Quarterly Review: Q2 2012

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Dear client,

In our Q1 outlook we concluded that volatility was likely to return even though Q1 was so positive. Q2 did indeed

bring that additional volatility as “talk of” systematic risk about Europe returned. The Greek elections have been held and a somewhat Euro friendly coalition was formed, however, they are already asking for concessions

to the February bail-out agreement. Obviously, it is much easier said than done to enact the required austerity

measures to rebalance the books. It seems that every investment conversation includes a discussion on the

European situation and unfortunately it is very hard to know what will happen. Some expect a “big bang”

scenario – either in the short term or longer term. This risk exists but we do not believe it to be a highly probable scenario. In the longer term, governments are likely to improve their balance sheets through “financial

repression” – a cost to be borne inevitably by citizens of that country – this means increased taxes, inflation,

reduced pension benefits, reduced healthcare etc. If the day of financial reckoning is in the short term then

markets will be severely affected by the uncertainty. We do not believe that investors should sit on the sidelines and wait for something to happen because it may take many years before we see identifiable events and there will be lots of noise on the way though.

The Japanese scenario comes to mind where Japan, following the rescue of its financial system, has had over

ten years of excessive government debt and consequently an extended period of low growth and low interest rates. There are key differences between the Japanese situation and the European one, but the lesson for

investors as we see it is that the financial system can continue for extended periods under stress without really

breaking. In conclusion, we do not believe the “end of Europe” theory and continue to look out for opportunities in Europe, albeit from an “underweight risk position” from an asset class point of view. As always, you are invited to pose questions to the investment team, either via your Personal Relationship

Manager or directly via info@piowealth.com.

Best wishes, Investment Team, Private Wealth Planning, Pioneer International Group

Quarterly Review: Q2 2012

Disclaimer The views expressed in this Review should be considered as market comment for the short term for information purposes only. As such the views herein may be

subject to frequent change, are indicative only and no reliance should be placed thereon. This Review does not constitute legal, tax or accounting advice, or any

investment recommendation, or any offer to buy or sell financial instruments of any kind, and does not take into account the investment objectives or needs of

specific investors. Although this Review has been produced with all reasonable care, based on sources believed to be reliable, reflecting opinions at the time of

its writing and subject to change at any time without prior notice, neither the Private Wealth Planning Service nor any other entity or segment within the

Pioneer International Group makes any representations or warranties as to the accuracy or completeness hereof and accepts no liability for any loss or damage

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Brief Summary of Asset classes performance for Q2

High risk asset classes were severely negatively affected in Q2 whilst more conservative asset classes were

essentially flat. Commodities, European Equities and Emerging Market Equities were all down in the high single

digits (-8% to -10%) for Q2. Hedge funds were only moderately down or flat. Hedge funds have struggled to show

positive absolute performance but they generally have done well to reduce downside risk. USA equity was down approx. -4.5% which was less than other equity classes, as the USA produced mixed economic data. Higher risk

bonds suffered moderately but investment grade bonds seemed to survive the quarter quite well.

The result of the above is that Private Wealth Planning portfolios have given some, but not all, of the Q1 gains back. From a volatility point of view, we are satisfied with our model portfolios' ability to withstand the increased market volatility and stay within their targets. Clients without hedge funds are showing higher volatility than client with hedge funds.

Outlook for Q3 We remain tactically defensively positioned with

our overweight recommendations in cash of up

to 15%. European stress levels will continue to

rise and their politicians will continue to

respond as usual – “one minute to mid-night”. We do expect them to respond, eventually, and

to issue the required amount of European paper

to keep the system afloat and thereby avoiding

a complete financial disaster. When they do respond and give the market the comfort it

needs, the market may react so positive spikes

are still possible. Higher volatility will therefore

continue as we approach USA elections. The key

short term issues there will be tax policy and the Debt Ceiling, so again we will have political

issues adding fuel to the volatility fire.