Guinness Global Innovators Fund Dr Ian Mortimer, CFA Matthew Page, - - PowerPoint PPT Presentation

Guinness Global Innovators Fund

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Dr Ian Mortimer, CFA Matthew Page, CFA Q3 2018

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• High conviction, long only equities
• Founded in 2003, headquartered in London
• $1.8bn AUM (Guinness Group assets)
• UCITS, US Mutual Funds, Separately Managed

accounts

• 25 employees
• 100% employee‐owned (all investment managers
• wn equity in business)
• Investment strategies
• Global Equity
• Energy
• Asia

Guinness Asset Management

Source: Guinness Asset Management

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Performance vs peers1:

Rank YTD 110/ 301 1 year 41/ 288 3 years 14 / 261 5 years 10 / 232 10 years 2 / 158

1 UCITS Fund (launched on 31.10.2014)

in IA Global sector. Returns are a simulation based on the actual returns

• f a sister mutual fund for US

investors, until the launch of the UCITS

• version. Both funds are managed in

accordance with the same investment process and with the same portfolios.

Global equity strategies from Guinness

Source: Guinness Asset Management. Guinness Atkinson Asset Management. Financial Express (30.06.2018).

Global Equity Income

Quality, value, and dividend growth Managers : Matthew Page & Ian Mortimer Analysts : Sagar Thanki AUM in strategy : $531mn

Global Innovators

Global growth Managers : Matthew Page & Ian Mortimer Analysts : Sagar Thanki AUM in strategy : $436mn

2 UCITS Fund (GUGLEIE ID) in

IA Global Equity Income sector.

3 31.12.2010

Performance vs peers2:

Rank YTD 10 / 54 1 year 20 / 54 3 years 9 / 46 5 years 16 / 38 Since launch* 6 / 22

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Growth in global equity strategies from Guinness

Source: Guinness Asset Management, Guinness Atkinson Asset Management (data as at 30.06.2018)

$0 $200 $400 $600 $800 $1000 $1200 2010 2011 2012 2013 2014 2015 2016 2017 Jun‐18 US$m AUM Global Equity Income strategy Global Innovators strategy

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Matthew Page, CFA Portfolio Manager

• Joined Guinness Asset Management in 2005
• Previously worked for Goldman Sachs as an analyst in Fixed

Income Currencies and Commodities (FICC)

• Graduated from University of Oxford, with a Masters degree

in Physics in 2004

• Manager of Global Innovators strategy since 2010
• Manager of Global Equity Income strategy since launch

Portfolio managers

Source: Guinness Asset Management

Dr Ian Mortimer, CFA Portfolio Manager

• Joined Guinness Asset Management in 2006
• Graduated from University of Oxford, with a D.Phil. in Physics

in 2006

• Graduated from University College London, University of

London, with a Masters degree in Physics in 2003

• Manager of Global Innovators strategy since 2011
• Manager of Global Equity Income strategy since launch

Global Innovators 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Tim Guinness Manager Matthew Page ‐ ‐ Analyst Manager Ian Mortimer ‐ ‐ ‐ ‐ ‐ ‐ Analyst Manager Sagar Thanki ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Analyst

Global Equity Income 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Matthew Page ‐ ‐ ‐ ‐ ‐ ‐ ‐ Manager Ian Mortimer ‐ ‐ ‐ ‐ ‐ ‐ ‐ Manager Sagar Thanki ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Analyst

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‐20% 20% 60% 100% 140% 180% 220% 260% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Guinness Global Innovators (USD) MSCI World Index (USD)

Global Innovators strategy performance

Track record of current investment management team (total return, USD)

Source: Financial Express, Y class (0.99% OCF), Guinness Asset Management (data 31.12.2009 to 30.06.2018)

198% 123%

Bid to bid basis, total return Past performance should not be taken as an indicator of future performance. The value of investments and the income from them can fall as well as rise.

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Rank 1 Year 41/288 3 year 14/261 5 year 10/232 10 year 2/158

Performance in UK IA peer group of global funds

Guinness Global Innovators Fund (UCITS version) launched on 31.10.2014. The Guinness Global Innovators returns stated above are a simulation based on the actual returns of a sister mutual fund for US investors, calculated in USD, until the launch of the UCITS version on 31.10.2014. Both funds are managed in accordance with the same investment process and with the same portfolios. Source: Financial Express, bid to bid, total return. The value of an investment and the income from it can fall as well as rise as a result of market and currency movement; you may not get back the amount originally invested. Past performance is not a guide to future performance.

Total returns in USD, 30/06/2018

Top 50 IA Global sector funds Summary:

1 year 3 years 5 years 10 years

Baillie Gifford Long Term Global Growth Investment 37.43 Morg Stnly Global Opportunity 76.82 Morg Stnly Global Opportunity 195.79 Baillie Gifford Global Discovery 253.62 Baillie Gifford Positive Change 34.60 Fundsmith Equity 60.95 Baillie Gifford Global Discovery 118.76 Guinness Global Innovators 182.93 Baillie Gifford Global Discovery 34.31 Standard Life Investments Global Smaller Companies 59.62 Lindsell Train Global Equity 117.14 Morgan Stanley Global Brands 176.96 Aubrey Capital Management Ltd Aubrey Global Conviction 32.86 Lindsell Train Global Equity 55.87 Fundsmith Equity 114.15 Morg Stnly Global Brands 176.27 Morg Stnly Global Opportunity 32.57

• T. Rowe Price Global Focused Growth Equity

53.50

• T. Rowe Price Global Focused Growth Equity

113.45 L&G Global Health & Pharmaceuticals Index Trust 173.56 Neptune Global Smaller Companies 32.39 Seilern Stryx World Growth 48.81 Seilern Stryx World Growth 102.09 Schroder Global Healthcare 173.54 Standard Life Investments Global Smaller Companies 29.06 Baillie Gifford Global Discovery 48.15 Standard Life Investments Global Smaller Companies 98.85 Pictet Security 170.89 Guinness Global Energy 27.90 Aubrey Capital Management Ltd Aubrey Global Conviction 47.17 Janus Henderson Global Equity 95.16 Janus Henderson Global Equity 169.59 Schroder ISF Global Energy 27.35 Baillie Gifford International 45.07 Old Mutual Global Equity 94.61 Seilern Stryx World Growth 166.63 Lindsell Train Global Equity 25.85 Rathbone Global Opportunities 43.57 Guinness Global Innovators 93.89 Fidelity Global Consumer Industries 159.84 Kames Global Equity 24.96 Baillie Gifford Global Alpha Growth 42.65 Rathbone Global Opportunities 93.30 McInroy & Wood Smaller Companies 146.22 GAM Multistock Luxury Brands Equity 24.15 Sanlam Global High Quality 40.83 GS Global CORE Equity Portfolio 90.31 GS Global Small Cap Core Equity Portfolio 137.19 Baillie Gifford Global Select 23.17 JGF‐Jupiter Global Value 40.44 Aubrey Capital Management Ltd Aubrey Global Conviction 90.06 Sanlam Global High Quality 136.40 JGF‐Jupiter Global Value 22.76 Guinness Global Innovators 40.27 Baillie Gifford International 86.21 Fidelity Global Health Care 133.31 JOHCM Global Select 21.87 Morg Stnly Global Brands 40.14 Old Mutual World Equity 84.89 Baillie Gifford International 124.94 Mirabaud Equities Global Focus 21.70 Morgan Stanley Global Brands 40.00 Ardevora Global Equity 84.69 Old Mutual Global Equity 124.29 Rathbone Global Opportunities 21.68 GS Global CORE Equity Portfolio 39.88

• T. Rowe Price Global Growth Equity

84.34 Invesco Perpetual Global Smaller Companies 123.56 Neptune Global Equity 21.40

• T. Rowe Price Global Growth Equity

39.63 Baillie Gifford Global Alpha Growth 83.53 Investec Global Special Situations 120.85 Seilern Stryx World Growth 20.83 Old Mutual Global Equity 39.35 GS Global Small Cap Core Equity Portfolio 80.75 Orbis Global Equity 119.63

• T. Rowe Price Global Focused Growth Equity

20.81 Ardevora Global Long Only Equity 39.20 McInroy & Wood Smaller Companies 80.07 Schroder ISF Global Smaller Companies 112.93 McInroy & Wood Smaller Companies 20.45 Brown Advisory Global Leaders 37.88 Investec Global Special Situations 78.00 Veritas Global Focus 108.10 New Capital Global Equity Conviction 20.27 Orbis Global Equity 37.85 Fidelity Global Special Situations 77.23 Pictet Premium Brands 107.75 Brown Advisory Global Leaders 19.55 Janus Henderson Global Equity 37.36 Threadneedle Global Extended Alpha 76.08 GS Global CORE Equity Portfolio 102.90 Oldfield Overstone UCITS Global Smaller Companies 19.32 McInroy & Wood Smaller Companies 37.30 Pictet Security 75.48 MFS Meridian Global Equity 102.14 Hermes Global Small Cap Equity 18.30 Old Mutual World Equity 37.17 Investec Global Strategic Equity 73.96 Standard Life TM International 101.16

• T. Rowe Price Global Growth Equity

18.28 Morg Stnly Global Quality 36.81 Artemis Institutional Global Capital 73.74 Robeco BP Global Premium Equities 100.72 Baillie Gifford International 18.20 GS Global Small Cap Core Equity Portfolio 36.80 R&M World Recovery 73.51 Invesco Perpetual Global Opportunities 100.59 Comgest Growth World 18.02 Investec Global Special Situations 36.73 Artemis Global Growth 73.14 MFS Meridian Global Concentrated 99.46 Baillie Gifford Global Alpha Growth 17.81 Kames Global Equity 36.66 Premier Global Alpha Growth 72.90 Fidelity Institutional Global Focus 98.88 Fidelity Global Focus 17.76 Fidelity Global Consumer Industries 36.42 F&C Institutional Global Equity 72.79 Troy Asset Management Ltd Trojan Global Equity 96.34 GS Global Small Cap Core Equity Portfolio 17.65 Hermes Global Small Cap Equity 36.34 Fidelity Global Focus 72.59 BNY Mellon Long Term Global Equity 96.26 Allianz Global Small Cap Equity 17.41 Investec Global Franchise 35.89 Janus Henderson Global Sustainable Equity 72.27 Rathbone Global Opportunities 95.81 GS Global Millennials Equity Portfolio 17.15 Threadneedle Global Select 35.87 Standard Life TM International 71.93 Fidelity Global Focus 94.44 UBS (Lux) Equity SICAV Global Opportunity Unconstrained (US 16.97 Ardevora Global Equity 35.01 Threadneedle Global Select 71.78 Russell Investments II World Equity 93.56 Fundsmith Equity 16.95 Comgest Growth World 34.62 Kames Global Equity 71.76 Oldfield Overstone UCITS Global Smaller Companies 92.64 Ardevora Global Equity 16.50 Fidelity Global Focus 34.29 Fidelity Global Consumer Industries 71.57 Aubrey Capital Management Ltd Aubrey Global Conviction 91.09 Ardevora Global Long Only Equity 16.40 GAM Multistock Luxury Brands Equity 33.98 Schroder ISF Global Smaller Companies 71.29 BlackRock NURS II Overseas Equity 90.50 Liontrust Sustainable Future Global Growth 16.34 Stewart Investors Worldwide Sustainability 33.28 Vanguard Global Small‐Cap Index 70.97 Threadneedle Global Select 89.89 Fidelity Global Consumer Industries 16.14 MI Thornbridge Global Opportunities 32.98 Schroder Global Healthcare 70.62 Invesco Perpetual Global Ex UK Core Equity Index 89.47 Investec Global Special Situations 16.12 New Capital Global Equity Conviction 32.98 JOHCM Global Select 70.17 Dimensional International Core Equity 88.77 Guinness Global Innovators 16.07 BNY Mellon Long Term Global Equity 32.91 Fidelity Institutional Global Focus 69.86 Sanlam Global Financial 88.54 Kames Global Sustainable Equity 16.07 Vanguard Global Small‐Cap Index 32.69 L&G Global Health & Pharmaceuticals Index Trust 68.20 Janus Henderson Global Sustainable Equity 88.39 Jupiter Fund of Investment Trusts 15.82 L&G Global 100 Index Trust 32.64 Quilter Investors Global Equity Growth 68.10 Scottish Widows Multi‐Manager International Equity 88.39 Threadneedle Global Select 15.81 Threadneedle Global Extended Alpha 32.27 Morg Stnly Global Brands 67.88 Schroder ISF Global Equity Yield 88.13 Fidelity Institutional Global Focus 15.65 MI Metropolis Value 32.11 Morgan Stanley Global Brands 67.41 Schroder Global Equity 87.44 First State Global Resources 15.63 Fidelity Institutional Global Focus 31.93 Orbis Global Equity 67.34 Investec Global Strategic Equity 86.86 Pictet Premium Brands 15.60 Davy Discovery Equity 31.83 Invesco Perpetual Global Opportunities 67.22 L&G International Index Trust 86.36 Old Mutual Global Equity 15.59 Stonehage Fleming Global Best Ideas Equity 31.77 Davy Discovery Equity 67.02

• T. Rowe Price Global Focused Growth Equity

85.53 F&C Global Thematic Opportunities 15.53 Quilter Investors Global Equity Growth 31.29 F&C Responsible Global Equity 66.69 F&C Responsible Global Equity 84.50 Investec Global Strategic Equity 15.48 RWC Global Horizon 31.26 Hermes Global Equity 65.96 Capital Group Global Growth and Income (LUX) 82.95

• No. of funds in sector

288

• No. of funds in sector

261

• No. of funds in sector

232

• No. of funds in sector

158 IA Global sector average 10.9 IA Global sector average 20.88 IA Global sector average 48.06 IA Global sector average 52.11 MSCI World Index 11.09 MSCI World Index 27.65 MSCI World Index 60.61 MSCI World Index 83.51

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Global Innovators philosophy

Source: Guinness Asset Management

Concentrated portfolio of innovative, high quality, growth companies

Conviction

The Fund typically has 30 equally weighted positions We target a low turnover with average of 3 – 5 year investment horizon

Innovation

We use innovation as a lens to identify good growth companies We believe innovative companies should be able to generate a high return

• n capital in the future

Growth & valuation

We look for companies that can grow profitably, which have good margins, and do not require significant external capital to grow We aim to avoid over paying for future growth

Quality

We focus on companies that earn a return on capital above their cost of capital and have historically grown their economic profit We avoid highly leveraged companies

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Why do we look for innovative companies?

Source: Guinness Asset Management

• We think innovative companies can outperform
• Compared to their peers, innovative companies can generate
• Better growth opportunities
• Higher profit margins
• Which can translate into
• Superior returns on capital
• Greater opportunity to reinvest in profitable projects
• Sustained competitive advantage period
• Innovative secular growth themes are less exposed to market cycles

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How do we assess innovation: Innovation matrix

Inventing Disrupting Leading Technology

Scientific breakthrough leading to new technology with significant potential impact Rapid improvements in young technology Small continuous advances in an established technology that will provide incremental benefits to end user

Products

A new product that has the potential to quickly take market share and change the dynamics of an industry Rapid advances in adoption of product Small advances in product that maintains or grows market share or competitive positioning

Services

A new revenue/cost model or the confluence

• f technologies that has

significant impact on incumbents Rapid adoption of new service leads to rapid growth in market share Continuous evolution of service to maintain competitive strength

Source: Guinness Asset Management

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• A list of 15 core innovative themes are identified through subjective analysis and research
• Companies ($0.5bn mkt cap minimum) that have economic exposure to these innovative themes are then identified
• Typically we will identify a long list of c.1,000 companies
• Innovative themes reviewed annually

How do we identify innovative companies?

Sector Energy Industrials Consumer Discretionary Consumer Staples Health Care Financials Information Technology Telecom Services Utilities Real Estate Materials Themes Artificial intelligence & big data x x x x x x Augmented and virtual reality x Autonomous vehicles x x Clean energy x x x x Cloud computing x x Consumer trends x x x x Cyber security x x x Ecommerce x x x Fintech x x x Health & wellness x x x Internet of things x x x x x NextGen engineering x x x x Robotics & automation x x x x x x Smart materials x x x Software x x x x

Source: Guinness Asset Management

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5% 1%

• Our Global Innovators universe includes c.1000 mid‐ and large‐cap companies that we have identified as innovative

Global Innovators universe characteristics – sector and geographic distribution

Source: Guinness Asset Management

• Higher exposure to IT, industrial, health care and

consumer sectors

• Lower exposure to commodity and regulated sectors
• Similar geographic breakdown to MSCI World Index

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Quality assessment

Global Innovators Universe (~1,000 companies) Quality Global Innovators Universe (~500 companies)

• Just because a company is innovative does not necessarily make it a good investment
• Reduce the long list of innovative companies further to focus on those with quality financial characteristics
• Only want to invest in profitable companies, with strong balance sheets, that have good growth prospects
• Return on Capital > Cost of capital last year
• Debt / equity < 150%
• Positive earnings growth expected next year

Source: Guinness Asset Management

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• Following our quality assessment the final Global Innovators investible universe includes c.500 companies
• The broad distribution remains very similar to that of the wider initial universe

Quality Global Innovators universe characteristics – sector and geographic distribution

Source: Guinness Asset Management

6% 2%

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Investment process: systematic, repeatable, robust

Quality Global Innovators Universe (~500 companies)

Prioritisation

Growth, Valuation, Risk

Portfolio addition

Target 50% upside on 3 year view, better risk/return than a current holding

Fundamental analysis

Proprietary modelling, Assessment of return potential, Risk analysis, Competitive advantage, Market sentiment

Watchlist

Like the business, don’t like the valuation

Reject

Weak business, poor allocator of capital, industry in decline

Source: Guinness Asset Management

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Investment process: prioritising companies for further due diligence

Discount vs peers Discount vs company 10yr average multiple Discount to companies with similar growth profiles

Valuation

Above average earnings growth Wide margins Cash flow growth Asset light Reinvesting to grow

Growth

Source: Guinness Asset Management Debt / equity Net debt / equity Interest cover

Risk

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Fundamental analysis – proprietary company modelling and due diligence

Source: Guinness Asset Management

• Understand the business model
• Understand the risks
• Analyse valuation relative to peers and

history

• Understand industry trends
• Investigate company‐specific issues
• Analyse market sentiment towards the

company

Financial model Qualitative assessment

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• Prospect for return from cash‐flow growth
• Higher than average return on capital or prospect of achieving it
• Confidence that earnings can grow – revenue growth, margin expansion
• Consider full spectrum of growth companies to identify best opportunities
• Prospect for return from re‐rating
• Company out of favour or irrational hype has abated
• Multiple (P/E, EV/EBITDA) discount to peers, or market, or company history
• Avoid story stocks, don’t pay up for expected future growth
• Recognise markets can be irrational over short term
• Do not know when market will re‐value company
• Buy and hold
• Use any short term movements to trim/top‐up position

What we are looking for when we buy a new company for the fund

Business value creation Return from re‐rating >50% upside to current valuation over 3 years

+ =

Source: Guinness Asset Management

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Monitoring: sell discipline

Innovation

• 1. Company no longer providing exposure to identified theme or

losing competitive edge to competition

Quality

• 2. Weakening return on capital profile
• 3. Balance sheet becomes stretched

Growth & valuation

• 4. Slowing growth with no obvious catalysts for future reacceleration
• 5. Company no longer offering compelling upside / multiple re‐rating

Conviction

• 6. New idea more compelling

Source: Guinness Asset Management

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Portfolio construction

Holdings & sizing

• 30 companies in portfolio (typically)
• Equally weighted
• Rebalancing effect:

Trim winners, top up underperformers

• One in, one out:

Strong sell discipline, no long tail of small positions

• Limit stock specific risk:

No large weights in just one or two positions

• High active share:

Genuinely index agnostic

• Diversified globally and across sectors
• Maximum 30% in any one industry

Diversification

• Low turnover of positions
• 3 – 5 year average holding period

Turnover

• Benchmark aware, rather than benchmark driven
• Regularly assess concentration risks in portfolio

Macro/Top‐down

Source: Guinness Asset Management

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Portfolio breakdown

Source: Guinness Asset Management, Bloomberg (data as at 30.06.2018) By receipt of this presentation document in either hard or soft copy, the recipient agrees not to copy, disclose, disseminate or use this information other than in their own fund selection process. Note: this portfolio data is Confidential Information that, until the 15th day of each month, is not in the public domain.

PE PE 18Y 19Y Continental AG Automobiles & Components 45.5 DE 3.1% 11.9 10.7 Boeing Co/The Capital Goods 195.5 US 3.4% 22.9 19.7 Eaton Corp PLC Capital Goods 32.7 US 3.3% 14.2 13.0 FANUC Corp Capital Goods 39.9 JP 3.3% 22.5 25.9 Roper Technologies Inc Capital Goods 28.5 US 3.4% 24.5 22.9 Schneider Electric SE Capital Goods 46.9 FR 3.5% 15.9 14.5 Siemens AG Capital Goods 111.8 DE 3.3% 15.1 13.8 ANTA Sports Products Ltd Consumer Durables & Apparel 14.2 CN 3.2% 25.2 20.9 NIKE Inc Consumer Durables & Apparel 128.4 US 3.8% 33.9 30.1 New Oriental Education & Technology Group Inc Consumer Services 15.0 CN 3.2% 42.9 32.2 Intercontinental Exchange Inc Diversified Financials 42.6 US 3.3% 20.9 18.8 Danaher Corp Health Care Equipment & Servic 68.9 US 3.4% 22.1 20.4 Comcast Corp Media 151.0 US 3.0% 13.1 11.9 Shire PLC Pharmaceuticals, Biotechnology 50.7 US 3.2% 11.1 10.4 Applied Materials Inc Semiconductors & Semiconductor 46.6 US 3.3% 10.2 9.9 Infineon Technologies AG Semiconductors & Semiconductor 28.4 DE 3.1% 23.4 20.7 KLA‐Tencor Corp Semiconductors & Semiconductor 16.0 US 3.1% 12.9 11.7 Lam Research Corp Semiconductors & Semiconductor 28.4 US 3.4% 9.9 9.9 NVIDIA Corp Semiconductors & Semiconductor 143.8 US 3.3% 53.0 29.8 Alphabet Inc Software & Services 779.2 US 3.3% 21.7 19.7 Baidu Inc Software & Services 84.7 CN 3.3% 24.9 21.2 Check Point Software Technologies Ltd Software & Services 15.5 IL 3.3% 17.4 16.1 Cognizant Technology Solutions Corp Software & Services 46.3 US 3.5% 17.6 15.5 Facebook Inc Software & Services 562.7 US 3.7% 22.6 18.6 PayPal Holdings Inc Software & Services 98.9 US 3.4% 35.6 29.6 SAP SE Software & Services 140.1 DE 3.4% 22.6 20.3 AAC Technologies Holdings Inc Technology Hardware & Equipmen 17.2 CN 3.3% 17.9 14.4 Catcher Technology Co Ltd Technology Hardware & Equipmen 8.5 TW 3.4% 9.9 8.4 Cisco Systems Inc Technology Hardware & Equipmen 202.4 US 3.3% 16.6 14.8 Samsung Electronics Co Ltd Technology Hardware & Equipmen 261.1 KR 3.4% 6.5 6.3 Average mkt. cap 115.0 Total portfolio 16.8 15.2 Median mkt. cap 46.7 Y‐o‐Y growth 11% MSCI World Index 15.9 14.6 Fund premium / (discount) 5.5% 4.1% Name Country of domicile % NAV

• Mkt. cap

(USDbn) Industry

22

Portfolio allocation by long term growth rate

Source: Guinness Asset Management (data as at 30.06.2018)

Portfolio today Range last 10years 10 – 20% growth 20% + growth 27% 20 ‐ 50% 66% 30 ‐ 65% 7% 0 ‐ 20% 0 – 10% growth

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Portfolio turnover – last 8 calendar years

Buys Sells 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Source: Guinness Asset Management

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Sector breakdown of Global Innovators strategy

Source: Guinness Asset Management (data as at 30.06.2018) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cash (3.5%) Real Estate (0.0%) Consumer Discretionary (15.8%) Consumer Staples (0.0%) Energy (0.0%) Financials (3.2%) Health Care (6.4%) Industrials (19.5%) Information Technology (51.5%) Materials (0.0%) Telecommunication Services (0.0%) Utilities (0.0%)

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Geographic breakdown of Global Innovators strategy

Source: Guinness Asset Management (data as at 30.06.2018) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cash (3.5%) Africa/ME (3.2%) Japan (3.1%) Asia Pacific (ex Japan) (19.0%) Europe (15.8%) North America (55.4%)

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Geographic exposure

Source: Guinness Asset Management (data as at 30.06.2018)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% By domicile By sales Latin America Africa/ME Japan Asia Pacific (ex Japan) Europe North America

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Portfolio statistics – are we doing what we say we will do?

Conviction Innovation Quality Growth

Source: Guinness Asset Management, Bloomberg, CS HOLT (data as at 30.06.2018)

Fund MSCI World R&D / Sales 7.9% 5.9% CAPEX / Sales 6.6% 8.6% Fund MSCI World CFROI (2017) 17% 12% Net debt/equity ‐10% 65% Fund MSCI World Annualised 3yr sales growth 14.1% 6.2% Earnings growth 10.8% 9.3% FCF yield 4.9% 4.3% PE (2018) 16.8 15.9 Positions 30 Top 10 %NAV 34% Bottom 10%NAV 31% Active share 94%

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‐300% ‐200% ‐100% 0% 100% 200% 300% 400% 500% Guinness Global Innovators (USD) MSCI World Index (USD)

15.8% 10.9% 11.8% 18.8% 21.2% ‐45.5% 45.2% 17.0% ‐6.7% 20.2% 45.3% 11.9% ‐3.4% 7.3% 33.9% 0.52% 29.2% 15.2% 10.0% 20.7% 9.6% ‐40.3% 30.8% 12.3% ‐5.0% 16.5% 27.4% 5.5% ‐0.3% 8.2% 23.1% 0.76%

‐60% ‐40% ‐20% 0% 20% 40% 60% 2003* 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Strategy performance from inception (01.05.2003 to 30.06.2018 in USD)

Source: Financial Express. Based on composite of US mutual fund version up to 31.10.2014, launch date of UCITS version in an Irish‐domiciled OEIC. Past performance should not be taken as an indicator of future performance. The value of investments and the income from them can fall as well as rise.

* 2003 data from 1st May (strategy inception)

All data total return, USD

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< ‐4% ‐4% to ‐2% ‐2% to 2% 2% to 4% > 4% Guinness Global Innovators Fund ‐8.2% ‐3.0% 0.2% 3.2% 7.0% MSCI World Index ‐8.1% ‐2.7% 0.2% 2.7% 6.2% Difference ‐0.1% ‐0.3% 0.0% 0.5% 0.8% Frequency 16 18 76 39 32 ‐10% ‐8% ‐6% ‐4% ‐2% 0% 2% 4% 6% 8% Average Monthly TR (USD) Index Total Return Range (USD) Guinness Global Innovators Fund MSCI World Index < ‐4% ‐4% to ‐2% ‐2% to 2% 2% to 4% > 4% Guinness Global Innovators Fund ‐8.2% ‐3.0% 0.2% 3.2% 7.0% MSCI World Index ‐8.1% ‐2.7% 0.2% 2.7% 6.2% Difference ‐0.1% ‐0.3% 0.0% 0.5% 0.8% Frequency 16 18 76 39 32 ‐10% ‐8% ‐6% ‐4% ‐2% 0% 2% 4% 6% 8% Average Monthly TR (USD) Index Total Return Range (USD) Guinness Global Innovators Fund MSCI World Index

Strategy performance characteristics (all USD)

Source: Guinness Asset Management, Bloomberg, Financial Express (data as at 30.06.2018)

Monthly returns frequency table grouped by index return ranges

Performance and risk analysis Fund Index Fund Index

Annualised return 14.16 10.55 10.96 6.86 Alpha 2.07 3.9 Beta 1.11 1 1.04 1 Downside risk 14.68 12.30 21.88 20.67 Excess return 3.29 4.09 Information ratio 0.54 0.49 Max drawdown ‐17.68 ‐16.43 ‐48.06 ‐48.05 R2 0.85 1 0.86 1 Sharpe 0.73 0.6 0.37 0.2 Sortino 0.69 0.55 0.35 0.18 Tracking error 5.57 7.84 Volatility 13.8 11.39 20.65 18.38

5 years 10 years Performance and risk analysis Fund Index Fund Index

Annualised return 14.16 10.55 10.96 6.86 Alpha 2.07 3.9 Beta 1.11 1 1.04 1 Downside risk 14.68 12.30 21.88 20.67 Excess return 3.29 4.09 Information ratio 0.54 0.49 Max drawdown ‐17.68 ‐16.43 ‐48.06 ‐48.05 R2 0.85 1 0.86 1 Sharpe 0.73 0.6 0.37 0.2 Sortino 0.69 0.55 0.35 0.18 Tracking error 5.57 7.84 Volatility 13.8 11.39 20.65 18.38

5 years 10 years

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Key facts: Guinness Global Innovators Fund

Source: Guinness Asset Management

The Fund Structure & legal Pricing & dealing

Fund launch date

31 October 2014

Domicile

Ireland

Pricing

Daily

Fund managers

Matthew Page, CFA Dr Ian Mortimer, CFA

Fund structure

Dublin OEIC (UCITS IV)

Performance fee

None

Benchmark

MSCI World Index

Administrator

Link Fund Administrators (Ireland) Ltd.

Exit fees

2% within 30 days of purchase

(to mitigate market timing)

Leverage

None

Custodian

JP Morgan

Valuation point

23:00 (Dublin time)

Currency hedging

None

Reporting status

Reporting Fund for UK tax purposes

Dealing cut off

15:00 (Dublin time)

Share classes*

Class Currency Max TER (OCF) Description SEDOL Y

USD 0.99% Standard post‐RDR share class BQXX3M0 * Other share classes available in EUR and GBP

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All share classes

Fund Lab

0.99% OCF 0.74% OCF For charities 1.24% OCF 1.99% OCF

Currency GBP EUR USD GBP EUR USD GBP EUR USD GBP EUR USD Accumulation or Distribution Acc Acc Acc Acc Acc Acc Acc Acc Acc Acc Acc Acc Name Y GBP Acc Y EUR Acc Y USD Acc Z GBP Acc Z EUR Acc Z USD Acc X GBP Acc X EUR Acc X USD Acc C GBP Acc C EUR Acc C USD Acc Initial charge 0% 0% 0% 0% 0% 0% 0% 0% 0% 5% 5% 5% Total Expense Ratio (OCF) 0.99% 0.99% 0.99% 0.74% 0.74% 0.74% 1.24% 1.24% 1.24% 1.99% 1.99% 1.99% Minimum: direct £10,000 £10,000 $10,000 £100,000,000 £100,000,000 £100,000,000 £10,000 £10,000 $10,000 £10,000 £10,000 $10,000 Minimum: platform Guinness Asset Management minimums do not apply. Platforms apply their own minimum investment levels. ISIN

IE00BQXX3K83 IE00BQXX3L90 IE00BQXX3M08 IE00BQXX3N15 IE00BQXX3P39 IE00BQXX3Q46 IE00BQXX3G48 IE00BQXX3H54 IE00BQXX3J78 IE00BQXX3C00 IE00BQXX3D17 IE00BQXX3F31

SEDOL

BQXX3K8 BQXX3L9 BQXX3M0 BQXX3N1 BQXX3P3 BQXX3Q4 BQXX3G4 BQXX3H5 BQXX3J7 BQXX3C0 BQXX3D1 BQXX3F3

Bloomberg ticker

GGIYGBA ID GGIYEUA ID GGIYUSA ID GGIZGBA ID GGIZEUA ID GGIZUSA ID GGIXGBA ID GGIXEUA ID GGIXUSA ID GGICGBA ID GGICEUA ID GGICUSA ID

Country registrations*

UK, Austria, Finland, Germany, Luxembourg, Spain, Sweden, Switzerland and Singapore

32 ‐ Rebalancing effect

Trim winners, top up underperformers – can add meaningfully to performance over long term

‐ One in, one out

Strong sell discipline No long tail of small positions

‐ Limited stock specific risk

Will not have very large weights in just one two positions

‐ High active share

Genuinely index agnostic. No reference to index when weighting positions.

‐ Other considerations

Performance of the fund has come through consistent application of process, not by getting lucky with good returns from a handful

• f heavily overweight stocks.

Can we really have confidence in predicting the scale and timing of when a stock will re‐rate in the market? We do not think so.

Appendix 1: Why equally weighted, concentrated portfolio?

Source: Guinness Asset Management

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Contact Details

Sales, marketing and investor relations

Charlie Riddell charlie.riddell@guinnessfunds.com +44 (0) 20 7222 3473 Flurry Wright flurry.wright@guinnessfunds.com +44 (0) 20 7222 5703 Deborah Kay deborah.kay@guinnessfunds.com +44 (0) 20 7222 2037 Alex Hall alex.hall@guinnessfunds.com +44 (0) 20 7042 6525 Padraig Staunton padraig.staunton@guinnessfunds.com +44 (0) 20 7222 3719

Investment management team

Ian Mortimer ian.mortimer@gafunds.com +44 (0) 20 7222 3115 Matthew Page matthew.page@gafunds.com +44 (0) 20 7222 3085 Sagar Thanki sagar.thanki@gafunds.com +44 (0) 20 7042 6514

Guinness Asset Management Ltd.

14 Queen Anne’s Gate London SW1H 9AA info@guinnessfunds.com www.guinnessfunds.com +44 (0) 20 7222 5703 For your protection, calls to these numbers will be recorded

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Issued by Guinness Asset Management Limited, authorised and regulated by the Financial Conduct Authority. This report is primarily designed to inform you about Guinness Global Innovators Fund. Any investment decision should take account of the subjectivity of the comments contained in the report. It is provided for information only and all the information contained in it is believed to be reliable but may be inaccurate or incomplete; any opinions stated are honestly held at the time of writing, but are not guaranteed. The contents of the document should not therefore be relied upon. It should not be taken as a recommendation to make an investment in the Fund or to buy or sell individual securities, nor does it constitute an offer for sale. Risk The Guinness Global Innovators Fund is an equity fund. Investors should be willing and able to assume the risks of equity investing. The value of an investment and the income from it can fall as well as rise as a result of market and currency movement, and you may not get back the amount originally invested. Details on the risk factors are included in the Fund’s documentation, available on our website. Documentation The documentation needed to make an investment, including the Prospectus, the Key Investor Information Document (KIID) and the Application Form, is available from the website guinnessfunds.com, or free of charge from:‐

• the Manager: Link Fund Manager Solutions (Ireland) Ltd, 2 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland;
• the Promoter and Investment Manager: Guinness Asset Management Ltd, 14 Queen Anne's Gate, London SW1H 9AA.

Residency In countries where the Fund is not registered for sale or in any other circumstances where its distribution is not authorised or is unlawful, the Fund should not be distributed to resident Retail Clients. THIS INVESTMENT IS NOT FOR SALE TO U.S. PERSONS. Structure & regulation The Fund is a sub‐fund of Guinness Asset Management Funds PLC (the “Company”), an open‐ended umbrella‐type investment company, incorporated in Ireland and authorised and supervised by the Central Bank of Ireland, which operates under EU legislation. The Fund has been approved by the Financial Conduct Authority for sale in the UK. If you are in any doubt about the suitability of investing in this Fund, please consult your investment or other professional adviser. Switzerland The prospectus and KIID for Switzerland, the articles of association, and the annual and semi‐annual reports can be obtained free of charge from the representative in Switzerland, Carnegie Fund Services S.A., 11, rue du Général‐Dufour, 1204 Geneva, Switzerland, Tel. +41 22 705 11 77, www.carnegie‐fund‐services.ch. The paying agent is Banque Cantonale de Genève, 17 Quai de l'Ile, 1204 Geneva, Switzerland. Telephone calls will be recorded and monitored. 13/07/2018, GBP

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