     40/205    12.27 25/197      9.44     13/175   -                 -           -
 Old Mutual Global Strategic Bond                                              1.49      227    9.22       2/67    15.73 21/65       69.89      8/55 62.04       6/47 117.47       6/29
 Rathbone Global Opportunities                                                   -      86.1    1.76      15/205    14.21 17/197      -7.1    107/175 42.88     10/147    -           -
 Schroder Global Property Securities                                             -      499.4    6.69      4/42    18.38 12/42       -7.51      5/35    -          -      -           -

* Fund sizes (£m) are collected one month in arrears
** Position in sector omitted due to sector amalgamation
†
   Please note that investment outside of the ISA wrapper is Creation/NAV + 1%
Whilst every effort has been made to ensure the accuracy of this information, including discounts, Chelsea Financial Services take no responsibility for any errors,
omissions or inaccuracies contained therein.

Please read the Important Notice on page 2. Past performance is not a guide to future returns.
Source: Financial Express Analytics, 31 August 2010. Yield figures as at 31st August 2010.

                                                                                                             October 2010 Viewpoint Chelsea Financial Services                        43
      The Chelsea
      Relegation Zone
      Market volatility is the watchword of 2010. Bears fear                              Can multi-manager performance justify fees?
      a double dip, bulls see a decade-long equities surge.                               The proliferation of multi-manager funds is a recurrent theme in
      Myopia maybe, but these polar views are causing a                                   this year’s league of laggards. There are 24 multi-manager funds
      period of sustained volatility in markets.                                          included in the league table – accounting for 28% of the entire
           The broader economic flux is not helping either. While                         list. The largest fund in the Relegation Zone is SWIP Multi-
      tough austerity measures have improved UK plc’s credit rating,                      Manager with over a billion under management. Yet despite the
      slower-than-expected growth has meant the fear of double-dip                        generally poor performance of multi-manager funds, according
      recession looms like a spectre; Cameron and Osborne’s                               to the Investment Management Association (IMA), 10 years ago
      honeymoon has long since finished, and US incumbent                                 there was £11 billion in multi-manager funds; by the end of
      President Obama is not faring much better across the pond as                        2009 there was £42 billion. The number of funds has
      negative equity remains and unemployment rises. Emerging                            mushroomed too, with over 400 now available to UK investors.
      markets have been robust but questions over valuations remain                       Why the popularity you may ask? We at Chelsea have yet to see
      – a fall-off in global demand could cause tiger economies a                         a convincing argument for products that apply not one but two
      sprain. While some fund managers have admirably navigated                           layers of charging, unless used in a multi-asset capacity. The
      the choppy investment waters, those who have seen their                             argument for multi-manager is of course increased diversification
      performance torpedoed through poor stock selection and                              and a more managed solution. But looking at the abject
      porous investment processes are for the plank – inclusion                           performance of multi-managers in the Relegation Zone it is clear
      in the Chelsea Relegation Zone.                                                     that many are failing to compensate for their annual fees and are
           The number of fund managers included in this issue                             actively destroying value through poor fund selection.
      of Viewpoint’s league of shame remains depressingly high:
      85 in the drop zone, accounting for a whopping £13.2 billion                        Rocky road for Legg Mason investors
      in underperforming assets under management. This is far too                         The US has long been a graveyard for active managers, given
      much of investors’ money underperforming for far too long.                          the efficiency of US markets. Nonetheless our researchers were
                                                                                          surprised and disappointed to see US veteran Bill Miller among
      Banking on underperformance                                                         the deadwood with his US Equity fund. Bill believes US blue chips
      With the odd exception of course, the ability of banks to provide                   are the ‘bargain of the lifetime’. He will need his long-term
      top-performing proprietary funds to the investing public has                        conviction to start yielding some results if he is to remove this
      never been great. To say that the majority of these funds are                       fund from the quagmire of consistent underperformance.
      competently managing investors’ savings would be to give them
      a delusion of adequacy. In general, independent fund managers                       Never too big to go down
      or long-established asset management arms of financial                     What is surely a major theme of this year’s Relegation Zone is the
      institutions are what to look for when seeking to buy the best-            proliferation of big name houses with multiple inclusions. Given
      performing actively-managed funds. When a major bank                       their considerable resources and reputation, it is alarming that
      launches a suite of products examine very closely for bandwagon            Standard Life and Investec are just some of the big names with
      jumping, and have a good look under the bonnet for the                     multiple entries in this issue’s league table. An inflection point is
      investment objectives. Barclays range of multi-manager funds is            long overdue for these funds. Investment houses should not be
      an example of multiple funds offered by a bank woefully                    able to depend on investor inertia to allow these funds to
      underperforming their active peers; shockingly, five of their multi-       continue to take in assets while continuing to underperform.
      manager products have warranted inclusion in the drop zone.                It is less of a surprise to see perennial underperformers Scottish
                                                                                                                         Widows/SWIP with
                                                                                                                         seven entries.
                                                                                                                             Once again it goes to
                                                                                                                         show; poor performance
                                                                                                                         can affect the big names as
THE RELEGATION ZONE – THE ‘DIRTY DOZEN’                                                                                  well as the small. Regular
                                                                                                                         monitoring of your portfolio
                                            Fund size                                       % negative deviation         should enable you to spot
Largest funds in the Relegation Zone        (millions)   Worst Performers                   from sector average*
                                                                                                                         these and any other poor
1st   SWIP – MULTIMANAGER UK EQU INC £1105.9M            1st ELITE – HENDERSON ROWE DOGS FTSE 100 33.64%                 performers before they enter
                                                                                                                         the Relegation Zone.
2nd L&G – MULTIMANAGER UK ALPHA £877.1M                  2nd LEGG MASON – US EQUITY                   33.13%

3rd STD LIFE INV – GLBL INDEX LINKED BOND £864.4M        3rd MFM – TECHINVEST SPECIAL SITS               32.51%

4th SCOT WID – UK EQUITY INCOME £712.0M                  4th EFA – NEW HORIZON HIGH INC                  30.55%

5th STD LIFE TM – GLOBAL EQUITY           £602.8M        5th SVM – GLOBAL OPPORTUNITIES                  26.04%

6th STD LIFE INV – CORPORATE BOND £490.2M                6th CITY FINANCIAL – STR GLBL BOND 26.01%
                                                         *Based on three-year cumulative performance




      44   Chelsea Financial Services Viewpoint October 2010
                                                      3 year % Quartile   Status                                                            3 year % Quartile    Status
                                                       growth position    (NE*)                                                              growth position     (NE*)


ASIA PACIFIC EXCLUDING JAPAN                                                         JAPAN
F&C - Pacific Growth                                   -0.34       4       NE        Santander - Premium Japan Equities                     -16.12      4         NE
L&G - Pacific Growth                                    9.52       4       NE        Scot Wid - Japan Select Growth                         -14.20      3         ~
Sector Average                                         17.74       2                 SLFC - Japan                                           -13.68      3         NE
                                                                                     Threadneedle - Japan                                   -15.91      3         ~
                                                                                     Sector Average                                          -7.87      2
CAUTIOUS MANAGED
Aviva Inv - Manager of Manager Cautious                 -3.24      3       NE
AXA - Defensive Distribution                           -10.79      4       ~         NORTH AMERICA
City Financial - Multimanager Income                    -7.66      4       NE        BlackRock - US Dynamic                                  -8.78      4         NE
CF - Miton Cautious Income Portfolio                   -17.73      4       NE        Invesco Perp - US Equity                               -14.79      4         ~
COURTIERS - Total Return Cautious Risk                  -7.41      4       NE        L&G - (Barclays) MultiManager US Alpha S2†             -15.94      4         ~
Gartmore - Multimanager Cautious                        -1.55      3       NE        Legg Mason - US Equity                                 -34.88      4         NE
IFDS - Chartwell Balanced Income                       -23.13      4       ~         Santander - Premium US Equities                         -7.61      4         NE
L&G - (Barclays) Balanced†                             -10.05      4       NE        Sector Average                                          -1.75      2
Margetts - Greystone Cautious Managed                  -17.73      4       NE
MFM - Maze Cautious Managed                             -6.86      4       NE
Premier - Hurlingham Balanced Portfolio                -17.57      4       ~
Premier - Liberation IV                                 -8.63      4       NE
                                                                                     UK ALL COMPANIES
Santander - Multimanager Balanced                       -3.19      3       NE        Aviva Inv - Sustainable Future UK Growth               -22.24      4         ~
Schroder - MM Cautious Managed                          -3.61      3       NE        Aviva Inv - UK Growth & Value                          -16.96      4         ~
Sector Average                                          0.60       3                 CF - Real Life                                         -18.83      4         NE
                                                                                     Elite - Henderson Rowe Dogs FTSE 100                   -45.65      4         NE
                                                                                     Family - Charities Ethical                             -28.67      4         ~
                                                                                     JPM - Premier Equity Growth                            -23.67      4         ~
EUROPE EXCLUDING UK                                                                  L&G - (Barclays) MultiManager UK Alpha S2†             -15.48      3         NE
AEGON - European Equity                                -31.60      4       NE        L&G - (Barclays) MultiManager UK Alpha†                -14.72      3         ~
Artemis - European Growth                              -36.53      4       NE        Majedie - UK Opportunities                             -27.65      4         NE
AXA - Rosenberg European                               -24.28      4       ~         Melchior - UK Opportunities                            -33.88      4         NE
CF - Canlife European                                  -22.31      4       NE        Premier - Castlefield UK Alpha                         -29.70      4         NE
Henderson - European Opportunities                     -22.17      4       NE        Premier - Castlefield UK Equity                        -15.08      3         NE
Henderson - European Value                             -19.32      4       ~         Rensburg - UK Managers Focus Trust                     -15.03      3         NE
Legg Mason - Continental European Equity               -26.06      4       ~         Saracen - Growth                                       -33.34      4         NE
M&G - European                                         -24.46      4       NE        S&W - Opportunities                                    -16.57      4         ~
Old Mutual - European Equity                           -21.06      4       NE        Taylor Young - Opportunistic                           -26.27      4         ~
Schroder - European                                    -22.05      4       NE        Sector Average                                         -12.01      3
SLFC - European                                        -17.06      3       NE
Stan Life Inv - European Equity Manager of Managers    -19.38      4       NE
SWIP - Multimanager European Equity                    -17.44      3       ~
Sector Average                                         -13.35      2                 UK CORPORATE BOND
                                                                                     Architas MM - High Income Portfolio                      4.41      4         NE
                                                                                     Stan Life Inv - Corporate Bond                          11.93      3         NE
GLOBAL BOND                                                                          Sector Average                                          15.1       3
AXA – Pan European High Yield Bond                     -.2.53      4       NE
BlackRock Inv Mgrs UK – Charinco Common Invest         30.67       4       ~
City Financial – Strategic Global Bond                  8.22       4       ~         UK EQUITY INCOME
EFA – New Horizon High Income                           3.68       4       NE
                                                                                     AXA - Framlington Equity Income                        -32.92      4         ~
M&G - European High Yield Bond                         35.56       3       NE
                                                                                     AXA - Framlington Monthly Income                       -33.22      4         NE
Scot Wid – Cautious Portfolio                          13.47       4       NE
                                                                                     Henderson - Global Care UK Income                      -22.64      4         NE
Stan Life Inv - Global Index Linked Bond               20.15       4       ~
                                                                                     Ignis - Higher Yield                                   -16.41      3         NE
The 140 Inv Mgrs – Broadway ICVC Income                18.48       4       ~
                                                                                     Scot Wid - UK Equity Income                            -17.33      4         ~
Threadneedle - European Corporate Bond                 31.69       3       NE
                                                                                     SWIP - MultiManager UK Equity Income                   -17.02      3         NE
Sector Average                                         34.23       3
                                                                                     Sector Average                                         -12.99      3


GLOBAL EMERGING MARKETS
Aberdeen - Multi Manager Emerging Markets Portfolio     0.11       4       ~
                                                                                     UK SMALLER COMPANIES
F&C - Emerging Markets                                 14.12       4       NE        AXA - Framlington UK Smaller Cos                       -30.74      4         ~
Gartmore - Emerging Markets Opportunities               2.61       4       NE        Invesco Perp - UK Smaller Companies Growth             -34.59      4         ~
Martin Currie - Emerging Markets                       -2.04       4       ~         Jupiter - UK Smaller Companies                         -24.86      4         NE
Sector Average                                         20.98       3                 JPM - UK Smaller Companies                             -27.12      4         NE
                                                                                     MFM - Techinvest Special Situations                    -48.24      4         ~
                                                                                     Premier - Castlefield UK Smaller Companies             -22.38      3         NE
GLOBAL GROWTH                                                                        Scot Wid - UK Smaller Companies                        -25.13      4         NE
                                                                                     UBS - UK Smaller Companies                             -41.28      4         ~
Aviva Inv - Sustainable Future Global Growth           -16.38      4       NE        Sector Average                                         -15.73      2
Architas MM - Diversified Share Portfolio              -22.86      4       NE
AXA - Rosenberg Global                                 -15.52      4       NE
CF - Purisima PCG                                      -27.15      4       NE      Please read the Important Notice on page 2. This is a purely statistical
CF - Sackville Growth Portfolio                        -17.82      4       NE
EFA - New Horizon Growth                                -7.17      3       NE
                                                                                   chart, featuring funds which have been 3rd or 4th quartile for three
Fidelity - International                               -11.81      4       NE      discrete consecutive years.
Henderson - Multi Manager Tactical                     -25.05      4       NE
Investec - Global Equity                                -9.82      3       NE      *NE = New Entry
                                                                                   †
Investec - Global Free Enterprise                      -14.68      4       NE        The management of the L&G (Barclays) funds is carried out by Barclays
JPM - Global Equity Income                             -15.41      4       ~         Wealth; Legal & General are responsible for the administration only.
L&G - (Barclays) MultiManager Global Core†             -25.55      4       ~
Old Mutual - Global Equity                              -18.1      4       NE      All cumulative statistics % change, bid to bid, net income reinvested, three
Premier - Fulcrum Global Diversified                   -11.58      3       NE      years to 31/08/10.
Pru - Global Growth                                    -10.91      3       NE
Scot Wid - Stockmarket Growth Portfolio                 -6.85      3       NE      Source: Financial Express Analytics. Whilst every effort has been made to
Standard Life TM - Global Equity                       -10.78      3       NE      ensure the accuracy of this information, Chelsea Financial Services take no
SVM - Global Opportunities                             -30.61      4       ~       responsibility for any errors, omissions or inaccuracies contained therein.
Sector Average                                          -4.57      2               Past performance is not a guide to future returns.




                                                                                                    October 2010 Viewpoint Chelsea Financial Services              45
                                                                                                       Fund manager reports and accounts – Paper copies of the fund manager reports and accounts
                          Key Features of the                                                          are available on request at a charge of £20 per fund.
                                                                                                       Shareholder/unitholder meetings – For the Cofunds Investment ISA, you have the right to
                          Cofunds Platform                                                             attend and vote at shareholder meetings of companies in which you hold shares. You can also
                                                                                                       instruct Cofunds to vote at these meetings on your behalf. For carrying out each such instruction,
                          Incorporating T&Cs (1108)                                                    Cofunds will charge you £20.
                                                                                                       Other costs of investment
This document should be read in conjunction with the Cofunds Platform Fund Key                         Intermediary charges – You and your intermediary will agree the cost of their advice at the
Features. This gives further information regarding the funds available through Cofunds,                outset. To help you keep track of the overall costs of your investments, Cofunds offers a service
such as charges, fund objectives and risks.                                                            where your intermediary’s charges can be deducted from the Cofunds Cash Account.
The Financial Services Authority is the independent regulator for the financial services industry.
It requires us, Cofunds, to give you this important information to help you to decide whether the       For current rates of interest paid to investors on money held on the
platform service we provide (in respect of ISAs, and investment funds) is right for you. You should     Cofunds platform go to: www. cofunds.co.uk/docs/cofundsrates.pdf
read this document carefully so that you understand what you are buying, and then keep it safe          If you don’t have online access, please ask your intermediary for rate details.
for future reference.                                                                                   You can download fund manager reports and accounts free of charge at
Copies of all documentation can be provided in large print, braille or audio tape. All documentation    www.cofunds.co.uk
and communications in relation to Cofunds will be in the English language.                              If you would like specific information on:
Cofunds is the UK’s leading independent investment platform and is backed by some of the
largest financial institutions in the UK and USA, including Threadneedle, Jupiter, Newhouse
Capital Partners, Legal & General, IFDS and Prudential.
Cofunds enables intermediaries, on behalf of their clients, to invest in over a thousand funds from     please write to Cofunds Administration, PO Box 1103, Chelmsford, CM99 2XY.
many different fund managers – all in one place. Essentially, Cofunds provides award-winning
administration services to investors via their intermediaries. Cofunds is not a fund manager
and therefore does not offer its own range of funds, nor does it offer investment advice. This
independent status means that it is free to concentrate on providing the tools and services your
                                                                                                       CONFLICTS OF INTEREST
intermediary needs to give you superlative service.                                                    Conflicts of interest will invariably exist for every company, due to the complex nature of its
Services include the opportunity to hold investments, either directly in funds, in ISAs or within an   relationship with its stakeholders. Cofunds treats issues surrounding conflicts of interest very
investment bond or pension (for which separate documents are available).                               seriously and has a duty of care to manage them in a manner which is in the best interests of its
                                                                                                       customers, in line with its regulatory requirements.
Cofunds offers greater convenience and choice compared to investing with each individual
product provider. These include:                                                                       Listed below are a series of conflicts of interest that might arise as a result of Cofunds providing
                                                                                                       its services; and also outlines the manner in which Cofunds deals with these conflicts of interest.
   One view of most of your investments within your portfolio including cash and any insured funds
   you may hold within an investment bond or pension.                                                  Beneficial Corrections
   Consolidated valuations across your entire investment fund and insured fund portfolio.              In exceptional circumstances Cofunds may make corrections to a client’s holdings where
                                                                                                       instructions received from an intermediary are capable of misinterpretation. In all such cases
   The ability to switch funds easily as your investment needs change.                                 Cofunds will bear the cost of correction. Full details are available upon request by writing to our
   Significantly less paperwork.                                                                       administration address (see above).
   Statements issued at least annually.                                                                Business Entertainment and Gifts
   One consolidated tax voucher issued each year.                                                      While recognising the value of personal relationships with service providers, intermediaries and
With so many different financial products in the market, selecting the ones that best suit your        suppliers, Cofunds has strict standards in respect of what gifts and business entertainment are
needs can be a complex process. Cofunds believes in the value of advice, which is why we only          acceptable. This is applicable both to the provision and receipt of such items. Our policy on gifts
offer our services via intermediaries. Through your relationship with your intermediary, not only do   and business entertainment forms part of our code of conduct which is subject to our disciplinary
you benefit from their expertise but also the value added services that Cofunds has to offer.          process if it is not strictly adhered to.
If you receive advice, your intermediary will give you two ‘key facts’ documents – one details the     Code of Conduct
services they provide and the other the costs of their services. The amount may depend on the          A code of conduct is in place at Cofunds which all staff must adhere to. At the forefront of the
size of your investment and, in the case of regular savings, the period for which you make them.       code of conduct is the key principle that no employee may benefit from the knowledge of an end
Cofunds Limited administers your investment and is also the ISA Plan Manager. Cofunds cannot           customer’s affairs. Non-compliance with the code of conduct will result in the application of the
advise you or assess your investment or the appropriateness of an investment in respect of your        disciplinary process.
own personal circumstances.                                                                            Cofunds Platform
To use the Cofunds service, you must at all times have a nominated intermediary. Please refer to
Section A 3.1 of the Terms & Conditions of the Cofunds Platform.                                       providers for distribution and administration services connected with your investment. This is
                                                                                                       disclosed where required and does not influence the choice, positioning or offering of platform
ITS AIMS                                                                                               products.
  To give you access to the country’s leading fund managers in one place.                              Fee Payments
  To provide a one-stop investment dealing and custody service available exclusively through           We may pay fees to third parties in connection with the maintenance of your account. If you
  your nominated intermediary.                                                                         require details of these fees, please write to us at our administration address (see above).
                                                                                                       Intermediary Benefits
FEES AND CHARGES                                                                                       (a) Monetary – Cofunds may agree to pay a commission based on a proportion of the platform

How Cofunds is paid for its services                                                                   marketing costs.
Cofunds doesn’t charge you for investing through the platform. You pay the same fund charges           (b) Non-monetary – ‘Non-monetary’ services may from time to time be provided to an
as you would if you invested directly with the fund manager.                                           intermediary free of charge. These include:
Cofunds receives its income from a number of different sources to help provide you with a                 Data gathering of customer information from fund managers.
market-leading service. This pays for the costs of distributing funds through our platform and the        Technical training on use of the platform and associated facilities.
associated administration services we provide to you and your intermediary.                               Integration of computer systems and websites.
a. Client charges                                                                                      Such benefits will only be provided to an intermediary on the strict understanding that this will
The charges you pay are detailed in section d. ‘What charges will I pay?’.                             enable the intermediary to:
These include:                                                                                            Improve and extend the range of services provided, whether or not investment advice is given,
                                                                                                          and to give greater scope to pass savings made back to the investor by: discounting funds,
                                                                                                          rebating commissions, or reducing fees.
                                                                                                       Full details of any monetary or non-monetary benefits are available on request at our
                                                                                                       administration address (see above).
b. Fund Manager payments                                                                               Matching Trades
Initial charge – Every time you make a new investment, you will pay your chosen fund manager           We deal in units at the standard prices determined by the fund, which may set different prices for
an initial charge. Cofunds will receive a proportion of this charge from the fund manager.             buying and selling units. We may from time to time offset your order against orders received from
We receive between 0% and 0.75% of the investment amount as our proportion of the fund                 other customers, thereby realising a profit equal to the difference between the buying and selling
manager initial charge, with the average being 0.09%.                                                  prices. We retain this profit and are not obliged to pay it to you. The price at which we deal is the
Annual Management Charge (AMC) – Each year, you will pay each fund manager an annual                   same whether or not we offset transactions in this way.
management charge. The fund manager will pass Cofunds a proportion of this charge.
Cofunds receives between 0.1% and 0.4% of the value of assets in each fund administered by             YOUR INVESTMENT
Cofunds, with the average being 0.25%.                                                                 There are three ways of investing via your intermediary with Cofunds. You can also invest in a
Fund management charges are detailed in individual Fund Key Features.                                  range of pension and investment bond products via the Cofunds platform. Please refer to your
The example in section d. ‘What charges will I pay?’ demonstrates how Cofunds is paid for its          intermediary for further details.
services. The items highlighted in bold are retained by Cofunds.                                       1. Investment funds
c. Interest on money held on clients’ behalf                                                           You can invest directly into three types of investment funds through Cofunds:
Cofunds may earn interest on all money held on clients’ behalf, for example money awaiting                Unit Trust
investment. Depending on the type of account in which the money is held, you may be paid                  A unit trust is an easy way to invest in stock market investments. Investors’ money is ‘pooled’
a portion of this interest. The rate of interest earned is based on the current Bank of England           and invested across a wide spread of investments on their behalf by professional fund
base rate.                                                                                                managers. You own units in the fund, which represent your share of the ‘pool’. Normally, two
d. What charges will I pay?                                                                               prices are published for a unit trust – the buying price and the selling price. The difference
Fund manager charges – These are outlined in section 1b above and the example below shows                 between these is known as the ‘spread’ and is effectively a charge built into the price.
how Cofunds is paid for its services. The items highlighted in bold are retained by Cofunds.              Open Ended Investment Company (OEIC)
                                                                                                          An OEIC is similar to a unit trust. The main difference is that OEICs have a corporate structure
Example – £10,000 invested in an ISA in a typically priced investment fund                                and offer shares rather than units. In addition, there is generally only a single price published
                                                                                                          for the fund that reflects the underlying value of the investments in the fund. Fund managers’
  Investment amount                                                                   £10,000             charges are shown separately.
                                                                                                          European Collective Investment Vehicles (ECIVs)
  Fund manager initial charge                                           5%              £500              ECIVs are investment funds based outside of the UK which are subject to local tax and
                                                                                                          legislation. These include Luxembourg based SICAVs (Société d’Investissement à Capital
     Retained by fund manager                                         1.25%              £125             Variable – the Luxembourg equivalent of an OEIC) and Dublin based OEICs. Please see the
     Commission paid to the intermediary by the                         3%              £300              section ‘Taxation’ for more information regarding taxation and ECIV funds.
     fund manager                                                                                      2. Investment funds within an ISA
                                                                                                       An ISA is an account that acts as a tax efficient ‘wrapper’ for your investment funds. You can
     Received by Cofunds                                              0.75%              £75           invest in a wide range of unit trust and OEIC investments available on the Cofunds platform
  Fund manager AMC                                                     1.5%             £150           through a stocks and shares ISA.
                                                                                                       There are two types of ISAs:
     Retained by fund manager                                          0.6%              £60              Stocks and shares ISAs, which normally include investments in unit trusts, open-ended
     Commission paid to the intermediary by the                        0.5%              £50              investment companies (OEICs), investment trusts, shares, corporate bonds and gilts.
     fund manager                                                                                         Cash ISAs, which include building society and bank deposits, national savings and money
                                                                                                          market funds. Cash ISAs are not available through Cofunds.
     Passed to Cofunds by fund manager                                 0.4%              £40           Cofunds Investment ISA
  Total charges paid by the client                                                      £650           The Cofunds Investment ISA is a stocks and shares ISA that allows you to invest in Unit trusts and
                                                                                                       OEICs on the Cofunds platform.
  Total amount paid to Cofunds                                                          £115              You can invest up to £10,200 into a Cofunds Investment ISA in each tax year. You can invest at
                                                                                                          any time.
Switching charge – If you switch your investment between directly-held funds or between funds             The above maximum is subject to the amount you may hold in a cash ISA. For example, if
held in an ISA, Cofunds will apply a charge of 0.25% of the amount of money you are switching.            you have £3,000 invested in a cash ISA elsewhere you can invest up to £7,200 into a Cofunds
                                                                                                          Investment ISA.
For example, you might hold £10,000 in an ISA, all invested in one fund. If you wished to switch
£5,000 of that investment to a new fund, Cofunds would charge 0.25% of £5,000 – so you would           If you have a stocks and shares ISA and a cash ISA, you cannot increase the maximum allowance
pay £12.50. However, there is no cost to switch funds within the Cofunds Pension Account.              in one by transferring it to the other.
                                                                                                       It is your responsibility as the investor to ensure that you do not exceed the total maximum
          46      Chelsea Financial Services Viewpoint October 2010                                    ISA allowance (£10,200) in each tax year.
Can I invest cash within my Cofunds Investment ISA?                                                      b) Investments into an ISA or investment funds
You may temporarily hold monies in the Cash Reserve facility. This allows you to shelter your            1. Lump sum investments
investment, either in times when markets are uncertain or when you simply want to secure your            You have the ability to make a lump sum payment into your ISA or investment funds from your
ISA allowance for the tax year, pending a suitable investment opportunity. You may earn interest         Cash Account or via cheque. If paying from your Cash Account please ensure that it is in the
on your money while it is held in this way. Any interest you receive is not intended to compete with     same name and if applicable, has an identical designation to the holders of the Cash Account.
rates for other cash accounts and is unlikely to achieve the potential returns of equity investments.    Cheques must be made payable to Cofunds Limited and should either be drawn on your
Please see Section B 3.2 of the ISA terms for further details.                                           own or on a joint account. For building society cheques, your name must appear on the front
If there is no clear instruction on your Cofunds Investment ISA application, your cash will be           of the cheque (for example, Cofunds Limited Re: A.B. Smith), or on the back of the cheque
automatically placed into the Cash Reserve facility.                                                     accompanied by the building society’s official stamp and signature. New investments can also be
Movement of cash to and from your Cash Reserve is subject to the same switching arrangements             made online via your intermediary.
and charges as investment funds. Please refer to the section ‘How do I move between funds?’ for          2. Regular monthly investments
more information.                                                                                          If your intermediary has verified that the bank or building society account you wish to make
The use of the Cash Reserve facility within your Cofunds Investment ISA does not qualify as an             monthly payments from belongs to you, then your first monthly subscription can simply be
ISA cash component. Interest payable on cash held in the Cash Reserve is paid net of a 20%                 made by direct debit. For applications received up until the last day in any month, the first direct
HMRC flat rate charge which is not reclaimable. If cash is not invested, HMRC may require the ISA          debit collection will be made on or just after the 25th day of the following month.
manager to return the cash to you.                                                                         If your intermediary has not verified your bank or building society account as belonging to
Investment Limits for 2010/11                                                                              you, you will need to send your first monthly subscription by cheque, drawn on your own or
                                                                                                           a joint account which must match that of the direct debit instruction. Thereafter, Cofunds will
                                                                                                           automatically collect on or just after the 25th day of each month.
       Product                  Min New                 Max New                Main Regular                If you stop paying regular monthly savings for three consecutive months and the value of the
                               Lump Sum                 Lump Sum              Monthly Savings              investment is below £1,000, Cofunds reserve the right to cash in your investment and return the
                                per fund                                         per fund                  value to you. Consequently you will lose the portion of your overall ISA allowance for the value
                                                                                                           of any investment already made. Any future contributions to an ISA in the current tax year will
   Investment funds               £1,000                    NONE                      £100                 be limited to the difference between the ISA limit and the total value of all subscriptions made in
                                                                               by direct debit only        the current tax year.
        Cofunds                   £1,000                   £10,200*                   £500               c) Transferring funds
     Investment ISA                                   (please see below)       by direct debit only
                                                                                                         1. Investment Funds
                                                                                                         If you wish to transfer existing unit trust or OEIC holdings to Cofunds, you can do so as long as
                                                                                                         the fund is available through Cofunds. Your existing manager will re-register your investment in the
       Product                     Min                      Max                      Min                 name of Cofunds Nominees. Your money will remain invested and you will not pay an initial charge.
                                Transfers                Transfers                  Top Up
                               in per fund              in per fund                per fund              2. ISA Investments
                                                                                                         Transfers of stocks and shares ISAs:
   Investment funds               £1,000                    NONE                      £500                  If you have a stocks and shares ISA from the current tax year and would like to transfer this
                                                                                                            into a Cofunds Investment ISA, you must transfer the full amount. This will continue to count
        Cofunds                   £1,000                    NONE                  £500 (up to               towards your ISA allowance for the current tax year.
     Investment ISA                                                              maximum limit)             If you wish to transfer stocks and shares in an ISA from a previous tax year into Cofunds, you do
                                                                                                            not have to transfer the full amount. This transfer will not count towards your ISA allowance for
                                                                                                            the current tax year.
                                                                                                         Transfer of cash ISAs:
3. Cofunds Cash Account                                                                                       If you transfer your cash ISA in the current tax year and can use this to buy funds within a
The Cofunds Cash Account is a client money account that allows you to hold monies on the Cofunds              Cofunds Investment ISA. This will continue to count towards your ISA allowance for the current
platform. It is not an investment product, ISA or bank account – it is a service that allows you to           tax year. For example, if you only hold £3,600 in a current year cash ISA and transfer this cash
transfer monies in and out of relevant investment(s) conveniently, and at a time suitable to you.             into a Cofunds Investment ISA, it will then be classed as a stocks and shares ISA. You then
The cash account is made available in the name(s) of the investor(s) and if applicable will carry             have the ability to open another cash ISA to the value of £3,600 as you now have an unused
the same designation. The cash account can then be used to fund future payments into these                    cash ISA allowance.
investments. One investor may therefore be linked to several cash accounts, as they may be                    If you have invested into the cash component of an ISA from previous years, you can transfer
part of separate investments that have different holders or, carry different designations. You may            some or all of this amount to buy funds within a Cofunds Investment ISA. This will not count
hold a Cofunds Cash Account without having any other investment on the platform, however all                  towards your total ISA allowance for that year.
monies within your cash account must be destined for investment.                                         Cash transfer – If the old manager cannot support re-registration, your investment can be sold
The cash account will be linked to the nominated bank account you designate at the time of               and the cash proceeds transferred to Cofunds.
investment. Your nominated bank account can be used to transfer monies to and from your cash             Please Note:
account. Cofunds will normally process your transfer instruction within 1 business day of receipt.
Where large numbers of transfer instructions are received, transfers may be processed within 2              Your nominated intermediary will detail all the charges on transfer.
business days of receipt.                                                                                   You should also check any exit charges that your existing manager may make for cash
Interest                                                                                                    transfers.
Monies held within a Cofunds Cash Account will accrue interest daily, which will be credited to the         If you are transferring an existing stocks and shares ISA in cash, there is a potential loss of
balance monthly in arrears. The rate of interest earned will be a fixed percentage below the Bank           income or growth because you will be out of the market between the time your investment is
of England (BOE) base rate:                                                                                 sold and bought back. This applies to both transfers into and out of Cofunds.
   Details of Cofunds current interest rates can be found at the below link. Alternatively,              d) Registration
   please contact your intermediary: www.cofunds.co.uk/docs/cofundsrates.pdf
   Details of the Bank of England’s current base rate can be found in the financial section of           please see the Terms and Conditions of the Cofunds Platform.
   leading newspapers or by visiting: www.bankofengland.co.uk
                                                                                                         For SIPP, SSAS, Corporate or Trust fund investments please consult with your nominated
Any interest you receive will fluctuate in line with the BOE base rate. If interest earned in any        intermediary before making your application.
monthly period is £1 or under, no interest will be paid.
Cofunds is not a retail bank, nor a deposit taker. All Cofunds Cash Account monies are pooled            When and how is my money invested? (Order execution policy)
together and held as a client account with the Bank.                                                     Your money is invested, whether by way of lump sum, regular monthly savings, cash transfer or
Please note that if the Bank defaults or becomes insolvent you may not receive all your money            Cofunds Cash Account, using one method:
back. Cofunds uses a number of banks to spread the risk of default. For more information on                Units are purchased and executed directly through the fund manager who sets prices at a
the current Cofunds nominated Bank(s), please contact your intermediary or visit the Cofunds               specific ‘valuation pricing time’ in the future. Therefore, you will not know in advance exactly
                                                                                                           what price you will receive. Provided the relevant fund dealing cut-off times are met (usually
Cofunds will receive additional interest from the Bank. Details are available in request by writing to     11.15am, but does vary between funds), we will normally buy units in the funds you have chosen
the Cofunds administration address (see previous page).                                                    at the next available valuation pricing time following receipt of your instruction. In the case of
                                                                                                           regular savers, the price will be calculated at the next available valuation pricing time following
TAXATION                                                                                                   receipt of your monthly payment. The valuation pricing times vary between fund managers.
Tax treatment depends on your individual circumstances and may change in the future.                       Please refer to the “Fund Details” section of the Fund Key Features for further details.
Unit Trusts and OEICs
                                                                                                           be delayed due to the availability of valuation pricing times being impacted by European public
bought directly. Interest paying fund distributions are subject to income tax at 20%. UK dividend          holidays, where they differ to those in the UK.
distributions on equity funds are subject to tax at 10% which cannot be claimed back. Higher rate          Instructions are dealt with in due turn. When larger numbers of instructions are received, deals
taxpayers will have an additional tax liability.                                                           may be placed at the next available valuation pricing time on the business day following receipt.
ECIVs
                                                                                                         Am I eligible to invest?
The taxation treatment outlined in the Unit Trusts and OEICs section above is applicable to ECIVs
except that distributions may be paid gross, without deduction of any tax. UK investors should           Investment funds and Cofunds Cash Account
declare the income in their annual tax returns and will be subject to tax on this gross income as          You must be aged 18 or over.
                                                                                                           Up to four joint holders can be registered. Signatures from all joint holders are required for all
Please refer to your nominated intermediary if you are in any way unsure about the tax situation on        transactions.
ECIVs in respect to your own personal circumstances.                                                       Applications from overseas may be refused. Please contact your intermediary to confirm your
ISAs                                                                                                       eligibility for your chosen investment.
All growth, income and withdrawals through ISA investments are free of UK income and capital               ECIVs only – Applications to invest in or add to existing ECIV investments can only be accepted
gains tax. A 10% tax on UK dividend distributions does however apply and cannot be claimed                 from UK residents and must be in pounds Sterling.
back. Funds might not remain eligible for investment within ISAs.                                        Cofunds Investment ISA
Cash Account and Consolidated Income Account                                                               You must be 18 or over and resident or ordinary resident in the UK for tax purposes, or are a
Interest on the Cofunds Cash Account and Consolidated Income Account is paid net of                        Crown employee serving overseas, their spouse or civil partner.
Lower Rate Tax at 20%. Higher rate tax payers will, therefore, have an additional tax liability.           You are not eligible to take out a Cofunds Investment ISA if you have already taken out a stocks
Non-taxpayers are eligible to receive gross interest on these accounts by completing and                   and shares ISA with Cofunds, or another provider in the same tax year.
submitting a R85 form which is available via your intermediary or from the HM Revenue &
Customs website. If applicable, please quote the Cofunds Cash Account reference.                         Verification of personal identity
                                                                                                         UK anti-money laundering regulations require firms to identify anyone associated with the
INVESTING THROUGH COFUNDS                                                                                investment. This may also apply to existing investors. As a result, your intermediary may require
                                                                                                         documentary evidence of proof of your identity before you invest. Cofunds may also carry out an
Simply complete the relevant application form supplied by your intermediary.                             identity search, using a credit reference agency. Processing of your instruction or payment may
                                                                                                         be delayed, pending receipt of satisfactory evidence.
a) Investments into a Cofunds Cash Account
                                                                                                         ECIVs only – To satisfy overseas anti-money laundering requirements, we may need to provide
1. Lump sum investments                                                                                  information about your investment to the fund manager if requested.
Your initial payment can be made by either cheque or Bank Automated Clearing System (BACS).
Cheques must be made payable to Cofunds Limited and should either be drawn on your
own or on a joint account. For building society cheques, your name must appear on the front
                                                                                                         RISK FACTORS
of the cheque (for example, Cofunds Limited Re: A.B. Smith), or on the back of the cheque                  Please refer to the Fund Key Features for details of the risks associated with investment funds,
accompanied by the building society’s official stamp and signature.                                        including ECIV funds.
Once your Cash Account is made available to you, you will receive a confirmation letter which              When placing your instruction with Cofunds, all individual fund deals will be added together with
provides your account reference and the bank details required for future payments in. You must             other investors and a single deal is placed with the fund manager. On certain occasions a fund
ensure that you use this account reference so that monies are not delayed being received into              manager may apply a large deal price or dilution levy when the value of a deal exceeds certain
your Cash Account.                                                                                         limits. This may have a negative impact on the price you would receive.
2. Regular investments
If you wish to make any future BACS or standing order payments from your nominated bank
account, please use the account reference and bank account details provided to you in the
confirmation letter.
Please remember the Cofunds Cash Account is used to fund investments held in the
names of all holders and, if applicable, the same designation as the Cash Account.


                                                                                                                         October 2010 Viewpoint Chelsea Financial Services                   47
QUESTIONS AND ANSWERS                                                                                  FURTHER INFORMATION
What can I do with income earned on investment funds?                                                  What documentation will I receive?
You can choose to either take income or reinvest back into investment funds. In most cases, you        General
                                                                                                         We will send you details of your transactions, once completed.
  “ACC” units/shares – any income earned on your investment accumulates within the price of              Cofunds will send you a tax deduction certificate each year detailing the deduction of tax from
  your holding, increasing the value.                                                                    your cash account and Consolidated Income Account for the previous year. Duplicate tax
  “INC” unit/shares – income generated can be paid to you as income or used to purchase                  deduction certificates are available upon request at a charge of £10 each.
                                                                                                         If you invest by regular savings, we will send you an acknowledgement confirming the amount
                                                                                                         of your monthly investment.
                                                                                                         We will maintain the records of your investments. Certificates will not be issued. In the case
                                                                                                         of an investment held in joint names, all documentation will be sent to the primary holder’s
reinvested back into the fund.                                                                           address. Secondary holders can of course request copies of correspondence.
                                                                                                         A statement will be sent direct to you at least annually showing the value of your investments
Can I have income paid to me?                                                                            and all the transactions since the previous statement date.
Funds that pay income do so either as dividends or, in the case of fixed interest funds, interest.     Investment Funds
You can have income paid to you in several different ways on the Cofunds platform.
                                                                                                         For investment funds only, one consolidated tax voucher is issued each year, which details all
  Consolidated Natural Income – when income is generated, that income and the tax                        relevant income and tax deductions during the previous financial year.
  consolidated and held in your Consolidated Income Account, pending payment to you.                   Cofunds Cash Account
  On a monthly basis, shortly after the 6th working day of the following month, your Consolidated        Once your Cash Account is made available to you, you will receive a confirmation letter which
  Natural Income will be paid directly to your nominated bank account, as one payment.                   contains your account reference and the bank details required for all future payments in. Use
                                                                                                         this account reference so that monies are not delayed being received into your cash account.
  If you do not supply us with your bank details we will be unable to process your application and
  will contact your intermediary for further instruction. Payments will be made using BACS (Bank         If you are eligible and request to set up a regular withdrawal facility for your cash account, you
  Automated Clearing System) and will be paid in pounds Sterling.                                        will receive an acknowledgment confirming the details of the plan.
  All monies pending payment are pooled together and held as a client account with the Bank            What happens if I change my mind?
  and will earn the same rate of interest as the Cofunds Cash Account. Details of Cofunds current      Cofunds provides a cancellation period of 14 days after you invest. This applies to all investment
  interest rates can be found at the below link. Alternatively please contact your intermediary.       funds including those held within an ISA. Cancellation rights will apply to all unit purchases and
                                                                                                       transfers. If you wish to cancel your investment through Cofunds you must inform us in writing
  If your Consolidated Income Account is overdrawn, we reserve the right to reclaim any cash           within 14 days of receipt of your confirmation notice, instructing Cofunds to cancel the relevant
  owed to us prior to income being paid. The frequency of the fund distribution payments will          investments. Please forward your request to cancel to the Cofunds administration address (refer
  impact upon the amount you will receive on a monthly basis. If the funds you hold only pay           to the ‘Fees and Charges’ section).
  income quarterly or half yearly then in some months a payment may not be made at all.                Prior to the release of your monies we may need to carry out additional security checks and
  If you elect to take a regular withdrawal from your Cofunds Cash Account, then your separate         ensure all payments have cleared, which may delay settlement.
  income payment may cease as it may fund part of your regular withdrawal. Please refer to the         Financial Consequences of Cancellation
  “Addendum to the Cofunds Platform Key Features (1108R) – Cofunds Cash Account Regular                If you cancel your investment and withdraw from the contract, we will return your original
  Withdrawal Facility”.                                                                                investment to you less a deduction for any amount by which the value of your investment has
  Cofunds Cash Account – Income can be paid to your cash account. It may then be used for              fallen at the time we receive your cancellation letter. You will be required to repay any amounts
  future investment or a lump sum withdrawal.                                                          already paid to you under the contract.
  If you select this option for your ISA holdings, income earned will not be retained within the tax   You will not be able to cancel outside of the 14 day period. If you wish to withdraw after this period then:
  efficient ‘wrapper’.                                                                                    All fund management charges will apply.
  Natural Income – If the value of your account is £100,000 or more, you have the option of               A potential tax liability will apply outside an ISA investment.
  receiving the income paid to you shortly after it is received from the relevant fund manager. To
  request this please write to our administration address (refer to the ‘Fees and Charges’ section).      Any ISA contribution will still qualify towards the allowance for the relevant tax year.
                                                                                                       Investment fund investors only – All joint holders must sign the cancellation letter informing us
How do I reinvest income? (retain into the fund)                                                       that you wish to cancel.
                                                                                                       ISA investors only – Interest will not be paid on cancelled investments held in Cash Reserve.
                                                                                                       Transfers, ISA – If you exercise your right to cancel, the cancellation will apply to all your
                                                                                                       investments being transferred. On cancellation, you have the following options:
                                                                                                       1. To transfer the plan back to your previous plan manager, we require a letter of acceptance from
  for any income generated to be reinvested into the fund.                                                the plan. Your investment will continue to be held within your chosen funds until the acceptance
                                                                                                          has been received by Cofunds. If your previous plan manager accepts and requests
                                                                                                          re-registration of the plan we will arrange for this. If the previous plan manager does not accept
                                                                                                          re-registration we will transfer the plan back in cash.
How do I move between funds?                                                                           2. To transfer the plan to a new plan manager, we will require a letter of acceptance from the new
Simply complete the switch instruction form, which can be obtained and submitted via your                 plan manager in order for this to take place. Your investment will continue to be held within your
intermediary. Online switching may also be available through your intermediary. Switches are              chosen funds until the acceptance has been received by Cofunds. If the new plan manager
not instantaneous and depend upon the valuation pricing times for the funds you wish to switch            accepts and requests re-registration of the plan we will arrange for this. If the new plan manager
out of and into. Your investment may be out of the market for a period of time whilst the switch is       does not accept re-registration we will transfer the plan in cash.
taking place. There is normally a switch charge of 0.25% of the value of the switch. We will deal in   3. We will cancel the contract and return the proceeds to you by cheque. In this instance your
                                                                                                          holdings will no longer be held in a ISA and will lose all future tax advantages.
time and bought at the next available valuation pricing time. Please see ‘When and how is my           Your cancellation letter should clearly indicate which of the above options you wish to follow.
money invested?’ for more details.
                                                                                                       Investment fund transfers – If you are transferring assets to Cofunds and use your right to
How do I take my money out?                                                                            cancel, you will be given the following options:
Requests for withdrawals can be made in writing to the Cofunds administration address (refer to        1. To transfer your investments back to the previous fund manager. In this instance we will require
the ‘Fees and Charges’ section). Online withdrawal requests may also be made online through               confirmation of your client account number with the fund manager in question. If you do not
your intermediary. We are unable to accept instructions by either fax or phone. Please note that          supply us with your account number we may not be able to re-register the units. Once the units
                                                                                                          have been re-registered the contract will be cancelled.
from any fund. The same order execution policy is used for the sale of units as detailed in ‘When      2. We will cancel the contract and return proceeds to you by cheque. If you choose this option it
and how is my money invested?’.                                                                           may give rise to a chargeable event for capital gains tax purposes.
Cofunds permits withdrawal proceeds to be sent to your Cofunds Cash Account, nominated bank            Your cancellation letter should clearly indicate which of the above options you wish to follow.
account or to your registered home address. In the absence of any instruction, we will transfer the
proceeds to your Cofunds Cash Account.                                                                 How do I keep track of my investments?
Timings                                                                                                There are a number of ways that you can do this including:
Cofunds will send the proceeds to your nominated bank account, Cofunds Cash Account or to                Contact your intermediary and request a valuation at any time.
your registered home address within 5 working days of the valuation pricing time of the last fund        The latest buying and selling prices and estimated distribution yield for many funds can be
sold. However, payment may take up to 8 days in total to reach your account. This is subject
to funds being made readily available by the fund manager. For proceeds being sent to your               Daily fund prices are available through the Investment Management Association website
registered home address, please be aware that postal times can vary.
For ECIV funds only – some fund managers may settle a day later and therefore the payment in to
your bank account will be deferred by 1 business day. If you withdraw monies from a number of          What should I do if I have a complaint?
funds and one settles on a different day, we will normally release proceeds within 5 working days      Please write to:
of the fund being sold.                                                                                Head of Retail Operations, Cofunds Limited, PO Box 1103, Chelmsford CM99 2XY
Additional Information                                                                                 We can give you full details of the procedure we have set up for dealing with complaints.
ISA and Investment Funds withdrawals – If you do not fully encash your investment you must             Alternatively, you may wish to make a complaint through your intermediary. If you are not satisfied
leave a minimum amount of £1,000 in any investment per fund. For ISA investments, you will not         with Cofunds response, you may take your complaint to the Financial Ombudsman Service
be able to replace contributions withdrawn in the same tax year, unless the amount you wish to         whose address is:
invest is within your unused ISA allowance.                                                            The Financial Ombudsman, South Quay Plaza, 183 Marsh Wall, London E14 9SR
Cofunds Cash Account withdrawals – Requests for either one-off or regular withdrawals must be          Tel: 0845 080 1800 E-mail: complaint.info@financial-ombudsman.org.uk
made using the Cash Account withdrawal form.
We are unable to accept instructions by either fax or phone.                                           Will I be entitled to compensation?
   One-off withdrawals – Cofunds will process your instruction within 1 business day of receipt.       Yes. Cofunds is covered by the Financial Services Compensation Scheme (FSCS).
   Monies will be released from Cofunds within 5 business days via BACS transfer.                      You may be entitled to compensation from the scheme if Cofunds cannot meet its obligations.
   Regular withdrawals – For information on the Cofunds Cash Account regular withdrawal facility,      In general this is when a firm has stopped trading, and has insufficient assets to meet claims, or
   please refer to the “Addendum to the Cofunds Platform Fund Key Features (1108R) – Cofunds           is in insolvency. This depends on the type of business and the circumstances of the claim. Most
   Cash Account Regular Withdrawal Facility”.                                                          types or investment business are covered up to a maximum compensation of 100% of £50,000.
How do I transfer money between Cofunds Cash Accounts?                                                  For details on the Financial Services Compensation Scheme (FSCS), in relation
You can transfer monies between cash accounts by completing a “Cofunds Cash Account Inter               to Cofunds and any product avaialble on Cofunds go to: www.cofunds.co.uk/docs/
Account Transfer Form”. For jointly held accounts, all signatures will be required to authorise the     FSCS.pdf. If you don’t have online access, please ask your intermediary for details.
transfer. Only cleared funds can be transferred between Cofunds Cash Accounts.
                                                                                                        For further information about the Financial Services Compensation Scheme (FSCS),
What’s the difference between the Consolidated Income Account,                                          please speak to your intermediary or contact the FSCS:
Cash Reserve and Cofunds Cash Account?                                                                  Financial Services Compensation Scheme
Cofunds Cash Account is a separate service to that of the Cash Reserve. The Cash Reserve                7th Floor, Lloyds Chambers, Portsoken Street, London E1 8BN
facility is part of your ISA investment and issued to temporarily hold cash for future investment.      www.fscs.org.uk, Tel: 020 7892 7300
The Consolidated Income Account is an account which temporarily holds distributions pending
payment to your nominated bank account.
Please refer to the following sections of this document for more information.                          EU Savings Directive
  For Cash Reserve: ‘Can I invest cash within my Cofunds Investment ISA?’ in ‘YOUR INVESTMENT’.        If you move overseas within the European Union the EU Savings Directive may apply. Please
  For the Consolidated Income Account: ‘Can I have income paid to me’ in ‘QUESTIONS AND                contact your intermediary for more details.
  ANSWERS’.
Can I transfer out of Cofunds?
If you wish to transfer your ISA investment to another manager, then your investments will be sold
and the proceeds paid across to your new ISA manager. In the case of transfers, we will require a
completed transfer authority form from the new ISA manager.
Investment funds will be re-registered.



           48     Chelsea Financial Services Viewpoint October 2010
                                                                                                        2.5 Special Circumstances
Terms and Conditions of the Cofunds Platform                                                            We have discretion to apply Funds to an Account on a day other than a Business Day. If, after
Introduction – The terms and conditions are split into three sections as follows:                       you’ve made your investment, we make an adjustment to your holding on the basis of instructions
SECTION A                                                                                               received from the Fund Manager which is then found to be incorrect, adjustments of £5 or less
To be read by all investors.                                                                            will not be processed or kept by Cofunds.
SECTION B                                                                                               2.6 Assignment and Delegation
Additional terms to be read by all ISA investors.                                                       We may assign all or any of our benefits and obligations under this Agreement to any other
SECTION C                                                                                               company within the Cofunds group. Should this become necessary, then you will be notified in
                                                                                                        advance of any such assignment or delegation and Cofunds Limited will remain primarily liable at
Additional terms to be read by all investment fund investors investing outside of an ISA.               all times.
                                                                                                        2.7 Address
SECTION A                                                                                               Correspondence about our service should be sent to the Administration Address (refer to the
The Terms & Conditions in this section together with the ISA Terms & Conditions in Section B,           ‘Fees and Charges’ section).
Customer Agreement in Section C and Key Features of the Cofunds platform form the overall               2.8 Client Classification
terms for your investment. If you would like more information, or have any questions, please call       Cofunds classifies all clients as Retail, other than FSA regulated firms who are classified as
your Intermediary who will be able to advise you.                                                       Professional. Any clients, who would ordinarily be considered to be a Professional or Eligible
A.1 Definitions                                                                                         Counterparty, may not necessarily have rights under the Financial Ombudsman Service (FOS)
                                                                                                        or the Financial Services Compensation Scheme (FSCS) as a result of that classification.
In these Terms the following words mean:
                                                                                                        2.9 Timing
Account: The account that we open in your name to record investments that you make through
Cofunds.                                                                                                Your investments will be purchased as soon as reasonably practicable and in any event, no
                                                                                                        later than the valuation pricing time on the next Business Day. Please refer to the section “How
Administration Address: Cofunds Limited, PO Box 1103, Chelmsford CM99 2XY.
Application: The application(s) completed by you or on your behalf to invest or withdraw                investment.
(redeem) in the Account.                                                                                2.10 Cofunds Cash Account
Assets: Investments, income, interest, cash balances and any other rights and entitlements from         In the event that Cofunds is instructed to source monies from your Cofunds Cash Account for the
time to time held within your Account.                                                                  purposes of funding an onward investment, Cofunds will verify that there is a sufficient amount
Bank: A Cofunds nominated bank, which may vary from time to time. Full, up to date details, of          available within the account to perform the transaction. If sufficient monies are not available,
the banks with which money is held can be obtained by contacting your intermediary or visiting          Cofunds will not process your instruction. Cofunds reserves the right to reclaim any Cash owed
                                                                                                        prior to monies being withdrawn and will notify you of any amounts deducted.
Banking Day: Any day on which the Bank is open for normal business other than a Saturday, a             2.11 Circumstances Beyond Our Control
Sunday or a bank holiday in the United Kingdom.                                                         If circumstances beyond our control result in a loss to you, Cofunds will not be held responsible
Business Day: Any day when the London Stock Exchange is open for business. Our normal                   for any damages relating to the loss. Examples of when these circumstances apply could be
hours of opening are 9:00am to 5:00pm.                                                                  when the loss occurred as a result of a flood or earthquake.
Calculation Date: Three working days before the sell down valuation pricing time.
Cash: Any cash balances, interest, distributions and other amounts received or receivable as            A.3 Making your Investment
cash in your Account from time to time.                                                                 3.1 Your Nominated Intermediary
Cash Reserve: A client money account used solely for money destined for eventual investment in          We are entitled to rely and act on any instruction which purports to have been given by your
one or more of the Funds offered by Cofunds.                                                            Nominated Intermediary however transmitted and whether or not in writing and unless we have
Client Account: A bank account held by us with the Bank                                                 received written notice to the contrary in accordance with the following paragraph, whether or
                                                                                                        not the authority of any such person has been terminated. You allow us to give your Nominated
Cofunds Cash Account: An interest paying client money account, separate from Cofunds                    Intermediary information about you and your Account from time to time.
money, and held under trust with the Bank.
                                                                                                        Cofunds will treat the Intermediary identified in your Application as your Nominated Intermediary.
Consolidated Income Account: A cash account which temporarily holds distributions pending               You may at any time tell us in writing to stop accepting instructions from your current Nominated
payment to your nominated bank account.                                                                 Intermediary and appoint a new Nominated Intermediary in their place. Your instruction will
Current Year Account: A separate Account containing only Assets representing your                       take effect upon receipt by us at our Administration Address (refer to the ‘Fees and Charges’
Subscriptions made in the current Year.                                                                 section). We will acknowledge receipt of your instruction and will inform both of the Intermediaries
Dealing Cut-off Time: The time by which an instruction needs to be processed in order to utilise        concerned. In the case of joint holders, a change of Intermediary notification must be signed by
the next valuation pricing time.                                                                        all holders.
Fund: An authorised unit trust or open-ended investment company (or sub-fund thereof) we                You must at all times have a Nominated Intermediary. If you do not nominate a replacement
specify as available for investment within your Account.                                                Intermediary then Cofunds will continue to deal with your existing Intermediary until you appoint
FSA: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.            one. Should your Intermediary cease to be authorised, Cofunds can provide you with details of
                                                                                                        other Intermediaries registered with Cofunds, but does not make any recommendation as to the
Income: All payments received as income including any tax payments we reclaim for your Account.         suitability or appropriateness of any Intermediary or subsequent advice.
Indemnify: Secure against future loss, damage, or liability: give security for.                         3.2 Buying and selling your Investments
Intermediary: A person authorised by the FSA to conduct investment business.                            Your investment will be made if we accept your correctly completed application form and
ISA: An Individual Savings Account managed under the ISA Regulations.                                   payment. Please see the ‘Investing through Cofunds’ section of the Key Features for further
ISA Manager: This is Cofunds Limited.                                                                   details. Levels of trading are actively monitored and acceptance of anyone who is considered
Joint Holders: A maximum of four persons who can invest in the same investment.                         to have a history of short-term or excessive trading or whose trading has been disruptive may
                                                                                                        be refused. In instances where a payment to your Account is unpaid for any reason, you will be
Monies: Any client money held within the Cofunds Cash Account for the purposes of future                held accountable for any loss that may arise due to market movement. Please refer to the section
investment.
Nominated Bank Account: A UK bank or building society account of which you are a named                  your investment.
holder and which you specify and we accept as the account to pay Income and withdrawal                  3.3 Unit Allocation on Transfers (Equalisation)
proceeds to you.
                                                                                                        If you are re-registering Investments, we will request the old manager to provide us with the
Nominated Intermediary: An Intermediary nominated by you, who is authorised by you to give              correct Unit holdings for your Investment and register your Investment with Cofunds with the
instructions on your behalf on all matters concerning your Account.                                     same Unit split.
Nominee: Cofunds Nominees Limited, a wholly owned subsidiary of Cofunds for which we
accept full responsibility.                                                                             A.4 Title and Registering Investments
Ombudsman: The Financial Ombudsman Service who may be contacted at South Quay Plaza,                    4.1 Title and borrowing
183 Marsh Wall, London E14 9SR.                                                                         All documents evidencing title to Assets in your Account are held by us or as we direct. We may
Payment: A payment by cheque, direct debit or debit card in sterling, to be applied to your             not lend any part of your Account to a third party and we cannot use it as security for borrowing.
Account either paid by you from your bank account or paid on your behalf by your Nominated              4.2 Beneficial ownership
Intermediary, or previous ISA Manager.
                                                                                                        You are and remain the beneficial owner of the Assets. Investments made by you will be held in
Primary Holder: The first named person on the Cofunds Application form.                                 your name as owner but you must not use them as security for a loan although you may be able to
Registered Office: Cofunds Limited, 1st Floor, 1 Minster Court, Mincing Lane, London EC3R 7AA.          use the Assets in your Account as a loan repayment method, subject to your lender’s agreement.
Regulations: The Individual Savings Account Regulations 1998, and any other applicable                  You may not dispose of or transfer an interest in any Asset held through us and may not create (or
regulations made from time to time by HM Treasury.                                                      have outstanding) any charge or security on or over any Asset.
Sell down: The process by which Cofunds will effect a sale of units from your investment to fund        4.3 Registration
regular withdrawals from your Cofunds Cash Account where insufficient monies are available              We register your Investments in the same name as those of other Cofunds investors and do not
Terms: The Key Features of the Cofunds Platform and the Terms & Conditions, as from time to             identify individual Investments by separate certificates.
time amended, together with your Application. The Terms & Conditions will take precedence if the        4.4 Default
two differ.                                                                                             Should we default on our obligations, any shortfall in Investments registered in Cofunds name
Units: Income or Accumulation units, or shares of any class, in a Fund, including any fractions or      may be shared out proportionately among all of our customers whose Investments are registered
decimals of units.                                                                                      with our Nominee. In this event, your Investment may be returned to you or transferred to another
Valuation Pricing Time: The dealing time utilised to price units that are either bought or sold.        company as specified by you or your Nominated Intermediary.
We, us and our: Cofunds Limited (“Cofunds”) of Minster Court.                                           A.5 Payments to you
Year: A year beginning on 6 April and ending on the following 5 April. This is commonly known as        5.1 Income payments
the tax year.
                                                                                                        It takes seven Business Days after we receive your instructions to apply them to Income
You and your: A person who invests in an Account through Cofunds.                                       payments. If you no longer have a holding in an Investment at the time when we receive the
A.2 Our Role                                                                                            Income arising from it, we pay that Income to you.
2.1 General                                                                                             You can instruct us at any time to stop using a particular account.
We do not review your portfolio and we do not give advice about investments.                            5.2 Withdrawals and closing payments
All personal data relating to you that we hold for the purpose of providing services under this         We may deduct from any amount to be paid to you any outstanding fees, charges and expenses
Agreement is held in accordance with the requirements of Data Protection legislation.                   due from you. We keep an amount which we reasonably estimate will be enough for us to meet
                                                                                                        any tax liability for which we must account to the HM Revenue & Customs for you under the
2.2 Regulation                                                                                          Regulations. We hold any cash due awaiting payment outside your Account in a Client Account.
We are authorised and regulated by the FSA for Investment business. Our FSA registration                We may delay paying any sale proceeds and cash balances until we know that all Payments made
                                                                                                        by you have cleared and we have received all amounts which you owe to us. Cofunds will not
contacting the FSA on 0845 606 1234.                                                                    make payments to a third party account except another FSA regulated firm.
2.3 Client Account                                                                                      5.3 Residual payments
We will deposit your money in our Client Account. If there has been no movement on your                 Upon full closure of your Account, any payments subsequently received by us of £1 or less will not
balance for a period of at least six years, including any payments on account of charges,               be processed or retained by Cofunds.
interest or similar items, we will write to you and your Nominated Intermediary at your last known      If you transfer holdings to Cofunds and payments are subsequently received from your old
addresses informing you of our intention to no longer treat your balance as client money. You will      manager, such as distributions and tax reclaims, these will be added to your Account in the
have 28 days to make a claim for this money. However, we will still pay what is due to you if you       following way: Any residual Income received from the old manager will be reinvested into the
subsequently claim payment.                                                                             largest value holding within your Account, regardless of any change to mandate instructions
We do not pay interest on client monies but we reserve the right to do so in the future.                received upon transfer to Cofunds. Cofunds reserves the right to return any residual Income to
2.4 Client Asset Protection                                                                             the old manager if the amount is below £25.
We keep all Client Account Money separate from our own money and hold it under trust with the           5.4 Other payments
Bank. We are also responsible for safe custody of all Assets held in your Account. Legal title to all   All payments other than Income payments shall be made to you or your Nominated Intermediary.
Assets is registered in the name of the Nominee.                                                        5.5 Good discharge
We register Investments in the name of Cofunds Nominees Limited, whose address is our                   Payment to your Nominated Bank Account or to your Nominated Intermediary for the time being,
Registered Office. You authorise us to direct and instruct our Nominee to discharge our                 at their direction, is in any case a discharge of our obligation to pay monies owed to you under
responsibilities under these Terms. We are responsible for the acts and omissions of our                this Agreement.
Nominee. Our Nominee is not itself an authorised person under the Financial Services and
Markets Act 2000; it can only hold investments and does not carry on business in its own right.




                                                                                                                        October 2010 Viewpoint Chelsea Financial Services                 49
A.6 Documentation                                                                                           2.3 Tax status
6.1 Confirmation notes                                                                                      You may not subscribe to your ISA Account while not resident and ordinarily resident in the UK
                                                                                                            for tax purposes unless you qualify as a Crown employee (a person holding public office or
Confirmation notes will be sent to you and your Nominated Intermediary on the next Business                 employment under the Crown and paid out of the public revenue of the UK or of Northern Ireland),
Day following the completion of the Investment transaction carried out at your instruction. This            their spouse or civil partner. You must inform us immediately if you stop being UK resident and
will include the essential details of the transaction. For regular savings we will send you an              ordinarily resident for tax purposes, or if as a non-resident you stop being a Crown employee,
acknowledgement of receipt of your Application. We do not send confirmation notes each time                 their spouse or civil partner.
a payment is received as these details will be included within your statements and Consolidated
Confirmation Note.                                                                                          2.4 Account type
6.2 Statements                                                                                              For an investment held under these Terms, we designate your ISA Current Year Account as
                                                                                                            “Cofunds Investment ISA”. All new ISA investments will be designated “Cofunds Investment ISA”.
At least annually we send you an Account statement showing details of all Assets within your
Account on the statement date and all transactions made since the previous statement date,                  2.5 Timing
including Investment and interest Income. A copy will be made available to your Intermediary.               In the case of an ISA transfer, the date of transfer is the date agreed between the Plan Managers.
Valuations are based on the bid price as at the date shown on your statement.                               These Terms will take effect if Cofunds accepts your Application, which is normally on the day of
6.3 Records                                                                                                 receipt. Cofunds has discretion to reject an Application.
You may inspect copies of confirmation notes, vouchers and entries on our books or electronic               B.3 Investments
media relating to transactions on your Account. We keep these records for six years.
                                                                                                            3.1 Choosing your Investments
A.7 Withdrawals and closing your account                                                                    Your Nominated Intermediary can help you choose the Investments to buy for your Account and
7.1 Minimum amount                                                                                          can advise you on changes you should make to the Investments in your Account.
Should the amount in your Fund fall below £1,000 as a result of your instruction to sell, we will contact   The Cash Reserve provides a temporary shelter for your Investment. Cash held in this way must
your intermediary to inform them that we may require you to sell your entire holding in that Fund.          be destined for investment in one or more of the Funds offered by Cofunds.
7.2 Closing your Account                                                                                    3.2 Cash Reserve
You may close your Account at any time by withdrawing all the Assets, or transferring them to               Investments held temporarily in the Cash Reserve may earn interest. If interest earned in any
another Manager. Closing your Account does not affect any transactions initiated before the                 accrual period is under £10, no interest will be credited to your Cash Reserve investment. The
closure began. These Terms continue to apply until we complete all outstanding transactions and             interest is payable six monthly. Details of the Cofunds current interest rates can be found at:
meet all liabilities.                                                                                       www.cofunds.co.uk/docs/cofundsrates.pdf
                                                                                                            Alternatively, please contact your intermediary. Any interest you receive within your ISA will
A.8 Fees, Charges and Expenses                                                                              fluctuate with changes to this base rate. Please refer to ‘Can I invest cash within my Cofunds
8.1 Our Remuneration                                                                                        Investment ISA?’ section of the Key Features for further details.
We do not charge you a fee for investing through us. The only additional charges are those                  If you close your Cash Reserve without having invested in a Fund(s), interest will not be payable
described under Section B 5.2 of the ISA Terms & Conditions and Section A 8.4 below. We                     on money withdrawn. Please note that we require written instructions to carry out all of the above
do however receive a fee from Fund Managers for administration services provided to Fund                    transactions.
Managers connected with your Investment. If you require details of these fees, please write to us
at our Administration Address (refer to the ‘Fees and Charges’ section).                                    B.4 Void Accounts
8.2 Fund Manager                                                                                            Your Account will be managed in accordance with the Regulations. We will notify you if, by
The manager of each fund in your Account may receive an initial charge. An annual management                reason of any failure to satisfy the provisions of the Regulations, your Account has or will become
charge and other fees, charges or expenses properly payable to them may be paid out of the                  no longer exempt from tax. If your Account is voided, we will sell the Investments and, after
property of that Fund.                                                                                      deducting any cash available to cover any tax we have to pay or repay, pay you the proceeds
                                                                                                            together with any remaining cash balance held in your Account. Any interest accrued in the Cash
8.3 Nominated Intermediary                                                                                  Reserve will not be payable. There will be a charge of £100 if we have to void your ISA due to an
Commissions payable to your Nominated Intermediary will be disclosed to you on the                          error on your part.
confirmation note sent to you after each transaction, other than regular Investments, where these
will be shown on your statement.                                                                            B.5 Report & Accounts and Voting
8.4 Switch fees & Unit Conversion                                                                           5.1 Voting rights
We will allow you to switch funds within your Account. You will normally pay an initial switching           We do not exercise voting rights for any of your Investments unless you instruct us to vote on your
charge of 0.25% of the value of the switch. Commission on switches may be added if agreed with              behalf. If you have requested this, you will be notified of each voting event.
your Nominated Intermediary. The maximum switching charge or commission will not exceed the                 5.2 Reports, notices, meetings and voting
funds standard initial charge.
                                                                                                            For any Investment held in your Account, we can arrange when you open your Account, (or at
Unit conversion: Where available, fund managers offer the facility to convert Accumulation units            your request in writing after one month’s notice) for you:
to Income units, or vice versa within the same fund. No commission is paid on unit conversion.
Should you wish to exercise this facility, there is no charge for unit conversion.                            to receive a copy of the annual report and accounts for each Fund in which you are invested,
                                                                                                              and
A.9 Variation, Termination and Amendment of Terms                                                             to attend meetings of unit holders or shareholders and exercise voting rights
9.1 Funds offered by Cofunds                                                                                Your instruction should be given on your Application. Availability of these facilities will be subject
Cofunds reserves the right to add and remove Funds from the service.                                        to a charge of £20.00 per communication to cover our costs, although copies of report and
                                                                                                            accounts can be downloaded free from the Cofunds website. The charge may be deducted from
9.2 Changes to these Terms                                                                                  cash in your Account.
We may introduce changes to our services and to these Terms from time to time. We will give                 Other notices will be sent to you either directly or with your statements.
you at least 30 days advance notice of any change, except where the change is not to your
disadvantage or is required in order to comply with a legal or regulatory requirement. If you are           B.6 Transferring out of Cofunds
not happy with a change, you can close your Account at any time by withdrawing all the Assets or,
if applicable, transferring them to another ISA manager.                                                    6.1 ISA Transfers out
9.3 Termination                                                                                             Transfers out upon your instructions, and in the time specified by you, Cofunds will transfer all
                                                                                                            or part of your ISA, with all your rights and obligations under it, to another ISA Manager who has
We may terminate your Account provided we give you a minimum of three months notice. Upon                   agreed to accept the transfer. In the case of your current year Payments, you may either transfer
termination, unless otherwise agreed at the time, we will realise all your Units and will pay the           these as part of a transfer of the whole of your ISA to another ISA Manager or you may maintain
proceeds, together with any other Cash in your Account, to your Nominated Bank Account.                     them in your Cofunds ISA, for which purpose we may create a Current Year Account.
9.4 If we cease to be an Account Manager                                                                    We require that the transfer is made in cash after selling relevant Investments and deducting any
Your Account will close if we stop acting as an Account Manager. We will give you at least 30 days          amounts due to us. If we subsequently receive any Income arising from Investments transferred
advance notice of any change, except where the change is not to your disadvantage or is required            out, we will remit it directly to you.
in order to comply with a legal or regulatory requirement. At the end of that notice period the             These Terms continue to apply to (the part of) your ISA being transferred until the transfer is
Account will close but in the meantime you may withdraw or transfer Assets.                                 complete, all outstanding transactions settled and all liabilities met.
A.10 Indemnity                                                                                              B.7 If you die
You will indemnify us and our Nominee against any liability or loss which we or our Nominee may             Upon your death, your Account will cease to be tax exempt and will be closed. We will continue
suffer or incur (including taxes for which you are primarily liable and any expenses reasonably and         to hold your Assets until we receive instructions from your personal representatives, upon whom
properly incurred) in the proper course of administering your Account, except to the extent arising         these terms become binding.
from any negligence, wilful default or fraud on the part of ourselves or our Nominee or breach to
regulatory duties.                                                                                          We do not reinvest income but hold it in our Client Account until we can pay it as your personal
                                                                                                            representatives direct. Any tax reclaimed on income distributions paid between the date of your
A.11 Notices                                                                                                death and notification of your death will be deducted by us.
Except as otherwise provided, notices to Cofunds should be sent to us at our Administration
Address (refer to the ‘Fees and Charges’ section). Notices to you will be sent to your last known           Investment Funds Customer Agreement
address and may be copied to your Nominated Intermediary.                                                   Additional terms to those stated in Section A, to be read by all clients investing in Investment Funds
A.12 Information for the Manager                                                                            C.1 Title and registering Investments in joint names
You must give us all information which we reasonably request to manage your Account and tell                The first named applicant will be the ‘Primary’ Holder of the Investment. This is purely for
us promptly if you change your permanent residential address or wish to change your Nominated               administrative purposes and does not affect the legal status of your joint ownership.
Bank Account or Nominated Intermediary.
                                                                                                            All communication and documentation will be sent to the Primary Holder’s address. Secondary
Instructions should generally be in writing and signed by you unless we agree otherwise.                    holders may request copies of correspondence.
A.13 Governing law                                                                                          C.2 Opening Your Account
These Terms & Conditions are governed by and are to be construed in accordance with English                 This agreement will take effect if Cofunds accepts your Application, which is normally the day we
law. The information contained in these Terms and the Application is based on our understanding             receive it. A direct debit instruction authorises us to collect and invest regular investments for you
of current legislation and HM Revenue & Customs practice and could be affected by changes in                unless and until you tell us to stop, either at the time you apply or both. Cofunds has discretion to
legislation and practice.                                                                                   reject an application.
If there is any conflict between these Terms & Conditions and the ISA Regulations or other
                                                                                                            C.3 If you die
                                                                                                            Upon your death, we will continue to hold your Assets and Cash until we receive instructions from
Terms and Conditions of the Cofunds ISA                                                                     your personal representatives, upon whom these Terms become binding.
Additional terms to those stated in Section A, to be read by all clients investing in ISAs.                 We do not reinvest income but hold it in our Client Account until we can pay it as your personal
                                                                                                            representatives direct.
B.1 Your ISA Manager                                                                                        If a Primary Holder dies then the next named holder is promoted to Primary Holder. We reserve
1.1 Our Role                                                                                                the right to carry out further money laundering checks if the new Primary Holder’s bank account
                                                                                                            differs from the original.
We agree to act as ISA Manager for your Account. We make all necessary claims for tax relief
relating to your Account and the Assets held in it.
1.2 Regulations
We will notify you if all or part of your Account is no longer exempt from tax. We will sell any             THE DIRECT DEBIT GUARANTEE
investments that are no longer exempt from tax at the published selling price and normally release
proceeds with 5 working days together with any affected cash balances.
                                                                                                                This Guarantee is offered by all Banks and Building Societies that take part in the Direct
B.2 Opening your account                                                                                        Debit Scheme. The efficiency and security of the Scheme
2.1 ISA Applications                                                                                            is monitored and protected by your own Bank or Building Society.
In the case of an ISA, your Account is opened when we accept your correctly completed                           If the amounts to be paid or the payment dates change, Cofunds will notify you five working
Application and Payment.                                                                                        days in advance of your account being debited or as otherwise agreed.
Your ISA Application covers the current Year and each subsequent Year until we receive no                       If an error is made by Cofunds or your Bank or Building Society, you are guaranteed a full
Payments for one full Year. We reserve the right to require a fresh Application for each new tax Year.          and immediate refund from your branch of the amount paid.
A direct debit instruction authorises us to collect and invest regular Payments for you unless and              You can cancel a Direct Debit at any time by writing to your Bank or Building Society.
until you notify us to the contrary, either at the time of your Application or otherwise.                       Please also send a copy of the letter to us. Please ensure you retain this guarantee.
2.2 ISA Transfers in
Where you have transferred your current year’s ISA investment, you may reactivate your Account
by restarting Payments, although you must submit another Application if we receive no Payments
for one full Year.

           50      Chelsea Financial Services Viewpoint October 2010
HOW WILL CHARGES AND EXPENSES                                                                             General Risk Factors
                                                                                                          Like any investment there are risks involved in investing in the funds available through Cofunds.
AFFECT MY INVESTMENT?                                                                                     There are general risks which apply to all fund investments, as well as additional risks arising as a
Cofunds shares a platform fee from the fund manager’s Standard Initial Charge with the fund               result of your fund selection. The general risks are listed below. Additional risks are highlighted in
manager. This fee has no impact on the charges you pay. Please refer to the ‘Platform fee’ section        subsequent pages of this document.
of the Key Features of the Cofunds platform for more information.                                           The value of your investment is not guaranteed, it may go down as well as up and income from
The following tables illustrate the total effect of charges and expenses on a typical Cofunds direct        it may fluctuate and you may not get back your original investment.
investment and an ISA or investment into a unit trust or an OEIC. Dealing costs are not included.           Levels of taxation and tax relief are subject to change. The value of any tax relief will depend on
Allowance for any tax relief available has been made in the calculation. The effect of charges              your own individual circumstances.
is based on a lump sum investment of £5,000, and a monthly investment of £100 assuming a                    Funds available through Cofunds are not suited to short-term investment i.e. less than 5 years
growth rate of 7.00% per year for ISAs and 6.0 0% for direct investments. These figures are laid            where, in most instances, investment into a bank or building society deposit account is likely to
down by the Financial Services Authority to demonstrate the effect of charges and expenses                  be more appropriate.
on an investment and are not guaranteed. The figures do not take into account any additional                For newly launched funds there is a risk that, if the assumed size is not achieved, the proportion
discount you may receive on your investment.                                                                of charges and expenses allocated to the fund may be higher and the value of the investment
                                                                                                            consequently reduced.
An example unit trust (Income) fund
                                                                                                            Where a fund manager is the operator of an Open Ended Investment Company (OEIC) it
Normally, unit trusts have a buying (offer) price and a selling (bid) price and the difference between      is important to note that, although each sub-fund within the OEIC will be treated as being
these two prices is known as the spread. The buying price includes the manager’s initial charge.            responsible for meeting its own liabilities, the Authorised Corporate Director may reallocate
For further details of the spread applied to an individual fund please contact your intermediary.           these in a manner which is fair to all the OEIC investors if any such sub-fund is unable to meet
Initial charge: 5.25%                                                                                       its liabilities. A shareholder will not, however, be liable for the debts of the OEIC after paying the
Annual Management Charge: 1.5%                                                                              purchase price of the shares.
Additional charges and expenses: 0.04%
Gross Distribution Yield: 3.56%                                                                           Special Risk Factors
Annual charges and expenses are deducted from capital.                                                    1. Part or all of the Manager’s annual management charge and expenses may be charged to
Figures are based on income units.                                                                           capital, rather than income of the fund, which could reduce the potential for capital growth.
Investments within an ISA                                                                                    Your capital could also decrease if withdrawals exceed the growth rate of the fund(s).
                                                                                                          2. For funds that invest overseas, exchange rate variations may cause the value of your
 At end        Investment               Income               Effect of      What you might                   investment to increase or decrease.
 of year         to date                to date          deductions to date   get back
                                                                                                          3. Investments in certain funds, including emerging markets, specialist geographical areas,
                    £                      £                     £           at 7.00% £
                                                                                                             smaller companies and specialist sectors (such as technology and ethical stocks) tend to be
           Lump sum      Monthly       Lump sum           Lump sum Monthly Lump sum Monthly                  more volatile. This is due to factors such as restrictions in those areas or possibly the size
           investment     saver        investment         investment saver investment saver                  of the companies. Additionally, these funds can suffer from partial or total illiquidity, which
    1        5,000         1,200             164               399          85        4,780       1,130      may lead to considerable price fluctuations and the inability to redeem your investment. For
                                                                                                             investments in emerging markets these are usually considered to carry a greater degree of
    3        5,000        3,600              503               619        330         4,950      3,450
                                                                                                             risk relating to dealing, settlement and custody practices, than investments in established
    5        5,000        6,000              855               877        689         5,130      5,850       markets.
   10        5,000       12,000            1,790             1,720      2,220         5,610     12,200    4. Funds that invest in fixed interest securities (corporate or government bonds). Unit values are

                                                                                                             long-term interest rates is likely to reduce the value of your investment.
The last line in the table shows that over 10 years the effect of the total charges and expenses
could amount to £1,720 (lump sum investment) or £2,220 (monthly saver). Putting it another way,           5. Where an investment objective is to provide income, when income is paid out, there is minimal
if the growth rate were to be 7.00% per year, which is in no way guaranteed, the total charges               potential for capital growth especially over the medium to long term. Where a bond fund
would have the effect of reducing the growth rate to 4.60% per year (lump sum investment) or
4.02% per year (monthly saver).                                                                           6. Any adverse changes to perceived or actual solvency of organisations in which the fund
                                                                                                              invests may affect the fund’s capital and therefore, any income paid by the fund.
Investment directly into Funds
                                                                                                          7. For funds comprising mainly Bonds, the Gross Redemption Yield is normally quoted after all
 At end        Investment               Income               Effect of      What you might                    charges, but before tax has been deducted.
 of year         to date                to date          deductions to date   get back                    8. Whilst equity investments carry potential for greater returns over the longer term as opposed
                    £                      £                     £           at 6.00% £                       investing in lower risk assets, the volatility on these returns can also be greater and the value
           Lump sum      Monthly       Lump sum           Lump sum Monthly Lump sum Monthly
                                                                                                              of your capital is not guaranteed.
           investment     saver        investment         investment saver investment saver               9. Fund managers may use derivative investments as part of their investment strategy. These
                                                                                                              may increase the fund’s volatility, can cause disproportionate price fluctuations and may
    1        5,000         1,200             163               396          84        4,730       1,120
                                                                                                              restrict potential gains in a rising market. Funds that primarily use derivatives as the main
    3        5,000        3,600              495               602        324         4,810      3,400        investment vehicle are considered higher risk.
    5        5,000        6,000              833               837        670         4,900      5,710    10. If a fund invests in capital shares, income shares or zero dividend preference shares (Zeros),
                                                                                                              their value is at risk if the capital growth of the underlying assets that back these investments
   10        5,000       12,000            1,700             1,570      2,090         5,110     11,600        is inadequate.
                                                                                                          11. The overall fund, or a significant portion of it, is invested in relatively few individual assets.
The last line in the table shows that over 10 years the effect of the total charges and expenses              Therefore, the performance of the fund is significantly influenced by the shares, fixed interest
could amount to £1,570 (lump sum investment) or £2,090 (monthly saver). Putting it another way,               securities or properties of a relatively small number of companies or institutions.
if the growth rate were to be 6.00% per year, which is in no way guaranteed, the total charges            12. Where the main objective of the fund is to provide an income, the level of income is not
would have the effect of reducing the growth rate to 3.62% per year (lump sum investment) or                  guaranteed and will often vary from one payment to another.
3.03% (monthly saver).
                                                                                                          13. Funds that invest in higher risk fixed interest securities, known as subinvestment grade bonds.
An example OEIC (Growth) Fund                                                                                 These bonds have a lower credit rating and a higher risk of default than investment grade
                                                                                                              bonds. This means there is an increased risk that the value of your investment could fall.
single price at which you buy and sell. The initial charge is deducted from the amount you invest         14. Property assets can be difficult to buy or sell, the impact of this could mean cash remains
and the remaining subscription invested at the single price.                                                  uninvested, disposing of property at an unfavourable price, illiquidity of investments and
                                                                                                              reduced diversification if the size of the portfolio falls significantly. Investors should be aware
Initial charge: 5.00%                                                                                         that their right to sell units may be suspended by the fund manager in situations where
Annual Management Charge: 1.38%                                                                               there is insufficient uninvested cash or assets which are readily realisable to meet investor
Additional charges and expenses: 0.28%                                                                        demand for the sale of units. In addition rental growth is not guaranteed, rent default could
Annual charges and expenses are deducted from income.                                                         have an adverse impact on performance. Property valuations are based upon the opinion of
Figures are based on accumulation shares.                                                                     independent property experts, not fact, so can be liable to revision, up or down.
Investments within an ISA                                                                                 15. These funds are unable to invest in certain sectors and companies due to the ethical criteria
                                                                                                              used to select investments for the fund. This could mean that the fund is more volatile than
 At end            Investment                    Effect of                     What you might                 funds which do not have these restrictions.
 of year             to date                 deductions to date                  get back
                                                                                                          16. As this is an aggressively managed fund, investors should be prepared to accept a higher
                        £                            £                          at 7.00% £                    degree of risk than for a fund with a broader investment mandate.
            Lump sum         Monthly       Lump sum         Monthly       Lump sum            Monthly     17. The value of units may be adversely affected by insolvency or other financial difficulties
            investment        saver        investment        saver        investment           saver
                                                                                                              affecting the banks and building societies with whom the fund’s monies are deposited.
    1          5,000           1,200            374              78          4,970             1,160          These deposits are not protected by the Financial Services Compensation Scheme (FSCS).
    3          5,000           3,600            611             315           5,510            3,680      18. The value of investment returns will be reduced by a ‘performance’ fee charged to the fund
                                                                                                              if the fund outperforms a pre-determined level of return. Full details of how this is calculated
    5          5,000           6,000           902              679           6,110            6,480          and charged is available from your intermediary and within the fund’s Scheme particulars,
   10          5,000          12,000          1,930          2,340           7,890            14,800          Prospectus or Simplified Prospectus.
                                                                                                          19. The Close protected unit trust funds give exposure to the movements of the stockmarket,
The last line in the table shows that over 10 years the effect of the total charges and expenses              with either 100% or 95% protection (depending upon fund choice) on a quarterly basis from
could amount to £1,930 (lump sum investment) or £2,340 (monthly saver). Putting it another way,               falls, provided the investment remains intact across two consecutive quarter dates, i.e. for a
if the growth rate were to be 7.00% per year, which is in no way guaranteed, the total charges                full three month period. The selling price at the end of each period is to be no lower than the
would have the effect of reducing the growth rate to 4.20% per year (lump sum investment) or                  selling price at the start of the period for the 100 Fund, or a maximum of 5% lower for the 95.
4.20% per year (monthly saver).                                                                           20. For the Close 100 and 95 funds at the beginning of each quarter a minimum selling price is
                                                                                                              set for the Funds representing the protection on the units sold at this price. Instructions to
Investment directly into Funds                                                                                sell must be received to coincide with the quarter days which are the third Fridays in March,
 At end            Investment                    Effect of                     What you might                 June, September and December. Actual returns will depend on the stockmarket. No return is
 of year             to date                 deductions to date                  get back
                                                                                                              guaranteed and the return in any one quarter can be zero.
                        £                            £                          at 6.00% £
            Lump sum         Monthly       Lump sum         Monthly       Lump sum            Monthly
                                                                                                          WHERE TO GET FURTHER INFORMATION
            investment        saver        investment        saver        investment           saver      If you wish to receive further information about the funds or copies of the scheme particulars or
    1          5,000           1,200            371              78          4,920             1,160      prospectuses, you will need to contact your intermediary or the fund management group direct.
                                                                                                          If you require a simplified prospectus relating to any UCITS scheme held on the Cofunds platform,
    3          5,000           3,600           595              311          5,350             3,630      please request this information directly from your intermediary. This should be supplied to you
    5          5,000           6,000           862              661          5,820             6,320      free of charge.
   10          5,000          12,000          1,760          2,200            7,180           14,100
                                                                                                          All fund information has been provided by the respective fund manager. Please note that Cofunds
                                                                                                          only offers retail funds. The information supplied within this document is an accurate and current
                                                                                                          as we can make it, but we cannot guarantee that the status of any fund has not changed since
The last line in the table shows that over 10 years the effect of the total charges and expenses          this document was published in November 2009.
could amount to £1,760 (lump sum investment) or £2,200 (monthly saver). Putting it another way,           ‘FTSE®’ is a registered trademark of the London Stock Exchange plc and the Financial Times
if the growth rate were to be 6.00% per year, which is in no way guaranteed, the total charges            Limited and is used by the FTSE under licence.
would have the effect of reducing the growth rate to 3.70% per year (lump sum investment) or
3.20% (monthly saver).                                                                                    The funds included in this schedule were chosen by Chelsea Financial Services, your
                                                                                                          nominated intermediary. They represent a selection of funds available on the Cofunds
                                                                                                          platform. Cofunds cannot advise you on which funds to choose or whether the funds
                                                                                                          selected by Chelsea Financial Services are appropriate for you. Please note that no advice
costs, unlike a typical dual priced fund where costs are included in the spread. Therefore, the           has been given in this offer. If you are in any doubt about the suitability of this investment
                                                                                                          for you, please contact Chelsea Financial Services.
effect of dilution on the fund value. This amount is paid to the fund and if applied will be shown on
your confirmation note.
Stamp Duty Reserve Tax
You may also be charged an amount of Stamp Duty Reserve Tax (SDRT) Provision (currently
0.5%). This is a charge made by the fund manager to be made as a provision for SDRT for which
the fund may be liable and this is usually deducted from the fund (under the Stamp Duty and
Stamp Duty Reserve Tax Regulations 1999). This is normally charged on withdrawals and certain
transfers of Investments. Any amount of SDRT Provision charged to you will be shown separately
on your confirmation note.
                                                                                                                           October 2010 Viewpoint Chelsea Financial Services                    51
Consolidation Service Fund Key Features Schedule


                                                                                                              Initial charge: The charge made by the fund manager when you make your
                                                                                                              investment. This is charged as a percentage of your initial investment.
 Fund Aim: This is the objective of the fund as set out in the trust
 deed. The fund manager must invest in accordance with this fund
 objective and act within any limits on their investment powers.
                                                                                                              EXAMPLE FUND MANAGER
 Special Risk Factors: As well as the general and sector risks,                                               Example Fund
 the funds may carry additional risks associated more specifically with
 the type of assets in which they invest. The special risk factors which                                      Unit/Share type: Acc & Inc Fund type: OEIC
 relate to the funds you invest in are in the Special Risk Factors section in
 numerical order. Just check the relevant special risk information against                                    Investment Aims – To maximise the total return (income plus
 the numbers shown in the individual fund details.                                                            capital) by investing in global debt instruments, denominated in any
                                                                                                              currency, ranging from AAA Government Bonds through to high
                                                                                                              yield and emerging market corporate bonds. At least 50% of the
  Annual Management Charge (AMC): Deducted annually                                                           fund will be invested in sterling and other currency denominated
  by the fund manager as a percentage of the value of your investment at                                      bonds hedged back to Sterling.
  a specific date.
                                                                                                              Trustee           Royal Bank of Scotland plc

 Additional Charges and Expenses: These are additional                                                        Special                Standard           Annual     Additional  RIY ISA
 costs incurred by the fund which are not included in the AMC. This could                                     Risk                   Initial            Management Charges     based on
 include such costs as Trustee or Depositary fees.                                                            Factors                Charge             ChargeI    & ExpensesI UGR** ISA 7%
                                                                                                              1,3,4,5,6,             4.50%              1.25%               0.14%                5.33% (Acc)
 I, C, IC: Fund managers can differ in the way they apply charges.                                            7,11,12,13                                                                         5.33% (Inc)
 Some take the AMC and additional charges and expenses from income                                            RIY UT/OEIC    Single/                    Valuation           Dealing cut
 (indicated as ‘I’ here), some take it from capital (indicated as ‘C’) and
                                                                                                              based on UGR** Dual                       Pricing Time        Off time
 some take it from a mix of capital and income (indicated as ‘IC’).
                                                                                                              UT/OEIC 6%     Priced
                                                                                                              4.39% (Acc) Dual                          16:00               15:15
 Valuation Pricing Time and Dealing cut off time:                                                             4.02% (Inc)
 Please see ‘When and how is my money invested?’.


 Single/Dual Priced: Please see ‘Your Investment’.                                                            Effect of Charges: This is calculated by the fund manager, based on a set of
                                                                                                              calculations laid down by the Financial Services Authority. Assuming that the Underlying
                                                                                                              Growth Rate (UGR)** will be a particular percentage, then over 10 years the charges
** UGR=Underlying Growth Rate. The Reduced Investment Yield is calculated                                     would reduce the growth rate to the lower percentage figure. The actual effect on your
   on a lump sum investment over 10 years assuming an underlying growth rate                                  investment would of course depend on the performance of the fund and how long you
   as indicated above, which is in no way guaranteed. The yields are based on                                 remain invested.
    paid out, unless otherwise stated. Dealing costs are not included. Any tax relief
    has reduced the expenses rate, where available.
The Reduced Investment Yields quoted reflect the standard initial charges and do not
take account of any discounts or commission waivers that may be available.



 ABERDEEN UNIT TRUST MANAGERS LIMITED                                                                          ALLIANZ GLOBAL INVESTORS (UK) LTD

 Aberdeen Emerging Markets A Fund                                                                              Allianz RCM BRIC Stars A Fund
Unit/Share type: Acc Fund type: OEIC                                                                          Unit/Share type: Acc Fund type: OEIC
Investment Aims – The Fund aims to provide long term capital growth from direct                               Investment Aims – The Fund aims to achieve capital growth in the long term by
or indirect investment in emerging stock markets worldwide or companies with                                  investing mainly in the equity markets of Brazil, Russia, India and China.
significant activities in emerging markets.
                                                                                                              Depositary        J.P. Morgan Trustee and Depositary Company Limited
Depositary          Royal Bank of Scotland plc                                                                Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Special Risk            Standard Initial   Annual Management     Additional Charges   RIY ISA based on        Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 6%
Factors                 Charge             ChargeI               & ExpensesI          UGR** ISA 7%            2,3,8                  4.00%              1.75%               0.34%                3.49%
2,3,8                   4.25%              1.75%                 0.12%                5.04%                   RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
RIY UT/OEIC based on    Single/Dual        Valuation             Dealing cut                                  UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
UGR** UT/OEIC 6%        Priced             Pricing Time          Off time                                     3.49%                  Single             12:00               11:00
3.57%                   Single             12:00                 11:00

                                                                                                               ARTEMIS FUND MANAGERS LIMITED
 AEGON ASSET MANAGEMENT UK PLC
                                                                                                               Artemis Income Fund
 AEGON Investment Grade Bond A Fund
                                                                                                              Unit/Share type: Acc & Inc Fund type: Unit Trust
Unit/Share type: Acc & Inc Fund type: OEIC
                                                                                                              Investment Aims – To achieve a rising income combined with capital growth from a
Investment Aims – The primary investment objective is to maximise total return                                portfolio primarily made up of investments in the United Kingdom.
(income plus capital) by investing primarily in investment grade and government bonds
denominated in sterling and other currencies. The fund may hold up to a maximum of                            Trustee           Royal Bank of Scotland plc
20% in high yield bonds and may also hold cash. A minimum of 80% of the fund will be                          Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
invested in £ denominated assets or hedged back to £.                                                         Factors                Charge             ChargeC             & ExpensesC          UGR** ISA 7%
                                                                                                              1,5,8,12               5.25%              1.50%               0.06%                4.69% (Acc)
Depositary          Royal Bank of Scotland plc
                                                                                                                                                                                                 4.58% (Inc)
Special Risk            Standard Initial   Annual Management     Additional Charges   RIY ISA based on
Factors                 Charge             ChargeI               & ExpensesI          UGR** ISA 7%            RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
                                                                                                              UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
1,4,6,7,9,11,14         4.50%              1.25%                 0.09% (Acc)          5.09%
                                                                                                              3.71% (Acc)            Dual               12:00               11:00
                                                                 0.10% (Inc)                                  3.60% (Inc)
RIY UT/OEIC based on    Single/Dual        Valuation             Dealing cut
UGR** UT/OEIC 6%        Priced             Pricing Time          Off time
4.11%                   Single             12:00                 11:00
Investors should be aware that their right to sell units may be suspended by the fund manager in situations
where there is insufficient uninvested cash or assets which are readily realisable to meet investor demand
for the sale of units.




           52      Chelsea Financial Services Viewpoint October 2010
                                                                                                       GARTMORE FUND MANAGERS LIMITED
 Artemis UK Special Situations Fund
Unit/Share type: Acc Fund type: Unit Trust                                                             Gartmore UK Absolute Return R Fund
Investment Aims – To achieve long-term capital growth by exploiting special                           Unit/Share type: Acc Fund type: OEIC
situations.
                                                                                                      Investment Aims – To achieve a positive absolute return over the long-term
Trustee           Royal Bank of Scotland plc                                                          regardless of market conditions.
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   Depositary          HSBC Bank plc
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
                                                                                                      Special Risk           Standard Initial   Annual Management     Additional Charges   RIY ISA based on
3,8                    5.25%              1.50%               0.08%                4.64%              Factors                Charge             ChargeI               & ExpensesI          UGR** ISA 7%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             2,3,8,9,11,16,18       5.00%              1.50%                 0.17%                5.64%
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      RIY UT/OEIC based on   Single/Dual        Valuation             Dealing cut
3.67%                  Dual               12:00               11:00                                   UGR** UT/OEIC 6%       Priced             Pricing Time          Off time
                                                                                                      3.58%                  Single             12:00                 11:00
 AXA INVESTMENT MANAGERS UK LIMITED
                                                                                                       HENDERSON NEW STAR
 AXA Framlington UK Select Opportunities Fund
Unit/Share type: Acc & Inc Fund type: Unit Trust                                                       Henderson Strategic Bond A Fund
Investment Aims – To achieve capital growth by investing in companies, primarily of                   Unit/Share type: Inc Fund type: OEIC
UK origin, where the Manager believes above average returns can be realised.
                                                                                                      Investment Aims – To provide a return by investing in higher yielding assets
Trustee           Royal Bank of Scotland plc                                                          including high yield bonds, investment grade bonds, government bonds, equities,
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   preference shares and other bonds. The Fund will take strategic asset allocation
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       decisions between countries, asset classes, sectors and credit ratings. The Fund may
2,3                    5.25%              1.50%               0.07%                4.65%              invest in other transferable securities, money market instruments, derivatives and
                                                                                                      forward transactions, deposits and units in collective investment schemes.
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time                                Depositary          Royal Bank of Scotland plc
3.70%                  Dual               12:00               11:00                                   Special Risk           Standard Initial   Annual Management     Additional Charges   RIY ISA based on
                                                                                                      Factors                Charge             ChargeI               & ExpensesI          UGR** ISA 7%
                                                                                                      1,2,4,6,7              4.00%              1.25%                 0.19%                4.70%
 BLACKROCK
                                                                                                      RIY UT/OEIC based on   Single/Dual        Valuation             Dealing cut
                                                                                                      UGR** UT/OEIC 6%       Priced             Pricing Time          Off time
 BlackRock Continental European A Fund                                                                3.80%                  Single             12:00                 11:00
Unit/Share type: Acc & Inc Fund type: Unit Trust
Investment Aims – To achieve long term capital growth.                                                 INVESCO PERPETUAL
Trustee           Royal Bank of Scotland plc
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on    Invesco Perpetual High Income Fund
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 6%
                                                                                                      Unit/Share type: Acc & Inc Fund type: OEIC
2,3,8 (Acc)            5.00%              1.50%               0.21%                3.90%
2,3,6,8 (Inc)                                                                                         Investment Aims – To achieve a high level of income, together with capital growth.
                                                                                                      The fund intends to invest primarily in companies listed in the UK, with the balance
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
                                                                                                      invested internationally. In pursuing this objective, the fund managers may include
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      other investments that they consider appropriate, which may include units in collective
3.90%                  Dual               12:00               11:00                                   investment schemes, warrants and other permitted investments and transactions.
                                                                                                      Depositary          Citibank International Plc
                                                                                                      Special Risk           Standard Initial   Annual Management     Additional Charges   RIY ISA based on
 BlackRock UK Absolute Alpha P Fund                                                                   Factors                Charge             ChargeC               & ExpensesC          UGR** ISA 7%

Unit/Share type: Acc Fund type: Unit Trust                                                            1,2,4,5,8,12           5.00%              1.50%                 0.18%                4.80% (Acc)
                                                                                                                                                                                           4.80% (Inc)
Investment Aims – To acheive a positive absolute return for investors and, as
such, the Fund will not be managed against any UK equity index. The Fund invests                      RIY UT/OEIC based on   Single/Dual        Valuation             Dealing cut
primarily in a portfolio of equity-related securities (including derivatives) of companies            UGR** UT/OEIC 6%       Priced             Pricing Time          Off time
incorporated or listed in the UK.                                                                     3.72% (Acc)            Single             12:00                 11:00
                                                                                                      3.65% (Inc)
Trustee           Royal Bank of Scotland plc
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 6%
6,8,9,18               5.00%              1.50%               0.19%                3.60%               Invesco Perpetual Monthly Income Plus Fund
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             Unit/Share type: Acc & Inc Fund type: OEIC
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      Investment Aims – To achieve a high level of income whilst seeking to maximise
3.60%                  Dual               12:00               11:00
                                                                                                      total return through investing in high yielding corporate and Government bonds,
                                                                                                      together with UK equities. In pursuing this objective, the fund managers may include
 FIDELITY INVESTMENT SERVICES LTD                                                                     other investments that they consider appropriate, which may include shares, units
                                                                                                      in collective investment schemes, warrants and other permitted investments and
                                                                                                      transactions.
 Fidelity Special Situations A Fund
                                                                                                      Depositary          Citibank International Plc
Unit/Share type: Acc Fund type: OEIC
                                                                                                      Special Risk           Standard Initial   Annual Management     Additional Charges   RIY ISA based on
Investment Aims – To achieve long term capital growth from a portfolio primarily                      Factors                Charge             ChargeC               & ExpensesC          UGR** ISA 7%
made up of the shares of UK companies.                                                                1,2,4,5,6,7            5.00%              1.25%                 0.19%                5.00% (Acc)
Depositary        J.P. Morgan Trustee and Depositary Company Limited                                                                                                                       5.00% (Inc)
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   RIY UT/OEIC based on   Single/Dual        Valuation             Dealing cut
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       UGR** UT/OEIC 6%       Priced             Pricing Time          Off time

3,8                    3.50%              1.50%               0.16%                3.90%              3.98% (Acc)            Single             12:00                 11:00
                                                                                                      3.87% (Inc)
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
3.86%                  Single             12:00               11:00                                    INVESTEC ASSET MANAGEMENT

 FIRST STATE INVESTMENTS (UK) LIMITED                                                                  Investec American A Fund
                                                                                                      Unit/Share type: Acc Fund type: OEIC
 First State Asia Pacific Leaders A Fund                                                              Investment Aims – To achieve long term capital growth primarily through investment
Unit/Share type: Acc Fund type: OEIC                                                                  in a portfolio of equities issued by USA companies and in derivatives the underlying
                                                                                                      assets of which are equities issued by USA companies.
Investment Aims – The Fund aims to achieve long term capital growth. The Fund
invests in large and mid capitalisation equities in the Asia Pacific region (excluding                Depositary          State Street Trustees Limited
Japan, including Australasia).                                                                        Special Risk           Standard Initial   Annual Management     Additional Charges   RIY ISA based on
                                                                                                      Factors                Charge             ChargeI               & ExpensesI          UGR** ISA 7%
Depositary        Royal Bank of Scotland plc
                                                                                                      2,8                    4.50%              1.50%                 0.11%                4.81%
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       RIY UT/OEIC based on   Single/Dual        Valuation             Dealing cut
                                                                                                      UGR** UT/OEIC 6%       Priced             Pricing Time          Off time
2,3,8                  4.00%              1.50%               0.06%                4.91%
                                                                                                      3.83%                  Single             12:00                 11:00
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time                                Please note, transfers are accepted for the Investec American Fund with the share type B.
4.27%                  Single             12:00               11:00

                                                                                                       J O HAMBRO CAPITAL MANAGEMENT LTD
 First State Greater China Growth A Fund                                                               JOHCM UK Opportunities R Fund
Unit/Share type: Acc Fund type: OEIC                                                                  Unit/Share type: Acc & Inc Fund type: OEIC
Investment Aims – The Fund aims to achieve long term capital growth. The Fund                         Investment Aims – To achieve long-term capital appreciation through investment in
invests in equity and equity related securities issued by companies with either assets                a concentrated portfolio primarily invested in transferable securities of UK companies.
in, or revenues derived from, the People’s Republic of China, Hong Kong and Taiwan.
                                                                                                      Depositary          HSBC Bank plc
Depositary        Royal Bank of Scotland plc
                                                                                                      Special Risk           Standard Initial   Annual Management     Additional Charges   RIY ISA based on
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   Factors                Charge             ChargeC               & ExpensesI          UGR** ISA 7%
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
                                                                                                      8,18                   5.00%              1.25%                 0.09%                5.02%
2,3,8                  4.00%              1.75%               0.17%                4.86%
                                                                                                      RIY UT/OEIC based on   Single/Dual        Valuation             Dealing cut
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             UGR** UT/OEIC 6%       Priced             Pricing Time          Off time
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      4.04%                  Single             12:00                 11:00
4.30%                  Single             12:00               11:00


                                                                                                                       October 2010 Viewpoint Chelsea Financial Services                      53
 JPMORGAN ASSET MANAGEMENT
                                                                                                       M&G Global Dividend A Fund
 JPM Natural Resources A Fund                                                                         Unit/Share type: Acc & Inc Fund type: OEIC
Unit/Share type: Acc & Inc Fund type: OEIC                                                            Investment Aims – To deliver a dividend yield above the market average, by investing
                                                                                                      mainly in a range of global equities. To increase distributions over the long term whilst
Investment Aims – The Fund aims to provide capital growth over the long term.
                                                                                                      also maximising total return (the combination of income and growth of capital).
Depositary         Royal Bank of Scotland plc
                                                                                                      Depositary        Royal Bank of Scotland plc
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
                                                                                                      Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeI             & Expenses           UGR** ISA 6%
                                                                      I                               Factors                Charge             ChargeC             & ExpensesI          UGR** ISA 7%
2,3,8 (Acc)           4.25%               1.50%               0.18% (Acc)          3.78% (Acc)        1,2,5,8,12             4.00%              1.50%               0.19%                4.80% (Acc)
                                                                   IC
1,2,3,6,8,10,16 (Inc)                                         0.18% (Inc)          3.78% (Inc)                                                                                           4.70% (Inc)
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             RIY UT/OEIC based on   Singlel            Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time                                UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
4.27% (Acc)            Single             12:00               11:00                                   4.10% (Acc)            Single             12:00               11:00
3.76% (Inc)                                                                                           4.00% (Inc)


 JUPITER UNIT TRUST MANAGERS LIMITED
                                                                                                       M&G Optimal Income A Fund
 Jupiter Absolute Return Fund Acc
                                                                                                      Unit/Share type: Acc & Inc Fund type: OEIC
Unit/Share type: Acc Fund type: Unit Trust                                                            Investment Aims – The Fund aims to provide a total return to investors based on
Investment Aims – To generate an absolute return independent of market conditions                     optimal exposure to income streams in investment markets.
by investing on a global basis.
                                                                                                      Depositary        Royal Bank of Scotland plc
Trustee            Royal Bank of Scotland plc                                                         Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 5%
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       4,5,7,9,12,13          4.00%              1.25%               0.20%                3.30%
2,3,8,9,18             5.25%              1.25%               0.31%                3.73%              RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             UGR** UT/OEIC 5%       Priced             Pricing Time        Off time
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time                                3.30%                  Single             12:00               11:00
2.76%                  Dual               12:00               11:00


                                                                                                       M&G Recovery A Fund
 Jupiter Emerging European Opportunities Fund
                                                                                                      Unit/Share type: Acc & Inc Fund type: OEIC
Unit/Share type: Acc Fund type: Unit Trust                                                            Investment Aims – The Fund’s sole aim is capital growth, through primarily investing
Investment Aims – To achieve long-term capital growth through investment primarily                    in a diversified range of companies which are out of favour, in difficulty or whose
in Central and Eastern Europe.                                                                        future prospects are not fully recognised.
Trustee            Royal Bank of Scotland plc                                                         Depositary        Royal Bank of Scotland plc
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
2,3,8,11               5.50%              1.50%               0.40%                4.28%              2,3,8                  4.00%              1.50%               0.05%                4.80%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time                                UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
3.31%                  Dual               12:00               11:00                                   3.80%                  Single             12:00               11:00


                                                                                                       MARLBOROUGH FUND MANAGERS LTD
 Jupiter European Special Situations Fund
Unit/Share type: Acc & Inc Fund type: Unit Trust                                                       Marlborough Special Situations Fund
Investment Aims – To achieve long-term capital growth by exploiting special                           Unit/Share type: Acc Fund type: Unit Trust
situations by investing principally in European equities, in investments considered to
                                                                                                      Investment Aims – To provide investors with capital growth by following a
be undervalued.
                                                                                                      speculative policy investing in smaller companies, new issues and companies going
Trustee           Royal Bank of Scotland plc                                                          through a difficult period with good recovery prospects.
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   Trustee            HSBC Bank plc
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
                                                                                                      Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
2,8                    5.25%              1.50%               0.31%                4.40%              Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut                             2,3,8                  5.00%              1.50%               0.12%                4.68%
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
3.43%                  Dual               12:00               11:00                                   UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      3.70%                  Dual               12:00               11:00

 Jupiter Japan Income Fund
                                                                                                      MARTIN CURRIE INVESTMENT MANAGEMENT LTD
Unit/Share type: Acc & Inc Fund type: Unit Trust
Investment Aims – To achieve long term capital and income growth by investing in a                     Martin Currie IF North American Alpha A Fund
combination of Japanese equities and convertible bonds as well as cash, deposits and                  Unit/Share type: Acc Fund type: OEIC
money market instruments.
                                                                                                      Investment Aims – The fund is unconstrained by any benchmark, and aims to
Trustee           Royal Bank of Scotland plc                                                          produce capital growth by investment in the United States of America and Canada.
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeC             & ExpensesC          UGR** ISA 7%
                                                                                                      Depositary        State Street Trustees Limited
1,2,4,6,8,12           5.25%              1.50%               0.26%                4.37%              Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
                                                                                                      Factors                Charge             ChargeC             & ExpensesC          UGR** ISA 7%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      2,8,11,16              5.00%              1.50%               0.19%                3.70%
3.40%                  Dual               12:00               11:00                                   RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
                                                                                                      UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                      3.60%                  Single             12:00               11:00
 LEGAL & GENERAL UNIT TRUST MANAGERS LIMITED

 Legal & General Dynamic Bond A Trust                                                                  MITON ASSET MANAGEMENT
Unit/Share type: Acc & Inc Fund type: Unit Trust                                                       CF Miton Special Situations Portfolio A Fund
Investment Aims – To achieve a total return by investing principally in a range of
                                                                                                      Unit/Share type: Acc Fund type: OEIC
fixed and variable rate income securities.
                                                                                                      Investment Aims – To provide long-term growth by investing in a portfolio of other
Trustee            Royal Bank of Scotland plc                                                         authorised funds, worldwide equities, fixed interest stocks, cash and money market
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   instruments.
Factors                Charge             ChargeIC            & ExpensesIC         UGR** ISA 5%
                                                                                                      Depositary         Bank of New York Trust & Depositary Co. Ltd
1,2,4,5,6,9,13         3.00%              1.25%               0.17%                3.30%
                                                                                                      Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
                                                                                                      Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
UGR** UT/OEIC 5%       Priced             Pricing Time        Off time
                                                                                                      1,2,7,8,12             5.00%              1.50%               0.47%                3.90%
3.30%                  Dual               12:00               11:00
                                                                                                      RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
                                                                                                      UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
 M&G SECURITIES LIMITED                                                                               3.90%                  Single             12:00               11:00

 M&G American A Fund
Unit/Share type: Acc & Inc Fund type: OEIC
Investment Aims – The Fund’s objective is long term capital growth through
investment in North American securities. It may also invest in Canada, and in
companies which are listed, registered or trading within North America.
Depositary         Royal Bank of Scotland plc
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%
2,8                    4.00%              1.50%               0.15%                4.80%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
4.00%                  Single             12:00               11:00


           54    Chelsea Financial Services Viewpoint October 2010
 NEPTUNE INVESTMENT MANAGEMENT LIMITED
                                                                                                       Schroder UK Alpha Plus A Fund
 Neptune European Opportunities A Fund                                                                Unit/Share type: Acc & Inc Fund type: Unit Trust
Unit/Share type: Acc & Inc Fund type: OEIC                                                            Investment Aims – To provide capital growth through investment in UK and other
                                                                                                      companies.
Investment Aims – The investment objective of Neptune European Opportunities
Fund is to generate capital growth by investing predominantly in a concentrated                       Trustee           J.P. Morgan Trustee and Depositary Company Limited
portfolio of securities selected from European markets, excluding the UK, with a                      Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
view to attaining top quartile performance within the appropriate peer group.                         Factors                Charge             ChargeI             & ExpensesC          UGR** ISA 7%

Depositary         State Street Trustees Limited                                                      8,11                   5.25%              1.50%               0.15%                5.48%
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       UGR** UT/OEIC 6%       Priced             Pricing Time        Off time

2,3,8,11 (Acc)         5.00%              1.75%               0.06% (Acc)          4.59% (Acc)        3.80%                  Dual               12:00               11:00
1,2,8,9,16 (Inc)                                              0.07% (Inc)          4.57% (Inc)
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
                                                                                                       STANDARD LIFE INVESTMENTS LIMITED
3.63% (Acc)            Single             12:00               11:00
3.23% (Inc)
                                                                                                       SL Inv UK Equity High Income R Fund
                                                                                                      Unit/Share type: Acc & Inc Fund type: OEIC
                                                                                                      Investment Aims – The objective of this fund is to provide a high level of income
 Neptune US Opportunities A Fund                                                                      with some capital growth over the longer term. The investment policy of the fund
                                                                                                      is to invest in equities and equity-type investment of companies listed on a UK
Unit/Share type: Acc Fund type: OEIC                                                                  stock exchange or which in the opinion of the ACD carry a substantial part of their
Investment Aims – The investment objective of Neptune US Opportunities Fund is                        operations in the UK.
to generate capital growth by investing predominantly in a concentrated portfolio of                  Depositary         J.P. Morgan Trustee and Depositary Company Limited
North American securities, which may include Canada as well as the US, with a view
to achieving top quartile performance within the appropriate peer group.                              Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
                                                                                                      Factors                Charge             ChargeC             & ExpensesC          UGR** ISA 7%
Depositary        State Street Trustees Limited                                                       1,6,8,12               4.00%              1.50%               0.09%                5.19%
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 7%       UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
2,8,11                 5.00%              1.60%               0.05%                4.82%              4.20%                  Single             07:30               15:15
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
3.38%                  Single             12:00               11:00                                    THREADNEEDLE INVESTMENTS

                                                                                                       Threadneedle Absolute Return Bond 1 Fund
 NEWTON (BNY MELLON ASSET MANAGEMENT LIMITED)
                                                                                                      Unit/Share type: Acc Fund type: OEIC
 Newton Asian Income Fund                                                                             Investment Aims – The investment objective of the fund is to achieve a total positive
                                                                                                      return in all market conditions.
Unit/Share type: Inc Fund type: OEIC
                                                                                                      Depositary         J.P. Morgan Trustee and Depositary Company Limited
Investment Aims – To achieve income together with long term capital growth
                                                                                                      Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
predominantly through investments in securities in the Asia Pacific ex Japan
                                                                                                      Factors                Charge             ChargeI             & ExpensesI          UGR** ISA 6%
(including Australia & New Zealand) region. The sub-fund may also invest in collective
investment schemes.                                                                                   2,3,4,5,7,9,12         3.00%              1.25%               0.12%                4.60%
                                                                                                      RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
Depositary        Royal Bank of Scotland plc                                                          UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on   4.60%                  Single             12:00               11:00
Factors                Charge             ChargeC             & ExpensesC          UGR** ISA 7%
1,2,3,5,6              4.00%              1.50%               0.17%                4.68%
8,10,11,12
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
3.70%                  Single             12:00               11:00


 RATHBONE UNIT TRUST MANAGEMENT LIMITED

 Rathbone Income Fund
Unit/Share type: Acc & Inc Fund type: Unit Trust
Investment Aims – To achieve above average and maintainable income but without
neglecting capital security and growth.
Trustee            Royal Bank of Scotland plc
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeC             & ExpensesI          UGR** ISA 7%
1,5,6,8,12             5.50%              1.50%               0.06%                4.69% (Acc)
                                                                                   4.56% (Inc)
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
4.00% (Acc)            Dual               12:00               11:00
3.90% (Inc)


 SCHRODER UNIT TRUSTS LIMITED

 Schroder European Alpha Plus A Fund
Unit/Share type: Acc & Inc Fund type: Unit Trust
Investment Aims – Aims to achieve capital growth by investing in European
countries. The fund may also invest in companies headquartered or quoted outside
Europe which have material or critical operations within, or derive significant business
from Europe. Fixed interest securities may also be included in the portfolio.
Trustee            J.P. Morgan Trustee and Depositary Company Limited
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeI             & ExpensesC          UGR** ISA 7%
2,3,8,11               5.25%              1.50%               0.19%                5.47%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
3.80%                  Dual               12:00               11:00



 Schroder Income Maximiser A
Unit/Share type: Acc & Inc Fund type: Unit Trust
Investment Aims – The Fund’s investment objective is to provide income with
potential for capital growth primarily through investment in equity and equity related
securities of UK companies. The Fund will also use derivative instruments to generate
additional income.
Trustee           J.P. Morgan Trustee and Depositary Company Limited
Special Risk           Standard Initial   Annual Management   Additional Charges   RIY ISA based on
Factors                Charge             ChargeC             & ExpensesC          UGR** ISA 7%
1,5,6,8,9,12           5.25%              1.50%               0.21%                5.47%
RIY UT/OEIC based on   Single/Dual        Valuation           Dealing cut
UGR** UT/OEIC 6%       Priced             Pricing Time        Off time
3.70%                  Dual               12:00               11:00




                                                                                                                      October 2010 Viewpoint Chelsea Financial Services                     55
How can
we help?
                                       CHELSEA FINANCIAL SERVICES was founded
                                       in 1983 as a firm of independent financial
                                       advisers by its present Chairman, Dr John
                                       Holder. We were the first intermediary to
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                                       bonds, and later PEPs/ISAs. Over the last
                                       twenty-seven years our clients have saved
                                       many millions of pounds they would have
Freephone brochure line                paid in charges had they bought direct
0800 071 3333                          from investment companies and we are still
                                       leading the way. Simply by sending your
General enquiries                      investment application to us, you can save
020 7384 7300                          up to 5.5%, an incredible £561 on a
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Visit our website                      to a flying start, invest through Chelsea
www.chelseafs.co.uk                    Financial Services.




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