www.kamescapital.com Kames Global Equity Income Fund A strategy that pays
The Fund is currently registered for sale in: UK Ireland For our latest market views and factsheets please visit our website at www.kamescapital.com
The power of dividends History teaches us that over 90% of long-term global equity returns come from reinvesting dividend income. This gives investors the opportunity to profit from the powerful compounding effect of reinvested dividends. This means investing in a concentrated number of companies which have the potential to sustain and grow their dividend income streams. Going global An increasing number of international companies are paying dividends to shareholders. A global equity income strategy helps manage concentration risk. The chart below shows the concentration of the top 10 stocks in the US, continental Europe, the UK and Japan by both market capitalisation and dividend income. This concentration can have a severe impact on investors income: for example, in the credit crunch, high yielding European banks were forced to cut or suspend dividend payments in 2008. And even major companies can be affected, as witnessed by BP s dividend suspension after the Deepwater Horizon disaster in 2011. Risk of single-country income investing 70% Concentration of top 10 stocks 60% 50% 40% 30% 20% 10% % of total dividends in top 10 stocks % of total market capitalisation in top 10 stocks 0% Source: SG Cross Asset Research, FTSE UK US Europe ex UK Japan 3
Sustainability matters A focus on sustainability of income is important, because higher prospective dividend yields often lead to unfulfilled expectations. Prediction is very difficult, especially if it s about the future. Nils Bohr, Nobel laureate in Physics The chart here compares forecast and actual dividend yields. It illustrates how abnormally high yields often fail to deliver the forecast level of income as very high yields often indicate a company in distress. We have identified a sweetspot at around 6% where the forecast yield closely matches the realised yield. This increased predictability reduces the volatility of returns. And this is our main investment target. 4
Searching for the sweetspot 18% 16% 14% Dividend yield 12% 10% 8% 6% 4% 2% 0% <4% 4%-5% 5%-6% 6%-7% 7%-8% 8%-9% 9%-10% 10%-15% 15%-20% Dividend yield grouping Source: SG Cross Asset Research, FTSE Average forecast yield Realised yield 5
Our assets manage your assets We believe our people are our greatest assets. We have a long history of running equity portfolios, and have successfully managed a large segregated global equity income mandate since January 2011. Our Global Equity Income Fund is co-managed by Mark Peden and Piers Hillier, both international equity specialists with 20 years investment experience. Piers became co-manager of our global equity income strategies in March 2012, when he joined Kames Capital as Head of Overseas Equities. In addition, Piers has reviewed and refreshed the team s structure and process, and has introduced a number of improvements that have deepened the rigour of our approach. The results are already being seen in the performance of our overseas equity funds. Mark and Piers are supported by Marcus Chandler, who joined Kames Capital in September 2012. 6
Our global equity income team Mark Peden Senior Investment Manager, European Equities 20 years experience Mark is a senior investment manager at Kames Capital. He joined in 1992 as an analyst within the European Equity team. Over his tenure he has been Head of European Equities and Head ofmainstream International Equities. Piers Hillier Head of Overseas Equities 20 years experience Piers leads the equity investment teams that cover markets outside the UK. He joined Kames Capital in 2012 from LV Asset Management where he was the chief investment officer and a board member. Marcus Chandler Investment Manager 10 years experience Marcus is an investment manager in the North American equities team and supports the management of the global equity income fund. He joined us in 2012 from LV Asset Management, where he managed the US Equity Income Fund. Prior to that Marcus worked for Credit Suisse Asset Management and Sarasin. 7
How we invest for income We believe that equity markets under-appreciate quality and undervalue persistency. These are qualities that can form the core of portfolios that deliver long-term outperformance with an acceptable level of risk. Our process is based on three clear stages. 1. Screening Narrowing the universe 2. Analysis Developing conviction 3. Construction Building an efficient portfolio Universe Ideas Conviction Portfolio c. 2,500 stocks with > 1bn free float market cap c. 2,500 stocks many of which we already research or own c. 20 proprietary insight notes per month 30-50 holdings Stock-specific risk > 75% Yield > 130% of benchmark Multi-factor screening Fundamentals, valuations and technicals Risk optimisation of best ideas Stage 1: Screening Using Kames Capital s proprietary model we screen our global equity universe to identify companies with attractive dividend yields, dividend growth rates, pay-out ratios, balance sheets and returns on equity. Our screening produces a sub-set of around 250 stocks, around 10% of the original universe of global stocks 8 Stage 2: Analysis Our regional equity teams then conduct in-depth qualitative analysis, including an evaluation of the fundamental operating outlook, relevant valuation metrics and technical support for each company we research. We look for dividend growers, companies with the potential to increase their dividend payout ratio and surprise the market, and those with inefficient balance sheets where there is scope for M&A or share buy-backs. Stage 3: Portfolio Construction From our analysis, we build a concentrated portfolio of our 30-50 best ideas, diversified across sectors and regions. All investments are compared against each other. A new idea has to bring something different to the Fund to be considered, and we maintain the optimal mix of investments according to our investment process.
Our Fund What the Fund offers It is difficult to overstate the importance of dividends to long-term equity returns. At Kames Capital we have developed a Global Equity Income Fund that: is genuinely global and diversified; combines proven screening with high quality fundamental analysis; focuses on companies that are able to deliver sustainable and growing dividend income streams; invests for the long-term, with lower portfolio turnover; offers a portfolio of 30-50 high conviction ideas; and utilises the best of Kames Capital s investment capabilities. Key Fund facts Objective To provide long-term income and capital growth by investing in global equities. The portfolio will aim to deliver a yield higher than that generally available from investment in global equities. Benchmark MSCI World Index Dividend yield Target 150% of benchmark Performance objective To outperform the MSCI World index over rolling three years periods Number of holdings Maximum of 70, typically 30-50 Domicile Dublin-registered OEIC Launch date 28 September 2012 Currency Base currency of US$, with and share classes Minimum investment C shares available from 1m AMC C share annual fees of 0.60% 9
Our contacts For more information on the Kames Global Equity Income Fund, please contact us. Head office Kames Capital Kames House 3 Lochside Crescent Edinburgh EH12 9SA Tel: +44 (0) 870 609 0101 www.kamescapital.com/europe 10
Risk factors The value of investments and the income from them may fall as well as rise and cannot be guaranteed. This fund is a medium to long-term investment. Fluctuations in interest rates and exchange rates may affect the capital value and income received from the fund. The views expressed in this document represent our understanding of the current and historical positions of the market. They should not be interpreted as a recommendation or advice. Past performance is not a guide to future performance. The value of investments may fall as well as rise, and investors may not receive back the amount invested. Any investment objective, performance benchmark and yield information will be treated as a target only and should not be considered as an assurance or guarantee of the performance of the fund or any part of it. The impact of the initial charge will be to reduce the amount available for investment. All annual charges are deducted from fund income as far as possible. Where fund income is insufficient to meet charges, they will be deducted from capital. Investors in the fund should consider the following risk factors; Market risk: The potential for change in market value of instruments due to adverse movements in equity, bond, commodity, currency and other market prices, indices or interest rates or changes in the anticipated or calculated volatility of these movements. Liquidity risk: This includes both market liquidity risk and funding risk. Market liquidity risk is the inability to trade an instrument at the desired price due to a lack of supply or market demand. Funding risk is where a fund has insufficient cash to meets its financial obligations. Counterparty risk: The risk that the failure of a counterparty to meet its obligations leads to a financial loss to the fund, both through loss of any monies owed to the fund by the counterparty and the cost of reinstating economic exposure in the case of counterparty default. Concentration risk: The risk of a portfolio being too concentrated in particular positions or too exposed to certain issuers. Highly concentrated positions can exacerbate market, liquidity and counterparty risk. Yield disclosure All yields are stated as at 28 September 2012. Yields may vary, the yield information should not be considered as a guarantee or representative of future yields. The Distribution Yield reflects the amounts that may be expected to be distributed over the next twelve months as a percentage of the mid-market unit price of the fund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminary charge and investors may be subject to tax on distributions. We calculate yields in compliance with the industry standard formula we are obliged to use which takes no account of potential future defaults. This may mean that, depending on future economic factors, the actual yield could be less than those shown. The Underlying Yield reflects the annualised income net of expenses of the fund (calculated in accordance with relevant accounting standards) as a percentage of the mid-market unit price of the fund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminary charge and investors may be subject to tax on distributions. The Distribution Yield is also the Underlying Yield for this fund. Sharpe Ratio Sharpe Ratio measures the non-systematic (or total) risk of a fund. It is a ratio between the average (or mean) fund return (often in excess of a risk-free return such as Libor) and the volatility (standard deviation) of the fund s return. It may not be so simple to say one fund is better than another because it yielded greater returns. It may be the case that the risk (reflected in the standard deviation) taken to achieve those returns was significant. The Sharpe Ratio adjusts for this risk the fund with higher Sharpe Ratio has yielded greater returns per unit of volatility. To improve our customer service, and for training purposes, your telephone conversations with us may be recorded. You should read the Key Investor Information and Application Form document carefully, particularly the section on Risk Factors. The Prospectus, Supplement, and Key Investor Information of Kames Capital Investment Company (Ireland) plc are available from www.kamescapital.com and also by calling our investor helpdesk on + 353 1 622 4493 or in writing from Citigroup Europe plc, PO Box 11167, Cardiff Lane, Dublin 2, Ireland. The Kames Investment Grade Global Bond Fund is currently authorised for distribution in UK, Channel Islands, Ireland, Switzerland, Luxembourg, Malta and the Netherlands. Applicants in the countries listed below should note the following: For investors in the UK, Ireland and Channel Islands A limited range of Kames Capital Investment Company (Ireland) plc s sub-funds and share class have Reporting Fund status. Kames Capital Investment Company (Ireland) plc seeks to comply with UK Reporting Fund status requirements; more information is contained in the full prospectus. The Kames Investment Grade Global Bond Fund is a sub fund of the Kames Capital Investment Company (Ireland) plc which is an umbrella type open-ended investment company with variable capital registered in the Republic of Ireland (no: 442106). This document has been issued by Kames Capital plc. Kames Capital Investment Company (Ireland) plc, is an umbrella type open-ended investment company with variable capital registered in the Republic of Ireland (Company Number 442106), registered office at 25-28 North Wall Quay, International Financial Services Centre, Dublin 1. Board of Directors: Andrew Bell (UK), Mike Kirby (Ireland) and Brian McDermott (Ireland). Kames Capital Investment Company (Ireland) plc is regulated by the Central Bank of Ireland. Kames Capital is an AEGON Asset Management company and includes Kames Capital plc (Company Number SC113505) and Kames Capital Management Limited (Company Number SC212159). Both are registered in Scotland and have their registered office at Kames House, 3 Lochside Crescent, Edinburgh, EH12 9SA. Kames Capital plc is authorised and regulated by the Financial Services Authority, (FSA reference no: 144267). Kames Capital plc is the Investment Manager and Marketing Agent for Kames Capital Investment Company (Ireland) plc. Kames Capital Management Limited is an appointed representative of Scottish Equitable plc (Company Number SC144517), an AEGON company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (FSA reference no: 165548). For Investors in Switzerland - On March 26th 2009, the Swiss Financial Market Supervisory Authority FINMA authorised the distribution to the public of the shares of Kames Capital Investment Company (Ireland) plc (the Company ) in or from Switzerland in conformity with article 120 of the Federal Law on Collective Investments of Capital dated June 23rd 2006. The Company was authorised as a Foreign Collective Investment Scheme. The articles of the Company, the Extract Prospectus for Switzerland, the Key Investor Information (Swiss edition), the annual and semi annual Report for Switzerland of the Company can be obtained free of charge on our website www.kamescapital.com or from the Representative in Switzerland, BGG Banque Genevoise De Gestion, 15, Rue Toepffer, 1206 Geneva, Switzerland, (Tel : + 41 22 3479040; Fax: + 41 22 3479327). For Investors in Luxembourg - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme registered in Luxembourg by the Commission de Surveillance du Secteur Financier. The Prospectus, Supplement and Key Investor Information of Kames Capital Investment Company (Ireland) plc are available from CACEIS Bank Luxembourg 5, allée Scheffer, L-2520 Luxembourg. For Investors in Malta - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme authorised by the MFSA to market its units in Malta. The Prospectus, Supplement and Key Investor Information of Kames Capital Investment Company (Ireland) plc are available free of charge from Michael Grech Financial Investment Services Limited, 78A, Fleur de Lys Road, Birkirkara, BKR 9062, Malta (Tel: +356 21 441003). 11
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