It is our belief that Individual Investors are in search of both

CAPITAL PROTECTION and ABSOLUTE PERFORMANCE

788 Asset Management wealth management process is geared towards the achievement of ABSOLUTE returns.

Contrary to the widely shared views that portfolios should be benchmarked, we believe that the only benchmarks clients, institutional and private alike, are interested in are absolute returns, within given risk tolerance constraints.

Our only Performance benchmarks are :

. Not losing money, - or small amounts for limited periods of time ,
. Money market rates,
. Inflation rates

Our Risk tolerance benchmarks are :
. Volatility, as measured by standard deviation
. Cumulative draw-downs, as the maximum level of accumulated losses that can be tolerated for a given strategy

The POWER of CAPITALISATION

788 Asset Management Ltd. believes in the powerful effect of capitalization over the years, and an investment management process that privileges the long term building up of solid performances through the addition of small, but well researched and well implemented, investment decisions, at the expense of “brilliant”, “winner takes all” bets on the markets.

Our process starts from the “risk free” level of interest rates, as materialized by short term Government bill rates, and aims at making the average performance of the portfolio diverge to the upside from this low risk free rate by taking, small, measured and well controlled risks time after time.

By nature, each risk we are taking is of a size that is such that if a totally adverse scenario were to materialize, the negative impact on the portfolio would be limited to the expected performances and, hopefully, would not impact the capital.

This process of slowly but surely building up performances can be assimilated to using the power of capitalization in our favor as a tailwind effect with massive consequences on the well- being of our clients.

As a matter of illustration, the following tables show the evolution of USD 1 Million over long periods of time, using various levels of average performances. The most interesting part of these tables is the huge difference a small 1 Percent average performance makes to the final wealth of our clients :

The same USD 1 Million will become USD 3.2 Millions after 40 years at 3 % average return per annum, and USD378 Millions after the same 40 years at 16 %, the average performance of the 788 Global Asset Allocation Fund over the last 5 years.

Every 1 % of incremental average performance has a tremendous impact on the final value of the portfolio, what we call : The POWER OF CAPITALIZATION.

LOSSES are our WORST ENEMY

Institutional performance determination analyses demonstrate, without doubt, that the most important factor to the successful generation of positive performances is the ability to avoid negative performances.

This may sound like a truism, but it is in fact much more significant than first appears.

The comparison of two types of strategies is eloquent in that respect :

Strategy 1 : Conservative : generates constant 6 % per annum over the next fifty years.

Strategy 2 : Riskier : generates + 15 % one year, and - 5 % the following year, etc. etc

The table shows that, save for years 1, 3 and 5, the Conservative Strategy outperforms the Aggressive Strategy all the time, and the outperformance becomes extremely significant as time goes by.

In other words, it is more effective to buy a long dated 6 % government bond, providing one can reinvest coupons at the same rate, than try to achieve high octane performances and accept the volatility that goes with them.

The mathematical explanation of this phenomenon comes from the fact that :

POSITIVE Performances and NEGATIVE Performances are NOT SYMETRICAL

Every 1 % of positive performance brings with it all the capitalized interest on that one percent for the future, while every 1 % loss takes away the future capitalized interest on that 1 %.

788 Asset Management Ltd. considers, as a fundamental pillar of its philosophy, that its first duty is to AVOID LOSSES, and that it will make money if it manages not to lose money.

Our Philosophy goes as far as having adopted the motto :

SELL FIRST, THINK AFTER

As the main element of our risk management techniques.

60 to 70 % SUCCESSFUL CALLS, 30 to 40 % WRONG CALLS

Our belief, and it is verified by our own experience over the past 20 years is that a successful analytical process leads to making 60 to 70 % successful calls, and that we are left with between 30 and 40 % unsuccessful assessments.

The main problem of an investment manager is to make sure that the impact of his negative calls on the portfolio remains limited, while the successful ones are left to run and deliver the expected returns.

788 Management Limited uses stringent management techniques to contain immediately the negative impact of its unsuccessful calls.