NEWTON MULTI-ASSET INCOME FUND

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1 March 2019 NEWTON MULTI-ASSET INCOME FUND This document is for professional investors only. Please read the important disclosure on the last page. Newton Multi-Asset Income Fund 1

2 Newton Multi-Asset Income Fund Performance aim Aims to yield 30% more than a reference yield of 60% MSCI AC World Index (equities) and 40% hedged BofA Merrill Lynch Global Broad Market Index (bonds). Inception date 4 February 2015 Asset classes Directly held equities Directly held bonds Alternatives, including infrastructure, private equity, convertibles, commodities and renewables Derivatives used for hedging purposes Recent pension reforms and increased longevity are accentuating the need to provide an attractive retirement income for an extended period. The Newton Multi-Asset Income Fund seeks to meet this requirement by generating a stable monthly income with an eye to capital growth, using a broader investible universe than just bonds or equities. The compounding nature of income and its benefits to long-term wealth creation also make the Fund well suited to the pre-retirement phase. The strategy is equally relevant for defined-benefit schemes wishing to de-risk growth assets or meet cash-flow requirements, and draws on Newton s record of managing multi-asset and income portfolios. A fully flexible multi-asset strategy The Newton Multi-Asset Income Fund seeks to deliver sustainable income and attractive total returns through: A stable and growing income, paid monthly A fundamental, active and flexible approach to portfolio construction Harnessing the power of compounding Aiming to deliver sustainable and growing income Newton Multi-Asset Income Fund Income 130% of 60% equities/ 40% bonds reference 2 Newton Multi-Asset Income Fund

3 A stable and growing income Current annual yield 4.5% Fund (based on the current prospective yield of the portfolio) 1 2.9% Current reference yield target Since its launch in February 2015, the Newton Multi-Asset Income Fund has delivered an income in excess of its performance aim in an environment in which many companies have cut their dividends and coupons to investors. The Fund aims to pay a stable monthly income via 11 identical monthly payments; a 12th monthly payment will include any excess income. CUMULATIVE TOTAL RETURN (%) Feb-15 May-15 Aug-15 Dec-15 Mar-16 Jun-16 Oct-16 Jan-17 Apr-17 Aug-17 Nov-17 Feb-18 Jun-18 Sep-18 Dec-18 Income received Total return Performance is stated gross of management fees. The impact of management fees can be material. A fee schedule providing further detail is available on request. The Fund aims to yield 30% more than a reference yield of 60% MSCI AC World Index (equities) and 40% hedged BofA Merrill Lynch Global Broad Market Index (bonds). 1 The prospective income yield is based on forwardlooking 12-month yields, sourced from aggregate broker estimates. Source: Newton, as at 31 December Source: Newton, close of business prices, total return, income reinvested, gross of fees, in GBP, 31 December Total indicative income received from holdings smoothed daily for illustrative purposes. Newton Multi-Asset Income Fund 3

4 Fundamental, active and flexible approach to selecting assets and securities The Newton Multi-Asset Income Fund s objective of generating a sustainable yield is set at the portfolio level. The unconstrained nature of the Fund, combined with holistic portfolio construction, affords us the freedom to reallocate capital in a timely manner across the capital structure to explore the best risk/reward opportunities. We believe this is a key advantage that often gets overlooked, particularly in a fund of funds approach or a single asset-class fund. Having this discretion allows us to understand risk on a holistic basis and its interplay across asset classes. The Fund is fully flexible, allowing us to invest without any sector, country or asset class constraints, seeking those assets that we believe will deliver the best income, while also aiming to preserve and grow capital over the long term. Newton Multi-Asset Income Fund sector and asset-class positioning as at 31 December 2018 Currency hedging -0.6% Royalties 1.7% Cash 5.1% Economic infrastructure 0.7% Asset financing 4.1% Energy storage 1.8% Direct lending 1.7% CLO equity 1.2% Property 2.5% Oil & gas 2.0% Basic materials 0.9% Industrials 6.4% Consumer goods 5.7% Health care 1.6% Infrastructure 7.6% Renewables 10.3% Yield 4.9% Weight 31.7% Weight 19.8% Weight 4.5% YIELD 1 4.5% Yield 5.7% Weight 44.0% Yield 4.1% Consumer services 7.8% Telecommunications 2.6% Utilities 0.1% Financials 11.8% Investment-grade bonds 0.2% Emerging-market bonds 4.4% Sub-investment-grade bonds 3.3% Government bonds 4.9% Corporate bonds 4.1% Convertible bonds 0.9% Technology 5.2% Index-linked bonds 2.0% Equities Bonds Alternatives Cash 1 The prospective income yield is based on forward-looking 12-month yields, sourced from aggregate broker estimates. Source: Newton, 31 December Newton Multi-Asset Income Fund

5 Harnessing the power of compounding The compounding benefits of reinvested income can provide attractive risk-adjusted returns over the long term. This applies not only to the income from equities but also in exactly the same way to income from the bonds and alternative investments in a multi-asset portfolio. In this context, we consider risk primarily in relation to the sustainability of income payments and our ability to continue paying investors a growing pence-per-share distribution. When researching investment opportunities, we do not use yield as a starting point, but instead look for discipline in how a company allocates its capital, or how a government generates its revenues. Chasing yield can be dangerous. We view security selection as critical in managing risk, and look for sustainable yields which should not disappear in times of market distress. Many of the opportunities within alternative investments fit very well with an income objective and also help diversify the sources of income the Fund receives. The Fund currently has significant exposure to renewable-energy and infrastructure assets which should have stable cash flows with very little sensitivity to the economic cycle. Comparing forecast and realised dividend yields end-1995 to 31 December DIVIDEND YIELD (%) <4% 4%-5% 5%-6% 6%-7% 7%-8% 8%-9% 9%-10% 10%-15% 15%-20% Average forecast yield Realised yield For illustrative purposes only. Source: SG Quantitative Research, Factset, 31 December Newton Multi-Asset Income Fund 5

6 Rigorous security selection Our thematic approach provides a global perspective to help us understand the drivers of opportunities and risks across industries and asset classes, and this guides security selection. We achieve conviction in the investment thesis of each holding through thorough proprietary research, fundamental analysis and regular management meetings. Each asset is assessed both in isolation, to ensure it meets our risk and return objectives, and on a relative basis against other assets within the portfolio, not just against securities in the same asset class. We consider the full capital structure of each company we invest in, and the Fund invests in each case in the instrument that supports its income-producing objective. This way, the Fund may gain exposure to securities such as convertibles and preference shares, for example, if the risk/return pay-off is more attractive. In addition, alternative investments can offer return characteristics which are attractive compared with many fixed-income assets and more stable than equities. As with other asset classes, we use our thematic approach to help us identify alternative assets, and we focus on real, operational assets, often with inflation-linkage and defined return profiles. Alternatives demonstrate strong thematic attributes RENEWABLES AVIATION PROPERTY INFRASTRUCTURE 6 Newton Multi-Asset Income Fund

7 Newton s Multi-Asset Income team Our organisational structure encourages lateral thinking, fluid communication and the swift implementation of ideas. Our analysts and investment managers are located on a single investment floor in London, which helps to ensure that the investment process is flexible and opportunistic. The entire investment team is responsible for generating investment ideas. Newton Multi-Asset Income team Average 22 Tim Wilson Paul Flood Lead manager Joo Hee Lee Nick Clay Alternate manager Freeman Le Page 1 Bhavin Shah years investment experience 12 years at Newton Global research 14 years investment experience 8 years at Newton Industry analysts Responsible investment analysts Credit analysts Portfolio managers 20 years investment experience 14 years at Newton Global equity Multi-asset & UK Real Return Emerging & Asian equity Fixed income 1 Investment specialist/client director, not included in the calculation of team average numbers. Source: Newton, 31 December Years investment experience and tenure at Newton are team average numbers as at 31 December Newton Multi-Asset Income Fund 7

8 Why Newton? Track record of managing multi-asset strategies since 1978 and income strategies since 1995 Integrated environmental, social and governance (ESG) analysis Managing 46.7 billion of assets (as at 31 December 2018) on behalf of clients including pension funds, corporations and charities around the world Global thematic framework ensures long-term investment perspective Key strengths of the Newton Multi- Asset Income Fund Flexibility to harness diversified sources of income across asset classes and the capital structure Brings together two of our core competencies: multi-asset investing and income investing Focus on monthly, sustainable income payments with opportunity for capital growth Want to find out more? Please contact our consultant relations and business development team: Tel: Newton Investment Management Past performance is not a guide to future performance. Your capital may be at risk. 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. You should read the Prospectus and the Key Investor Information Document (KIID) for each fund in which you want to invest. The Prospectus and KIID can be found at Key investment risks Objective/performance risk: There is no guarantee that the Fund will achieve its objectives. Currency risk: This Fund invests in international markets which means it is exposed to changes in currency rates which could affect the value of the Fund. Derivatives risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the Fund can lose significantly more than the amount it has invested in derivatives. Changes in interest rates & inflation risk: Investments in bonds/money market securities are affected by interest rates and inflation trends which may negatively affect the value of the Fund. Credit ratings and unrated securities risk: Bonds with a low credit rating or unrated bonds have a greater risk of default. These investments may negatively affect the value of the Fund. Credit risk: The issuer of a security held by the Fund may not pay income or repay capital to the Fund when due. Emerging-markets risk: Emerging markets have additional risks due to less developed market practices. Charges to capital: The Fund takes its charges from the capital of the Fund. Investors should be aware that this has the effect of lowering the capital value of your investment and limiting the potential for future capital growth. On redemption, you may not receive back the full amount you initially invested. Shanghai-Hong Kong Stock Connect and/or the Shenzhen-Hong Kong Stock Connect ( Stock Connect ) risk: The Fund may invest in China A shares through Stock Connect programmes. These may be subject to regulatory change and quota limitations. An operational constraint such as a suspension in trading could negatively affect the Fund s ability to achieve its investment objective. Counterparty risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the Fund to financial loss. Investment performance Newton Multi- Asset Income Fund 31 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Performance is stated gross of management fees. The impact of management fees can be material. A fee schedule providing further detail is available on request. Source: Newton, close of business prices, total return, income reinvested, gross of fees, in GBP, 31 December Important information This is a financial promotion. This document is for professional investors only. Issued in the UK by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No Newton Investment Management is authorised and regulated by the Financial Conduct Authority. These opinions should not be construed as investment or any other advice and are subject to change. This document is for information purposes only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those countries or sectors. Please note that portfolio holdings and positioning are subject to change without notice and should not be construed as investment recommendations. Assets under management (AUM) include assets managed by Newton Investment Management Ltd and Newton Investment Management (North America) Limited. In addition, AUM for Newton may include assets of bank-maintained collective investment funds for which Newton has been appointed sub-advisor, and assets of wrap fee account(s) for which Newton Investment Management (North America) Limited provides sub-advisory services to the primary manager of the wrap programme. Newton Investment Management (North America) Limited and Newton Investment Management Limited are authorised and regulated by the Financial Conduct Authority in the UK, and Newton Investment Management (North America) Limited is registered as an investment adviser with the SEC. The Fund is operated by BNY Mellon Fund Managers Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No T /19