Global small caps: Diversity provides opportunity

Transcription

1 Global small caps: Diversity provides opportunity About the author Kenneth Abrams Equity Portfolio Manager Kenny is a portfolio manager in Global Equity Portfolio Management and leader of the Small Cap Opportunities team. Drawing on research from the firm s global industry analysts, equity portfolio managers, and team analysts, he currently manages various Global Perspectives and Small Cap Opportunities approaches. He is also a member of the firm s Hedge Fund Review Group. GIVEN OUR RISK-AWARE APPROACH TO GLOBAL SMALL-CAP INVESTING, we typically avoid taking significant sector and regional positions relative to the broader market. However, as active investors, we have flexibility on how and where to expend our risk budget in light of our opportunity set and the broader macro or fundamental trends that may affect it over time. Thus, while our overall positioning remains neutral to mitigate stock-specific risk, our approach can still benefit from relativevaluation opportunities. Given small-cap stocks strong absolute performance over recent years, clients regularly ask us about valuations and the potential impact of current market metrics on future returns. With the forward price-to-earnings ratio (P/E) of the Russell 2000 Index at over 30 times (as of 30 June 2015), many are concerned that the asset class is overvalued. We believe that small caps are just as attractive as they have been historically and that active managers in the space still have scope to deliver strong potential returns over the long term. The factors that have driven much of the valuation expansion in small-cap securities have been isolated to specific market segments and geographies. As a result, we do not believe that broader valuations are an accurate representation of the viable small-cap investment universe. In our view, the expanding subset of small-cap companies with little to no earnings is driving the valuation distortion. Amid increasing stock prices, these non-earning companies account for much of the multiple expansion that has occurred over the past several years. KEY POINTS While pockets of overvaluation exist within small caps, we believe that most sectors and geographies are reasonably valued. In particular, we are positive on some North American energy companies, European industrials, and Chinese clean-energy and health care companies. believes diversity of thought strengthens our investment discussions. We do not have a house view, and the perspectives of our investors often vary. To capture this breadth, we plan to feature different insights into global equity markets and sectors each quarter. We are cautious on biotech companies and areas exposed to potential systemic risk, such as Southern European financials.

2 2 In our view, a narrow market like this one, in which overvaluation is isolated within certain sectors and countries, is attractive. By identifying and avoiding these pockets of overvaluation and by taking advantage of the broader market s apathy resulting from the top-line valuations of the asset class, active small-cap investors should be able to position themselves to generate alpha over the coming years. At the same time, with interest rates at historic lows and investors seeking tangible long-term growth, we believe that institutional investors on the whole are underequitized. Real government bond yields of 0% (or less) will have important consequences. Even if considered on a yield basis alone, equities appear to provide a better potential return to reward investors for their risk capital over time. Below, we highlight a number of potential market opportunities around the world that we believe showcase the depth and array of high-quality, reasonably valued investments within global small caps. Europe Despite the turmoil resulting from the bailout negotiations with the Greek government, certain investment opportunities are evident within the broader European market. The euro has depreciated meaningfully against many other global currencies (down 18.6% versus the US dollar over the 12 months ending 30 June 2015), and monetary policy has continued to ease. However, we believe that estimates for export-oriented industries have not fully priced in the implications of these developments. For industrials companies and export-oriented consumer discretionary businesses, the potential impact of this currency trend is significant. We continue to find reasonably priced, well-managed businesses in both of these sectors, where strong company-specific fundamental drivers, coupled with a powerful cyclical tailwind, have set up the potential for meaningful outperformance. However, we remain cognizant of the contagion risk associated with the issues in Greece and, through the application of our macro and quantitative inputs, have identified pockets of potential systemic risk, such as Italian financials, where we are sizing investments accordingly. North America While North American equity markets have generally outperformed other regions in recent years, we continue to find some areas of specific opportunity, many driven by broader market trends or dislocations. For example, the rapid decline in the price of crude oil from mid-2014 has had an enormous adverse impact on many energy, materials, and industrials companies in the US and Canada. Although these companies are obviously levered to commodity prices in the short term, the broader market dislocation has provided the opportunity to invest in a number of superior producers, refiners, and services companies across these sectors. We do not have a view on when and how the price of oil will stabilize. However, based on the marginal cost of production and the reductions in rig count over the last year, we believe that the market-clearing price for oil will be above where it is today, and that higher-quality producers with proven reserves will be direct beneficiaries of any recovery. The drop in crude oil prices has had numerous secondary impacts as well, such as lower input costs, which have benefitted transportation companies across all regions, particularly North America.

3 3 Meanwhile, we are generally avoiding small-cap biotech companies as the industry s valuation continues to rise and the potential for a major drawdown in this group increases. We have long believed in the secular opportunity in biotech, because of the scientific breakthroughs that lie behind many of these businesses. However, the multiples the market is willing to apply appear excessive in many cases, leading us to take a more conservative view of this space in the short term. Japan The Japanese market remains challenging for us, as tax increases and other headwinds have partially offset the benefits of a rapidly depreciating currency (the yen has lost almost 20% versus the dollar over the past 12 months) and aggressive monetary easing by the Bank of Japan (BOJ). One segment where we are finding interesting opportunities is among domestically oriented consumer companies. We believe that, as BOJ interventions in the Japanese economy continue to drive change in the market, individual consumption may begin to accelerate meaningfully for the first time in two decades. Against this backdrop, well-run consumer businesses with savvy management teams and effective capital discipline appear well positioned for success in the years ahead. Emerging markets The diversity of emerging market companies and countries is such that we can identify many different potential areas of idiosyncratic opportunity. China, where we see both the best growth potential and the greatest risk across global markets, provides some interesting case studies. The initial steps to open the country up to global markets have had a massive impact on Chinese equities, leading to a strong rally followed by the recent severe pullback. Overall, Chinese small caps appear to be overvalued, with the MSCI China A Shares Small Cap Index trading at a current P/E of 121, as of 30 June However, beneath the surface, we see positive long-term trends and compelling investment opportunities. Major demographic and governmental trends are changing the face of the Chinese economy, creating significant potential upside for well-run businesses. Two opportunities that we view as particularly appealing are clean technology and health care. As the physical and economic repercussions of poor environmental stewardship take their toll, it has become clear that developing more stringent environmental standards and alternative power sources will be a prime objective of the Chinese government. The long-term opportunity for clean-tech companies operating in China is significant. Similarly, as the Chinese population ages, we expect addressing the inadequacies of the health care system to become a key priority, leading to a dramatic increase in spending on the sector. Many interesting companies operate in this sector, and we think the secular trends and reasonable relative valuations represent an exciting opportunity. Conclusion Assessing the global small-cap investment landscape today, we see a wealth of compelling investment opportunities. Despite a few pockets of genuine overvaluation, the idiosyncratic nature of small-cap stocks provides us with interesting top-down and bottom-up trends to research and evaluate. Furthermore, in light of low interest rates and high investor return expectations, the growth potential of this asset class merits its inclusion in strategic investment portfolios.

4 4 About the author Alan Hsu Global Industry Analyst and Portfolio Manager, Global Environmental Opportunities Alan leads the Global Environmental Opportunities team, conducting fundamental analysis on companies promoting environmental sustainability from a wide variety of sectors and regions. In his current roles, he draws on his many years of experience as a global industry analyst in the utilities, energy midstream, and alternative energy sectors. SECTOR SPOTLIGHT Renewable energy and sustainable infrastructure We believe that sustainability and environmental risk present a broader range of opportunities than many investors appreciate. Until recently, the sustainable-investment universe was limited to alternative energy or companies aiming to improve their scores for environmental, social, and corporate governance (ESG). Now, the universe has expanded to encompass low-carbon electricity and transportation, energy efficiency, and water and resource management companies, which are all key areas of focus for us. The global opportunity set today comprises over 600 companies, with an aggregate market capitalization of about US$4 trillion. Demand for sustainable solutions is growing, driven by chronic underinvestment in infrastructure, new policy and regulation, more competitive costs of renewable fuels and efficient technologies, and heightened consumer awareness. We expect this demand growth to lead to a rise in the value of sustainability-related assets in the years ahead. For investors with a social-responsibility mandate or an objective of reducing exposure to high-carbon assets, we believe that our investment approach can potentially deliver an attractive double bottom line: The companies we invest in are directly involved in solving for sustainability, and their stocks have the potential to deliver competitive total investment returns over time. Certainly, over the last decade, companies providing these types of sustainability solutions have delivered returns commensurate with both the broad energy sector and global equities. We believe sustainability-related assets will continue to have an expanding role in the future energy landscape, and investors may therefore want to think about their current energy exposure in relation to these assets. Differentiated approach to ESG Many ESG-themed portfolios contain companies that are spending money to improve their ESG scores and thus increase their attractiveness to investors. By contrast, we target companies for which ESG solutions are a source of revenue, not a cost. For example, growing numbers of businesses are seeking to embrace sustainability by purchasing electricity from producers of solar or wind power. While such efforts can improve these companies ESG footprints, they incur costs. We see significant opportunities among the producers of renewable energy and other sustainability solutions, for whom these companies efforts represent a source of revenue and return. s experienced ESG specialists are integral to our research and risk management. They help us develop investment ideas, hone our research, and identify ESG-related opportunities and risks. Assessing a company s ESG efforts is a window on its motivations and values, giving us a sense of the management attributes we care about, such as capital stewardship, employee relations, and shareholder distribution.

5 5 We target companies for which ESG solutions are a source of revenue, not a cost. Areas of greatest disruption and investment opportunity The many disruptive changes underway present opportunities in power storage, energy efficiency, renewable energy, and resource infrastructure. The current inability to store electricity causes significant inefficiency on power grids and heating and cooling systems. Large-scale energy storage has the potential to fundamentally alter the energy sector and generate enormous value. Utilityscale batteries could enable wind farms and solar arrays to store electricity when demand and costs are low, and dispatch it when demand and costs rise. Additionally, people are beginning to appreciate the cost savings gained by improving energy efficiency. Building-based energy usage represents approximately 35% of global consumption, 1 and lighting alone is the largest single driver of demand. Many of the companies we invest in provide lighting and efficiency solutions that yield tremendous cost and energy savings. As renewable energy becomes mainstream, the day is fast approaching when wind and solar power may no longer be thought of as alternative energy. Industry watchers expect more than 50% of incremental electricity capacity to come from renewable sources over the next five years. 2 While this presents capital investment opportunities for renewable providers, it may pose challenges for incumbent power generators. Finally, the management of scarce water will be one of the most pressing issues globally over the next several decades. By 2030, global water demand is set to surpass supply by 40%, 3 yet countries have underinvested in water management for decades. New infrastructure, including pipelines, plumbing, meters, and sanitization facilities, will become critically important in many areas of the world. As technologies advance, costs fall, and the world more fully embraces and demands sustainability, these types of opportunities should become broader and more attractive, supporting investors ability to deliver a double bottom line for clients. 1 International Energy Agency, Transition to Sustainable Buildings: Strategies and Opportunities to 2050, Bloomberg New Energy Finance, June UNESCO, UN World Water Development Report 2015, Water for a Sustainable World.

6 Samuel A. Sanom, CFA Equity Portfolio Specialist 6 Equity Market Review About the author Sam is an equity portfolio specialist in the Equity Product Management Group. He uses product-specific and market knowledge to generate investment content and communicate investment strategy for clients, consultants, and prospects worldwide. GLOBAL EQUITIES (-0.4%) FELL MODESTLY, declining for the first time in 12 quarters. Late in the quarter, the Greek debt crisis took center stage. Negotiations between top Greek officials and creditors broke down, increasing the likelihood that Greece would miss its next scheduled payment to the International Monetary Fund (IMF). On June 30, Greece officially defaulted on a 1.6 billion repayment. The Greek government held a referendum on July 5, asking its citizens to accept or reject the creditors final terms, and they ultimately voted to reject them. All Greek banks and the Athens Stock Exchange will now remain closed for an indefinite period. Despite the default and fears of contagion among the European peripheral countries, global economic data remained constructive, with continued signs of a gradual recovery in the US and Europe. In Europe, consumer prices exited the deflationary zone in April. The rebound coincided with the rollout of the European Central Bank s (ECB s) bold quantitative easing program, which aims to restore inflation to around 2% by A continued boom in corporate takeovers also fueled bullish sentiment. Global merger and acquisition (M&A) activity remained robust, with 2015 on pace to be the second-highest year of deal volume, trailing only In Asia, the People s Bank of China (PBOC) sought to quell Chinese growth slowdown concerns by lowering its benchmark lending and deposit rates during June, the fourth interest-rate cut since November. United States US equities (+0.3%) advanced for the tenth straight quarter, reaching another all-time high on May 21. The Greek debt crisis overshadowed mostly encouraging news flowing out of the world s largest economy. In April, the tech-heavy Nasdaq Composite topped the 5,000 mark for the first time since the dot-com bubble, breaking its closing record from March Continued strong M&A activity, a rebound in hiring, and solid housing data helped to fuel risk appetites. May marked the second-best month in history for deals involving US companies, with US$234 billion in announcements. News of an economic contraction and comments from US Federal Reserve (Fed) Chair Janet Yellen about equity valuations being quite high were not enough to subdue bullish sentiment. Stocks closed the quarter on a sour note after negotiations between Greece and its creditors broke down near the end of June. US equities fell 1.9% in June despite promising data releases and an upbeat economic assessment by the Fed. The Federal Open Market Committee s (FOMC s) June statement was perceived to be dovish even as the Fed indicated it was on track to raise rates later this year. In the Fed s dot plot (the chart displaying Fed officials interest-rate forecasts), the median funds rate for 2016 fell to 1.625% from 1.875%, while the 2017 rate shifted down to 2.875% from 3.125%. With the drop in rate projections, many market participants were reassured that the policy-normalization process will be gradual.

7 7 On the economic front, data releases during the quarter were mixed but encouraging. Nonfarm payrolls surprised to the upside in June (280,000 versus 226,000 expected) the best reading in five months with upward revisions of 32,000 to the prior two months. The improving job market, coupled with near-record stock prices, helped consumer confidence reach a five-month high. After disappointing in April and May, retail sales increased by a healthy 1.2% in June as consumers stepped up spending on automobiles and other goods. The US housing market continued to display strong trends. Existing home sales surged 5.1%, new home sales climbed 2.2% to a 546,000 annualized pace (the most since February 2008), and building permits jumped 12% to the highest level in almost eight years. Unfortunately, contracting economic growth dominated the headlines, overshadowing the positive real estate sector metrics. Revised data showed that the US economy shrank at a 0.2% annualized rate in the first quarter (an upward revision from a previously reported 0.7% contraction). Harsh winter weather, West Coast port disruptions, and capital-expenditure reductions across the oil complex conspired to produce the growth setback. Net exports were a 1.9% drag on GDP, largely because of a 5.9% drop in exports that can be attributed to the port strikes and the strong US dollar. Europe European equities (-3.6%) fell for the first time in three quarters as the Greek debt crisis took center stage. Despite the heightened worries about Greece s future in the European Union, European economic data was fairly encouraging. The economy benefitted from a weaker currency (helping exports), continued low oil prices, and a general boost in confidence stemming from the prospect of further ECB stimulus. Eurozone economic confidence remained near a four-year high, a signal that the recovery is shaping up. Equities in Greece (+1.5%) managed a modest gain before negotiations broke down. Greek stocks did not trade during the final two trading days of the quarter. Italian stocks (-0.7%) outperformed on news that the Italian economy had exited its third recession since First-quarter GDP rose 0.3% (versus +0.2% expected) as Italy benefitted from the combination of a weak euro, ECB monetary stimulus, and cheap oil. In Germany (-8.5%), equities slumped amid mixed economic data releases. First-quarter GDP fell short of projections (+0.3% quarter over quarter versus +0.5% forecast) and the ZEW Indicator of Economic Sentiment sank to its lowest level in seven months. On the positive side, German exports and industrial production both beat expectations in June, an encouraging sign for second-quarter expansion. French equities (-2.7%) modestly outperformed on news that manufacturing activity had increased for the first time since April 2014 and that the Purchasing Managers Index (PMI) composite climbed to its highest level since August In Spain (-5.5%), the unemployment rate remained stubbornly high at 22.5%, a sign that the country s stronger economic growth is not yet reaching the labor market. Spain s GDP expanded 0.9% in the first quarter, the best performance in 28 quarters.

8 Market performance total returns (%) Equities indexes Periods ended 30 Jun mos YTD 1 yr 1Q15 MSCI AC World (USD) MSCI AC World (local) MSCI World (USD) MSCI World (local) S&P Russell 1000 Growth Russell 1000 Value S&P Russell MSCI EAFE (USD) MSCI EAFE (local) MSCI Europe (USD) MSCI Europe (local) MSCI Pac Basin ex JPN (USD) MSCI Pac Basin ex JPN (local) MSCI Emerging Mkts Free (USD) MSCI Emerging Mkts Free (local) MSCI world sectors (local) Consumer discretionary Consumer staples Energy Financials Health care Industrials Information technology Materials Telecommunication service Utilities Europe (local) France Germany Italy Spain United Kingdom Pacific Basin (local) Australia Hong Kong Japan Singapore Emerging markets (local) Brazil China India Russia Pacific Basin Stocks in the export-driven economies of the Pacific Basin (+2.3%) rose for the fifth consecutive quarter. Healthy performance in Japan (+5.2%) led the region higher. The Japanese economy expanded at an annualized rate of 3.9% during the first quarter, beating forecasts (+2.7%) and up from an initial projection of 2.4%. A strong pickup in business investment and inventory buildup led the expansion. The jobless rate unexpectedly fell to 3.3% (the lowest level since April 1997), and Japan s PMI composite exceeded estimates. Equities in Hong Kong (+5.6%) surged in April on hopes of continued fresh money inflows from mainland China: In late March, the China Securities Regulatory Commission decided to relax restrictions on domestic mainland fund managers buying Hong Kong-listed Chinese stocks (H-shares), which led to large inflows in April. In Australia (-6.7%), GDP expanded by 2.3% during the first quarter, ahead of forecasts for a 2.1% advance, driven by a surge in exports. During May, the Reserve Bank of Australia (RBA) cut the official interest rate to a historic low of 2%. Stocks in Singapore (-1.8%) were down for the first time in five quarters. Exports unexpectedly fell for the first time in three months during May, declining 0.2% from a year earlier as shipments of petrochemicals and electronics disappointed. Emerging markets Emerging market equities (+0.8%) rose modestly and ended June up 5.8% year to date. All three regions Latin America (+3.3%); Europe, the Middle East, and Africa (EMEA, +1.3%); and Asia (+0.2%) saw gains during the period. Within Latin America, Brazil (+4.0%) led even though the macroeconomic environment continued to deteriorate amid growing fiscal and current account deficits and worsening business and consumer confidence. During the quarter, the Central Bank of Brazil raised interest rates by 50 basis points (bps) to counter inflationary pressures. In EMEA, Russian equities (+4.1%) continued the momentum from their strong first quarter rally (+15.7%). Despite further declines in consumption, data pointed to a peak in inflation and relatively stable production, while the central bank cut rates by 100 bps. Among markets in Asia, China (+6.2%) posted positive performance for the fifth straight quarter, reaching a year-to-date return of 14.8%. The PBOC cut the reserve requirement ratio (the amount of cash banks must hold as reserves) in order to counter deflationary risks and an economic slowdown, and it lowered the benchmark interest rate to reduce real lending rates and boost growth. In addition, the Politburo announced its intention to promote economic reforms that stimulate development in response to slower GDP expansion, which has been dragged down by depressed industrial activity and a weak housing market.

9 9 Notes

10 10 Notes

11 11 Notes

12 The Morning Meeting at WELLINGTON MANAGEMENT COMPANY LLP Boston Chicago Radnor, PA San Francisco WELLINGTON MANAGEMENT AUSTRALIA PTY LTD Sydney WELLINGTON MANAGEMENT CANADA LLC Serviced from Boston and Chicago WELLINGTON MANAGEMENT HONG KONG LTD Hong Kong Beijing Representative Office WELLINGTON MANAGEMENT INTERNATIONAL LTD London Frankfurt WELLINGTON MANAGEMENT JAPAN PTE LTD Tokyo WELLINGTON MANAGEMENT SINGAPORE PTE LTD Singapore WELLINGTON MANAGEMENT SWITZERLAND GmbH Zurich Company LLP (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission (SEC). WMC is also a commodity trading advisor (CTA) registered with the US Commodity Futures Trading Commission. In certain circumstances, WMC provides commodity trading advice to clients in reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, ), provides investment management and investment advisory services to institutions around the world. Located in Boston, Massachusetts, also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Frankfurt; Hong Kong; London; Singapore; Sydney; Tokyo; and Zurich. This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. In Canada, this material is provided by Canada LLC, a US SEC-registered investment adviser also registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Quebec, and Saskatchewan in the categories of Portfolio Manager and Exempt Market Dealer. In the UK, this material is provided by International Limited (WMIL), a firm authorized and regulated by the Financial Conduct Authority (FCA). This material is directed only at persons (Relevant Persons) who are classified as eligible counterparties or professional clients under the rules of the FCA. This material must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment service to which this material relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. In Germany, this material is provided by International Limited, Niederlassung Deutschland, the German branch of WMIL, which is authorized and regulated by the FCA and in respect of certain aspects of its activities by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This material is directed only at persons (Relevant Persons) who are classified as eligible counterparties or professional clients under the German Securities Trading Act. This material does not constitute investment advice, a solicitation to invest in financial instruments or financial analysis within the meaning of Section 34b of the German Securities Trading Act. It does not meet all legal requirements designed to guarantee the independence of financial analyses and is not subject to any prohibition on dealing ahead of the publication of financial analyses. This material does not constitute a prospectus for the purposes of the German Capital Investment Code, the German Securities Sales Prospectus Act or the German Securities Prospectus Act. In Hong Kong, this material is provided to you by Hong Kong Limited (WM Hong Kong), a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and Type 9 (asset management) regulated activities, on the basis that you are a Professional Investor as defined in the Securities and Futures Ordinance. By accepting this material you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. In Singapore, this material is provided for your use only by Wellington Management Singapore Pte Ltd (WM Singapore) (Registration Number E). WM Singapore is regulated by the Monetary Authority of Singapore under a Capital Markets Services Licence to conduct fund management activities and is an exempt financial adviser. By accepting this material you represent that you are a non-retail investor and that you will not copy, distribute or otherwise make this material available to any person. In Australia, Australia Pty Ltd (WM Australia) (ABN ) has authorized the issue of this material for use solely by wholesale clients (as defined in the Corporations Act 2001). By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Company LLP is exempt from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 in respect of financial services, in reliance on class order 03/1100, a copy of which may be obtained at the web site of the Australian Securities and Investments Commission, The class order exempts a registered investment adviser regulated by the SEC, among others, from the need to hold an AFSL for financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Company LLP are regulated by the SEC under the laws and regulatory requirements of the United States, which are different from the laws applying in Australia. In Japan, Japan Pte Ltd (WM Japan) (Registration Number R) has been registered as a Financial Instruments Firm with registered number: Director General of Kanto Local Finance Bureau (Kin-Sho) Number 428. WM Japan is a member of the Japan Investment Advisers Association (JIAA) and the Investment Trusts Association, Japan (ITA). WMIL, WM Hong Kong, WM Japan, and WM Singapore are also registered as investment advisers with the SEC; however, they will comply with the substantive provisions of the US Investment Advisers Act only with respect to their US clients Company LLP. All rights reserved. G2675_1