... Pillar 3 disclosure ...

1.         Purpose

This disclosure information is published in accordance with FSA rules.

2.         Background

The Firm deliberately utilises a simple business model designed to maximise protection of Clients’ portfolios.  Clients have individual accounts in their own name at the custodian, broker and bank.  The Firm does not hold Clients’ money or assets and never places itself in debit with Clients.

The Firm exercises an equally conservative policy on payments.  Generally, invoices are paid on receipt, with no advantage being taken of credit periods.  There is thus no accumulation of obligations building for future payment.

The Firm is cost-aware and, in accepting any new obligation, seeks to ensure an even spread of payments, where possible, so as to avoid peaks and troughs.  The Firm is profitable and has a positive cash flow.  As a matter of policy, the Firm has no borrowings and is thus unaffected by interest rate changes.  It neither trades on its own account nor underwrites.  The Firm has never made a loss in its twenty-four years of trading.

The Firm holds Regulatory capital in accordance with the Capital Requirements Directive.  All such capital is classified as Tier 1 and is therefore of the highest quality.  The Firm has voluntarily decided to hold higher capital than required by its Pillar 1 requirements in order to provide the greatest security to Clients.

3.         Risks

The simplicity of the Firm’s business model described above means that the Firm is not exposed to many of the risks facing many investment managers.  The Firm’s risk management objective is to be as simple and risk averse as practical.  Its policy is to achieve this by holding all stock and cash on mandated accounts in the client’s own name at banks or major stockbrokers.

Business interruption risks are managed proactively by an extensive backup network.  The Firm has three standby sites of its own, distributed widely across the South of England, linked by a broad band network.  Essential services can be maintained from one or two out of these three locations even if the broad band network is unavailable.

4.     Inapplicable items

Due to the simplicity of its business model, many risk items covered by FSA rules do not apply.  In particular:-

1. The Firm is not subject to the Banking Consolidation Directive;
2. Many credit book, trading book, foreign currency and operational risk requirements do not apply, but the Firm does apply 8% risk weighted exposure amounts for certain routine debtors;
3. The Firm does not have exposures to equity or commodity risks, nor does it have exposure to counterparty risks, market risk, non-trading book equity exposure or non-trading book interest rate risk.

5.         Recessionary risks

FSA guidance requires Firms to stress test for the impact of recession, on the scale of severity of a recession that might be expected as infrequently as once in every twenty five years.

Unlike most investment managers, the Firm's investments (the highest quality Government bonds) and entire philosophy are more likely to prosper than suffer in such a recession.  It follows that no further consideration of recessionary risks need be undertaken.

June 2008