Because of the evolutionary nature of IM Default Portfolio it is not possible to show specifi c asset class/geographic exposure, as by defi nition this will be different from one investor to another at any given time.

Therefore we show below illustrative asset class/geographic exposure over different cycles based on current market conditions.

Longer Investment Term Medium Investment Term Shorter Investment Term

intelligentmoney

INTELLIGENT ASSET MANAGEMENT

IM DEFAULT PORTFOLIOFACTSHEET – JANUARY 2015

INVESTMENT MANAGER

Tim Horrocks

Tim runs the investment management and asset allocation models for Intelligent Asset Management on behalf of Quilter Cheviot, which he joined in 1999.

He has over 25 years of fi nancial services experience having previously worked at Albert E Sharp and Henderson Crosthwaite.

Tim is a Chartered Fellow of The Chartered Institute for Securities & Investment and a Chartered Wealth Manager.

INVESTMENT OBJECTIVEThis portfolio aims to deliver CPI plus 4% to CPI net over the long term in order to provide a lump sum at the end of the accumulation phase for withdrawal or annuity purchase.

The investment manager places each client in a risk adjusted portfolio that reduces exposure to equities and increases exposure to gilts and cash as each client moves closer toward their specifi ed target date in order to manage risk by reducing volatility.

The portfolio provides full risk management and investment management using passive underlying investments, but in order to reduce costs does not offer the same degree of active asset allocation as our Optimum Portfolios.

ASSET ALLOCATION/GEOGRAPHICAL LOCATION

Fixed Interest - UK GiltsFixed Interest - UK Index Linked GiltsOther UK Fixed Interest

Fixed Interest - OverseasEquities - UK Large CapEquities - US

Equities - JapanEquities - EuropeEquities - Far East

Equities - OtherProperty FundsGold

Cash

HISTORIC PERFORMANCE£100,000 invested over 10 years into the underlying investments within this portfolio to 31st December 2014:

£174,080

The average annual return from these underlying assets over 10 years to 31st December 2014 was:

5.7% p/a

Please note, these returns are based upon the fi nal ten years of an investment cycle when our portfolios are reducing risk to deliver a capital lump sum for withdrawal.

Past performance is not an indication of future returns.

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Intelligent Money is authorised and regulated by the Financial Conduct Authority. The underlying Investment Manager of our IM Optimum Portfolios is Quilter Cheviot. Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London WC2B 6AN. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority.

This document is not a solicitation or an offer to buy or sell any security. The information on which the document is based is deemed to be reliable, but we have not independently verified such information and we do not guarantee its accuracy or completeness. Changes in exchange rates may have an adverse effect on the value, price or income of foreign currency denominated securities. Estimated gross yield is not a reliable indicator of future returns. The securities and investment services discussed in this factsheet may not be suitable for all recipients. Intelligent Money recommends that investors independently evaluate particular investments and strategies, and seek the advice of a financial advisor. The appropriateness of a particular strategy will depend on an investor’s individual circumstances and objectives.

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MARKET COMMENTARY

2014 saw modest global growth and a mixed performance from markets as investors grappled with a number of headwinds including the impact of the Federal Reserve phasing out quantitative easing, the European Central Bank’s failure to deliver aggressive stimulus measures, the stability of the Chinese banking system and the crisis in the Ukraine. In the event, global activity recovered sufficiently for GDP to grow 2.7% while interest rates remained close to zero and inflation at 1.4% was well below expectations.

Global growth showed significant regional variations with central bank policy action the key influence. Whilst US and UK GDP grew reasonably strongly at +2.3% and +3% respectively, Japan – constrained by the consumption tax rise – recorded only +0.3% prompting a snap election to shore up support for Prime Minister Abe’s reform programme. Although sub-optimal Eurozone growth of +0.8% was broadly as expected, the ECB failed to resolve the structural challenges and sanctions against Russia adversely impacted Germany. France and Italy remained weak but Spain surprised on the upside as did Ireland with growth of +5.5%. Despite concerns about a growing property bubble, GDP growth in China at +7.3% was in line with official forecasts while other Asian economies – particularly India, Taiwan and Korea - matched or exceeded expectations. The most disappointing areas were commodity-dependent economies and those like Brazil, Russia, Venezuela and Argentina that are facing major structural challenges.

Slowing demand, surging supply and a strong dollar resulted in weaker commodity prices – most notably the 50% decline in Brent crude oil to $57 over the second half of 2014. OPEC’s refusal to countenance production cuts was variously portrayed as a means of attempting to rein in US shale oil production, curtailing Russia’s influence or dealing with production excesses within the cartel itself. The real reason could be more geo-political with Saudi Arabia trying to limit the market share of OPEC’s Shia “bloc” as western relations with Iran thaw and the US focus shifts eastwards. As the price decline represents a significant fiscal and political risk for producers – possibly greater than the ‘Arab spring’ uprising - commodity futures are signalling a rebound to $80 by late 2015. Whilst lower oil prices will provide an obvious boost for consumers – particularly in the US – and benefit global growth short-term, the protracted period of low inflation is likely to continue as long as there is an excess of savings over investment, under-utilisation of the labour force and policies to promote less energy/carbon intensive production.

Central banks continued to face challenges in a low inflation environment. Having successfully navigated the financial crisis, the pace of economic growth since 2010 (averaging +2% in the US and +0.7% in the Eurozone) has been disappointing. Although this is widely attributed to fiscal consolidation and private sector deleveraging, neither was a key factor in 2014. Solvency became an increasing structural challenge for parts of the Eurozone and Japan as well as some emerging economies such as China and Korea. Just as the Federal Reserve and Bank of England withdrew their monetary measures, the ECB and Bank of Japan stepped up efforts to stimulate growth/inflation through quantitative easing. With interest rates effectively close to zero, the main impact was felt in currency markets where the euro and yen both fell 14% against the dollar with similar declines in emerging market currencies. Sterling - which faces election uncertainty in 2015 – was caught in the crossfire and depreciated 6% to $1.55.

Boosted by increasing corporate optimism and the oil price collapse, Wall Street powered to new all-time highs in the second half with the S&P 500 up 210 over the year to 2,058 leaving European markets trailing in its wake. The FTSE Eurofirst 300 rose 52 to 1,368 and the FTSE 100 fell 183 to 6,566 although the

FTSE 250 managed a small gain. Japanese equities tracked the Bank of Japan’s aggressive monetary easing with the Nikkei 225 rising 1,159 to 17,450 albeit yen depreciation eliminated gains for un-hedged overseas investors. Asian equities produced positive returns but commodity-related emerging markets (notably Russia -45%) were weak. China (+50%) and India (+30%) were among the best performers in local currency terms. Although UK commercial property and hedge funds made respectable gains, it was bonds that exceeded expectations as the widely anticipated “normalisation” of US and UK interest rates failed to materialise. Instead, consistently low consumer price inflation across the OECD resulted in lower long-term inflation expectations and demand from pension funds and insurance companies for longer-dated conventional and index-linked bonds. The yield on UK 10 year gilts fell steadily ending the year down 127bp at 1.76% with the FTSE Gilt index returning +14%.

The corporate sector continued to weather the low growth environment relatively well mainly by re-leveraging balance sheets via equity buybacks and extraordinary dividends, cost cutting and also mergers and acquisitions. Global earnings increased 9% with Japanese (+20%) and Eurozone (+12%) companies leading the way. US earnings were +8% while the UK - impacted by a high exposure to oil/resource stocks - managed only +2%. Healthcare and technology companies again performed well and the unexpected rally in government bonds boosted utilities.

2015 starts against a backdrop of further modest economic growth. In the absence of radical policy initiatives, global GDP is likely to be just over +3%. The mix of austerity versus policy stimulus means +3% in the US and UK will be well ahead of +1% expected in the Eurozone and Japan but still below +4.4% forecast for emerging economies. The expectation of a delay normalising US and UK interest rates until late 2015 should be supported by only a small decline in the stubbornly high (7%) OECD unemployment rate and wage growth unlikely to exceed 2%. Meanwhile, the lingering impact of energy and food price falls will provide a boost to consumer real incomes at all levels suggesting that economic activity may well surprise on the upside. The risks inherent in the unsustainable fiscal/financial position of the peripheral Eurozone economies and the credit bubble in China will continue but, without any external catalysts, are unlikely to disrupt capital markets. The decline in the relative cost competitiveness of some emerging economies combined with the G20’s trade restriction policies mean globalisation of the supply chain has levelled off for the time being. The US dollar is expected to strengthen against most other major currencies. Consumer price inflation could decline further in the short-term and keep yields at low levels but the scope for disappointment - especially among more illiquid higher yielding bonds – is high. Rental income growth will help underpin commercial property valuations.

Corporate profits are estimated to increase by 8% in 2015 which would put global equities on a middle of the range prospective P/E of 15x. Equity volatility has risen reflecting the difficulty of securing consistent sales growth and the reliance on cost cutting and other self-help measures to boost corporate earnings. With oil companies facing significantly lower profits, the UK market could again under-perform. The prospective dividend yield of 3.5% on European shares looks attractive by comparison with 2% – excluding share buybacks – on US equities.