mtx Sustainable Global Leaders Fund

Transcription

1 mtx Sustainable Global Leaders Fund Reporting 1 th Quarter 2017 Roger Merz April 2017

2 Table of contents mtx at a glance Market review Performance / attributions Portfolio activities Current positioning Outlook ESG reporting 2

3 March 2017 Firm profile mtx invests globally using a consistent investment approach About mtx mtx is part of Vontobel Asset Management s Thematic Investing Boutique with AuM of CHF 6.5 bn Assets under management CHF 1.5 billion Offers a range of 5 regional equity strategies 14 investment professionals located in Zurich, Switzerland Industry experience of 15 years in traditional and sustainable investments About Vontobel Asset Management Active asset manager with global operations Founded in 1988 Multi-boutique approach focused on equities, fixed income, multi-asset class and alternative investments 398 employees in a dozen international locations Assets under management CHF 92 billion Assets under Management (in CHF mn) 7% 8% 11% 1'047 1'121 1'554 1'648 1' % 2% 2% Switzerland Sweden Germany by client domicile 23% by client type 50% 60% 28% Australia New Zealand Other Italy Monaco Taiwan Luxembourg Cooperation Institutional Wholesale 19% 42% 6% 6% 5% Global by strategy by wrapper type 21% 64% 37% Emerging Markets China Europe Asia Segregated Account Third-party Investment Fund Vontobel Investment Fund Source: Vontobel Asset Management; AuM data as of

4 March 2017 Investment team We combine experience with one, shared investment belief Head of mtx Portfolio Management Roger Merz, CFA (19/7) PM Global, Emerging Markets Portfolio Management Thomas Schaffner, CFA (18/8) PM Emerging Markets, Asia ex Japan, China Daniel King-Robinson (19/14) PM Global, Europe Equity Research Philip Ammann, CFA (25/14) Consumer Staples, Telecom, ESG Lead Rustem Bektenov, CFA (11/1) Healthcare, Utilities Naomi Rosenthal (6/3) ESG Consultant Christoffer Slöör (14/1) Financials, Real Estate Diana Quirino(22/14) PM Desk Assistant Alban Cousin (10/1) Information Technology Ireneus Stanislawek (13/1) Quantitative Analyst Portfolio Advisor Marc Bindschädler (16/6) Portfolio Advisor André Frick (15/6) Energy Antoine Hnein (11/3) Consumer Discretionary William Wyman (16/1) Industrials, Materials Team Facts 14 Investment Professionals 3 Portfolio Managers 7 Sector Analysts 1 ESG Consultant 1 Quantitative Analyst 1 Portfolio Advisor 1 PM Desk Assistant 9 Nationalities Investment Universe ~ companies ~ invested companies ~ companies per analyst Organizational set-up Portfolio Managers organized by region Analysts organized by sector (X/X) = years of investment experience / years with Vontobel Source: Vontobel Asset Management 4

5 Investment philosophy and approach It pays off to invest in companies with high returns on invested capital We use a 4-pillar approach to identify attractively valued industry leaders We believe There is a strong, positive correlation between improvements in a company s return on invested capital (ROIC) and its share price performance First quartile First quartile + 25% Exceeds valuation minimum upside criteria As guiding principles We are benchmark agnostic and build highconviction, concentrated portfolios We use a combination of systematic screens ( matrix ) and fundamental research to identify companies with - Above average quality, in terms of ROIC, industry positioning and ESG - Below average valuation Return on Invested Capital (ROIC) Industry Position Intrinsic Value Sustainability (ESG) Source: Vontobel Asset Management, Goldman Sachs 5

6 Key data mtx Sustainable Global Leaders Portfolio manager Investment approach Investment objective Roger Merz, 18 years investment experience in Global, European and thematic equities Invest in companies worldwide that are industry leaders in terms of competitive position and ROIC, and meet key sustainability criteria. Achieve bps outperformance p.a. versus benchmark Benchmark MSCI All Countries World Index TR Net (new as per ). MSCI World Index TR Net until Investment discipline Position size Actively managed, concentrated high-conviction portfolio of stocks Weighted average market capitalization USD 72bn, median USD 43bn Bottom-up intrinsic value based stock selection Fully invested, max 10% cash Initiation position size 1%-5%, with rule-based sizing Highest conviction holdings maximum 7% Top 10 positions 40-50% of portfolio Sector / country allocation No top down views on sector, country, currency allocation Invested in at least five MSCI sectors at any time Max 20 percentage point benchmark deviation (sector / country) Key data Inception date 14 December 2012 Fund AuM USD 172 mn Strategy AuM USD 0.8 bn Source: Vontobel Asset Management; data as of

7 Table of contents mtx at a glance Market review Performance / attributions Portfolio activities Current positioning Outlook ESG reporting 7

8 Market review Performance Q1 by sectors*/countries MSCI World Utilities MSCI World Telecom MSCI World Materials MSCI World Information Technology MSCI World Industrials MSCI World Healthcare MSCI World Financials MSCI World Energy MSCI World Consumer Staples MSCI World Consumer Discretionary -4.8% -5.3% 1.3% 3.7% 6.7% 6.0% 7.1% 5.4% 7.0% 5.7% 8.7% 8.0% 4.9% 7.2% 6.3% 7.4% 6.4% 12.4% 11.9% Euro Stoxx % 7.8% FTSE % 4.9% Dax 7.3% 8.8% Nasdaq % 10.1% S&P % 6.1% Hang Seng 9.9% 10.1% MSCI Emerging Markets 7.8% 11.5% MSCI All Countries World 7.0% 5.8% MSCI World 6.5% 5.6% -10% -5% 0% 5% 10% 15% 20% in USD in local currencies Source: Vontobel Asset Management / Datastream, data as of Past performance is not a reliable indicator of current or future performance. 8

9 May 2016 Topic of the quarter: What to own in times of rising volatility? Quality and value outperform in times of higher volatility and accelerating earnings growth Own high quality when volatility picks up. Based on research by BofA Merrill Lynch, the best hedge against rising volatility is to be invested in higher quality companies. As the VIX picks up, higher quality companies start to outperform (on a relative basis) while lower quality stocks start to underperform. The chart shows a near-linear relationship between relative share price performance and relative quality as volatility picks up. Value outperforms growth when earnings growth accelerates. Value typically outperforms growth when profit growth starts to accelerate. BofAML expect a continued acceleration of the earnings growth cycle in The Global Leaders fund offers both higher quality (higher ROIC, stronger balance sheets, better industry position) and lower valuation (EV/EBIT discount to MSCI World AC of 18%, P/E discount of 9%) than the benchmark. Source: Vontobel Asset Management, Bank of America Merrill Lynch BofAML US covered stocks by quality rank: 12m performance correlation to 12m change in CBOE VIX (1987-present) Source: S&P, CBOE, Factset, BofA Merrill Lynch US Equity & US Quant Strategy Style index performance during periods of decelerating and accelerating S&P 500 earnings growth (1982-present) Note: Periods of profits deceleration excludes the tech bubble. Source: S&P, Russell, BofA Merrill Lynch US Equity & US Quant Strategy 9

10 April 2017 Performance overview Fund performance versus benchmark (I share class, net of fees) YTD Year 3 Years p.a since inception p.a. 1 mtx Sustainable Global Leaders Fund I USD 9.14% 3.27% 2.67% 24.62% -3.54% 4.48% % 7.26% MSCI ACWI Index TR Net USD % 15.04% 5.60% 26.68% -5.08% -0.87% 7.23% 10.35% Relative Return (bps) % 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% YTD year 3 years p.a since inception p.a. mtx Sustainable Global Leaders Fund I USD MSCI World Index TR Net Relative Return Source: Vontobel Asset Management; data as of , As per we have changed the benchmark from MSCI World to MSCI ACWI Past performance is not a reliable indicator of current or future performance. Performance data take no account of the commissions and costs charged when units are issued and redeemed. The return of the fund may go down as well as up due to changes in rates of exchange between currencies. 10

11 For institutional investors use only / not for public viewing or distribution Performance since inception 1 Fund performance versus benchmark (I share class, net of fees, in USD) 60% 50% 40% 30% 20% 10% 0% mtx Sustainable Global Leaders - cumulated MSCI World / MSCI ACWI TRN cumulated2 Source: Vontobel Asset Management; data as of , As per we have changed the benchmark from MSCI World to MSCI ACWI Past performance is not a reliable indicator of current or future performance. Performance data take no account of the commissions and costs charged when units are issued and redeemed. The return of the fund may go down as well as up due to changes in rates of exchange between currencies. 11

12 Performance commentary Q Q1 performance recap. The mtx Sustainable Global Leaders fund gained 9.14% in Q1. It outperformed the benchmark by 223bps. The outperformance was caused by positive sector allocation (140bps) and positive stock selection (120bps). Sector allocation generated positive attribution during Q1. Information Technology was the best performing sector in Q1. As we are overweighted the sector, the contribution to the overall performance was positive (+80bps). In contrast to Q our underweight in Energy contributed positively (+60bps) as the sector was the worst performing one in the past three months. Positive stock selection accounts for the other half of the outperformance. The biggest positive contribution came from stock selection in Information Technology (+80bps) and Financials (+40bps). In the IT sector our holdings in Broadcom (+129bps) and Facebook (+100bps) contributed most. The single biggest positive contribution came from Hasbro (+143bps), which reported strong earnings numbers. Style became favourable again in Q1. In contrast to the whole 2016 Best in class style groups started to outperform again. Year-to-date Best in class is the best performing style as extreme style shifts, like last year s shift from quality to value, did not occur. Pure quality and value oriented stocks tended to underperform so far in Source: Vontobel Asset Management / Bloomberg PORT, data as of

13 Performance attribution by sectors Q Average Relative Weight vs. Benchmark Total Return Attributable Relative Return Utilities -3.1% Utilities 6.9% Utilities Telecommunication Services -3.5% Telecommunication Services 2.1% Telecommunication Services 0.2% Real Estate -1.5% Real Estate 4.8% 10.3% Real Estate 0.1% Options 0.1% Options -99.6% Options -0.3% Materials -2.2% Materials 7.7% 14.3% Materials -0.1% 0.3% Information Technology 13.8% Information Technology 13.0% Information Technology 0.8% 0.8% Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash Vontobel Fund - mtx Sustainable Global Leaders -9.7% -1.5% -4.5% -2.6% 1.4% 3.9% 9.2% -20% -10% 0% 10% 20% Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash Vontobel Fund - mtx Sustainable Global Leaders -3.9% -5.6% 7.1% 1.8% 7.2% 9.0% 8.3% 6.0% 5.4% 10.4% 7.8% 8.9% 6.9% 9.5% -15% -10% -5% 0% 5% 10% 15% Benchmark Portfolio Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash Vontobel Fund - mtx Sustainable Global Leaders Allocation Effect 0.1% 0.6% -0.1% 0.1% -0.1% -0.4% -0.4% 1.4% 0.2% 0.4% 0.3% 1.2% -5% -3% -1% 1% 3% 5% Selection Effect Source: Vontobel Asset Management / Bloomberg PORT, Data as of , data for mtx Sustainable Global Leaders Fund I USD from Bloomberg PORT is gross of fees and might therefore differ from official performance data. Past performance is not a reliable indicator of current or future performance. Performance data take no account of the commissions and costs charged when units are issued and redeemed. The return of the fund may go down as well as up due to changes in rates of exchange between currencies. 13

14 Performance attribution by countries Q Average Relative Weight vs. Benchmark Total Return Attributable Relative Return United States United Kingdom South Africa Russia Options Netherlands Japan Israel Germany France Denmark China Cash Canada Vontobel Fund - mtx Sustainable Global Leaders -3.4% -4.6% -2.7% -1.0% 1.4% 1.4% 2.0% 0.1% 1.5% 1.0% 1.4% 3.5% 5.5% 11.7% -20% -10% 0% 10% 20% United States United Kingdom South Africa Russia Options Netherlands Japan Israel Germany France Denmark China Cash Canada Vontobel Fund - mtx Sustainable Global Leaders -4.7% -5.6% -9.3% -1.0% 5.0% 17.0% 3.4% 6.4% 4.3% 11.8% 6.1% 12.6% 0.4% 6.8% 7.0% 8.2% 12.5% 110.6% 7.0% 18.2% 6.0% 2.9% 6.3% 13.0% 14.2% 6.9% 9.5% -40%-30%-20%-10% 0% 10% 20% 30% Benchmark Portfolio United States United Kingdom South Africa Russia Options Netherlands Japan Israel Germany France Denmark China Cash Canada Vontobel Fund - mtx Sustainable Global Leaders Allocation Effect -0.2% -0.3% -0.1% 0.1% -0.2% 0.2% -0.1%-1.0% 0.1% -0.1% 0.1% -1.2% 3.6% 0.3% 0.1% 0.2% -0.1% 0.6% 0.1% 3.8% -5% -3% -1% 1% 3% 5% Selection Effect Source: Vontobel Asset Management / Bloomberg PORT, Data as of , data for mtx Sustainable Global Leaders Fund I USD by Bloomberg PORT is gross of fees and might therefore differ from official performance data. Past performance is not a reliable indicator of current or future performance. Performance data take no account of the commissions and costs charged when units are issued and redeemed. The return of the fund may go down as well as up due to changes in rates of exchange between currencies. 14

15 Top 5 contributors Q Stock (Country) Sector Average Portfolio Weight Average Relative Weight vs. Benchmark Contribution to Portfolio Return Comment Hasbro (US) Consumer Discretionary 5.14% 5.12% 1.43% Hasbro continued its outperformance following a very strong 2016 finish with full year earning numbers exceeding market expectations and confirming some market share gains from its main peers. Broadcom (US) Information Technology 5.60% 5.40% 1.29% Broadcom F1Q17 results confirmed management s ability to meet the operating margin longterm outlook upgraded in December during the F4Q16 earnings call. Indeed, the company delivered better than expected results and outlook, prompting investors to lift their EBITDA and EPS forecasts. Facebook (US) Information Technology 4.63% 3.87% 1.00% Facebook benefited from multiple expansion, as investors revisit the monetization potential of their properties (WhatsApp, Instagram). EPS and EBITDA were revised up 10% each, which also contributed to the performance. Euronet (US) Information Technology 3.86% 3.86% 0.68% Euronet delivered reassuring results on Feb.7th, prompting a rerating of the shares. Siemens (DE) Industrials 5.05% 4.80% 0.66% Outperformance has been driven by robust indicators of industrial activity, endorsed by the CEO in comments during the quarter, and contributing to increasing confidence short-term trading in Siemens cyclical businesses. The consolidation of Gamesa has also contributed to small increases in consensus earnings estimates, which was already at the top of the guidance range given by management at the FY1Q results. Source: Vontobel Asset Management / Bloomberg PORT, data as of

16 Top 5 detractors Q Stock (Country) Sector Average Portfolio Weight Average Relative Weight vs. Benchmark Contribution to Portfolio Return Comment Pandora (DK) Healthcare 3.00% 2.97% -0.50% Pandora shares de-rated following a mixed set of FY16 earnings results which exhibited a continued slowdown in the underlying business prompting shareholders to reduce their holding of the stock. Lukoil ADR (RU) Novo Nordisk (DK) Energy 2.41% 2.41% -0.14% Healthcare 2.98% 2.81% -0.12% Lukoil s underperformance was due to lower oil prices as Russian oil stocks offer a higher sensitivity to oil prices than Western majors. Company specific, everything is on track, Q results were ahead of expectations, new projects are on track and EBITDA is expected to grow double digit over the coming years. The shares have suffered a prolonged period of underperformance ever since last year s cut in guidance and management reshuffle. Despite the current share price discounting a long-term negative terminal growth rate, which we view as overly pessimistic, the ROIC (return on invested capital) profile for 2017 has started to roll over. NICE Ltd. (IL) Information Technology 3.69% 3.69% -0.04% NICE delivered in-line results and 2017 guidance, but 1Q17 guidance was weak, implying a higher risk of missing expectations. Management has also unveiled a target to double the business over an unspecified period of time. This is too vague to prompt upwards revisions, but we expect a more detailed plan towards higher profitability at the analyst day in May. Snap-On (US) Industrials 1.15% 1.12% -0.01% Prior to the full year 2016 earnings Snap-on s share price hit an all-time high, but fell 7% post the results mainly due to profit-taking. This was despite a revenue beat vs consensus, and the only noticeable headwind being unfavourable foreign currency effects. Source: Vontobel Asset Management / Bloomberg PORT, data as of

17 Table of contents mtx at a glance Market review Performance / attributions Portfolio activities Current positioning Outlook ESG reporting 17

18 Portfolio activities Summary Q Exposure to Materials and Energy companies further increased. In January we added BASF, a leading chemical company from Germany, to the portfolio. We expect rising returns for BASF on the back of growing aggregate demand. In addition we further increased our position in Lukoil. Further reduction in Healthcare exposure driven by risk management. We decided to reduce the positions in Biogen, Celgene and Shire in order to further decrease our exposure to healthcare due to the uncertainty around the US healthcare system and the general pricing discussions which could lead to considerable pricing pressure in the industry. We also cut the position in Novo Nordisk in response to the uncertainties around their medium to longer-term growth outlook. Reduction in position weights due to valuation. We reduced our positions in Hasbro, Time Warner, Siemens, Broadcom and SAP as the stocks are approaching our price targets and valuation seems relatively rich. Source: Vontobel Asset Management 18

19 Portfolio activities Sector shifts Country shifts Utilities Telecommunication Services Real Estate Options Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.2% -3.1% -3.4% -3.6% -1.5% -1.5% -3.3% -1.5% -0.6% -2.0% -9.7% -9.6% -4.6% -4.6% -2.8% -2.7% 0.5% 12.6% 15.0% 5.9% 3.2% 9.7% 8.6% 0.5% 1.7% -0.5% 1.5% 0.3% -0.9% 2.4% -1.3%-0.1% -3.1% 0.2% -0.3% 0.7% 1.0% -0.2% 0.1% -1.2% 0.1% 1.3% United States United Kingdom South Africa Russia Options Netherlands Japan Israel Germany France Denmark China Cash Canada -3.6% -3.3% -4.7% -4.3% -2.8% -2.8% -0.9% -0.9% 1.6% 0.9% 1.2% 1.6% 1.5% 2.4% 0.5% 1.4% 1.5% 3.7% 3.4% 6.4% 4.9% 0.9% 1.0% 0.5% 1.7% 11.7% 12.0% -4.1% 2.8% 0.4% 0.3% -0.2% 1.0% -0.5% 0.2% -0.3% 0.6% -0.2% 0.1% -0.9% -0.6% 0.3% 1.3% -20% -10% 0% 10% 20% -5% -3% -1% 1% 3% 5% -10% -5% 0% 5% 10% 15% -8% -6% -4% -2% 0% 2% 4% Relative Relative Transactions Relative Relative Transactions Performance impact Source: Vontobel Asset Management / Bloomberg PORT 19

20 Activity overview - stocks Q Sector New Position Sold Position Increased Decreased Consumer Staples Consumer Discretionary Hasbro (US) Time Warner (US) Energy Lukoil (RU) Financials Healthcare Industrials BOC Hong Kong (HK) Biogen (US) Celgene (US) Siemens (DE) Novo Nordisk (DK) Shire (US) Information Technology SAP (DE) Broadcom (US) Materials BASF (DE) Real Estate Telecom Utilities Source: Vontobel Asset Management 20

21 Activity details: New position Q Month Company (Country) Sector Company Description Current Weight Reasoning Jan. BASF (DE) Materials BASF SE is a chemical company. The Company operates in six segments chemicals, plastics, performance products, functional solutions, agricultural solutions and oil & gas. 1.46% We expect improving returns in BASF s core chemicals business. The key drivers are improving aggregate demand growth and limited capacity additions over coming years, supporting improving pricing in upstream chemicals. Source: Vontobel Asset Management 21

22 Activity details: Increased positions Q Month Company (Country) Sector Company Description Current Weight Reasoning Mar. Lukoil (RU) Energy Lukoil is one of the major international oil and gas companies that accounts for more than 2% of the world's oil production and around 1% of the proven hydrocarbon reserves. While having the full production cycle, Lukoil exercises full control over the whole production chain. Russia accounts for 88% of hydrocarbon reserves and 83% of hydrocarbon production. 2.80% Production ramp up of new, higher margin greenfield projects and more disciplined capex should lead to improving CFROI s. Within our ESG assessment, Lukoil had acceptable Environment & Social disclosure, and good Governance. The stock is attractively priced, what we used to increase our position further Source: Vontobel Asset Management 22

23 Activity details: Decreased positions (1/3) Q Month Company (Country) Sector Company Description Current Weight Reasoning Feb. Hasbro (US) Consumer Discretionary Hasbro designs, manufactures and markets toys, games, interactive software, puzzles and infant products. Hasbro has a portfolio of iconic entertainment properties. 5.02% We have reduced further our Hasbro position on the back of limited upside to our assumed fair value for the business. Feb. Time Warner (US) Consumer Discretionary Time Warner, a global leader in media and entertainment with businesses in television networks and film and TV entertainment, uses its scale and brands to create, package and deliver high-quality content worldwide on a multi-platform basis. 3.98% We have reduced further our Time Warner position on the back of limited upside to our assumed fair value for the business. Feb. BOC Hong Kong (HK) Financials BOC Hong Kong provides a comprehensive range of financial products and services to retail and corporate customers. Its products include retail banking, corporate banking, and treasury services. The Company operates its branches in Hong Kong and China. 3.14% We remain bullish on BOC HK s ability to benefit from further rate hikes but see that part of this has played out. The position was reduced for portfolio construction reasons. Source: Vontobel Asset Management 23

24 Activity details: Decreased positions (2/3) Q Month Company (Country) Sector Company Description Current Weight Reasoning Jan. Biogen (US) Healthcare Jan. Celgene (US) Healthcare Jan. Shire (US) Healthcare Biogen Inc. discovers, develops, manufactures, and delivers therapies for the treatment of neurodegenerative diseases, hematologic conditions, and autoimmune disorders Celgene Corporation discovers, develops, and commercializes therapies to treat cancer and inflammatory diseases worldwide Shire, a biotechnology company, focuses on serving people with rare diseases and other specialized conditions. The company develops products across core therapeutic areas. 1.71% 3.56% 3.79% Positions were reduced as part of our strategy to reduce risk in the portfolio. At the start of 2017, within Healthcare, the fund had a relative overweight of +6% to the benchmark and the sector represented over 50% of the contribution to tracking error. In Q we cut our Healthcare overweight in half and the fund tracking error has subsequently been reduced. Fundamentally we still have conviction on our healthcare positions, however the political backdrop still remains volatile and short-term visibility on drug pricing policy remains opaque. Jan. Novo Nordisk (DK) Healthcare Novo Nordisk, a healthcare company, engages in the discovery, development, manufacture, and marketing of pharmaceutical products worldwide. It operates in two segments, Diabetes and Obesity Care, and Biopharmaceuticals. 2.74% Despite the current share price discounting a long-term negative terminal growth rate, which we view as overly pessimistic, the ROIC (return on invested capital) profile for 2017 has started to roll over. Combined with a near-term subdued growth outlook, we decided to cut the position further until growth prospects and visibility improves again. Source: Vontobel Asset Management 24

25 Activity details: Decreased positions (3/3) Q Month Company (Country) Sector Company Description Current Weight Reasoning Jan. Siemens (DE) Industrials Siemens is a global industry powerhouse focusing on the areas of electrification, automation and digitalization., Siemens is a leading supplier of systems for power generation and transmission as well as medical diagnosis. 4.69% We continue to believe that Siemens is well-positioned to benefit from improving demand in the cyclical business areas (including Digital Factory and Process & Drives) and from further steps toward portfolio optimization. The outperformance and rerating in the shares relative to the sector, however, leads us to reduce. Feb. SAP (DE) Information Technology SAP SE is a global software company. The company develops business software, including e-business and enterprise management software, consults on organizational usage of its applications software, and provides training services. 3.62% We decreased our position as SAP valuation significantly expanded in the last six months, when SAP outlook has not changed dramatically. Feb. Broadcom (US) Information Technology Broadcom designs, develops, and supplies semiconductors and integrated circuits. The company offers products such as broadband carrier access, cables, switches, network processors, and wireless connectors. 5.43% We trimmed our holding in Broadcom following a strong run in the first two months of 2017, which inflated our position to above 5%. From a pure risk management and going into the quarterly results, we subsequently decided to slightly reduce our position size. Source: Vontobel Asset Management 25

26 Table of contents mtx at a glance Market review Performance / attributions Portfolio activities Current positioning Outlook ESG reporting 26

27 Portfolio characteristics Higher quality Cheaper valuation Higher growth in % in % in % Return On Equity Dividend Cover Net Debt / Equity Ratio 10 P/E EV/EBIT 10 Forecast Earnings Growth Global Leaders MSCI World AC Global Leaders MSCI World AC Global Leaders MSCI World AC Source: UBS Portfolio Analysis System, data as per ; excluding Financials 27

28 Portfolio profile Top 10 holdings Portfolio characteristics Company name Country Industry GICS Sectors Weight Portfolio Benchmark BROADCOM LTD US Information Technology 5.43 HASBRO INC US Consumer Discretionary 5.02 FACEBOOK INC-A US Information Technology 4.91 CVS HEALTH CORP US Consumer Staples 4.78 SIEMENS AG-REG DE Industrials 4.69 EURONET WORLDWIDE INC US Information Technology 4.17 TIME WARNER INC US Consumer Discretionary 3.98 BOC HONG KONG HOLDINGS LTD HK Financials 3.94 SHIRE PLC US Health Care 3.79 SAP SE DE Information Technology 3.62 Total top Number of Holdings Volatility (3y) 13.43% 10.40% ex-ante Tracking Error (1y) 3.82% ex-post Tracking Error (3y) 7.23% Alpha (3y) -3.41% Beta (3y) 1.08 Active Share Information Ratio (3y) Upside Capture (3y) 1.07 Downside Capture (3y) 1.33 Portfolio Turnover (YTD 2017)** 3.7% Average Market Capitalization (USD bn) Median Market Capitalization (USD bn) Source: Vontobel Asset Management, UBS Portfolio Analysis System, data as of ** PTR = (sum of transactions sum of subscriptions and redemptions) / average net assets 28

29 Sector and country positioning Sector positioning Country positioning Information Technology 30.5% 16.4% 14.1% United States 54.2% 53.2% 0.9% Consumer Discretionary Health Care Financials Industrials Consumer Staples Materials Energy Cash Real Estate 20.7% 12.1% 14.2% 11.1% 9.1% 18.4% 8.6% 10.7% 6.8% 9.5% 3.8% 5.3% 2.8% 6.7% 1.7% 1.7% 3.2% -9.3% -2.0% -2.7% -1.5% -3.9% -1.5% 8.6% 3.1% 1.7% Germany Denmark China Israel Japan Netherlands Russia South Africa Canada United Kingdom 15.1% 3.1% 5.4% 0.5% 3.9% 2.9% 3.6% 0.2% 3.3% 7.6% 2.9% 1.4% 2.8% 0.4% 2.4% 0.8% 2.3% 3.2% 2.0% 5.3% -4.3% -0.9% -3.3% 4.9% 1.0% 3.4% 1.5% 2.4% 1.6% 12.0% Telecommunication Services 3.4% -3.4% Cash 1.7% 1.7% Utilities 3.2% -3.2% France 0.5% 3.2% -2.8% -20%-10% 0% 10% 20% 30% 40% -20% -10% 0% 10% 20% -20% 0% 20% 40% 60% -10% -5% 0% 5% 10% 15% Portfolio Benchmark Relative Portfolio Benchmark Relative Source: Bloomberg, data as of

30 Portfolio characteristics Evolution of value, growth and quality statistics Size profile (in %, based on deciles pf portfolio companies market capitalization, in USDbn) P/E Yield Price / Book EV/EBIT Historic Earnings Growth Forecast Earnings Growth Return On Equity Dividend Cover Debt / Equity Ratio Relative to BM Relative to BM Relative to BM >271.6 >177.9 >107.2 >75.6 >49.2 >34.0 >23.7 >14.6 >8.9 >0.7 Relative to BM Relative to BM Relative to BM Relative to BM Relative to BM Relative to BM Benchmark weight Portfolio weight Relative weight Source: Vontobel Asset Management / UBS Portfolio Analysis System, data as of

31 Portfolio characteristics Style Portfolio Benchmark Difference Aggregate Statistics: Value P/E (12m forward) Yield (12m forward) Price/Book (last reported) EV/EBIT (12m trailing) Aggregate Statistics: Growth Historic Earnings Growth (5y trailing) Forecast Earnings Growth (12m forward, based on consensus) Forecast Dividend Growth (12m forward, based on consensus) Aggregate Statistics: Quality Return on Equity (12m forward) Dividend Cover (12m forward) Debt/Equity Ratio (last reported) Style Weights (%) Growth Composite* Value Composite* High 6m Price Momentum* High Dividend Cover* Mid Cap* High Free Cash-flow Yield* Source: UBS Portfolio Analysis System, data as of *shows the percentage of the portfolio and benchmark that are held in the stocks qualifying as constituents of the selected styles. There are overlaps between the styles. 31

32 Risk summary Active risk contribution by holding (top 5 / bottom 5) Active Risk (Std) Contribution Total 3.82% 10 Non-Factor 3.05% 63.7% Factor 2.30% 36.3% - Country 1.08% 9.2% - Industry 1.25% 14.3% - Style 0.76% 7.1% - Currency 0.98% 5.8% by GICS GICS Active Risk (Std) Contribution Information Technology 2.48% 31.03% Health Care 1.71% 20.58% Consumer Discretionary 1.79% 16.02% Industrials 0.95% 6.92% Financials 1.85% 6.85% Consumer Staples 0.96% 6.74% Materials 0.69% 4.45% Energy 1.01% 3.74% Real Estate 0.43% 2.00% Utilities 0.33% 1.04% Telecommunication Services 0.41% 0.63% Holding Weight Portfolio Weight Benchmark Active Risk (Std) Contribution BROADCOM LTD 5.43% 0.22% 1.27% 9.91% SHIRE PLC 3.79% 0.13% 1.14% 9.12% HASBRO INC 5.02% 0.03% 1.10% 6.62% EURONET WORLDWIDE 4.17% 0.00% 0.89% 5.43% CELGENE CORP 3.56% 0.24% 0.81% 5.31% LUKOIL PJSC-ADR 2.80% 0.00% 0.94% -1.54% JOHNSON&JOHNSON 0.00% 0.85% 0.16% -0.53% PFIZER INC 0.00% 0.52% 0.10% -0.30% MICROSOFT CORP 0.00% 1.22% 0.21% -0.29% MERCK & CO 0.00% 0.44% 0.09% -0.28% by country (top 10) Country Active Risk (Std) Contribution United States 2.85% 58.20% Germany 2.09% 9.97% Denmark 1.06% 7.81% Japan 0.82% 4.95% Israel 0.73% 3.83% Canada 0.52% 2.76% Netherlands 0.59% 2.53% South Africa 0.52% 2.24% China 0.59% 1.74% Australia 0.45% 1.71% Source: Bloomberg PORT, data as of

33 Table of contents mtx at a glance Market development Performance / attributions Portfolio activities Current positioning Outlook ESG reporting 33

34 Outlook Fund managers are betting on an up market. According to a recent report from BofA Merrill Lynch the average portfolio beta of large cap manager vs. the S&P 500 is currently close to a post-crisis high at around Further the relative weight of cyclical vs defensive sectors for the average manager is at the highest exposure since Beta as a style has delivered strong performance during the second half of 2016 and the first quarter of Historically such beta rallies are short-lived though and give way to more extended periods during which value outperforms by the widest margin. Contrarian characteristics of the mtx Sustainable Global Leaders Fund. While the market has been loading up on beta, the mtx Sustainable Global Leaders Fund has considerably reduced beta to 0.91 by mid April from 1.05 at the end of Relative to the benchmark the fund remains cheaper on valuation multiples, has a significantly higher free cash flow yield and is superior in terms of future earnings growth. We believe we have to be more risk-aware in times when (1) leverage ratios in the S&P 500 (ex Financials) have reached the highest level since the financial crisis and (2) the potential for higher rates my hurt more levered companies while - at the same time - the average active manager has lifted beta to the highest level since the financial crisis and fund manager holdings show the highest cyclical exposure since We feel the area of high cyclicals, high-beta companies could become very crowded with the risk of valuations getting stretched from which we want to steer away. French elections The Elephant in the room. With global growth and inflation expectations trailing off in April, risk appetite has begun to stall and the average cash balance of fund managers has risen close to 5% (above the 10-year average). Despite this, the overweight in European equities and the relative monthly rotation from the US into Europe is gathering pace and market complacency remains elevated. Any adverse results in the French elections could see a major reversal of this positioning and a fast unwind of the high-beta trade in our view. Future positioning. From a risk perspective, moving into earnings, we began to reduce positions that have had a strong run. Hasbro, Broadcom and Facebook are all such examples. As a result our overweight in IT will likely be reduced. We remain disciplined on valuation and any pull back in the market may be an opportunity to add to Financials, Materials and Industrials where we are currently underweight. Source: Vontobel Asset Management, Bank of America Merrill Lynch 34

35 Table of contents mtx at a glance Market review Performance / attributions Portfolio activities Current positioning Outlook ESG reporting 35

36 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q For institutional investors use only / not for public viewing or distribution ESG summary Historical development of Overall ESG Score Recent Developments 7 Hermes EOS engaged on our behalf with 5 companies on ESG issues Overall ESG Score Environmental Score Minimum Overall ESG Score Social Score The weighted average ESG Overall Score of the Sustainable Global Leaders portfolio declined slightly from 6.5 to 6.3 within the last 3 months. In order to get more information on certain ESG issues, which were not satisfactory researched by third-party research providers, we approached the Russian oil and gas company Lukoil. We wanted more details and clarity on reporting standards, rights of minority shareholders, incidents on pipeline leakages and price fixing agreements in Bulgaria. There were no major up- or downgrades of the Minimum Standard Frameworks of the invested companies. Hence, we did not have to divest from a company because of ESG issues. Governance Score Source: Vontobel Asset Management, data as of , * data for Q1 17 is available as of

37 Stock #23 Stock #13 Stock #31 Stock #26 Stock #29 Hasbro Siemens Stock #18 Stock #19 Stock #24 Stock #33 CVS Health Stock #17 Shire Stock #14 Stock #22 Stock #11 Time Warner Euronet Stock #30 Stock #16 Stock #32 Stock #27 Stock #12 SAP Broadcom Stock #28 Stock #20 Facebook Stock #25 BOC HK Stock #15 Stock #21 For institutional investors use only / not for public viewing or distribution Current ESG profile of the Sustainable Global Leaders portfolio Overall scores based on Minimum Standard Frameworks (MSF) 10 9 MSF Score MSF Minimum Companies closely monitored Weighted average score of the Sustainable Global Leaders portfolio is 6.3 Source: Vontobel Asset Management, data as of

38 Stock #23 Stock #13 Stock #31 Stock #26 Stock #29 Hasbro Siemens Stock #18 Stock #19 Stock #24 Stock #33 CVS Health Stock #17 Shire Stock #14 Stock #22 Stock #11 Time Warner Euronet Stock #30 Stock #16 Stock #32 Stock #27 Stock #12 SAP Broadcom Stock #28 Stock #20 Facebook Stock #25 BOC HK Stock #15 Stock #21 Stock #23 Stock #13 Stock #31 Stock #26 Stock #29 Hasbro Siemens Stock #18 Stock #19 Stock #24 Stock #33 CVS Health Stock #17 Shire Stock #14 Stock #22 Stock #11 Time Warner Euronet Stock #30 Stock #16 Stock #32 Stock #27 Stock #12 SAP Broadcom Stock #28 Stock #20 Facebook Stock #25 BOC HK Stock #15 Stock #21 For institutional investors use only / not for public viewing or distribution Current ESG profile of the Global Leaders portfolio Environmental scores based on Minimum Standard Frameworks (MSF) E E Weighted Average E -1 STDV Social scores based on Minimum Standard Frameworks (MSF) S S Weighted Average S -1 STDV Source: Vontobel Asset Management, data as of

39 Stock #23 Stock #13 Stock #31 Stock #26 Stock #29 Hasbro Siemens Stock #18 Stock #19 Stock #24 Stock #33 CVS Health Stock #17 Shire Stock #14 Stock #22 Stock #11 Time Warner Euronet Stock #30 Stock #16 Stock #32 Stock #27 Stock #12 SAP Broadcom Stock #28 Stock #20 Facebook Stock #25 BOC HK Stock #15 Stock #21 For institutional investors use only / not for public viewing or distribution Current ESG profile of the Global Leaders portfolio Governance scores based on Minimum Standard Frameworks (MSF) 10.0 G G Weighted Average G -1 STDV Source: Vontobel Asset Management, data as of

40 Summary of proxy votings for Sustainable Global Leaders portfolio Q4 2016* Company Name Country Meeting Date Meeting Type Voting Action Voting Explanation There were no shareholder meetings of portfolio companies during Q Source: Vontobel Asset Management, data as of , * data for Q1 17 is available as of

41 Summary of engagement activities for Sustainable Global Leaders portfolio Q4 2016* Company Name Country Topics engaged on Lukoil Russia Board Diversity, Skills & Experience, Bribery & Corruption, Business Strategy, Human Rights, Integrated Reporting, Risk Management, Succession Planning, Environmental Policy & Strategy Novo Nordisk Denmark Board Diversity, Skills & Experience, Conduct & Culture, Human Rights SAP Germany Human Rights Siemens Germany Human Rights Reckitt Benckiser UK Risk Management Source: Vontobel Asset Management, data as of , * data for Q1 17 is available as of

42 Contact Roger Merz, CFA Managing Director Head of mtx Portfolio Management Vontobel Asset Management AG Gotthardstrasse Zürich Marc Bindschädler Director mtx Portfolio Advisor Vontobel Asset Management AG Gotthardstrasse Zürich

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