Rwc

Absolute Return Bond - Investing in an uncertain world

2

Introduction to RWC Partners

• RWC Partners is an independent investment firm• Focus is exclusively on high-alpha asset management to institutions, professional investors and intermediaries• Business is built around highly-talented portfolio managers, an intense focus on performance and a strong risk

management culture

• Majority of equity in RWC Partners is owned by RWC personnel – the balance is owned by Schroders• 7 investment teams

• UK Equity John Innes• European Equity Ajay Gambhir• US Equity Mike Corcell• Global Convertible Bond Davide Basile• Global Growth Equity Priya Kodeeswaran• Equity Income and Value Nick Purves & Ian Lance• Absolute Return Bond & Currency Peter Allwright & Stuart Frost

• 65 personnel of which nearly half are investment professionals• Product focus: UCITS & non-UCITS high alpha & absolute return funds

3

Introduction to RWC Absolute Rate & Currency Funds

• Absolute Return funds investing in highly liquid bonds, interest rates and currencies• Alpha-generating investment positions underpinned by short-dated, high grade bond portfolio (beta component)• Currently all short-dated bonds are AAA-rated and the vast majority are government guaranteed

• Strategy first launched by Peter Allwright and Stuart Frost at Threadneedle Asset Management• $3.5bn AUM in absolute return and high alpha strategies; awarded two Gold Medals by Sauren• Investment strategies generated by Price, Flow & Macro investment process developed by the Portfolio Managers

• Proven risk management system based on extensive experience in financial markets• Real-time, market dependent approach to risk taking• Intense focus on instrument liquidity in both short and longer term investments

• Funds aim to make alpha-driven returns with low volatility and low correlation to markets• Agnostic approach to market direction allows funds to take advantage of both rising and falling markets

• Offers good diversification from traditional bond, equity and commodity funds• Low correlation with risk asset drawdowns; high volatility environments provide investment opportunities• Investment process does not depend on asset class rotation

• Funds are sophisticated UCITS IV Luxembourg SICAVS with daily liquidity

Absolute Return Bond & Currency Portfolio Management Team

4

Peter Allwright - Portfolio Manager• Co-manager of Threadneedle Target Return

Bond and Macro Funds• Awarded 2 Gold Medals by Sauren in 2009• MA Engineering, University of Cambridge• CFA Charterholder

Stuart Frost - Portfolio Manager• Co-manager of Threadneedle Target Return

Bond and Macro Funds• Established Natwest FX Chart and

Fundamental Research team in London• Various trading positions at Natwest New

York – prop trader, FX forward

Alice Leedale - Market Strategist• Financial Analyst at Goldman Sachs• MPhil Economics, University of Cambridge• BA Economics and Management, University

of Oxford• CFA candidate

Larry Furness - Market Strategist• Investment Analyst at Permal Investment

Management• BA Economics, University of Nottingham• Investment Management Certificate holder• CFA candidate

Portfolio Management

Peter Allwright

Stuart Frost

Analysis

Larry Furness

Operations

Alice Leedale

Risk

Peter Harrison

Compliance and Legal

Sales and Marketing

Robert Ritchie

Administrator

5

RWC Absolute Rate & Currency Funds

RWC Absolute Rate & Currency Funds – Overview

6

• Macro-orientated Absolute Return trading funds, investing in liquid interest rate and currency markets• Core, high grade, fixed income portfolio supports alpha-generating trading strategies• Alpha strategies provide returns with low correlation to markets and low volatility

• Strategies aim to achieve a net return* of cash +3% and cash +6%, annualised, over the market cycle• Highly liquid securities ensure exposure can be de-risked efficiently to reduce “drawdowns”• Physical high grade bond investments provide a stable yield and exposure to duration• Directional and tactical “strategies” provide the majority of excess returns

Alpha Portfolio

High Grade Bond Portfolio

• Physical high grade bond portfolio• Short maturities• Provides a cash return on investments• Some alpha component from duration management• Highly liquid and provides collateral if needed

• Overlay adds pure alpha• Liquid rates and currencies• Predominantly derivative instruments• Exchange traded rates and forward and OTC FX• No illiquid derivative structures

*Net of the institutional share class fee

RWC ARC Funds –High Grade Bond Portfolio (Example of Holdings)

7

Country Issuer Coupon Maturity Rating Holding (%)

Leaseplan Corporation (Govt. Guarantee) 3 1/8 10/02/2012 Aaa/AAA 14.33%

Swedbank AB (Govt. Guarantee) 3 1/8 02/02/2012 Aaa/AAA 8.19%

SNS Bank (Govt. Guarantee) 2 7/8 30/01/2012 Aaa/AAA 8.17%

HSH Nordbank (Govt. Guarantee) 2 3/4 20/01/2012 Aaa/AAA 8.17%

Bayerische Landesbank (Govt. Guarantee) 2 3/4 23/01/2012 Aaa/AAA 8.17%

Spar Nord Bank (Govt. Guarantee) 2 1/2 10/07/2012 Aaa/AAA 8.10%

NIBC Bank (Govt. Guarantee) 3 5/8 19/12/2011 Aaa/AAA 6.18%

NIBC Bank (Govt. Guarantee) 3 1/8 17/02/2012 Aaa/AAA 6.14%

Rabobank Nederland 4 1/8 04/04/2012 Aaa/AAA 4.12%

Commerzbank (Govt. Guarantee) 2 3/4 13/01/2012 Aaa/AAA 4.08%

Source: RWC Partners 03/11/11

Alpha Portfolio

High Grade Bond Portfolio

Rating % of Fund

AAA 79.73%

AA 0.00%

A 0.00%

BBB 0.00%

BB and below 0.00%

Unrated 0.00%

Total 79.73%

Sector % of Fund

Sovereign/Agency/Supra 75.61%

Financial 4.12%

Corporate 0.00%

Secured/Collateralised 0.00%

Total 79.73%

Analytics % of Fund

Duration 0.28 years

Current Yield 0.79%

Average rating AAA

• Provides beta element of portfolio

• Emphasis on liquidity and quality

• Residual interest rate and/or credit risk can be hedged if necessary

Country of Issuer % of Fund

Netherlands 38.94%

Germany 20.42%

Denmark 12.18%

Sweden 8.19%

RWC ARC Funds – Alpha Portfolio

8

• Managed as overlay to add return to high grade bond portfolio

• Focused, highest conviction investment strategies:

• Strategies can be directional or market neutral

• Typically a small number of strategies deployed at any point in time• One strategy may be implemented in a number of different ways

• Liquid securities ensure overlay can be collapsed or de-risked efficiently and quickly

• Option strategies may be used to take exposure, hedge risk or book profit where it is economic and efficient to do so

• Range of instruments potentially employed:

Alpha Portfolio

High Grade

Bond Portfolio

Interest Rates

• Short term interest rate futures and options on futures

• Repos• Interest rate swaps

Credit• Corporate bonds• CDS indices e.g. iTraxx• New issues

• Global and emerging markets• Spot and forward FX• OTC FX options

Currencies

• Physical government bonds• Government bond futures and options on

futures (exchange traded)• Sovereign CDS

Government Bonds

9

Investment Process Overview

Flow Analysis•Aim: Identify supply/demand dynamics and permanent positioning•Analyse: Monitoring actions of major market participants•Action: Directional investments

Investment Process – Price, Flow & Macro Analysis

10

Price Analysis•Aim: To establish current and future

state of play in any given market, i.e. trend or range

•Analyse: Charts of bonds, FX and indices

•Action: Identification of trading opportunities and attractive

entry and exit points

Macro Analysis•Aim: To anticipate economic trends in growth and inflation, future path of interest rates

•Analyse: Key economic variables, qualitative analysis of economic fundamentals

•Action: Fundamental input for trading ideas

P.F.M.

Investment Process – Price, Flow & Macro Analysis

11

• Investment process looks at opportunities from three critical perspectives:• Price Analysis

• What market are we in? Trend / Range / Reversal• Market psychology – price performance relative to economic releases• Moving average support – confirmation of trend/range• Discipline – price and time – stop loss / stop profit

• Flow Analysis• Bond auctions / QE buybacks / Index moves• CB/SWF currency diversification policy and resource management• Pension solvency regulation / Bank capital• Overall risk sentiment and positioning

• Macro Analysis• Economic fundamentals – GDP / Employment / Retail sales etc.• Monetary policy, interest rates and inflation• Fiscal policy and debt outlook• Internal and geo-political outlook

• The Price, Flow & Macro analysis is quantified through the P.F.M. ‘Scorecard’ (see overleaf)• Each of the macro, flow, and price chart-based input factors is scored on a scale of -3 to +3; scores should be forward-looking

• Aggregate scores give representation of attractiveness of currencies, commodities, equity indices and various points on the yield curve

• Ratings move frequently as P.F.M. inputs change – formally reviewed every week

• Scorecard output is used to help assess and select investment opportunities• It is an idea generator and is not followed mechanically

• A high conviction strategy developed from any of the P.F.M. processes will be tested against the other two analytical processes

MacroFlow

Price

Price

Flow Macro

Price

MacroFlow

USD EUR GBP JPY CHF AUD NZD NOK SEK CAD CNY BRL KRW MXN TRY ZAR SGD HUF PLN RUB

Price RatingCurrency 0 -1 0 1 0 1 1 1 1 1 -1 0 1 1 0 -1 2 0 0 0

2Y 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - -5Y 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - -

10Y 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - -30Y 1 2 2 2 2 2 2 2 2 2 - - - - - - - - - -

Flow Rating Risk Sentiment Factor: neutral 0

Currency -1 2 2 -1 1 2 2 1 1 2 1 2 3 2 0 2 3 1 1 02Y 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - -5Y 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - -

10Y 1 0 1 0 0 0 0 0 0 0 - - - - - - - - - -30Y 1 0 1 0 0 0 0 0 0 0 - - - - - - - - - -

Macro RatingCurrency 1D 0 0 0 2D 2D 2 2 2D 2D 2 2 2 2 1 1 2 1 2 1

2Y -1 -2 -1 -1 -1 -2 -2 -2 -2 -2 - - - - - - - - - -5Y -1 -2 -1 -1 -1 -2 -2 -2 -2 -2 - - - - - - - - - -

10Y -1 -2 -1 -1 -1 -2 -2 -2 -2 -2 - - - - - - - - - -30Y -1 -2 -1 -1 -1 -2 -2 -2 -2 -2 - - - - - - - - - -

TOTAL USD EUR GBP JPY CHF AUD NZD NOK SEK CAD CNY BRL KRW MXN TRY ZAR SGD HUF PLZ RUBCurrency 0 1 2 0 3 5 5 4 4 5 2 4 6 5 1 2 7 2 3 1

2Y -1 -2 -1 -1 -1 -2 -2 -2 -2 -2 - - - - - - - - - -5Y 1 0 1 1 1 0 0 0 0 0 - - - - - - - - - -

10Y 2 0 2 1 1 0 0 0 0 0 - - - - - - - - - -30Y 1 0 2 1 1 0 0 0 0 0 - - - - - - - - - -

Fixed Income Rating Currency Rating Only

Investment Process – Price, Flow & Macro Scorecard

12Risk sentiment factor reflects the current overall level of market risk aversion. As a general rule, in a “risk-off “market USD, JPY, CHF and bonds benefit, at the expense of the other currencies such as EUR, SEK, AUD and CAD.

Macro scores with U and D reflect potential score upgrade and downgrade respectively. See appendix pages 29 – 33 for further details.

SPECIMEN ONLY

Please note, this is a historical example and not the current scorecard and will therefore not reflect current positions

Very High or Low TOTAL scores

highlight attractive investment

opportunities

Risk Sentiment Factor reflects current overall level

of market risk aversion: risk-off, neural or risk-on

Investment Process – Current Themes and Evolving Ideas Board

13

Current Themes Evolving Ideas

Risk-off,

Lower YieldsLess Liquidity, More Volatility

German Political Crisis?

Global Slowdown

China Hard Landing?

Commodity Bubble Bursts

Italian Debt Crisis

DM: Inflation or Deflation?

Iran Nuclear Standoff

Commodity Country

Slowdown

Greek Haircut: How Large?

Eurozone Breakup?

Weak Asian Equities

French Debt Crisis

Eurozone Fiscal Union /

Eurobonds

ECB =

Bad Bank?

ECB does QE

Gold Bubble Bursts?

Global Deleveraging

Priced-in

Greek Restructuring

Energy Prices

QE2 in the UK

Portugal & Ireland

Haircuts

Operation Twist

Developed World

Recession?

UK & EZ Downgrades

EFSF Leveraging

Republicans vs. the Fed

US stronger than

Eurozone?

Global Trade Wars

Currency Wars: CHF, JPY, CNY

US Debt Ceiling Round 2

US Stronger Q3, Weaker

Q4

Bond Market Crisis of

Confidence

14

Investment Process – Implementation of Investment Opportunities

Expression of Investment Opportunity

• Market• Currency• Long or short• Proxy or security

specific

Choice of Instrument•Cash securities•Futures •Options•Forwards•Swaps

Sizing & Risk Management• Risk budget• Liquidity• Volatility• Transparency• Simplicity

Entry and Exit Points• Price targets• Call level• Rolling stop profits• Time Limits

15

Sizing and Risk Management

Sizing and Risk Management – Approach to Risk Management

16

• Pragmatic, market dependant approach to risk taking

• Consider three key sources of risk: market, liquidity and counterparty

• Risk assessed on a top down ‘whole portfolio’ view as well as an individual trade-by-trade basis

• Aim to deliver portfolio return targets consistently and incrementally• Stop-loss markers at the portfolio and individual trade levels• Portfolio stop-losses consistent with return target (+3% and +6%)

• Expected maximum VaR (Monte Carlo)

• Cautious ARC 20 day 99% confidence, 500bps limit

• Enhanced ARC 20 day 99% confidence, 1000bps limit

• However, VaR measure is predominantly a backward looking indicator

• Important to consider that:• Correlations move to extremes in times of stress• Market neutral strategies may have significant implicit directional bias

Sizing and Risk Management – Position Sizing

17

• Focus on position sizing as a basic risk control

• Examine four key variables for position sizing: conviction, volatility contribution, liquidity and potential correlation with other holdings

• Size of risk allocation dependant on market conditions:

• High conviction and low expected volatility/risk suggests typical sizing

• High expected volatility/risk requires reduced sizing

• DV01 risk (bonds, interest rates) and % NAV (FX) used to size and set stop profit/loss levels relative to expectations of market volatility and not just current market volatility

Position Sizing

Conviction

Volatility Contribution

Correlations with Other Holdings

Liquidity

P.F.M. Scorecard

Market Assessment

Volatility Scorecard


18

Appendices

RWC Cautious Absolute Rate & Currency Fund – Term Sheet

19

• Launch Date 29th December 2006• Liquidity Daily subscriptions & redemptions / daily NAV• Fees A Share Class: Retail 1.35% AMC / 10% performance fee

Fees B Share Class: Institutional 0.70% AMC / 10% performance fee• Performance Fee HWM Yes – highest previous calendar year end• Performance Fee hurdle Yes – HWM + LIBOR or equivalent• Fund structure Luxembourg SICAV (UCITS IV)

Sub-fund of the “RWC Funds” SICAV• Currency EUR base currency – USD, GBP, CHF hedged share class• UCITS IV status Sophisticated Fund• Administrator Banque Privée Edmond de Rothschild Europe• Local Registrations Luxembourg / UK / Germany / Switzerland / Italy / Sweden• Tax UK / Germany / Austria

RWC Enhanced Absolute Rate & Currency Fund – Term Sheet

20

• Launch Date 14th February 2011• Liquidity Daily subscriptions & redemptions / daily NAV• Fees A Share Class: Retail 1.5% AMC / 15% performance fee

Fees B Share Class: Institutional 0.8% AMC / 15% performance fee• Performance Fee HWM Paid quarterly. Share class level high water mark• Performance Fee hurdle Yes – HWM + LIBOR or equivalent• Fund structure Luxembourg SICAV (UCITS IV)

Sub-fund of the “RWC Funds” SICAV• Currency EUR base currency – GBP, USD hedged share classes• UCITS IV designation Sophisticated Fund• Administrator Banque Privée Edmond de Rothschild Europe• Local Registrations Italy / Luxembourg / Germany / Switzerland / Sweden / UK• Tax UK / Germany / Austria

Daily reporting available for Germany Tax Transparency


21

Peter Allwright – Portfolio Manager

• Joined RWC Partners in September 2010 with Stuart Frost as co-head of the Absolute Return Bond & Currency Team

• Threadneedle Asset Management – 2005-2010• Co-manager on all Absolute and Target Return Bond Funds and Macro Funds from inception

• $3bn AUM in absolute return and high alpha strategies

• Absolute Return Bond Fund – AA rated by S&P / A rated by OBSR

• Awarded 2 Gold Medals by Sauren in 2009 for Absolute Return funds and 2 for the Macro fund

• Additional responsibilities included management of core Global and European Bond funds

• Gartmore – Senior Portfolio Manager – 2004-2005

• Royal London Asset Management – 2001-2004• Manager of the award winning Overseas Bond Fund

• Professional Pensions best performing Global Bond Fund 2002, 2003 and 2004

• 1993 – 2001 Nomura, Nikko and Svenska Handelsbanken

• Proprietary trader and market maker in government bond and credit markets

• MA (Hons) from the University of Cambridge in Engineering and Management Studies

• CFA Charterholder


22

Stuart Frost – Portfolio Manager

• Joined RWC Partners in September 2010 with Peter Allwright as co-head of the Absolute Return Bond & Currency Team

• Threadneedle Asset Management – 2007-2010• Co-manager on all Absolute and Target Return Bond Funds and Macro Funds from inception

• $3bn AUM in absolute return and high alpha strategies

• Absolute Return Bond Fund – AA rated by S&P / A rated by OBSR

• Lloyds TSB Markets – Head of Global Charting - 2006

• Gartmore – Senior Portfolio Manager – 2004-2005

• FX Hedge Fund

• NatWest Markets – 1980-2000• 1992-2000 Established and managed the NatWest Treasury FX chart and fundamental research

team in London

• 1980-1990 Forward FX dealer, Futures trader and Prop Trader in New York

• A regular top 3 winner in the Euro money FX and Greenwich markets survey polls

• Responsibilities for client coverage within research – Europe, UK and Asia

• Qualifications from New York Institute of Finance in Technical Analysis and Bond Markets

• 1994-1997 Guest lecturer in Charting at City University Business School

23


Alice Leedale – Market Strategist

• Joined RWC Partners in March 2011 as a Market Strategist in the Absolute Return Bond & Currency Team

• Goldman Sachs International – 2006-2009• Financial analyst in the UK Mergers and Acquisitions Advisory Group• Extensive experience in financial modelling, company valuation and capital structure analysis

• University of Cambridge – MPhil Economics – 2009-2010• Specialist subjects: Asset Pricing, International Finance, Monetary Policy• Dissertation: ‘Asset Prices and Monetary Policy: Evidence from the UK’

• University of Oxford – First Class BA (Hons) Economics and Management – 2002-2006

Larry Furness – Market Strategist

• Joined RWC Partners in August 2010 as a graduate recruit• Joined the Absolute Return Bond & Currency Team in February 2011

• Permal Investment Management – Investment Analyst (Internship) – 2010• Involved with manager research which included attending Cap Intro events as an Analyst

• Government Economic Service – Assistant Economist (Internship) – 2008• Graduated in 2009 with an honours bachelor’s degree in Economics from The University of

Nottingham

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2006Threadneedle TRF - - - - 0.4% -0.1% 0.1% -0.6% 0.6% 0.3% 0.4% -0.1% 0.9%

EURIBOR – 3 month - 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 2.3%

2007Threadneedle TRF -0.2% 1.1% -0.3% -0.4% -0.7% -0.5% 1.8% 1.5% 1.5% 0.8% 1.0% 0.0% 5.6%

EURIBOR – 3 month 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 4.4%

2008Threadneedle TRF 2.8% 1.3% 1.9% -1.8% -1.1% -0.4% 0.5% 1.7% 0.9% 1.9% 2.4% 1.3% 12.0%

EURIBOR – 3 month 0.4% 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.5% 0.4% 0.3% 0.3% 4.6%

2009Threadneedle TRF 0.1% 0.3% 0.4% 0.8% 0.9% 0.7% -0.2% 0.4% 0.3% 0.4% -0.1% 0.0% 4.1%

EURIBOR – 3 month 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 1.2%

2010Threadneedle TRF 0.0% 0.0% 0.2% -0.2% -0.5% 0.0% n/a n/a n/a n/a n/a n/a -0.4%

EURIBOR – 3 month 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% n/a n/a n/a n/a n/a n/a 0.3%

2011RWC Cautious ARC n/a n/a -0.5% -0.1% -0.1% -0.1% 0.8% 0.3% 0.8% -0.3% 0.6%

EURIBOR – 1 month n/a n/a 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 1.0%

24

Performance of Strategy Since Inception (Net of Fees)

% of up-months

% of down-months

Total ReturnAnnualised

ReturnAnnualised Vol Sharpe Ratio

Strategy 64 36 24.5% 4.6% 3.0 0.69

Source: RWC Partners / Bloomberg. Data shown is for the period April 2006 – end October 2011, calculated on a NAV‐NAV basis, net of fees with Gross income reinvested. Data is not included for the period July 2010 – February 2011 as Peter Allwright and Stuart Frost were not managing the strategy. Performance from March 2011 relates to the RWC Cautious ARC Fund (B‐EUR). The Fund became sophisticated on 8th March 2011. Performance shown for the period April 2006 to June 2010 is for the Threadneedle Target Return (Threadneedle TRF) Fund, EUR institutional share class, calculated on a Bid‐Bid basis, net of fees. The index used is 3‐Month EURIBOR for the period April 2006 – June 2010, and 1‐month EURIBOR from March 2011 – September 2011.

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

Performance of Strategy Since Inception (Net of Fees)

25Source: RWC Partners / Bloomberg. Data shown is for the period April 2006 – end October 2011, calculated on a NAV‐NAV basis, net of fees with Gross income reinvested. Data is not included for the period July 2010 – February 2011 as Peter Allwright and Stuart Frost were not managing the strategy. Performance from March 2011 relates to the RWC Cautious ARC Fund (B‐EUR). The Fund became sophisticated on 8th March 2011. Performance shown for the period April 2006 to June 2010 is for the Threadneedle Target Return (Threadneedle TRF) Fund, EUR institutional share class, calculated on a Bid‐Bid basis, net of fees. The index used is 3‐Month EURIBOR for the period April 2006 – June 2010, and 1‐month EURIBOR from March 2011 – September 2011.


-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11

Cum

ulat

ive

Ret

urn

Performance of Strategy since inception

Cumulative Strategy Reference Index

Note: Period relates to when the portfolio managers were in between companies and were not managing the strategy

0

2

4

6

8

10

12

14

16

18

-4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Mo

nths

Monthy Return

Strategy - Distribution of Monthly Returns

Performance of Strategy Since Inception – Distribution of Returns

26

0

5

10

15

20

25

-4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Mo

nths

Monthy Return

Strategy - Distribution of Monthly Returns

Returns from period when the fund was unsophisticated

Source: RWC Partners / Bloomberg. Data shown is for the period April 2006 – end October 2011, calculated on a NAV‐NAV basis, net of fees with Gross income reinvested. Data is not included for the period July 2010 – February 2011 as Peter Allwright and Stuart Frost were not managing the strategy. Performance from March 2011 relates to the RWC Cautious ARC Fund (B‐EUR). The Fund became sophisticated on 8th March 2011. Performance shown for the period April 2006 to June 2010 is for the Threadneedle Target Return (Threadneedle TRF) Fund, EUR institutional share class, calculated on a Bid‐Bid basis, net of fees. The index used is 3‐Month EURIBOR for the period April 2006 – June 2010, and 1‐month EURIBOR from March 2011 – September 2011.


Performance of Threadneedle Macro Trading Fund (Net of Fees)

27

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2008Threadneedle Macro

Trading Fund- - - - - - - - - 0.96% 3.65% 2.11% 6.85%


Trading Fund0.09% 0.31% 1.82% 1.35% 2.07% 0.37% 0.17% 1.43% 0.31% 1.23% 0.66% 0.04% 10.28%


Trading Fund0.65% -0.19% 0.60% -1.20% -1.72% -0.29% - - - - - - -2.16%

Source: RWC Partners / Bloomberg.

NAV to NAV net income reinvested. Net of fees

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

% of up-months

% of down-months

Total ReturnAnnualised

ReturnAnnualised Vol Sharpe Ratio

Strategy 81% 19% 15.29% 8.47% 4.09% 1.79

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Sep 08

Oct 08

Nov 08

Dec 08

Jan 09

Feb 09

Mar 09

Apr 09

May 09

Jun 09

Jul 09

Aug 09

Sep 09

Oct 09

Nov 09

Dec 09

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Threadneedle Macro Trading Crescendo Fund - Class A USD

28

Price, Flow & Macro Analysis

P.F.M. Scorecard – Score Calculation Explanation

29

Please note, this is a historical example and not the current scorecard and will therefore not reflect current positions


Price RatingCurrency 1 -1 0 0 3 1 1 0 1 1 -1 0 1 1 0 -1 2 0 0 0

2Y 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - -5Y 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - -

10Y 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - -30Y 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - -

Flow Rating Risk Sentiment Factor: risk-off -2

Currency 1 0 0 1 2 -1 -1 -1 -1 -1 -1 0 0 -1 -2 0 0 -1 -1 -22Y 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - -5Y 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - -

10Y 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - -30Y 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - -

Macro RatingCurrency 2D 2D 1 0 2 2 1U 2 2 2 2 2 2 2 1 2 2 1 2 1

2Y -2 -2 -1 -1 -1 -2 -1 -2 -2 -2 - - - - - - - - - -5Y -2 -2 -1 -1 -1 -2 -1 -2 -2 -2 - - - - - - - - - -

10Y -2 -2 -1 -1 -1 -2 -1 -2 -2 -2 - - - - - - - - - -30Y -2 -2 -1 -1 -1 -2 -1 -2 -2 -2 - - - - - - - - - -

TOTAL USD EUR GBP JPY CHF AUD NZD NOK SEK CAD CNY BRL KRW MXN TRY ZAR SGD HUF PLZ RUBCurrency 4 1 1 1 7 2 1 1 2 2 0 2 3 2 -1 1 4 0 1 -1

2Y 0 0 1 1 1 0 1 0 0 0 - - - - - - - - - -5Y 0 0 1 1 1 0 1 0 0 0 - - - - - - - - - -

10Y 1 1 2 2 2 1 2 1 1 1 - - - - - - - - - -30Y 1 1 2 2 2 1 2 1 1 1 - - - - - - - - - -

Currency Rating OnlyFixed Income Rating

GBP Currency Score Calculation:

Price = 0Flow = 0Currency = 1

Total Score: 0 + 0 + 1 = 1

CAD 2 Year Government Bond Score Calculation:

Price = 1Flow = 1Currency = -2

Total Score: 1 + 1 - 2 = 0

• Please see pages 31 to 33 for a guide to P.F.M scoring

Risk sentiment factor reflects the current overall level of market risk aversion. As a general rule, in a “risk-off “market USD, JPY, CHF and bonds benefit, at the expense of the other currencies such as EUR, SEK, AUD and CAD.

Macro scores with U and D reflect potential score upgrade and downgrade respectively.

Price Analysis Methodology Overview

30

• The main thrust of our chart/price analysis is to establish the type of investment arena a market is currently in

• Key question: range-bound or trend?

• This defines our investment horizons: trading positions in range-bound markets will be shorter term in nature and positions in trending situations will be longer term

Key Aim

• We use simple chart analysis of hourly, daily, weekly and monthly bar charts

• We do not use black box systems or chart techniques that follow standardised rules, e.g. DeMark, Elliot wave, Gann analysis etc.; all views are discretionary

Instruments

• We look for patterns in the price of a security of a reversal or continuation nature; some are standard market patterns such as double tops, double bottoms and some are proprietary to our knowledge and experience

• We also look at the angle of trend and how that can impact on market retracements. Past experience with market bubbles is key and we are able to identify these situations as they occur, before they break down, with market experience back to 1985

Pattern Recognition

• In summary we employ a tape reading technique that uses simple support and resistance lines, pattern recognition, and market psychology as it relates to price vs. macro views

• We also consider round numbers and price against time to be very important

Summary

• We examine price developments in relation to fundamentals, looking for price to confirm or not confirm Macro views

• This gives us early warning signals of trend or range reversals when price fails to confirm prior moves at some point Confirmation

• We also look at the psychology of the market and historical support and resistance levels, particularly 100% retracements of prior moves

• Is the market overbought or oversold and struggling at historical levels?

Market Psychology

• Support and resistance levels• Psychological levels• Contrarian views when appropriate• Market positioning – overbought or oversold• Does price action confirm economic

releases?• Are fundamentals already priced in?

P.F.M. Scorecard – Guide to Price Scoring

31

• Scores represent attractiveness from a technical / price action perspective

• Scores imply trading opportunities and target entry and exit points

• Price discipline is key in confirming economics / flow

• Price numbers reflect medium to long term time horizon

• Score of +3 indicates a strong long term upward trend, -3 indicates a strong long term downward trend

• Score of -1, 0 or +1 represents a range bound market

Investment Environment

Moving Average Support

• Trend or range bound• Potential range breakout• Reversal or continuation• Pattern recognition• Timing• Short term or long term

Market Psychology

Discipline

• Intraday high/low day moving average bands

• Used for trend confirmation• Can suggest continued or persistent

trending markets

• Stop losses• Stop profits• Trailing stops• Time discipline – stale investments• Identify targets on trends or ranges

• Key areas of consideration and analysis for price scoring:

Price Rating USD EUR GBPCurrency -1 0 -1

2Y 1 0 15Y 1 0 1

10Y 1 0 130Y 1 0 1

• Trend or range bound• Potential range breakout• Reversal or continuation• Inflection points• Short term or long term market• Pattern recognition• Inter-market analysis and correlations

MacroFlow

Price

• Scores indicate positive and negative flow and positioning dynamics

• Score of +3 could represent buybacks, regulation or bad market positioning

• Score of -3 could reflect large supply, asset allocation flows or sentiment

• Time frame is market dependent (e.g. pension flows LT, auctions ST)

• Flow factors can produce idiosyncratic scores at points on the yield curve (e.g. pension regulation, upcoming auctions)

Flow Rating USD EUR GBPCurrency -2 1 1

2Y 1 -1 15Y 1 -1 1

10Y 0 -1 130Y 0 0 2

Risk Sentiment Factor: risk-off -2

P.F.M. Scorecard – Guide to Flow Scoring

32

Market Sentiment & Positioning

Regulation

• Risk-on vs. risk-off market sentiment

• Market positioning

• Asset allocation: safe havens, carry trade

• Key market bull and bear themes

• Pension fund regulation

• Bank capital requirements

• Key areas of consideration and analysis for flow scoring:

Bond Supply & Demand Dynamics

FX Supply & Demand

Dynamics

• CB/SWF currency diversification

• Reserve regulation

• FX market intervention

• Exchange controls policy (EM)

• Government bond auctions

• QE and buybacks

• Mortgage convexity hedging

• Month end index extension

Price

MacroFlow

• Risk sentiment toggle adjusts for current overall level of market risk aversion

• A negative score reflects a more “risk-off” market sentiment

• General rule in a “risk-off “market: USD, JPY, CHF and bonds benefit, at the expense of the other currencies

• Inflation: headline, core, target• Inflation expectations• GDP relative to trend, unemployment• Central bank communications:

announcements, press conferences, minutes, speeches

• Taylor rule analysis, real yields• QE, money supply

P.F.M. Scorecard – Guide to Macro Scoring

33

Macro Rating USD EUR GBPCurrency 2D 2 1

2Y -2 -2 -15Y -2 -2 -1

10Y -2 -2 -130Y -2 -2 -1

• Scores reflect relative macro fundamental strength (-3 to +3)

• Currency scores below 0 signal recession (-3 equivalent to Sep-01/Sep-08)

• Scores are updated as views change based on new data and news flow

• Scores are forward looking and represent short term horizon (0 – 6 months)

• Outlook for longer term bonds incorporate long term expectations

• Signals potential downgrade (D) or upgrade (U) (e.g. recent data inconsistent with current score but not yet conclusive)

• EUR bond scores refer to core Eurozone bonds (i.e. Germany), not peripheral sovereign debt

Economic Fundamentals

Fiscal Policy &

Sovereign Debt

• Growth and business cycle metrics: GDP, industrial production, trade, retail sales

• Forward looking indicators and surveys• Current account, terms of trade• Labour market, unemployment• Property market• Financial sector

Monetary Policy &

Interest Rates

Political & Other

• Fiscal deficit as % of GDP• Govt debt as % of GDP• Sovereign debt rating• Issuance and redemption profiles• Fiscal consolidation• Sovereign debt crises and bail-outs• Risk premia and default rates

• Political instability: elections, minority and coalition governments, US Congress

• Policy and regulatory changes• Wars, terrorism• Natural disasters, extreme weather• Demographics

• Key areas of consideration and analysis for macro scoring:

Price

Flow Macro

34

Sizing and Risk Management

35

ARC Funds and RWC Partners Risk Management Overview

Independent Fund Monitoring• RWC Asset Management LLP act as the fund’s advisor• BPERE (Rothschild) are independent administrator &

custodian• AB Fund Services appointed for local Luxembourg and

UCITS oversight• Daily production and reconciliation of NAVs• Daily cash reconciliation• Independent Board of Directors speak with portfolio manager

and CEO once a quarter

Corporate Risk Management• Revenue is diversified across investment teams, products

and clients.

• Business is managed to be profitable before performance fees are generated

• An independent third party consultant reviews our compliance infrastructure twice a year.

Internal Risk Management & Oversight• Separation of compliance, risk oversight and portfolio

management • Independent Risk Manager reporting directly to CEO

• Daily independent review of DV01, option and FX exposures via thinkFolio

• Exposures considered within context risk observed and expected within market

• Market-dependent stress-testing and scenario analyses

• VaR monitoring (considering both expected correlations and extreme correlations)

• Significant risks discussed directly with PM and highlighted to CEO who has ultimate oversight of risk. CEO has regular review meetings with PM teams.

Portfolio Risk Management• Pragmatic, market dependant approach to risk taking

• Risk assessed at the individual trade and portfolio levels

• Funds managed through :

• Beauchamps hedge fund accounting system; and

• thinkFolio portfolio modelling and trade management system, designed specifically for bonds and currency management (not a VaR system)

• Highly liquid securities ensure portfolio can be collapsed or de-risked efficiently and quickly

• Third party risk company AB Funds in Luxembourg using Kinetic Software to measure daily VaR (Monte Carlo)

Yield Volatility Scorecard

36

As at 12 Jul 11

1st 3Month

5th 3Month Short Medium Long 2yr 5yr 10yr 30yr

USDED1 ED5 TU1 FV1 TY1 US1 WN1

Curr Yield 0.43% 0.74% 0.98% 1.66% 3.09% 4.03% 4.18% 0.35% 1.42% 2.86% 4.15%30d Yield Vol (bps) 69.8 122.4 87.1 150.6 116.8 96.0 96.3 54.0 119.3 105.4 83.3

180d Yield Vol (bps) 43.3 85.4 59.2 87.6 73.8 71.4 74.1 36.0 75.2 79.4 72.0Extreme Yield Vol (bps) 68.1 100.5 79.7 118.2 122.0 125.4 44.5 124.4 149.1 157.7

EURER1 ER5 DU 1 OE1 RX1

Curr Yield 1.65% 1.74% 1.71% 1.95% 2.60% 1.20% 1.77% 2.60% 3.25%30d Yield Vol (bps) 101.1 116.1 105.6 114.5 95.3 93.8 107.0 88.0 93.3

180d Yield Vol (bps) 77.0 79.3 80.5 76.2 59.9 72.9 67.7 57.5 59.1Extreme Yield Vol (bps) 104.1 118.7 108.5 100.9 85.2 98.2 90.2 88.9 99.1

GBPL 1 L 5 G 1

Curr Yield 0.92% 1.12% 3.20% 0.67% 1.68% 2.99% 4.08%30d Yield Vol (bps) 58.6 65.3 128.4 46.9 82.6 86.7 58.5

180d Yield Vol (bps) 62.2 82.1 66.2 40.1 58.0 57.3 50.5Extreme Yield Vol (bps) 70.3 100.1 106.6 60.4 84.3 97.1 94.8

JPYJB1

Curr Yield 1.31% 0.16% 0.42% 1.15% 2.10%30d Yield Vol (bps) 27.3 9.2 21.8 28.7 27.0

180d Yield Vol (bps) 31.3 12.9 27.3 33.0 33.5Extreme Yield Vol (bps) 64.4 35.9 53.1 68.4 88.2

AUDYM1 XM1

Curr Yield 4.45% 4.95% 0.16% 0.42% 1.15% 2.10%30d Yield Vol (bps) 137.2 117.5 9.2 21.8 28.7 27.0

180d Yield Vol (bps) 70.1 63.2 12.9 27.3 33.0 33.5Extreme Yield Vol (bps) 175.3 161.1 35.9 53.1 68.4 88.2

Yield Volatility Scorecard

Ultra Long

• Please see pages 16 and 17 for a guide to sizing and risk management• As with the P.F.M. Scorecard, an objective view of expected volatility is made as well as the following quantitative view

Please note this is a historical example and not the current scorecard and will therefore not reflect current values

‘Curr Yield’ is the current yield to maturity on the contract; ‘30d Yield Vol’ is the observed volatility in the yields of the contract over the past 30 calendar days in bps; ‘180d Yield Vol’ is the observed volatility in the yields of the contract over the past 180 calendar days in bps; ‘Extreme Yield Vol’ is the 95% highest ‘30d Yield Vol’ observed over the past 10yrs in bps.

FX Volatility Scorecard

37

As at 13 Jul 11


Curr FX 1.41 1.60 0.01 1.21 1.08 0.83 0.18 0.15 1.04 0.15 0.64 0.09 0.09 0.61 0.15 0.82 0.53 0.35 0.0430d Yield Vol (bps) 13.3% 7.7% 7.1% 10.1% 12.2% 14.2% 15.1% 17.5% 10.8% 1.9% 9.7% 8.1% 9.1% 10.6% 12.9% 5.9% 21.2% 18.2% 8.3%

180d Yield Vol (bps) 10.7% 7.6% 9.0% 10.2% 10.8% 12.2% 12.9% 13.8% 8.1% 2.0% 9.4% 8.2% 7.4% 10.7% 12.6% 5.1% 15.4% 14.2% 7.5%Extreme Yield Vol (bps) 15.0% 16.2% 16.1% 16.0% 23.1% 25.4% 21.4% 23.5% 16.4% 2.7% 33.7% 25.0% 17.5% 32.3% 29.6% 8.4% 28.8% 28.5% 16.9%









FX Volatility Scorecard

Please note this is a historical example and not the current scorecard and will therefore not reflect current value

‘Curr Yield’ is the current yield to maturity on the contract; ‘30d Yield Vol’ is the observed volatility in the yields of the contract over the past 30 calendar days in bps; ‘180d Yield Vol’ is the observed volatility in the yields of the contract over the past 180 calendar days in bps; ‘Extreme Yield Vol’ is the 95% highest ‘30d Yield Vol’ observed over the past 10yrs in bps.

• Please see pages 16 and 17 for a guide to sizing and risk management• As with the P.F.M. Scorecard, an objective view of expected volatility is made as well as the following quantitative view

38

Example Trades

Example Trades Overview

39

Investment Strategies

Instruments

Relative• US curve trade (e.g. 5s vs. 30s)• Gilts vs. Bunds

Outright Long/Short• Buy/Sell 10 yr USTs• Buy/Sell 3m Euro EURIBOR

Directional• Short sterling call spread• Euro$ long call

Volatility• Short sterling butterfly spread• USTs 10y straddle/strangle• Short sterling call condor

Futures on:• Government Bonds: Gilts, Bunds, USTs• Short term interest rates: Short Sterling,

EURIBOR, Euro$)

Derivatives:• Puts and calls• Option structures, such as butterfly spreads,

strangles and condors

Bonds and Interest Rates

Relative/Directional• Buy AUDCAD, 1 month forward• Sell USDZAR, 1 month forward

Directional• Buy/Sell EURUSD put

Volatility• Buy/Sell USDJPY broken call fly

Spot and Forwards on:• Global and emerging market currencies

Derivatives:• OTC puts and calls• OTC option structures

Currency

Position Sizing Process

40

• Size of risk allocation dependant on market conditions:• Assess volatility, correlations and liquidity (e.g.

holidays, auctions or economic releases)• DV01 risk (bonds, interest rates) and % NAV (FX)

used to size and set stop profit/loss levels relative to expectations of market volatility and not just current market volatility

• Examples of typical risk budget sizing:

• Relative trade e.g. 5s/10s curve trade• 1bp / 2bp per bp of fund P+L for CARC / EARC

• Spread trade e.g. Gilts/Bunds• ½bp / 1bp per bp of fund P+L for CARC / EARC

• Outright long/short e.g. long 10y treasuries• ¼bp / ½bp per bp of fund P+L for CARC / EARC

• G10 currency trade e.g. EURCHF• 2% / 4% of NAV for CARC / EARC

• Emerging market currency trade e.g. USDZAR• ½% / 1% of NAV for CARC / EARC

• High conviction and low expected volatility/risk suggests typical sizing

• High expected volatility/risk requires reduced sizing

Position Sizing

ConvictionPotential Volatility

Contribution

Potential Correlations with Other Holdings

Liquidity

P.F.M. Scorecard


Market Assessment

Bonds / STIRs:# of Contracts

Currency: % NAV

Example 1: Gilts / Bunds Spread Trade Date: Oct-2010

41

• Investment view: UK government bonds expected to underperform relative to German government bonds i.e. UK yields will rise faster than German yields and the spread between them will widen

• Macro perspective: UK government bonds outperformed throughout Oct-2010 as a result of expectations of QE and government spending cuts (1); however, 3rd quarter GDP released on 26-Oct-2010 was stronger than expected, shocking the market (2)

• Flow perspective: UK government bonds had become overbought i.e. the price was too high and due for a correction; GDP shock saw longs panic, with follow through selling around gilt syndication (4)

• Price perspective: the spread between UK and German government bond futures contracts had broken a ‘double bottom’ around 520 ticks (3); the price action suggested an initial target for this breakout of 565 ticks with a stop loss at 480 ticks

• Trade idea: take long position in German government bonds and short position in UK government bonds

Investment View

• Highly liquid exchange-traded government bond futures

• UK 10 year government bond futures (“Gilts”)

• German 10 year government bond futures (“Bunds”)

• Trade strategy: purchase Bund contracts and sell short Gilt contracts (1:1 ratio)

Choice of Security

• Number of Bund and Gilt contracts traded represented risk budget (DV01) of 1bp for CARC

• i.e. 1bp move in the Gilt-Bund spread results in 1bp of fund performance

• Initial futures price spread target of 565 ticks (difference between price of 1 Bund contract and 1 Gilt contract)

• Stop loss of 480 ticks (based on price action)

Sizing and Risk Mgmt.

• Entered trade at spread of 535 ticks (represents difference between price of long Gilt future and price of short bund future)

• Closed half of trade at 595 ticks , profit of 60 ticks per contract (pre-hedging of gilt syndication)

• Closed remaining half of trade at 633 ticks , profit of 98 ticks per contract (pricing of gilt syndication)

Entry and Exit Points

Example 1: Chart of Bunds - Gilts Futures Price Spread

42

1

2

4

3

‘in’ at 533

‘out’ at 595

‘out’ at 633

1 – Spread driven tighter on UK QE and spending cuts

2 – UK GDP positive surprise

3 – Spread breaks out of double bottom at 520 ticks

4 – Gilt syndication

Example 2: EUR/CHF FX Trade Date: Jun-2011

43

• Amount of EURCHF traded represented 2% of CARC and 4% of EARC

• CARC: 1 percent change in EURCHF rate results in 2bps of fund performance

• EARC: 1 percent change in EURCHF rate results in 4bps of fund performance

• Stop loss of EURCHF = 1.23000 (based on price action)

Sizing and Risk Mgmt.

• Entered trade at EURCHF = 1.2112 (1m forward rate, spot rate = 1.2123)

• Closed half of trade 1 day later at EURCHF = 1.2006 (spot rate = 1.2015), percentage change: -0.87%

• Close remaining half of trade 2 days later at EURCHF = 1.1901 (spot rate = 1.1910), percentage change: -1.74%

Entry and Exit Points

• Investment view: Swiss Franc (CHF) to outperform relative to Euro (EUR) in the short term

• Macro perspective: worries were dominating markets about EU/IMF refusing to release next tranche of bail-out money to Greece, which would have resulted in a Greek sovereign default in July and extreme market volatility and stress

• Flow perspective: broad ‘risk-off’ sentiment in markets, CHF to benefit from flight-to-quality flows, particularly with month- and quarter-end approaching

• Price perspective: price action suggested a long term trend of CHF strength vs. EUR, USD and GBP

• Trade idea: take long position in Swiss Francs vs. short position in Euros

Investment View

• 1 month EURCHF FX forward

• Trade strategy: sell EURCHF (long CHF, short EUR)

Choice of Security

Example 2: Chart of Intraday EUR/CHF Exchange Rate

44

‘in’ at 1.2112 (spot rate = 1.2123)

Source: Bloomberg

‘out’ at 1.2006 (spot rate = 1.2015)

‘out’ at 1.1901(spot rate = 1.1910)

45

Further Information

thinkFolio – Portfolio Management System

46

• thinkFolio is a simple, intuitive and sophisticated portfolio modelling and trade management system designed specifically for bonds and currency management

thinkFolio – Portfolio Management System

47Source: www.thinkfolio.com

Linedata Beauchamp – Hedge Fund Accounting System

48Source: www.linedata.com

49

Contact Us

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

RWC Partners Ltd

60 Petty France

London

SW1H 9EU

Tel: +44 20 7227 6000

Fax: +44 20 7227 6003

Email: [email protected]

50

Risk Warnings & Disclaimers

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

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

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

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

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

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

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

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

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

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

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

Date post:	13-Nov-2014
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