Pinnacle BNY Mellon Global Infrastructure Yield Fund · 11/28/2018 · Pinnacle BNY Mellon Global Infrastructure Yield Fund 3 Fund Summary Description The Pinnacle BNY Mellon Global

Pinnacle BNY Mellon Global Infrastructure Yield Fund

Superior

This report has been prepared for financial advisers only

INTRODUCTION

Key PrinciplesThe underlying principles of the assessment process are to:

- identify the long term commercial potential of the Responsible

Entity/Investment Manager;

- evaluate management’s capabilities, previous performance in the

specific industry and the stability of the organisation;

- evaluate identified markets (domestic and international existence,

stability and growth potential);

- benchmark key performance assumptions and variables against

industry peers;

- weigh up the relevant risks of the Responsible Entity/Investment

Manager;

- assess structure and ownership;

- determine if the Responsible Entity/Investment Manager is

structured in such a way as to protect investor’s interests; and

- allow an opinion to be formed regarding the investment quality of

the Responsible Entity/Investment Manager.

AssessmentSQM Research conducts a detailed site inspection of the projects/properties within the Responsible Entity’s/Investment Manager’s managed funds.

- The site assessment considers the following areas:

- sustainability of the site for the purpose intended;

- management skills, qualifications, capabilities and experience; and

- associated property risks and their management.

4½ stars and above

Outstanding Highly suitable for inclusion on APLsThe fund most often outperforms its peers and benchmark. In all cases the fund is operating to its mandate and product disclosure statement (PDS). There are no corporate governance issues. Management is extremely experienced and skilled and has access to significant resources.

High Investment grade rating

4 stars to 4¼ stars

Superior Suitable for inclusion on most APLsThe fund outperforms (or is likely to) its peers and benchmark the majority of the time. The fund most of the time has been operating within its mandate and PDS. There are very little to no corporate governance concerns. Management is of a very high calibre.

High Investment grade rating

3¾ stars Favourable Consider for APL inclusionThe fund may outperform its peers and benchmark the majority of the time or SQM believes this is a fund that has potential to be an outperforming fund over the medium term. Management is of a quality calibre but may not yet be fully tested. There are no corporate governance concerns or they are of a minor nature.

Approved

3½ stars Acceptable Consider for APL inclusion, subject to advice restrictionsThere is some degree of additional risk attached to the fund by way of performance. The fund may periodically underperform its peers and benchmark or it has not been fully tested. There may be some additional concentration risk. Management is generally experienced and capable. There might be corporate governance issues of a mid-level or concerns over the Responsible Entities/Parent Entities financial position/performance.

Low investment grade rating

3¼ stars Caution required Not suitable for most APLsPerformance has been significantly under-benchmark and peers. There is a greater than average risk of underperformance over the medium term. There is a risk of the fund not operating to mandate or to its PDS. There could be corporate governance concerns. Management has been operating in an average manner.

Unapproved

3 stars Strong Caution Required

Not suitable for most APLsThe fund is unlikely to perform to its mandate over the near term. There might be some greater than average corporate governance concerns. SQM has a number of concerns of management.

Unapproved

Below 3 stars Avoid or redeem Not suitable for most APL inclusion Unapproved

Star Rating*Investment products are awarded a star rating out of a possible five stars and placed on the following websites: www.sqmresearch.com.au

Licensed Investment AdviserSQM Research is licensed as an Australian Financial Services Licensee, Licence No. 421913, pursuant to section 913B of the Corporations Act 2001. The licence authorises SQM Research to carry on a financial services business to provide general financial product advice only.

Privacy PolicySQM Research collects only a limited amount of personal information from its clients. Our privacy policy can be viewed at www.sqmresearch.com.au. This will enable you to understand your rights, our obligations and what SQM Research does with any information it collects about you.

Fees charged for ReportSQM Research has received a fee from the fund manager for this report and rating.

General Financial Product AdviceThis advice will not take into account your, or your clients, objectives, financial situation or needs and will not be provided in respect of any other financial products. Accordingly, it is up to you and your clients to consider whether specific financial products are suitable for your objectives, financial situations or needs.

Report Date: 27 November 2018

Hold – The rating is currently suspended until SQM Research receives further information. A rating is typically put on hold for a period of two days to four weeks.

Withdrawn – The rating is no longer applicable. Significant issues have arisen since the last report was issued, and investors should avoid or redeem units in the fund.

Not rated – The fund has not been rated by SQM.

Star Rating Description Definition Investment Grading

INTRODUCTION


3CONTENTS

Summary 2

Fund Summary 3

SQM Research’s Review and Key Observatioins 3

Strengths of the Fund 7 Weaknesses of the Fund 8 Other Considerations 8 Key Changes Since the Last Review 8

Investment Process & Portfolio Construction 9 Investment Process Diagram 9 Process Description 9

Corporate Governance/Business Strategy 16 Key Counterparties 16 Parent Company 16 Fund Manager 16 Investment Manager 17 Responsible Entity 18 Management Risk 18 Funds Under Management (FUM) 18

Management & People 19 Investment Team 19 Staffing Changes 19 Remuneration and Incentives 21

Product Features - Fees & Redemption Policy 22 Ongoing Fees 22 Buy/Sell Spread 22 Performance Fees 22 Overall Fees 22

Quantitative Analysis 23 Quantitative Insight 23 Returns and Risk 27Asset Allocation & Risk Parameters 29 Recent Positioning 30 Fund Composition 31


2

SQM Rating Superior. Suitable for inclusion on most APLs.

Fund Dtails Fund Name Pinnacle BNY Mellon Global Infrastructure Yield Fund

APIR Code WHT6597AU

Manager BNY Mellon Investment Management Australia Limited

Responsible Entity Pinnacle Fund Services Limited

Custodian State Street Australia Limited

Investment Details

Fund Inception August 2018

Fund Size $5.1m as at 30 September 2018

Fund Type Global Listed Infrastructure

Return Objective Returns above benchmark over a full cycle Gross yield target of 6% per annum

Internal Return Objective None

Risk Level High

Internal Risk Objective 4% - 8% volatility

Benchmark S&P Global Infrastructure Index (Net) Unhedged

Number of positions in portfolio 20-40

Gearing (Fund) Nil

Fund Specifications

Minimum Application $25,000

Redemption Daily

Distribution Frequency Quarterly as at 31 March, 30 June, 30 September and 31 December

ICR 1.15% p.a.

MER 1.15% p.a.

Performance Fee None

Buy/Sell Spread 0.15% / 0.15%

Currency Hedging Unhedged

Time Horizon for Investment Five years or more

Other

Turnover 50% - 80%

Top 10 Holdings Weight 54%

SUMMARY


3

Fund Summary

Description

The Pinnacle BNY Mellon Global Infrastructure Yield Fund (the Fund) is an all capitalization, global, concentrated portfolio that seeks to uncover the most attractive fundamental investment ideas that have exposure to infrastructure or real asset related businesses. The fund invests in a broadly defined universe of infrastructure and infrastructure-related securities in Transport, Utilities, Energy, Telecoms and Social infrastructure in areas such as hospitals, aged-care and correctional facilities. The fund is actively managed to deliver a high and consistent level of income, along with some capital gain.

About the Manager

The Fund Manager is BNY Mellon Asset Management North America (BNY Mellon AMNA), an independently operated indirect subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). BNY Mellon AMNA’s investment strategies span a range of active and passive investment disciplines across the style, geography, and capitalization spectrum. It serves a wide variety of clients, including corporations, endowments, foundations, public and sovereign wealth funds, investment management services across several product lines. As a subsidiary of BNY Mellon, the firm is able to leverage business functions such as Human Resources, Information Technology and Finance provided by its parent company.

On 1 February 2018, BNY Mellon Asset Management North America was formed when three BNY Mellon Investment Management boutiques (Mellon Capital, Standish and The Boston Company) combined. As a result, a new senior leadership team and Board of Directors were established. Effective 2 January 2019, the firm will be branded Mellon, and operate under the name Mellon Corporation.

Fund Rating

The Fund has achieved the following rating:

Star Rating

Description DefinitionInvestment

Grading

4.00 stars

SuperiorSuitable for inclusion

on most APLsHigh Investment

Grade Rating

SQM Research’s Review and Key Observations

1. People and Resources

Size and Resources of the Fund Management Company

The Global Infrastructure Dividend Focus Equity strategy is managed by two portfolio managers, James A. Lydotes, CFA

and Brock Campbell, CFA. The investment process is able to leverage the broader BNY Mellon Global Fundamental Equity Research Team, which includes the Global Research, Quantitative Research and Global Investment teams across regions, market capitalizations and investment styles.

Unlike strategies that are either quantitatively or fundamentally based, the team incorporates both a global research platform that provides fundamental insights at the stock-specific level with a series of customized quantitative tools.

Investment Team

Portfolio Manager James Lydotes is responsible for assigning coverage and workload to analysts. Research on companies is performed by both the portfolio managers as well as sector analysts, who then present their conclusions to the portfolio manager. In these meetings, all buy and sell ideas are discussed. Ultimately, the portfolio manager has final responsibility for all decisions about portfolio construction.

The Research Team consists of 14 individual teams with joint responsibility for the stocks in their designated industry groups. The research analysts are considered specialists. Some focus on specific regions or sectors, while others specialize in a combination of both geographic and sector expertise.

There has been no turnover of the key investment professionals or staff over the past 3 years.

2. Investment Process and Philosophy

Investable Universe

The investment focus is on infrastructure-related companies, primarily in the Energy, Telecommunications, Utilities, Materials and Industrials sectors. The Manager takes a broader view of the global infrastructure universe than its peers that tend to invest purely in the sectors included in the global infrastructure indexes. In addition to traditional infrastructure, BNY Mellon also includes telecoms companies as well as social infrastructure in areas such as hospitals, aged-care and correctional facilities.

The target asset allocation ranges are:

• Global infrastructure and related securities 95-100%

• Cash & cash equivalents 0-5%

Process / Philosophy / Style

The investment style is primarily active, bottom-up. Macro top-down inputs are limited to ensure the majority of performance is derived from stock-specific risk.

The Fund invests in companies that demonstrate high, sustainable dividend yields and dividend growth potential,

SUMMARY


4SUMMARY

solid business momentum at an attractive valuation, quality, stability and strong cash flows. The Fund aims to deliver better capital preservation characteristics than the index, with up-market capture strong enough to translate into compelling risk-adjusted returns.

The portfolio relies upon bottom up stock selection to deliver its excess return target over a full market cycle. The broader investable universe provides a variety of infrastructure and real asset-related opportunities in developed and emerging countries. Investing at a global level allows a mix of sizable cash-producing mature projects and earlier-stage growth assets to produce a portfolio with a strong dividend income profile and growth that can perform well in both up-market and down-market conditions.

The investment focus is on infrastructure and real asset related companies that exhibit three critical attributes:

• The nature and predictability of the regulatory environment.

• The sustainability of cash flow and dividend growth.

• Does the company own the assets and are they “rent collectors”.

SQM notes that the requirement for any stock to demonstrate that it meets all these criteria provides a strong base to the stock selection process which aligns with investment objective of the fund.

A combination of fundamental and quantitative multi-factor alpha models is used in addition to a thematic approach to identify global companies with solid business momentum, cash flow growth potential and attractive valuation within tolerable risk parameters. While the strategy primarily seeks to deliver alpha through stock selection, normally the portfolio will have a higher sensitivity to asset class factors such as dividend yield compared to the broader global equities market. Additionally, the Manager maintains a valuation discount at the portfolio level versus the S&P Global Infrastructure Index.

The Pinnacle BNY Mellon Global Infrastructure Yield Fund aims to achieve returns above the benchmark over a full cycle, and to achieve a gross yield target of 6% per annum.

The Fund’s objective is to invest in companies that demonstrate high, sustainable dividend yields and dividend growth potential, solid business momentum at an attractive valuation, quality, stability and strong cash flows, while maintaining a risk posture associated with lower volatility, capital preservation and low correlation to traditional asset classes.

Portfolio positions are driven by the conviction of the analyst’s bottom up stock research and are not constrained by benchmark weights. The portfolio has a bias towards liquid small and mid-cap securities, with relatively little exposure to the mega cap securities. As a concentrated and largely unconstrained global portfolio, the Manager historically has meaningful country and sector over- and underweight positions. That said, a quantitative risk-monitoring process incorporates and measures key macro inputs such as interest rates and oil-price sensitivity to ensure the majority of the active exposure is delivered through stock-specific risk.

The high active share score indicates that historically the investment approach has been active compared to the Index. Over the past eight years, the active share has ranged from 80 to 95%. (Active share represents the fraction of portfolio holdings that differ from the benchmark index, thus emphasizing stock selection. Tracking error is the volatility of fund return in excess of the benchmark, so it emphasizes bets on systematic risk.) SQM notes that a comparison of the Fund’s activity as measured by its tracking error vs. its active share score indicates that historically the investment approach has been consistently active with a bias to stock picking.

The investment team incorporates a number of proprietary portfolio management and risk assessment tools to monitor the factor exposures relative to portfolio risk budgets and to ensure that the portfolio consistently maintains an appropriate risk/return profile based on the strategy’s objectives. A stock may be sold if the analyst determines that the stock is fairly valued, uncovers flaws in the business model, or identifies a more promising investment opportunity. Analysts recommend position sizing relative to their conviction in the stock and its investment thesis. While analysts drive the buy and sell decisions, the portfolio manager reviews all stock research and has final decision-making authority over all portfolio activity. SQM believes this close involvement of the analysts strengthens the link between research conviction and portfolio construction.

Risk Management

Portfolio risk is primarily managed through quantifying individual stock risk as part of the research process. The investment team utilises a number of quantitative and risk management tools to ensure style consistency is maintained and that the portfolio is not taking on uncompensated macro risks, as well as to ensure it is isolating active exposures around stock specific risks.

Risk is defined as any exposures that can detract from overall alpha generation and increase volatility. Risk factors can include price momentum, earnings momentum, market capitalisation,


5SUMMARY

position size, sector weights and industry weights. The Manager monitors the level of gearing within the overall portfolio, although there are no hard limits on the amount of leverage each individual name can be carrying.

Tracking error is a by-product of the investment process and philosophy but has generally been about 4.6% relative to the S&P Global Infrastructure Index. Although not a key component of the investment process, tracking error is used to evaluate and control the components of total risk, including security-specific, industry- and style-related risk. SQM Research observes that tracking error has tended to be reasonably consistent over time.

Currency risk is factored into the investment process as part of the fundamental research at the stock level and as part of the input into the macro allocation model. BNY Mellon views currency risk as a passive part of global investing.

While the Manager does not incorporate a formal stop-loss policy, it does require a documented investment thesis, price target and catalyst for a position to be maintained in the portfolio. Daily outlier reports are generated to screen for material outperformers and laggards, and any security that significantly underperforms is vetted for thesis violation.

Portfolio Characteristics

Portfolio Turnover

The portfolio is managed to a turnover range of 50% - 80% p.a. and has averaged 58% over the last five calendar years. Approximately half of the turnover is driven by new security purchases while the other half is attributed to add and trim activity around existing holdings. The holding period for investments is 18 months on average, based on expected turnover.

Liquidity

The Fund generally invests in liquid infrastructure related securities listed on global exchanges. Given the Manager’s broader definition of infrastructure and the current FUM in the strategy, SQM does not believe that liquidity will be a constraint on portfolio performance.

Leverage

This Fund does not employ leverage through borrowing by the Fund. There may be leverage in the invested companies. The portfolio’s Long Term Debt / Capital profile is 58.7% versus 53.2% for the S&P Global Infrastructure index as of October 31, 2018.

3. Performance & Risk

Length of Track Record

Although the Pinnacle BNY Mellon Global Infrastructure Yield Fund is a new product, the BNY Mellon Global Infrastructure strategy has a track record of seven years. As a result, observations and analysis of the strategy’s returns used in this analysis will have some practical statistical value.

SQM Research notes that the management team has not changed during this period.

Return Objective & Performance

The Pinnacle BNY Mellon Global Infrastructure Yield Fund is designed to provide investors with capital appreciation by investing in global listed infrastructure securities. The Manager’s stated benchmark is to outperform the S&P Global Infrastructure Index (Net) Unhedged over a rolling five year period and to deliver a target gross yield of 6% per annum.

The Manager has outperformed the benchmark since inception on a net basis, with an excess return of 1.06% p.a.

Fund Performance to 31 July 2018 (% p.a.)

Total Return 1-Month 3-Month 6-Month 1-Year 3-Year 5-Year Inception

Fund1 -0.64 0.24 6.11 8.30 5.57 11.89 14.32

Benchmark2 1.18 3.48 6.25 7.73 5.79 11.67 13.26

Peer Average 1.13 2.98 3.86 4.04 6.34 10.98 12.00

Alpha -1.82 -3.24 -0.14 0.57 -0.22 0.22 1.06

FUM (Funds Under Management) / Capacity

The Manager has outperformed the benchmark since inception on a net basis, with an excess return of 1.06% p.a.


6SUMMARY

Growth of $10,000

+3.2

+9.0 +7.7

+5.1

-0.4

+13.0

+11.2

+3.8 +4.7

+9.9

+12.4

+1.9

-2.0

+0.0

+2.0

+4.0

+6.0

+8.0

+10.0

+12.0

+14.0

Dec 15 Dec 16 Dec 17 Jul 18

Fund Benchmark Peer Avg

Annual Returns

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000

Jul 1

1

Jan

12

Jul 1

2

Jan

13

Jul 1

3

Jan

14

Jul 1

4

Jan

15

Jul 1

5

Jan

16

Jul 1

6

Jan

17

Jul 1

7

Jan

18

Jul 1

8

Benchmark Fund Peer Average

Fund Excess Returns %: Calendar Year (net of fees)

5.63 5.66

0.01

3.57

-3.93 -3.47

1.23

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

2012 2013 2014 2015 2016 2017 2018

Exce

ss R

etu

rns

2018 data = 7 months ending Jul-18

1. Assumes dividend reinvestment. Returns one year and longer are annualised. Return history starts Aug-20112. Benchmark: S&P Global Infrastructure Index NR Unhedged

Metrics 1-Year 3-Year 5-Year Inception

Tracking Error (% p.a.) - Fund 3.78 4.56 4.67 4.61

Tracking Error (% p.a.) - Peer Average 5.14 6.09 6.32 7.76

Information Ratio - Fund 0.15 -0.05 0.05 0.23

Information Ratio - Peer Average -0.55 0.03 -0.08 -0.17

Sharpe Ratio - Fund 0.84 0.55 1.28 1.56

Sharpe Ratio - Peer Average 0.44 0.69 1.24 1.41

Volatility - Fund (% p.a.) 9.85 10.07 9.31 9.18

Volatility - Peer Average (% p.a.) 8.60 9.28 8.87 8.55

Volatility - Benchmark (% p.a.) 10.10 10.09 9.38 9.01

Beta based on stated Benchmark 0.91 0.90 0.87 0.89


7SUMMARY

Volatility

The risk level for the Fund is considered to be Medium to High.

The Fund’s volatility (standard deviation of monthly returns) over the year to July 2018 was 9.8% compared to a peer average of 8.6% and 10.1% for the benchmark. Since inception, volatility has been 9.2% p.a., similar to the benchmark at 9.0% p.a.

Drawdown Experience

The Fund’s downside capture ratio over the three years to July 2018 was 79.1% compared to a peer average of 72.4%.

Drawdown Size (peak-to-trough)

Fund Bench Peers

Average -3.40% -3.20% -3.52%

Number 13 14 11

Drawdowns have on average been similar to the benchmark and to the peer average.

Correlation to Australian Equities

Correlation Min Max Avg

3-Yr Rolling S&P/ASX 300 2.73% 53.95% 39.61%

3-Yr Rolling MSCI World 51.97% 75.61% 67.03%

Over the life of the Fund, the 3 year rolling correlation has ranged from a low of 2.7% to a high of 53.9% and averaged 39.6%. Over the same time frame, the peer group’s 3 year rolling correlation has ranged from a low of 36.8% to a high of 58.4% and averaged 48.5%.

The low correlation with the S&P/ASX 300 Index and the MSCI World Index suggests that the Fund will provide significant diversification benefit to an Australian diversified Growth portfolio in the event of a market downturn.

5. Other Features

Governance

Pinnacle Fund Services Limited is the Responsible Entity. Pinnacle Fund Services is an owner-managed company delivering a boutique approach to accounting, administration and transfer agency services for investment funds, management companies and general partners.

Custody and Administration

State Street Australia Limited provides custody and portfolio administration services to institutional investors worldwide. The company also offers performance and analytical, and middle

office investment services. The company was incorporated in 1985 and is based in Sydney, Australia.

Fees

Base Management Fee

• 1.15% per annum of the Fund’s Net Asset Value (“NAV”)

• including GST and impact of RITC (Reduced Input Tax Credit)

• calculated daily and paid monthly

• peer group average is 1.02% per annum

Buy/Sell Spread

• total of 0.30% (0.15% buy / 0.15% sell)

• the peer group average is 0.40% (0.% buy / 0.20% sell)

Performance Fee:

The Fund does not charge a performance fee.

Overall Fees

If held and redeemed within 12 months, total transaction costs would amount to 1.45% of investment in the Fund. This figure includes the MER, expense recovery and the buy/sell spread. It does not consider rebates or negotiations or any potential performance fee. The peer group average cost for a one year round-trip is 1.42% of the Fund’s NAV.

Distributions

The Fund will pay quarterly distributions. Distributions have averaged 4% per quarter for the past nine quarters.

FUM (Funds under Management) / Capacity

The strategy had assets under management of $1.47bn globally as at the end of September 2018, of which $25 million is in the Fund. The Manager believes that capacity for this strategy is in the order of $5 billion.

As of 30 August 2018, the Top 10 accounts represent 13% of FUM.

Strengths of the Fund

• Highly experienced portfolio managers.

• Access to a large and experienced research team and a robust research approach, with close integration of the research analysts’ views into the portfolio construction process.


8SUMMARY

• Well defined criteria underpinning the security selection approach.

• Reliance primarily on stock selection for performance, rather than on macro bets.

• Unconstrained allocations to sectors, regions or countries allow a high active share score. Significant potential for the strategy to be concentrated (or absent) in certain sectors, with holdings comprised of only a few positions.

Weaknesses of the Fund

• No full look through of the leverage embedded within the underlying stocks or maximum limit on overall leverage within the portfolio.

• A deep value bias may result in prolonged periods of underperformance in in markets where growth and momentum are persistent outperforming factors versus value.

Other Considerations

• The Manager takes a broader view of the global infrastructure universe than its peers. In addition to traditional infrastructure sectors included in the global infrastructure indexes (Transport, Utilities and Energy), BNY Mellon also includes telecoms companies as well as social property and REIT infrastructure in areas such as hospitals, aged-care and correctional facilities.

• The mix of mature income producing investments along with some growth opportunities leads to a more stable inflation protected portfolio.

Key Changes Since the Last Review

• This report is an inaugural review.


9

Investment Philosophy

Ivestment Philosophy

BNY Mellon believes that successful global investing is achieved through an investment process that is based on:

• Research: A combination of fundamental and quantitative techniques are used in addition to a thematic approach to identify global companies with solid business momentum, dividend growth potential and attractive valuation within tolerable risk parameters

• Security Selection: The Manager believes that the best opportunity to add value is through security selection.

• Sustainability: A consistent blend of income and growth in the international and emerging uni-verse can come from companies with the following attributes:

o Stable cash flows;

o Consistent dividend income; and

o Attractive returns and acceptable risk levels.

The Fund’s characteristics make it predominantly defensive while at the same time providing stable growth opportunities.

INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION

Investment Process Diagram

Process Description


10INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION

Investment Approach

Style The Fund invests in companies that demonstrate high, sustainable dividend yields and dividend growth potential, solid business momentum at an attractive valuation, quality, stability and strong cash flows. The Fund aims to deliver better capital preservation characteristics than the index, with up-market capture strong enough to translate into compelling risk-adjusted returns.

The investment style is primarily bottom-up. Macro top-down inputs are limited to ensure the majority of performance is derived from stock-specific risk.

Investable Universe The investment focus is on infrastructure-related companies, primarily in the Energy, Telecommunications, Utilities, Materials and Industrials sectors. The Manager takes a broader view of the global infrastructure universe than its peers that tend to invest purely in the sectors included in the global infrastructure indexes. In addition to traditional infrastructure, BNY Mellon also includes telecoms companies as well as social infrastructure in areas such as hospitals, aged-care and correctional facilities.

BNY Mellon has identified approximately 500 stocks in the developed and emerging markets for inclusion in its investable universe.

The Manager invests primarily in local shares. ADRs/GDRs are used in cases where the liquidity of the stock is greater than in the local market or where restrictions to local ownership exist. Although the strategy can invest in IPOs, they are not important in managing the strategy. Typically derivatives, futures or options are not employed in the investment process. The Manager does intend to use futures and ETFs to equitize cash during periods of high cash flow activity.

The target asset allocation ranges are 95-100% in global listed infrastructure and related securities and 0-5% in cash and cash equivalents.

Research and Portfolio Construction Process

Idea Generation

BNY Mellon’s methodology focuses on key themes within the global infrastructure and real asset-related universe, including public/private partnerships, emerging-markets infrastructure growth, and stable income plays primarily within the developed markets.

While excess returns in the asset class are predicated on bottom up stock selection, the Manager takes a wider view on global infrastructure assets, including social infrastructure and telecom services. It believes there are several secular and structural themes set to play out within the global infrastructure universe over the next several years, including: public/private partnerships, emerging markets infrastructure growth, stable income plays primarily within the developed markets, the shale gas phenomenon in North America, rollout of 5G, the infrastructure backbone of IoT, as well as booming demand for a variety of senior and assisted living formats for aging baby boomers. The chosen investment themes enable us to access a variety of infrastructure-related opportunities in developed and emerging countries.

Research

The portfolio relies upon bottom up stock selection to deliver its excess return target over a full market cycle. The broader investable universe provides a variety of infrastructure and real asset-related opportunities in developed and emerging countries. Investing at a global level allows a mix of sizable cash-producing mature projects and earlier-stage growth assets to produce a portfolio with a strong dividend income profile and growth that can perform well in both up-market and down-market conditions.

The investment focus is on infrastructure and real asset related companies that exhibit three critical attributes:




...continued

• The nature and predictability of the regulatory environment.

• The sustainability of cash flow and dividend growth.

• Does the company own the assets and are they “rent collectors”.

A combination of fundamental and quantitative multi-factor alpha models is used in addition to a thematic approach to identify global companies with solid business momentum, cash flow growth potential and attractive valuation within tolerable risk parameters. While the strategy primarily seeks to deliver alpha through stock selection, normally the portfolio will have a higher sensitivity to asset class factors such as dividend yield compared to the broader global equities market. Additionally, the Manager maintains a valuation discount at the portfolio level versus the S&P Global Infrastructure Index.

Step 1

The process begins with a screening of the entire large cap, global investable universe of approximately 2,500 stocks, which is narrowed down to roughly 500 infrastructure and real asset-related stocks for inclusion in the investible universe. These stocks must exhibit the three defining characteristics of infrastructure: stable underlying cash flows, regulatory predictability and asset-owning business models.

Step 2

Next, the Manager applies a proprietary multi-factor quantitative model, which further narrows the investment universe to approximately 100 stocks that both fit its definition of infrastructure and possess the quantitative characteristics that make them attractive investments. The metrics used to select stocks include dividend yield, stability and growth opportunities of dividends as well as the robustness of the business and the balance sheet, stock-price valuation and liquidity. The process relies on quantitative models for each sector which rank the investable universe within economic sectors and countries by combining relative value characteristics (such as P/E, P/B, EV/EBITDA) and relative growth characteristics (estimate trends, revision ratios) and quality attributes (payout ratio and return on investment capital) to create a relative attractiveness score for each stock in that sector.

Step 3

The 100 most attractively ranked stocked are weighed alongside the current portfolio to establish approximately 50 stocks for consideration, using the Integrated Risk Investment System (IRIS). These include the 30 incumbent holdings and 20 candidates. In addition to the quant model, analysts employ fundamental analysis and review portfolio holdings with an emphasis on the more attractively ranked stocks. In order to select stocks in the portfolio, the Manager analyses dividend yield, stability and growth opportunities of dividends as well as the robustness of the business and the balance sheet, stock-price valuation and liquidity.

Step 4

Once the focus list is determined, analysts undertake detailed fundamental analysis on each of the 50 stocks. The research team evaluates the sustainability of a company’s yield, quality of management, competitive market position, growth opportunities and other qualitative factors. After completing this analysis, the analyst derives a fair price for each stock to ensure that the stock price does not fully reflect the company’s prospective business potential. Factors relating to company valuation, business momentum and quality are combined into customized models for each specific market sector (region/country/industry). The customized sector models capture and monitor a broad array of risk factors and exposures across areas such as valuation, growth and momentum as well as quality.

While such activities are not cumulatively tracked, analysts visit with roughly 1,000 companies annually. Supplemental to its in-house research, the Manager may use select broker and independent research providers and regularly confers with industry-specific consultants and experts. External resources provide a limited role in the research process, primarily to help provide industry colour and comparative information for a given sector/industry/company. Approximately 10% of the research effort is from external resources.




...continued

Analysts review portfolio holdings with an emphasis on the more attractively ranked stocks. Opportunities are identified through collaboration between portfolio managers and fundamental sector analysts in the context of risk in the portfolio, resulting a range of 20 to 40 securities. Sector analysts are responsible for making a buy, sell or hold recommendation; the portfolio managers have final say on portfolio decisions. All decisions are made with the current thematic insights of the investment team. The aim is to strike a balance between established and emerging infrastructure trends and to only invest in those in which have high fundamental conviction.

Portfolio Construction

The Pinnacle BNY Mellon Global Infrastructure Yield Fund aims to achieve returns above the benchmark over a full cycle, and to achieve a gross yield target of 6% per annum

The Fund’s objective is to invest in companies that demonstrate high, sustainable dividend yields and dividend growth potential, solid business momentum at an attractive valuation, quality, stability and strong cash flows, while maintaining a risk posture associated with lower volatility, capital preservation and low correlation to traditional asset classes.

Portfolio positions are driven by the conviction of the analyst’s bottom up stock research and are not constrained by benchmark weights. The portfolio has a bias towards liquid small and mid cap securities, with relatively little exposure to the mega cap securities. The Manager requires a minimum $500 million in market cap with at least $1 million of daily liquidity and two sell side analyst ratings to make it into the investable universe.

As a concentrated and largely unconstrained global portfolio, the Manager historically has meaningful country and sector over- and underweight positions. That said, a quantitative risk-monitoring process incorporates and measures key macro inputs such as interest rates and oil-price sensitivity to ensure the majority of the active exposure is delivered through stock-specific risk.



Portfolio Construction

...continued

The active share score indicates that historically the investment approach has been active compared to the Index, with the active share consistently above 80%. (Active share represents the fraction of portfolio holdings that differ from the benchmark index, thus emphasizing stock selection. Tracking error is the volatility of fund return in excess of the benchmark, so it emphasizes bets on systematic risk.)

The strategy attempts to be fully invested at all times.

Sell Discipline The investment team incorporates a number of proprietary portfolio management and risk assessment tools to monitor the factor exposures relative to portfolio risk budgets and to ensure that the portfolio consistently maintains an appropriate risk/return profile based on the strategy’s objectives. The models were jointly developed between the Global Infrastructure team, Global Research team, and the Quantitative Research team.

Analysts review stocks that decline in rank due to an elevated price multiple, a weakness in prospective earnings or a combination of both. A stock may be sold if the analyst determines that the stock is fairly valued, uncovers flaws in the business model, or identifies a more promising investment opportunity. Analysts recommend position sizing relative to their conviction in the stock and its investment thesis.

While analysts drive the buy and sell decisions, the portfolio manager reviews all stock research and has final decision-making authority over all portfolio activity. While the lead portfolio manager has the final say over position sizes, he typically will not add a position that has not been the result of collaboration between himself and individuals on the team.

Historical turnover has generally ranged from 50% to 85%, which is what would be expected in normal market environments. On average, the holding period has historically been approximately 18 months.

The current portfolio profile is highly liquid. The Manager estimates that it could liquidate half the assets in just four trading days, while 80% of the assets could be efficiently raised over the course of thirteen days. This analysis only makes assumptions based on published daily volumes and does not take into account alternative sources of liquidity, to which it would have access.



Risk Manaagement Portfolio risk is primarily managed through quantifying individual stock risk as part of the research process. The investment team utilises a number of quantitative and risk management tools to ensure style consistency is maintained and that the portfolio is not taking on uncompensated macro risks, as well as to ensure it is isolating active exposures around stock specific risks.

Risk is defined as any exposures that can detract from overall alpha generation and increase volatility. Risk factors can include price momentum, earnings momentum, market capitalization, position size, sector weights and industry weights. The Manager monitors the level of gearing within the overall portfolio, although there are no hard limits on the amount of leverage each individual holding can be carrying.

Risk guidelines include the following:

Risk Factor Permitted Range or Limit

Leverage Not permitted

Derivatives Typically derivatives, futures or options are not used in the investment process. May use futures and ETFs to equitize cash during periods of high cash flow activity.

Short selling Not permitted

Number of positions 20-40

Market Cap Minimum $500m

Portfolio stock weight Maximum 10% of the total portfolio at time of purchase relative to benchmark weight. Typically 1.5%-9%.

Holding in company 5% of the outstanding common stock.

Ex Index Holdings May hold non-index securities in infrastructure-related businesses

Regional exposure Unconstrained

Country exposure Unconstrained

Sector exposure Typically <50%; otherwise unconstrained

Cash holding Remain fully invested in all market cycles; seek to hold cash below 5%.

The Manager adheres to these guidelines regardless of the market environment.

Tracking error is a by-product of the investment process and philosophy but has generally been about 4.6% relative to the S&P Global Infrastructure Index. Although not a key component of the investment process, tracking error is used to evaluate and control the components of total risk, including security-specific, industry- and style-related risk. SQM Research observes that tracking error has tended to be reasonably consistent.

Currency risk is factored into the investment process as part of the fundamental research at the stock level and as part of the input into the macro allocation model. BNY Mellon views currency risk as a passive part of global investing.

While the Manager does not incorporate a formal stop-loss policy, it does require a documented investment thesis, price target and catalyst for a stock to be maintained in the portfolio. Daily outlier reports are generated to screen for material outperformers and laggards, and any security that significantly underperforms is vetted for thesis violation.

Lopsided or narrow market environments where the asset class performance is driven primarily by one factor or sector would normally be the most challenging market environment for the Fund to add value. For example, if interest rates end up declining unexpectedly, rewarding index infrastructure sectors (Utilities, Industrials and Energy) over the non-index social infrastructure sectors that form part of the investable universe (Telecom Services and Health Care REITs), then the Fund would likely incur a period of relative underperformance.



Risk Manaagement

...continued

BNY Mellon seeks to minimise risk through its security selection process and risk-control guidelines. Each month, the team reviews a set of risk-based reports, including Barra, Northfield as well as the proprietary risk-exposure measures. FactSet Portfolio Analytics is used to manage the daily holdings of the portfolios and to generate attribution reports. The attribution analysis analyses the effect of portfolio management decisions, including allocation, security selection, and interaction. All attribution effects are computed daily and are linked through time. They are used to analyse past performance and decisions, not as a decision-making tool within the strategy.

There are several layers of risk oversight:

• The Compliance Department implements several risk controls into its trading system, which notifies portfolio managers and traders of potential guideline and risk-control violations.

• The Investment Risk Team conducts risk reviews across all of the firm’s portfolios. On a weekly basis, the investment risk tracking system is screened and any outliers beyond certain thresholds are identified. Any concerns are escalated first to the Portfolio Manager of the respective fund, and then to the appropriate CIO (active equity, active fixed income, or multi-factor/multi-asset/index). The Investment Risk Team reports to the Chief Business Officer, and not to the CIOs, so if necessary, issues can be escalated to the CBO, senior firm leadership and ultimately the Board of Directors of AMNA. The Investment Risk Team can also escalate issues to the Investment Risk Committee. This quarterly meeting examines investment risks from across the firm, to review any potential risks that the firm as a whole is taking, or issues that might persist over longer time periods.

• BNY Mellon’s Office of Risk Management periodically conducts in-depth reviews of all firm-wide investment strategies to ensure the portfolios are being managed in a manner consistent with their stated objectives and risk controls.

Trading/Implementation

Trading Resources & Procedure

All trading is done through an affiliate, xBK LLC, a multi-asset trading boutique with traders in four locations: Boston, San Francisco, London and Hong Kong. There are six active equity traders.

A Brokerage and Counterparty Committee ensures that the firm operates in a manner consistent with regulations, industry best practices and client expectations as it relates to matters of brokerage, including the duty to seek best execution. Any broker selected to execute an order must be an approved broker. For these purposes, BNY Mellon AMNA has adopted The Bank of New York Mellon Corporation’s Approved Broker List. However, BNY Mellon AMNA reserves the right to use brokers not included on the BNY Mellon Approved Broker List for legitimate business reasons, subject to a pre-approval process. In such instances, BNY Mellon AMNA will employ an equivalent evaluation process to the due diligence process implemented by BNY Mellon Corporate Risk. BNY Mellon AMNA maintains documented procedures for these purposes.

Trade Execution and Allocation

It is the responsibility of the xBK to ensure that each order placed by a portfolio manager is assigned to the trader most capable of handling such a transaction. Factors that are considered in assigning orders include the experience level of the trader, recent activity in the specific security, the overall distribution of orders on the Trading Desk at the time and the size and degree of difficulty of the order. A certain degree of specialization among the traders is achieved via specific product responsibilities.

The traders incorporate factors such as informed broker selection and appropriate speed of execution and consider technical indicators, stock-specific news and current market conditions in choosing a strategy which will most likely result in best execution. The approach a trader utilizes in executing an order while seeking best execution shall be a subjective determination in all cases.


16CORPORATE GOVERNANCE / BUSINESS STRATEGY

Key Counterparties

Parent Company

The Bank of New York Mellon Corporation (BNY Mellon) is an American worldwide banking and financial services holding company headquartered in New York City. It is one of the world’s major financial services groups with operations in 35 countries, serving more than 100 markets.

Fund Manager

The Fund Manager is BNY Mellon Asset Management North America (BNY Mellon AMNA), an independently operated indirect subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). BNY Mellon AMNA’s investment strategies span a range of active and passive investment disciplines across the style, geography, and capitalization spectrum. It serves a wide variety of clients, including corporations, endowments, foundations, public and sovereign wealth funds, investment management services across several product lines. As a subsidiary of BNY Mellon, the firm is able to leverage business functions such as Human Resources, Information Technology and Finance provided by its parent company.

On February 1, 2018, BNY Mellon Asset Management North America was formed when three BNY Mellon Investment Management boutiques - Mellon Capital, Standish and The Boston Company - combined. As a result, a new senior leadership team and Board of Directors were established. Effective January 2, 2019, the firm will be branded Mellon, and operate under the name Mellon Corporation.

• Active Equity: Active equity strategies leverage the expertise built by The Boston Company, which was founded in 1970. It relies on bottom-up stock selection and in-depth investigative research to support its active equity strategies. The active equity portfolios cover the geographic and market cap spectrum.

• Active Fixed Income: BNY Mellon offers a range of actively managed fixed income strategies managed by Standish, which was founded in 1933.

• Index, Multi-Asset and Multi-Factor Equity and Fixed Income: A fundamentals-based systematic investing


17CORPORATE GOVERNANCE/BUSINESS STRATEGY

approach based on an understanding of long-term economic relationships, researched by Mellon Capital since its founding in 1983.

Employees may own up to 20% of the firm via the BNY Mellon AMNA equity program. Currently, employees own 3.4% of the firm. The balance of the firm’s equity is indirectly held by The Bank of New York Mellon Corporation.

Investment Manager

BNY Mellon Investment Management Australia is the Investment Manager.

Responsible Entity

Pinnacle Fund Services Limited is an owner-managed company delivering a boutique approach to accounting, administration and transfer agency services for investment funds, management companies and general partners.

Custody and Administration

State Street Australia Limited provides custody and portfolio administration services to institutional investors worldwide. The company also offers performance and analytical, and middle office investment services. The company was incorporated in 1985 and is based in Sydney, Australia.

Fund administration activities include:

• Net asset value calculation (price capture, transactions capture, daily securities and cash reconciliation, first-level and second-level controls)

• NAV oversight and valuation

• Fund accounting.

Management Risk

An Office of Risk Management takes a holistic view of investment and operational risk across portfolio positions, trading, liquidity, compliance and operations. The ORM establishes appropriate reporting systems for senior management and the Risk and Compliance Committee related to risks in the day-to-day operations of the firm and assures that data, metrics and best practices are shared across the investment, implementation, trading and operations groups.

BNY Mellon AMNA has not been a party to any investment- related judgments, indictments or settlements of potential litigation, investigation or enforcement action by a regulatory agency or other legal proceedings that would materially impair the ability of BNY Mellon AMNA to perform the relevant services within the last three years.

Funds management businesses rely on the operational capabilities of key counterparties. A critical element is the corporate ability of the Responsible Entity to monitor operational performance and to meet the regulatory and statutory responsibilities required. For any investment fund, there is a risk that a weak financial position or management performance deterioration of key counterparties could temporarily or permanently compromise their performance and competency. This can adversely affect financial or regulatory outcomes for the Fund or associated entities.

Based on the materials reviewed, SQM Research believes that the Investment Manager and associated key counterparties are highly qualified to carry out their assigned responsibilities. Management risk is rated as being low.

Funds Under Management (FUM)

The Fund is approximately $1.47 billion in size as at September 2018. The Manager believes the capacity for this strategy is $5 billion. There is approximately $5m in the Australian fund as at September 2018.

The strategy undergoes a bi-annual capacity study to evaluate the AUM level a portfolio can maintain while successfully executing on the strategy’s relative return objectives. This analysis includes a series of scenarios related to liquidity, turnover, share of average daily trading volumes, market cap ranges represented in the portfolio, among others.

FUM for Fund under Review ($mill)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Dec

12

Jun

13

Dec

13

Jun

14

Dec

14

Jun

15

Dec

15

Jun

16

Dec

16

Jun

17

Dec

17

Jun

18


18CORPORATE GOVERNANCE/BUSINESS STRATEGY

-$50

$0

$50

$100

$150

$200

$250

$300

$350

$400

Mar

-16

Jun-

16

Sep-

16

Dec

-16

Mar

-17

Jun-

17

Sep-

17

Dec

-17

Mar

-18

Jun-

18

Sep-

18

Oct

-18

Quarterly Net Flows ($million)


19MANAGEMENT & PEOPLE

Key Investment Staff

Name Responsibility / Position LocationYears with Company

Years in Industry

David A. Daglio Jr., CFA Executive Vice President, Active Equity CIO Boston 20.0 20.0

James A. Lydotes, CFA Managing Director, Portfolio Manager Boston 19.0 20.0

Brock A, Campbell, CFA Director, Portfolio Manager Boston 13.0 13.0

Justin R. Sumner, CFA Director, Senior Research Analyst Boston 11.0 20.0

Timothy J. McCormick, CFA Director, Senior Research Analyst Boston 20.0 35.0

Robin Wehbé, CFA, CMT Managing Director, Senior Research Analyst Boston 12.0 19.0

Richard Bullock, CFA Director, Senior Research Analyst Boston 3.0 14.0

Jason L. Gibson Director, Senior Research Analyst Boston 11.0 11.0

Barry K. Mills, CFA Director, Senior Research Analyst Boston 19.0 32.0

Matthew D. Griffin, CFA Managing Director, Senior Research Analyst Boston 12.0 27.0

Rick R. Rosania, CFA Director, Senior Research Analyst Boston 17.0 23.0

Karen Miki Behr Director, Senior Research Analyst Boston 10.0 19.0

George E. DeFina Director, Senior Quantitative Analyst Boston 11.0 25.0

Niall Brennan, CFA Director, Quantitative Analyst Boston 12.0 13.0

Laura D. Kunkemueller Director, ESG Officer Boston 3.0 12.0

William J. Adams Managing Director, Global Investment Strategist Boston 13.0 23.0

Investment Team

The Global Infrastructure Dividend Focus Equity strategy is managed by James A. Lydotes, CFA and Brock Campbell, CFA. The investment process is able to leverage the broader BNY Mellon Global Fundamental Equity Research Team, which includes the Global Research, Quantitative Research and Global Investment teams across regions, market capitalisations and investment styles.

Portfolio Manager James Lydotes is responsible for assigning coverage and workload to analysts. Research on companies is performed by both the portfolio managers as well as sector analysts, who then present their conclusions to the portfolio manager. In these meetings, all buy and sell ideas are discussed. Ultimately, the portfolio manager has final responsibility for all decisions about portfolio construction.

Unlike strategies that are either quantitatively or fundamentally based, the team incorporates both a global research platform that provides fundamental insights at the stock-specific level with a series of customized quantitative tools.

Research Team

The Research Team consists of 14 individual teams with joint responsibility for the stocks in their designated industry groups.

The research analysts are considered specialists. Some focus on specific regions or sectors, while others specialise in a combination of both geographic and sector expertise.

Staffing Changes

There has been no turnover of the key investment professionals or staff over the past 3 years.

Key Investment Staff

James A. Lydotes, CFA - Managing Director, Senior Portfolio Manager

Mr Lydotes is the lead portfolio manager of the Global Infrastructure Dividend Focus Equity and Global Healthcare REIT strategies and a senior research analyst on the Global Equity team, primarily focused on the International Equity and International Small Cap Equity strategies. He is responsible for research coverage of the non-US Health Care, Utilities, Information Technology and Telecommunication Services sectors, in addition to assisting in the development and enhancement of the team’s quantitative stock selection models. Before joining the firm, he served as a fixed income business analyst at Wellington Management Co. Mr Lydotes received a BA in economics from Syracuse University, holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society Boston.



Brock A. Campbell, CFA - Director, Portfolio Manager

Mr Campbell is a portfolio manager on the Global Infrastructure Dividend Focus Equity strategy. He is also a senior research analyst on the Global Research team, covering utilities and industrials. Previously, he was a research associate, supporting senior analysts covering the energy, utilities and materials sectors. He has also served as a portfolio assistant, responsible for generating a diverse range of analytical data and creating performance attribution reporting materials. He holds a BA in political science and economics from Wheaton College and the Chartered Financial Analyst® designation.

William J. Adams - Managing Director, Global Investment Strategist

Mr Adams is a global investment strategist for the firm’s active equity Non-US and Emerging Markets investment disciplines, responsible for communicating the teams’ strategies to clients,

prospective clients and consultants, serving as the interface between client-facing staff and investment teams. In this role, he guides the messaging and positioning of these investment strategies, helping to create marketing materials and content, responding to investment- related client inquiries and ensuring relevant investment insights of portfolio management teams are delivered internally and externally in a timely, effective way. Before joining the firm, he was an associate at Deutsche Bank, where he was responsible for European equity research sales. Previously, he was a senior account officer at Putnam Investments, where he managed 401(k) relationships, and a senior account administrator at State Street Research and Management Co. Mr Adams earned a BA in political science from Boston College and an MBA in finance from the University of Maryland.

Meeting Schedule

The table below shows the regular meetings that form part of the overall investment process.

Meeting PurposeFrequen-

cyParticipants

Global Research Team Meeting

Updates from fundamental research team that covers a variety of subjects including new research, new initiations, news and

earnings.

DailyPortfolio Managers, Portfolio Strategist, Research Analysts

Trading UpdateGlobal markets update from traders at

08.35 ESTDaily

Portfolio Managers, Portfolio Strategist, Research Analysts & Trader

Investment StrategyThe team's weekly meeting is functionally

a strategy meeting and influences the decision-making process.

Weekly Portfolio Managers

Global Sector Team Meeting Global Sector Team Meeting Weekly Portfolio Managers, Portfolio Strategist, Research Analysts

Quantitative Factor ReviewReview of monthly quantitative factor

reporting.Monthly Portfolio Managers

Attribution Review Review of monthly portfolio attribution. Monthly Portfolio Managers

Communication among the investment teams is fostered through a number of regularly scheduled meetings - daily, weekly, monthly, etc. that allows individuals to share their research and expertise with their colleagues.

The team’s weekly meeting is functionally a strategy meeting and influences the decision-making process. Just the two portfolio managers (Mr Lydotes and Mr Campbell) attend the meeting. The Manager believes a small team makes for more nimble decision making. The agenda for this meeting is as follows:

• Review trailing 1-, 3-, 6-month performance by sector, country, region, factor, custom grouping

• Review rolling 6- and 12-month performance versus buy & hold portfolio to assess behavioural biases exhibited in the trading

• Review factor exposures surfaced by the quantitative models

• Review new well scoring ideas for new idea generation



• Discuss recent, relevant industry level work performed by the global research platform.

SQM Research believes the practice of constant communication and the broad-based inclusion of team members in decision-making is a vital ingredient to the success of the process. Interactive peer review and collaboration across a tightly knit group of experienced investors will likely make the best use of their combined intellectual property and shared history.

Remuneration and Incentives

The compensation for each individual is evaluated on a total compensation basis, in which combined salaries and incentives are reviewed against competitive market data for each position annually. The following factors encompass the investment professional rewards program.

• Base salary

• Annual cash incentive

• Long-Term Incentive Plan

o Deferred cash for investment

o BNY Mellon restricted stock units and/or

o BNY Mellon AMNA equity

Base Salaries

Base salary is determined by the employees’ experience and performance in the role, taking into account ongoing compensation benchmark analyses. Base salary is generally a fixed amount that may change as a result of an annual review, upon assumption of new duties, or when a market adjustment of the position occurs.

Performance Incentives

Incentive compensation decisions are based on merit. There is an emphasis on deferred awards, which incentivize staff to focus on long-term alpha generation. Bonus awards are 100% discretionary and can have a large range of possible outcomes depending on individual, team, and firm performance.

Some employees receive deferred compensation in the form of participation in a Long-Term Incentive Plan payable in deferred investment and/or BNY Mellon restricted stock. Awards for selected senior portfolio managers are based on a two-stage model: an opportunity range based on the current level of business, and an assessment of long-term business value. A significant portion of the award is based upon the performance of the portfolio manager’s accounts relative to the performance of appropriate peers, with longer-term performance more heavily weighted.

Team Alignment

BNY Mellon AMNA employees are eligible to invest in BNY Mellon funds. In addition, a significant portion of BNY Mellon AMNA investment professionals’ compensation is aligned with the performance of the products through the LTIP program, in which the deferred cash component is invested into BNY Mellon products. Equity grants, as part of the Long-Term Incentive Program, are typically made with a three-year cliff vesting period. If an employee voluntarily leaves BNY Mellon AMNA before retirement, any vested shares are valued and distributed at the next settlement window and any unvested shares are forfeited.

SQM Research believes access to firm equity, and client-focused performance bonuses act as strong incentives for optimising staff engagement, retention and productivity. The intention (and SQM believes, the effect) is to align staff performance with client and share-holder objectives. It focuses on the customers’ needs and medium to long-term results.


22PRODUCT FEATURES - FEES, REDEMPTION POLICY

Fees

Fees and Costs FundPeer Avg

Difference

Management Fee (% p.a.) 1.15% 1.02% +0.13%

Expense Recovery (% p.a.) Nil - -

Performance Fee (%) Nil 15.08% -

Indirect Cost Ratio ICR (% p.a) no data 1.12% -

ICR Data: no data

Buy Spread (%) 0.15% 0.20% -0.05%

Sell Spread (%) 0.15% 0.20% -0.05%

1. Management fee and expected expense recoveries. 2.. Indirect costs ratio

Ongoing Fees

Base Management Fee

• 1.15% per annum of the Fund’s Net Asset Value (“NAV”)

• including GST and impact of RITC (Reduced Input Tax Credit)

• calculated daily and paid monthly

• peer group average is 1.02% per annum

Buy/Sell SpreadA buy/sell spread is applicable as follows:

• total of 0.30% (0.15% buy / 0.15% sell)

• the peer group average is 0.40% (0.% buy / 0.20% sell)

This spread represents the difference between the application price and the withdrawal price of the Fund, a reflection of transaction costs relating to the underlying assets.

Performance Fees

The Fund does not charge a performance fee.

Overall Fees

If held and redeemed within 12 months, total transaction costs would amount to 1.45% of investment in the Fund. This figure includes the MER, expense recovery and the buy/sell spread. It does not consider rebates or negotiations or any potential performance fee.

The peer group average cost for a one year round-trip is 1.42% of the Fund’s NAV.

Distributions

Distributions are paid on a quarterly basis, subject to the availability of distributable income. In a scenario where the Fund’s realised losses and expenses exceed income in a distribution period, the Fund may elect not to make a distribution during that time.

A General Note on Distributions for Managed Funds

The Responsible Entity of a Managed Fund will provide for a regular schedule of distributions, such as monthly/quarterly/ semi-annual or annual. This is subject to the Fund having sufficient distributable income.

The official total distributable income available to pay to investors is determined for the period of that Fund’s financial year. By distributing the net taxable income of the Fund to investors each year, a Fund itself should not be liable for tax on its net earnings.

If a Fund makes distributions more frequently than once over the financial year, those distributions will be made based on estimates of the distributable income for that distribution period. The final total amount of distributable income available for passing on to investors can only be calculated after the close of the financial year, based on the Funds taxable income for that year.

If the total distributions a Fund pays out exceeds total tax income for that particular financial year, the excess amount may be treated as a return of capital rather than income. This will possibly have tax implications for the investor.

Due to the considerations outlined above, there may be periods in which no distributions are made, or a Fund may make additional distributions

A Fund’s ability to distribute income is determined by the performance of the Fund and general market conditions. Accordingly, there is no guarantee a Fund will make a distribution in any particular distribution period.

1.91

5.15 5.245.99

4.11

11.38

3.92

5.85

12.02

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18

Distribution Amount - cents per unit


23QUANTITATIVE ANALYSIS

Metrics 1-Year 3-Year 5-Year Inception

Tracking Error (% p.a.) - Fund 3.78 4.56 4.67 4.61

Tracking Error (% p.a.) - Peer Average 5.14 6.09 6.32 7.76

Information Ratio - Fund 0.15 -0.05 0.05 0.23

Information Ratio - Peer Average -0.55 0.03 -0.08 -0.17

Sharpe Ratio - Fund 0.84 0.55 1.28 1.56

Sharpe Ratio - Peer Average 0.44 0.69 1.24 1.41

Volatility - Fund (% p.a.) 9.85 10.07 9.31 9.18

Volatility - Peer Average (% p.a.) 8.60 9.28 8.87 8.55

Volatility - Benchmark (% p.a.) 10.10 10.09 9.38 9.01

Beta based on stated Benchmark 0.91 0.90 0.87 0.89

Quantitative Insight1

Note: Unless otherwise stated, all return and risk data reported in this section are after-fees and for periods ending 31-Jul-2018.

Returns

The Fund has displayed strong performance since inception against both benchmark and peers. Only in the past 3 years has the fund lagged, recovering over the past 12 months. These returns are satisfactory relative to the objective and meet SQM’s expectations for the Fund relative to its fee level and volatility. SQM Research notes that the Fund has outperformed the peer group by a material margin.

1. Note: Sharpe and Information Ratios are not reliable comparison tools in periods where both the Fund and its peers/benchmark record a negative result

8.30

5.57

11.89

14.32

7.73 5.79

11.67 13.26

4.04

6.34

10.98 12.00

1-Year 3-Year 5-Year Inception

Total Return % pa

Fund Benchmark Peer Average

0.57

-0.22

0.22

1.06

4.27

-0.77

0.91

2.32


Excess Returns compared to Benchmark & Peers

Benchmark Peer Average

1. Assumes dividend reinvestment. Returns one year and longer are annualised. Return history starts Aug-20112. Benchmark: S&P Global Infrastructure Index NR Unhedged

The Fund’s benchmark is the S&P Global Infrastructure Index (Net) Unhedged.

Risk/Return Data to 31 July 2018

Total Return 1-Month 3-Month 6-Month 1-Year 3-Year 5-Year Inception

Fund1 -0.64 0.24 6.11 8.30 5.57 11.89 14.32

Benchmark2 1.18 3.48 6.25 7.73 5.79 11.67 13.26

Peer Average 1.13 2.98 3.86 4.04 6.34 10.98 12.00

Alpha -1.82 -3.24 -0.14 0.57 -0.22 0.22 1.06



Return Analysis Last 6Years

to Dec-17

Last 12Half-Yearsto Jun-18

Last 84Monthsto Jul-18

v.Bench v. Bench v. Bench

Average outperformance 3.72 2.81 1.13

Average underperformance -3.70 -3.38 -1.02

No. of Periods of positive alpha 4 8 43

No. of Periods of negative alpha 2 4 41

Hit Rate 66.7% 66.7% 51.2%Benchmark: S&P Global Infrastructure Index NR Unhedged

Total Gains 14.9 22.5 48.5

Total Losses -7.4 -13.5 -41.8

Asymmetry 2.0 1.7 1.2

The Fund has outperformed its benchmark on 51.2% of rolling three year observations since its inception. As the table above shows, the quantum of outperformance has been only marginally higher than that of underperformance.

Risk

9.85 10.07

9.31 9.18

10.10 10.09

9.38 9.01

8.60

9.28 8.87

8.55


Volatility % pa

Volatility - Fund (% p.a.) Volatility - Benchmark (% p.a.) Volatility - Peer Average (% p.a.)

The Fund’s volatility (standard deviation of monthly returns) has tended to be slightly higher than benchmark and peers since inception, but marginally lower over the past five years.

As another perspective, the Fund’s 3-year rolling volatility (of monthly returns) has varied from a low of 6.32% per annum to a high of 10.98% and averaged 8.86% over the rolling observations of the Fund’s lifespan. Over this same time frame the peer group rolling volatility ranged from a low of 6.87% per annum to a high of 9.86% and averaged 8.66%.

3.78 4.56 4.67 4.61

5.14 6.09 6.32

7.76


Tracking Error % pa

Tracking Error (% p.a.) - Fund Tracking Error (% p.a.) - Peer Average

The Trust’s tracking error (standard deviation of monthly excess returns) has tended to be significantly lower than peers, with a long-term tracking error of 4.6% p.a. compared to peers at 7.7% p.a.

The risk outcomes as described above regarding volatility and tracking error are consistent with the Manager’s objectives about risk and are in line with SQM’s expectations for this Fund. We note that for an active and concentrated portfolio, the tracking error is very low.

Drawdowns

Drawdown Summary

Drawdown Size (peak-to-trough)

Fund Bench Peers

Average -3.40% -3.20% -3.52%

Number 13 14 11

Best -0.64% -3.32% -3.71%

Worst -8.77% -9.25% -9.16%

Length of Drawdown (in months)

Fund Bench Peers

Average 3.8 3.6 4.6

Length of Drawdown = time from peak to trough and back to previous peak level

The Fund’s downside capture ratio over the 3 years to July 2018 was 79.1% compared to 72.4% for the peer average.

Drawdowns have on average been in line with the benchmark and the peer average.

Snail Trail

The snail trail chart and tables below depicts the combination of the Fund’s rolling 3-year excess returns and rolling 3-year volatility. There are 49 observations in total.

The tables below display the distribution of these observations across the risk/return quadrants as well as the overall frequency of Outperformance v. Underperformance, and of High-Vol v. Low-Vol. As shown in the last table entry, the Fund is in the optimal upper left-hand quadrant (higher return, lower volatility) 35% of the time.



0.84

0.55

1.28

1.56

0.77 0.57

1.24

1.47

0.44

0.69

1.24 1.41


Sharpe Ratio

Sharpe Ratio - Fund Sharpe Ratio - Benchmark Sharpe Ratio - Peer Average

Snail Trail Distribution by Quadrant

49 datapoints Lower Vol Higher Vol

Higher Return 17 13

Lower Return 15 4

Q1 (Optimal)

Hi-Return, Low-Volatility 35%

Single Factor Frequency

Higher Return 61%

Lower Return 39%

Higher Volatility 35%

Lower Volatility 65%

Risk-Adjusted Returns

Except for the past 3 year period, the Fund displays strong risk-adjusted returns across the board for both Sharpe and Information ratios when compared to benchmark and peers.

Correlation

Correlation Min Max Avg

3 yr rolling S&P/ASX 300 2.73% 53.95% 39.61%

3 yr rolling MSCI World 51.97% 75.61% 67.03%

3 yr rolling AusBond Comp 11.46% 51.40% 38.33%

3 yr rolling Global Agg -4.80% 40.94% 27.77%

Peer Avg S&P/ASX 300 36.77% 58.42% 48.50%

3 yr rolling Beta 0.67 0.94 0.84

49 Datapoints

The Fund shows low correlation against the major market indices and will provide good portfolio diversification benefits. The correlation of the Fund’s returns to the ASX300 returns over this period is 39.6% and 67.0% against the MSCI World Index. The Fund shows lower correlation than its peers.

Tail Risk

The tail risk chart below shows a strong positive correlation with the ASX300 in times of equity market extremes.

(The analysis in the paragraph below looks at the performance relationship of the Fund to the ASX300, a practice that SQM has set as common across asset classes in Fund reviews. This approach recognises that for the large bulk of financial planner clients, their key traditional asset class risk regarding size and volatility is to Australian equities. Exploring that relationship is useful regardless of the asset class of the Fund itself, as it is helpful to understand how a Fund has acted in times of Australian equity market stress in terms softening or exaggerating the negative performance experienced at such times.)

The table below details the ten largest negative monthly returns for the ASX 300 since the inception of the Fund. This is compared to the Fund’s performance over the same ten months. The correlation of the Fund’s returns to the ASX300 returns over this period is +24.2%. The Fund posted 3 negative returns compared to the ten negative returns of the Australian stock market.

Worst Market Returns vs Fund Return Same Month

Index: S&P/ASX 300 TR Timeframe: from Aug-11 to Jul-18

Rank Date Market Fund Difference

1 Aug-15 -7.70% -0.84% 6.86%

2 May-12 -6.74% 2.70% 9.44%

3 Sep-11 -6.28% 3.18% 9.45%

4 Jan-16 -5.45% -0.77% 4.68%

5 Sep-14 -5.37% 1.89% 7.26%

6 Jun-15 -5.32% -4.77% 0.55%

7 May-13 -4.54% 3.21% 7.75%

8 Mar-18 -3.73% 3.38% 7.11%

9 Nov-11 -3.44% 0.36% 3.80%

10 Nov-14 -3.24% 3.07% 6.31%

TOTALS -51.79% +11.41% +63.20%

Correlation +24.2% Positive 7 out of 10Outperform 10 out of 10

The sum of returns over those 10 worst months was -51.8% for the ASX 300 and -11.4% for the Fund, a difference of +63.2%.

0.15

-0.05

0.05

0.23

-0.55

0.03

-0.08 -0.17


Information Ratio

Information Ratio - Fund Information Ratio - Peer Average



90% 89% 89% 88% 86%82% 81% 78%

61%

50%43%

38%

-13%

0.0%

-20%

0%

20%

40%

60%

80%

100%

Max 95% 90% 80% 70% 60% 50% 40% 30% 20% 10% 5% Min

Cor

rela

tion

to W

orst

Ret

urns

for

ASX

300

Percentile Rank

Correlation to Australian Equity Tail Risk

Property Universe Fund

130% 126%121%

115%

96%86%

80% 78% 73% 71%64% 62% 59%

0.0%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Max 95% 90% 80% 70% 60% 50% 40% 30% 20% 10% 5% Min

Dow

nsid

e C

aptu

re r

elat

ive

to A

SX30

0

Percentile Rank

Downside Capture Ratio in Tail Risk

Property Universe Fund

Similarly, the chart below ranks the Fund’s downside capture of these extreme 10 months of equity tail risk, against its asset class universe.

The chart below shows how the Fund’s tail risk correlation ranks relative to the broader universe of funds in its asset class.



Return and Risk

Rolling Returns

Rolling Excess Returns

0%

5%

10%

15%

20%

25%

30%

Jul 1

4

Jan

15

Jul 1

5

Jan

16

Jul 1

6

Jan

17

Jul 1

7

Jan

18

Jul 1

8

Benchmark 3-yr Return Fund 3-yr Return 3 yr Return Peer Avg

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Jul 1

4

Jan 1

5

Jul 1

5

Jan 1

6

Jul 1

6

Jan 1

7

Jul 1

7

Jan 1

8

Jul 1

8

Fund 3yr Excess Return 3 yr Excess Return Peer Avg

Cumulative Excess Returns

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

-5%

0%

5%

10%

15%

20%

25%

Jul 1

1

Jan 1

2

Jul 1

2

Jan 1

3

Jul 1

3

Jan 1

4

Jul 1

4

Jan 1

5

Jul 1

5

Jan 1

6

Jul 1

6

Jan 1

7

Jul 1

7

Jan 1

8

Jul 1

8

1 month Excess (RHS) Fund: Cumulative Excess

Rolling Correlation to ASX 300

Rolling Information Ratio

-1.00

-0.50

0.00

0.50

1.00

1.50

Jul 1

4

Jan 1

5

Jul 1

5

Jan 1

6

Jul 1

6

Jan 1

7

Jul 1

7

Jan 1

8

Jul 1

8

Fund 3yr Info Ratio 3 yr Info Ratio Peer Avg

0%

10%

20%

30%

40%

50%

60%

70%

Jul 1

4

Jan 1

5

Jul 1

5

Jan 1

6

Jul 1

6

Jan 1

7

Jul 1

7

Jan 1

8

Jul 1

8

Fund: 3 yr Correlation with S&P/ASX 300 TRPeer Avg: 3 yr correlation to S&P/ASX 300 TR

Rolling Sharpe Ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Jul 1

4

Jan

15

Jul 1

5

Jan

16

Jul 1

6

Jan

17

Jul 1

7

Jan

18

Jul 1

8

3yr Sharpe Ratio Fund 3yr Sharpe Ratio Peers



Return and Risk

Rolling Tracking Error

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Jul 1

4

Jan 1

5

Jul 1

5

Jan 1

6

Jul 1

6

Jan 1

7

Jul 1

7

Jan 1

8

Jul 1

8

Fund 3yr TE 3 yr TE Peer Avg

Aug-15

May-12Sep-11

Jan-16

Sep-14

Jun-15

May-13

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

-8% -6% -4%Fu

nd R

etur

n Sa

me

Mon

th

ASX300 since Aug-11

Tail Risk - Returns in Worst Australian Equity Down Markets Since Inception

Snail Trail

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

-2.0% -1.0% 0.0% 1.0% 2.0%

Fun

d: R

olli

ng

3yr

Exc

ess

Ret

urn

s

Fund: Rolling 3yr Excess Volatility

Rolling Beta

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

Jul 1

4

Jan

15

Jul 1

5

Jan

16

Jul 1

6

Jan

17

Jul 1

7

Jan

18

Jul 1

8

Fund: Rolling 3yr Beta

Rolling Volatility

4%

5%

6%

7%

8%

9%

10%

11%

12%

Jul 1

4

Jan 1

5

Jul 1

5

Jan 1

6

Jul 1

6

Jan 1

7

Jul 1

7

Jan 1

8

Jul 1

8

Benchmk Std Dev 3yr Fund Std Dev 3yr 3 yr Volatility Peer Avg

Drawdowns

85

90

95

100

Jul 1

1

Jan

12

Jul 1

2

Jan

13

Jul 1

3

Jan

14

Jul 1

4

Jan

15

Jul 1

5

Jan

16

Jul 1

6

Jan

17

Jul 1

7

Jan

18

Jul 1

8

Benchmark Drawdown Fund Drawdown Peer Avg Drawdown


29ASSET ALLOCATION & RISK PARAMETERS

Asset Allocation

The Fund’s history of asset allocation, sector and other portfolio metrics are detailed below:

Equity Sector Profile Fund Benchmark Active

Equity Real Estate Investment Trusts (Reits) 11.87% 0.00% +11.87%

Diversified Telecommunication Services 10.36% 0.00% +10.36%

Water Utilities 8.83% 0.46% +8.37%

Independent Power And Renewable Electricity Producers 5.45% 0.18% +5.27%

Air Freight & Logistics 2.50% 0.00% +2.50%

Gas Utilities 3.91% 1.67% +2.24%

[Cash] 1.37% 0.00% +1.37%

Oil Gas & Consumable Fuels 18.76% 22.58% -3.82%

Electric Utilities 22.57% 28.47% -5.90%

Multi-Utilities 5.50% 14.55% -9.05%

Transportation Infrastructure 8.89% 32.08% -23.19%

Country Profile Weight Benchmark Active

Australia 0.00% 8.69% -8.69%

USA 43.54% 40.46% +3.08%

Japan 0.00% 0.00% +0.00%

UK 13.30% 4.06% +9.24%

France 0.00% 5.59% -5.59%

Germany 0.00% 2.46% -2.46%

Russia 0.00% 0.00% +0.00%

Other Europe 30.33% 15.99% +14.34%

China 3.60% 3.77% -0.17%

Korea 0.00% 0.00% +0.00%

Taiwan 0.00% 0.00% +0.00%

India 0.00% 0.00% +0.00%

Malaysia 0.00% 0.00% +0.00%

Other Asia 0.00% 2.87% -2.87%

Brazil 0.00% 0.46% -0.46%

Mexico 0.00% 3.43% -3.43%

Other 9.23% 12.22% -2.99%



Currency Profile Weight Benchmark Active

AUD 0.00% 8.69% -8.69%

USD 45.63% 45.01% +0.62%

EUR 23.99% 22.80% +1.19%

GBP 13.30% 4.06% +9.24%

CHF 0.00% 1.24% -1.24%

RUB 0.00% 0.00% +0.00%

Other Europe 3.35% 0.00% +3.35%

Other Asia 0.00% 0.17% -0.17%

Other 13.73% 18.03% -4.30%

Region Profile Weight Benchmark Active

Australia 0.00% 8.69% -8.69%

North America 52.33% 54.43% -2.10%

South America 0.00% 0.71% -0.71%

Europe (incl UK) 40.64% 28.09% +12.55%

Asia (incl Japan) 3.60% 8.08% -4.48%

Other 3.43% 0.00% +3.43%

Profile by Region & Class Weight Benchmark Active

Developed Markets 100.00% 95.87% +4.13%

Emerging Markets 0.00% 4.13% -4.13%

Recent Positioning

Comments from the Fund’s due diligence questionnaire dated August 2018 are reproduced below as a perspective on the Manager’s strategy and style:

Market Review / Market Commentary

The key market risks over the past twelve months have been the sharp spike in US 10 year rates in addition to the burgeoning US trade war with China. The first issue has created a significant headwind to the global infrastructure asset class as the “bond proxy” segments of the space have underperformed the S&P Global Infrastructure index, which is down approximately -4.7% in USD terms through August 2018.

Due to the focus on value, dividend sustainability and portfolio balance related to exogenous factor exposures at the index level such as interest rate risk, the Fund has outperformed by over 500 basis points over the past twelve months.

Part and parcel to the focus on valuation, dividend potential and sustainability as well as an expanded global opportunity set of economic and social infrastructure securities, the performance history has delivered approximately in-line

up-market capture paired with a 77% down-market capture versus the S&P Global Infrastructure index. As a result, the Manager has historically maintained a lower beta and standard deviation profile versus the index.

As of August 2018, the all cap portfolio maintains a weighted average market cap of $22.5 billion versus $28.2 billion for the S&P Global Infrastructure index. BNY Mellon has historically carried a modestly lower weighted average market cap profile compared to the index due to its expanded 500 stock investable universe. The portfolio held 16 of its 28 holdings in non-index stocks that are part of the investable universe, representing approximately 51% of the portfolio weight. This is a typical portfolio profile, but importantly the Manager has historically maintained an approximate 92% correlation with the asset class, which falls in the middle of the range of its largest global infrastructure peers globally.

At the end of August, we maintained off benchmark sector exposure of approximately 23%, including 12% in US Health Care REITs, as well as 11% in Telecom Services, split across Europe, the US and EMEA. We are materially underweight to Industrials as we have found far more compelling opportunities in the aforementioned sectors, as well as US



Utilities after a prolonged period of underperformance at the index level has provided attractive valuations and sustainable dividend profiles with low investor expectations.

The global infrastructure equity space was down approximately 3% in absolute terms over the last 12 months. The Fund, however, outperformed this by approximately 5%, showing a positive 2% return over that same period. Key areas of outperformance included US and Finnish Utilities as well as US Health Care REITs and US and Norwegian energy infrastructure. While the fund performed very well in a relative sense and displayed positive absolute performance, the overall infrastructure space was down over the last 12 months, lagging most broad equity indices. Over the last 12 months, there has been a sharp move higher in global interest rates and this has pressured global infrastructure equities. While all of these businesses have inflation pass-through mechanisms to eventually reprice their revenues in a rising rate / inflationary environment, concerns around this can sometimes lead to pressure on equities. Ultimately, the Manager believes concerns around a rising rate environment to have been the single largest issue related to the underperformance of the asset class over the last 12 months.

Outlook

At different points in time across the asset class, it is more or less difficult to find value in the investable universe. However, after a twelve-month period where interest rate sensitive industries have been under pressure, today we are finding several compelling opportunities where the biggest challenge is identifying portfolio candidates to sell in order to fund them.

In a normalizing market environment where interest rate volatility subsides, we would typically expect the portfolio’s ability to generate a consistent 6% equity dividend yield, in conjunction with modest inflation and alpha potential to approximate an 8-10% absolute return.

Fund Composition as of July 2018

Top 5 Holdings (% of Fund)

Name % of Fund % of Index GICS Sector

PPL Corporation 7.41% 1.13% Utilities

Inter Pipeline Ltd. 5.80% 0.58% Energy

Dominion Energy Inc. 5.57% 2.56% Utilities

Enel SpA 5.57% 2.21% Utilities

Atlantia S.p.A. 5.42% 3.12% Industrials

© SQM Research 2018

DISCLAIMER

Although all reasonable care has been taken to ensure that the information contained in this document is accurate, neither SQM Research nor its respective officers, advisers or agents makes any representation or warranty, express or implied as to the accuracy, completeness, currency or reliability of such information or any other information provided whether in writing or orally to any recipient or its officers, advisers or agents.

SQM Research and its respective officers, advisers, or agents do not accept:

- any responsibility arising in any way for any errors in or omissions from any information contained in this document or for any lack of accuracy, completeness, currency or reliability of any information made available to any recipient, its officers, advisers, or agents; or

- any liability for any direct or consequential loss, damage or injury suffered or incurred by the recipient, or any other person as a result of or arising out of that person placing any reliance on the information or its accuracy, completeness, currency or reliability.

This document contains statements which reflect current views and opinions of management and information which is current at the time of its release but which may relate to intended or anticipated future performance or activities. Such statements and financial information provided have been estimated only and are based on certain assumptions and management’s analysis of the information available at the time this document was prepared and are subject to risk and uncertainties given their anticipatory nature. Actual results may differ materially from current indications due to the variety of factors.

Accordingly, nothing in the document is or should be relied upon as a promise or representation as to the future or any event or activity in the future and there is no representation, warranty or other assurance that any projections or estimations will be realised.

By accepting the opportunity to review this document the recipient of this information acknowledges that:

- it will conduct its own investigation and analysis regarding any information, representation or statement contained in this or any other written or oral information made available to it and will rely on its own inquiries and seek appropriate professional advice in deciding whether to further investigate the business, operations and assets of the business; and

- to the extent that this document includes forecasts, qualitative statements and associated commentary, including estimates in relation to future or anticipated

performance, no representation is made that any forecast, statement or estimate will be achieved or is accurate, and it is acknowledged that actual future operations may vary significantly from the estimates and forecasts and accordingly, all recipients will make their own investigations and inquiries regarding all assumptions, uncertainties and contingencies which may effect the future operations of the business.

In providing this document, SQM Research reserves the right to amend, replace or withdraw the document at any time. SQM Research has no obligation to provide the recipient with any access to additional information or to release the results of or update any information or opinion contained in this document.

Reproduction

SQM Research assessment reviews cannot be reproduced without prior written permission from SQM Research. Each assessment review completed by SQM Research is held under copyright. Extracts may not be reproduced.

Requests to reproduce or use an SQM Research assessment review should be sent to [email protected]

Disclosure

SQM Research has no involvement in this fund or any of the organisations contained in the product disclosure statement. This assessment does not constitute an investment recommendation. It is designed to provide investment advisers with a third party view of the quality of this fund, as an investment option. SQM Research charges a standard and fixed fee for the third party review. This fee has been paid under the normal commercial terms of SQM Research.

Analyst remuneration is not linked to the rating outcome. Where financial products are mentioned, the Analyst(s) may hold financial product(s) referred to in this document, but SQM Research considers such holding not to be sufficiently material to compromise the rating or advice. Analyst holdings may change during the life of the report. The Analyst(s) certify the views expressed in the report accurately reflects their professional opinion about the matters and financial product(s) to which the report refers.

SQM Research, under its Australian Financial Services Licence (Licence number 421913) operates under the provisions set down under ASIC Regulatory Guide 79.

Please note a Financial Services Guide and a Conflicts of Interest policy is available on our website. Subscribers to SQM Research receive access to the full range of fund research, ratings and fund updates.

This report has been prepared for Financial Advisers Only.

Address:Level 16, 275 Alfred StreetNorth Sydney, New South Wales, 2060

Contacts:Louis Christopher 02 9220 4666Rob da Silva 02 9220 4606

Analyst:Patrick Bennett

Central Contacts:Phone 1800 766 651Email: [email protected]: www.sqmresearch.com.au

Documents

Pinnacle BNY Mellon Global Infrastructure Yield Fund · 11/28/2018 · Pinnacle BNY Mellon Global Infrastructure Yield Fund 3 Fund Summary Description The Pinnacle BNY Mellon Global