Investment PolicyDecember 2018

Our market view in a nutshell – December 2018

• As we approach the end of the year, most asset classes show a negative performance. The only exceptions areUS stocks and short-term corporate bonds in US dollars, which are barely in positive territory. This poor resultreflects investors' concern about the progressive withdrawal of the monetary stimulus, as well as theextraordinary duration of the current economic expansion in the United States, which will soon become thelongest cycle that has been recorded

• Investors have been calibrating, alternatively, both higher interest rates due to the robustness of an economyapproaching its maximum capacity, and the risk of an economic slowdown caused by the tightening of financialconditions, a waning impact of fiscal stimulus in the US, and a possible trade war

• However, from a valuation perspective, recent corrections in both the equity and credit markets offer one of themost attractive entry points of recent years. Obviously, these valuations depend on companies fulfilling theirearnings projections. Cheap valuations can become expensive if, as is the case when the economic cycle turns,corporate profits decrease considerably

• So far, macroeconomic data show no visible sign of recession in the US. However, bond markets seem to beassessing an increasing probability of a slowdown in economic activity. This is revealed both by the current formof the yield curve and by the widening of corporate spreads

• For the coming year, the interaction between economic "hard data" (unemployment, earnings, inflation, etc.) and"soft data" (confidence and sentiment indicators) will be decisive both in the way the Federal Reserve will follow asfor the investors' faith in a continuation of the current economic cycle. Given this situation, we continue to advocate aconservative approach, favoring quality stocks and bonds, short maturities and the purchase of portfolio insurance

2

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MWM Investment Policy

3

From a relative valuation perspective, we like European stocks as they trade at lower multiples, and we expect profits to pick up as economic activity accelerates

Multi-strategy / multi-manager hedge funds with daily liquidity are having a disappointing performance, particularly when compared with other less risky alternatives, like short-term corporate bondsA diversified commodities allocations, further help us to increase diversification and to protect the portfolios against a scenario of rising inflationInvesting in late-stage private equity provides access to the asset class with liquidity provision up to a certain degree

Corporate debt and High Yield currently offer the best combination of risk and return. We prefer medium maturities as theyield curve has flattened considerably and there is little term premium to compensate for taking interest rate risk

High quality debt in Euros presents a very unattractive combination of risk and return as current yields offer very little cushion to weather potential interest rates increases

In European credit we only see value in subordinated debt, asset-backed securities and short-duration high yield

Treasuries offer protection from a slowdown in growth – although this less likely with the fiscal stimulus in the US – whilstTIPS offer protection against rising inflation as a consequence of reflationary policies

We avoid Emerging Markets until there is more clarity on the new US administration trade policy, and the effects of astronger dollar and higher financing costs for Emerging Markets are calibrated by the market

Amongst others, we favor Biotechnology and listed Real Estate

Japanese stocks are the cheapest in developed markets, but have suffered recently due to sluggish growth, and concerns about global tradeEmerging markets have corrected sharply since the beginning of the year affected by a strong dollar and trade concerns. We deem the correction suffered has been excessive, and continue favoring India and Frontier Markets within EM

After the recent market corrections, valuations have improved substantially. We have therefore increased our exposure to US equities, mostly through quality and growth oriented companies

Equities

Multi-Strategy Hedge Funds

Commodities

Private Equity

Alternative Investments

Fixed Income

US Credit

European Sovereign

US Treasuries

Europe

Emerging Markets

European Credit

Sectors & Themes

Japan

Emerging Markets

US

Asset Class RationaleView

+

+

−

−

+++

==

Overweight+ Underweight− Neutral=

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−

A (difficult) year in review

4

• With rising interest rates, and widening spreads, most areas in fixed-income had a negative performance this year.Only the shortest parts of the yield curve offered positive returns

• Equity markets, one more time, showed a divergence between the US and the rest of the world• Commodities and gold suffered from higher real interest rates and a stronger US dollar

Source: Bloomberg, as of December 7, 2018

-2.4%-1.1%

-1.8%

0.9%0.0%

-0.3% -0.3%

-3.7% -3.8% -3.6%

2.7%

5.2%

-9.1%

-3.1%

-13.4%

-7.9%

-4.5%

-0.6%

-2.1%

3.3%

-15%

-10%

-5%

0%

5%

10%

Glo

bal A

ggr.

US

Aggr

.

US

Trea

surie

s

US

Aggr

. 1-3

Yr

EUR

Agg

r.

EUR

Agg

r. 1-

3Yr

US

Hig

h-Yi

eld

EUR

Hig

h-Yi

eld

EM A

ggr.

($)

Subo

rdin

ated

Deb

t

S&P

500

Nas

daq

Euro

Sto

xx 5

0

Nik

kei 2

25

Emer

ging

Mar

kets

S&P

GSC

I

Bren

t Cru

de

Gol

d

HFR

I FoF

Dol

lar I

ndex

Looking forward into 2019

5

• From a valuation perspective, the suppression of volatility engineered by central banks since the financial crisis canstill be felt in a number of indicators, like corporate spreads

• Only equity markets seem to be more attractively valued, particularly if low interest rates are not to revert to theirhistorical mean as a consequence of structural factors (demographics, globalization and technological disruption)

Source: PIMCO and Bloomberg as of December 5, 2018

14.0%

2.5%

345

143

15.1

18.4%

3.7%

468

171

16.7

24.3%

4.7%

645

215

18.5

59.9%

6.7%

1,891

575

26.7

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Volatility

10 Yr UST

HY Spreads

IG Spreads

S&P 500 P/E

Percentile 1 Percentile 2 Percentile 3 Percentile 4

Min Max

11.42

118

239

1.5%

9.5%

Current

16.9

174

423

3.12%

18.1%

Rising investor anxiety about the economic cycle

6

• Investors have been calibrating, alternatively, both higher interest rates due to the robustness of an economyapproaching its maximum capacity, and the risk of an economic slowdown

• In this interplay, corporate earnings, inflation and growth data will be key to determine the future direction of equitymarkets

Source: Bloomberg

2.3%

2.5%

2.7%

2.9%

3.1%

3.3%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2,500

2,600

2,700

2,800

2,900

3,000

S&P 500 10 Yr US Treasury Yield

Where is the neutral rate?

7

• Financial conditions have tightened to levels close to its historical average, despite the still low levels of interest ratesfrom a historical perspective

• This complicates further the task of the Federal Reserve, as the risk of a policy mistake has considerably increasedsince the lift-off in 2015

Source: Bloomberg

1

2

3

4

5

6

7

8

9

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 201798

99

100

101

102

103

104

105

GS US Financial Conditions Index (lhs) Bloomberg Barclays US Agg - Yield to Worst (rhs)

First cracks in credit are emerging

8

• US High Yield spreads, which have remained relatively immune to stock market volatility bouts, have widenedsignificantly in November. European High Yield have fared significantly worse, and spreads are now approaching levelsclose to the 2015 sell-off

• As we consider credit markets to be one of the best leading indicators of a recession, this is an indicator to monitormore closely in the future

Source: Bloomberg

2%

3%

4%

5%

6%

7%

2015 2016 2017 20184%

5%

6%

7%

8%

9%

10%

11%

US High Yield - Yield-to-Worst (lhs) European High Yield - Yield-to-Worst (rhs)

Leverage remains an area of concern

9

• Concerns about credit markets are compounded because of the increase of financial leverage experienced by thecorporate sector in the US since the financial crisis

• However, debt affordability is relatively ample at current interest rate levels, and there is no immediate “debt maturitywall” that needs to be refinanced

Source: Bloomberg

40

60

80

100

120

140

160

180

20

30

40

50

60

70

80

1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

Total Credit to Non-Financial Corporations (US) Total Credit to Non-Financial Sector (US)

No signs of recession, but turns are sharp

10

• Despite the unease observed in credit markets, the main leading indicators continue pointing to a continuation of thecurrent economic expansion

• However, it is important to be cautious and remain vigilant, as the deterioration in economic conditions can be verysudden

Source: Bloomberg

3%

4%

5%

6%

7%

8%

9%

10%

11%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 201830

35

40

45

50

55

60

65

ISM Manufacturing PMI (lhs) US Unemployment Rate (rhs)

Dollar strength to remain

11

• As long as dollar-denominated bonds continue yielding significantly more than those of the major currencies, the USdollar will remain strong

• Although a large part of the increase in interest rate differentials was priced in at the onset of the Fed normalizationprocess, the latter has become more pronounced than initially anticipated by the market

Source: Bloomberg

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2014 2015 2016 2017 201875

80

85

90

95

100

105

U.S. Dollar Index (lhs) Bloomberg Barclays Global Aggregate Yield-to-Worst US vs. Rest (rhs)

Model portfolio evolution

12Source: Bloomberg as of December 1, 2018* Fund publishes monthly NAV with a 1 month of delay

-20% -15% -10% -5% 0% 5% 10% 15%

Partners Group Global Value*Franklin K2 Alternative Strategies Fund

Amura Absolute ReturniShares Diversified Commodity Swap UCITS

Polar Capital Funds JapanT.Row Price Frontier Markets Equity Fund

Henderson Global Property EquitiesPolar Capital Biotechnology Fund

Pictet Indian EquitiesBNP Paribas TIER US 4% Index

Bonus Certificate SX5EBonus Certificate SMI

Wellington Global Quality Growth PortfolioiShares Edge MSCI USA Quality FactorSchroder ISF - Global Convertible Bond

Ellipsis European Convertible FundGAM Star Credit Opportunities

Neuberger Berman Corporate HybridOddo Compass Euro Credit Short Duration USDh

AB Mortgage Income Portfolio - A2M&G Global Floating Rate High Yield Fund

Muzinich Short-Duration High YieldiShares USD Short Duration Corporate Bond

iShartes Ultrashort Bond UCITS ETFiShares $ TIPS

iShares $ Treasury Bond 3-7yr UCITS ETF

Ytd Last Month

Investment scenarios

13

Driv

ers

Mar

ket i

mpa

ctPr

obab

ility

• Global economic slowdown caused by political accidents or policy errors (Trade war with China, EU breakup, a too aggressive Fed, etc.)

• Deflationary scenario due to a combination of low growth and structural factors, although the rise of protectionism would be inflationary

• The Fed will have to reverse course, which would be complicated if inflation is rising

Scenario 1Recession by political/policy accident

• Correction in credit due to a rise in defaults and a widening of corporate spreads

• Correction in equities due to lower projected earnings, though low rates will offer support

• Sovereign and IG credit to profit due to flight to quality and the continuation of an ultra-loose monetary policy globally

• USD neutral to weak as flight to quality is counterbalanced by low interest rates

• Commodities will fall

40%

• The fiscal stimulus in the US provides a short-term impulse to the global economy, but not enough to attain a higher growth trajectory

• Inflation, particularly in the US will pick-up, but remains subdued globally due to structural factors (demographics, low aggregated demand, deleveraging)

• The Fed will continue its normalization path

Scenario 2Goldilocks

• Equities appreciate moderately, with Europe and Japan catching up with the US

• Credit spreads remain stable as the credit cycle is further elongated

• Sovereigns suffer as monetary policy is progressively normalized

• USD appreciate moderately due to higher interest rate differentials

• Commodity prices will rise in the short-term, normalizing once the impulse vanishes

30%

• Growth concerns dissipate, with economic activity accelerating in US, Europe and Japan

• Inflation in the US increases, as a consequence of president Trump’s fiscal stimulus, and pulls other developed economies off deflation

• The Fed will have to step up the pace of rate increases and/or reduce balance sheet

Scenario 3New regime

• Impact on equities will depend on how much real economic growth is sustained, and how accommodative the Fed remains

• Sovereign and IG bonds will face steep losses due to higher rates, particularly if long-term inflation expectations rise

• Corporate credit will correct moderately if inflation comes together with higher growth

• The USD will appreciate, particularly against those currencies facing deflation

• Commodities will gain from higher inflation

30%

Other risksTrade wars, EM crisis, Spread of populist political parties, China slowdown, Terrorism

Short-term catalyzersFiscal stimulus in the US, improvement in macro-data globally, lower geopolitical tensions

MWM Model Portfolio Balanced USD

14

Cash Fixed Income Equity Alternative Inv.Commodities

USD100%

USD

Asset Allocation Currency Allocation

2%

48%

39%

3%8%

Cash2%US Treasuries

3%

Short-Term IG14%

Convertibles26%

Sub. Debt28%

HY Europe3%HY US

3%HY Floating3%TIPS

5%MBS3%

Growth4%

Volatility16%

India3%

Biotechnology3%

Real Estate3%

Japan3%

Frontier Markets3%

US Quality4%

Diversified3%

Multi-Strategy5%

Private Equity3%

MWM Investment Profiles

Strategic Asset Allocation

15

Conservative Balanced Growth

AlternativeInvestments

Commodities

Equities

FixedIncome

Cash 3%5%

64%64%

24%

26%

2%2%

5%5%

2%5%

48%43%

38%

39%

3%4%

8%10%

1%5%

30%22%

54%52%

4%6%

10%15%

0%

10%

20%

30%

40%

50%

60%

2015 2016 2017 2018

Cash Fixed Income Equities Commodities Alternatives

MWM Model Portfolio – Asset Allocation evolution

16

0%

1%

2%

3%

4%

5%

6%

7%

0%

2%

4%

6%

8%

10%

12%

14%

2015 2016 2017 2018

1Y VaR 99% MWM Balanced (lhs) 1Y Std. Dev MWM Balanced (rhs) 1Y Std. Dev Benchmark (rhs)

MWM Model Portfolio – VaR evolution

17

MWM Model Portfolio – Peer comparison

18

• Total Return (Ytd1): 5th out of 15• Standard Deviation (1 year1): 1st out of 15• Downside Risk (1 year1): 1st out of 15• Sharp Ratio (1 year1): n/a

1 As of December 3, 2018Source: Bloomberg

-12%

-8%

-4%

0%

4%

8%

Dec 17 Jan 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18Janus Balanced Fund Invesco Balanced Risk Allocation Fund Investec Global Strategic Managed FundTempleton Global Income Fund UBS Global Allocation PIMCO Global Multi-Asset FundUBAM Multifunds Allocation 50 Julius Baer Strategy Balanced BlackRock Global Allocation FundNordea Stable Return Fund Schroder Global Multi-Asset Flexible BNY Mellon Global Real Return FundJPMorgan Global Balanced Fund Carmignac Patrimoine MWM Balanced USD

-1.59%

MWM Model Portfolio – Ytd performance

19

• Total Return (Ytd1): -1.59% vs. -1.12% Benchmark2

• Standard Deviation (Ytd1): 3.01% vs. 5.09% Benchmark2

• Downside Risk (Ytd1): 2.33% vs. 3.89% Benchmark2

• Sharpe Ratio (Ytd1): -1.20vs. -0.59 Benchmark2

1 As of December 3, 20182 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Dec 17 Jan 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18

MWM Balanced USD Benchmark

MWM Model Portfolio – Historical performance (1)

20

• Total Return (1 year1): -0.69% vs. 0.22% Benchmark2

• Total Return (3 year1): 5.26% vs. 16.06% Benchmark2

• Total Return (Since Jan 121): 25.66% vs. 37.52% Benchmark2

1 As of December 3, 20182 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

-20%

-10%

0%

10%

20%

30%

40%

50%

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Sep

13

Dec

13

Mar

14

Jun

14

Sep

14

Dec

14

Mar

15

Jun

15

Sep

15

Dec

15

Mar

16

Jun

16

Sep

16

Dec

16

Mar

17

Jun

17

Sep

17

Dec

17

Mar

18

Jun

18

Sep

18

MWM Balanced USD Benchmark Difference

MWM Model Portfolio – Historical performance (2)

21

• Standard Deviation (1 year1): 2.93% vs. 4.94% Benchmark2

• Downside Risk (1 year1): 2.28% vs. 3.79% Benchmark2

• Sharpe Ratio (1 year1): -0.86 vs. -0.40 Benchmark2

• Var 95% - 1day (1 year1): -0.34% vs. -0.52% Benchmark2

1 As of December 3, 20182 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Jan

12

Apr

12

Jul 1

2

Oct

12

Jan

13

Apr

13

Jul 1

3

Oct

13

Jan

14

Apr

14

Jul 1

4

Oct

14

Jan

15

Apr

15

Jul 1

5

Oct

15

Jan

16

Apr

16

Jul 1

6

Oct

16

Jan

17

Apr

17

Jul 1

7

Oct

17

Jan

18

Apr

18

Jul 1

8

Oct

18

MWM Balanced USD Benchmark

c/ de l’Aigüeta, 3AD500 Andorra la VellaPrincipat d’Andorrawww.morabanc.ad

22www.morawealth.com

This document is for information purposes only and does not constitute, and may not be construed as, a recommendation, offer or solicitation to buy or sell any securities and/or assets mentioned herein. Nor may the information contained herein be considered as definitive, because it is subject to unforeseeable changes and amendments.

Past performance does not guarantee future performance, and none of the information is intended to suggest that any of the returns set forth herein will be obtained in the future.

The fact that MWM can provide information regarding the status, development, evaluation, etc. in relation to markets or specific assets cannot be construed as a commitment or guarantee of performance; and MWM does not assume any liability for the performance of these assets or markets.

Data on investment stocks, their yields and other characteristics are based on or derived from information from reliable sources, which are generally available to the general public, and do not represent a commitment, warranty or liability of MWM.