Nucleus User Sessions

1. Nucleus User Sessions October 2010

2. Agenda Nucleus proposition • Operational update • New developments • Model portfolio enhancements • Discretionary fund management • Understanding Nucleus account types Break Nucleus best practice • Model portfolios • Transfer and re-registrations • Reports, Alerts and Tools • The new business process Finish

3. Session 1 – Nucleus proposition

4. Nucleus proposition • Transparent • IFA control • Open architecture • Cost effective • Clear charging structure • Wide range of tax wrappers Clientplatform IFA platform 1. Analytical and support tools General Isa Pension Onshore bond Offshore bond 2. Cash Assets Mutual funds Equities Gilts Bonds ETFs / other 3.

5. New developments

6. New developments • Client platform • Funds research • Jira enhancements • Reports • Discretionary fund management • Regular payments • Portfolio reviews • USP / ASP info • Client statements • Model portfolio enhancements

7. Client platform • Transaction history (opt out) • IFA branding • Memo assets • Correspondence • Client reports (opt out)

8. Fund research • Screener across Nucleus fund universe • Search across multiple criteria • Easy access to fund factsheets, fund charges, charts • Sort by: • Prices • Performance • Ratings • Charges

10. Client statements • Transaction summary • Payments in • Withdrawals out • Income • Fees & charges • Model portfolio info • Easier to read transactions • Large print format available • 3 main sections: • Summary • Holdings • Transactions • On platform: 28th October • User guidance available

12. Jira enhancements • Only enter data specific to query • Resolution dates for requests • Separation into following categories: • Instructions • Notifications • Issues Due: November

13. Reports • Download specific to advisers & firms / local offices • Improved date search • Quicker to download complex report e.g. Outstanding trades

14. Regular payments – asset allocation • When updating model portfolio can also update asset allocation for regular payments • Checkbox enables you to select whether regular payment asset allocation should also be updated • Provides flexible mechanism to update lump sum, regular contribution and rebalancing asset allocations

15. Portfolio review • Shows performance across any time periods • Can be used to show valuations on a specific day

16. USP/ASP account information • GAD limits • Income amounts • Payslips • Review dates • Tax codes

17. Corporate actions • Correct transaction types to appear on transaction history • Corporate action types for: • Equities • Collectives • Bonds • Improved correspondence to IFAs

18. Corporate actions Unit trusts / OEICS Merger Two funds merge to create single fund De-merger One fund is split and units in new company issues to investors Closure Fund is closed to new business Equities Bonus issue Issue of further shares to shareholders without payment Subscription Shareholder has right to subscribe for shares of different share class Consolidation Issuer decreases number of shares in issue Rights issue Existing shareholders have right to subscribe for further shares Subdivisions Number of shares is increased by reducing nominal value of shares Compulsory call payments New shares issues and holders required to make further payments Scrip dividends Shareholder opts to receive further shares instead of cash dividend Optional call payments Shareholder elects to make a call payment to subscribe to new issue Acquisition 2 companies merge into 1 to make new company Resale Where group of shareholders are invited prior to offer with subscription Share capital reduction as part of return of capital to shareholders Closed offer Selected group of investors are invited to purchase shares Bonds Name change Name of a bond changes Optional redemption Holders of a bond can redeem their holding without any payment Optional conversion Holders can covert their bond into shares without any payment

19. Model portfolio enhancements • Self-service model portfolios • Bulk rebalancing • Exclude cash from rebalance Due: December

20. Self-service model portfolios • Ability to add / edit new and existing model portfolios • Single model portfolio used across multiple account types • Modify model portfolios for new client sub-groups

21. 1. Select model portfolio

22. 2. View model portfolio

23. 3. Add / edit model portfolio

24. 4. Confirm product availability

25. 5. Confirm MP profile updates

26. New business enhancements New workflow making it easier to add new business • Multi-client, multi-account • Enables joint accounts to be processed online • Removes need to send in application paperwork • Integrates illustration and new business processes • Pre-population of forms • Signatureless direct debit mandates IFA usability testing currently underway

27. Illustrations enhancements • Integrated into new business process • Consistency across all pre sales, post sale and pension review illustrations • Illustration will incorporate existing account value/data for top-ups or for moving to USP • Growth rates used based on fund selection • Quick quote or full illustration • Fees in % or monetary amount / Multiple regular contributions • Can do illustrations for joint accounts, lump sum and regular contributions. • Save and retrieve illustrations / Copy illustrations • Download & print multiple illustrations

34. Automated sell-downs • Automatically sell down if <1% cash in account • Sell down in last week of each month, in order to pay monthly fees • Sell down will: • Sell across assets held in proportion to their holding • Sell in order to create 2% cash in accounts • Flagged assets will not be sold • Accounts with too little cash will be escalated to Nucleus • ‘Pending transactions’ will stop sell-downs

35. Gross general account • Gross interest on distributions on cash • Applicable for: • Non-doms • Corporates / trusts • Third party products • Have had difficulties obtaining gross distributions from fund managers • Provide update later in year

36. Recent changes • Apply fees • Account search • Calculate % fee amount (as well a £ value) • Alerts • Cash balance above 5% • Tax relief paid • Client search list –alphabetical order • Fees tab – admin fees now shown • Payments tab – now has filtering • Export transactions

37. Other upcoming changes • Bulk switching – will analyse existing fund status before switching in order to eliminate rejections • Correspondence – USP Annual illustrations • Equity / ETF trading – better disaggregation of units • Back-office systems – Intelliflo • Links to Financial Express • ‘Print all’ accounts • Gross general account

38. Understanding Nucleus account types

40. Wrap contributions by account type

41. Pensions - the market • By far the largest accessible market for advisers • Not recession proof but sales holding up better than other markets • Mainly transfer business so investors not required to sign a cheque • Gradual unwinding of occupational schemes continues to release money into this market • Personal pensions legacy books a soft target • Main players are Standard Life, Skandia, AEGON, Scottish Widows and AVIVA – nearly 2/3rd of the market. • More than £3.1bn (APE) placed into personal pension market in 2009. • This is an annualised total to reflect effect of regulars • Means that singles and transfers (most of the total) are in fact reported at 1/10th their monetary value. FUM accessible is therefore much bigger than this. • More than £270m (APE) or £2.7bn into Income Drawdown in 2009 • Surge in Q1 ahead of age change rules • Doubled normal run rates • Main players are Standard Life, Prudential, Winterthur, Scottish Widows

42. Key Benefits • Open to all UK residents, including non-earners • Highly tax efficient • Open to very wide range of investments • Investment flexibility – shape around evolving requirements and risk tolerance • Flexibility on what and when to take as benefits • Risk management flexibility as benefits are taken • Lifestyle flexibility - stay working, supplement earnings • Security - trust based instead of insured basis Going forward will provide materials on how to make most of pension options

43. Nucleus pension pots Pension (Sipp) Pension (non-protected rights) Pension (protected rights) Appropriate Personal Pension Accumulation Accumulation Accumulation Benefits and Income * Benefits and Income * Benefits and Income * USP (can convert to ASP) / Income drawdown

44. Onshore bonds - the market • More than £12bn placed in 2009 • Down on 2008 but some evidence of trending back up in late 2009 and early 2010, particularly unit linked • Main players are Skandia, Prudential (particularly with-profits), Scottish Widows, AVIVA and L&G who together control over half the market

45. Onshore Bonds – Key Benefits • No CGT liability to the investor – due to ‘life funds’. Growth is subject to income tax rules for end investor but not necessarily payable when it’s released • Tax planning - liability to investor only arises at encashment • Retirement planning - defer encashment until in lower rate tax bracket • Inheritance tax planning - can assign under trust • Very flexible - fund switches free of charge and tax • Nucleus feature – daily calculation of tax due - benefit increases with fund growth and term Going forward will provide materials on how to use onshore bonds within a portfolio, including technical support including for trusts

46. Onshore bond tax account • Tax account • Appears as ‘asset’ within account valuation • Calculated on daily basis to represent tax deductions

47. Onshore bond tax account • Tax account • Purpose is to show effect of tax deductions on full encashment • Determined on asset gain (ignoring UK equity based dividends) • Allowance for indexation (Consumer Price Index) • Tax rate of 20% • For example: • Investment of £100K rises to £110K after 1 year • 50% of assets in equity based uk funds, CPI increase is 2% • Tax account value shows: 10K * 0.98 * 0.5 * 0.2 = £980 • Tax account would show -£980 • Calculated daily – cumulative balance shown • Mitigates fund losses through tax rebate to client

48. Onshore bond tax relief • Tax relief payable on initial adviser fees, as is classed as part of taxable business of life assurance company • Reduces amount payable to client by 20% • For example: • 3% initial fee • 3% * 0.8 = 2.4% is paid by client • 0.6% is claimed back as tax relief • 2.4% is deducted from client account • Ignore this for purposes of new business application (e.g. Still put 3% as fee – tax relief works ‘behind the scenes’) • Illustration • Keyed at 3% initial adviser fee • Illustration will show 2.4% in initial adviser charges (reducing RIY) • Monetary amount of initial adviser fee will be equivalent to 3%

49. Offshore bonds - the market • Nearly £5bn placed in 2009 with some trending upwards towards the end of 2009/start 2010 • Main players are AXA, Skandia, Canada Life and Scottish Widows who together make up over half the market

50. Offshore Bonds – Key Benefits • A ‘life’ contract issued by a non UK life assurance • Benefits from ‘gross’ roll up outside the UK tax system • Normally able to access a wider range of asset types than onshore bonds • Tax planning • Retirement planning • Trusts • Manage disposal of assets and protect from inheritance tax • Considerable strength and expertise from the RL360 relationship • Work through Nucleus to get the best from this resource