Invesco Global Equities Capital and Income Growth Opportunities in Global Equity Markets June 218 John Botham Product Director This presentation is for Professional Clients only and is not for consumer use.
The importance of dividends A significant proportion of long-term equity returns come from dividends Real returns (%) Nominal returns (%) 7. 6. 5. 4. 3. 2. 1.. -1. -2. -3. 5.1 6.3 5.6 5.5 UK US France Germany Australia Canada Japan Dividend Yield Dividend growth Multiple expansion Total annualised returns 4. 5.4 3.9 Source: Société Générale data as at 11 October 217. Data shown is since 1982 2
Global equity performance contribution Earnings improvement being offset by valuation de-rating in 218 MSCI ACWI annual breakdown of total returns in local currency (%) 3 25 2 15 1 5-5 -1-15 212 213 214 215 216 217 218 YTD* Dividends PE change EPS change Total return Source: Datastream as at 1 June 218. Past performance is not a guide to future returns. *YTD = to 31 May 218. 3
The importance of dividends Why not just focus on the highest yielders? Because high yield can be a sign of financial weakness Higher yielding companies can be more volatile than the market average Our focus is on both capital and income growth, with below average volatility Dividend yield (%) Forecasted and realised Sep 1994 Sep 216 18 16 14 12 1 8 6 4 2 1.7 1.8 11.8 9.4 8.4 7.4 6.4 5.4 5.7 6.2 6.5 6.4 6.1 5.1 4.5 4.3 17.1 5.3 Forecasted Realised Source: SG Cross Asset Research as at February 218. Universe is MSCI AC World. 4
The importance of dividends Equities paying higher than average yields tend to outperform over the longer term High dividend yield stocks outperform globally (relative total returns, indexed in US dollars) 4. 3.5 3. 2.5 2. 1.5 1..5. 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 EAFE US Global We believe we can further enhance returns and lower volatility by focusing on high quality, dividend paying companies Source: Thomson Datastream, Kenneth R French as at 11 October 217. 5
Volatility is lower for dividend paying stocks Volatility of payers, non-payers and the market (%) (Annualised, FTSE World 1989-215, local currency 25 2 15 1 5 Dividend Paying No Dividend Universe Source: Société Générale as at 11 October 217. 6
Free cash flow and dividend yield are some of least crowded trades History-relative crowding of low vol, quality and value (1 = most crowded vs history) 1 9 8 7 6 5 4 3 2 1 ROE IBES long-term growth Quality PB Dividend Yield FCF Yield Low Volatility Low Beta Source: Bernstein U.S. Quant Team as at June 218. 7
Global equity market valuations MSCI World Composite Valuation Indicator (Z Score)* Standard Deviation 3. 2.5 2. 1.5 1..5. -.5-1. -1.5-2. -2.5 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 Source: Datastream as at 1 May 218. Past performance is not a guide to future returns. *Equally weighted Z Score of trailing PE, DY and PBV. R Squared based on 1 year subsequent returns. 8 R squared 86% Current.37 Components of composite valuation indicator Current Average Z score Price to Earnings 19.74 18.15.26 Dividend Yield 2.41 2.88.45 Price to Book Value 2.36 2.9.4
Equity market valuations They have proved a poor guide historically to short-term returns MSCI World Composite Valuation Indicator and subsequent 1 year total return (%) since 1974 1 yr TR CAGR % 6 5 4 3 2 1-1 -2-3 -4-5 -2.5-2 -1.5-1 -.5.5 1 1.5 2 2.5 Composite Valuation Indicator Current.37 R squared 1% Source: Datastream as at 2 May 218. Past performance is not a guide to future returns. CAGR = Compound Annual Growth Rate. Past performance is not a guide to future returns. 9
Equity market valuations but a much better guide historically to long-term returns MSCI World Composite Valuation Indicator and subsequent 1 year total return CAGR (%) since 1974 2 1 yr TR CAGR % 15 1 5-5 -2.5-2 -1.5-1 -.5.5 1 1.5 2 2.5 Composite Valuation Indicator Current.37 R squared 86% Source: Datastream as at 2 May 218. Past performance is not a guide to future returns. CAGR = Compound Annual Growth Rate. Past performance is not a guide to future returns. 1
Global Equities one of the best sources of income internationally today Global Equities dividend yield compares favourably with other asset classes 8. 7. 6. 5. 4. 3. 2. 1.. -1. -2. 3.6 Europe div yield 4.2 UK div yield Equities 2 US div yield 2.2 Japan div yield.8 A corp bond yield Corp Bonds.5.4 AA corp bond yield Government Bonds German 1y Bund Current (%) 3 yr average (%) 3 year forecast growth (%) 2.9 US 1yr bond yield -.35 Money Markets German 3m FIBOR 2.32 US 3m rates Source: UBS, Datastream, Bloomberg as at 19 June 218. *Datastream indices used for trailing DY data until 24 and IBES MSCI Indices from 24 for forward DY. German 3m rates are 18 year data and US 3m rates, AA and A corporate bond yields are 15 year data. Europe here refers to the wider region rather than the EU or Eurozone specifically. 11
Invesco Perpetual Global Equity Income Fund Profile Investment objective Strategy inception 2 March 29 Benchmark Fund manager Investment philosophy and process No. of holdings 4 7 Market cap Average holding period Aims to generate a rising level of income, together with long-term capital growth, investing primarily in global equities Invesco Perpetual Global Equity Income Fund has been managed by Invesco since 5 July 21 MSCI World index Nick Mustoe (Supported by the Invesco Perpetual Global Equity Income Group) Unconstrained, valuation-led, bottom-up investment approach We aim to construct a high conviction portfolio of the best global quality income ideas All cap 3 years Past performance is not a guide to future returns. Source: Lipper as at 31 May 218. Performance figures are based on the Z (Acc) share class. As this was launched on 12 November 212, for the periods prior to this launch date, performance figures are based on the A Acc share class, without any adjustment for fees. Performance figures for all share classes can be found in the relevant Key Investor Information Document. Performance figures are shown in GBP, inclusive of reinvested income and net of the Ongoing Charge and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Sector average performance is calculated on an equivalent basis. *Inception date 2 March 29. 12 Invesco Perpetual Global Equity Income Fund Cumulative returns, net of fees in GBP (%) 28 24 2 16 12 8 4 1 yr 3 yrs 5 yrs SI* IP Global Equity Income Fund Rolling 12-month returns (%) IP Global Equity Income Fund IA Global Equity Income 31/5/13 31/5/14 31/5/14 31/5/15 IA Global Equity Income 31/5/15 31/5/16 31/5/16 31/5/17 31/5/17 31/5/18 9.5 11.75-1.23 27.64 6.73 5.71 1.39 -.67 27.89 3.3
Invesco Perpetual Global Equity Income Fund Top ten holdings Stocks Portfolio weight (%) Dividend yield 1 (%) 3 year dividend CAGR 2 (%) Royal Dutch Shell 3.2 5.6 +2.1 BP 2.97 5.3 +4.4 Orange 2.95 5.6 +4.9 Chevron 2.94 3.6 +3.7 Total 2.76 4.9 +2.9 Equinor 2.7 3.6 +4.3 JP Morgan Chase 2.63 2.4 +9.2 NASDAQ 2.44 1.9 +11.7 Next 2.41 2.7-17. Pfizer 2.4 3.9 +5.7 MSCI World index 2.4 +5.8 Source: Invesco Perpetual & Bloomberg as at 31 May 218. 1 Next 12 month dividend yield. As at 19 June 218. 2 Based on Bloomberg projected compound annual growth rate of dividend over three years. As at 19 June 218. Holdings may change without notice. Holdings may change without notice. This is not financial advice and no recommendation to buy / hold / sell these securities. There is no guarantee that Invesco will keep these securities within its funds. 13
Invesco Perpetual Global Equity Income Fund We do not chase the highest yields, we seek to deliver an attractive total return Active sector weights vs. MSCI World index next 12m estimated sector yields (%) 14 1.2 9.9 7 3.7 3.6 2.7 5.2 1.4 1.7 2.3 2.5 2.8 3.2 4.4 3.9 2.5 1.8-7 -1.6-1.8-2.6-2.9-3. -3.3-14 Energy Financials Telecoms Cash Industrials Health Care Materials Cons. Staples Utilities Real Estate Cons. Disc. -11.1 IT Invesco Perpetual Global Equity Income Fund active sector weights MSCI World index sector yields (12m forecast) Source: Invesco Perpetual as at 31 May 218 Portfolio weightings are subject to change without notice. Dividend yield (Source: Bloomberg) estimates as at 19 June 218 14
Invesco Perpetual Global Equity Income Fund Regional weightings Portfolio breakdown (%) 7 63.7 6 5 4 3 2 1 35.1 32.8 2.2 16.4 6.5 7.2 4.4 3.3 Europe ex. UK North America United Kingdom Pacific Rim* Japan Invesco Perpetual Global Equity Income Fund MSCI World Index 9. Source: Invesco Perpetual as at 31 May 218. *Pacific Rim = Includes HK & China and Singapore. Holdings may change without notice. 15
Invesco Perpetual Global Equity Income Fund Underlying portfolio characteristics Characteristic Portfolio MSCI World index Dividend Yield* 3.8% 2.6% Price to Earnings 14.1x 18.9x Free Cashflow Yield 7.6% 4.4% Return on Equity 12.5% 12.4% Source: Bloomberg as at 19 June 218. Characteristics are trailing 12 month figures, except where noted (*) which are 12 month forward forecasts. Portfolio holdings /characteristics are subject to change without notice. 16
Invesco Perpetual Global Equity Income Fund An attractive risk-return profile Risk versus return (%) 3 years to 31 May 218 11. Lower risk Higher return IP Global Equity Higher risk Higher return Annualised return 1.5 1. 9.5 Lower risk IA Global Equity Higher risk Lower return Income sector Lower return 9. 9. 9.5 1. 1.5 11. Annualised risk Past performance is not a guide to future returns. Source: Lipper as at 31 May 218. Performance figures are provided for the Z Acc share class of the Invesco Perpetual Global Equity Income Fund and are shown in GBP, inclusive of reinvested income and net of Ongoing Charge and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. 17
Investment risks The value of investments and any income will fluctuate (this may partly be the result of exchange-rate fluctuations) and investors may not get back the full amount invested. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/or generate additional capital or income, although this may not be achieved. The use of such complex instruments may result in greater fluctuations of the value of the fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. 18
Important information This document is for Professional Clients only and is not for consumer use. All data is as at 31.5.218 and sourced from Invesco Perpetual unless otherwise stated. Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities. For the most up to date information on our funds, please refer to the relevant fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the Annual or Interim Reports and the Prospectus, which are available using the contact details shown. Invesco Perpetual is a business name of Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority. 19