Europe Update Raj Shant – Investment manager – European Equities

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  • Geographic allocation within the Fund is a function of stock selection while operating an unconstrained investment approach means that sector allocation is chiefly driven by Newton global thematic process. When compared to the FTSE W Europe ex UK Index, the Newton European Higher Income Fund currently has marked overweights in the telecoms, consumer services, basic materials and oil and gas sectors with corresponding underweights in the consumer goods, healthcare, technology and industrial sectors. At the country level, the Fund is currently overweight Italy, Sweden, Greece, Belgium and Finland and underweight Spain, France, Switzerland and the Netherlands
  • Europe Update Raj Shant – Investment manager – European Equities

    1. 1. Europe Update Raj Shant – Investment manager – European Equities June 2008
    2. 2. European equities at Newton <ul><li>Our outlook earlier this year </li></ul><ul><li>Our outlook for Europe now </li></ul><ul><li>Portfolio positioning in the European Equity Strategy </li></ul><ul><li>Summary </li></ul>
    3. 3. Our outlook earlier this year <ul><li>We felt that the credit crisis was far from over </li></ul><ul><li>We argued that the world was underestimating the broader ramifications of the likely credit contractions </li></ul><ul><li>We felt that Central Banks would be stuck between rising inflation and the faltering banking system </li></ul><ul><li>We were underweight banks, real estate and consumer discretionary sectors </li></ul><ul><li>We found lots of interesting investment opportunities in large cap companies with low leverage </li></ul><ul><li>We liked companies in the energy space, in telecoms and healthcare </li></ul><ul><li>Much of this has played out in the markets so far this year, resulting in strong performance against the benchmark and the peers across our European equity strategies </li></ul>
    4. 4. <ul><li>Bottom-up stock picking with conviction </li></ul><ul><li>Strong risk adjusted returns </li></ul><ul><li>The process has been in place for nearly 30 years </li></ul>Newton Pan European Equity Composite versus FTSE Eurofirst 300 Index Quarterly performance relative to the benchmark (%) Pan European Equity Strategy - performance Please see appendix for full disclosure information To 31/05/08 Source: Newton
    5. 5. Our economic outlook for Europe now <ul><li>We think the ECB is doing the right thing </li></ul><ul><li>Despite slowing growth in the short term, it will ensure a healthier recovery </li></ul><ul><li>European households’ stronger balance sheets reduce the risk from raising rates </li></ul><ul><li>Euro strength and higher rates will dampen growth but set the stage for a stronger ’09 </li></ul><ul><li>Food and fuel inflation pose less risk in Europe than elsewhere </li></ul>
    6. 6. Our thematic outlook for Europe now <ul><li>Thematically we move from Debt & Credit to All Change, conclusions are similar but broader </li></ul><ul><li>Europe continues to offer global leadership investments relating to our Earth Matters theme </li></ul><ul><li>Large Cap Laggards, Medical Technology and Networked World themes continue to throw up liquid, high quality, low leverage investment opportunities </li></ul><ul><li>Our long term exposures to Developing Economy, Global Realignment and Old Economy themes continue to do well </li></ul><ul><li>The diverse and heterogeneous nature of European equity markets throws up an abundance of stock selection opportunities </li></ul>
    7. 7. Idea generation <ul><ul><li>Global leader in a high growth sector with excellent pricing power </li></ul></ul><ul><ul><li>Non-cyclical growth drivers - increased focus on environmental and sustainable energy </li></ul></ul><ul><ul><li>Growth opportunities in developing markets </li></ul></ul><ul><ul><li>Management is committed to financial discipline and high ROCE </li></ul></ul>Held across all European equity portfolios Stock selection example: Acciona Portfolio holdings are subject to change at any time without notice and should not be construed as investment recommendations <ul><ul><li>High ROCE suggests invested capital is undervalued </li></ul></ul><ul><ul><li>Attractive PE valuation relative to growth and peers </li></ul></ul><ul><ul><li>Low earnings risk - should surprise on upside due to ongoing investment opportunities and high power prices </li></ul></ul>Themes
    8. 8. Newton Pan European Strategy Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as a investment recommendations Source: Newton, as at 31 May 2008 Stock selection drives regional allocation Country allocation relative to FTSE Eurofirst 300 France UK Greece Finland Ireland Netherlands Portugal Switzerland Sweden Spain Denmark Austria Italy Belgium US Russia Cash Norway Germany
    9. 9. Newton Investment Management Limited Newton Pan European Equities - Annual Disclosure Presentation <ul><ul><li>Newton Pan European Equities Composite contains fully discretionary portfolios and for comparison purposes is measured against the FTSE Eurotop 300 and MSCI Europe indices. Returns include the effect of foreign currency exchange rates.   </li></ul></ul><ul><ul><li>Newton has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).   </li></ul></ul><ul><ul><li>‘ Newton’ refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited, Newton Capital Management LLC and Newton Fund Managers (CI) Limited. Assets under management include assets managed by all of these companies except Newton Capital Management LLC, which provides marketing services in the U.S. for Newton Capital Management Limited Except for Newton Capital Management LLC and Newton Capital Management Limited, none of the other Newton companies offer services in the U.S. The firm maintains a complete list and description of composites, which is available upon request.   </li></ul></ul><ul><ul><li>Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Non-fee-paying accounts are not included in this composite. Capital gains, dividend and interest received may be subject to withholding taxes imposed by the country of origin and such taxes may not be recoverable. The FTSE and MSCI Index ranges are calculated gross of withholding taxes . Past performance is not indicative of future results.   </li></ul></ul><ul><ul><li>The U.S dollar is the currency used to express performance. Further information regarding the exchange rates used is available upon request. Returns are presented net and gross of management fees and include the reinvestment of all income. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. The fee schedule appropriate for this presentation starts at 0.25% per annum subject to a minimum of £100,000, however, individual fees are negotiated on an account by account basis .   </li></ul></ul><ul><ul><li>The Newton Pan European Equities Composite was created 3Q00.  </li></ul></ul><ul><ul><li>Newton has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS ®). For each of the years from 1996 to 2005, Newton has been verified by an independent verifier. Copies of the verification reports are available upon request. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. </li></ul></ul>N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. * Part period return – Composite inception 1 st April 1999.
    10. 10. Important information <ul><li>Newton Capital Management Limited </li></ul><ul><li>‘ Newton’ refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited, Newton Capital Management LLC and Newton Fund Managers (CI) Limited. Assets under management include assets managed by all of these companies except Newton Capital Management LLC, which provides marketing services in the U.S. for Newton Capital Management Limited Except for Newton Capital Management LLC and Newton Capital Management Limited, none of the other Newton companies offer services in the U.S. </li></ul><ul><li>Past performance is not a guide to future returns. 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. The value of overseas securities will be influenced by fluctuations in exchange rates. If part of the portfolio is invested in sub-investment grade bonds, which typically have a low credit rating and carry a high degree of default risk, then please be aware that this can affect the capital value of your investment. If the portfolio has exposure to hedge funds, gold, private equity and property via publicly quoted transferable securities, then there are additional risks associated with these sectors. The information contained within this document should not be construed as a recommendation to buy or sell a security. It should not be assumed that a security has been - or will be - profitable. There is no assurance that a security will remain in the portfolio. </li></ul><ul><li>The opinions expressed in this presentation are those of Newton Capital Management Limited and should not be construed as investment advice. In addition the information should not be construed as a recommendation to buy or sell a security. This presentation is for professional investors only. </li></ul><ul><li>Where referencing MSCI Index performance figures: Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent. </li></ul><ul><li>Newton Capital Management Limited is an investment management firm authorized and regulated in the United Kingdom by the Financial Services Authority in the conduct of investment business and is a wholly owned subsidiary of the Bank of New York Mellon Corporation. Registered in England no: 2675952. </li></ul><ul><ul><li>Tel: (516) 338 3521 </li></ul></ul><ul><ul><li>web: www.newton.co.uk/us </li></ul></ul><ul><li>Newton Investment Management Limited </li></ul><ul><li>This presentation is for professional investors only. The opinions expressed in this presentation are those of Newton Investment Management and should not be construed as investment advice. In addition the information contained in this presentation should not be construed as a recommendation to buy or sell a security. </li></ul><ul><li>Newton Investment Management Limited </li></ul><ul><li>The Bank of New York Mellon Centre </li></ul><ul><li>160 Queen Victoria Street </li></ul><ul><li>London EC4V 4LA </li></ul><ul><li>Registered in England No. 1371973 </li></ul><ul><li>Tel: 020 7163 9000 </li></ul><ul><li>www.newton.co.uk </li></ul><ul><li>Registered office: As above </li></ul><ul><li>Authorised and regulated by the Financial Services Authority The Bank of New York Mellon Corporation SM </li></ul>

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