Smith & WilliamsonGlobal Government Bond FundManaged by Chris LynasFund adviser Robin MarshallCitywire North 20126-7 September 2012 For professional advisers only | www.sandwfunds.com
For professional advisers only | www.sandwfunds.comThe proposition • A fund of global government and investment grade bonds Investing in mainly index-linked and conventional government bonds Flexibility to protect against inflation and deflation Targets protection of capital and lower volatility Currency and portfolio diversification benefits ISAble 2
For professional advisers only | www.sandwfunds.comTarget audience • Designed for investors: Seeking total returns greater than the FTSE UK Gilts All Stocks Index Seeking to preserve capital by minimising credit risk and seeking to avoid financial accidents Investors with at least a two-year investment horizon Investors wishing to complement equity exposure Investors wishing to hedge sterling exposure 3
For professional advisers only | www.sandwfunds.comWhy have we launched this fund?• Global financial background volatile and fraught with risk• Forecasting uncertainty high• Persistent low interest rates• 2 - 4% annual current inflation rates in G20• Reduced supply of safe haven assets 4
For professional advisers only | www.sandwfunds.com Inflation / deflation historyUK Annual Rate of inflation % Date Source: Officer and Williamson, Credit Suisse Feb 2012 5
For professional advisers only | www.sandwfunds.com Both an inflation and deflation hedge• Index linked government Real bond and equity returns vs. inflation rates 1900-2011 bonds offer most reliable Rate of return/inflation % inflation hedge• Inflation proofed bonds issued with a floor of par also offer a deflation hedge• Conventional bonds offer Percentiles of inflation across 2128 country-years most reliable deflation Real bond return Real equity return Inflation rate of at least % hedge Source: Dimson, Marsh and Staunton; Credit Suisse Feb 2012 6
For professional advisers only | www.sandwfunds.com Yield gap reversed with equities – heading back to early1950s levels US 10-year yield 16 14 12 10 8 6 4 2 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 US Dividend Yield US long run interest rateSource: Shiller, Yale University as at 16.04.2012 7
For professional advisers only | www.sandwfunds.com“Risk on” / “risk off” examples “Risk-on” currencies protect Safe havens protect capital during capital during risk-on phases “risk-off” phases Australia and Canada Singapore Sweden Switzerland Eurozone US and Canada Norway Norway 8
For professional advisers only | www.sandwfunds.comWhen will we hedge?• Currencies can add diversification benefits to sterling-based investors• Hedging methodology The Fund has the freedom to hedge the currency risk if appropriate Opportunity to pick up yield from forward curve anomalies (eg US$) High yield currencies with strong fundamentals unlikely to be hedged (eg Australian $) 9
For professional advisers only | www.sandwfunds.comPortfolio construction Instrument Range Current portfolio (31.07.2012)Cash 0-10% 10.5%Global Government Index Linked Bonds 30-70% 58.6%Global Government Conventional Bonds 20-60% (including Cash above) 28.6%Investment Grade Corporate Bonds 0-20% 2.36%Average maturity variable 13.6Average modified duration variable 11.5% in any one Government Less than or equal to 30% Canada – 10.7% Except UK which may be up to 100% UK – 49.2%Number of holdings 20-40 21Note: Index-linked bonds future global inflation rate assumptions; local prevailing rate continues to maturity(except UK bonds: Debt Management Office assumption of 3% to maturity) 10
For professional advisers only | www.sandwfunds.comCurrent portfolio characteristics: Current underlying currency Current effective currency 2.4% 3.0% 12.7% GBP 10.7% GBP 70.5% USD 60.7% SGD SGD 4.4% 10.7% CAD DKK NOK 6.1% SEK CAD 6.1% CHF NOK 12.7% SEK Top ten holdings 1 UK Treasury Gilt 5.0% 2025 11.7% 6 Canadian Gov I-L 1.5% 2023 4.9% 2 UK Treasury Gilt 1.75% 2022 9.7% 7 US Treasury I-L Bond 0.125% 2029 4.8% 3 UK Treasury Gilt 4.25% 2027 8.9% 8 US TIP 1.75% 2022 4.8% 4 UK Treasury I-L Gilt 0.125% 2029 5.7% 9 UK Treasury Gilt 4.25% 2032 4.8% 5 UK Treasury I-L Gilt 1.25% 2027 5.6% 10 Denmark I-L 0.1% 2023 4.4%Source: Smith & Williamson Investment Management, 31.07.2012 11
For professional advisers only | www.sandwfunds.comProduct features• Dublin ICVC (UCITS) – sub-fund of the existing Dublin umbrella company Smith & Williamson Investment Funds Plc• Settlement T+4• Dealing: 5pm each Irish business day; Valuation: 11.59pm each Irish business day• XD dates: Interim: 31 March Final: 30 September• Distribution within six weeks of the XD date• ISAable• Four single priced £ share classes: A share class: retail (income and accumulation) B share class: institutional (income and accumulation)• Charges A share class: Initial up to 5% AMC 1% (charged to income)• Minimum Investment: Initial: £1,000, Subsequent: £1,000• Charges B share class: Initial up to 5% AMC 0.65% (charged to income)• Minimum Investment: Initial: £250,000, Subsequent: £1,000 12
For professional advisers only | www.sandwfunds.comSummary• Unusually low interest rates likely to persist• Aiming to protect capital in uncertain times• Minimising credit risk• Aiming to protect against inflation and deflation• Focusing on safe haven assets 13
For professional advisers only | www.sandwfunds.comKey risks Key risks •Investment does involve risk. The value of investments can go down as well as up and investors may not receive back the original amount invested. •The Fund will invest in government bonds globally, but substantially in UK government bonds. It will therefore carry a lower degree of credit risk than funds investing in corporate fixed income or equity securities. However, please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed income for a fixed period with a fixed return of capital are lost. •The Fund will be exposed to credit risk on parties with whom it trades and may also bear the risk of settlement default. •Not all government securities are backed by the full faith and credit of the relevant national government. Some are backed only by the credit of the issuing agency which accordingly subjects the fund to additional credit risk. •When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable. •Past performance is not a guide to future performance. •Investment is subject to documentation (Prospectus, Key Investor Information Document (KIID) and Terms & Conditions), copies of which can be obtained free of charge in English from Smith & Williamson Investment Management Limited, 25 Moorgate, London EC2R 6AY or online www.sandwfunds.com 14
For professional advisers only | www.sandwfunds.comAppendix
For professional advisers only | www.sandwfunds.comSmith & WilliamsonShort-Dated Corporate Bond Fund • A short-dated corporate bond fund Investing in £, $ and € bonds • Aims to provide investors with a higher yield than cash. Underlying yield** GRY** Retail Share Class 3.8% 0.6% Institutional Share Class 4.1% 0.9% • Current size £474million * • ISAable • Target audience: Investors seeking a better yield than cash without excessive credit risk With a 12 month+ investing horizon*As at 31.08.12. **The Underlying yield reflects the annualised income net of expenses of the Fund as a percentage of the mid-marketunit price of the Fund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminarycharge and investors may be subject to tax on distributions. GRY stands for Gross Redemption Yield. The GRY is a forecast of the totalreturn on the Fund taking account of expected income receipts and capital charges if all holdings are held to redemption. Yield figuresare unaudited as at 31.07.12.For a full description of the risks please read the risk section of the Fund’s prospectus. 16
For professional advisers only | www.sandwfunds.comPerformance – A share class 122 120 118 116 114 112 110 108 106 104 102 100 98 96 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 A share class TR daily gross A share class TR daily net*Source: Morningstar. Data from launch, mid to mid, excluding initial charges, income reinvested at exdividend dates, to 31.07.12.*Net of UK basic rate tax 17For a full description of the risks please read the risk section of the Fund’s prospectus.
For professional advisers only | www.sandwfunds.com Smith & Williamson Fixed Interest Trust • A bond fund with a strategic view that:- Bonds are in a secular bull market due to global disinflationary pressures Western government yield curves are becoming more Japanese Credit risk needs to be properly rewarded otherwise government debt is favoured • And a tactical view that:- The steepness of the yield curve should be exploited Non-sterling bonds can offer attractions either fully hedged or nakedFor a full description of the risks please read the risk section of the Fund’s prospectus. 18
For professional advisers only | www.sandwfunds.comGross five year performance 160 150 140 130 120 110 100 90 80 70 Jul - 07 Jan -08 Jul -08 Jan - 09 Jul -09 Jan - 10 Jul -10 Jan - 11 Jul -11 Jan -12 Jul -12 Smith & Williamson Fixed Interest Trust IMA OE £ Corporate Bond IMA OE £ Strategic BondSource: Morningstar direct, Mid to mid, excluding initial charges,including net income reinvested at ex dividend dates, to 31.07.12.For a full description of the risks please read the risk section of the Fund’s prospectus. 19
For professional advisers only | www.sandwfunds.comSmith & WilliamsonMedium-Dated Corporate Bond Fund • A medium-dated corporate bond fund Investing in £, $ and € bonds • Aims to provide investors with a positive return through investment predominantly in medium-dated investment grade corporate bonds (6-12 years maturity). Underlying yield* GRY* Retail Share Class 3.2% 1.7% Institutional Share Class 3.6% 2.0% • ISAable • Target audience: Investors seeking to exploit a well defined and relatively steep part of the yield curve in a disciplined and focused way. With at least a one year investment horizon*The underlying yield reflects the annualised income net of expenses of the Fund as a percentage of the mid-market unit price of theFund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminary charge and investorsmay be subject to tax on distributions. GRY stands for Gross Redemption Yield. The GRY is a forecast of the total return on the Fundtaking account of expected income receipts and capital charges if all holdings are held to redemption. Yield figures are unaudited as at31.07.12.For a full description of the risks please read the risk section of the Fund’s prospectus. 20
For professional advisers only | www.sandwfunds.com Portfolio characteristics Credit rating breakdown Maturity breakdown Underlying currency breakdown (hedged back to sterling) 2.0% 2.0% 6.9% 8.1% 14.4% 38.2%30.3% 6.1% 20.2% 24.3% 34.1% 38.6% 13.0% 61.8% AAA AA A 6 - 7 Years 7 - 8 Years GBP USD BBB NR Cash 8 - 9 Years 9 - 10 Years 10 - 11 Years 11 - 12 Years Source: Bloomberg and Smith & Williamson Investment Management, all data as at 31.07.12. For a full description of the risks please read the risk section of the Fund’s prospectus. 21
For professional advisers only | www.sandwfunds.comDisclaimerFor professional advisers only - not for use by or distribution to retail investors. This document contains information believed to be reliable butno guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitationto buy or sell any investment referred to in this document. Smith & Williamson Investment Management (SWIM) documents may contain futurestatements which are based on our current opinions, expectations and projections. Smith & Williamson Investment Management does notundertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate adviceshould be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from basedon this publication.The opinions expressed are those held by SWIM at the time of going to print and are subject to change. This material should not be considered bythe recipient as a recommendation relating to the acquisition or disposal of investments. This material does not contain sufficient information tosupport an investment decision and investors should ensure that they obtain all available relevant information before making any investment.There can be no assurance that the professionals currently employed by SWIM will continue to be employed by SWIM or that the pastperformance or success of any such professional serves as an indicator of such professional’s future performance or success.There can be no assurance that the Fund will achieve its investment objective, the target return or any other objectives. Any target return shown isneither guaranteed nor binding on the Manager.Any information about specific stocks or investments is given for illustrative purposes. It is considered to be accurate at the time of writing but nowarranty of accuracy is given and no liability in respect of any error or omission is accepted. Any examples of specific stocks are included solely toillustrate the investment process and strategies which may be utilised by the Fund. These investments are not necessarily representative of futureinvestments that the Fund will make.The Smith & Williamson Global Government Bond Fund, Smith & Williamson Short-Dated Corporate Bond Fund and the Smith & WilliamsonMedium-Dated Corporate Bond Fund are sub-funds of Smith & Williamson Investment Funds PLC, a Dublin domiciled OEIC regulated by the by theIrish Financial Services Regulatory Authority. The Funds are a recognised scheme under section 264 of the Financial Services and Markets Act 2000.The rules made under the Act for the protection of private customers (for example, those conferring rights to cancel or withdraw from certaininvestment agreements) do not apply in connection with an investment in the Funds. In addition, the protections available under the FinancialServices Compensation Scheme and the Financial Ombudsman Service may not be available.Smith & Williamson Fixed Interest Trust is a UK domiciled unit trust authorised by the UK’s Financial Services Authority.Issued in the UK by Smith & Williamson Investment Management Limited which is authorised and regulated by the Financial Services Authority(registration number is 131816).Ref: 614/2012/db 22
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