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City of Fresno Retirement Systems
Newton’s Global Real Return Strategy
Suzanne Hutchins – Investment manager Chris Henkel – Business development, client and consultant relations
August 27, 2013
Presentation to:
1
It is important to note that over the course of this presentation the Global Real Return strategy will be shown in both USD & GBP. This presentation introduces the Newton Global Real Return USD Strategy, which achieved a three-year track record on June 30, 2012. The original strategy, Newton Real Return GBP, was launched in 2004 and is managed with the same investment objectives as the Newton Global Real Return USD Strategy. Information relating to the Newton Real Return GBP Strategy and representative portfolio has been provided to illustrate Newton’s experience in managing multi-asset, absolute return strategies. Although the USD & GBP strategies are managed with the same objectives and by the same team, they are materially different in that they are managed in different base currencies, which may result in different hedging positions and variations in asset allocation. Information from the GBP strategy is included for illustrative purposes only and should not be relied upon when making an investment decision.
Over the course of the presentation Important to note
2
Suzanne Hutchins Chris Henkel 2010 to date Newton* 2005 – 2010 Capital International Limited 1991 – 2005 Newton Investment Management Ltd
2010 to date Newton Capital Management, LLC 1999 – 2009 Thomas Weisel Partners
– Founding partner 1988 – 1999 Deutsche Bank Alex Brown
– Institutional equity sales
Responsibilities Responsibilities Investment manager – Real Return team Member of the global investment meeting *Re-joined Newton in 2010 and was also registered as an investment manager for Newton Capital Management Ltd and BNY Mellon under a dual officer arrangement in 2011
Business development, client and consultant relations
Qualifications Qualifications Associate member of the United Kingdom Society of Investment Professionals (UKSIP) BA (Hons)
BA, History FINRA Registered Securities Representative – Series 7 & 63
16 years at Newton 22 years’ investment experience
2 years at Newton 24 years’ investment experience
Newton team
3
Global Research
Fixed Income $5.9bn
Global Bonds, Global Dynamic,
Global High Yield, Credit and UK Fixed Income
UK Equity $6.1bn UK Equity,
UK Opportunities, UK Equity Income and Asia Pacific and
Emerging Equity $10.3bn
Asian Equity, Asian Equity Income, Emerging Equity and
Emerging Equity Income
Multi-Asset $20.5bn
Balanced, UK Enhanced, Global Equity,
Multi-Asset and SAA* Real Return
$15.3bn Real Return,
Global Real Return (USD) and Global Real Return
(EUR)
Global Equity $24.4bn
Global Equity, Global Equity Income, Global Opportunities,
Global ex US and European Equity
Assets under management Summary of mandates as at June 30, 2013
Note: *AUM for SAA (Strategic Asset Allocation) included in respective underlying asset class Source: Newton, June 30, 2013
Total AUM $82.4bn
4
Newton’s investment philosophy
Global themes provide perspective
• Forward looking
• Global approach
• Single location
Rigorous fundamental research within a global thematic framework
• Long only
• Conviction based
• Benchmark agnostic
Valuation discipline combined with judgement and pragmatism
• Single security selection
‘Our aim is to protect and grow the real wealth of our clients’
Our investment philosophy: Perspective; Research; Valuation Discipline and Pragmatism
• Long term
• Single portfolio approach
5
A perspective on investment returns R
etur
ns
Time
Ret
urns
Time
… a more volatile world
The ‘great moderation’ is over …
• Active, flexible approaches • Emphasis on income • Strategies that protect capital and aim for asymmetry of
return • ‘Return based’ objectives
Investment solutions in a lower return/volatile world
Then and now… it’s a different world
1 December 2012 2 Calculated by the Bureau of Economic Analysis in the US in calculating the national accounts 3 Used 10 years of earnings to remove the effect of the economic cycle from the PE calculation 4 Data as at end Q3 2012 5 Includes c2.5% from accelerated dividend payments ahead of year end tax changes Source: Datastream, Bloomberg, US Census Bureau, Newton
United States 1982 Q4 2012¹ Fed funds rate 12% 0.25% 10-year bond yield 14% 2% Monetary base $149 billion $2.7 trillion Budget deficit as % of GDP -2.2% -6.7% Household debt to GDP ratio 47.1% 81.2%4 Inflation rate, % yoy 8.9% 1.7% Savings rate 11.9% 6.5%5
Unemployment rate 8.5% 7.8% Profit margins (national accounts)2 9.6% 17.3%4
S&P 500 P/E ratio (1 year trailing) 8.0x 14.6x S&P 500 cycle adjusted PE3 7.8x 21.5x MSCI USA dividend yield 5.8% 2.3% Demographics – average age of babyboomer
27 58
Updated Approved 29/05/12
The above charts are illustrative and intended to be a theoretical representation of less robust returns and greater volatility Please see important information at the end of the presentation
6
• Absolute return strategy following a benchmark unconstrained, multi-asset approach
• 1 month LIBOR +4% p.a. is the nominal long-term objective (gross of fees)
• Seeking to deliver strong real returns with lower volatility through:
1) Security selection 2) Asset type flexibility 3) An emphasis on downside protection
• Daily liquidity, Daily valued
• A low volatility, fundamental approach
Newton Global Real Return strategy
Our solution – Newton Global Real Return strategy
This target is believed to be reasonable based on market conditions, however there is no guarantee that this performance will be achieved or that the target will be reached in any performance period
7
Newton Global Real Return strategy
P0005
Absolute return style, multi-asset investing
Long-term real returns with volatility between bonds and equities
The power of perspective and flexibility
• Cash
• Corporate bonds
• Derivatives
• Equities
• Government bonds
• Other assets via tradable securities e.g.
– Real estate
– Commodities
– Currencies
– ‘Alternative’ strategies
Can invest in:
Allowable assets Strategy type
• A benchmark unconstrained active multi-asset strategy with lower volatility
• Emphasis on long-term investing and with an aim of capital preservation
• Transparent, single portfolio of direct, liquid investments
• Flexibility at the portfolio construction level;
– Emphasis on traditional asset classes
– No asset allocation constraints
Objective
Performance aim
* This performance aim is not a guarantee, may not be achieved and a capital loss may occur. Funds which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected
The Fund has a performance aim of cash (1 month US LIBOR) +4%p.a. over 5 years before fees* In so doing, the Fund aims to achieve a positive absolute return on a rolling 3-year basis
Performance aim
8
Newton Global Real Return strategy Conceptual representation
• Emphasis on traditional asset classes
• A return seeking core with particular security characteristics
• Risk offsetting positions aimed to dampen volatility and provide downside protection
• Not an asset allocation strategy – flexibility to adjust risk hedging in addition to shifting asset allocation
Building a multi-asset portfolio
Source: Newton Please see important information at the end of this presentation
9
Newton Global Real Return representative portfolio (GBP) Our absolute return credentials
• Unconstrained evolution of our established global multi-asset approach
• Attractive long-term return; not possible through market returns in broad asset classes
• Absolute return in every calendar year
• Achieved with absolute volatility closer to bonds than equities
Absolute return with ‘bond-like’ volatility
Risk versus return since inception April 1, 2004 to June 30, 2013 Use Exempt Funds
Scatter Charts – dd.mm.yyyy Provided by Lars
Low High
Past performance is not a guide to the future performance Source: Newton, weekly data, total return in sterling, gross of fees and income reinvested, net of fees and income reinvested. Asset class statistics relate to the following measures: 60/40 benchmark= MSCI World/CG WBGI, Global Equities = FTSE World, Gov't Fixed All Stocks, Global Bonds = JPM Global Gov't Bond, Hedge Funds = HFRI Fund of Funds (net), Property =IPD All Properties, Cash = LIBOR 1 Month Please see end of presentation for an explanation of these indices
Newton Real Return (Gross of fees)
Global equities
Global bonds
Hedge funds
Property
Cash
Newton Real Return (Net of fees)
60/40 benchmark
0
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4
6
8
10
12
0 2 4 6 8 10 12 14 16 18
Ret
urn
(% p
.a.)
Volatility (% p.a.)
10
Investment approach The importance of perspective…
• Highly interactive investment process
• Our structure of thinking globally from a single location allows us to utilise themes
• Themes provide valuable perspective
• Generalist multi-asset team supported by teams of specialists provide objective thinking and a powerful combination of perspectives;
– fundamental analysis
– global cross comparison of asset types
– global cross comparison of securities within asset types
• Single ‘holistic’ portfolios enable global portfolio construction and enhanced risk awareness
Assessing the world as one investment opportunity
Thinking globally
Perspective is fostered through:
Using themes
Our single location
Specialists and generalists
Holistic portfolio construction
11
Newton’s Real Return team Idea generation and input
Portfolio ideas come from everywhere – powerful combination of perspectives
Real Return team
Real Return Meeting
James Harries
Iain Stewart
Matthew Brown
Aron Pataki
Suzanne Hutchins
Philip Shucksmith
Ian Clark
Bond / FX Strategy Group Investment Strategy Group Thematic Focus Groups
Lars Middleton*
Strategy – 3 Avg yrs’ experience: 14 Avg yrs at Newton: 10
Global – 28 Avg yrs’ experience: 17 Avg yrs at Newton: 11
Global industry research – 18
Avg yrs’ experience: 13 Avg yrs at Newton: 6
Regional – 10 Avg yrs’ experience: 13 Avg yrs at Newton: 10
Corporate Governance / SRI – 4
Avg yrs’ experience: 11 Avg yrs at Newton: 5
Fixed income – 9 Avg yrs’ experience: 14
Avg yrs at Newton: 7
* Non-investment professional Total number of investment personnel = 73 Source: Newton, June 2013 (excludes private client business)
12
Global thematic framework Themes help identify opportunities and challenges
Challenges Opportunities
• Themes represent the first stages of idea generation and risk management…
• …provide a dynamic framework for investment thinking…
• …and allow a longer term global perspective in a volatile world
• …are about change and less likely to be caught out by change
R0087
13
Equity Fixed Income Other assets Currency Self financing, ‘stable’ earnings, high yields (healthcare, tobacco, oil & gas)
Growth areas
Credit dependent sectors/leveraged business models
Senior debt in more cyclical sectors
‘Surplus’ economy Government bonds e.g. Norway
Deficit economy sovereign debt
Government bond options
Direct and indirect risk asset hedges (e.g. equity index options and currency options)
Selected developing world currencies (e.g. Singapore dollar)
Weak, deficit economy currencies (e.g. Sterling, Euro)
Idea generation How themes influence investment selection
The credit bubble has left many economies carrying levels of debt which materially impair their economic prospects. We anticipate an extended period of relatively low growth and higher economic volatility as debt is reduced to more manageable levels. The scale of the accumulated public and private debt means that how the debt loads are reduced (whether in disorderly fashion or not) and the effect of offsetting policies will be critical for all aspects of the investment outlook
+ +
+
+
+
+
+
Portfolio holdings are subject to change at any time without notice This information should not be construed as a recommendation to purchase or sell any security Source: Newton, July 31, 2013
– –
–
14
Unconstrained multi-asset investing The process
… and our view of the world…
…which defines the portfolio structure…
… and provides the building blocks…
… to construct a single, flexible portfolio
Our starting point seeks equity like returns with bond like volatility
Absolutely focused – flexibility is key
• Security characteristics
• Capital preservation
• Asset allocation
• Regional mix
• Volatility
• Currency
Research Recommended
Lists
Model Portfolios
Return
+
Volatility
Real Return strategy
Global Strategy
15
UK 15.5%
North America 18.0%
Europe ex UK 19.6% Japan 2.9% Pacific ex Japan 0.8%
Other 1.0%
Government index linked (Australia & New Zealand) 1.4%
Government bonds (Norway, Australia,
New Zealand & USA) 14.8%
UK 2.3%
Europe 5.5%
US 2.9%
Newton Global Real Return representative portfolio (USD) Positioning as of July 31, 2013
Managing currency risk within a global unconstrained portfolio Source: Newton, July 2013
Equities 57.8%
Bonds 26.9%
Convertibles 2.2%
By geography and asset type By currency
US dollar 105.1
Other -0.6 Australian Dollar -0.7 Euro -3.9
-10
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30
40
50
60
70
80
90
100
110
R0106
Derivatives, commodities
and other 2.1% Cash & equivalents 11.0%
UPDATED MONTHLY
BNY Mellon GRRF (USD) 340055_NEWTON (Regional positioning tab)
Provided by Chris K
Updated Approved 17/07/13
Corporate bonds
16
Global Real Return investing Controlling the risks
1 Month LIBOR +4% target
(gross of fees)
Risk control (portfolio guidelines)
Ensuring risk is appropriate, consistent and intended
Risk monitoring
Global Real return strategy
Risk parameters
Volatility targets 10% – 12%*
Portfolio diversification Max 5% in any corporate issuer at purchase
Portfolio concentration Max 20% in any sector
Quantitative risk assessment How much risk? – (stock weights, correlation, volatility) What kind of risk? – (currency, industry, security specific) Is risk consistent? – (strategic views, security and bond picks)
A BNY Mellon CompanySM
Bottom up risk management
Themes
Security selection
Portfolio construction
Fundamentals Proprietary research Price
Single portfolio approach Perspective
We aim to deliver long-term real returns with
volatility between equities and bonds
* Based on long term volatility statistics Please see important information at the end of this presentation This target is believed to be reasonable based on market conditions, however there is no guarantee that this performance will be achieved or that the target will be reached in any performance period
17
Newton Global Real Return representative portfolio (GBP) Strategic positioning since inception***
Monthly – Phil S
Please see important information at the end of this presentation * Net positions, factoring in derivative exposure on a delta adjusted basis ** Factor multiplied x 100, rolling 3 years ***inception March 31, 2004 Source: Newton, June 30, 2013
Historic min/max and current positioning
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Equities* Fixed interest* Cash Equity andcurrencyinsuranceprotection(notional)
Inflationprotection(Direct)
GBP exposure Beta of totalportfolio**
(%)
(%)
Current positioning
18
Seeking real returns with lower volatility Security selection, an active process
Focusing on security characteristics
Newton Global Real Return representative portfolio (GBP) Cumulative contribution March 31, 2004 to June 30, 2013
Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. The value of overseas securities will be influenced by fluctuations in exchange rates. Please see important information at the end of this presentation Source: Newton, as of June 30, 2013, since inception (April 1, 2004 )
-20
0
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Mar
-04
Aug
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Jan-
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Mar
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Sep
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12Ju
l-12
Dec
-12
May
-13
(%)
Equities BondsCash & currency Derivative Instruments
Since inception (% p.a.) Return Volatility
Newton Global Real Return equities only return 10.0 8.2
MSCI World NDR Index 7.7 14.2
1- month GBP LIBOR +4% p.a. 7.1 0.7
19
Newton Global Real Return representative portfolio (GBP) Seeking real returns with lower volatility
Past performance is not a guide to the future performance Please see important information at the end of this presentation Return seeking assets are adjusted for equity hedges (delta adjusted). Stabilising assets and hedging positions are adjusted for delta adjusted synthetic fixed income exposure Source: Newton as at June 30, 2013, Newton Real Return Fund (£), total return gross of fees
Active and flexible risk management… …can be accretive while lowering volatility
Updated Approved 09/01/13
0%
20%
40%
60%
80%
100%
Mar
-04
Nov
-04
Jun-
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Feb-
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Sep
-06
Apr
-07
Dec
-07
Jul-0
8
Feb-
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Oct
-09
May
-10
Dec
-10
Aug
-11
Mar
-12
Oct
-12
Jun-
13
Allo
catio
n (%
)
Stabilising assets & hedging positions
Return seeking assets
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Tota
l ret
urn
(%)
Return seeking assets (contribution)Stabilising assets & hedging positions (contribution)Global Real Return representative portfolio total return (%)MSCI World NDR
20
Performance in rising/falling markets Emphasis on downside protection
Use Newton Real Return Fund vs. MSCI World NDR Chart – dd.mm.yyyy Provided by Lars Quarterly
Approved 16/04/12
Seeking an asymmetric return profile Newton Global Real Return Representative Portfolio (GBP) Since inception* performance to June 30, 2013
The power of negative compounding (and why it’s best avoided!)
• More capital to work with when you limit the downside
• A steep road back if suffering capital loss
“The first rule is not to lose money. The second rule is not to forget the first rule” – Warren Buffett
Past performance is not indicative of future returns Note: Monthly data, total return, net of fees. Rising and falling periods defined using quarterly MSCI World NDR returns Rising markets: Q204, Q404- Q106, Q306- Q307, Q209- Q110, Q310- Q211, Q411- Q112, Q312, Q412, Q1 13, Q2 13 Falling markets: Q304, Q206, Q407- Q109, Q210, Q311, Q2 12 * March 31, 2004 Please see important information at the end of this presentation Source: Newton, GBP representative portfolio, net of fees
Worked examples – returns required to offset losses
Year 1 -10% -20% -30% -40% -50%
Year 2 (required to break
even)
+11% +25% +43% +67% +100%
138.9
0.7
140.6
299.1
-50.3
98.4
-100
-50
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200
250
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Rising markets Falling markets Cumulative(%
)
Newton Real Return Fund MSCI World NDR
21
Newton Global Real Return composite (USD) Calendar year performance to July 31, 2013
Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. The value of overseas securities will be influenced by fluctuations in exchange rates. Please see important information at the end of this presentation * July 1, 2009 to December 31, 2009 ** Three year volatility calculated using monthly data points *** July 1, 2009. Source: Newton, as of July 31, 2013, gross and net of fees, Newton’s Global Real Return Strategy composite, all returns in USD
Newton Real Return Since Inception bar chart – dd.mm.yyyy Provided by Lars
13.1
6.9
1.2
4.8
3.9
7.3
12.7
6.1
0.4
4.1
3.5
6.6
2.1 4.
2 4.3
4.2
2.4 4.
3
22.2
11.8
-5.5
15.8
14.1
14.0
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-10
-5
0
5
10
15
20
25
(%)
Composite(gross of fees)
Composite (netof 0.75% fees)
1 Month USDLIBOR + 4%
MSCI World(NDR)
CY volatility** 2009* 2010 2011 2012 2013
Since inception*** (annualized)
Portfolio n/a n/a n/a 5.5 n/a 5.9 MSCI World Index NDR n/a n/a n/a 16.7 n/a 15.6
22
15.0
16.9
9.0
16.4
6.6
10.7
10.2
1.1
4.7 6.
0
10.3
14.3
16.0
8.2
15.5
5.8
9.9
9.4
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3.9 5.
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9.4
6.6
9.0 9.1 10
.3
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7.0
22.4
5.3 7.
2
-17.
9
15.7
15.3
-4.8
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22.4
8.2
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25
(%)
Composite(gross of fees)
Composite (netof 0.75% fees)
1 Month GBPLIBOR + 4%
MSCI World(NDR)
Newton Global Real Return composite (GBP) Calendar year performance to July 31, 2013
Newton Real Return Since Inception bar chart – dd.mm.yyyy Provided by Lars Quarterly
Do not copy from £ pack.
Input data and change dates separately
Different wording for US
Updated Approved 10/07/12
Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. The value of overseas securities will be influenced by fluctuations in exchange rates. Please see important information at the end of this presentation * March 31, 2004 to December 31, 2004 ** Three year volatility calculated using monthly data points. *** March 31, 2004 Source: Newton, as of July 31, 2013, gross and net of fees, Newton’s Global Real Return Strategy composite, all returns in GBP
CY volatility** 2004* 2005 2006 2007 2008 2009 2010 2011 2012 2013
Since inception*** (annualized)
Composite n/a n/a n/a 6.3 10.5 11.2 11.3 7.3 5.4 n/a 8.1 MSCI World Index NDR n/a n/a n/a 9.6 15.1 18.9 20.5 16.7 12.2 n/a 14.2
23
Newton Global Real Return composite (USD & GBP) Annualized performance as of July 31, 2013
3.9 4.8
5.8 7.3
3.5 4.1 5.1
6.6
2.4
4.2 4.2 4.3
0
2
4
6
8
2013 1 year 3 year Since inception p.a. (07/01/09)
(%)
Global Real Return (gross) Global Real Return (net) 1 Month USD LIBOR + 4%
USD Global Real Return and 1 Month USD LIBOR + 4%
GBP Global Real Return and 1 Month GBP LIBOR + 4%
Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. The value of overseas securities will be influenced by fluctuations in exchange rates. Please see important information at the end of this presentation Source: Newton, as of July 31, 2013, gross and net of fees, Newton’s Global Real Return composite
6.0 6.4 7.0 8.5 8.8
10.3
5.6 5.6 6.2 7.7 8.0
9.4
2.6 4.5 4.6 5.0
6.4 7.0
0
5
10
15
2013 1 year 3 year 5 year 7 year Since inception p.a.(04/01/04)
(%)
Global Real Return (gross) Global Real Return (net) 1 Month GBP LIBOR + 4%
24
0.1
0.1 0.1
0.1 0.1
0.1
0.1
0.1
Equity(ex-goldminers)
Corporatebonds
Convertiblebonds
Goldequities andphysical gold
Cash Inflationlinked
govt bonds
Govtbonds
Forexforward &active US$
position
Options Volatilityof Portfolio
Newton Global Real Return Conceptual risk exposures
High
Medium
Low
Portfolio
Risk contribution based on a representative portfolio
Return seeking (adds to risk) Hedging positions (reduces risk)
This is only a conceptual illustration Source: Newton
Vola
tility
25
Newton Global Real Return representative portfolio (GBP) Distribution of weekly returns as of June 30, 2013
Please see important information at the end of this presentation Source: Newton, weekly data, total return, net of management fees, gross income reinvested, since inception (April 1, 2004 )
Weekly returns (%)
Narrower, less volatile return profile than global equities
Use Absolute Intrepid Distribution Frequencies – dd.mm.yyyy Provided by Lars
Approved 16/05/12
Do not copy from £ pack.
Input data and change dates separately
Different wording for Eur
0
20
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200
<-5 -4 to -5 -3 to -4 -2 to -3 -1 to -2 0 to -1 0 to 1 1 to 2 2 to 3 3 to 4 4 to 5 >5
Freq
uenc
y
Representative portfolio MSCI World NDR index
26
Newton Global Real Return representative portfolio (GBP) An asymmetric return profile
Rolling 3 year returns (% p.a.)
• Long-term real returns with lower volatility
• Active and discerning security selection
• Flexibility in asset type aids downside protection
• Seamless consideration of risk and return
Figures are based on sterling returns. Past performance is not a guide to the future. Please see important information at the end of this presentation. Please remember that the value of shares and the income from them can fall as well as rise and investors may not get back the full amount originally invested Source: Lipper, gross of fees, midday prices based upon weekly returns. Rolling 3 year annualised returns on a weekly basis. June 30, 2013
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200
-12 to -8 -8 to -4 -4 to 0 0 to 4 4 to 8 8 to 12 12 to 16 16 to 20 Morethan 20
No.
of w
eekl
y ob
serv
atio
ns
Newton Real Return MSCI World NDR Index
27
GRR
Please see important information at the end of this presentation Source: Newton, as of June 30, 2013
Why Newton’s Global Real Return strategy?
Stable, growing and profitable firm with $82.4bn (as of June 30, 2013) in assets under management.
Seek to add value through our perspective on global markets which may serve as an input into the overall management of the plan.
Dedicated client service based in New York and San Francisco. Our US team is experienced in servicing Taft-Hartley, corporate/public plans, endowments and foundations.
Flexible and fundamental approach.
Seeks to deliver strong real returns with lower volatility through security selection, asset type flexibility and emphasis on downside protection.
Our strategy has been tested in various market conditions. Over nine years it has generated a positive gross return in each calendar year including 2008 and 2011, +6.6% (+5.8% net of fees) and 1.1% (+0.4% net of fees) , respectively.
Newton
Appendix
29
Newton Global Real Return comparative positioning (£, €, $) Managed by the same team with the same objectives
Quarterly – provided by Phil S
Source: Newton as of June 30, 2013, representative portfolios Please see important information at the end of this presentation Portfolio holdings are subject to change at any time without notice Should not be construed as investment advice or to buy or sell a specific security *The credit rating breakdown for the corporate bond portfolio represents the lower of the bond’s S&P and Moody’s rating Please note the effects of rounding
Equities by sector (% weight)
Top ten equities (% weight)
GBP EUR USD GlaxoSmithKline 4.3 GlaxoSmithKline 3.9 GlaxoSmithKline 3.9 Bayer 3.4 Bayer 3.5 Bayer 3.5 Sprint Nextel 3.1 Sprint Nextel 3.1 Sprint Nextel 3.1 Reynolds American 2.4 Reynolds American 2.4 Reynolds American 2.4 Novartis 2.3 Novartis 2.2 Merck & Co 2.3 Roche 2.1 Merck & Co 2.2 Novartis 2.1 Centrica 2.0 Roche 2.0 Centrica 2.0 Sanofi 2.0 SSE 1.9 Sanofi 1.9 Total 1.8 Centrica 1.9 Roche 1.9 SSE 1.8 Sanofi 1.8 Total 1.9
Asset allocation (% weight) Corporate bond portfolio (% weight) Currency exposure (% weight) GBP EUR USD Cash & equivalents 11.3 12.2 10.9 Equities 58.4 58.3 58.4 Convertibles 2.0 2.0 2.2 Government bonds 14.7 14.8 14.8 Corporate bonds 11.0 10.1 11.1 Commodities 3.0 3.0 3.0 Derivatives -0.4 -0.4 -0.4
GBP EUR USD GBP 68.8 -0.3 -1.3 EUR -3.2 65.6 -8.6 USD 23.9 22.2 111.9 AUD 1.0 0.9 -0.9 CHF 5.9 3.5 -0.4 NZD 1.4 1.3 -0.1 NOK -0.2 3.1 -0.1 SGD 2.9 2.9 1.0 Other -0.5 0.8 -1.1
GBP EUR USD AA 0.0 0.0 0.0 A 7.6 7.3 7.5 BBB 9.7 7.8 8.4 BB 26.8 24.4 17.4 B 46.6 49.7 54.4 CCC 9.3 10.8 12.3 Financial 4.4 3.2 2.9 Asset backed 0.0 0.0 0.0 Government/Agency 0.0 0.0 0.0 Industrial 67.3 69.4 66.6 Telecom / utilities 28.3 27.4 30.5
GBP EUR USD Pharmaceuticals & biotechnology 14.3 13.9 13.6 Mobile telecommunications 9.2 8.9 8.6 Tobacco 4.9 4.7 4.8 Gas, water & multiutilities 4.6 5.3 5.5 Chemicals 4.5 4.7 4.9 Mining 3.7 3.6 3.5 Oil & gas producers 2.8 2.8 3.0 Food & drug retailers 2.4 2.3 2.4 Support services 2.1 1.9 2.0 Fixed line telecommunications 1.8 1.8 1.7 Electricity 1.8 1.9 1.7 Media 1.2 1.2 1.2 Software & computer services 1.1 1.2 1.4 Beverages 1.0 0.9 0.9 Health care equipment & services 0.9 1.0 1.0 Aerospace & defense 0.9 1.0 1.1 Banks 0.0 0.0 0.0
30
Newton Global Real Return representative portfolio (USD)
Historical asset allocation
Source: Newton June 30, 2013 Please see important information at the end of this presentation Flexibility to invest dynamically is key
The chart above illustrates changes in asset allocation for the representative portfolio since inception, July 1, 2009. For illustrative purposes, delta adjusted equity market option exposure is shown below the main body of the chart, to demonstrate the extent to which downside protection has been utilized over time. Similarly, synthetic bond positions (bond options) have been highlighted above the main body of the chart to illustrate clearly the different bond exposures -via options and physical positions. Importantly, the strategy does not borrow to implement derivative strategies and risk controls exist to prevent exposing the strategy to open-ended losses
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Newton Global Real Return representative portfolio (GBP) Historical asset allocation
Source: Newton, June 30, 2013 Flexibility to invest dynamically is key to success of strategy
The chart above illustrates changes in asset allocation for the representative portfolio since inception, March 31, 2004. For illustrative purposes, delta adjusted equity market option exposure is shown below the main body of the chart, to demonstrate the extent to which downside protection has been utilized over time. Similarly, synthetic bond positions (bond options) have been highlighted above the main body of the chart to illustrate clearly the different bond exposures -via options and physical positions. Importantly, the strategy does not borrow to implement derivative strategies and risk controls exist to prevent exposing the strategy to open-ended losses. * Pre July 2007, delta has been adjusted using end of day data sourced from the relevant exchanges
Quarterly Use RR £ template – dd.mm.yyyy – provided by Phil S
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Equities (excluding gold equities) Government bondsCorporate bonds Index linkedConvertible bonds CommoditiesGold direct and indirect (gold equities and ETC) CashDerivatives - premiums on index, bond & currency instruments Equity hedge (delta adjusted protection*)Synthetic fixed income exposure (delta adjusted)
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Updated Approved 9/10/12
32
Managing risk and return through uncertain times
Each security has a role within the single portfolio – it is return seeking or risk reducing
Updated Approved 15/01/13
Source: Newton USD Global Real Return, July 31, 2013
This is USD specific, to be updated by PS
Inflation protection (QE3?, real rates negative)
Deflation protection (slow global growth,
deleverage) European debt crisis Global growth slowdown % of portfolio
Government index linked 1.4 Cash equivalents 11.0 Banks 0.0 Equities (non cyclical, high yielding)
57.8
Corporate index linked 1.0 Norwegian Gov 3.6 Short EUR -3.9 Australian Government bonds
3.6
Gold ETC 3.1 Australian Gov 3.6 Italy, Spain, Ireland, other EMU gov
0.0 New Zealand Government bonds
0.9
Gold mining companies 3.9 New Zealand Gov 0.9 Cash & equivalents 11.0 Corporate bonds 10.7
Agriculture related 5.1 US Gov 6.7 High yielding global equities
57.8 Index put protection
Oil related 3.1 Gold ETC 3.1 Precious metals 7.0
Other equities 0.4 Corporate bonds 10.7 Norwegian bonds 3.6
Index put options Investment grade corporates
1.6
Index put protection
33
Global Real Return representative portfolio (USD) Equity and bond analysis as of July 31, 2013
Stock characteristics that fit our outlook
Portfolio holdings are subject to change at any time without notice This information should not be construed as a recommendation to purchase or sell any security Source: Newton, as of July 31, 2013
Global sector breakdown (% weight) Top ten holdings
Use GRR $ template – dd.mm.yyyy Provided by Chris K
Provided by Chris K
RWC Partners = RWC Global Convertible Bond Fund
Updated Approved 08/01/13
Stock Weighting
(%)
USA Treasury Bonds 3.125% 4.70
GlaxoSmithKline 3.84
Bayer 3.75
Secured Gold Index-Linked Note 3.12
Norway (Kingdom of) 4.5% bonds 2.46
Reynolds American 2.36
Merck & Co 2.35
Novartis 2.11
Centrica 2.07
Total 1.97
0 3 6 9 12 15 18
Health care
Telecommunications
Utilities
Consumer non-cyclical
Agricultural related
Precious metals
Industrials
Oil & gas
Consumer cyclical
Financials
Equity Bond ETC
34
Global Real Return representative portfolio (USD) Corporate bond positioning as of July 31, 2013
Use GRR $ template – dd.mm.yyyy Provided by Phil S
Updated Approved 08/01/13
Portfolio holdings are subject to change at any time without notice This information should not be construed as a recommendation to purchase or sell any security Source: Newton, as of July 31, 2013
Credit rating Sector breakdown
Effective duration
Total 3.3
Investment grade 7.9
High yield 2.5
Average maturity
Total 6.1
Investment grade 10.0
High yield 5.4
0 10 20 30 40 50 60
AAA
AA
A
BBB
BB
B
CCC & Below
% of corporate debt 0 20 40 60 80
Financial
Asset backed
Govt/Agency
Industrial
Telecoms/Utilities
% of corporate debt
35
Global Real Return representative portfolio (USD) Currency exposure – Since launch
Please see important information at the end of the presentation Source: Newton July 31, 2013
Provided by Phil S Quarterly
Approved 10/01/13
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US$ FX (+) US$ physical US$ FX (-) Non-US$ Non-US$ FX (-) Total US$ currency exposure
36
LIBOR + 4 % p.a. – a challenging target
Source: Newton, as of June 30, 2013
Use Newton Real Return (World Market Indices 30 Yrs)– dd.mm.yyyy Provided by Lars Monthly
Updated Approved 10/10/12
5 Year (p.a.) 15 Year (p.a.) 20 Year (p.a.)
Return Volatility Return Volatility Return Volatility
MSCI World (NDR) 2.70 20.15 3.69 16.53 6.56 15.35
Citigroup WGBI TR 3.04 7.41 5.36 7.15 5.60 6.70
1 month Libor + 4% 4.51 0.21 6.88 0.65 7.56 0.66
70/30 (MSCI World/CG WBGI) 3.19 15.13 4.52 12.08 6.55 11.25
60/40 (MSCI World/CG WBGI) 3.28 13.55 4.73 10.72 6.50 10.01
HFRI Fund of funds Index -0.62 6.19 4.12 6.06 5.76 5.97
37
Newton Global Real Return strategy Use of derivatives
Three main purposes:
1. Downside protection – risk management / insurance / income generation to offset cost of protection
(e.g. buying equity index protection, security selection)
2. Volatility reduction – smoother return profile
(e.g. direct : buying volatility index, indirect : currency pairs)
3. Synthetic exposure – hedging ‘what if’ scenarios
(e.g. buying bond options in case of further bond yield reductions)
No borrowing against portfolio assets
No shorting securities
No complex derivatives
38
Investment Strategy Group
Chairman: Simon Pryke
Standing Members: Iain Stewart, Jeff Munroe, Paul Brain, Tim Lucas, Peter Hensman, Jason Pidcock, Richard Wilmot, Rob Marshall-Lee, Tim Wilson
Bringing together key investors from across the investment team, purpose is to:
• Establish the global investment environment
• Challenge and debate differences between lead portfolios/models
• Analyse relative valuation of assets
• Identify themes and oversee thematic focus group process
Meets 10am Monday
Part 1 ‘Open’ format: Emphasis on active participation – this is not a ‘listen only’ meeting.
Part 2 ‘Closed’ format: Standing members, plus others by invitation. Incorporates a monthly review of the thematic focus groups.
39
Idea generation Global thematic framework
Investment Strategy Group
Chair – Simon Pryke Informed debate and challenge
Meets on a weekly basis with a monthly focus on themes
Debt, crisis and policy Innovation
Energy, environment and infrastructure Economics, geopolitics and demographics
Peter Hensman
Stephen Rowntree
Fati Naraghi
Duncan Bulgin
Robert Marshall-Lee
Paul Markham
40
Return seeking assets – composition Active security selection
The importance of security characteristics
Updated Approved 08/01/13
Quarterly Use RR £ template – dd.mm.yyyy – provided by Lars
Newton Global Real Return (GBP) Representative Portfolio – return seeking assets industry allocation (%)
*excluding gold equities Portfolio holdings are subject to change at any time without notice. This information should not be construed as a recommendation to purchase or sell. Source: Newton. Newton Real Return Representative Portfolio (£) combined equity and corporate bond holdings reweighted to 100% allocation, periods to June 30, 2013
• Active management – exposure to each of telecoms, financials and health care have ranged by more than +/-20%
• Around the time of the banking crisis:
– over 57% of return seeking core in telecoms and health care
– no western bank equity
• Post-crisis, effective exposure in place for high yield spread anomaly
No. of holdings 1 Apr 2004 1 Sept 2008 30 June 2013
Equities* 67 48 38
Corporate bonds 15 0 53
0
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Basic mats.
Cons. Svcs
Cons. goods
Industrials
Technology
Telecoms
Utilities
Financials
Health care
Oil & gas
Beta since inception to 30/06/13 Return seeking 0.8 Stabilising and hedging -0.1 Total Fund 0.4
41
Newton Global Real Return representative portfolio (GBP) Summary statistics as of June 30, 2013
Provided by Lars Quarterly
Provided by Chris K Quarterly
Do not copy from £ pack.
Input data and change dates separately
Different wording for US
Representative portfolio; calculated excluding cash, cash equivalents and derivative instruments Volatility – based on the standard deviation of monthly performance. Please see important information at the end of this presentation. Source: Newton as of June 30, 2013, Algorithmics, ThinkFoli0
Updated Approved 9/10/12
Updated Approved 08/01/13
General
Total fund turnover* 32.44%
Equity turnover (12 month, period to 30/06/13)* 27.99%
Beta (fund level) since inception 0.44
Beta (equity portion) since inception 0.78
Number of stocks (equities) as at 30/06/13) 43
Sharpe ratio
Including derivatives since inception 0.86
Excluding derivatives since inception 0.83
Fund
Historical volatility (3 year rolling) 5.42
Historical volatility (1 year rolling) 5.28
Correlation with MSCI World Index since inception 0.76
MSCI World (NDR) Index
Historical volatility (3 year rolling) 10.90
Historical volatility (1 year rolling) 8.50
Fixed interest % portfolio
Number of holdings (bonds) 71
Sovereign index linked 2 1.4
Sovereign conventional 8 13.4
Investment grade 14 1.9
High yield 47 9.1
Modified duration 3.5
Weighted average yield to maturity 5.6
42
Newton Global Real Return strategy Assets under management as of June 30, 2013
$0.9
$2.4
$5.6
$9.4
$15.3
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 YTD 2013
$ bn
Note effects of rounding Source: Newton as of June 30, 2013
Global Real Return (£), $12.7bn
Global Real
Return (€), $1.9bn
Global Real Return ($), $0.6bn
43
Newton Global Real Return Composite (USD) – Annual disclosure
• Newton Global Real Return (USD) Composite contains fully discretionary portfolios that have an unconstrained multi asset investment mandate, and for comparison purposes is measured against a “performance target” of US$ 1 Month LIBOR +4% per annum
• Newton claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Newton has been independently verified for the periods 1996 to 2010, (PS Ashland (1996 to 2003) and PricewaterhouseCoopers LLP (2004 to 2011))
• The verification reports are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation
• Newton, the firm, includes all the assets managed by Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited and Newton Fund Managers (CI) Limited which are investment management firms and wholly owned subsidiaries of The Bank of New York Mellon Corporation. In addition, the AUM for the firm, where quoted, may include assets managed by the firm’s officers as dual officers or employees of the Bank of New York Mellon
• Newton Investment Management Limited is authorized and regulated by the Financial Services Authority in the conduct of investment business. Newton International Investment Management Limited and Newton Fund Managers (CI) Limited (Newton) are authorized and regulated by the Jersey Financial Services Commission in the conduct of investment business. Newton Capital Management Limited is registered with the U.S. Securities and Exchange Commission as an investment advisor under the Investment Adviser’s Act 1940
• Returns are presented gross and net of management fees and include the reinvestment of all income. Capital gains, dividend and interest received may be subject to withholding tax imposed by the country of origin and such taxes may not be recoverable. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. The fee schedules appropriate for this presentation start at 0.75% base fee (plus performance related component) per annum, however, individual fees are negotiated on an account by account basis
• The Global Real Return (USD) Composite was previously called the Global Real Return Composite • A list of composite descriptions and additional information regarding the firm’s policies and procedures for valuing portfolios, calculating and reporting performance results are
available upon request. Please contact Jon Ritz, Co Head North American Business at 212-635-6030.
Total Firm Composite Assets Annual Performance (in US$ terms) 3 Year Ex Post Risk Statistics Assets US$ % of Firm Number of Gross Net US$ 1 Month Composite Composite Benchmark Information
Year End (US$ million) (millions) Assets Accounts Composite Composite LIBOR +4% Dispersion Std Dev Std Dev Ratio 2011 71,470 157 Less than 1% Five or fewer 1.2% 0.4% 4.2% N.A. N.A. N.A. N.A. 2010 73,936 42 Less than 1% Five or fewer 6.9% 6.1% 4.1% N.A. N.A. N.A. N.A. 2009 67,986 23 Less than 1% Five or fewer 13.1%* 12.7%* 2%* N.A. N.A. N.A. N.A.
N.A. = Not statistically meaningful due to insufficient number of portfolios in the composite for the entire year / Dispersion is calculated on an equal weighted basis for funds in the composite for the full year * Part period return – composite inception 1 July 2009 / Composite created Q4 2009
44
Newton Global Real Return Composite (GBP) – Annual disclosure
• Newton Global Real Return(GBP) Composite contains fully discretionary portfolios which have an unconstrained multi asset investment mandate and for comparison purposes is measured against 1 Month Sterling LIBOR +4% per annum
• Newton claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Newton has been independently verified for the periods 1996 to 2010, (PS Ashland (1996 to 2003) and PricewaterhouseCoopers LLP (2004 to 2011)). The verification reports are available upon request
• Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation
• Newton, the firm, includes all the assets managed by Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited and Newton Fund Managers (CI) Limited which are investment management firms and wholly owned subsidiaries of The Bank of New York Mellon Corporation
• Newton Investment Management Limited is authorized and regulated by the Financial Services Authority in the conduct of investment business. Newton International Investment Management Limited and Newton Fund Managers (CI) Limited (Newton) are authorized and regulated by the Jersey Financial Services Commission in the conduct of investment business. Newton Capital Management Limited is registered with the U.S. Securities and Exchange Commission as an investment advisor under the Investment Adviser’s Act 1940. The firm maintains a complete list and description of composites, which is available upon request
• Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Non-fee-paying accounts are not included in this composite. Capital gains, dividend and interest received may be subject to withholding tax imposed by the country of origin and such taxes may not be recoverable. The custom benchmark is calculated using index returns that are gross of withholding tax. Past performance is not indicative of future results
• The Pound Sterling is the currency used to express performance. Further information regarding the exchange rates used is available upon request. Returns are presented gross of management fees and include the reinvestment of all income. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. The fee schedule appropriate for this presentation starts at 0.65% (plus performance related component) per annum subject to a minimum of £260,000, however, individual fees are negotiated on an account by account basis.
• The Newton Real Return Composite was created 4Q04. • The Newton Global Real Return (GBP) Composite was previously called the Newton Real Return Composite • Additional information regarding the firm’s policies and procedures for valuing portfolios, calculating and reporting performance results are available upon request. Please contact
Jon Ritz, Co Head North American Business at 212-635-6030.
N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. Dispersion is calculated using the equal weighted standard deviation of annual gross fund returns included in the composite for the entire year. * Part period return – Composite inception 1st April 2004.
Total Firm Composite Assets Annual Performance Results 3 Year Ex Post Risk Statistics (Gross) Year Assets Sterling % of Firm Number of
1 Month £ Composite Standard Deviation Information
End (millions) (millions) Assets Accounts Composite LIBOR +4% Dispersion Fund Benchmark Ratio 2011 45,988 5,461 12% Five or fewer 1.11% 4.69% N.A. 7.30% 0.07% N.A. 2010 47,224 3,433 7% Five or fewer 10.17% 4.55% N.A. 11.33% 0.64% N.A. 2009 42,101 1,451 3% Five or fewer 10.73% 4.86% N.A. - - - 2008 35,292 766 2% Five or fewer 6.58% 9.52% N.A. - - - 2007 39,535 566 1% Five or fewer 16.39% 10.27% N.A. - - - 2006 35,610 481 1% Five or fewer 9.01% 9.06% N.A. - - - 2005 28,758 111 Less than 1% Five or fewer 16.90% 9.01% N.A. - - - 2004 21,739 13 Less than 1% Five or fewer 14.97%* 6.60%* N.A. - - -
45
Important information Explanation of indices
• JPM Global Government Bond Index. The GBI Global index is J.P. Morgan's flagship index for fixed rate government debt. The index measures the total return from investing in 13 developed government bond markets—Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, Netherlands, Spain, Sweden, UK, and US. The index is market capitalization weighted and bonds enter and leave at the monthly rebalance. There are no size criteria for inclusion, but bonds must have a minimum remaining maturity of one year
• MSCI World NDR Index. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. NDR means that net dividends are reinvested
• 1- month LIBOR. LIBOR is the interest rate that banks charge each other for one-month, three-month, six-month and one-year loans. LIBOR is an acronym for London InterBank Offered Rate. This rate is that which is charged by London banks, and is then published and used as the benchmark for bank rates all over the world. LIBOR is compiled by the British Bankers Association (BBA), and is published 11 am each day in conjunction with Reuters. It is comprised from a panel of banks representing countries in each currency.
• FTSE World Index. The FTSE All-World Index Series is the Large/Mid Cap aggregate of 2,700 stocks from the FTSE Global Equity Index Series. It covers 90-95% of the investable market capitalization. Global Dynamic Universe. On 1 December 2009 there was a change to the index to 1-month LIBOR +2% per annum. Prior to that date, the strategy’s index was a composite of four bond indices, the ‘Global Dynamic Universe’, fully hedged to sterling (25% Merrill Lynch Global Broad Market Corporate Index, 25% Merrill Lynch Global High Yield Constrained Index, 25% JP Morgan Government Bond Index, 25% Merrill Lynch Global Emerging Market Sovereign Plus).
• FTSE British Government All Stocks Index (FTSE Actuaries Government Securities UK Gilts All Stock Index) The FTSE Actuaries UK Gilts Indices are a comprehensive family of indices and related bonds data (e.g. duration) and are based on all eligible British Government Securities. The indices are divided into conventional gilts and index linked gilt indices. There is a headline index for each sub-division, and different maturity bands are available
• IPD All Property Index (Investment Property Databank Index) A property performance index which tracks retail, office and industrial properties. The index includes data on actual property transactions from institutional investors and property companies. It produces annual and monthly figures for the total property return
• Citigroup WGBI (CG WBGI). The World Government Bond Index (WGBI) includes the 23 government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, Norway, Poland, Portugal2, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States
• The HFRI Monthly Indices ("HFRI") are a series of benchmarks designed to reflect hedge fund industry performance by constructing equally weighted composites of constituent funds, as reported by the hedge fund managers listed within HFR Database. The HFRI range in breadth from the industry-level view of the HFRI Fund Weighted Composite Index, which encompasses over 2000 funds, to the increasingly specific-level of the sub-strategy classifications
46
Important information Issued by Newton Capital Management Limited
Tel: (212) 635 6067 web: www.newtoncapitalmanagement.com
‘‘Newton’ refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited, Newton Capital Management LLC and Newton Fund Managers (CI) Limited. Assets under management include assets managed by all of these companies except Newton Capital Management LLC, which provides marketing services in the U.S. for Newton Capital Management Limited. Except for Newton Capital Management LLC and Newton Capital Management Limited, none of the other Newton companies offer services in the U.S. In addition, AUM for the Firm may include assets managed by the firm’s officers as dual officers or employees of The Bank of New York Mellon and assets of wrap fee account(s) and high net worth client model(s) for which Newton Capital Management Limited provides advice in the form of non-discretionary model portfolios. This document is issued by Newton Capital Management Limited an investment management firm authorized and regulated in the United Kingdom by the Financial Services Authority in the conduct of investment business and is a wholly owned subsidiary of the Bank of New York Mellon Corporation. Registered in England no: 2675952. Newton Capital Management Limited is registered in the United States as an investment adviser under the Investment Advisers Act of 1940. All information within has been prepared by Newton. Any views and opinions contained in this document are those of Newton Capital Management Limited at the time of going to print and are not intended to be construed as investment advice. Nothing herein constitutes an offer to sell, or solicitation of an offer to purchase, any securities. Due to, among other things, the volatile nature of the markets and the investment areas discussed herein, they may only be suitable for certain investors. The information is not intended for, and should not be construed as, legal or tax advice. Parties should independently investigate any investment strategy or manager, and should consult with qualified investment, legal, and tax professionals before making any investment. It should not be assumed that any of the securities transactions or holdings discussed was or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. To derive Strategy and Portfolio details for presentation purposes, the investment manager has used the representative portfolio, relative to the benchmark, if applicable, or actual portfolio weightings. This portfolio data is “as of” the date indicated and should not be relied upon as a complete or current listing of the holdings of the portfolio. The holdings may represent only a small percentage of the aggregate portfolio holdings, are subject to change without notice, and may not represent current or future portfolio composition. A complete list of the portfolio holdings may be made available upon request. Indices shown are provided for illustrative purposes only and to allow clients to compare their performance to that of a well-known and widely recognized index. Comparisons to indices have inherent limitations because the indices shown may have volatility, composition, and other characteristics that may differ materially from the representative/composite portfolio. Also, performance results for indices do not reflect the payment of investment management fees and other expenses. In addition, investors cannot invest directly in an index. Because of these differences, the indices shown should not be relied upon as an accurate measure of comparison. Gross returns are calculated using a time weighted rate of return, and are gross of advisory fees, net of transaction costs, and include the reinvestment of dividend and capital gain distributions. The effect of advisory fees could be material. If the expenses were reflected, the performance shown would be lower. Fees are also described in Newton Capital Management Limited’s ADV Part 2 and will vary depending on, among other things, the applicable fee schedule and account size. Many factors affect investment performance including changes in market conditions and interest rates and other economic, political, or financial developments. The investment return and capital value of your investment will fluctuate, so that when your investment is sold, the amount you receive could be less than what you originally invested. Past performance is not a guide to or indicative of future results. Future returns are not guaranteed. Investments are not insured by the FDIC (or any other state or federal agency), are not guaranteed by any bank, and may lose value. The Bank of New York Mellon and Newton Capital Management Limited are all wholly-owned subsidiaries of The Bank of New York Mellon Corporation ("BNY Mellon"). BNY Mellon Asset Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand for The Bank of New York Mellon Corporation. Unaudited data: Some information in this report is based on unaudited information and is subject to change. Investment Risks: Equities: Equity securities are subject generally and to varying degrees to market, market sector, market liquidity, issuer and investment style risks, among other factors. Bonds: Bonds are subject to varying degrees of interest-rate, credit, liquidity, prepayment and extension, derivative and market risks. Generally, all other factors being equal, bond prices move in the opposite direction of interest rate changes. High Yield Bonds: High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity. Derivatives: The strategy may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. A small investment in certain derivatives may have a potentially large impact on a fund’s performance. Emerging Markets: It should be noted that Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Emerging markets have additional risks associated with local custody and registration practices that may be less developed than more mature markets.
