Quarterly Report

01/10/2019 to 31/12/2019

Tatton Tracker Active

FOR USE BY PROFESSIONAL INVESTMENT ADVISERS

Contents

Ÿ Portfolio Performance: An overview of the model portfolio performance over the previous quarter. Page 2

Ÿ Portfolio Characteristics: Covering the model portfolio objective, suitability & key information. Page 2

Ÿ Portfolio Returns: Graphical demonstration of the model portfolio cumulative returns, excess returns relative Page 3
to the model benchmark and drawdown oversight.

Ÿ Asset Allocation & Fund Selection: Covering asset allocation, sub asset allocation, a summary of the asset Page 4
allocation changes over the quarter and the fund changes.

Ÿ Global Market Review: A quarterly summary written by our investment team covering global markets Page 5

Page 1 of 5
Model Portfolio Performance
Returns (%)
Calculation Benchmark: IA Mixed Investment 40-85% Shares
1 Month 3 Months YTD 3 Years 5 Years Since
Inception
Tatton Tracker Active 1.3 2.2 15.7 22.2 49.9 83.9
+/- Benchmark -0.17 -0.16 -0.24 2.37 10.26 15.63
Calculation Benchmark: IA Mixed Investment 40-85% Shares

YTD 2019 2018 2017 2016 2015

Tatton Tracker Active 15.7 15.7 -5.5 11.8 18.6 3.4

+/- Benchmark -0.24 -0.24 0.54 1.78 5.34 0.54

Performance
The above tables show comparative performance against a relevant Investment Association (IA) sector benchmark so that you can
compare performance to our competitors using relatively similar asset allocations. The benchmark is an indicator of similar investments
performance relative to each other and is not intended to provide an indication of future returns or investor expectations.
Past performance is not a guide to future performance.

Portfolio Characteristics
Risk Profile: Active

12 Mo Yield 2.32
Std Dev 3 Yr (Qtr-End) 6.77
Since Inception Annualised Return 9.10

Portfolio Objective - Active

The leading objective of this portfolio is to maximise potential total return for a given level of risk.

The primary determinant of risk is the proportion invested in the riskiest assets, such as equities.

For this portfolio, over the long-term, we would expect the proportion invested in equities to be approximately 75%. This strategic
exposure may be adjusted over the longer term to maintain adherence to the risk limits.

In the shorter term, we may also adjust this weight tactically as economic and market conditions dictate while not deviating by more than
±12.5%.

Who is the portfolio for?

This portfolio is likely to be suitable for: An investor who is comfortable with holding a significant proportion of their portfolio in higher risk
investments in order to have the opportunity for a greater investment return. An investor who is prepared to accept investment losses in
the short-term in order to achieve potentially greater investment returns over the longer-term. The portfolio will be subject to fluctuations
in value.
Source Data: Total Return Calculation Benchmark: IA Mixed Investment 40-85% Shares
18.0
15.7 15.9 15.7 15.9
16.0
14.0
12.0
10.0
8.4
8.0 6.9 6.9
6.2
6.0
4.5 4.4
4.0
2.2 2.3
2.0
Return

0.0
QTD YTD 6 Months 1 Year 3 Years 5 Years

Tatton Tracker Active IA Mixed Investment 40-85% Shares

Page 2 of 5
Model Portfolio Analysis
190.0
182.5
175.0
167.5
160.0
152.5
145.0
137.5
130.0
122.5
115.0
107.5
100.0
2013 2014 2015 2016 2017 2018 2019

Tatton Tracker Active IA Mixed Investment 40-85% Shares

Drawdown
Time Period: Since Common Inception (02/01/2013) to 31/12/2019

0.0

-2.0

-4.0

-6.0

-8.0

-10.0

-12.0

-14.0

-16.0
2013 2014 2015 2016 2017 2018 2019

Tatton Tracker Active IA Mixed Investment 40-85% Shares

Drawdown - Defined
The peak to trough decline during a specific period. On the drawdown chart a new high is represented at any period where the chart shows 0. The
period between the low and 0 is recovery to the new peak. With the 0 to low the drawdown from peak to trough in percentage terms

Page 3 of 5
Model Portfolio: Asset Allocation

Asset Allocation Sub Asset Allocation

% %
Equity 75.8 UK Equity 34.9
Bond 13.5 North America Equity 24.1
Cash 10.7 Cash Proxy 8.7
Total 100.0 Europe Equity 6.9
Inv. Grade Bond 6.8
Emerging Market Equity 5.0
Govt Bond 3.9
Japan Equity 2.9
Strat Bond 2.9
Cash 1.9
Other 1.9
Total 100.0

Portfolio Activity: Asset Allocation & Fund Selection

Asset Allocation
The portfolio was rebalanced on 22 October 2019. The world appears to be finely balanced between the positives and negatives. As such
we will maintain a broadly neutral asset allocation. The US may well continue to be a better performer in the event of stasis, and probably
will also fare better in a more negative environment, its more expensive valuation being justified by its less risky nature. Therefore, we will
remove our valuation-driven underweight to US stocks, albeit with a bias against the more expensive mega-caps. We are mindful that
equity outperformance has been concentrated in this area, with both value and small cap having cheapened to historically extreme levels.

Given that bond yields are persistently low, we remain slightly short of duration in our models. Indeed, while not likely, there are scenarios
where both equities and bonds could fall. The decline in long-term global inflation expectations looks to be overdone, particularly if policy
responses shift towards fiscal stimulus through public spending increases combined with ample monetary liquidity. We increased our
position in inflation linked global bonds (outside UK), the proceeds coming from fixed coupon government bonds. The rationale does not
apply in the UK, where the impact of Brexit has raised inflation expectations, driven by sterling weakness. We recognise that general
investor sentiment is risk-averse but also less stable. This has created a strong preference for investments which are likely to remain
liquid in stressed scenarios. Clearly, an improvement in global trade relations could release a strong burst of pent-up activity.

The UK can be considered as an extreme version of the global situation of rising uncertainty, and perhaps as a model for what might be
possible. UK markets have suffered as global investors have required a greater risk premium in order to hold sterling-based assets. An
improvement in sentiment, which we regard as likely and plausible could have a particularly positive impact. We remain neutral in our
allocations to the UK, a position which we believe differentiates us from other managers who appear to be holding fewer UK assets than
normal. The current investment environment is one of the most challenging and potentially volatile. We are prepared to respond quickly to
substantive changes, and the likelihood of another rebalance in the coming quarter is greater than usual.

Fund Selection - Tracker

We repeat our thoughts expressed after July’s investment committee. We are cognisant that both a “melt-up” in equities driven by liquidity
and a fall (because of a perceived “policy error”) are possible. As such a neutral equity weight will be maintained in client portfolios.
Given that bond yields are persistently low (with yet another decline in “term risk premia”), we remain slightly short of duration in our
models. Indeed, while not likely, there are scenarios where both equities and bonds could fall.

Summary of changes:

Ÿ Increase in inflation linked bond allocations (L&G index fund) at the expense of nominal government bonds (Vanguard UK Bond
fund)
Ÿ Reduction in European equity overweight (trimming of several passive and active managers), with this reduction being reinvested in
North American stock markets (HSBC Index fund)

Page 4 of 5
Global Market Review

The strong performance of equity markets in the fourth quarter (Q4) topped off a positive year and a stellar decade for all the global stock
indices we regularly track. In GBP-terms, global markets rose 1.3% in Q4 and 4.6% in the second half of 2019, as measured by the MSCI
World All Countries Index.
US technology stocks ended the quarter up 5% and the decade on a strong note, echoing the clear investor preference for growth
companies over the past ten years. The US Nasdaq technology index outperformed all other major indices and increased a stunning
580% or 21% per annum over the course of the 2010s. The second-best performing market was the S&P500, rising 348% or 16%
annualised and has a large ~20% exposure to growth/tech stocks.

UK stocks kept pace with both European and Japanese peers over the 2010s, increasing 8%, 8% and 8.5% respectively. Bonds posted
mid-single digit returns but corporate bonds outperformed government bonds over the period. The only asset we track that showed a
negative return over the past ten years was commodities, with a -3% annualised return, mainly driven by weaker oil prices.

Markets had looked positive for most of 2019. However, sentiment took a clear step up in Q4, with the arrival of the US Federal Reserve’s
efforts to boost liquidity through direct injections into shorter-term funding markets, easing investor concerns. The Fed reversed course by
significantly expanding its balance sheet and there are some predictions of further interest rate cuts in 2020. The next supportive factor
was the growing prospect of a US-China trade agreement, as each side took small, but clear steps to de-escalate the dispute by rolling
back some tariffs. All indications suggest that “phase one” of a trade deal will be signed on January 15. This helped push stock markets to
record highs, with the S&P500 reaching 35 new all-time highs last year, with 20 of those days coming in the last two months. Valuation
expansion accounted for 92% of the S&P 500 return in 2019, the forward P/E expanded from 14x to 19x.

The last of the ‘fear dominoes’ to fall was that of uncertainty around the UK general election. The strong Conservative win helped put the
Pound on more solid footing, setting up a potential longer-term rebound in GBP. Boris Johnson’s large majority now likely means the UK
leaves the European Union on January 31, but all indications suggest this could be in a softer form than investors may have feared,
helping underpin UK stock markets. Indeed, after languishing for most of 2019, UK markets posted some of the strongest returns globally
in December.

However, the key defining moment for the global economy in 2019 was the downturn in the manufacturing sector, which was a drag on
growth. The good news is that as we enter a new decade, manufacturing looks to be making a comeback. We see early indications in
both the soft and hard economic data. In November, manufacturing PMIs improved for the first time in nearly seven months.
Encouragingly, November’s soft data bounce appears to have translated into December’s hard data. Korean exports – a leading indicator
for global trade – rebounded strongly. This is a hugely positive sign and any upturn in trade and manufacturing should help underpin
global growth, which now appears to have troughed at the end of 2019.

Risks to the recovery remain, especially if US-China trade tensions re-escalate or middle eastern geopolitics resurface. Other risks
include the possibility financial stability deteriorates, or if inflation and wage growth shows a sharper than expected acceleration relative
to both business investment (capex) and productivity growth, that could require central banks to tighten monetary policy.
We would be happy to reassess portfolio positioning in the event of more positive confirmatory economic data. Overall, we believe a
neutral risk position in portfolios remains warranted for now.

Important Information
The information in this document does not constitute investment advice or a recommendation and investment decisions should
not be made on the basis of it.

The portfolio returns presented in this document are for information purposes only and should be regarded as indicative of the
returns individual clients will have achieved with their actual investment portfolios, which are managed in the same respective
investment style and risk profile. While client portfolio returns are expected to be very similar to the returns shown here, they
may differ as a result of new monies having been introduced by the client, or withdrawn from the portfolio and/or the specific
fee charging arrangements agreed between the client and the adviser.

Please be aware that adjustments to previously reported data can occur. The value of your investments and the income from
them can fluctuate and it is possible that investors may not get back the amount they invested. All returns are calculated in £-
Sterling and are shown after fund charges, but before all other fees, like platform and adviser charges. The charts, data and
related performance calculations shown within this report is sourced from Morningstar and is valid as at the date of publication.
Asset Allocation: Operational cash of 2% is to cover costs and charges; any additional amount is for strategic purposes.
Portfolio yield is calculated as the rolling 12-month yield.

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