13.10 convertibles and the great rotation

40
OCTOBER 2013 Convertibles and the Great Rotation For Professional Investors and Advisers Only

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Transcript of 13.10 convertibles and the great rotation

Page 1: 13.10 convertibles and the great rotation

O C T O B E R 2 0 1 3

Convertibles and the Great Rotation

For Professional Investors and Advisers Only

Page 2: 13.10 convertibles and the great rotation

RWC

| RWC 1

Convertible Bond – asymmetric return profile

Junk – distressed credits with high likelihood of a company default.

Bond proxy – parity value significantly below bond floor and therefore insensitive to movements in the underlying equity. Delta range between 0% and 20%.

Balanced convertibles – most attractive risk/return profile. Rate of change in sensitivity to equity price accelerates as equity rises and decelerates as equity falls. Delta range between 20% and 70%.

Equity proxy – virtual equity with delta 70% - 100%. Importantly bond floor significantly below the convertible price and therefore provides little support as equity falls.

Page 3: 13.10 convertibles and the great rotation

RWC

| RWC 2

Why invest in Convertible Bonds? – Ideal for Multi-Asset Portfolios

Source: Bloomberg, UBS, RWC

Why buy convertibles:

• Upside potential of equities and downside protection of bonds

• Provides an asymmetric risk/return profile

• Strong risk adjusted returns

• Low duration asset class

• Lower duration exposure within a fixed income portfolio

• Low correlation with other fixed income instruments

• Increases diversification within a multi-asset portfolio

• Improves efficient frontier

• Provides exposure to volatility through embedded call options

• Long-only investors can benefit from volatility exposure

• Equity exposure without taking all the downside risk

if equities fall

• Puts, resets and takeover ratchets (which can be particularly attractive in this market environment)

Annualised Return & Volatility of Global Equities, Convertibles & Bonds (1996 – June 2013)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Convertible Bonds Equities Government Bonds

Annualised Return (LHS) Annualised Std. Dev. (LHS) Sharpe Ratio (RHS)

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RWC

| RWC 3

Performance Comparison

Source: UBS, Citi, RWC, September 2013

Global Convertible Bonds vs. Global Equities

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

UBS Global Focus Convertible Index MSCI World Equity Index

Page 5: 13.10 convertibles and the great rotation

RWC

| RWC 4

Performance Comparison

Source: UBS, Citi, RWC, September 2013

RWC Asia Convertibles vs. MSCI Asia Ex-Japan Equity Index

60

65

70

75

80

85

90

95

100

105

110

Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13

MSCI Asia Ex-Japan Equity Index RWC Asia Convertibles

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RWC

| RWC 5

Convertible Bonds – Correlation Analysis

Source: Bloomberg, MSCI, BoA-ML, RWC. Data as at end of 1996 to end of 2012. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Asset Class Correlation with

Convertibles Bonds Annualised Volatility

Global Convertible Bonds 1.00 8.89

Global 7-10yr Corporate Bonds 0.13 5.52

Global 3-5yr Corporate Bonds 0.08 4.99

Global 7-10yr Sovereign Bonds -0.06 11.58

Global 3-5yr Sovereign Bonds -0.04 10.65

US Treasuries/Agencies 7-10yr -0.22 6.25

US Treasuries/Agencies 3-5yr -0.23 3.32

US 3month T-Bills -0.08 0.34

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RWC

| RWC 6

Convertible Bonds Through Monetary Cycles

Sources: Chart: Bloomberg, MSCI, UBS, BoA-ML, RWC. December 2012. Table: Bloomberg, MSCI, UBS, BoA-ML, RWC. December 2012.

Performance Through Monetary Cycles Performance in Different Interest Rate Environments

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0

50

100

150

200

250

300

1997 2000 2003 2006 2009 2012

UBS Global Focus Convertible Bond IndexMSCI World Total Return Equity IndexBoA-ML 1-3yr Global Investment Grade Corporate Bond IndexG3 Base Rates

Equities Convertible

Bonds Corporate

Bonds

FALLING INTEREST RATES

February 2001 - August 2004 -13.7% -2.4% 28.7%

September 2007 - March 2009 -51.2% -28.4% -4.7%

FLAT INTEREST RATES

January 1997 - August 1999 57.2% 36.1% 13.6%

March 2009 - December 2012 96.7% 46.5% 29.7%

RISING INTEREST RATES

August 1999 - February 2001 2.7% 13.2% 4.2%

August 2004 - September 2007 73.3% 34.3% 15.3%

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RWC

| RWC 7

Equities Convertible

Bonds Corporate

Bonds

EXPANSIONARY PERIOD

January 1997 - November 2000 65.8% 49.2% 15.7%

August 2001 - August 2007 74.7% 37.8% 42.1%

March 2009 - December 2012 80.0% 43.0% 26.9%

RECESSIONARY PERIOD

November 2000 - August 2001 -19.6% -4.6% 5.0%

August 2007 - March 2009 -44.8% -24.4% -0.8%

Convertible Bonds Through Business Cycles

Sources: Chart: Bloomberg, MSCI, UBS, BoA-ML, NBER, RWC. December 2012. Table: Bloomberg, MSCI, UBS, BoA-ML, RWC. December 2012.

0

50

100

150

200

250

300

1997 2000 2003 2006 2009 2012

NBER Recession DatesUBS Global Focus Convertible Bond IndexMSCI World Total Return Equity IndexBoA-ML 1-3yr Global Investment Grade Corporate Bond Index

Performance Through Business Cycles

Performance in Expansionary and Recessionary Periods

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RWC

| RWC 8

Convertible Bond Volatility

Source: Bloomberg, MSCI, UBS, CBOE, RWC. December 2012 Table: Bloomberg, MSCI, UBS, CBOE, RWC. December 2012

0

10

20

30

40

50

60

70

Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12

VIX (3-month Moving Average)

Annual Volatility of UBS Global Focus Convertible Bond Index (3-month Moving Average)

VIX

Average Equities

Convertible Bonds

January 1997 - January 2004 24.0 45.1% 55.0%

January 2004 - June 2005 14.7 12.2% 1.2%

June 2005 - July 2007 12.7 50.1% 29.3%

July 2007 - August 2008 23.0 -15.7% -10.4%

August 2008 - December 2009 36.4 -9.5% 3.5%

December 2009 - December 2012 21.4 24.1% 16.2%

Performance in Different Volatility Environments

0

5

10

15

20

25

0

10

20

30

40

50

60

70

Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12

VIX (3-Month Moving Average) (LHS)Annual Volatility of VIX (3-Month Moving Average) (RHS)

Equity Volatility Developments

Equity Volatility and Convertible Bond Volatility

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RWC

| RWC 9

Delta / Equity Sensitivity (disciplined portfolio construction)

• Balanced delta exposure of between 30 – 50%, focused on high convexity names (Gamma)

• Provide upside equity exposure with bond floor protection

Global portfolio - diversified by region and sector

• Avoid regional delta and sectorial concentrations

• New issue calendar

Optimum approach is index unconstrained

• Convertibles are issued opportunistically & fashionable sectors enjoy heavy issuance (TMT bubble, property in 2007)

• Equity sensitivity usually highest at equity markets peaks, and vice versa / indices can be misrepresentative

Focus on high credit quality and use of internal ratings where bonds are non-rated

• Typically a minimum of 50% in formally rated investment grade securities

• High emphasis on valuing non rated securities (typically 40% of the convertible universe)

Volatility

• Focus on cheap implied volatility within convertible bonds & low volatility of returns within fund

• Volatility provides diversification within a multi-asset class portfolio

Little or no use of “Synthetic” structures

• Implied volatility compression / liquidity and transparency / potentially high concentration of credit risk to financial counterparties

Objective: To provide long term capital appreciation through a well balanced portfolio of global convertible bonds, focusing on stock selection and disciplined management to give the optimal profile throughout the market cycle.

RWC Global Convertibles Fund – Philosophy & Approach

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RWC

| RWC 10

RWC Global Convertibles – Delta Breakdown

Source: RWC / Nomura

End of September 2013

Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range

Delta Contribution RangeDelta Exposure vs. Region vs. Region WeightDelta Contribution by Region

Delta Contribution by Sector

0.1

0.4

2.7 3.0

7.4

10.7

8.2

9.7

6.4

3.0

-

2

4

6

8

10

12

10 20 30 40 50 60 70 80 90 100

Cons. Disc. 59%

Finan. 40%

Indust. 57%

IT 60%

Telec. Sv c. 49%

Health Care 70%

Cons. Stap. 39%

Mat. 59%

Energy 46%

Util. 59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

9.6

7.1

6.1

10.0

1.4

6.7

1.9

3.2

4.1

1.5

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Cons. Disc.

Finan.

Indust.

IT

Telec. Svc.

Health Care

Cons. Stap.

Mat.

Energy

Util. SUM = 51.6

South America 64.8%

North America 59.4%

Japan 56.3%

Europe 52.4%

Af rica 45.5%

Weighted Av erage

Delta 51.6%

Australia 44.8%

Asia 40.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1.8%2.7%

10.3%

8.4%

16.5%

19.6%

12.5% 13.1%

7.6%

3.2%

0%

5%

10%

15%

20%

25%

10 20 30 40 50 60 70 80 90 100

1.4

24.7

5.3

13.0

0.7

0.2

6.4

0.0 5.0 10.0 15.0 20.0 25.0 30.0

South America

North America

Japan

Europe

Africa

Australia

AsiaSUM = 51.6

WeightedAv erage

Delta51.6%

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RWC

| RWC 11

UBS Global Focus –Delta Breakdown

Source: RWC / UBS

Delta Contribution by Region

Delta Contribution by Sector Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range

Delta Contribution RangeDelta Exposure vs. Region vs. Region Weight

0.4

0.9

2.3

3.7

6.0

8.7

7.1 7.2

9.4

3.5

-

1

2

3

4

5

6

7

8

9

10

10 20 30 40 50 60 70 80 90 100

Cons. Disc. 51%

Finan. 41%

Indust. 57%

IT 63%

Telec. Sv c. 39%

Health Care 57%

Cons. Stap. 42%

Mat. 42%

Energy 36%

Util. 46%

0%

10%

20%

30%

40%

50%

60%

70%

80%

6.9

7.3

6.7

10.9

1.3

5.8

1.5

3.0

3.9

2.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Cons. Disc.

Finan.

Indust.

IT

Telec. Svc.

Health Care

Cons. Stap.

Mat.

Energy

Util. SUM = 49.2

South America

68%North

America 57%

Japan 55.1%

Europe 49.8%

Af rica 43.6%

Weighted Av erage

Delta 49.2%

Asia 31%

Australia 25.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

10.3%

5.7%

9.1%

10.4%

13.4%

15.8%

10.7%9.8%

11.1%

3.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

10 20 30 40 50 60 70 80 90 100

2.4

19.0

2.9

18.0

0.7

6.1

0.1

0.0 5.0 10.0 15.0 20.0

South America

North America

Japan

Europe

Africa

Asia

AustraliaSUM = 49.2

WeightedAv erage

Delta49.2%

End of September 2013

Page 13: 13.10 convertibles and the great rotation

RWC

| RWC 12

Example: Equinix Convertible Bonds (Aug 2010 – Dec 2011 )

Source: Nomura, Bloomberg, RWC, 2012

75

85

95

105

115

125

135

Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11

EQIX 2.5% 2012 CBs EQIX 3% 2014 CBs EQIX Stock

1. EQIX shares fall by 33% after the company's lowered revenue guidance for Q3'10 and FY'10 by 2% and 1%, respectively. Our analysis led us to believe that the share price reaction was far overdone, and that our fundamental thesis remained intact. In response to the 33% decline in share price, the more conservative EQIX 2.5% convertible bonds lose only 8% of their value. The higher-delta 3% 2014 convertible bonds lose 16% of their value.

2. Due to the drop in the share price, the profiles of the two convertibles undergo a significant transformation. The 2.5% 2012 convertibles move from a delta of 33% with a gamma of 1.5 to a delta of only 12% with a gamma of 0.9. At this point, the 2.5% 2012 convertible bonds offer very little equity participation, but they do retain some convexity. Meanwhile, the 3% 2014 convertible bonds move from a 70% delta to a 37% delta, whilst gamma increases from 0.4 to 1.6. Given the dramatic change in the profiles of the two convertible bonds, as well as our fundamental view on the company, switching from the 2012 bonds to the 2014 bonds becomes a very attractive trade. It is in these situations that active management of a convertible bond fund becomes especially important.

3. As the EQIX share price stages a recovery, the 3% 2014 convertible bond is able to participate to a greater degree than the 2.5% 2012 bond. Over this period, the stock delivers investors a total return of 33.3% with a vol of 31.3%. The 2012 2.5% convertible bonds a total return of 11.1% with a vol of 6.9%. The 2014 3.0% convertible bonds deliver a total return of 24.9% with a vol of 14.2%.

Page 14: 13.10 convertibles and the great rotation

O C T O B E R 2 0 1 3

Global Convertibles Fund

For Professional Investors and Advisers Only

Page 15: 13.10 convertibles and the great rotation

RWC is an active investment manager

• Independent and owner managed since its foundation in 2000 and centered around skill-based, active fund management.

• Experienced and trusted portfolio managers accomplish the best results when they are free from artificial restrictions. Our portfolio managers take full accountability for investment decisions, having no house investment style.

• Our clients – we invest on behalf of both intermediaries and institutions that look to us to grow the real value of their assets without exposing them to undue risks.

Focus on longevity and stability

• Employee ownership generates a level of stability and professionalism essential to the ongoing strength of a fund management business.

• Strong focus on performance and a solid risk management culture lies at the heart of our business which is built around highly-talented portfolio managers.

• An unconstrained approach to investing means that our portfolio managers can express their views without hindrance or artificial restrictions. We offer fund management expertise with a strong focus on liquidity.

• Matching fund capacity with the investment approach ensures long-term success of our investment processes.

RWC Introduction to RWC

| RWC 14

Page 16: 13.10 convertibles and the great rotation

RWC

| RWC 15

Delta / Equity Sensitivity (disciplined portfolio construction)

• Balanced delta exposure of between 30 – 50%, focused on high convexity names (Gamma)

• Provide upside equity exposure with bond floor protection

Global portfolio - diversified by region and sector

• Avoid regional delta and sectorial concentrations

• New issue calendar

Optimum approach is index unconstrained

• Convertibles are issued opportunistically & fashionable sectors enjoy heavy issuance (TMT bubble, property in 2007)

• Equity sensitivity usually highest at equity markets peaks, and vice versa / indices can be misrepresentative

Focus on high credit quality and use of internal ratings where bonds are non-rated

• Credit quality of the overall portfolio is typically investment grade equivalent, no securities rated below B-

• High emphasis on valuing non rated securities (c. 50% of the convertible universe)

Volatility

• Focus on cheap implied volatility within convertible bonds & low volatility of returns within fund

• Volatility provides diversification within a multi-asset class portfolio

No use of “Synthetic” structures

• Implied volatility compression / liquidity and transparency / potentially high concentration of credit risk to financial counterparties

Objective: To provide long term capital appreciation through a well balanced portfolio of global convertible bonds, focusing on stock selection and disciplined management to give the optimal profile throughout the market cycle.

RWC Global Convertibles Fund – Philosophy & Approach

Page 17: 13.10 convertibles and the great rotation

RWC

| RWC 16

Cheapness to Fair Value

Source: Nomura, March 2013

-14

-12

-10

-8

-6

-4

-2

0

2

4

Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

Japan Cheapness to Fair Value

-30

-25

-20

-15

-10

-5

0

5

Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

Asia ex Japan Cheapness to Fair Value

-20

-15

-10

-5

0

5

10

Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

Europe Cheapness to Fair Value

-35

-30

-25

-20

-15

-10

-5

0

5

Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

US Cheapness to Fair Value

Page 18: 13.10 convertibles and the great rotation

RWC

| RWC 17

RWC Infrastructure & Support

• Former Lead Manager of Morgan Stanley Global Convertible bond fund

• Extensive long – only portfolio management expertise and track record

• Broad macro/fixed income experience • Previously Global Fixed Income

Product Specialist at Fortis Investments

• Credit research & company modelling

• Former Credit Analyst for Morgan Stanley Global Convertible Fund

• Quantitative expertise • Former member of equity fund

management team focusing on Asian equities

Davide Basile

Esther Watt, CFA Michelle Shi

Lakshman Harendran

• Leverages internal trading capabilities

• System for automated convertible exchange being considered

• Bi-weekly analyst meetings • Informal and free flowing information

exchange • Leveraging of internal expertise

• Client support • Reporting literature & updating

• Operational support • Corporate actions / cash

management • Reconciliations • Portfolio Analytics support

Operations Trading Support Client Reporting Other Inv. Teams

RWC Global Convertibles – Investment Team

Page 19: 13.10 convertibles and the great rotation

RWC

| RWC 18

• Continual monitoring process to assess appropriate “Greek” adjusted exposures

• Delta adjusted see – through analysis • Portfolio credit attribution and delta adjusted

breakdown • Modified duration exposure portfolio analysis • Implied volatility curve monitoring

• Gamma focused portfolio adjustment • Strong emphasis on Call and Put monitoring • Liquidity

• Portfolio built bottom-up, focused on absolute (not relative) returns • Seek diversification across industry, country and sector (on delta basis) • Maintain balanced delta profile • Scrutinise portfolio for unintended risks • Execution an integral part of process due to nature of market

• Decide macroeconomic landscape and top down risk levels • Assess market liquidity • Determine exposure levels

• Delta / Omega / Rho / Vega • Determine convertible trends • New issuance

Equity • Screening model to filter universe • Emphasis on value and cash flow factors • Rigorous fundamental assessment • Global perspective – identification of anomalies & themes

Credit • Research focused on ascertaining strength of bond floor • Trends in credit ratios seen as important as actual level of ratio • Equity market often provides lead indication of deterioration in credit fundamentals

Fundamental Analysis

Portfolio Construction

Macroeconomic and Thematic Insights

Risk Disaggregation

Investment Process – Disciplined, Proven Approach

Page 20: 13.10 convertibles and the great rotation

RWC

| RWC 19

• Create Company Model / Fundamental assessment / Valuation • Balance sheet and Cash flow analysis • Fundamental in understanding effect on company based on developing market trends

• Capacity • What is the adequate weight for the new holding based on credit worthiness • Issue size in relation to portfolio size

• Portfolio interaction • Vital to understand how new position interacts with overall portfolio • New delta adjusted sectoral, regional exposure and credit exposure

• Constructive exclusion • Does new position come at expense of existing position within the fund • Basis for re-evaluating current portfolio holdings

• Constantly update company model • As new information becomes available company models must be updated • Integrating new results releases and re-evaluating original rational for inclusion

• Positive target levels • Each position within the fund has a target level the convertible team believes the

equity/credit or convert can achieve • Once target levels are reached the position is re-evaluated for exclusion from

portfolio or re-evaluation of target levels based on updated information • Negative target levels

• Each position has a lower level which acts as a catalyst if position does not perform as expected

• Upon breach of the lower level, understanding rational (credit worsening / liquidity driven sell-off/company specific forecast misses / general market movement) may lead to selling position or resetting targets

• Capacity • Based on performance of position and fund flows weightings must be constantly

reconsidered

• New issues tend to come to market in a rapid book build method

• Focus is on cheapness of the deal based on: • Structure of bond (coupon / maturity / Puts &

Calls) • credit assumptions to determine bond floor in

conjunction with structure • Equity structure component (strike on call option /

convertibility of bond / equity volatility • Implied volatility of new issues

• Scenario analysis of variable terms • Once a convertible bond is determined as cheap

additional factors considered: • Issue size • Expected investor involvement (long-only / Hedge

Fund) • Underwriter • Grey Market • Rarity value

• Once participation in a new issue has occurred we re evaluate the holding as a new position and determine whether to hold or consider the trade a short term holding

• Participating in the new issue market may often be a short term trade that can generate significant alpha given the tendency of new issues to be brought to market at a slight discount to fair value

• Overall portfolio managed as a single unit • Optimised for gamma exposure • Delta / Omega / Rho exposure viewed in aggregate

Existing Positions

New Positions

Portfolio

New Issues

Investment Process - Methodology

Page 21: 13.10 convertibles and the great rotation

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| RWC 20

RWC Global Convertibles – Delta Breakdown

Source: RWC / Nomura

End of September 2013

Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range

Delta Contribution RangeDelta Exposure vs. Region vs. Region WeightDelta Contribution by Region

Delta Contribution by Sector

0.1

0.4

2.7 3.0

7.4

10.7

8.2

9.7

6.4

3.0

-

2

4

6

8

10

12

10 20 30 40 50 60 70 80 90 100

Cons. Disc. 59%

Finan. 40%

Indust. 57%

IT 60%

Telec. Sv c. 49%

Health Care 70%

Cons. Stap. 39%

Mat. 59%

Energy 46%

Util. 59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

9.6

7.1

6.1

10.0

1.4

6.7

1.9

3.2

4.1

1.5

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Cons. Disc.

Finan.

Indust.

IT

Telec. Svc.

Health Care

Cons. Stap.

Mat.

Energy

Util. SUM = 51.6

South America 64.8%

North America 59.4%

Japan 56.3%

Europe 52.4%

Af rica 45.5%

Weighted Av erage

Delta 51.6%

Australia 44.8%

Asia 40.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1.8%2.7%

10.3%

8.4%

16.5%

19.6%

12.5% 13.1%

7.6%

3.2%

0%

5%

10%

15%

20%

25%

10 20 30 40 50 60 70 80 90 100

1.4

24.7

5.3

13.0

0.7

0.2

6.4

0.0 5.0 10.0 15.0 20.0 25.0 30.0

South America

North America

Japan

Europe

Africa

Australia

AsiaSUM = 51.6

WeightedAv erage

Delta51.6%

Page 22: 13.10 convertibles and the great rotation

RWC

| RWC 21

UBS Global Focus –Delta Breakdown

Source: RWC / UBS

Delta Contribution by Region

Delta Contribution by Sector Delta Exposure vs. Sector vs. Sector Weight Delta Distribution Range

Delta Contribution RangeDelta Exposure vs. Region vs. Region Weight

0.4

0.9

2.3

3.7

6.0

8.7

7.1 7.2

9.4

3.5

-

1

2

3

4

5

6

7

8

9

10

10 20 30 40 50 60 70 80 90 100

Cons. Disc. 51%

Finan. 41%

Indust. 57%

IT 63%

Telec. Sv c. 39%

Health Care 57%

Cons. Stap. 42%

Mat. 42%

Energy 36%

Util. 46%

0%

10%

20%

30%

40%

50%

60%

70%

80%

6.9

7.3

6.7

10.9

1.3

5.8

1.5

3.0

3.9

2.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Cons. Disc.

Finan.

Indust.

IT

Telec. Svc.

Health Care

Cons. Stap.

Mat.

Energy

Util. SUM = 49.2

South America

68%North

America 57%

Japan 55.1%

Europe 49.8%

Af rica 43.6%

Weighted Av erage

Delta 49.2%

Asia 31%

Australia 25.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

10.3%

5.7%

9.1%

10.4%

13.4%

15.8%

10.7%9.8%

11.1%

3.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

10 20 30 40 50 60 70 80 90 100

2.4

19.0

2.9

18.0

0.7

6.1

0.1

0.0 5.0 10.0 15.0 20.0

South America

North America

Japan

Europe

Africa

Asia

AustraliaSUM = 49.2

WeightedAv erage

Delta49.2%

End of September 2013

Page 23: 13.10 convertibles and the great rotation

RWC

| RWC 22

RWC Global Convertible Bond Holdings – Delta Evolution

Source: RWC/ UBS

10

15

20

25

30

35

40

45

50

55

60

Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12

Del

ta (%

)

UBS Global Focus Index (EUR Hedged) Delta RWC Global Convertibles Fund Delta

Page 24: 13.10 convertibles and the great rotation

RWC

| RWC 23

RWC Global Convertibles – Credit Breakdown

Source: RWC/ UBS

End of September 2013

Credit Category Delta ContributionNR Distribution

Credit Categories vs. Delta Exposure vs. Portfolio WeightsRanked Credit Rating Attribution

B+

BB

BB-

B

BB+

B-

BBB-

AA-

BBB+

AAA

BBB

A

A-

BBB 0.51 Av . Credit

Rating Score

-0.40 -0.20 0.00 0.20 0.40 0.60

AAA 31.9%

AA- 49.8%

A 41.9%

A- 53.3%

BBB+ 50.8%

BBB 55.8%

BBB- 51.2%

BB+ 56.5%

BB 55.8%

BB- 70.1%B+ 66.4%

B 50.5%

B- 50.3%

Inv .Grade Delta Av erage 51%

-

Non Inv .Grade Delta Av erage 60.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1.6

0.4

7.6

5.4

10.7

13.2

4.7

8.1

3.2

4.0

0.9

0.5

0 2 4 6 8 10 12 14

AAA

A

A-

BBB+

BBB

BBB-

BB+

BB

BB-

B+

B

B-

0.9

1.6

2.9

5.5

4.1

11.0

7.6

3.5

5.1

3.9

4.3

0.9

0.3

0 2 4 6 8 10 12

AAA

AA-

A

A-

BBB+

BBB

BBB-

BB+

BB

BB-

B+

B

B-

Page 25: 13.10 convertibles and the great rotation

RWC

| RWC 24

RWC Global Convertibles – Interest Rate Sensitivity & Volatility Breakdown

Source: RWC/ UBS

End of September 2013

Interest Rate Sensitivity vs. Credit Rating vs. Portfolio Weight Interest Rate Contribution by Currency

Rho Exposure by Currency and Yield Curve Segment Vega vs. Difference between Implied and Historical Vol.

-

5

10

15

20

25

0 to 1 1 to 2 2 to 3 3 to 4 4 to 5 5 to 6 6 to 10 10 to 14 14 to 18 >18

GBP

OTHER

EUR

JPY

USD

AAA -1.08

AA- -3.41

A -2.38A- -1.04

BBB+ -1.1

BBB -1.55

BBB- -1.65

BB+ -1.64

BB -1.85BB- -1.45

B+ -1.42

B -0.89

B- -1.94

Inv .Grade Rho W. Av erage -1.6

-

Non Inv .Grade Rho W. Av erage -1.58

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

-

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0 EUR USD GBP JPY OTHER

-60%

-40%

-20%

0%

20%

40%

60%

-0.2 0 0.2 0.4 0.6 0.8

Portf olio Vega of 42.6%

His

toric

al -

Impl

ied

Vol

atili

ty Cheap Option

Expensiv e Option

Page 26: 13.10 convertibles and the great rotation

RWC

| RWC 25

RWC Global Convertibles – Portfolio Characteristics

Source: RWC/ UBS

End of September 2013

Number of Holdings 128

Credit Rating BBB

Delta 51.6%

Gamma 0.91 Current Yield 2.1%Yield to Put or Mat. -5.4%

Conversion Premium 19.0%Historical - Implied Vol. -4.0%

Vega 42.5%Omega -1.6%Rho 1.52-

Region

Sector

Credit Rating Implied

Credit Rating (formal rating)

Base Currency

Key Details

1.23.2

6.62.72.6

12.21.71.6

3.83.22.5

0.953.5

4.4

0 10 20 30 40 50 60

AAAAA-

AA-

BBB+BBB

BBB-BB+

BBBB-B+

BNR

Cash

60.8

20.2

4.0

2.2

0.4

0.7

8.6

3.1

0 20 40 60 80

USD

EUR

GBP

HKD

CNY

KRW

JPY

SGD

0.4

24.7

15.9

41.6

9.4

1.5

2.1

4.4

0 10 20 30 40 50

Australia

Europe

Asia

NorthAmerica

Japan

Africa

SouthAmerica

Cash

16.4

17.9

10.7

16.7

2.8

9.6

4.7

5.5

9.0

2.5

4.4

0 5 10 15 20

Cons. Disc.

Finan.

Indust.

IT

Telec. Svc.

Health Care

Cons. Stap.

Mat.

Energy

Util.

Cash

2.83.2

7.010.4

8.019.6

14.96.2

9.25.6

6.51.7

0.54.4

0.0

0 5 10 15 20 25

AAAAA-

AA-

BBB+BBB

BBB-BB+

BBBB-B+

BB-

Cash

% %

%

%

%

-

Page 27: 13.10 convertibles and the great rotation

RWC

| RWC 26

RWC Global Convertibles – Top 10 Holdings

Source: RWC/ UBS

End of September 2013

By Weight By Delta# Name Weight # Name Weight Delta

1 Daimler (Aabar) 4% 16 2.5% 1 Saw ai Pharmceutical 0% 15 0.3% 100.0%2 Siemens 1.65% 19 (WW) 2.5% 2 BioMarin Pharm 1.875% 17 0.4% 98.4%3 Galp Energia (ENI SpA) 0.25% 15 2.4% 3 Covanta Holding Corp 3.25% 14 0.4% 98.0%4 Linear Technology 3% 27 2.1% 4 Ford 4.25% 16 0.3% 95.2%5 Intel 3.25% 39 2.0% 5 Cubist Pharm 2.5% 17 0.5% 94.6%6 Glencore 5% 14 1.9% 6 Asahi Brew ery 0% 28 0.5% 94.5%7 Archer-Daniels 0.875% 14 1.7% 7 Lennar Corp (144A) 2% 20 0.4% 93.4%8 China Unicom 0.75% 15 1.7% 8 Xilinx Inc 2.625% 17 0.4% 90.6%9 Standard Chartered (Temasek) 0% 14 1.6% 9 Novellus Systems 2.625% 41 0.5% 89.8%10 Ares Capital 5.75% 16 1.6% 10 Nokia Oyj 5% 17 0.4% 88.6%

By Yield to Put/Mat By Gamma# Name Weight Yield to Put/Mat # Name Weight Gamma

1 China Precious Metal Resources 7.25% 18 0.1% 12.6% 1 FLEXium Interconnect Inc 0% 16 0.3% 9.17%

2 PennyMac (PennyMac Mtg) (144A) 5.375% 20 0.3% 6.2% 2 Nippon Meat Packers #5 0.7% 2.85%

3 Drillsearch Energy 6% 18 0.4% 4.5% 3 Boston Properties (144A) 3.625% 14 1.3% 2.51%

4 Starw ood Property Trust 4.55% 18 0.8% 3.5% 4 Linear Technology 3% 27 2.1% 2.43%

5 Steinhoff 6.375% 17 0.5% 3.3% 5 Sainsbury 4.25% 14 1.0% 2.35%

6 Redw ood Trust 4.625% 18 0.6% 3.1% 6 LifePoint Hospitals 3.5% 14 0.9% 1.81%

7 Comtech Tel 3% 29 0.4% 2.8% 7 CapitaMall Trust 2.125% 14 0.6% 1.79%

8 Hologic 2% 37 (2010) (B) 0.5% 2.7% 8 Pennon Group Plc 4.625% 14 0.5% 1.73%

9 Ares Capital 5.75% 16 1.6% 2.6% 9 BioMed Realty (144A) 3.75% 30 0.5% 1.70%

10 BioMed Realty (144A) 3.75% 30 0.5% 2.5% 10 PPR (Artemis) 3.25% 16 0.7% 1.66%

Page 28: 13.10 convertibles and the great rotation

Global Convertibles Fund A P P E N D I C E S

Page 29: 13.10 convertibles and the great rotation

RWC

| RWC 28

Repeat of 2008 Unlikely

Source: RWC, Bloomberg, Barclays Capital, Greenwich Survey. June 2013.

Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

HF (%) Long Only (%)

2007 63 37

2008 64 36

2009 45 55

2010 46 54

2011 41 59

2012 41 59

Europe CB Market - Changing balance between long-only and hedge fund investors

US CB Market - Changing balance between long-only and hedge fund investors

HF (%) Long Only (%)

2007 76 24

2008 76 24

2009 62 38

2010 55 45

2011 52 48

2012 51 49

500

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

29/08/2008 03/09/2008 08/09/2008 13/09/2008 18/09/2008 23/09/2008 28/09/2008

Chart 1: September 2008

MSCI World Total Return Index UBS Global Focus Convertibles IndexS&P 50 Total Return Index Euro Stoxx Total Return Index

-20%

-15%

-10%

-5%

0%

29/07/2011 03/08/2011 08/08/2011 13/08/2011 18/08/2011

Chart 2: End of July 2011 - August 19th 2011

MSCI World Total Return Index UBS Global Focus Convertibles IndexS&P 50 Total Return Index Euro Stoxx Total Return IndexS&P 500 Total Return Index

S&P 500 Total Return Index

Page 30: 13.10 convertibles and the great rotation

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| RWC 29

Why invest in Convertible Bonds? – Ideal for Multi-Asset Portfolios

Source: Bloomberg, UBS, RWC

Why buy convertibles:

• Upside potential of equities and downside protection of bonds

• Provides an asymmetric risk/return profile

• Strong risk adjusted returns

• Low duration asset class

• Lower duration exposure within a fixed income portfolio

• Low correlation with other fixed income instruments

• Increases diversification within a multi-asset portfolio

• Improves efficient frontier

• Provides exposure to volatility through embedded call options

• Long-only investors can benefit from volatility exposure

• Equity exposure without taking all the downside risk

if equities fall

• Puts, resets and takeover ratchets (which can be particularly attractive in this market environment)

Annualised Return & Volatility of Global Equities, Convertibles & Bonds (1996 – June 2013)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Convertible Bonds Equities Government Bonds

Annualised Return (LHS) Annualised Std. Dev. (LHS) Sharpe Ratio (RHS)

Page 31: 13.10 convertibles and the great rotation

RWC

| RWC 30

Convertible Bonds – Correlation Analysis

Source: RWC, Bloomberg, UBS, MSCI, BoA-ML. Data as at end of 1996 to end of 2012. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

Asset Class Correlation with

Convertibles Bonds Annualised Volatility

Global Convertible Bonds 1.00 8.89

Global Large-Cap Stocks 0.87 18.18

Global Mid-Cap Stocks 0.88 19.01

Global 7-10yr Corporate Bonds 0.13 5.52

Global 3-5yr Corporate Bonds 0.08 4.99

Global 7-10yr Sovereign Bonds -0.06 11.58

Global 3-5yr Sovereign Bonds -0.04 10.65

US Treasuries/Agencies 7-10yr -0.22 6.25

US Treasuries/Agencies 3-5yr -0.23 3.32

US 3month T-Bills -0.08 0.34

Page 32: 13.10 convertibles and the great rotation

RWC

| RWC 31

New Issuance Trends

Source: UBS, 30 September 2013

• Issuance has recently been picking up on a global basis but is still subdued relative to past levels

• Convertibles are an appealing financing vehicle and issuance increase as economy grows

0

2

4

6

8

10

12

Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13

US$

bn

Monthly Convertible Issuance 2012-13

US Europe Asia Japan Other

0

20

40

60

80

100

120

140

160

180

200

220

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(ann.)

US$

bn

Annual Convertible Issuance 2000-2013

US Europe Asia ex-Japan Japan Other

Page 33: 13.10 convertibles and the great rotation

RWC

| RWC 32

Performance of RWC Global Convertibles Fund

Source: Bloomberg & RWC as at 30 September 2013. Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13

Cu

mu

lati

ve R

etu

rn

RWC Global Convertibles Fund - Cumulative Return

RWC Global Convertible Bond Fund UBS Global Focus Hedged (EUR) CB Index

Page 34: 13.10 convertibles and the great rotation

RWC

| RWC 33

Portfolio Construction and Limits – Fund Structure

Portfolio construction and limits

• Diversified by security: 100-135 holdings

• Security concentration limits (initial limit 5%, absolute maximum 10%)

• Reference index: UBS Global Focus CB Index (hedged to base currency)

• Normally fully hedged to base currency (minimum 80% hedged)

• No tracking error limits. Focus on sharpe ratio rather than information ratio

Fund structure

• Luxembourg SICAV – UCITS IV

• Daily priced, daily liquidity

• Retail and institutional share classes (€25,000 and €10m minimums respectively)

• Fees

• A share class 1.5% annual management charge

• B share class 0.8% annual management charge

• Available in fully hedged share classes – USD / EUR / GBP / CHF

• USD / EUR / CHF / GBP Institutional Distribution / GBP share classes – registered for reporting status for 2010

• Registered for sale: UK / Luxembourg / Switzerland / Italy / Germany / France (EUR share classes only)

• Investment Manager: RWC, London

• Custodian / Administrator: Banque Privee Edmond de Rothschild Luxembourg

Page 35: 13.10 convertibles and the great rotation

RWC

| RWC 34

Breakdown of Global Convertible Bond Universe

Source: UBS, September 2013

Market Capitalisation (US$bn)

• Total convertible market cap approximately $459bn

• Total number of issues: 1,924

• Average issue size in the US and Europe larger than other regions

• Improved liquidity in the US and Europe

• Although US market mainly concentrated to certain sector issuance, opportunity still present given larger issue market

• Asia and Japan offer attractive structures and usually more attractive valuations

• Significant proportion of issues not rated. Implied ratings on these bonds are a mixture of sub investment and investment grade bonds

• Investment grade portion of the CB universe has shrunk (about 35%), mainly driven by new high yield issuance and financial downgrades

• Index relative investment may lead to excessive high yield exposure, while similar yield may be achieved through investing in rated convertibles

Credit Ratings Number of Issues

US 206

Europe 115

Asia Ex-Japan 74

Japan 26

Other 38

US 717

Europe 335 Asia Ex-

Japan 501

Japan 83

Other 288 AAA 0.1% AA 0.3%

A 6.7%

BBB 12.4%

BB 8.3%

B 8.9%

CCC 2.5%

D 0.0%

CC 0.1% C 0.1%

Non Rated 60.7%

Page 36: 13.10 convertibles and the great rotation

RWC

| RWC 35

Convertible Bonds – A Snapshot of 2008 & 2009 / 2 Extraordinary Years

Source: Bloomberg, Hedge Fund Research

Sharp Reduction in Equity markets and subsequent recovery

• Markets fell sharply in 2008, contributing to the decline in convertibles

• Markets subsequently recovered some of the loss in 2009, however long only convertibles recovered by a greater extent

Credit significantly wider and subsequent recovery

• Credits widened significantly following the Lehman Bankruptcy in 2008

• Dramatic improvement from the 1st quarter of 2009

Reduced leverage and higher funding costs

• Reduced availability of leverage and increasing funding costs have negatively affected convertible arbitrage funds which rely heavily on leverage. Convertible bonds were sold as positions became too expensive to hold

• Leverage returned but to a much lower degree in 2009, but convertibles recovered regardless mainly driven by long only convertible investors

Short selling restrictions

• The short selling ban adversely affected the valuations of CBs as convertible arbitrageurs became unable to delta-hedge their positions. Over 7,000 securities with a total market cap of almost $3trillion were subject to short sale bans.

• This ban has now been reversed

Redemptions

• Heavy redemptions from the convertible asset class caused a spiral of forced selling in a weak market, further propagating the spiral by forcing prices lower

• Conversely 2009 saw significant inflows into the convertible asset class mainly favouring the long-only strategies, allowing recovery in pricing

Page 37: 13.10 convertibles and the great rotation

RWC

| RWC 36

Davide Basile - Head of RWC Global Convertibles Team

Joined RWC in January 2010

Morgan Stanley Investment Management, 2005 – 2009

• Previously Head of Convertible Bonds and lead portfolio manager

• Responsible for the management of convertible accounts and institutional convertibles

• Responsible for convertible bond management of multi-asset class portfolios

Morgan Stanley International & Co. 2003 – 2005

• Member of the Morgan Stanley Convertible fund management team

• Responsible for portfolio and risk management on convertible bond funds

Morgan Stanley International & Co. 2001 – 2003

• As part of the client strategy group involved in derivative structuring for portfolio protection

Bachelor of Material Science Engineering, Imperial College, London

“The unique selling points of convertible bonds do hold true through a multitude of different cyclical market environments.”

Davide Basile, Portfolio Manager

Page 38: 13.10 convertibles and the great rotation

RWC

| RWC 37

RWC Convertible Bond Funds

As at end September 2013

1 Fund managed by Davide Basile since January 2010. 2 Previously “RWC Cautious Absolute Rate & Currency Fund” launched on 29th December 2006; re-launched and renamed “RWC Core Plus Fund” on 1st October 2013 and managed as stated above. 3 The specific variables are the overall market capitalisation of the asset class and the weighted average delta level of the asset class (given that the Fund targets the 30%-50% delta range). Currently, the market cap of the asset class is about $420bn and the weighted average delta level is at 45%-50% and so we believe that $2.1bn is an appropriate level (or about 50bps of the total cap of the asset class), if the delta of the asset class where to deviate substantially from our desired investment range, then 25bps of the market cap would be more appropriate. 4 Please note that a 3 day redemption period applies for the RWC Asia Convertibles Fund.

RWC Global Convertibles Fund RWC Asia Convertibles Fund RWC Core Plus Fund

Lead Manager Davide Basile Davide Basile Co-managed by Michelle Shi

Davide Basile Co-managed by Lakshman Harendran

Approach

To achieve high risk-adjusted returns from a diversified global portfolio of convertible securities. The Fund combines four main sources of return: top-down macro and thematic positioning, bottom-up equity security selection, careful credit analysis and the blending of the derivative features of convertibles.

To achieve high risk-adjusted returns by investing in a portfolio of convertible bonds issued by Asian corporates. The Fund combines four main sources of return: top-down macro and thematic positioning, bottom-up equity security selection, careful credit analysis and the blending of the derivative features of convertibles.

To generate strong returns with low volatility whilst minimising drawdowns by using the convexity and capital protection that are inherent in convertible bonds, whilst enhancing the profile of returns with complementary asset classes and derivative exposure.

Reference Index UBS Global Focus CB Index (hedged to base currency)

UBS Asian ex Japan Focus CB Index (hedged to base currency)

Benchmark: 1 month LIBOR (currency specific)

Launch Date 29 December 20061 8 June 2011 1 October 20132

AuM USD 1,761.9m USD 37.5m USD 6.7m

Capacity The level of AUM which the Fund’s current trading strategy would begin to be constrained or restricted is a function of the investible universe of convertible bonds.3

The Fund has a capacity of $350m given its current liquidity profile. The capacity of the Fund could be amended due to the size of the investible universe and client liquidity requirements.

The Fund has a relatively large capacity of at least $5bn given its global and multi-asset investment universe.

Fund Structure Luxembourg SICAV – UCITS IV Daily priced, daily liquidity, 1pm CET dealing cut-off4

Retail and institutional share classes (base currency 25,000 and 10,000,000 minimums respectively) Investment Manager: RWC, London Custodian / Administrator: Banque Privee Edmond de Rothschild Luxembourg

Share Classes Available in fully hedged share classes – USD / EUR / CHF / GBP / GBP Institutional Distribution

Available in fully hedged share classes – USD / EUR / GBP

Available in fully hedged share classes – USD / EUR / GBP / CHF

Annual Management Fees

A share class 1.5% B share class 0.8%

A share class 1.8% B share class 0.9%

A share class 1.35% B share class 0.7%

Performance Fees The Fund does not levy a performance fee. 10%; quarterly; only applied to performance over an annualised rate of 8% with a high watermark.

10%; quarterly; only applied to performance over the relevant reference index with a high watermark.

Page 39: 13.10 convertibles and the great rotation

Please contact us if you have any general questions or would like to discuss any of our strategies.

RWC

60 Petty France, London, SW1H 9EU Tel: +44 20 7227 6000 Fax: +44 20 7227 6003 Email: [email protected] Web: www.rwcpartners.com

RWC Contact

| RWC 38

Page 40: 13.10 convertibles and the great rotation

RWC Risk Warnings & Disclaimers

This document contains information relating to RWC Partners Limited, RWC Focus Asset Management Limited and RWC Asset Management LLP (collectively, “RWC”), each of which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”), and services provided by them and may also contain information relating to certain products managed or advised by RWC (“RWC Funds”).

RWC may act as investment manager or adviser, or otherwise provide services, to more than one product pursuing a similar investment strategy or focus to the product detailed in this document. RWC seeks to minimise any conflicts of interest, and endeavours to act at all times in accordance with its legal and regulatory obligations as well as its own policies and codes of conduct.

The services provided by RWC are available only for and this document is directed only at, persons that qualify as Professional Clients or Eligible Counterparties under rules of the FCA. It is not intended for distribution to and should not be relied on by any person who would qualify as a Retail Client.

In addition, although certain sub-funds of RWC Funds SICAV are recognised schemes for the purposes of Section 264 of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”), all other RWC Funds are unregulated collective investment schemes for the purposes the FSMA, the promotion of which either in or from the United Kingdom is restricted by law. Accordingly, this document is issued and approved by RWC Limited for communication by RWC Partners only to, and is directed only at, persons reasonably believed by it to be of a kind to whom it may communicate financial promotions relating to unregulated collective investment schemes by virtue of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, as amended (the “Order”), or the Conduct of Business Rules of the FCA. Such persons include: (i) persons outside the United Kingdom; (ii) persons having professional experience of participating in unregulated collective investment schemes; and (iii) high net worth bodies corporate, partnerships, unincorporated associations, trusts, etc. falling within Article 22 of the Order. Any unregulated collective investment schemes described herein are available only to such persons, and persons of any other description may not rely on the information in this document.

Where this document is received outside the United Kingdom, it is the responsibility of every person reading this document to satisfy himself as to the full observance of the laws of any relevant country, including obtaining any government or other consent which may be required or observing any other formality which needs to be observed in that country. Nothing in this document constitutes an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Interests in RWC Funds are available only in jurisdictions where their promotion and sale are permitted.

No person receiving this document may further distribute it, or copies of it, to any other person or publish any of its contents, in whole or in part, for any purpose.

This document is provided for informational purposes only. The information contained in it is subject to updating, completion, modification and amendment. RWC does not accept any liability (whether direct or indirect) arising from the reliance on or other use of the information contained in it. The information set out in this document is to the reasonable belief of RWC, reliable and accurate at the date hereof, but is subject to change without notice. In producing this document, RWC may have relied on information obtained from third parties and no representation or guarantee is made hereby with respect to the accuracy or completeness of such information. Performance figures and data analysis within this document are shown and calculated net of fees and expenses and represent the reinvestment of dividends and income. Market index information shown within this document is included to show relative market performance for the periods indicated and not as standards of comparison. Such broadly based indices are unmanaged and differ in numerous respects from the portfolio composition of RWC Funds.

This document does not constitute offer or solicitation to anyone in any jurisdiction of or to acquire interests in any RWC Fund. Investment in any RWC Fund should be considered high risk. Past performance is not a reliable indicator of future results and may not be repeated. The value of investments in RWC Funds and the income from them may fall as well as rise and may be subject to sudden and substantial falls. Changes in rates of exchange may cause the value of such investments to fluctuate. An investor may not be able to get back the amount invested and the loss on realisation may be very high and could result in a substantial or complete loss of the investment. In addition, an investor who realises their investment in RWC Funds after a short period may not realise the amount originally invested as a result of charges made on the issue and/or redemption of such investment. The value of such interests for the purposes of purchases may differ from their value for the purpose of redemptions. No representations or warranties of any kind are intended or should be inferred with respect to the economic return from, or the tax consequences of, an investment in RWC Funds. Current tax levels and reliefs may change. Depending on individual circumstances, this may affect investment returns. There is no guarantee that the securities referred to in this document will be held by RWC Funds in the future. Nothing in this document constitutes advice on the merits of buying or selling a particular investment. This document does not constitute investment, legal or tax advice.

This document expresses no views as to the suitability or appropriateness of the RWC Funds or any other investments described herein to the individual circumstances of any recipient. Potential investors in the RWC Funds should refer to the latest relevant Full Prospectus, KIID and latest Annual and Interim Reports for more information.

A United Kingdom investor may not have the right (otherwise provided under the FCA Handbook of Rules and Guidance) to cancel any agreement constituted by acceptance by or on behalf of an RWC Fund of an application for interests in an RWC Fund. In addition, most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in an RWC Fund. Investors in an RWC Fund will not receive compensation under the Financial Services Compensation Scheme in the United Kingdom in the event that the fund is unable or likely to be unable to satisfy claims against it.

This document is issued by RWC Partners Limited, a company registered in England and Wales (No. 03517613) with its registered address at 60 Petty France, London SW1H 9EU. . | RWC 39