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Short term - Attractive returns, The right choice for corporate bonds
CORP_1
Prepared for professional clients only
Alexis Renault, CFAExecutive Director, Head of High Yield
20.6.-21.6.2013
Any views and opinions expressed within are those of the investment adviser.CFA© and Chartered Financial Analyst© are registered trademarks owned by CFA Institute.
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Duration Fund
Team & Track Record
Investment Philosophy & Process
Strategy & Portfolio Structure
Summary
1
Investment Management Investment Services
● $1.4 trillion in assets under management1
● 7th largest global asset manager2
● 7th largest U.S. asset manager2
● 8th largest asset manager active in the European marketplace2
● Service $179 billion in private client assets● Top 3 private bank in the US3
● Top 10 US wealth manager4
● One of the largest providers of securities services with $26.2 trillion of assets under custody and/or administration
● The world’s largest custodian5
● Service $2 trillion in global collateral, including tri-party repo collateral worldwide
● #1 service provider for ETFs6
● A leading lender of US Treasury securities● A leading offshore fund administrator● Leading provider of US Government Securities clearance services7
● #1 Trustee for US Debt Capital Markets8
● Market leader in depositary receipts with 1,398 sponsored programs with leading companies from 68 countries
Strong Market Positions in our Businesses
CORP_2
● Pershing, LLC is a leading provider of clearing and financial advisory solutions to IBDs and RIAs
● #1 U.S. clearing firm, ranked by broker-dealer clients (Pershing, LLC)9
● Manage one of the ten largest US bank derivatives portfolios10
● A leading provider of foreign exchange services11
● Process 170,000 global payments totaling an average of $1.5 trillion daily● Fifth largest participant in CHIPS funds transfer in the US12
● Sixth largest SWIFT participant worldwide13
● One of the world’s largest providers of performance & analytics
All company statistics are as at 31 March 2013 unless otherwise noted.1. Assets under management include investment boutiques and wealth management.2. Rankings include assets managed by BNY Mellon investment boutiques and BNY Mellon Wealth Management. Each ranking may not include the same mix of firms. Global asset manager rankings by Pensions & Investments, October 2012; US asset manager rankings by Institutional Investor, July 2012; European asset manager rankings by Investment & Pensions Europe, June 2012.3. Barron’s Top Private Banks Thriving in the Tumult, December 3, 20114 . Barron’s Top Wealth Management Firms, September 15, 2012 5. Institutional Investor, World’s Largest Global Custodians, October 2012, data as of June 20126. 2012 Mutual Fund Service Guide7. Federal Reserve Bank of New York - Fedwire Securities High Volume Customer Report, September 30, 20128. Thomson Reuters, US Capital Markets Review, first nine months, 20129. Investment News, July 201210. OCC Quarterly Report on Bank Trading and Derivatives Activities, second quarter, 201211. Global Finance World’s Best Foreign Exchange Providers, January 2013 and Global Investor/isf FX Survey, February 201212. The Clearinghouse and Federal Reserve Board, September 201213. SWIFT, January 2012
2
BNY Mellon Investment Management
• Total AUM US$1.4 trillion1
• Institutional grade investment management, innovation and market leading intelligence
• Each investment manager has its own proprietary investment processes
− No ‘house view’ is imposed: there is no overall Chief Investment Officer
− Each investment manager retains complete investment autonomy
• An entrepreneurial, focused approach is encouraged
− Each investment manager focuses solely on investment management
• A great breadth and depth of expertise in every major asset class and sector
CORP_4
1 As at 31 March 2013
− More than 275 institutional investment management product offerings
3
A multi-boutique investment management model encomp assing investment skills of world class specialist investm ent managers
BNY Mellon Investment ManagementOur world class specialist asset managers
Global sub-investment grade debt asset management
US$18.0bn1
Brazilian multi-strategy, long/short, long-only and fixed income strategies
US$7.7bnMoney market funds
US$225.7bn
Greater China capital market specialist
US$155mn
Active fundamental equity manager; core, growth & value styles; U.S., global
and world ex-domestic marketUS$43.6bn
Fund of hedge funds; non-proprietary manager of managers
Asian equities management
Leader in liability driven investment, fixed income, currency risk management, multi-asset, absolute return style and specialist
equity solutions
Global multi-asset solutions and strategies ranging from indexing to
alternatives European fixed
income and equities
CORP_5
2
3
46
1 AUM for The Alcentra Group, 2 A division of The Dreyfus Corporation, 3 Minority Owned, 4 In North America and Australasia the Insight Investment Group operates under the Insight Pareto brand. 5 Assets under management figure represents the combined assets under management of Insight Investment Management (Global) Limited and Pareto Investment Management Limited, which became part of the Insight group on 1 January 2013. Data as at 31 March 2013. Assets under management are represented by the value of cash securities and other economic exposure managed for clients. 6 Meriten Investment Management GmbH (formerly WestLB Mellon Asset Management) is wholly owned by The Bank of New York Mellon Corporation following the buyout of the remaining 50% of the 50:50 joint venture with Portigon (formerly WestLB AG) in October 2012. 7 AUM for The Newton Group, *Provisional AUM has been provided by each asset manager as at 31 March 2013. Total AUM, provided by the Bank of the New York Mellon Corporation, includes the asset managers outlined in this presentation as well as BNY Mellon Wealth Management and external data.
4
Total AUM US$1.4 trillion
manager of managersUS$5.0bn
managementUS$1.2bn*
equity solutionsUS$387.2bn5
alternatives US$303.9bn
income and equitiesUS$25.7bn
Active equity and bond, multi-asset, real-return and income solutions in a
global thematic frameworkUS$84.6bn7
Multi-strategy private equity investing; direct investment and fund-of-funds
US$10.4bn
Award-winning global, emerging markets and regional fixed income
solutions specialistUS$167.0bn
U.S. & Global real estate investment management
US$7.8bn
Global equity investment management
US$63.4bn
3
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Duration Fund
Team & Track Record
Investment Philosophy & Process
Strategy & Portfolio Structure
Summary
5
The Short Duration Credit Opportunity
Short duration credit (SDC) is an attractive, risk‐adjusted investment opportunity;
• Lower volatility of SDC is a direct result of reduced sensitivity to both:
− A rise in the general level of interest rates
− An increase in credit spreads
• A blended approach further enhances this efficiency• A blended approach further enhances this efficiency
• Appropriate for moderate to lower risk appetites
• SDC yields and prospective returns are attractive versus treasuries
• SDC has shorter duration than the high yield and investment grade markets without material yield compromise
6
Cumulative default rates over time*
Defaults inyears 5-8: 7.46%
Defaults inyears 1-4: 15.13%
High Yield
10
15
20
25
30
Cum
ulat
ive
defa
ult r
ate
(in %
)
*Source: S&P, based on global default rates from 1981 – 2010. Data for general market not for the fund.
● The increase in defaults over the first 4 years was the highest
● After several years, annual default rates decreased (i.e. annual defaultrates should be lower for bonds with a shorter residual time to maturity)
years 1-4: 15.13%
Investment Grade
0
5
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Cum
ulat
ive
defa
ult r
ate
Time horizon (in years)
7
Yearly Performance Short Duration Credit: the attraction of a blended approach
2000 3.75 3.91 4.23 4.54 -15.87 - 6.28 - 6.22 4.982001 14.76 13.58 11.22 8.89 -13.94 6.53 - 16.67 5.442002 5.13 5.28 5.54 5.76 -5.12 0.71 - 2.89 6.032003 17.87 16.18 12.85 9.61 26.4 28.10 - 20.29 4.90
US HY***Euro HY
1M-3,5Y***US HY 1-3Y***
Euro IG Non-Financial 1-3Y**
Credit Short Duration*
80% H Y/ 20% IG 70% H Y/ 30% IG 50% H Y/ 50% IG 30% H Y/ 70% IG
Euro HY***
As at 31 December 2012 .* Combination of BofAML High Yield US Corporates Cash Pay 1-3 Y (hedged into Euro) and iBoxx € Corporate Non-Financial 1-3 Y; ** iBoxx € Corporate Non-Financial 1-3Y; ***BofAML Euro High YieldNon-Financials BB1-B3 1 mo-3.5 Y; comparative index history of the Compass Fund Euro High Yield Bond Fund (currently: BofAML Euro High Yield Fixed Floating Rate Constrained Bond ex Financials); BofAML High Yield USCorporates Cash Pay 1-3 Y (hedged into Euro); BofAML US High Yield Cash Pay (hedged into Euro). Source: Bloomberg, DB Index Quant, Meriten Investment Management. Past performance is not a guide to futureperformance.
2004 8.62 8.07 6.97 5.87 14.73 11.40 - 9.05 4.252005 1.39 1.49 1.70 1.90 6.8 1.63 - 2.37 2.212006 6.94 6.33 5.13 3.93 8.9 9.06 - 10.74 2.172007 1.91 2.09 2.45 2.81 -2.09 0.77 - 2.96 3.342008 -12.06 - 9.99 - 5.84 - 1.71 -33.68 -27.85 -15.44 -14.71 6.182009 37.73 34.05 26.90 20.04 73.08 56.35 31.83 45.57 9.122010 11.03 10.05 8.09 6.15 14.51 14.42 7.75 13.43 2.652011 3.81 3.68 3.41 3.13 -1.26 4.46 3.76 4.07 2.702012 9.21 8.64 7.49 6.36 23.19 14.88 14.82 10.36 4.69
Positive returns in all years bar 2008
8
Yearly Performance Short Duration Credit: the attraction of a blended approach
2 Years 10 Years 2 Years 10 Years
2000 3.75 3.91 4.23 4.54 0.25% -0.52% -1.07% N/A2001 14.76 13.58 11.22 8.89 -0.88% 0.08% -2.11% -0.07%2002 5.13 5.28 5.54 5.76 -0.90% -0.73% -1.47% -1.21%2003 17.87 16.18 12.85 9.61 -0.14% 0.05% 0.24% 0.44%2004 8.62 8.07 6.97 5.87 -0.13% -0.64% 1.19% -0.05%
US Treasuries
Yield Change**Credit Short Duration*
German Bunds80% H Y/ 20% IG 70% H Y/ 30% IG 50% H Y/ 50% IG 30% H Y/ 70% IG
As at December 2012.*Combination of BofAML High Yield US Corporates Cash Pay 1-3 Y (hedged into Euro) and iBoxx € Corporate Non-Financial 1-3 Y; **Yield changes Germany based on Rex Bond Sub Index Current 2 Yand Rex Bond Sub Index Current 10 Y, Yield Changes USA based on BofAML US Treasury Current 2 Y and BofAML US Treasury Current 10 Y. Source: Bloomberg, DB Index Quant, Meriten Investment Management. Pastperformance is not a guide to future performance.
2004 8.62 8.07 6.97 5.87 -0.13% -0.64% 1.19% -0.05%2005 1.39 1.49 1.70 1.90 0.38% -0.38% 1.38% 0.18%2006 6.94 6.33 5.13 3.93 1.00% 0.63% 0.42% 0.31%2007 1.91 2.09 2.45 2.81 0.22% 0.46% -1.75% -0.67%2008 -12.06 - 9.99 - 5.84 - 1.71 -1.91% -1.10% -2.31% -1.79%2009 37.73 34.05 26.90 20.04 -0.97% -0.01% 0.38% 1.59%2010 11.03 10.05 8.09 6.15 -0.27% -0.20% -0.57% -0.53%2011 3.81 3.68 3.41 3.13 -0.64% -1.10% -0.36% -1.43%2012 9.21 8.64 7.49 6.36 -0.23% -0.55% 0.01% -0.14%
Strong performance in a rising yield environment
9
Duration effect
Indexed Price development
80.0
82.5
85.0
87.5
90.0
92.5
95.0
97.5
100.0
102.5
105.0
107.5
110.0
Jun-
11
Jul-1
1
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Indexed price development Lafarge 02/13 vs 03/20*
LGFP 5.448 12/04/2013 Corp
LGFP 4.75 03/23/2020 Corp
75.0
77.5
80.0
82.5
85.0
87.5
90.0
92.5
95.0
97.5
100.0
102.5
105.0
Jul-
11
Aug
-11
Sep
-11
Oct
-11
No
v-1
1
De
c-1
1
Jan
-12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12
Jul-
12
Aug
-12
Sep
-12
Oct
-12
No
v-1
2
De
c-1
2
Indexed price development FIAT 02/13 vs 07/18**
FIAT 6.625 02/15/2013 Corp
FIAT 7.375 07/09/2018 Corp
100
200
300
400
500
600
700
800
900
1000
1100
Jul-
11
Au
g-1
1
Se
p-1
1
Oct
-11
No
v-1
1
De
c-1
1
Jan
-12
Fe
b-1
2
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Se
p-1
2
Oct
-12
No
v-1
2
De
c-1
2
Spread development FIAT 02/13 vs 07/18**
FIAT 6.625 02/15/2013 Corp
FIAT 7.375 07/09/2018 Corp
100
200
300
400
500
600
700
800
Jun-
11
Jul-1
1
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12
Jul-1
2
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Spread development Lafarge 02/13 vs 03/20*
LGFP 5.448 12/04/2013 Corp
LGFP 4.75 03/23/2020 Corp
* Source: Bloomberg. As at December 2012. Notice: Past performance is not a guide to future performance. This information is provided for illustrative purposes only and should not be construed as investment advice.
Spread development
+81
+102
-93-19
10
Risk and return in selected periods (as of 31/05/2013)
Performance and risk of alternative portfolios structures (in %)Portfolio*
80%HY/20%IG 70%HY/30%IG 50%HY/50%IG 30%HY/70%IG
Period
1 year 3.49 9.64 14.19 11.46 17.77 8.38 7.76 6.53 5.30
3 years (annualised) 3.33 8.50 11.43 8.88 11.31 7.45 6.93 5.90 4.87
5 years (annualised) 5.00 9.56 9.59 7.49 10.59 8.76 8.34 7.45 6.51
10 years (annualised) 3.97 8.06 8.42 - 9.17 7.29 6.90 6.10 5.26
Period
Euro HYCredit Short Duration
Performance
Risk**
IG Non-Fin 1-3 Y
US HY 1-3 Y
US HYEuro HY 1M-3,5Y
*Represented by the following indices or index combinations: iBoxx € Corporate Non Financial 1-3 Year Index; BofA Merrill Lynch High Yield US Corporates Cash Pay 1- 3 Year Index; BofA Merrill Lynch High Yield US CorporatesCash Pay Index; BofAML Euro High Yield Non-Financials BB1-B3 1 mo-3.5 Y; comparative index history of the Compass Fund Euro High Yield Bond Fund (currently: BofAML Euro High Yield Fixed Floating Rate ConstrainedBond ex Financials); Credit Short Duration by combining BofAML High Yield US Corporates Cash Pay 1-3 Y (hedged into euro) and iBoxx € Corporate Non-Financial 1-3 Y. ** Standard deviation of monthly rates of return; Source:Bloomberg, DB Index Quant, Meriten Investment Management; Past performance is not a guide to future performance.
● Return generated by Credit Short Duration in nearly all periods > 5%
● Allocation between high yield/investment grade offers risk reduction potential
● On a 5 year view a 70%HY/30%IG portfolio would have delivered 80% returns as Euro HY with 60% of the volatility
● On a 3 year view a 70%HY/30%IG portfolio would have delivered ⅔ returns as Euro HY with only ⅓ of the volatility
Period
1 year 1.17 1.46 2.49 1.74 2.90 1.16 1.04 0.88 0.88
3 years (annualised) 1.20 3.46 6.37 4.38 8.46 2.84 2.53 1.96 1.48
5 years (annualised) 2.02 12.94 14.22 8.89 15.91 10.56 9.37 7.02 4.74
10 years (annualised) 1.63 9.40 10.59 - 11.87 7.67 6.81 5.11 3.47
Risk**
11
0.60 0.61 0.64
0.69 0.72
0.80
0.94
0.59 0.59 0.65
0.72 0.77 0.77
0.90
1.13
Highest Sharpe Ratios by combining High Yield and Investment Grade short duration (as of 31/05/2013)
10 Years (annualised)
5 Years (annualised)
0.59 0.59
Euro HY US HY US HY 1-3Y 80%HY/20%IG* 70%HY/30%IG* EU HY 1M-3,5Y 50%HY/50%IG* 30%HY/70%IG*
*Combination of BofAML High Yield US Corporates Cash Pay 1-3 Y (hedged into Euro) and iBoxx € Corporate Non-Financial 1-3 Y; Data for EU HY 1-3.5 based on BofAML Euro High Yield Non-Financials BB1-B3 1 mo-3.5 Y;Data for Euro HY based on BofAML Euro High Yield Fixed Floating Rate Constrained Bond Index ex Financials; Data for US HY 1-3Y based on BofAML High Yield US Corporates Cash Pay 1-3 Y Index (hedged into Euro); Datafor US HY based on BofAML US High Yield Cash Pay Index(hedged into Euro) Source: Bloomberg, DB Index Quant, Meriten Investment Management. Past performance is not a guide to future performance.
12
5.45
4.66
6.67
Short duration credit stands out in today’s low rate environment
Yield*
Modified Duration*
2.76
1.73
0.91 1.42
3.65
BNY Mellon Compass Fund Euro Credit Short Duration Fund
High Yield ex Financials** iBoxx Euro Corporate Non-Fi nancial iBoxx Euro Sovereign Germany
* To maturity. Source: Meriten Investment Management, as of 31/05/2013; ** BofAML Euro High Yield Fixed Floating Rate ex Financials Constrained Index; Past performance is not a guide to future performance.
13
Breakeven AnalysisECSD and EHY vs Short term German Government Bonds
� With a modified duration of 1.42 ECSD will outperform short term German government bonds if spreads rise less than 340 bp.
Yield Yield
What if spreads rise?
� With a modified duration of 3.68 Euro High Yield will outperform short term German government bonds if spreads rise less than 185 bp .
Source: Meriten Investment Management, as of 31/05/2013; Projected performance is based on model data. Unlike an actual performance record, projected results do not represent actual trading and may not reflect the impact that market factors might have. Such forecasts are not a reliable indicator of future performance and that are no guarantees that the performance will reflect the model.
BNY Mellon Compass Fund Euro Credit Short Duration Fund
2.76%
iBoxx Euro Sovereign Germany 1-3 Years
0.09%
Spread over iBoxx EuroSovereign Germany 1-3 Years
267 bps
BNY Mellon Compass Fund Euro High Yield Bond Fund
5.73%
iBoxx Euro Sovereign Germany 1-3 Years
0.02%
Spread over iBoxx Euro Sovereign Germany 1-3 Years
564 bps
14
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Durat ion Fund
Team & Track Record
Investment Philosophy & Process
15
Investment Philosophy & Process
Strategy & Portfolio Structure
Summary
BNY Mellon Compass Fund Euro Credit Short Duration Fund
Firm
Meriten Investment Management is a wholly owned subsidiary of Bank of New York Mellon Corporation
Firm AuM: €24.3 billion, €9.2 billion in credit (end of March 2013)
47 Investment professionals – 13 within credit team
Attractive track record of credit management with more than 12 years with no default in their entire history
Fund Objective
Achieve a high level of income and capital growth by investing primarily in corporate bonds denominated in Euro’s with a rating of at least B3 or B- and a maximum residual maturity of 3.5 years. A minimum of 20% of the assets will be invested in sub-investment grade bonds
¹ As at 31/05/2013. 2 Based on the iBoxx € Corporate 1- 3 Jahre Index (Investment Grade) / based on the BofA Merrill Lynch Euro High Yield Non-Financials BB1-B3 1 mo-3.5 Yrs Index (HighYield). As of 31/05/2013. Please note that no representation or warranty is given that return targets will be achieved. Past performance is not a guide to future performance.
Key facts Investment policy/guidelines
Launch date: 01 June 2011 A portfolio of high yield and investment grade corporate bonds
Portfolio duration: Approx 1.42 ¹ Maximum maturity of any one bond: 3.5 years
Volatility ex-ante: Approx 1.97% ¹ Market capitalisation: €399bn (Investment Grade),€61 bn (HY Non-Financials) 2
Current yield: Approx 2.76% ¹ ( 80% HY / 20% IG) Issuer limit: 5%
Minimum rating B3/B- Sector limit: 25%
Liquidity: Daily
B3 or B- and a maximum residual maturity of 3.5 years. A minimum of 20% of the assets will be invested in sub-investment grade bonds (High Yield). Issuers are principally from countries with investment grade rating.
16
Assets under Management in “Euro Credit Short Duration”Successful in challenging markets
600
700
800
900
1000
millions €Total AuM Compass Fund
17
BNY Mellon Compass Fund Euro Credit Short Duration Fund was launched June 1st 2011
0
100
200
300
400
500
Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13
Source: Meriten Investment Management, as of 31/05/2013; Past performance is not a guide to future performance.
100
105
110
115
120
125
Euro Credit Short Duration-Fund* Euro High Yield-Market** Euro Equity-Market***
BNY Mellon Compass Fund Euro Credit Short Duration Fund Stable performance in turbulent times
70
75
80
85
90
95
Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13
*BNY Mellon Compass Fund Euro Credit Short Duration Fund (cumulated performance net of fees); **BofAML Euro High Yield Fixed-Floating Rate ex FNCL 3% Cap (HEAE) Index (the index doesn’t serve as the comparative index of the fund); ***EURO STOXX 50 (the index doesn’t serve as the comparative index of the fund); Source: Datastream, Meriten Investment Management; as of 31/05/2013; Past performance should not be taken as an indication or guarantee of future performance.
18
9.16%
3.06%
8.03%
5.49%
Performance BNY Mellon Compass Fund Euro Credit Short Duration Fund (gross of fees, RF-B share class)
Calender year performance Standard periods performance
-0.25%
2.22%
2011* 2012 2013 YTD
0.09%
1.44%
3.06%
2.22%
1 month 3 months 6 months YTD 1 year since inception*
(p.a.)
* Inception: 01/06/2011; as of 31/05/2013; TER: 0.53% (as of 31/10/2012) Past performance is not a guide to future performance. Source: JPMorgan/Meriten Investment Management
Performance ratios since inception*
Performance (p.a.) Volatility Sharpe Ratio
5.49% 2.96% 1.66
19
Performance analysisBNY Mellon Compass Fund Euro Credit Short Duration Fund (30/12/2012 - 31/05/2013)
Sector/Segment Weighting* Contribution
Compass Euro Credit Short Duration 100,00 2,30 High Yield 88,45 1,94 Auto_Parts 14,42 0,24
Bank 3,30 0,06
BasicResources 13,70 0,17
FoodBeverages 1,88 0,01
HealthCare 9,55 0,36
IndGoodServ 16,14 0,31
Oil_Gas 1,75 0,05
Packaging 2,67 0,01
Retail 0,87 0,06
Technology 3,55 0,03
Telecom 3,22 0,04
Travel_Leisure 2,14 0,29
UtilitySuppliers 7,78 0,16
Chemicals 4,69 0,12
Telecom-Cable 2,79 0,02
Corporate Bond IG 20,05 0,27 Automobiles & Parts 1,54 0,01
Banks 4,92 0,08
Chemicals 0,10 0,00
Construction & Materials 1,30 0,02
Financial Services 0,65 0,01
Food & Beverage 1,16 0,01
Industrial Goods & Services 0,84 0,01
Media 0,17 0,00
Oil & Gas 1,36 0,01
Personal & Household Goods 0,38 0,00
Retail 0,76 0,01
Telecommunications 3,50 0,05
Utilities 3,37 0,05
Cash 0,88 0,09 Others** -9,38 0,00
* Average weighting. **This position contains synthetical receivables & liabilities; Source: Meriten Investment Management, Bloomberg; Past performance is not a guide to future performance.Investments are subject to risk and there is no guarantee that the Fund's investment objectives will be achieved. Portfolio holdings are subject to change at any time and without notice; are forinformation purposes only and should not be construed as investment recommendations. Performance numbers are based on gross of fee data
20
Low volatilityEx-ante volatility of the BNY Mellon Compass Fund Euro Credit Short Duration Fund (share class RF-B) since inception
3.5%
4.0%
4.5%
Inception: 01/06/2011; as of 31/05/2013; Note: Past performance is not a guide to future performance. Source: Barclays POINT
* Time horizon: 1 year / Confidence: 95%
1.5%
2.0%
2.5%
3.0%
Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13
21
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Duration Fund
Team & Track Record
22
Investment Philosophy & Process
Strategy & Portfolio Structure
Summary
Investment Management Team
Alexis Renault
Corporate Credit
Henning Lenz
Heike Christian
Gunther Westen
Asset Allocation/ Fund Management
Fixed Income Asset Allocation
Ulrich Faupel
Order Desk
Chief Investment Officer
Uwe Fuiten
Team Assistants
Dagmar Rust
High YieldMichael Grunow,CFA*
Frank Kreuzhagen
Iris Secker
InvestmentGrade
Bastian Gries,
Structured Credit/ABS
AndréSchlingloff, CFA*
Alexander Paluzelli
Sven Rudolf
Peter Zimmer
Marion van Bürck
Sara Schlamann
Dr. Stefan Braun, CFA*
Quantitative & Equity Products
Quant. Products& Research
Karsten Seier,
Europ. Small CapsSpec. Equity Prod.
As of June 2013; * CFA© and Chartered Financial Analyst© are registered trademarks owned by CFA Institute.
Asset Management/Research
Alexis RenaultCFA*
Marco Gemmel
Dennis Lehnhoff
Marcus Stegemann
Frank Blass
Brigitte Behrendt
André Schäfer
Stephan Schümann
HeikeJürgens-Kreft
Henning Flender
Markus Knebel
ChristianSobotta
Client Relation Desk
Iris Secker
Sandra Wendel, CFA*
Tim Frankenheim, CFA*
Matthias Lackmann, CFA*
Olga Lepp
Maik Ohm, CFA*
Elena Romanenko
Bastian Gries, CFA*
Peter Zimmer
O. Bogdan Covaciu
Martin Dreier
Thomas Rentsch,CFA*
Ivan Romanenko,CFA*
Frauke Wolkewitz, CFA*
Stefan Möckel(Deputy)Tobias BritschMichael PetersPatrick Ullrich
Karsten Seier, CFA*
Jürgen Heinz
Markus KreßDr. Renata LatochaGundula OehlkeDr. Stefan Schüder
CREDITCREDIT
23
BNY Mellon Compass Fund Euro High Yield Bond Fund
6 Months YTD 1 Year 3 Years (p.a.)
5 Years (p.a.)
10 Years (p.a.)
since inception
(p.a.)Fund +6.01 +3.61 +18.69 +11.70 +9.22 +8.67 +7.82
Comp. Index +5.71 +3.57 +17.79 +11.31 +10.59 +9.17 +5.21
-5
0
5
10
15
20
%
Periods ending 31 May 2013
50
70
90
110
130
150
170
190
210
230
250
270
290
06/0
012
/00
06/0
112
/01
06/0
212
/02
06/0
312
/03
06/0
412
/04
06/0
512
/05
06/0
612
/06
06/0
712
/07
06/0
812
/08
06/0
912
/09
06/1
012
/10
06/1
112
/11
06/1
212
/12
Monthly performance to 31 May 2013
Fund
Comp. Index
Morningstar:����������������TM-Rating (as of 5/2013) (A-Shares, registered funds in Germany)
● The performance shown is the BNY Mellon Compass Fund Euro High Yield Bond Fund managed by Meriten Investment Management against the given comparative index
● Comparative Index: BofA Merrill Lynch Euro High Yield Fixed Floating Rate Constrained Bond Index ex Financials; before 01/11/2009 BofA Merrill Lynch Euro High Yield Fixed Floating Rate Constrained Bond Index; before 08/09/2008 the corresponding fixed rate constrained index; before December 2002 the corresponding unconstrained index
● Inception was 30 Jun 00, and funds were managed against the given indexfrom 30 Sep 00
● The returns shown are based on gross monthly performance data in Euro
● A share class: TER per 31/10/2012 = 0.82%2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Fund +22.36 -1.01 +14.19 +51.56 -30.20 -0.23 +10.01 +6.60 +16.06 +22.04 +2.75 +0.53
Comp. Index +23.20 -1.26 +14.51 +73.08 -33.68 -2.09 +8.90 +6.80 +14.73 +26.40 -5.12 -13.94
Excess Return -0.83 +0.25 -0.33 -21.52 +3.48 +1.86 +1.11 -0.20 +1.33 -4.36 +7.87 +14.47
-40
-20
0
20
40
60
80
%
Annual returns
Comp. Index +5.71 +3.57 +17.79 +11.31 +10.59 +9.17 +5.21
active return +0.30 +0.03 +0.89 +0.39 -1.37 -0.49 +2.61 06/0
012
/00
06/0
112
/01
06/0
212
/02
06/0
312
/03
06/0
412
/04
06/0
512
/05
06/0
612
/06
06/0
712
/07
06/0
812
/08
06/0
912
/09
06/1
012
/10
06/1
112
/11
06/1
212
/12
Past performance is no guide to future performance. Investments are subject to risk and there is no guarantee that the Fund's investment objectives will be achieved. Source: Meriten InvestmentManagement/JPMorgan/Bank of America Merrill Lynch/Morningstar/S&P. Standard & Poor's Fund Ratings represent an opinion only, not a recommendation to buy or sell
24
BNY Mellon Compass Fund Euro Corporate Bond Fund
6 Months YTD 1 Year 3 Years (p.a.)
5 Years (p.a.)
10 Years (p.a.)
since inception
(p.a.)Fund +3.39 +2.15 +10.11 +6.21 +6.88 +4.82 +5.57
Comp. Index +2.73 +1.79 +8.99 +6.01 +6.54 +4.53 +5.21
active return +0.66 +0.37 +1.12 +0.20 +0.34 +0.29 +0.36
0
2
4
6
8
10
12
%
Periods ending 31 May 2013
100
110
120
130
140
150
160
170
180
190
03/
02
09/
02
03/
03
09/
03
03/
04
09/
04
03/
05
09/
05
03/
06
09/
06
03/
07
09/
07
03/
08
09/
08
03/
09
09/
09
03/
10
09/
10
03/
11
09/
11
03/
12
09/
12
03/
13
Monthly performance to 31 May 2013
Fund
Comp. Index
• The performance shown is the BNY Mellon Compass Fund Euro Corporate Bond Fund managed by Meriten Investment Management in a consistent manner against the given index
• The Comparative Index shown is the iBoxx Euro Corporate Overall Index. Prior to 20th March 2006 the iBoxx Non-Financial Index was used
• Inception is 13 March 02
• The returns shown are based on monthly performance data, gross of fees, in Euro
• A share class: TER per 31/10/2012 = 0.57%
2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002**Fund +14.23 +1.29 +3.82 +18.19 -3.45 -0.20 +0.47 +3.72 +7.65 +7.84 +8.69
Comp. Index +13.56 +1.72 +4.73 +16.02 -3.99 -0.22 +0.34 +3.44 +7.53 +7.79 +7.43
active return +0.67 -0.42 -0.91 +2.16 +0.55 +0.02 +0.14 +0.28 +0.12 +0.05 +1.26
-5
0
5
10
15
20
%
Annual returns
03/
02
09/
02
03/
03
09/
03
03/
04
09/
04
03/
05
09/
05
03/
06
09/
06
03/
07
09/
07
03/
08
09/
08
03/
09
09/
09
03/
10
09/
10
03/
11
09/
11
03/
12
09/
12
03/
13
Past performance is no guide to future performance. Investments are subject to risk and there is no guarantee that the Fund's investment objectives will be achieved. ** since inception (not annualised); Source: Meriten Investment Management/JPMorgan/Morningstar
25
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Duration Fund
Team & Track Record
26
Investment Philosophy and Process
Strategy & Portfolio Structure
Summary
Investment philosophy
� Investment philosophy and approach address the asymmetric risk/return profile of short duration corporate credit.
� Focus on the preservation of investors’ capital and compounding returns through disciplined fundamental credit research
Our aims:
� Preserve capital in challenging markets
� Achieving capital appreciation and income in positive markets without taking unnecessary risk� Achieving capital appreciation and income in positive markets without taking unnecessary risk
� Identification of bonds where liquidity will remain sufficient until maturity
� Disciplined implementation to minimise risk
“Successful management throughout the cycle”
27
Investment Process
• Qualitative analysis
• Model/scenario analysis
•
• Systematic monitoring of issuer risks & portfolio risks
• Sector weights
• Issuer weights
•
• Fundamental factors
• Technical factors
Monitoring / risk
management
Portfolioconstruction
Sector analysis
Credit and relative value
analysis
• Liquidity analysis
• Relative value analysis
& portfolio risks
• Sell discipline
• Performance measurement and attribution
• Allocation HY/IG
• Segment beta
28
Credit analysis A financial model of the company* (1)
Peugeot (Manufacturing & Sales Companies) Name of the company :
GAAP Analysts Cash deposit : 1,00%
Currency EUR Interest cost : 5,00%
Financial year end 31. Dez
Last change of the model 16.03.2009
Income Statement (costs positive, income negative,
revenues positive) 2004 2005 2006 2007 2008 2009-H1 2009-H2 2009 2010-H1
Revenues 54 745 54 887 53 789 57 132 52 705 22 720 24 165 46 885 27 620
Change in Revenues 3,9% 0,3% -2,0% 6,2% -7,7% -22,3% 3,0% -11,0% 21,6%
Gross Profit 14 427 14 271 13 473 13 782 12 223 4 517 5 406 9 923 6 491
Gross Margin 26,4% 26,0% 25,0% 24,1% 23,2% 19,9% 22,4% 21,2% 23,5%
S G & A (incl. R&D) 9 408 9 751 9 272 9 079 8 566 3 904 4 012 7 916 4 106
S G & A as a % of sales 17,2% 17,8% 17,2% 15,9% 16,3% 17,2% 16,6% 16,9% 14,9%
EBITDA 5 019 4 520 4 201 4 703 3 657 613 1 394 2 007 2 385
EBITDA margin 9,2% 8,2% 7,8% 8,2% 6,9% 2,7% 5,8% 4,3% 8,6%
Depreciation and Amortization 3 056 3 187 3 686 3 559 3 664 1 683 1 511 3 194 1 517
Recurring operating income 1 963 1 333 515 1 144 - 7 - 1 070 - 117 - 1 187 868
Operating income margin 3,6% 2,4% 1,0% 2,0% 0,0% -2,5%
Non recurring items 69 340 808 632 917 506 219 725 - 69
Operating income reported 1 963 1 333 - 293 512 - 923 - 1 576 - 336 - 1 912 799
2010e 2011e 2012e 2013e 2014e 2015e
50 636 53 168 55 826 56 384 56 948 57 518
8,0% 5,0% 5,0% 1,0% 1,0% 1,0%
11 646 13 558 14 515 14 660 14 806 14 955
23,0% 25,5% 26,0% 26,0% 26,0% 26,0%
7 595 9 570 10 049 10 149 10 251 10 353
15,0% 18,0% 18,0% 18,0% 18,0% 18,0%
4 051 3 988 4 466 4 511 4 556 4 601
8,0% 8,0% 8,0% 8,0% 8,0% 8,0%
3 599 3 477 3 419 3 405 3 401 3 404
452 511 1 047 1 105 1 155 1 197
0,9% 1,0% 1,9% 2,0% 2,0% 2,1%
452 511 1 047 1 105 1 155 1 197
WMAM ExpectationsMeriten Expectations
*All figures from 2010 to 2015 are fictitious, they are only intended to clarify the credit analysis model; This information is provided for illustrative purposes only and should not be construed as investment advice; Source: Meriten Investment Management. Past performance is not a guide to future performance.
Operating income reported 1 963 1 333 - 293 512 - 923 - 1 576 - 336 - 1 912 799
Interest expense, net including pension expenses (excluding
FX change on debt) 70 73 73 39 285 225 294 519 240
Share of net earnings of campanies at equity - 55 49 48 57 24 49 73 136
Profit before Tax 1 697 922 - 397 473 - 1 208 - 1 801 - 1 627 695
Tax expenses 347 189 101 218 156 72 72 168
Effective Tax rate 20,4% 20,5% -25,4% 46,1% -12,9% 30,0%
Net Income before minorities 1 350 589 - 328 405 - 858 - 1 240 - 459 - 1 699 527
Net Income Margin -1,6% -5,5% -3,6% 1,9%
Dividend 323 233 154 163
Retained earnings 1 027 356 - 482
Cash-Flow Statement (negative = decrease) 2004 2005 2006 2007 2008 2009-H1 2009-H2 2009 2010-H1
Funds from operations 4 602 4 258 4 027 4 446 3 216 388 1 028 1 416 1 977
Change in Working Capital 1 052 - 289 424 920 - 2 924 2 332 284 2 616 - 339
Other operating cash flow (reported OCF-calculated OCF down from
EBITDA) - 412 - 580 - 1 016 - 931 - 836
Cash Flow from operating activities reported 5 242 3 389 3 435 4 435 - 544 3 482
Capital Expenditure inclusive intangibles (net ) (-) - 3 662 - 3 853 - 3 400 - 2 689 - 3 072 - 1 660 - 1 126 - 2 786 - 1 211
capex as a % of sales -6,7% -7,0% -6,3% -4,7% -5,8% -5,9% -4,4%
Non cash interest expenses 0
Dividends Paid (-) / Dividend received (+) - 323 - 233 - 154 - 163 - 191 133 133 135
Recurring Free Cash Flow 1 669 - 117 897 2 514 - 2 971 1 060 319 1 379 562
Cash restructuring expense (-) - 550 - 91
Other extraordinary cash expense (-)
Acquisitions and Sale of Assets (- and +) - 147 15 - 18 4 - 27 - 7 2
Capital increase / Buy back of shares (+ and -) - 282 - 198 - 39 - 23 - 43 281
Free cash flow after exceptionals and Acquisit/CI 1 240 - 300 840 2 495 - 3 041 1 060 319 1 103 473
Total Period debt repayment (-) - 714 11 205 - 559 929 - 1 552
Financing surplus / Funding requirements 526 - 289 1 045 1 936 - 2 112 - 449
452 511 1 047 1 105 1 155 1 197
473 432 402 368 343 317
- 21 79 645 738 812 880
70 24 193 221 244 264
30,0% 30,0% 30,0% 30,0% 30,0% 30,0%
- 91 55 451 516 568 616
-0,2% 0,1% 0,8% 0,9% 1,0% 1,1%
2010e 2011e 2012e 2013e 2014e 2015e
3 508 3 532 3 871 3 922 3 969 4 020
375 253 266 56 56 57
3 673 3 785 4 137 3 978 4 026 4 077
- 2 988 - 3 190 - 3 350 - 3 383 - 3 417 - 3 451
-5,9% -6,0% -6,0% -6,0% -6,0% -6,0%
0 0 0 0 0 0
133 0 - 100 - 100 - 100 - 100
1 029 595 687 495 509 526
- 210
819 595 687 495 509 526
- 3 045 - 1 735 - 435 - 3 451 - 3 066 - 777
- 2 226 - 1 140 252 - 2 956 - 2 557 - 251
29
Credit analysisA financial model of the company* (2)
Liquidity at year end 2004 2005 2006 2007 2008 2009-H1 2009-H2 2009 2010-H1
Period End Cash 5 158 6 351 6 339 5 185 2 040 6 801 7 843 7 843 9 084
Total committed facilities 2 400 2 400
Liquidity (cash only) 6 801 7 843 7 843 9 084
Liquidity at Period End (cash + unused lines) 5 158 6 351 6 339 5 185 4 440 9 201 15 108 15 108 11 484
Balance sheet 2004 2005 2006 2007 2008 2009-H1 2009-H2 2009 2010-H1
Equity 13 703 14 406 14 106 14 555 13 277 12 600 12 446 12 447 13 845
Intangibles and Goodwill 5 400 5 563 5 435 5 373 5 298 5 563 5 677 5 677 6 095
Equity after goodwill and intangibles 8 303 8 843 8 671 9 182 7 979 7 037 6 769 6 770 7 750
Tangibles (Net fixed assets) + intangibles 17 770 18 795 18 643 18 537 18 125 18 382 17 995 17 995 18 803
Total assets 40 752 43 152 42 581 40 861 36 009 39 107 38 739 38 740 43 833
Total cash Debt of industrial companies 6 852 9 124 8 676 6 385 6 309 10 016 11 021 11 021 12 087
lease + pension deficit 1 249 1 334 1 334 1 334
Cash of the industrial companies 5 158 6 351 6 339 5 185 2 040 6 801 7 842 7 843 9 084
Peugeot (Manufacturing & Sales Companies) Name of the company :
GAAP Analysts Cash deposit : 1,00%Currency EUR Interest cost : 5,00%Financial year end 31. Dez
Last change of the model 16.03.2009
2 0 1 0 e 2 0 1 1 e 2 0 1 2 e 2 0 1 3 e 2 0 1 4 e 2 0 1 5 e
7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3
5 6 1 7 4 4 7 7 4 7 2 9 1 7 7 3 - 7 8 4 - 1 0 3 5
1 2 8 8 2 1 1 7 4 2 1 1 9 9 4 9 0 3 8 6 4 8 1 6 2 3 0
2 0 1 0 e 2 0 1 1 e 2 0 1 2 e 2 0 1 3 e 2 0 1 4 e 2 0 1 5 e
1 2 4 8 9 1 2 5 4 5 1 2 8 9 6 1 3 3 1 2 1 3 7 8 1 1 4 2 9 7
5 6 7 7 5 6 7 7 5 6 7 7 5 6 7 7 5 6 7 7 5 6 7 7
6 8 12 6 86 8 7 2 19 7 63 5 8 104 8 620
1 7 3 8 4 1 7 0 9 7 1 7 0 2 7 1 7 0 0 5 1 7 0 2 1 1 7 0 6 8
4 1 8 3 9 4 3 9 3 1 4 6 1 2 8 4 6 58 9 4 7 0 5 5 4 7 5 2 5
1 0 2 0 2 9 6 0 7 8 9 2 0 8 4 2 5 7 9 1 6 7 3 9 0
1 3 34 1 33 4 1 3 34 1 33 4 1 334 1 334
7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3
W M A M E x p e cta tio n sMeriten Expectations
*All figures from 2010 to 2015 are fictitious, they are only intended to clarify the credit analysis model; This information is provided for illustrative purposes only and should not be construed as investment advice; Source: Meriten Investment Management. Past performance is not a guide to future performance.
Cash of the industrial companies 5 158 6 351 6 339 5 185 2 040 6 801 7 842 7 843 9 084
Net cash debt including off B/S 5 518 4 549 4 513 4 512
Net cash debt 1 694 2 773 2 337 1 200 4 269 3 215 3 179 3 178 3 003
Market Cap 0 0 0 0 0 0
Enterprise Value 1 694 2 773 2 337 1 200 4 269 3 179 3 178
Ratios 2004 2005 2006 2007 2008 2009-H1 2009-H2 2009 2010-H1
Net debt / Equity 12,36% 19,25% 16,57% 8,24% 32,15% 25,52% 25,54% 25,53% 21,69%
Equity / Total assets 33,63% 33,38% 33,13% 35,62% 36,87% 32,22% 32,13% 32,13% 31,59%
Tangible fixed assets to net debt 1049,00% 677,79% 797,73% 1544,75% 424,57% 571,76% 566,06% 566,24% 626,14%
Net cash debt / EBITDA 0,3 0,6 0,6 0,3 1,2 2,6 1,1 1,6 0,8
Net cash debt including off B/S / EBITDA 1,5 2,2
FCF / Net debt 98,52% -4,22% 38,38% 209,50% -69,59% 32,97% 10,03% 43,39% 18,71%
Funds from operations/ net debt 271,66% 153,55% 172,31% 370,50% 75,33% 12,07% 32,34% 44,56% 65,83%
EBITDA / Net Interest expenses 71,7 61,9 57,5 120,6 12,8 0,0 0,0 3,9 0,0
EBITDA / Net cash Interest expenses 71,7 61,9 57,5 120,6 12,8 2,7 4,7 3,9 9,9
Enterprise Value / EBITDA 0,3 0,6 0,6 0,3 1,2 0,0 2,3 1,6 0,0
7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3 7 8 4 3
3 6 9 3 3 0 9 8 2 4 1 1 1 9 1 6 1 4 0 7 8 8 1
2 3 5 9 1 7 6 4 1 0 7 7 5 8 2 7 3 - 4 5 3
0 0 0 0 0 0
2 3 5 9 1 7 6 4 1 0 7 7 5 8 2 7 3 - 4 5 3
2 0 1 0 e 2 0 1 1 e 2 0 1 2 e 2 0 1 3 e 2 0 1 4 e 2 0 1 5 e
1 8 .8 9 % 1 4 .0 6 % 8 .3 5 % 4 .3 7 % 0 .5 3 % -3 .1 7 %
2 9 .8 5 % 2 8 .5 6 % 2 7 .9 6 % 2 8 .5 7 % 2 9 .2 9 % 3 0 .0 8 %
7 3 6 .8 4 % 9 6 9 .2 5 % 1 5 8 1 .0 8 % 2 9 2 0 .2 1 % 2 3 1 8 1 .8 6 % -3 7 7 1 .6 7 %
0 .6 0 .4 0 .2 0 .1 0 .0 -0 .1
4 3 .6 1 % 3 3 .7 5 % 6 3 .7 9 % 8 4 .9 4 % 6 9 3 .1 0 % -1 1 6 .2 3 %
1 4 8 .7 1 % 2 0 0 .2 4 % 3 5 9 .4 2 % 6 7 3 .5 0 % 5 4 0 6 .2 5 % -8 8 8 .3 7 %
8 .6 9 .2 1 1 .1 1 2 .3 1 3 .3 1 4 .5
8 .6 9 .2 1 1 .1 1 2 .3 1 3 .3 1 4 .5
0 .6 0 .4 0 .2 0 .1 0 .0 -0 .1
Analysis of the liquidity situation until maturity – Key f or Credit Short Duration• Liquidity development
• Viability of Refinancing
• Financial covenants
• Free cash flow generation
30
Portfolio construction
Credit risks are managed at two levels Basis for deci sion
• Allocation between high yield and investment grade
• Cyclical vs. non-cyclical names
• Mainly fundamentals, taking into account relevant top-down factors such as:- Business climate indicators- Lending standards
- Expected default rates
• Complemented by quantitative tools (monthly and weekly analysis of signals)
Portfolio Construction: Managing the credit risk of the portfolio
31
Portfolio constructionQuantitative tool supports allocation and beta management
Signals and OAS: Current signal NEGATIVE
EU USA 1 Month 3 Months 1 Month 3 Months
POSITIVE NEGATIVE NEGATIVE POSITIVE NEGATIVE NEGATIVE
-1 1 1 -1 1 1
NEUTRAL NEGATIVE
Cyclical Momentum Volatility
200
Combined Momentum Combined VolatilityCombined Cyclical
NEUTRAL1500
2000
2500
0
0,5
1
1,5
2
bps
sign
al s
tren
gth
signal "spreads increase" signal "Spreads decrease" Spread
Tool combines fundamental and technical indicators
POSITIVE means decrease in spreadNEGATIVE means increase in spread
Combined Total (4-Weeks-Moving Average)
200
Combined Cyclical Combined Momentum Combined Volatility
0 2
Spread Direction: Signal Strength: Signal Score
NEGATIVE LOW 0.67
0
0
500
1000
-2
-1,5
-1
-0,5
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
bps
sign
al s
tren
gth
Source: Meriten Investment Management; as of 07/05/2012; Note: This information is provided for illustrative purposes only and should not be construed as investment advice. Past performance is not a guide to future performance.
32
Active allocation between both segments depending on theeconomic cycle
60%
70%
80%
90%
100%
weight
Allocation between HY and IG since inceptionHY IG
Source: Meriten Investment Management; as of 31/05/2013; Please note: portfolio holdings are subject to change at any time without notice.
0%
10%
20%
30%
40%
50%
60%
Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Apr 13
33
Risk management
Single issue level Portfolio level
• Continuous review of whether information on the company and its environment require a change to the original view
• Max 5% per issuer, max 25% per sector
• Review e.g. in the financial model • Weekly internal performance analysis in order to identify potential vulnerabilities at an early stage
• Review of the liquidity situation of the company • Portfolio risk analysed by Portfolio Management with the support of high-performance software (Barclays Point)
Risk management and monitoring
support of high-performance software (Barclays Point)
• Sell discipline: Only in case of high probability of default • Risk analysis performed by Risk Controlling independently of Portfolio Management (Quantaxsystem)
34
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Duration Fund
Team & Track Record
Investment Philosophy and Process
35
Strategy & Portfolio Structure
Summary
BNY Mellon Compass Fund Euro Credit Short Duration Fund
Fund Strategy
Current allocation at 80% HY / 20 % IG
Thorough monitoring of bonds from peripheral countries for risk management
Longer maturities for non-cyclical names
As of June 2013; Please note: portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. This information should not be construed as a recommendation to purchase or sell any security; Return targets cannot be guaranteed.
Exposure in cyclical high yield names is mainly limited until 2014
Maintenance of a yield above 4% as a target, but most important target remains the capital preservation/ growth with avoidance of unnecessary risks
Maintenance of a high part of short-term bonds with a remaining life time less than 2 years for fund volatility management purposes
Strong focus on volatility figuresEx-ante volatility target of less than 4% (currently 2.0%)
Ex-post volatility figure of 3.0% since inception (01/06/2011)
36
Portfolio structure (1)BNY Mellon Compass Fund Euro Credit Short Duration Fund
Sector structure (*1)
Rating structure (*1)
Yield to maturity (*2) 2.76%Duration 1.42
No. of bonds 105No. of issuers 74
Important indicators 17.4%
16.5%
12.9%
11.0%
9.9%
6.8%
5.5%
Industrial Goods & Services
Automobiles & Parts
Basic Resources
Utilities
Health Care
Banks
Telecommunications
0.4%
18.5%
53.0%
25.9%
2.2%
A BBB BB B Liquidity
Please note: portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. This information should not be construed as a recommendation to purchase or sell any security; Return targets cannot be guaranteed. This information should not be construed as a recommendation to purchase or sell any security; Return targets cannot be guaranteed. Source: Meriten Investment Management; as of 31/05/2013(*1) : excluding CDS, (*2) including CDS
3.4%
3.3%
2.9%
2.4%
2.2%
2.1%
1.0%
0.3%
0.1%
2.2%
Food & Beverage
Oil & Gas
Chemicals
Technology
Packaging
Travel & Leisure
Retail
Construction & Materials
Media
Liquidity
37
Portfolio structure (2)BNY Mellon Compass Fund Euro Credit Short Duration Fund
Maturity structure
21.0%
16.4%
12.3%
12.0%
8.2%
4.8%
4.5%
4.1%
France
Germany
Italy
Portugal
Spain
USA
Luxembourg
Mexico
Country of Risk Structure (*1)
4.1%
3.6%
2.8%
2.1%
1.9%
1.5%
0.9%
0.9%
0.8%
0.2%
2.2%
Mexico
Denmark
UK
Hungary
Finland
Japan
Netherlands
Ireland
Russia
Switzerland
Liquidity
11.7%
42.1%
25.5%
18.6%
2.2%
2013 2014 2015 2016 Liquidity
Please note: portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. This information should not be construed as a recommendation to purchase or sell any security; Return targets cannot be guaranteed. This information should not be construed as a recommendation to purchase or sell any security; Source: Meriten Investment Management; as of 31/05/2013(*1) : excluding CDS
38
Portfolio structure (3)BNY Mellon Compass Fund Euro Credit Short Duration Fund
Top ten holdings (*1)
PHOENIX PHARMA 4.5%
PEUGEOT 4.3%
CEMEX 4.1%
HEIDELBERG CEMENT 3.9%
FIAT 3.7%
ISS 3.4%
Please note: portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. This information should not be construed as a recommendation to purchase or sell any security; Return targets cannot be guaranteed. This information should not be construed as a recommendation to purchase or sell any security; Source: Meriten Investment Management; as of 31/05/2013 (*1) : excluding CDS
ISS 3.4%
CEGEDIM 3.3%
LAFARGE 3.2%
EDP 3.1%
WENDEL 3.0%
39
Agenda
BNY Mellon Investment Management
The case for Euro Credit Short Duration
The BNY Mellon Compass Fund Euro Credit Short Duration Fund
Team & Track Record
Investment Philosophy and Process
40
Strategy & Portfolio Structure
Summary
Summary
Attractive risk/return profile Attractive risk/return profile
Low Interest rate and spread duration risk Low Interest rate and spread duration risk !
4% yield medium to long term target with a volatili ty of less than 4%4% yield medium to long term target with a volatili ty of less than 4%
Active allocation between IG and HY assets offers a dditional return potential Active allocation between IG and HY assets offers a dditional return potential
!
!
!
Defensive, stable returns in all market conditionsDefensive, stable returns in all market conditions !
Why Euro Credit Short Duration?Key aims:
Note: Past performance is not a guide to future performance.
Fundamental forward looking credit analysis forms t he core of a bottom-up-oriented investment processFundamental forward looking credit analysis forms t he core of a bottom-up-oriented investment process
Excellent track record in credit management of more than 12 yearsExcellent track record in credit management of more than 12 years
No defaults since launch of high yield products in the year 2000! No defaults since launch of high yield products in the year 2000!
A strong team: 13 European corporate bond specialis tsA strong team: 13 European corporate bond specialis ts
Proprietary quantitative tool supports the asset al location and risk decisions in the portfolioProprietary quantitative tool supports the asset al location and risk decisions in the portfolio
Why Euro Credit Short Duration with Meriten Investme nt Management?
!
!
!
!
!
41
Appendix
Credit Outlook: Key topics
Opportunities
Low expected default
Low corporate leverage
Loose lending standards
Low market volatility
Risks
Uncertain growth outlook
Less quantitative easing
Greece and Cyprus news flow
Country rating downgrades(Spain, UK, US, France,…)
Budget deficit periphery countries
Source: Meriten Investment Management; 06/2013
Low market volatility
Expansionary monetary policy
Search for yield
Budget deficit periphery countries
Election (Germany)
Tightening government spending
Fiscal cliff USA
Spread tightening Spread widening
43
30
40
50
60
70
80
Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13
Economic SentimentImprovement since May 2013
US Chicago Purchasing Manager Index
60
70
80
90
100
110
120
Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13
44
Source: Bloomberg; 05/2013
European Commission Economic Sentiment Indicator EU27
-150
-100
-50
0
50
100
Feb 06 Feb 07 Feb 08 Feb 09 Feb 10 Feb 11 Feb 12 Feb 13
Citigroup Economic Surprise IndexReduction in USA, slight improvement in Europe
USA
45
Source: Bloomberg; Citigroup; 05/2013
Europe
-200
-150
-100
-50
0
50
100
150
Feb 06 Feb 07 Feb 08 Feb 09 Feb 10 Feb 11 Feb 12 Feb 13
Percentage of issuers
• Default rates per end of April 2013 globally 2.6% (USA: 3.1%, Europe: 2.0%)
• Peak of default rate cycle: December 2009 (global: 13.00%, Europe: 10.30%)
• Forecast per end of April 2014: 2.5% global (long term average 4.5%)
Global speculative grade default rates by Moody’sStrong improvements since 2009
14
16
18
46
Source: Meriten Investment Management, Moody‘s, Bloomberg, 04/2013
0
2
4
6
8
10
12
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Forecast per end of2013: global 2.9%
Forecast per end of April 2014: global 2.5%
„Fiscal Cliffs“ also in Europe
Budget Balances, in % GDP (2012-14: prognosis EU Com mission)
-15
-10
-5
0Greece Ireland Portugal France Italy Spain Germany
3.3%pts 3.1%pts
4.0%pts
7.3%pts
(cumulatedtargeted improvement
from 2009 to 2014)
3.6%pts
9.7%pts12.1%pts
• Consolidation is necessary but does not suffice to end the crisis
• Consolidation targets appear increasingly unachievable in the time prescribed
• Reform enthusiasm has cooled in many countries – the question of democratic legitimation of all the bailout measures and conditions moves into the foreground
• Political risks are increasing the more, and the more rapidly living standards decline
• Multiplier effect between 0.9 and 1.7
47
Source: Meriten Investment Management, Ecowin, 05/2013
-20
2009 2010 2011 2012E 2013E 2014E
2014)
450
500
550
600
650
7005Y CDS Italy 5Y CDS ISPIM
480
530
580
630
6805Y CDS Spain 5Y CDS Banco Santander
Risk premiums of corporate bonds significantly influenced by the development of risk premiums of respective countries
Example from SpainBSP BSP
Example from Italy
100
150
200
250
300
350
400
05/11 09/11 01/12 05/12 09/12 01/13 05/13180
230
280
330
380
430
05/11 09/11 01/12 05/12 09/12 01/13 05/13
48
This information is provided for illustrative purposes only and should not be construed as investment advice.Source: Bloomberg, Meriten Investment Management; 05/2013
Spain: -1 BPS
Italy: +107 BPS
ISPIM: +149 BPS
Banco Santander: +51 BPS
700
800
900
1,000
1,1005Y CDS Spain ONO 12/2018
450
500
550
600
650
7005Y CDS Spain Telefonica 09/2017
Risk premiums of corporate bonds significantly influenced by the development of risk premiums of respective countries
BSP BSP
ONO:
Examples from Spain
49
200
300
400
500
600
05/11 09/11 01/12 05/12 09/12 01/13 05/13100
150
200
250
300
350
400
05/11 09/11 01/12 05/12 09/12 01/13 05/13
This information is provided for illustrative purposes only and should not be construed as investment advice.Source: Bloomberg, Meriten Investment Management; 05/2013
Spain: -1 BPS
ONO: +131 BPS
Telefonica: +36 BPS
Spain: -1 BPS
Expansionary monetary policy supports risky asset classes
Policy rates of major central banks, %
50
150
250
350
450
550January 2007 = 100
0
2
4
6
8
00 02 04 06 08 10 12
Central banks: balance sheet totals (% GDP)
50
• Policy rates likely to stay very low for a long time
• Quantitative easing like OMT (ECB) and QE3 (Fed) dampens systemic risk …
• … and fuels the rally of risky assets
Source: Meriten Investment Management, Ecowin, 05/2013
502007 2008 2009 2010 2011 2012 2013
ECB Fed BoJ BoE
00 02 04 06 08 10 12
Fed EZB BoE SNB
European HY bond fund flows
Fund flow data shows recent inflows in high yield
51
This information is provided for illustrative purposes only and should not be construed as investment advice.Source: BNP Paribas, Bloomberg, Meriten Investment Management; 02/2013
Profit and leverage ratios of companies
Corporate Profits at a high levelCorporate profits & wage share, in % of GVA*
Low leverage in USA, increase in EuropeNet debt/ EBITDA ratio w. scenario forecasts**
1,6
1,8
2
2,2
2,4
2,6S&P Non-Financials
EuroStoxx Non-Financials
64%
66%
68%
70%
12%
16%
20%
24%
28%
32%Profits
52
• The credit quality of companies has improved significantly over the last three years.
• The earnings season for Q1 2013 showed some weakness for cyclical companies, while non-cyclical company results were in line with expectations. The outlook continues to be cautious for 2013 especially for the European business units.
Source: Citi, CIRA, Haver Analytics, Bloomberg; * As of end of 09/2012; ** As of end of 09/2012
1
1,2
1,4
1,6
98 99 00 01 02 03 04 05 06 07 08 09 10 11 1260%
62%
64%
0%
4%
8%
12%
1970 1980 1990 2000 2010
Wages
Percentage of Commercial and Industrial Lenders Tightening
• Recently easing of lending standards
• So far no indication of significantly rising default rates
10
15
20
50
75
100Percentage Moody’s global default rates (right-hand scale)
C&I Lenders Tightening Standards (FED)Survey Change in Lending to Business (ECB)
Default Rates
Forecast per end of
Source: Meriten Investment Management, Moody‘s, Fed, ECB, Bloomberg; 04/2013
53
-5
0
5
-25
0
25
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Forecast per end of2013: global 2.9%
Forecast per end of April 2014:global 2.5%
The Corporate Credit Cycle US ahead of Europe
54
This information is provided for illustrative purposes only and should not be construed as investment advice.Source: BNP Paribas, Bloomberg, Meriten Investment Management; 02/2013. Past performance is not a guide to future performance.
1,500
2,000
2,500
15
20
25
Percent Base points
USAEurope
(rhs)
Default rates (lhs)
Default rates and spreadsGlobal default rates in comparison to US* and Euro High Yield** spreadsUSA Long-term average: 559 bps (end of 1986 – end of 05/2013)
55
0
500
1,000
0
5
10
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
436 bps***
* Spread BofA Merrill Lynch US High Yield Master II Constrained Index compared to US Treasuries; ** Spread BofA Merrill Lynch Euro High Yield Bond Fixed Floating Rate Constrained Index ex Financials; before 2007 the BofA Merrill Lynch Euro High Yield Bond Fixed Rate Constrained Index; *** Index composition 06/2013; Source: Moody’s, Meriten Investment Management; As of 05/2013
462 bps***US Average : 559 bp
Forecast per end of April 2014: global 2.5%
US and Europe spread move parallel since 2002
Development of short-duration corporate bond spreads
1000
1500
2000
2500
3000
3500
US HY 1 - 3 Years* Euro HY1 Month - 3.5 Years**
Euro Corporates Non-Financial1 - 3 Years***
Base points
* Spread BofA Merrill Lynch High Yield US Corporates Cash Pay 1-3 Years Index over US Treasuries; ** BofA Merrill Lynch Euro High Yield Non-Financials BB1-B3 1 mo-3.5 Yrs Index over US Treasuries (inception at 31/12/2008); *** Spread iBoxx € Corporate Non-Financial 1- 3 Years Index over benchmark bonds; Source: Bank of America Merrill Lynch, Bloomberg, DB Index Quant; asof 31/05/2013 Please note: Past Performance is no guide to future performance.
0
500
Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
Average(1999-2013)
High Low 31/05/2013
Euro CorporatesNon-Financial 1-3 Years
109 367 28 79
US HY1-3 Years
766 3280 188 502
Euro HY1 Month - 3,5 Years**
533 1798 248 248
base points
56
Conclusion
• The credit quality of companies has improved significantly over the last three years and is at a solid level.
• The earnings season for Q1 2013 has started showing some weakness for cyclical companies, while non-cyclical company results were in line with expectations. The outlook continues to be cautious for 2013 especially for the European business units.
• Our core scenario remains a moderate global growth in 2013.
• The market is supported by technicals such as the search for yield and inflows in the market.
• No sign of significantly rising default rates. • No sign of significantly rising default rates.
• The volatility has decreased since the EU actions for crisis management. However, the volatility could increase again due to the sovereign debt risk in Europe, the still uncertain growth outlook and less quantitative easing.
• Spreads are slightly below their long term average.
This information is provided for illustrative purposes only and should not be construed as investment advice.The achievement of targets can not be guaranteed. Past performance is not indicative of future performance.
57
Corporate CreditCorporate Credit – Investment Grade
Matthias Lackmann, CFA*
• Responsibilty/ sectors covered: Telecommunications, media, technology
• Industry experience: 6 years
Olga Lepp
• Responsibilty/ sectors covered: Automobiles & parts, construction & buildingmaterials, retail, personal & houshold goods
Henning Lenz Head of Corporate Credit Team
• Responsibilty/ sectors covered:Corporate credit strategy
• Industry experience: 22 years
Bastian Gries, CFA* Head of Investment Grade Team• Responsibilty/ sectors covered:
Investment grade fund strategy, banks, food & beverages
* CFA© and Chartered Financial Analyst© are registered trademarks owned by CFA Institute.
Maik Ohm, CFA*
• Responsibilty/ sectors covered: Industrial goods & -services, chemicals, travel & leisure, insurance companies
• Industry experience: 8 years
Tim Frankenheim, CFA*
• Responsibilty/ sectors covered: Banks, healthcare, commodities
• Industry experience: 10 years
• Industry experience: 5 years
Elena Romanenko
• Responsibilty/ sectors covered:Utilities, oil & gas, financial services
• Industry experience: 8 years
food & beverages
• Industry experience: 12 years
58
Corporate CreditCorporate Credit – High Yield
Alexis Renault, CFA*Head of High Yield Team� Responsibilty/ sectors covered:
High yield fund strategy, media, chemicals, automobiles & parts
Thomas Rentsch, CFA*� Responsibilty/ sectors covered:
Utilities, energy, commodities
� Industry experience: 8 years
Henning LenzHead of Corporate Credit Team� Responsibilty/ sectors covered:
Corporate credit strategy
� Industry experience: 22 years
Martin Dreier� Responsibilty/ sectors covered:
Financial services, industrial goods & -services
� Industry experience: 11 years
The sector personal & household goods is covered by all team members.* CFA© and Chartered Financial Analyst© are registered trademarks owned by CFA Institute.
automobiles & parts
� Industry experience: 18 years
Ovidiu-Bogdan Covaciu� Responsibilty/ sectors covered:
Retail, food & beverages, technology, commodities, healthcare
� Industry experience: 7 years
� Industry experience: 8 years
Frauke Wolkewitz, CFA*� Responsibilty/ sectors covered:
Travel & leisure, telecommunications – fixedline, cable TV
� Industry experience: 11 years
Ivan Romanenko, CFA*� Responsibilty/ sectors covered: Financial
services, packaging
� Industry experience: 6 years
59
AppendixMeriten Investment Management GmbH – Composite Performance (1) Glossary / GIPS® Compliance Verification Statement*
Definition of the FirmWestLB Mellon Asset Management Kapitalanlagegesellschaft mbH ("WMAM KAG") manages segregated and mutual funds in accordance with the German Investment Act (Investmentgesetz; InvG). The definition of the firm within the meaning of the Global Investment Performance Standards (GIPS) includes the funds established by WMAM KAG as well as its advisory or investment management services rendered to invest-ment funds managed by third parties.
History and ownership structureWestLB Mellon Asset Management Kapitalanlagegesellschaft mbH is a subsidiary of WestLB Mellon Asset Management Holding Ltd., jointly and equally owned by WestLB AG and Bank of New York Mellon Corpo-ration, Inc., (BNY Mellon).
The joint venture was formed on 1 April 2006. Prior to this, WMAM KAG operated under the name WestAMKAG. Since 1998, all investment activities of WestLB were combined in WestAM. However, the experience of WestLB in institutional asset management dates back to 1969.
The change in the ownership structure seen in 2006 has not led to any changes to the investment processes applied.
FeesManagement fees for institutional clients are generally negotiated on a case-by-case basis and depend on the product and the complexity of the individual mandate. Usually, fees range from 10 to 60 basis points.
The current fee schedule for the mutual funds is available under www.wmam.com.
GIPS® Compliance Verification Statement
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft confirms to the entity named WestLB Mellon Asset Management Kapitalanlagegesellschaft mbH that for the period from 1 January 2000 through 31 December 2011
(1) the entity complied with all composite structure requirements of the GIPS® on a firm-wide basis, and
(2) the entity designed its processes and procedures to calculate and present performance results in compliance with the GIPS®.
Eschborn/Frankfurt am Main, 4 June 2012 Ernst & Young GmbH
* This GIPS disclosure was approved before the name change from WestLB Mellon Asset Management to Meriten Investment Management.
applied.
Application of GIPS2007 is the first year in which WMAM KAG claimed compliance with the GIPS (“Compliance”). The compli-anceclaim refers to the aforementioned definition of the firm and the period between 2000 and 2011.
Calculation method and valuationReturns are calculated monthly on a time-weighted basis (BVI method). Annual performance figures are determined by linking the monthly returns geometrically.
Portfolios are valued at least on a monthly basis at market values (trade date). Performance is including in-terest claims and capital gains.
Gross-of-fee returns are calculated gross of all costs and fees (management fee, custodian fee, auditing and publishing fees etc.) with the exception of transaction costs. Net-of-fee returns are calculated net of all fees.
The dispersion shown is measured as standard deviation of annual returns of all portfolios represented within the Composite for the full year.
Additional information regarding the methods used for calculating returns and determining valuations is available upon request.
Wirtschaftsprüfungsgesellschaft
MiscellaneousUnless a launch date is given for a composite, the composite was created upon producing the presentations for the first time in 2007.
Unless reference is made to currency conversion, all funds contained in the composite are denominated in the same currency.
Carve-outs were created for the first time in 2007. Cash is allocated to the respective carve-out returns based on a fixed percentage of the portfolio’s assets. Detailed information is available upon request.
A complete list of all composites is available upon request. As of 1 January 2010, the entire composite structure was reorganised, resulting in some composites being aggregated that had previously been presented separately. An overview of the composites concerned is available upon request. In addition, notes to this effect have been included in the respective composite presentations.
60
AppendixMeriten Investment Management GmbH – Composite Performance (2) Relevant Composites*
Composite
Benchmark
Performance Type
Effective Date
Start Date
Currency
CompositeBench-
markDifference Quantity NAV (Mio) % of AuM
Jun 11 - Dec 11 -0,30 N/A N/A 4 168 0,72 N/A
CompositeBench-
markDifference Composite
Bench-
mark
Jun 11 - Dec 11 -0,30 N/A N/A 4,26 N/A N/A N/A
WestLB Mellon Asset Management KAG - Composite Performance
N/A
Corporate Bond - Short Duration
Dispersion*
Gross Performance
31 Dez 2011
01 Jun 2011
EUR
Performance in %
Year
Mandates (period-end)
Tracking
Error in %Time Period
Performance p.a.** in %Information
Ratio
Volatility in %
Composite
Benchmark
Performance Type
Effective Date
Start Date
Currency
CompositeBench-
markDifference Quantity NAV (Mio) % of AuM
2011 -0,18 -0,16 -0,01 3 133 0,57 N/A
2010 13,70 12,61 1,08 2 120 0,49 N/A
2009 43,15 60,18 -17,04 2 107 0,47 N/A
2008 -25,15 -32,21 7,06 1 66 0,30 N/A
Sep 07 - Dec 07 1,06 -0,16 1,22 1 100 0,34 N/A
CompositeBench-
markDifference Composite
Bench-
mark
1 Year -0,18 -0,16 -0,01 10,09 10,89 1,20 -0,01
2 Years 6,53 6,03 0,50 8,97 9,09 1,18 0,42
3 Years 17,56 21,67 -4,11 10,97 12,49 3,22 -1,28
Sep 07 - Dec 11 4,87 4,67 0,20 13,35 15,84 4,18 0,05
WestLB Mellon Asset Management KAG - Composite Performance
BofAML Euro Fixed & Floating Rate High Yield Non-Financial BB-B 3% Constrained
(HEAG) (since Jan 01, 2010)
European High Yield non CCC (Non-Financial)
Dispersion*
Gross Performance
31 Dez 2011
01 Sep 2007
EUR
Performance in %
Year
Mandates (period-end)
Tracking
Error in %Time Period
Performance p.a.** in %Information
Ratio
Volatility in %
* This GIPS disclosure was approved before the name change from WestLB Mellon Asset Management to Meriten Investment Management.
The composite comprises all portfolios consistently and discretionarily managed based on the "Corporates - Short Duration". The
term of the individual bonds is up to 3.5 years. To increase the rate of return also Sell Protection CDS with a term to maturity below
one year can be used. Details are available upon request.
WestLB Mellon Asset Management
Kapitalanlagegesellschaft mbH
Elisabethstraße 65
40217 Düsseldorf
WestLB Mellon Asset Management Kapitalanlagegesellschaft mbh claims compliance with the Global Investment
Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. WestLB
Mellon Asset Management Kapitalanlagegesellschaft mbh has been independently verified for the periods 2000-2011. The
verification reports are available upon request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS
standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance
in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this
report/advertisement
** Not annualised for periods shorter than one year.
* Calculation is made only at three or more continuously in a composite contained funds.
The composite comprises all portfolios that are consistently and discretionarily managed based on the European High Yield (Non-
Financial) investment process against the BofAML Euro Fixed & Floating Rate High Yield Non-Financial BB-B 3% Constrained Index
(HEAG) and therefore don't invest in CCC bonds. As a result of a change in the investment process to Non-Financials this composite
was renamed (former name: European High Yield Core (non CCC)) and the benchmark has been changed as of 1 January 2010.
Prior, the composite had an asset-weighted benchmark (indices: BofAML Euro Fixed & Floating Rate High Yield BB-B 3%
Constrained (HEAC) and BofAML Euro High Yield BB-B Constrained (HECO)). Further details are available upon request.
The funds in the composite are administrated at several entities. Therefore it is possible that different rates for securities and
currencies are applied within the composite. The significance of the presentation shouldn't be negatively impacted due to this.
Details of differences are available on request.
WestLB Mellon Asset Management
Kapitalanlagegesellschaft mbH
Elisabethstraße 65
40217 Düsseldorf
WestLB Mellon Asset Management Kapitalanlagegesellschaft mbh claims compliance with the Global Investment
Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. WestLB
Mellon Asset Management Kapitalanlagegesellschaft mbh has been independently verified for the periods 2000-2011. The
verification reports are available upon request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS
standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance
in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this
report/advertisement
** Not annualised for periods shorter than one year.
* Calculation is made only at three or more continuously in a composite contained funds.
Benchmark History: Asset Weighted Account Derived Benchmark (inception - Dec 31, 2009)
61
AppendixMeriten Investment Management GmbH – Composite Performance (3) Relevant Composites*
Composite
Benchmark
Performance Type
Effective Date
Start Date
Currency
CompositeBench-
markDifference Quantity NAV (Mio) % of AuM
2011 -1,00 -1,24 0,24 10 952 4,10 0,16
2010 14,31 14,52 -0,21 13 1.184 4,85 0,20
2009 51,37 73,80 -22,43 11 1.081 4,74 0,77
2008 -29,94 -33,81 3,87 14 1.122 5,13 0,62
2007 -0,31 -2,13 1,82 16 2.106 7,09 0,21
2006 9,89 8,92 0,97 18 2.238 3,77 2,87
2005 6,68 6,83 -0,14 15 1.100 1,97 0,06
2004 15,95 14,75 1,20 6 367 0,75 0,18
2003 22,02 26,43 -4,41 5 169 0,37 0,02
2002 2,74 -5,21 7,95 3 47 0,11 N/A
2001 0,53 -13,94 14,46 2 28 0,07 N/A
Jul 00 - Dec 00 1,96 -13,64 15,60 2 20 0,05 N/A
CompositeBench-
markDifference Composite
Bench-
mark
WestLB Mellon Asset Management KAG - Composite Performance
BofAML Euro Fixed & Floating Rate High Yield Non-Financial 3% Constrained
(HEAE) (since Jan 01, 2010)
European High Yield (Non-Financial)
Dispersion*
Gross Performance
31 Dez 2011
01 Jul 2000
EUR
Performance in %
Year
Mandates (period-end)
Tracking
Error in %Time Period
Performance p.a.** in %Information
Ratio
Volatility in %
Composite
Benchmark
Performance Type
Effective Date
Start Date
Currency
CompositeBench-
markDifference Quantity NAV (Mio) % of AuM
2011 -2,81 -2,56 -0,25 3 186 0,80 0,60
2010 14,42 14,52 -0,10 5 352 1,44 0,47
CompositeBench-
markDifference Composite
Bench-
mark
1 Year -2,81 -2,56 -0,25 11,92 12,40 1,19 -0,21
2 Years 5,45 5,63 -0,18 11,01 11,49 1,71 -0,10
Jan 10 - Dec 11 5,45 5,63 -0,18 11,01 11,49 1,71 -0,10
WestLB Mellon Asset Management KAG - Composite Performance
Asset Weighted Account Derived Benchmark (since inception)
European High Yield (incl. Financials)
Dispersion*
Gross Performance
31 Dez 2011
01 Jan 2010
EUR
Performance in %
Year
Mandates (period-end)
Tracking
Error in %Time Period
Performance p.a.** in %Information
Ratio
Volatility in %
* This GIPS disclosure was approved before the name change from WestLB Mellon Asset Management to Meriten Investment Management.
mark mark
1 Year -1,00 -1,24 0,24 10,84 11,60 1,22 0,20
2 Years 6,38 6,35 0,04 10,08 9,87 1,62 0,02
3 Years 19,65 25,26 -5,61 12,36 14,00 4,09 -1,37
5 Years 3,65 4,95 -1,30 14,57 16,18 3,98 -0,33
10 Years 7,38 7,37 0,01 10,92 12,57 4,30 0,00
Jul 00 - Dec 11 6,61 3,67 2,94 10,97 14,17 6,14 0,48
The composite comprises all portfolios consistently and discretionarily managed based on the European High Yield (Non-Financial)
investment process against the BofAML Euro Fixed & Floating Rate High Yield Non-Financial 3% Constrained Index (HEAE). The
composite contains two funds (one without a benchmark, another with an absolute return benchmark), which don't have the prior
called index as a benchmark, but are discretionarily managed based on the core investment process. Therefore, both funds are
allocated to the composite. Prior to 2010, the composite was named "European High Yield Core". After that the name and the
benchmark of the composite have been changed caused by changes in the investment process.
The funds in the composite are administrated at several entities. Therefore it is possible that different rates for securities and
currencies are applied within the composite. The significance of the presentation shouldn't be negatively impacted due to this.
Details of differences are available on request.
WestLB Mellon Asset Management
Kapitalanlagegesellschaft mbH
Elisabethstraße 65
40217 Düsseldorf
WestLB Mellon Asset Management Kapitalanlagegesellschaft mbh claims compliance with the Global Investment
Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. WestLB
Mellon Asset Management Kapitalanlagegesellschaft mbh has been independently verified for the periods 2000-2011. The
verification reports are available upon request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS
standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance
in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this
report/advertisement
** Not annualised for periods shorter than one year.
The Composite contains funds that are denominated in Non-Euro Currency. The returns have been calculated into Euro using WM-
Reuters spot rates.
The composite contained funds with a bundled fee. A recalculation of the included transaction cost couldn't applied, therefore the
funds have been included net of fee in the gross of fee calculation. Therefore, the composite performance is net of transaction costs.
These funds have the following share in the composite market value. 2005: 3%, 2006: 2%, 2007: 3%, 2008: 4%, 2010: 9%
* Calculation is made only at three or more continuously in a composite contained funds.
Benchmark History: Asset Weighted Account Derived Benchmark (Jan 01, 2007 - Dec 31, 2009); BofAML Euro High Yield
Constrained (HECO) (Dec 01, 2005 - Dec 31, 2006); BofAML Euro High Yield Unconstrained (inception - Nov 30, 2005)
The composite comprises all portfolios consistently and discretionarily managed based on the European High Yield (incl. Financials)
investment process against the BofAML Euro Fixed & Floating Rate High Yield 3% Constrained Index (HEAC) or the BofAML Euro
High Yield Constrained Index (HECO). Before the inception of this composite the funds were allocated to the former composite
European High Yield Core. As a result of changes in the investment process this composite was newly created as of 1 January 2010.
The funds in the composite are administrated at several entities. Therefore it is possible that different rates for securities and
currencies are applied within the composite. The significance of the presentation shouldn't be negatively impacted due to this.
Details of differences are available on request.
WestLB Mellon Asset Management
Kapitalanlagegesellschaft mbH
Elisabethstraße 65
40217 Düsseldorf
WestLB Mellon Asset Management Kapitalanlagegesellschaft mbh claims compliance with the Global Investment
Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. WestLB
Mellon Asset Management Kapitalanlagegesellschaft mbh has been independently verified for the periods 2000-2011. The
verification reports are available upon request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS
standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance
in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this
report/advertisement
** Not annualised for periods shorter than one year.
The Composite contains funds that are denominated in Non-Euro Currency. The returns have been calculated into Euro using WM-
Reuters spot rates.
* Calculation is made only at three or more continuously in a composite contained funds.
62
AppendixMeriten Investment Management GmbH – Composite Performance (4) Relevant Composites*
Composite
Benchmark
Performance Type
Effective Date
Start Date
Currency
CompositeBench-
markDifference Quantity NAV (Mio) % of AuM
2011 1,20 1,73 -0,53 10 691 2,97 0,14
2010 3,91 4,74 -0,83 12 870 3,56 0,16
2009 16,46 15,64 0,82 13 907 3,97 1,17
2008 -2,44 -3,90 1,47 11 708 3,24 0,93
2007 -0,20 -0,23 0,03 9 479 1,61 0,07
2006 0,46 0,55 -0,09 8 335 0,56 0,00
2005 3,95 4,11 -0,16 4 172 0,31 0,66
2004 7,78 7,71 0,08 4 170 0,35 0,32
2003 6,79 6,99 -0,20 3 130 0,28 N/A
2002 8,84 8,03 0,80 4 210 0,50 5,86
2001 6,59 6,68 -0,09 5 146 0,35 0,51
2000 6,12 5,76 0,35 3 80 0,19 N/A
WestLB Mellon Asset Management KAG - Composite Performance
Asset Weighted Account Derived Benchmark (since inception)
Corporate Bond IG All (Financials and Non-Financials)
Dispersion*
Gross Performance
31 Dez 2011
01 Jan 2000
EUR
Performance in %
Year
Mandates (period-end)
Performance p.a.** in % Volatility in %
Composite
Benchmark
Performance Type
Effective Date
Start Date
Currency
CompositeBench-
markDifference Quantity NAV (Mio) % of AuM
2011 3,40 3,94 -0,55 12 560 2,41 0,45
2010 4,78 5,13 -0,35 14 578 2,37 0,26
2009 15,47 16,13 -0,66 15 875 3,84 0,76
2008 2,81 0,91 1,90 10 536 2,45 0,88
2007 0,58 0,72 -0,13 7 526 1,77 0,03
2006 0,41 0,52 -0,11 7 451 0,76 0,00
2005 3,54 3,45 0,08 10 681 1,22 0,15
2004 7,56 7,50 0,06 14 742 1,52 0,09
2003 7,61 7,82 -0,21 13 591 1,30 0,09
2002 9,08 7,37 1,71 10 301 0,72 N/A
Apr 01 - Dec 01 3,58 4,35 -0,77 2 42 0,10 N/A
Bench- Bench-
WestLB Mellon Asset Management KAG - Composite Performance
iBoxx Euro Corporate Non-Financial (R)
Corporate Bond IG Non-Financial
Dispersion*
Gross Performance
31 Dez 2011
01 Apr 2001
EUR
Performance in %
Year
Mandates (period-end)
Tracking
Error in %Time Period
Performance p.a.** in %Information
Ratio
Volatility in %
* This GIPS disclosure was approved before the name change from WestLB Mellon Asset Management to Meriten Investment Management.
CompositeBench-
markDifference Composite
Bench-
mark
1 Year 1,20 1,73 -0,53 5,53 5,16 0,84 -0,63
2 Years 2,55 3,22 -0,68 4,68 4,31 0,82 -0,82
3 Years 6,99 7,21 -0,22 4,86 4,69 0,93 -0,23
5 Years 3,58 3,39 0,19 4,77 4,87 1,02 0,19
10 Years 4,54 4,41 0,14 3,86 3,93 0,80 0,17
Jan 00 - Dec 11 4,84 4,71 0,14 3,66 3,73 0,75 0,18
The composite contains all funds that are consistently and discretionary managed against iBoxx Euro Corporate Index or ML EMU
Corporate index according to the standard investment process. The benchmark of the composite is the asset weighted average of
the fund benchmarks. Details of the benchmark composition are available upon request.
The funds in the composite are administrated at several entities. Therefore it is possible that different rates for securities and
currencies are applied within the composite. The significance of the presentation shouldn't be negatively impacted due to this.
Details of differences are available on request.
Tracking
Error in %Time Period
Performance p.a.** in %
WestLB Mellon Asset Management
Kapitalanlagegesellschaft mbH
Elisabethstraße 65
40217 Düsseldorf
WestLB Mellon Asset Management Kapitalanlagegesellschaft mbh claims compliance with the Global Investment
Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. WestLB
Mellon Asset Management Kapitalanlagegesellschaft mbh has been independently verified for the periods 2000-2011. The
verification reports are available upon request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS
standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance
in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this
report/advertisement
Information
Ratio
** Not annualised for periods shorter than one year.
Volatility in %
* Calculation is made only at three or more continuously in a composite contained funds.
CompositeBench-
markDifference Composite
Bench-
mark
1 Year 3,40 3,94 -0,55 4,10 3,68 0,59 -0,94
2 Years 4,09 4,53 -0,45 3,64 3,28 0,53 -0,85
3 Years 7,75 8,27 -0,52 3,64 3,40 0,51 -1,00
5 Years 5,28 5,22 0,06 4,06 4,01 0,58 0,11
10 Years 5,43 5,25 0,18 3,40 3,38 0,62 0,29
Apr 01 - Dec 11 5,39 5,29 0,09 3,38 3,42 0,81 0,12
The composite contains all funds that are consistently and discretionary managed against iBoxx Euro Corporate Non-Financial
Index, resp. the Senior subindex according to the Non-Financial Standard investment process.
The funds in the composite are administrated at several entities. Therefore it is possible that different rates for securities and
currencies are applied within the composite. The significance of the presentation shouldn't be negatively impacted due to this.
Details of differences are available on request.
Error in %Time Period
WestLB Mellon Asset Management
Kapitalanlagegesellschaft mbH
Elisabethstraße 65
40217 Düsseldorf
WestLB Mellon Asset Management Kapitalanlagegesellschaft mbh claims compliance with the Global Investment
Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. WestLB
Mellon Asset Management Kapitalanlagegesellschaft mbh has been independently verified for the periods 2000-2011. The
verification reports are available upon request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS
standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance
in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
GIPS® is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this
report/advertisement
Ratio
** Not annualised for periods shorter than one year.
The composite contained funds with a bundled fee. A recalculation of the included transaction costs couldn't applied, therefore the
funds have been included net of fee in the gross of fee calculation. Therefore, the composite performance is net of transaction costs.
These funds have the following share in the composite market value. 2010:13%
* Calculation is made only at three or more continuously in a composite contained funds.
63
Important information
This document has been prepared by Meriten Investment Management GmbH, which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This document does not constitute an offer or solicitation in a jurisdiction where to do so is unlawful or where the person making the offer or solicitation is not qualified to do so or where a person receiving the offer or solicitation may not lawfully do so. All opinions and estimates herein reflect those of the respective author at the time of publishing and may change at any time without notice. This presentation is solely intended for information of clients and should not be construed as tax advice. We recommend clients requiring tax advice hereto to consult tax advisers. Although the information in this document is derived from public sources we believe to be reliable, we do not represent, warrant or guarantee that this information is accurate, complete or suitable for any purpose and it should not be used as a basis for investment decisions. All opinions and estimates herein, including forecast returns, involve a number of assumptions that may not prove valid. Further, investments in global markets can be affected by a host of factors, including political and social conditions, diplomatic relations, limitations on removal of funds or assets or imposition of (or change in) exchange control or tax regulations in such markets. All opinions and estimates contained herein reflect our view at the time of publishing and may change any time without notice. Additionally, investments denominated in an alternative currency will
If Meriten Investment Management GmbH receives any rebates on the management fee of target funds or other assets, Meriten Investment Management GmbH undertakes to fully remit such payment to the investor or the fund. If Meriten Investment Management GmbH performs services for an investment product of a third party, Meriten Investment Management GmbH will be compensated by the relevant company. Typical services are investment management or sales activities for funds established by a different investment management company. Normally, such compensation is calculated as a percentage of the management fee (up to 100%) of the respective fund, calculated on the basis of such fund’s assets managed or distributed by Meriten Investment Management GmbH. This may result in the risk that the investment advice given may not be consistent with the investor’s interest. The amount of the management fee is published in the prospectus of the respective fund. Any compensation paid to Meriten Investment Management GmbH does not increase the management fee of the relevant fund. There will be no direct charge to the investor. Further details are available upon request. This communication is not directed to persons in the United Kingdom and may not be used as a basis for their investment decisions. It is further intended solely for persons based in countries in which the respective funds are registered for distribution or in which such registration is not required. The shares of the fund have not been registered under the United States Securities Act of 1933, as amended (the “1933 Act”); they may therefore not be publicly
64
time without notice. Additionally, investments denominated in an alternative currency will be subject to changes in exchange rates that may have an adverse effect on the value, price or income of the investment. Meriten Investment Management GmbH or one of its affiliates may: maintain a long or short position in the securities referred to herein or in related futures or options; purchase or sell, make a market in or engage in any other transaction involving such securities and earn brokerage or other compensation in respect of the foregoing. Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. This document is intended solely for the information of those to whom it is distributed, Meriten Investment Management GmbH accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this document. No part of this document may be reproduced or retransmitted in any manner without the prior written permission of Meriten Investment Management GmbH. Additional information is available upon request. Investments in investment funds should only be made on the basis of the current sales prospectus of the respective fund. The prospectus and the financial reports of the funds as well as the key investor information documents are available free of charge from Meriten Investment Management GmbH, Elisabethstraße 65, 40217 Düsseldorf or electronically at www.meriten.com. If the fund makes investments in a currency differing from the shareholder’s currency, the share value may be subject to additional exchange rate fluctuations. The value of investments and the income from them can fall as well as rise and investors may not get back the amount originally invested. This material is for professional clients only and is not intended for distribution to, nor should it be relied on by, retail clients.
States Securities Act of 1933, as amended (the “1933 Act”); they may therefore not be publicly offered or sold in the United States of America or to US citizens or any US residents. This publication is intended as marketing instrument and does not satisfy the statutory requirements regarding the impartiality of a financial analysis, and the financial instruments concerned are not subject to any prohibition of trading in advance of the publication of this presentation. Copyright ©2012 Morningstar, Inc. All Rights Reserved. The information, data, analyses and opinions with reference to Morningstar contained herein (1) include the confidential and proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do not constitute investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supplemental sales literature, and therefore must be preceded or accompanied by a prospectus and disclosure statement.
143/Q2/2013