Yellow Capital Wealth Management e-Risk Assessment Report

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Introduction to Electronic Risk Assessment

The purpose of this risk profiling assessment is to accurately determine the parameters of your investment portfolio by measuring your attitude and tolerance to investment volatility and risk. All individuals have varying knowledge, behaviours, preferences and tolerances to investments and the variability and volatility of their returns and values. This is especially acute during severe market corrections or prolonged recessions.

Please answer the questions below without referring to anyone for assistance. It is important that your answers are not influenced by your advisor or anyone else. Couples are required to complete the assessment separately and independently.

Risk Warning

The value and income of any of the securities or investments and the price of shares and the income derived from them, which are recommended by Yellow Capital, may fall as well as rise. Investors may not receive the original amount invested in return. Investors should also be aware that past performance is not a guide to future performance.

Definitions of risk

Investment risk as defined by the dictionary is the permanent loss of capital. Many theoretic and scientific measures and analyses of risk have been developed; such as CAPM, Value at Risk and Standard Deviation. These measures have created a pseudo science of risk that is dependent on historic data in an unpredictable world of finance. Investing in the stock market is risky and it carries much volatility, therefore one must reasonably expect the possibility of a loss of capital value if you are investing for the shorter-term. Investing in the stock market is by its nature a long-term exercise.

Volatility is not an accurate measure of risk and should not be relied upon; Yellow Capital does not share the common view of risk as variation or volatility of returns. While the stock market is inherently unpredictable, the investment process and strategy followed by Yellow Capital is predictable and stable.

James Montier

Yellow Capital developed its risk assessment system from the work and research carried out by James Montier, a Chartered Financial Analyst and author of Behavioural Finance and Behavioural Investing.

Behavioural Finance

Behavioural finance is now a recognized feature in most business schools and leading investment firms. Human behaviour (bias) is proven to be the single largest contributing factor to poor investment performance. Discipline and non-emotionally charged thought patterns are vital to success in the stock market.

Date: 24 May 2013

Personal Details

First Name: Surname: Date of Birth: DD 01020304050607080910111213141516171819202122232425262728293031 MM JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember YYYY 20132012201120102009200820072006200520042003200220012000199919981997199619951994199319921991199019891988198719861985198419831982198119801979197819771976197519741973197219711970196919681967196619651964196319621961196019591958195719561955195419531952195119501949194819471946194519441943194219411940 Email: Requirement: Please Select Income Growth Income & Growth Total Investment Value: Currency: Please Select £ $ € Rand

Preliminary Question(s)

Preliminary Question 1: Do you have any ethical, social, religious or environmental considerations we should be aware of? No Yes If you answered yes to the above please elaborate.

Section 1 Time Horizon

Question 1: When do you expect to begin taking income from your investment? In less than 2 years In 3 to 4 years In 5 to 7 years In 8 to 10 years More than 11 years or I never expect to take income

Question 2: How do you plan to take an income from your investment? I plan to take a lump-sum withdrawal Regular withdrawals over 1 to 4 years Regular withdrawals over 5 to 7 years Regular withdrawals over 8 to 10 years Regular withdrawals over 11 to 13 years Regular withdrawals over 14 years / no immediate plans to take withdrawals

Continue

Total Score out of 20 for Section 1 from Question 1 and 2  

Section 2 Risk Tolerance

Question 3: Inflation can erode the return of your portfolio. For example, in a typical year with a 3.5% inflation rate, a portfolio with a 6% return before inflation would have a real return of only 2.5% (6% - 3.5% = 2.5%). However, investments that are expected to beat inflation over time may experience short-term losses. Which of the following statements best reflects your views toward investment risk and the effects of inflation? My main goal is to avoid loss even if I may earn less than or keep up with inflation While I will accept a low level of volatility, my main goal is to earn slightly more than inflation I am willing to accept some volatility for a chance to increase the value of my portfolio and outperform inflation over time I am willing to accept higher volatility for a change to maximize the return of my portfolio and to out-perform inflation

Question 4: Let us presume you invested £100,000 in an investment this year with the intention of holding it for ten years. If this investment were to lose value during the first year, at what value of your initial £100,000 investment would you sell and move to a more conservative option? £95,000 £90,000 £85,000 £80,000 I would not sell.

Question 5: The following table shows the probable performance of four hypothetical investment portfolios over a 20-year period. In which of these would you prefer to invest?

Portfolio	Possible number of years with negative returns	Possible worst 1-Year annual return	Possible 20-Year average annual return
Portfolio 1	3	-7%	5.3%
Portfolio 2	5	-22%	6.3%
Portfolio 3	6	-26%	7.8%
Portfolio 4	7	-33%	8.2%

Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4

Question 6: The following table shows hypothetical best and worst returns over one-year for five different portfolios of £100,000. Which of these portfolios would you prefer to invest in?

Portfolio	Best Return	Worst Return
Portfolio A	+£15,000	-£7,000
Portfolio B	+£25,000	-£15,000
Portfolio C	+£34,000	-£22,000
Portfolio D	+£41,000	-£26,000
Portfolio E	+£52,000	-£33,000

Portfolio A Portfolio B Portfolio C Portfolio D Portfolio E

Question 7: The following statements describe the most likely gain, as well as the chance of loss, on £100,000 invested for one year in five hypothetical portfolios. Which portfolio would you select? Most likely gain at the end of year one is £5,500. However, there is a 18% chance of negative return. Most likely gain at the end of year one is £6,800. However, there is a 24% chance of negative return. Most likely gain at the end of year one is £8,300. However, there is a 30% chance of negative return. Most likely gain at the end of year one is £9,200. However, there is a 33% chance of negative return. Most likely gain at the end of year one is £10,400. However, there is a 44% chance of negative return.

Question 8: Investing involves a trade-off between risk and returns, as depicted in the chart below. Three portfolios are shown on this graph in order of increasing risk and return. Which of the following portfolios would you choose?

Portfolio 1 - I am most concerned with limiting my risk and I am willing to accept low to moderate growth potential. Portfolio 2 - I am willing to accept a moderate level of risk and possible short-term downturns in order to seek high growth potential Portfolio 3 - I am willing to accept a high level of risk and a possibility of longer downturns in order to seek maximum growth potential

Total Score out of 100 for Section 2 from Question 3 through 8  

Results e-Risk Assessment

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