Dynamic Tracker Securities

CLS Winter Conference 2014

Dynamic tracker securities

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Bespoke ETF like securities that allow you the discretionary to change the composition of the underlying

investments exposure.

Can be linked to stocks, bonds, mutual funds, dividend futures…..combination of and hedge overlays.

Like a fund, whilst the underlying investment exposure changes, based upon you the discretionary ’s

instructions, the security that investors hold remains the same.

Unlike a fund, the costs and size constraints of issuing such a security are significantly lower with

denominations down to £1.

There are advantageous tax benefits to executing stock strategies in this manner rather than as direct

investments or via a fund.

You are accessing bank’s global execution and custody platforms. If they can trade and settle it, you can

access it.

How do they work?

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IssuerSecurity

Basket Returns

Stock Basket

Bank physically purchases stock as a hedge

Asset construction

Basket Returns

Basket Returns

How do they work?

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IssuerSecurity

Revised Basket Returns

Stock Basket

Bank adjusts its physical stock holding, based upon instructions

Asset construction

Revised Basket Returns

Revised Basket Returns

Discretionary

Revised basket composition instructions

Dynamic tracker securities in numbers

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Direct Investment - ISA / SIPP:1 2 3 4 5 6

1.98% 0.58% 0.58% 0.58% 0.58% 0.58%5.00% 5.00% 5.00% 5.00% 5.00% 5.00%2.52% 0.70% 0.67% 0.63% 0.60% 0.58%2.17% 0.35% 0.32% 0.28% 0.25% 0.23%

Direct Investment:1 2 3 4 5 6

2.92% 1.52% 1.52% 1.52% 1.52% 1.52%3.73% 1.85% 1.76% 1.68% 1.60% 1.52%3.38% 1.50% 1.41% 1.33% 1.25% 1.17%

Total gross cost

Potential Saving

Potential Saving

Costs comparison

Trading & SDRTGrowth

Total gross cost

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Trading, SDRT, Div

Benefits of and to whom?

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End Investor

Lower TER

Access BPS style stock

picking

Tax efficient

Potentially access new

stocks

Portfolio Manager

Lower TER; better

performance

Efficient implementation of

BPS style stock picking

Tax efficient; better

performance and can be

tailored to each investor

Access to all stocks banks

can trade and clear

The Firm

Ability to strategically roll out

BPS to MPS style clients

Efficiency gains both in terms

of both PM and BO time

Potential savings for custody

costs and access to new

markets

The information in this document is derived from sources believed to be reliable but which have not been independently verified. Catley Lakeman Securities makes no

guarantee of its accuracy and completeness and is not responsible for errors of transmission of factual or analytical data, nor is it liable for damages arising out of any

person’s reliance upon this information. All charts and graphs are from publicly available sources or proprietary data. The opinions in this document constitute the

present judgment of Catley Lakeman Securities, which is subject to change without notice. This document is neither an offer to sell, purchase or subscribe for any

investment nor a solicitation of such an offer. This document is intended for the use of institutional and professional customers and is not intended for the use of

private customers. This document is not intended for distribution in the United States of America or to US persons. This document is intended to be distributed in its

entirety. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient.

Catley Lakeman Securities is a LLP registered in England and Wales, Registered Office : One Eleven Edmund Street, Birmingham, B3 2HJ. Registration

Number: OC336585, FSA Reference: 484826

DISCLAIMER

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