BALANCED GROWTH INCOME & CAPITAL

Dear Investor,

You will be aware that at London Stone Securities we offer

a bespoke and personalised service to all of our clients.
Specifically we listen to our client needs and build tailor made
portfolios to suit their individual requirements, investment
aspirations and appetite for risk. We recognise that each client
is unique which is why we offer a wide range of different model
portfolios from very low risk income based investments to very
high risk derivative strategies.

However and as with any normal distribution curve, we find that

only a small number of our clients prefer either a very low risk
or very high risk approach to portfolio construction. That is to
say that the majority of our clients choose to follow something
that sits within these two extremes. Its no coincidence
therefore that our Balanced Growth (Income and Capital)
model portfolio is one of the most popular strategies that we
offer, and it works like this:

Firstly it is based upon the following key investment principles:

For optimal diversification we apply the principle of CAPM (Capital Asset Pricing Model) where extensive research
has shown that portfolios should generally consist of between 15 and 25 companies to diversify away systematic risk.
This principle of course applies not just to your equity portfolio but is relevant to your entire pool of assets as a wise
man once said you should never hold all of your eggs in one basket.

The overriding objective of the portfolio is to offer investors a mix of income and capital appreciation although the
strategy focusses on overall return. For example if an investor buys a share offering a dividend of say 4% and the
share price goes up by say 12%, this amounts to three years of future income. Therefore it may be advisable to sell
the share thereby foregoing the future dividend payments but in return capturing the capital appreciation.

Similarly if a company cuts its dividend or falls in price due to say a profits warning, it may be appropriate to sell
the share even though it was initially purchased for its dividend. After all it would be poor management advice to
hold onto a share which falls in value by say 25% even if it was paying a healthy dividend of 5%. This is because it
would take 5 years to recoup the capital loss during which time the money could potentially have been used more
effectively elsewhere.

The ratio between capital growth and dividends can be shifted depending on your circumstances and specific income
requirements although if you are looking primarily for income you should consider following the High Dividend
Income (HDI) strategy or Cautious model portfolio.

Stop losses are used only at either key levels of support or at pre-determined specific percentage points below the
entry purchase price. However stop losses are not always deemed necessary as certain companies (e.g. high dividend
payers) will have an inbuilt protection measure which includes an increasing dividend yield as the share price falls.

Individual holdings will be monitored on a daily basis to ensure that specific corporate news and general market data
is reacted upon accordingly. Sometimes taking no action is the best form of response particularly if the market over-
reacts which tends to be the case both to good or bad news. In other cases it may be appropriate to either reduce a
holding or add to a position depending on how severe and genuine the news is interpreted to be.

The portfolio can be rebalanced if it becomes skewed towards a particular stock or sector unless the view is taken
that an over-weight bias in that investment area should be encouraged. Similarly a sector or investment area that is
struggling to make an impact may be highlighted with an underweight or avoid bias and the exposure to this sector
reduced accordingly.

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 A core-satellite approach is generally taken whereby the portfolio
is split between the core shares which provide an income, and
satellite holdings which offer potential capital appreciation. The
percentages of core to satellite can be varied according to your
needs but typically sits at around 60:40.

Alternatively you could invest with a ratio of say 60:30:10 with

10% for more speculative investments such as AIM companies.
(AIM shares can be attractive for those wishing to mitigate a
future Inheritance Tax liability).

The core approach will tend to offer a buy and hold investment approach whilst the satellite holdings will focus on
shorter term trading opportunities looking specifically for capital appreciation. However how long shares should be
held for will depend on many factors including the conditions of the market at the time. For example in a bull market
a buy and hold approach works best, but in a sideways or bear market a more active trading approach will generally
yield higher returns.

In the event that the view is taken that the market is over-valued the higher risk investments (companies with a
higher beta) may be sold and either reinvested into lower risk shares or remain in cash. Therefore the portfolio is
likely to be in cash at some points during the year with the intention of minimising risk-exposure. For how long will
depend on market conditions and prevailing new buying opportunities.

Portfolios can be protected through the use of hedging tools included futures and options although this would sit as
a separate entity outside of the portfolio.

How the portfolio is constructed

PART A - CORE PORTFOLIO
We would typically create a core portfolio made up primarily
of low beta, high-dividend yielding shares in sectors which are
known for their defensive traits. In particular this would focus on
sectors including utilities and pharmaceuticals although other
sectors can also be added if they are deemed to be sufficiently
Satellite low risk. Similarly some sectors which have traditionally been
regarded as defensive can sometimes switch to being volatile
(as happened to the banking sector following the financial crisis
of 2007/8). With this in mind our team is constantly looking to

Core
Satellite ensure that your core portfolio continues to house only those
shares which are genuinely defensive in order to minimise
overall risk.

Detailed below are some of the types of companies that would

be suitable for a core portfolio. However the key advantage of
our model portfolio strategy is that it is a bespoke service. This
Satellite means that it is tailor made to your specific investment and
risk criteria so that if there is a particular share that you dont
like for whatever reason, we can easily adapt the strategy to
incorporate more suitable companies which are more in line
with your objectives.

Finally its important to note that the information given in this report is likely to change over time. After all we look at the
markets on a daily basis and depending on news flow, corporate earnings, and general market conditions our strategies
and stock selection will change to reflect these changes. However the compositional structure of this model portfolio
should give you a very good understanding of the basic principles behind the strategy.

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London Stone Securities Limited is registered in England and Wales, No: 6464964.
Authorised and regulated by the Financial Conduct Authority, No: 479827 W: www.londonstonesecurities.co.uk
 A1 UTILITIES

The utility sector is a very defensive arena which means that it has a low correlation to economic activity and generally
performs well in times of market volatility. This means that when global stock markets face heavy selling pressure due to
geo-political events (e.g. Syria uprising, Ukraine-Russian conflict) or a global economic slowdown (i.e. falling GDP) there
is often a flight to safety from high risk to low risk assets.

This will either mean that investors move out of equities into fixed income products (bonds) or that they stay within
equities but look for more defensive shares. Similarly some investors may choose to buy into gold or even the Swiss
Franc as a form of asset protection. However fund managers will generally rebalance portfolios along the lines of moving
into more defensive shares and as a result utility stocks will tend to benefit.

Of course conversely the opposite is also true. In a strong and rising market it makes sense to shift your investments
away from defensive shares into more aggressive shares as the high-beta companies such as the banks, commodity and
telecom stocks are likely to gain most in such conditions.

SCOTTISH and SOUTHERN ENERGY (SSE)

We all know that the energy companies have been subject to
some pretty aggressive bashing by most of the political parties
in recent times, in terms of the enforcement of strict price caps
on future energy price rises. However the fact remains that
firms of this stature do not generally care too much for external
intervention. This company is a lumbering giant with a dividend
that fits the bill it is a slow burner for many but with a high
dividend and reasonable potential for future growth its a good
stock to hold as part of your core portfolio. This is particularly
true if you want to sleep relatively easy at night and youre
happy to bank a healthy dividend every so often.

CENTRICA PLC (CNA)

Despite being one of those companies that seems to regularly get itself into hot water with the regulator OFGEM, (most
recently suffering a 5.6m fine for unfairly obstructing customers to switch providers), this is a company which truly has
great resilience. Figures from its international gas business showed a 23% increase in operating profits and a group wide
500million cost cutting project has also now been successfully completed. Moreover a 420million share repurchase
programme and an increase in its full year dividend to 17p per share is something worth getting excited about. In the
longer term investors can also feel comfortable in the knowledge that the introduction of smart meters and further
offshore wind projects should help to keep the revenue stream sustainable.

DRAX GROUP PLC (DRX)

Drax leads the way in engineering and is the first company to have successfully converted a generating unit at its plant
in North Yorkshire to burn sustainable biomass in place of coal. With a progressive dividend policy and good long term
management plans in place this is certainly one for the future. In the short term however expect price fluctuations
as witnessed in 2014, where the firm suffered a setback following news that one of its power station units was no
longer deemed eligible by the UK Government for an investment contract. Shares fell by nearly 15% in a day which
demonstrates that whilst utility companies are supposed to be relatively safe there are some factors which simply cant
be predicted nor easily safeguarded against. Nonetheless it should be recognised that the core holdings are longer term
holdings which is why we are confident that over the coming months and years hindsight will show us that this would
have now been an excellent buying opportunity.

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London Stone Securities Limited is registered in England and Wales, No: 6464964.
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 A2 PHARMACEUTICALS
The pharmaceuticals sector is often characterised by high
dividend payers but quite often it is also prone to volatility which
is because of the nature of the business that they are in. The
research, manufacture and sale of medicinal drugs is a sensitive
area where numerous factors outside of the control of the
investor (e.g. lawsuits, drugs not approved by regulator etc.) can
have a disproportionately large impact on the underlying share
price. This volatility is however somewhat dampened by the vast
number of drug related projects in operation at any one time
which helps to spread and reduce the risk of any single impact.

GLAXOSMITHKLINE PLC (GSK)

Glaxo continues to accelerate its sales growth and long-term earnings potential through clever partnerships which not
only offer useful synergies but also cost-cutting benefits through economies of scale. One example would be of the
deal with Swiss drug maker Novartis AG where GSK acquired the firms vaccine business for a cash sum of $5.25 billion
plus further royalty payments of up to $1.8billion. On completion of this mammoth deal and future deals, GSK will take
significant steps into the Consumer Healthcare business which we envisage to be a huge growth area for the foreseeable
future. Indeed it is ambition and vision like this which gets our portfolios salivating.

A3 TECHNOLOGY
Technology is generally regarded as a relatively volatile and therefore high risk sector. However the one stock that for
the time being at least, appears to be the exact opposite of that is Vodafone which is why it deserves a mention as part
of our core portfolio. Its also not uncommon for the same sector to appear in both the core and the satellite depending
on the companies in question. After all you will often have very low risk and very high risk shares within the same sector
and the difference in risk is usually only because of the difference in comparative size between the two firms.

VODAFONE (VOD)
In 2014 and following the 51 billion windfall which Vodafone shareholders received, there are now mixed views as to
whether VOD is likely to retain its title as one of the biggest and consistent dividend payers in the FTSE. Those against
point to Vodafone focussing mainly on Europe at the expense of the US which they believe will put cash flow under
pressure. Those still in the Vodafone loyalty camp point to their beloved being a potential takeover target for AT&T. To
be honest its a difficult one to call but certainly as far as reliable and established blue-chip dividend paying companies
are concerned, it would be very premature to be writing off this telecoms giant just yet.

A4 FOOD RETAILERS
Food retailers are generally good, solid companies to have as part of any medium to long term portfolio. However price
wars and falling margins means that you have to be ready to reduce exposure to this sector if and when things start
heating up. Unfortunately long gone are the days where you could buy these companies and forget about them.

SAINSBURY PLC (SBRY)

Whereas Tesco has dominated the food retailers for the past decade, it looks as though the wheel is finally turning
in favour of other smaller brands. At the top of our list is Sainsbury and despite the aggressive price wars that Tesco
regularly initiate, the fact is that it has made some calamitous mistakes in its growth plans. SBRY on the other hand has
grown organically and sensibly whilst maintaining throughout its market share of 17% with some ease. At the same time
it has added over a million square feet of new space over the past 12 months and opened 22 new convenience stores
over the quarter. With a progressive dividend policy and one of the highest dividend yields of any of the food retailers
this is a must buy for our Balanced Growth portfolio.

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London Stone Securities Limited is registered in England and Wales, No: 6464964.
Authorised and regulated by the Financial Conduct Authority, No: 479827 W: www.londonstonesecurities.co.uk
 A5 OIL & GAS
In the same way that technology can be regarded as a high
risk area so too can the Oil and Gas sector. However and once
again the reason that we must include this company is quite
simply because it is so huge in size that it inevitably brings
about a level of security to any portfolio. That said and in the
case of BP a few years ago we saw just how easy one disastrous
oil-spill can affect a companys fortunes which is why you still
need to keep a close eye on your core portfolio holdings even
if they are supposed to be more passively managed.

ROYAL DUTCH SHELL (RDSB)

With interest rates still relatively low, RDSB is the kind of company that attracts fund managers purely for its dividend
which makes sense as shareholder returns have historically been very lucrative despite the volatility of oil prices or
external market factors. An increase of 4% in its dividend is a welcome bonus for investors and is we envisage this to be
the first of several rises over the next year or two.

Further to this we have also seen a greater focus on capital expenditure and there is an expectation that the firms Oil
Products business will be sufficiently restructured to improve profitability yet further. A newly appointed Chief Executive
at the helm is also good news for a company that is committed to positive change.

A5 DEFENCE

BAE SYSTEMS (BA.)

Solid companies are what this model portfolio is all about and it doesnt get more solid than this big beauty. With a
forward PE of just 8.7 (sitting comfortably below the FTSE 100 average of 13), theres a lot of upside left in the tank. In
fact the recent decline in fortune (and share price) was due more to the fact that in the past, important deals such as the
one with the Saudis had fallen through, rather than due to any long term issues with the company itself.

A6 BANKS

HSBC (HSBA)
You wouldnt normally expect to see a bank as a core holding due to its volatility. However this bank is very different
to the rest and we feel that the recent positive comments emanating from the HSBC boardroom is not without good
reason. Early indications suggest that economic growth in mainland China is finally stabilising with positive implications
for Hong Kong and the rest of Asia-Pacific. Also due to its geographical positioning and strong balance sheet it is one of
the few banks that didnt go cap in hand to the Chancellor during the financial crisis, and so with no control relinquished
to the State. This means that HSBC will retain greater decision making power when it comes to employing the best staff
by offering the most attractive remuneration packages.

The firm also managed to miss the deadly bullets that we now know are
the PPI, LIBOR and interest-rate swap selling scandals as well as the ongoing
banker bonus saga. All in all it remains one of the most profitable and most
strongly capitalised banks in the world and that can only be a good thing
for investors. The fact that its operations are more focussed towards the
Far East and will have less contagious risk when Europe finally implodes on
itself is also probably a very good thing. Finally it should be remembered
that HSBC has consistently offered shareholders a high dividend and is
likely to continue to do so for the long term.

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London Stone Securities Limited is registered in England and Wales, No: 6464964.
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 A7 FOOD & AGRICULTURE

UNILEVER PLC (ULVR)

Group sales remain strong and growth is pretty much on target despite a slowing down in a number of markets and a
competitive environment. With a dividend yield of around 3-3.5% the income is not huge on this one but if offers the
kind of protection that core holdings demand which is why it features in our model portfolio. Unilever has also spent
2.5 billion to boost its holding in its Indian subsidiaries taking the figure to nearly 70% which is a positive step for future
growth. In the meantime it has weathered the slowdown in emerging markets remarkably well and we feel that its this
ability to manage risk through effective diversification that will prove to be the key to its long term success.

PART B - SATELLITE HOLDINGS

The satellite or peripheral holdings will tend to be the more actively traded part of any portfolio although this is
dependent on market conditions. For example in a bull (rising) market we would advise on a buy and hold strategy to
capitalise on higher returns in the medium to long term. However in a sideways moving market or one where there is a
concern of a potential market downturn, it would be advisable to take smaller and more frequent profits where possible.
The strategy of selling also should help to reduce the potential impact of any market fall by ensuring a proportion of any
given portfolio is in cash at least some of the time.
Of course it is quite likely that when you are investing for capital growth in what some would regard as solid, blued-chip
companies, you will find that many of these companies will also offer some form of dividend. Therefore satellite holdings
are not exclusively capital growth stocks only but will usually offer a combination of growth and income although the
main focus is growth. Any dividend received should therefore be regarded as a useful by-product of any strategy rather
than the motivation.

Also and in the same way that the core portfolio strategy is bespoke to your individual needs so too are the satellite
holdings. This means that you are not restricted to the list detailed below and indeed can add or take away according to
your individual requirements.

B1 HOUSE BUILDERS/CONSTRUCTION
The house builders have had a fantastic period of growth in recent times
and continue to be one of the favourite sectors in the medium term. This
is partly due to the recovery that we are beginning to see in the economy
and partly due to the Governments commitment to supporting long
term affordable housing construction projects. As a result we believe
that having at least some exposure to this sector is important.

Its also a clever strategy to sometimes look at companies which may

not be directly involved in construction but nonetheless support
this field and will therefore benefit from a housing market recovery.
For example shares like Travis Perkins and Howdens are companies
which to some extent have been overlooked and still provide good
opportunities to investors.

CREST NICHOLSON (CRST)

With the likes of Barratt Developments, Taylor Wimpey and Persimmons all taking the headlines and are therefore
more prone to being overinflated as a result of traders scrambling to buy more, Crest Nicholson has been relatively
understated. A less obvious choice has allowed the firm to now offer investors a far more sensible valuation. Revenue is
good and it pays a dividend of around 6.5p per share which is more than fair in relation to its retained earnings.

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BELLWAY PLC (BWY)
Property prices in London continue to sky rocket with double digit growth figures in the past couple of years and whilst
this is not sustainable in the long term, house prices are likely to continue to rise as demand outweighs supply. Even the
Bank of England Governor, Mark Carney, had been forced to introduce a number of measures in 2014 to curb house price
inflation, with restrictions on the Government backed housing scheme and future potential interest rate rises being his
most potent weapons. This was soon followed by the FCA introducing further measures to prevent excessive mortgage
lending.

However its still hard to fathom how the house builders wont continue to do well in the next two to three years
although it would be foolish to think that they can sustain the meteoric rise that we saw in 2013 and to a lesser degree
in 2014. Nevertheless, the fact remains that there is a chronic shortage of affordable housing in the UK and particularly
in the South East. Thats why at the top of our list of developers is residential property company Bellway which has
continued to experience strong demand for new homes. All the recent trading updates also suggest that the group has
great promise.

B2 TRAVEL & LEISURE

MERLIN ENTERTAINMENT (MERL)

Everyone loves a good theme park and nobody does
them quite as good as supreme park operator Merlin
Entertainment. Their advertising is second to none and
they seem to have punters coming in from afar, (despite
the British weather!). Last year revenue jumped up by
nearly 11% to around 1.2billlion and thats despite the
company investing huge sums in new rides and attractions
to keep their fans coming back for me.

But it wasnt just revenues, as earnings were also on the rise by

a healthy 13% to just shy of 400m coupled with an increase
in visitor attendance by more than 12%. Profits werent too
shabby either as they were up by nearly a third to close to
190m. Many firms are now offering Merlin either as a buy
or strong buy although this firm doesnt offer a dividend.
Therefore and very much like their rides this share is likely to
be a bit of a rollercoaster ride so hold tight.

B3 MEDIA

WPP PLC (WPP)

Its difficult not to be excited by a company where just about all of its business areas continue to grow. Yes there is
some doubt still over its public relations and public affairs divisions, but even combined they contribute a relatively
small amount towards the overall income stream pot. In addition the groups strategic focus on accelerating its
expansion into emerging markets and digital advertising domains helped WPP to complete a staggering 29 acquisitions
in the past 12 months. However there is not an over-reliance on one geographic hotspot which is why WPPs
businesses in what we might call mature markets (such as North America and the UK), remain strong.

The role played by WPP in the Winter Olympics in Sochi and the 2014 football World Cup in Brazil of course has also
presented huge opportunities for further brand awareness and future sustainable growth on a truly global scale.

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ITV PLC (ITV)
ITV remained resilient throughout the testing times that it has endured over the past 12 months and the recent correction in
share price remains something that should be viewed as a positive rather than a negative. In fact we believe that any of the recent
sell-offs have genuinely more to do with either unjustified panic-selling or profit taking, rather than anything more sinister. Indeed
a short correctional reprieve is healthy in any bull move and this is no exception. The firm sees global corporation marketing
budgets continuing to rise in the medium term and whilst emerging markets remain volatile this will be controlled through the
inevitable artificial growth based measures that are likely to be introduced by the respective central banks.

B4 BEVERAGES

DIAGEO PLC (DGE)

Diageos biggest strength also happens to be its biggest problem which is
the huge exposure that it has to the emerging markets. And of course as we
have seen in recent years the emerging markets are more volatile than those
domestic markets closer to home, which is why the upside and downside is
more pronounced on this particular share. However this share forms part of
the satellite holdings where capital growth is of most interest and to that
end it satisfies this criteria. A small dividend is never going to go amiss but
of greater significance is the fact that the firms sales growth continues to
impress and for as long as that continues we remain confident that it is worth
at least an appearance, however fleeting, in our model portfolio.

B5 SOFTWARE & COMPUTER

SAGE GROUP PLC (SGE)

Sage has made good progress on executing its strategy and is very much on target to achieve annualised 6% organic
revenue growth. The company has also increased its investment in research and development with specialist
marketing that is driving forward its Sage One, Sage ERP X3 products and its payments business. However and most
importantly, Sage is streets ahead of its competitors as it remains highly cash generative which allows it to have that all
important element of financial flexibility going forward coupled with a progressive dividend policy to keep investors on
board. Revenues continue to rise with recent figures showing an improvement of around 3% to 1.38 billion.

B6 BANKS
The banks remain very much in the public eye and usually for the wrong reasons. It seems that the lessons of the 2007-8
crisis have still not been learned and of course the subsequent scandals involving everything from PPI to unfair interest
rates collusion have done this sector no favours at all. Furthermore the regulators seem to have a point to prove given
the criticism that they received in terms of their handling of the banks. All in all, it paints a fairly dim picture but we
must also recognise that despite the odds the banks continue to make huge profits and there is no doubt that they will
eventually rise again to their former glory. They are also volatile and so are perfect component satellite parts for a short
term trading strategy for capital growth.

LLOYDS BANKING GROUP (LLOY)

Following the aftermath of the worst financial crisis in nearly a century the most recent
figures shows that Lloyds has returned to profit in pretty spectacular fashion. The move
involves a swing from a 606 million loss in 2012 to a pre-tax profit of 415 million in
2013. Thats a cool billion pound turnaround and no wonder, with group costs down by
5% to 9.63 billion and bad loan charges falling by a whopping 47% to 3.0 billion.

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Then in 2014 it made the wise decision to sell its asset management business (Scottish Widows) to Aberdeen Asset
Management for a not inconsiderable sum. Overall we fancy Lloyds reaching broker targets of between 100-120p in the
medium term (18-24 months) and dont be surprised if the firm announces a reasonable dividend too.

B7 GENERAL RETAILERS

KINGFISHER PLC (KGF)

Looking at companies always involves number crunching, and with KGF there are plenty to get stuck into although
weve only highlighted the main ones here. For example group sales for KGF rose by a steady 1.4% on a same store or
like-for-like basis to 2.9 billion and profit increased by 1.7% to 271 million. UK sales and profits are also both on the
rise, driven by a strong performances from its Screwfix outlets, which has remarkably opened its 300th store! Add
to this that KGF is still being touted by some analysts as a potential takeover target by a large US giant keen to gain a
global footprint across the pond and you can see why we are keen to have this share in our model portfolio.

ASHTEAD GROUP PLC (AHT)

Following an increased offering of notes, the firm has positioned itself in a good place to now repay a decent portion
of its debt as well as related fees and expenses. This is certainly smart finance raising by the Board and is good for
shareholders as the pricing of the 6.5% note which looked to raise $400m (up from $300m), was as a direct reaction to
the strong showing in demand from shareholders. And of course this makes sense as previous figures showed that pre-
tax profits jumped by 49% to 212m!

The net result is something which doesnt happen very often which is a win-win-win situation for the firm, existing
shareholders and new investors. The clever part in all of this of course is that it enhances the flexibility of the firms debt
package and further strengthens the balance sheet whilst doing so at a reasonable rate of interest.

B8 FINANCIAL SERVICES

ABERDEEN ASSET MANAGEMENT (AND)

With a good pipeline of just over 2billion set across a wide number of asset classes and global locations, ADN is making
good progress towards hitting its goals. One of those goals included the acquisition of Scottish Widows (Investment
Partnership) which is expected to expand significantly (as well as diversify) the base of assets under management.
Theres of course always a danger of paying too hefty a price for something that you really want and time will tell
whether the firm will be found guilty of that particular charge, but for the time being at least it appears that the shares
are trading at least 10-15% below their true intrinsic value and coupled with a reasonable dividend this is a must buy in
our portfolio construction.

B9 AIRLINES
In the middle of continuing geopolitical tensions between
numerous countries around the world that find war an easier path
to follow than peace, there seems to be a recurring fear about the
airline industry and how it might be affected. However the truth
is that airlines, like the banks, always seem to find a way through.
They also exhibit some pretty decent volatility which is what you
need if you are looking for capital appreciation. The other benefit
in trading airline stocks is that you can take short, medium or long
term investment approaches as the overall direction appears to
be positive, although rising oil prices need to be considered in
conjunction with any investment strategy.

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London Stone Securities Limited is registered in England and Wales, No: 6464964.
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INTERNATIONAL CONSOLIDATED AIRLINES GROUP (IAG)
Within the highly competitive business of air travel, ICAG remains one of the market leaders and global brands. Its
operating profits have consistently beaten analyst forecasts, which in many cases seemed overly-optimistic in the first
place, and as a result it has a significantly growing disposable income emanating from the emerging markets. Of course
this is somewhat of a double edged sword because as witnessed in recent times, an over-reliance on emerging markets
is not always a good thing particularly if there is a significant slowdown in that part of the world. However for now it
appears to be a great component for our Balanced Growth portfolio.

B10 MINING & COMMODITIES

Following Chinas phenomenal growth over
the past decade it appears that China is now
suffering from what some analysts may regard
as over-exhaustion. As a country that was often
seen as the engine for global growth, we have
now seen a decline almost as quick as its rise. Of
course China is still head and shoulders above
many of the other developed countries but a
slowing down in real GDP terms has impacted
the construction industry which in turn has led
to a fall in commodity prices. We expect this
trend to continue in the short to medium term
as miners continue to suffer.

However and as with any cloud, there is often a silver lining, although in the case of the mining sector we are lucky to
have three of them, RIO, BLT and ANTO. Weve only listed BLT in this report but the other two could also easily deserve
a mention also. Its worth nothing that each of these picks have the added safety net of companies which offer a yield
which is rare when it comes to miners. At least in this way and assuming that commodities continue to face downward
pressure, a falling share price on a dividend paying miner (even if the dividend is not covered) will improve the yield
which in turn should offer some level of support.

BHP BILLITON PLC (BLT)

BHP Billiton remains a solid company and the Western Australian Iron Ore (WAIO) business has achieved a record
production of 54 million tons for the quarter and copper production up over 6% year-on-year. The firm is also best
placed for any broad recovery from the global economy, which is another reason why it should feature in your portfolio.
Offering a dividend is obviously the icing on the cake as not only does this stock offer you an income but plenty of upside
capital potential too.

B11 SUPPORT SERVICES

CAPITA PLC (CPI)

In April 2014 Capita took on the electronic prisoner tagging contracts from the shambles that is G4S, and whilst
the Ministry of Justice appears to have continued discussions with other preferred bidders, we feel this could be an
opportunity for savvy investors.

Furthermore, Capita, which is one of the leading FTSE 100 support service solutions providers, also extended its 10-year
strategic partnership with Southampton City Council by a further five years which is estimated to generate additional
revenue to Capita of approximately 124m. The long term prospects of this business look set to grow and with a dividend
yield of around 3% its a share which gives an investor a bit of income plus the potential of reasonable long term capital
growth at a sensible level of risk.

T: +44 (0) 20 3697 1700

F: +44 (0) 20 3697 1708
E: info@londonstonesecurities.co.uk
London Stone Securities Limited is registered in England and Wales, No: 6464964.
Authorised and regulated by the Financial Conduct Authority, No: 479827 W: www.londonstonesecurities.co.uk
 PART C - High Income and High Growth
There are a few select sectors (and companies) which offer
both potentially high capital growth and high income.
However in such cases the dividend is not usually covered
(i.e. dividend cover of less than one), which makes such
investments more risky. This is because the company
is less likely to be able to sustain their dividend and will
eventually be forced to make a cut. Thats why its not a
good idea to hold for the long term. However for a small
part of your portfolio and provided you get in and out at
the right times, it is a useful way of capturing both capital
and income within the same investment holding.

LIFE INSURANCE & ASSURANCE

This sector suffered terribly following the Governments decision to give greater control to individuals over their pensions.
Specifically the 2014 budget stated that investors should no longer be forced to take out an annuity but to have greater
control over their own funds. This of course negatively impacted many of the insurance companies for whom the annuity
business was so lucrative. This has therefore changed the dynamics of the insurance sector but with change of course
comes opportunity if you know where to look for it.

Many companies in this sector have suffered a fall in price which makes their dividend yields even more attractive and so
you now have the peculiar situation of high yields and potentially strong capital growth. Of course the volatility is such
that this would be regarded as a higher risk investment area which is why we would suggest only a limited amount of
exposure in this area.

C1 LEGAL AND GENERAL (LGEN)

This is a great trading stock because not only do you get a lot of
shares for your money but also it is volatile enough to day trade
or hold for the long term, and yet still offers a divided income
stream that even the utility companies would be proud of. In
2014 the firm increased its total dividend payment by a whopping
22% following an increase in net cash generation of 16%. Annuity
premiums grew by 74% to over 4billion although with the 2014
budget this is likely to be severely impacted going forward.
Nonetheless they have an aggressive business with an excellent
balance sheet that continues to grow and continues to perform
despite the odds. Take for example the net inflows which last year
was 9billion and has now taken total assets under management
for LGEN to 450 billion. If you ever wanted to have your cake and
eat it, this could be the gateau au chocolat that you have been
looking for.

T: +44 (0) 20 3697 1700

F: +44 (0) 20 3697 1708
E: info@londonstonesecurities.co.uk
London Stone Securities Limited is registered in England and Wales, No: 6464964.
Authorised and regulated by the Financial Conduct Authority, No: 479827 W: www.londonstonesecurities.co.uk
C2 OLD MUTUAL PLC (OML)
This business has seen a phenomenal increase in sales by 33% coupled with an equally impressive rise of 10% in funds
under management from the start of the year to 76 billion. Whilst this has been driven largely by strong net flows,
gross sales in the UK were also up 1.2billion which equates to 40% driven by improving confidence. This has led to a
princely sum of 5 billion Rand now being set aside to support expansion in Africa. All in all, its a numbers stock and is
small enough in price to give you plenty of shares for your money, which in turn helps to increase the potential capital
percentage movements in price.

What are the risks of this portfolio?

This can be anything from a low, medium or high risk portfolio depending on the companies, sectors and markets that
you choose to invest in. For example if you choose to invest mainly in FTSE250 gold mining shares then clearly this is
likely to be far riskier than a portfolio which is predominantly made up of defensive utility shares with high dividends.

However generally speaking the Balanced Growth portfolio is categorised as medium risk and is a sensible and
measured approach to giving a reasonable balance of both income and growth. We would regard this model portfolio
to be suitable for most investors, particularly those who have previous stock market experience and sufficient funds to
invest comfortably in the market.

It is also important to state that this portfolio can

be changed in order to fit your risk profile. For
example if you have a higher propensity towards
risk you could look for a core of just 20% and
satellite holdings of 80%. If on the other hand you
are more risk averse you could have a core portfolio
of 80% and hold only 20% in satellite holdings for
trading purposes. So once again you are always in
control which will hopefully give you further peace
of mind.

If you wish to proceed with this strategy or would

like more information including further reading
material, please speak to one of our advisors.

How do I proceed if Im interested?

The first thing that you need to do is register for a free share dealing account. You will then be assigned to an experienced
advisor who will assess your investment requirements in order to create a bespoke strategy that is just right for you. You
can have as much or as little input in this process as you wish. Once you have agreed on a strategy that you are happy
with the next step is to decide on how much to invest in your new portfolio.

For this portfolio you can either use cash funds from your bank account, or alternatively you may choose to restructure
an existing share portfolio that you already hold. If you choose the cash option you can either write a cheque or make a
direct bank transfer (BACS). If on the other hand you wish to use your existing share portfolio, simply complete a stock
transfer form and your share holdings will be transferred electronically from your existing broker to your new account
with us. Dont worry we do all the form-filling for you at no cost and we will even contact your existing broker on your
behalf so you dont have to. You can even transfer an existing stock ISA or SIPP account.

Once the cash (or shares) have arrived your advisor will begin the process of implementing the agreed strategy on your
behalf. Throughout the whole process you maintain full control so that you can adapt the parameters according to
varying market conditions and indeed changes to your own circumstances. You can even have your money back if you
wish at any time with no lock-in periods or penalties.

T: +44 (0) 20 3697 1700

F: +44 (0) 20 3697 1708
E: info@londonstonesecurities.co.uk
London Stone Securities Limited is registered in England and Wales, No: 6464964.
Authorised and regulated by the Financial Conduct Authority, No: 479827 W: www.londonstonesecurities.co.uk