Newton UK Opportunities Fund

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Newton UK Opportunities Fund

Diversification and conviction in one place

May 2015 TM

Ratings correct as at 31.03.15 Any views and opinions are those of the investment managers, unless otherwise noted This is a financial promotion for Professional Clients

Diversify in the UK

What we’ll cover

Diversification in UK equities Overview of Newton UK Opportunities Fund Summary

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Diversify in the UK

What lies beneath? “A UK All Companies sector thriller”

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Diversify in the UK

Look carefully for diversification in your UK equity portfolios Material long term outperformance of smaller and mid cap stocks

27%

of FTSE All Share in just 6 companies Third of active UK equity funds are ‘closet trackers’

Source: Bloomberg, 7 May 2015. Assuming acquisition of BG by Royal Dutch Shell

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Four funds: Diversification or concentration of risk?

Diversify in the UK

M&G Recovery

Old Mutual UK Alpha

Fidelity Special Situations

BlackRock UK Special Situations

Top 5 holdings

Top 5 holdings

Top 5 holdings

Top 5 holdings

BP

HSBC

HSBC

Royal Dutch Shell

HSBC

Int. Airlines Group

Lloyds

HSBC

Prudential

Friends Life

Electronic Arts

GlaxoSmithKline

Lloyds

Barclays

Citigroup

Rio Tinto

GlaxoSmithKline

Royal Dutch Shell

Royal Dutch Shell

Howden Group

Largest sector holding FINANCIALS

Largest sector holding FINANCIALS

Largest sector holding FINANCIALS

Largest sector holding FINANCIALS

Source: Trustnet, April 2015. Funds chosen represent 4 of the biggest and well-known funds in the IMA UK All Companies Sector.

5

-40%

-50% 2005 2006 2007

FTSE 100 TR 2008 2009 2010

Source: Bloomberg. Data as at end March 2015 2011

FTSE 250 TR 2012 2013 2014

FTSE All Share

6 FTSE 100 TR FTSE 250 TR

01/03/2015

01/12/2014

01/09/2014

01/06/2014

01/03/2014

01/12/2013

01/09/2013

01/06/2013

01/03/2013

01/12/2012

01/09/2012

01/06/2012

01/03/2012

01/12/2011

01/09/2011

01/06/2011

01/03/2011

01/12/2010

01/09/2010

01/06/2010

01/03/2010

01/12/2009

01/09/2009

01/06/2009

01/03/2009

01/12/2008

01/09/2008

01/06/2008

01/03/2008

01/12/2007

01/09/2007

01/06/2007

01/03/2007

-30%

01/12/2006

-20%

01/09/2006

10%

01/06/2006

20%

01/03/2006

30%

01/12/2005

50%

01/09/2005

60%

01/06/2005

Less upside potential

01/03/2005

01/12/2004

Diversify in the UK

Importance of flexibility

But with a bumpy ride

350

40%

300

250

200

0%

150

-10%

100

50

0

YTD 2015

FTSE All Share TR

Paul Stephany has specialist mid and small cap investing background.

Diversify in the UK

This fund is different

Newton UK Opportunities

M&G Recovery

Old Mutual UK Alpha

Fidelity Special Situations

Black Rock UK Special Situations

Top 5 holdings

Top 5 holdings

Top 5 holdings

Top 5 holdings

Top 5 holdings

Diageo

BP

HSBC

HSBC

Royal Dutch Shell

Playtech

HSBC

Int. Airlines Group

Lloyds

HSBC

Reed Elsevier

Prudential

Friends Life

Electronic Arts

GlaxoSmithKline

AstraZeneca

Lloyds

Barclays

Citigroup

Rio Tinto

Centrica

GlaxoSmithKline

Royal Dutch Shell

Royal Dutch Shell

Howden Group

Largest sector holding CONSUMER SERVICES

Largest sector holding FINANCIALS

Largest sector holding FINANCIALS

Largest sector holding FINANCIALS

Largest sector holding FINANCIALS

Source: Trustnet, April 2015. Funds chosen represent 4 of the biggest and well-known funds in the IMA UK All Companies Sector.

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Diversify in the UK

What we’ll cover

Diversification in UK equities Overview of Newton UK Opportunities Fund Summary

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Diversify in the UK

Newton UK Opportunities Fund Looking to own stocks with the most attractive long term characteristics

Leveraging Newton’s thematic approach to investing

Active & dynamic

Source: Newton, 2015. 1 Outperformed its comparative index net of 0.75% AMC in all but one calendar year (2009) since its inception in 2002

+

Concentrated & unconstrained

9

=

Outperformance with lower risk1

Newton’s thematic approach to investing

Diversify in the UK

Compelling investments based on fundamentals and valuations

Themes

• Themes provide perspective

Newton’s investment ideas and portfolio construction

Valu a t io

n

ntals e m da

• Fundamentals and valuation provide opportunity

Themes provide perspective; Fundamentals and Valuation provide opportunity

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Fu n

Diversify in the UK

Active and dynamic management

Forensic

Cashflow focused

Dynamic •

• Using accounting background to detect red flags • Thorough investigation of primary sources

• Profits can be manipulated unlike cash • Avoid business models which absorb capital

• Timing can add value, no ‘sacred cows’ in the fund • Invests across the market cap spectrum with confidence

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Diversify in the UK

Concentrated and unconstrained

High ‘active share’

Around 40 stocks in portfolio

Total investment freedom

Small and mid cap experience support all cap investing

Ability to selectively invest overseas

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One we bought and sold

Diversify in the UK

• Fast growing global internet clothing retailer • Paul Stephany’s first purchase was at 110p share price in 2007 within Newton Smaller Companies Fund • Introduced into Opportunities at 5000p in October 2013 • Sold at 6900p in February 2014, trading at 3600p by May 2015 • Sell decision driven by focus on valuation anomalies – share price built in unrealistic growth expectations

Per cent return

Total return

Relative to FTSE all share – price index

SOLD

60

140

40

120

20

100

0

80 60

-20

40

BOUGHT

-40

20

-60 Sep 13

Dec13

Source: Bloomberg, 1 May 2015

Mar 14

Jun 14

Sep 14

Dec 14

0

Mar 15

13

Oct 13

Dec 13

Feb14

Apr 14

Jun 14

Aug 14

Oct 14

Dec 14

Risk / return over 10 years

Diversify in the UK

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Annualised return (%)

14 12 10 8 6 4 2 0 0

5 Newton UK Opportunities

Source: Lipper. Data as at end March 2015 showing IA UK All Companies peer group

10

15

Annualised volatility (%)

14

20

25

Maximum drawdown vs peers over 10 years

Diversify in the UK

10 year maximum drawdown – Newton UK Opportunities ranked 2/170 0 -10 -20

%

-30 -40 -50 -60 -70

Source: Lipper. Data as at end March 2015 showing IA UK All Companies peer group

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Long term outperformance through variety of conditions

Diversify in the UK

Fund launch to 30 April 2015

Cumulative outperformance

35

+153%

Relative annual performance

30 25 20 15 10 5 0 -5 -10 -15

2002

2003

2004

2005

2006

2007

FTSE All-Share used as the comparative index. Fund launch date = 08.02.02. Source: Newton, as at 30 April 2015. Fund performance calculated as total return including charges, but excluding initial charge, income reinvested gross of tax, expressed in share class currency. The impact of the initial charge, which may be up to 5%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.

2008

16

2009

2010

2011

2012

2013

2014

2015

Diversify in the UK

What we’ll cover

Diversification in UK equities Overview of Newton UK Opportunities Fund Summary

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Diversify in the UK

Key takeaways A real opportunity to diversify UK equity portfolios

1 Beware what lies beneath: combining different UK equity funds doesn’t always spread risk 2 Newton UK Opportunities has a differentiated approach that provides diversification • Forensic approach to company selection • Concentrated and unconstrained 3 Delivered outperformance with lower than average risk in varied market conditions

Cumulative performance

Annualised 3M

YTD

1YR

2YR

3YR

5YR

Net accumulation

7.39

7.39

12.50

13.19

15.59

11.11

Comparative index

4.67

4.67

6.57

7.69

10.63

8.34

Sector

5.46

5.46

5.62

9.79

12.22

9.56

1

1

1

1

1

1

Quartile Sterling Income

Source : Lipper as at 31 March 2015. Performance is shown for Institutional Shares W (Net Accumulation) unless otherwise stated. Total return including income net of UK tax, ongoing charge and performance fee (where applicable).Fund performance calculated as total return including charges, but excluding initial charge, income reinvested gross of tax, expressed in share class currency. The impact of the initial charge, which may be up to 5%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request..

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Diversify in the UK

Appendix

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Diversify in the UK

Newton UK Opportunities Fund, Sterling Income Shares Performance as at 31 March 2015

64.6% Newton UK Opportunities GBP Inc

5 year cumulative performance (%)

49.3% FTSE All-Share TR

60 50

57.9% IA UK All Companies

40 30 20 10 0 -10

Please note that sector returns are likely to vary, depending on the timing of data extraction from Lipper. Source for all performance: Lipper as at 31 March 2015. Performance is shown for Institutional Shares W (Net Accumulation) unless otherwise stated. Total return including income net of UK tax, ongoing charge and performance fee (where applicable). Ratings correct as at current month-end

Mar 10

Mar 11

Mar 12

Mar 13

Mar 14

Cumulative performance

Mar 15

Annualised 3M

YTD

1YR

2YR

3YR

5YR

Net accumulation

7.39

7.39

12.50

13.19

15.59

11.11

Comparative index

4.67

4.67

6.57

7.69

10.63

8.34

Sector

5.46

5.46

5.62

9.79

12.22

9.56

1

1

1

1

1

1

Quartile Sterling Income

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Diversify in the UK

Newton UK Opportunities Fund Portfolio positioning – as at 31 March 2015 Sector allocation – relative (%)

Top 10 positions

Consumer services

20.7

Utilities

5.1

Consumer goods

3.1

Technology

0.2

Industrials Health care Telecommunication

-0.4 -2.7 -4.9

(%) Diageo

5.34

Playtech

5.25

Reed Elsevier

4.65

British American Tobacco

4.44

AstraZeneca

4.12

Centrica

4.11

Basic materials

-6.8

Capita

4.09

Financials

-6.9

Plus500

4.05

Intermediate Capital

3.30

Moneysupermarket.com

3.18

-9.7

Oil & gas

Number of stocks: 40

Country allocation – absolute (%) United Kingdom Overseas* Cash

Notes: * Countries represented are Switzerland and USA. Source: Newton as at 31 March 2015. The FTSE All Share index is the comparative index for this fund.

92.1 5.7 2.2

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Diversify in the UK

Paul Stephany Portfolio manager Curriculum vitae 2005 to date Newton Investment Management Portfolio manager 2002 – 2005 PricewaterhouseCoopers Accountant working in corporate tax

Qualifications

Biography

Member of the Institute of Chartered Accountants in England and Wales

After studying History at Oxford University, Paul joined PwC’s insurance corporate tax team in London.

CFA charterholder

Paul qualified as a chartered accountant and then joined Newton as assistant portfolio manager on the UK equities desk in 2005.

BA (Hons) Modern History, Oxford University

In February 2013, Paul took on leadership of the Newton UK Opportunities strategy and in September 2014 he then also assumed leadership of the Newton UK Equity strategy.

10 years at Newton 10 years’ investment experience

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute

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Diversify in the UK

Emma Mogford Portfolio manager Curriculum vitae Oct 2013 to date Newton Investment Management Portfolio manager 2007 – 2013 Neptune Investment Management Portfolio manager

Qualifications

Biography

CFA charterholder

After studying Natural Sciences at Cambridge, Emma joined Neptune Investment management. She started as an analyst on the global utilities and chemicals sectors, before becoming manager of the Neptune UK Higher Income Fund, a multi-asset fund, which she ran for 3 years

MA (Hons) Natural Sciences, Cambridge University 7 years’ investment experience

In October 2013 Emma joined Newton as alternate portfolio manager on the Higher Income fund. In September 2014 Emma was appointed alternate portfolio manager on the UK Equity and UK Opportunities funds.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute

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Diversify in the UK

Important information

Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When investments are sold, investors may get back less than they originally invested. This is a financial promotion for Professional Clients. This is not investment advice. For a full list of risks applicable to this fund, please refer to the Prospectus. You should read the Prospectus and Key Investor Information Document (KIID) for each fund in which you want to invest. The Prospectus and KIID can be found at www.bnymellonim.co.uk. Any views and opinions are those of the investment manager, unless otherwise noted. Investments should not be regarded as short-term and should normally be held for at least five years. This material may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. This material should not be published or distributed without authorisation from BNY Mellon Investment Management EMEA Limited. Portfolio holdings are subject to change, for information only and are not investment recommendations. The Fund is a sub-fund of BNY Mellon Investment Funds, an open-ended investment company with variable capital (ICVC) with limited liability between sub-funds. Incorporated in England and Wales: registered number IC27. The Authorised Corporate Director (ACD) is BNY Mellon Fund Managers Limited (BNY MFM), incorporated in England and Wales: No. 1998251. Registered address: BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Authorised and regulated by the Financial Conduct Authority. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries. Newton Investment Management Limited (Newton) is authorised and regulated by the Financial Conduct Authority. Newton, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1371973. BNY Mellon Investment Management EMEA Limited, BNY MFM Newton are all ultimately owned by The Bank of New York Mellon Corporation. Issued in the UK by BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Conduct Authority.

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