Item 2 IRB Meeting 2024.11.20 - Common Good Funds Review of Investment and Income
Renfrewshire Council · 20 November 2024
Back to Investment Review Board — 20 November 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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1 ___________________________________________________________________ To: Investment Review Board On: 20 November 2024 ___________________________________________________________________ Report by: Director of Finance and Resources __________________________________________________________________ Heading: Paisley and Renfrew Common Good Funds six-month report to 30 September 2024 ___________________________________________________________________ 1. Summary 1.1 Hymans Robertson LLP have been engaged by the Council to provide investment advice pertaining to the Paisley and Renfrew Common Good Funds, and to assess the performance of the Funds’ investment managers, LGT Wealth Management (formerly abrdn Capital Limited). 1.2 A report by Hymans Robertson LLP is attached for Members’ consideration. The report provides an assessment of the performance of the Funds’ investments and income levels during the six-month period ending 30 September 2024. Hymans Robertson LLP will be represented at the meeting by David Watson (Investment Consultant), who will present his report to Members. Mr Watson will also give a presentation covering an update on markets and the current economic climate. 1.3 Gair Brisbane, Head of Charities - Scotland, LGT Wealth Management, will give a short presentation during which there will be an opportunity for Members to question him directly in regard to his presentation and Fund performance. 1.4 The Finance Resources and Customer Services Policy Board approved a new contract with LGT Wealth Management on the 13 June 2024. The new contract commenced on 1 October 2024 for 3 years with the option to extend for up to a further 2 years.
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2 ____________________________________________________________ 2. Recommendations 2.1 To consider the attached report and presentation from Hymans Robertson LLP and the presentation by LGT Wealth Management. ___________________________________________________________________ Implications of the Report 1. Financial – fund income generated by the Investment Manager is made available for distribution through grants and other awards agreed by Local Partnerships and the Finance, Resources and Customer Services Policy Board. All funds are managed in line with the requirements of local government regulations, and in line with the Investment Policy Statement. 2. HR & Organisational Development – none arising directly from this report. 3. Community Planning – none arising directly from this report. 4. Legal – none arising directly from this report. 5. Property/Assets – none arising directly from this report. 6. Information Technology – none arising directly from this report. 7. Equality & Human Rights – none arising directly from this report. The Investment Policy Statement that governs the Environmental, Social and Governance impacts of the Common Good Fund investment is set and agreed by the Investment review Board annually.. 8. Health & Safety – none arising directly from this report. 9. Procurement – none arising directly from this report. 10. Risk – there is an inherent risk that investment returns will not meet their target due to a number of external factors. It is the job of the investment manager to mitigate against this risk by their investment approach, and decisions taken throughout the year. 11. Privacy Impact – none arising directly from this report. 12. COSLA Policy Position – none arising directly from this report. 13. Climate Risk – none arising directly from this report.
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3 ___________________________________________________________________ List of Background Papers None ___________________________________________________________________ Author: Geoff Borland, Finance Manager 0141 487 0875 geoffrey.borland@renfrewshire.gov.uk
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Hymans Robertson LLP is a limited liability partnership registered in England and Wales with registered number OC310282. A list of members of Hymans Robertson LLP is available for inspection at One London Wall, London EC2Y 5EA, the firm’s registered office. Authorised and regulated by the Financial Conduct Authority and licensed by the Institute and Faculty of Actuaries for a range of investment business activities. Hymans Robertson is a registered trademark of Hymans Robertson LLP. Renfrewshire Council Common Good Funds Review of Investment Managers' Performance for the 6 months to 30 September 2024
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2 Historic returns for world markets [1] 2 Annual CPI inflation (% year on year) Sterling trend chart (% change) The US economy grew at an annualised pace of 3.0% in Q2, above forecasts and up from 1.6% growth in Q1. UK GDP increased 0.5% in Q2, following 0.7% growth in Q1, while growth in the eurozone slowed to 0.2% due to weak a manufacturing sector and lacklustre demand from China. Annual headline CPI eased across regions: UK and eurozone CPI both fell to a below-target rate of 1.7% in September, from 3.2% and 2.4% in March, respectively. Equivalent US inflation eased to 2.4%, from 3.5%, over the same period. Core CPI inflation, which excludes volatile energy and food prices, remains higher at 3.2%, 3.3%, and 2.7% UK, US, and eurozone, respectively. The decline in inflation prompted central banks to cut interest rates. The European Central Bank (ECB) cut rates twice, to 3.5% pa. The BoE lowered borrowing costs by 0.25% pa to 5% pa. The Federal Reserve (Fed) opted for a higher 0.5% pa reduction, taking the Fed funds target range to 4.75-5.0% pa. Market-implied interest rates fell, as investors once again began to price in further rate cuts ahead. In contrast, The Bank of Japan (BoJ) raised rates for the first time since 2007 in March and again by 0.25% in June, helping the trade-weighted yen rise 3.1%. Meanwhile, the equivalent US dollar measure eased 0.4% as rate differentials narrowed. Sterling rose 3.6% due to a slower pace of anticipated rate cuts. Oil prices dropped 17.7% as weak demand outweighed rising tensions in the Middle East, while geopolitical concerns and rate cuts pushed gold prices up 19%. Source: DataStream. [1] Returns shown in Sterling terms. Indices shown (from left to right) are: FTSE All World, FTSE All Share, FTSE AW Developed Europe ex-UK, FTSE North America, FTSE Japan, FTSE AW Developed Asia Pacific ex-Japan, FTSE Emerging, FTSE Fixed Gilts All Stocks, FTSE Index-Linked Gilts All Maturities, iBoxx Corporates All Investment Grade All Maturities, ICE BofA Global Government Index, MSCI UK Monthly Property; UK Interbank 7 Day Market Background – 6 Months to 30 September 2024
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3 3 Amid ongoing disinflation and rate cuts, US 10-year sovereign bond yields fell 0.4% pa to 3.8% pa. Equivalent German 10-year yields fell 0.2% pa to 2.1% pa. Despite the BoE’s rate cut, 10-year gilt yields rose by a modest 0.1% pa to 4.0% on the back of resilient growth and stubborn core inflationary pressures. Global investment-grade credit spreads were little changed at 1.0% pa, while speculative- grade credit spreads tightened 0.1% pa to 3.3% pa. Global equities gained 8.7% despite falling sharply in early August. Emerging markets surged in late Q3, buoyed by Chinese monetary and fiscal stimulus, to be the best performing region over the period. North American equities also outperformed due to above-average technology exposure and robust US growth. Japan was the worst performing region, following the biggest one-day sell-off since 1987 in early August, as rapid yen appreciation weighed on the export-heavy market. Europe ex- UK and the UK also lagged, with weak global manufacturing and subdued Chinese demand affecting the former, while the UK's heavy exposure to struggling energy and materials sectors hindered its performance. The MSCI UK Monthly Property Total Return Index rose by 3.5% between March and September as income was supplemented by a small rise in capital values. Aggregate capital values have stabilised in 2024, but there remains dispersion within sectors: capital values have continued to fall in the office sector, down 2.6% over 6 months, while retail and industrial capital values rose 1.5% and 1.7%, respectively. . Source: DataStream, Barings, ICE [1] FTSE All World Indices. Commentary compares regional equity returns in local currency. [2] Returns shown in Sterling terms and relative to FTSE All World. Market Background – 6 Months to 30 September 2024 Investment and speculative grade credit spreads (% p.a.)Gilt yields chart (% p.a.) Global equity sector returns (%) [2] Regional equity returns [1]
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4 Valuation and Performance - Paisley Common Good Fund Valuation Income Performance Cumulative Performance 31/03/2024 30/09/2024 Actual % Benchmark % Difference UK Equity 1.38 1.39 26.8% 60.0% Overseas Equity 2.69 2.75 52.8% 20.0% Total Equity 4.07 4.14 79.6% 80.0% UK Government Bonds 0.44 0.42 8.0% 18.0% UK Non Government Bonds 0.38 0.39 7.4% International Bonds 0.09 0.09 1.8% Total Bonds 0.91 0.90 17.3% 18.0% Cash 0.12 0.16 3.1% 2.0% Total 5.10 5.20 Value (£m) Proportions -33.2% 32.8% -0.4% -10.0% 7.4% 1.8% -0.7% 1.1% 31/03/2024 £145,697 30/06/2024 £156,952 30/09/2024 £156,357 Target £125,000 (Standard Life) Estimated Annual Income
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5 Valuation and Performance - Renfrew Common Good Fund Valuation Income Performance Cumulative Performance 31/03/2024 30/09/2024 Actual % Benchmark % Difference UK Equity 5.25 5.25 26.4% 60.0% Overseas Equity 10.33 10.53 53.0% 20.0% Total Equity 15.58 15.78 79.4% 80.0% UK Government Bonds 1.64 1.59 8.0% 18.0% UK Non Government Bonds 1.51 1.46 7.4% International Bonds 0.35 0.36 1.8% Total Bonds 3.51 3.42 17.2% 18.0% Cash 0.42 0.67 3.4% 2.0% Total 19.50 19.87 Value (£m) Proportions -33.6% 33.0% -0.6% -10.0% 7.4% 1.8% -0.8% 1.4% 31/03/2024 £558,909 30/06/2024 £601,100 30/09/2024 £595,659 Target £475,000 (Standard Life) Estimated Annual Income
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6 In the six months leading up to September 2024, the Paisley and Renfrew funds posted returns of 3.7% and 3.6%, respectively, underperforming their benchmark by 2.2% and 2.3%. While these figures reflect positive absolute returns, buoyed by cooling inflation and the growing momentum of global monetary easing, the relative underperformance was primarily due to the Funds' overweight exposure to overseas equities in Q3 2024, which lagged the benchmark. Over the past 12 months, the Paisley and Renfrew funds achieved returns of 18.3%, outperforming their benchmark by 2.6% and 2.5%, respectively. In the second quarter of 2024, global equity markets saw continued positive momentum, driven by strong corporate earnings, particularly from US technology companies, which pushed equity prices higher. This strong performance in equities enabled the funds to return 2.6% in Q2, offsetting headwinds from bond markets, which faced ongoing pressure due to rising yields influenced by central bank actions and geopolitical uncertainties. Moving into the third quarter, volatility increased, spurred by decelerating macroeconomic indicators and shifting global monetary policy expectations. Nonetheless, both equities and bonds posted gains, adding 1.1% and 1.0% to the Paisley and Renfrew funds' performance, respectively. Bonds benefited from the global monetary easing cycle, especially following the Fed's rate cut in September. Equity markets also recovered from August and September declines, finishing the quarter in positive territory, although the appreciation of sterling weighed on returns from overseas assets for unhedged investors. As of September 2024, the allocation to equities was broadly in line with the benchmark allocation (80%). The portfolio continues to be significantly underweight to UK equities and overweight in overseas equities. The underweight to UK equities has been beneficial over the longer term as UK equities have lagged other regions. The bond allocation stood at 17.3% and 17.2% for Paisley and Renfrew, slightly below the benchmark of 18%. Around 3% of the funds' assets were held in cash, maintaining liquidity for potential market opportunities. Looking longer term, Paisley and Renfrew funds have had positive 3-year returns of 2.4% pa and 2.5% pa, respectively, although they lag the benchmark by 3.1 and 3.0% pa, respectively. Over a 5-year period, performance improves, with returns of 4.9% and 5.0% pa, marginally behind the benchmark. Since the inception of the mandate, however, returns have been stronger at 6.8% pa, outperforming the benchmark return of 6.6% pa over the same period. Commentary
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Hymans Robertson LLP is a limited liability partnership registered in England and Wales with registered number OC310282. A list of members of Hymans Robertson LLP is available for inspection at One London Wall, London EC2Y 5EA, the firm’s registered office. Authorised and regulated by the Financial Conduct Authority and licensed by the Institute and Faculty of Actuaries for a range of investment business activities. Hymans Robertson is a registered trademark of Hymans Robertson LLP. Appendices
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8 Asset Allocation Paisley Common Good Fund Renfrew Common Good Fund 31/03/2024 Benchmark Fund Difference UK Equity 60.0% 27.1% Overseas Equity 20.0% 52.7% Total Equity 80.0% 79.8% UK Government Bonds 18.0% 8.6% UK Non Government Bonds 7.5% International Bonds 1.8% Total Bonds 18.0% 17.9% Cash 2.0% 2.3% Total 100.0% 100.0% -32.9% 32.7% -0.2% -9.4% 7.5% 1.8% -0.1% 0.3% 31/03/2024 Benchmark Fund Difference UK Equity 60.0% 26.9% Overseas Equity 20.0% 53.0% Total Equity 80.0% 79.9% UK Government Bonds 18.0% 8.4% UK Non Government Bonds 7.8% International Bonds 1.8% Total Bonds 18.0% 18.0% Cash 2.0% 2.1% Total 100.0% 100.0% -33.1% 33.0% -0.1% -9.6% 7.8% 1.8% 0.0% 0.1% 30/09/2024 Benchmark Fund Difference UK Equity 60.0% 26.8% Overseas Equity 20.0% 52.8% Total Equity 80.0% 79.6% UK Government Bonds 18.0% 8.0% UK Non Government Bonds 7.4% International Bonds 1.8% Total Bonds 18.0% 17.3% Cash 2.0% 3.1% Total 100.0% 100.0% -33.2% 32.8% -0.4% -10.0% 7.4% 1.8% -0.7% 1.1% 30/09/2024 Benchmark Fund Difference UK Equity 60.0% 26.4% Overseas Equity 20.0% 53.0% Total Equity 80.0% 79.4% UK Government Bonds 18.0% 8.0% UK Non Government Bonds 7.4% International Bonds 1.8% Total Bonds 18.0% 17.2% Cash 2.0% 3.4% Total 100.0% 100.0% -33.6% 33.0% -0.6% -10.0% 7.4% 1.8% -0.8% 1.4%
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9 Appendix 4 – Explanation of Performance Calculations Hymans Robertson are among the investment professionals who calculate relative performance geometrically as follows: ( (1 + Fund Performance) / (1 + Benchmark Performance) ) - 1 Some industry practitioners use the simpler arithmetic method as follows: Fund Performance - Benchmark Performance Arithmetic Method Fund Performance Benchmark Performance Relative Performance Quarter 1 7.0% 2.0% 5.00% Quarter 2 28.0% 33.0% -5.00% Linked 6 months -0.25% 6 month performance 37.0% 35.7% 1.30% • If fund performance is measured quarterly, there is a relative underperformance of 0.25% over the six month period. • If fund performance is measured half yearly, there is a relative outperformance of 1.3% over the six month period. • The arithmetic method makes it difficult to compare long term relative performance with shorter term relative performance. Geometric Method Fund Performance Benchmark Performance Relative Performance Quarter 1 7.0% 2.0% 4.90% Quarter 2 28.0% 33.0% -3.76% Linked 6 months 0.96% 6 month performance 37.0% 35.7% 0.96% • If fund performance is measured quarterly, there is a relative outperformance of 0.96% over the six month period. • If fund performance is measured half yearly, an identical result is produced. • The geometric method therefore makes it possible to directly compare long term relative performance with shorter term relative performance. The following example illustrates the shortcomings of the arithmetic method in comparing short term relative performance with the longer term picture :
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Risk Warning Please note the value of investments, and income from them, may fall as well as rise. This includes equities, government or corporate bonds, and property, whether held directly or in a pooled or collective investment vehicle. Further, investment in developing or emerging markets may be more volatile and less marketable than in mature markets. Exchange rates may also affect the value of an investment. As a result, an investor may not get back the amount originally invested. Past performance is not necessarily a guide to future performance. In some cases, we have commercial business arrangements/agreements with clients within the financial sector where we provide services. These services are entirely separate from any advice that we may provide in recommending products to our advisory clients. Our recommendations are provided as a result of clients’ needs and based upon our independent research. Where there is a perceived or potential conflict, alternative recommendations can be made available. Hymans Robertson LLP has relied upon third party sources and all copyright and other rights are reserved by such third party sources as follows: DataStream data: © DataStream; Fund Manager data: Fund Manager; Morgan Stanley Capital International data: © and database right Morgan Stanley Capital International and its licensors 2023. All rights reserved. MSCI has no liability to any person for any losses, damages, costs or expenses suffered as a result of any use or reliance on any of the information which may be attributed to it; Hymans Robertson data: © Hymans Robertson. Whilst every effort has been made to ensure the accuracy of such estimates or data - including third party data - we cannot accept responsibility for any loss arising from their use. © Hymans Robertson LLP 2024.
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© LIECHTENSTEIN. The Princely Collections, Vaduz‒Vienna Renfrewshire Council IRB Presented by GairBrisbane| SeniorInvestment Manager, Charity Lead (Scotland) Wednesday20th November2024
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Your Investment Manager Gair leads the Scottish charity and endowments offering from LGT, managing portfolios for charities, trusts and public institutions. He joined LGT following the acquisition of abrdn's discretionary investment management business in 2023, bringing over 20 years’ experience in the charity sector as a volunteer, Executive Director and Investment Manager. Gair moved into investment management in 2011 to specialise in charity investments and prior to that, spent six years in Military Intelligence, commissioned in the Royal Air Force. Gair is a former Trustee and Finance Committee member of the Officers’ Association Scotland and the John Muir Trust. He is a Fellow of the Chartered Institute for Securities and Investment and holds the CFA’s Certificates in ESGInvesting and Climate Finance. Gair Brisbane Senior Investment Manager and Charity Lead (Scotland) +44 (0) 131 385 1326 gair.brisbane@lgt.com 2
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© LGT World markets since 1st January 2022 to 30th September 2024 Following a very weak 2022, global equities only reached positive territory in the final quarter of 2023, and fixed income remains in negative territory -30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 Jan 2022 Apr 2022 Jul 2022 Oct 2022 Jan 2023 Apr 2023 Jul 2023 Oct 2023 Jan 2024 Apr 2024 Jul 2024 Oct 2024 UK Equities Global Equities UK Government Bonds UK Corporate Bonds Key: • UK Equities as measured by FTSE All Share • Global Equities as measured by MSCI World (local) • UK Government Bonds as measured by FTA Govt All Stock • UK Corporate Bonds as measured by ML £ Non-Gilt index 3Investors should be aware that past performance is not a reliable indicator to future performance Source: Factset, 30th September 2024 (total returns)
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© LGT Inflation 4 Inflation is subsiding, but likely to remain above the Bank of England & Federal Reserve’s 2% targets for the rest of 2024 Due to falling energy prices and slowing food price growth throughout the second half of last year, headline inflation has come down significantly from the peaks seen at the beginningof2023. Core inflation however, which excludes the forementioned, remains at elevated levels that central bankers will be keeping a watchful eye on. In the UK the core element has been driven by wage growth and service price increases, following the resumption of pre-lockdowntrendsandsignificantboutsofpublicandprivatesectorwage rises. Source: Factset, LGT Wealth Management The ‘Magnificent 7’ have driven index returns; which has been difficult for diversified, active managers to capture The market-cap weighted index has generated a 52.7% return since 1st January 2023; driven by Amazon, Apple, Alphabet, Meta, Nvidia, Tesla and Microsoft rebounding from a negative 2022. The S&P 500 equal weighted index (which de-emphasizes the weight of the larger companies relative to the market capitalisation weighted index) has delivered significantly lowerreturnsacrossthe period,and attimesbeinginnegativeterritory. 52.7% 29.0% A concentrated period of performance for US Equities -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Dec 2022 Mar 2023 Jun 2023 Sep 2023 Dec 2023 Mar 2024 Jun 2024 Sep 2024 S&P 500 Market Cap Weighted Index - Cumulative Return S&P 500 Equal Weighted Index - Cumulative Return Source: Factset, 31st October 2024 Investors should be aware that past performance is not a reliable indicator to future performance 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23 Nov-23 Jan-24 Mar-24 May-24 Jul-24 Sep-24 US & UK Inflation UK CPI UK Core CPI US CPI US Core CPI BoE & FED Target
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© LGT Election outlook 5 Historically, there is little relationship between ruling parties and stock performance Historically stocks can be volatile in the period running up to an election, however once clarity is provided about the likely policies to be introduced, market volatility subsides. Over the longer-term however, the incumbent president or prime minister has little effect on the growth of thematic investment trends that we look to invest in. In the last presidential election in 2020, it was the tides of lockdown and reopening from the COVID-19 pandemic that impacted broad markets most significantly, rather than the differing ideologies between now-President Biden and then-President Trump. -60 -40 -20 0 20 40 60 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 S&P 500 Calendar Year Returns (%) % Change - Democrat % Change - Republican -60 -40 -20 0 20 40 60 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 FTSE All-Share Calendar Year Returns (%) % Change - Conservative % Change - Labour % Change - Other/Coalition Source: Factset
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© LGT Investment guidelines Renfrewshire Council IRB The value of investments as well as the income derived from them can go down as well as up and investors may get back less than the original amount invested. Please note that LGT Wealth Management takes responsibility for the ongoing suitability of your portfolio. Please make us aware if your circumstances have changed. Investmentobjective Renfrew & Paisley Common Good Funds are managed with the objective of achieving a balance between capital growth and income through investing in a combination of UK and overseas equities, fixed interest securities and cash. IncomeRequirement Renfrew Common Good Fund seeks to generate an annual income of £475,000 and Paisley Common Good Fund seeks to generate an annual income of £125,000; income is paid to the Council bank account on a quarterly basis. InvestmentRestriction The investment restrictions in addition to those stated in the standard Terms & Conditions of your Investment Management Agreement are detailed in the Appendix. Benchmark/ComparatorIndex FTSE AllStocks Gilt Index (£) 18% FTSE AllShare Index (£) 60% FTSE World ex-UK Index (£) 20% SONIA (£) 2% RiskProfile Based on the information supplied by the Trustees a medium-high risk approach is being followed. This approach is appropriate for Charities who are prepared to accept a moderate to high level of risk over their time horizon. The Trustees understand that this may increase the risk of greater fluctuations in the value of your investments. TimeHorizon 10 years plus Capacityfor CapitalLoss 20-30% Capacityfor IncomeLoss 10-15% 6 Asset Class Renfrew Common Good Fund Portfolio* (%) Benchmark weightings (%) Indices (£) Government Bonds Corporate Bonds 10.4 8.2 18 FTSE All Stocks Gilt Index UK Equities (including Alternatives) Overseas Equities 26.8 53.7 60 20 FTSE All Share Index FTSE World ex-UK Index Cash 0.9 2 SONIA Total 100 100 Annual Income Yield 3.1 3.4 Portfolio Value as of 11th November 2024 (£) Renfrew Common Good Fund 19,897,576 Estimated annual income 609,066 Paisley Common Good Fund 5,204,300 Estimated annual income 159,490 *Source: LGT, Figaro, average weighting for Q3 2024
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© LGT Portfolio Values and Performance Portfolio Values 30th September 2024 (£) 30th June 2024 (£) 31st March 2024 (£) 31st December 2023 (£) Renfrew Common Good Fund 19,867,491 19,815,083 19,501,628 18,565,103 Estimated Annual Income 595,659 601,100 558,909 554,325 Paisley Common Good Fund 5,196,763 5,179,629 5,097,990 4,853,554 Estimated Annual Income 156,357 156,952 145,697 144,591 7 Portfolio Performance as of 30th September 2024 1 year (%) 3 years Cumulative (%) 5 years Cumulative (%) Renfrew Common Good Fund 18.2 7.6 27.3 Paisley Common Good Fund 18.2 7.2 27.1 Composite Benchmark* 15.3 17.9 29.6 ARC** Charities Steady Growth Benchmark (£) 13.3 8.3 24.4 FTSE All-Share Index (£) 13.4 23.9 32.2 FTSE World ex UK Index (£) 20.9 31.1 73.2 FTSE Govt. All-Stocks Index (£) 7.9 -19.3 -22.2 SONIA (£) 5.0 10.0 10.5 Source: LGT performance to 30th September 2024, unless otherwise stated. *The Composite Benchmark constituents are detailed on the Investment Guidelines page. **For information on ARC see appendix disclaimer page. All performance returns are Total Returns unless otherwise specified. Performance figures for the Fund are calculated net of the management fee. Investors should be aware that past performance is not a reliable indicator to future performance
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Renfrew Common Good Fund Source: LGT, average weighting for Q3 2024. Equities 71.9% Technology 14.6 Telecommunications 2.2 Healthcare 11.1 Financials 5.6 Real Estate 1.9 Consumer Discretionary 9.2 Consumer Staples 4.4 Industrials 12.3 Basic Materials 2.8 Energy 0.0 Utilities 7.8 Bonds 18.6% Corporate 10.4 Government 8.2 Alternatives 8.6% Renewables 3.6 Infrastructure 3.6 Private Equity 1.4 Cash 0.9% 71.9% 18.6% 8.6% 0.9% Equities Bonds Alternative Cash 8 Asset allocation
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Case Study: fuelling the energy transition Example of Italian energy company Enel Enel Company Enel operates e.g. wind parks and finances these, amongst other sources, with green bonds Green bond Green Bond Principles based on International Capital Market Association (ICMA) to reduce greenwashing risks LGT as an investor Via the capital markets, investors can seek dedicated exposure to environmental projects Enel wind park Proceeds used to finance development of generation plants from renewable sources OPERATES FINANCES GUARANTEES INVESTS 9 Enel is an Italian electric utility and the world’s largest private electricity distribution company, providing electricity to over 70 million users Its green bond issuance allows investors to directly finance the continued expansion of Enel’s renewable capacity. The company still generates electricity produced from fossil fuel combustions but is also the world’s largest private renewable energy operator, accounting for over 60% of total generation capacity
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© LGT Appendices 10
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© LGT Investment Guidelines - Restrictions 11 Renfrew & Paisley Common Good Fund The portfolio is managed according to your ethical policy and is implemented in conjunction with MSCI as required. (MSCI is a leading provider of ESG [environmental, social and corporate governance] services and research). This is also applied along with internal resources: please note that MSCI ethical screens may change. These restrictions relate to direct investment (see belowforthedefinitionofthis)*. All ethicalrestrictions are implementedona bestendeavours basis. Ifan existingholding is foundto be unacceptable underthe restrictions detailed, now orin the future,we will review the holdingandwhere deemedappropriatecontacttheTrustees. We define direct investment as investing in an equity or bond directly rather than via a pooled fund. We define indirect investment as applying to any holdings (equities or bonds) via a pooledfund. Thefollowingrestrictionsare in additiontothosein thestandardTermsand ConditionsofyourInvestmentManagementAgreement: Tobacco No directinvestmentin tobaccoproduction(i.e.excludethe tobaccosector)(TOB) No directinvestmentin companiesthatderivemorethan10% ofturnoverfromtobaccoproduction(MSCI- E05) Gambling No directinvestmentin acompanyif thereismorethan5% turnoverfromgambling-relatedbusinessactivities(MSCI– E80) Military No directinvestmentin armaments/ defence (i.e.excludetheaerospace& defencesector)(ARM) No directinvestmentin companiesthathave any industrytietothemanufactureoflandminesexceptforsafety,whichmaybe a positiveindicator.(MSCI- E17) No directinvestmentin companiesthatmanufactureclustermunitionswholeweaponssystems,components,ordeliveryplatforms.(MSCI- E38) No directinvestmentin acompanywithmorethan10% turnoverinweapons& components.(MSCI- E76)] FossilFuels No oil/gasstocks- excludeOil& Gas Sectorandthermalcoalproducers(Y23) No directinvestmentsina companyif therehasbeenprovenreservesofshalegasand/oroilownedby the company(MSCI- E73) FixedInterestrestriction FixedIntereststocksa targetassetallocationof15%,variablebetween10% and 20% at thediscretionofthe InvestmentManager.
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Authorised Signatories Renfrew & Paisley Common Good Fund Current Authorised Signatories Geoffrey Borland Christine McCourt Lisa Dickie Signing Requirements and Restrictions In accordance with the terms and conditions of the Investment Management Agreement, LGT WM will act on instructions and requests it reasonably believes to have been given by the following signatory(s) on your behalf. LGT WM will not be liable for loss, claims damages or expenses that might arise as a result of LGT WM acting in accordance with the authorised person’s instructions. Instructions are subject to the restrictions orlimitations imposedby you(the Client) as set out below: Onesignatoryforadministrativechanges,twoforcashwithdrawals 12 Please advise us if any updates or amendments are required. We can send out the Authorised Signatory Form to be completed via Docusign or email. For completion via Docusign, we will require the full names and email address of any new signatories to be added, as well as certified ID andaddressdocuments. Information Only Hymans Robertson
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© LGT Top 10 holdings (%) Top 10 holdings and equities Name Value % 1. VOLARE STERLING FIXED INTEREST OFFSHORE FUND 6.3 2. MICROSOFT 3.9 3. TAIWAN SEMICONDUCTOR MANUFACTURING 3.6 4. ASTRAZENECA 3.4 5. SCHNEIDER 3.2 6. CRH 3.1 7. AMAZON 3.0 8. RIO TINTO 2.9 9. ELI LILLY 2.9 10. RELX 2.9 Top 10 equity holdings (%) 13 Renfrew Common Good Fund Name Value % 1. MICROSOFT 3.9 2. TAIWAN SEMICONDUCTOR MANUFACTURING 3.6 3. ASTRAZENECA 3.4 4. SCHNEIDER 3.2 5. CRH 3.1 6. AMAZON 3.0 7. RIO TINTO 2.9 8. ELI LILLY 2.9 9. RELX 2.9 10. ASML 2.8 Source: LGT, Figaro, 30th September 2024
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© LGT Top 10 performers Stock Contribution – Q3 2024 Name Average Weight % Total Return % Contribution % CRH 2.93 16.10 0.44 NATIONAL GRID 2.56 16.70 0.39 NEXTERA ENERGY 2.60 13.23 0.33 HALEON 1.19 22.45 0.24 AIA GROUP 0.87 25.50 0.22 ENEL 1.81 12.00 0.21 ADYEN 0.82 23.65 0.18 VOLARE OFFSHORE STERLING FIXED INTEREST FUND 6.39 2.47 0.16 ZURICH INSURANCE 2.28 6.82 0.15 ORSTED 0.89 17.93 0.15 Bottom 10 performers 14 Renfrew Common Good Fund – 3 months to 30th September 2024 Source: LGT, Figaro, Q3 2024 Stock contribution is measured gross of management fees. Investors should be aware that past performance is not a reliable indicator to future performance. Name Average Weight % Total Return % Contribution % ASML 3.13 -23.97 -0.88 MICROSOFT 4.07 -9.11 -0.39 ALPHABET 2.35 -14.08 -0.37 AMAZON.COM 3.04 -9.13 -0.30 ELI LILLY 3.11 -7.65 -0.25 ASTRAZENECA 3.74 -5.64 -0.21 AIRBNB 0.80 -21.19 -0.21 TAIWAN SEMICONDUCTOR MANUFACTURING CO. 3.68 -5.56 -0.19 WEST PHARMACEUTICAL SERVICES 1.18 -14.06 -0.19 MERCEDES-BENZ 1.53 -7.80 -0.18
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© LGT Top 10 holdings (%) Top 10 holdings and equities Name Value % 1. VOLARE STERLING FIXED INTEREST OFFSHORE FUND 6.2 2. TAIWAN SEMICONDUCTOR MANUFACTURING 4.1 3. MICROSOFT 4.0 4. ASTRAZENECA 3.4 5. CRH 3.4 6. SCHNEIDER ELECTRIC 3.2 7. ELI LILLY 3.0 8. AMAZON 3.0 9. RELX 3.0 10. RIO TINTO 2.8 Top 10 equity holdings (%) 15 Paisley Common Good Fund Name Value % 1. TAIWAN SEMICONDUCTOR MANUFACTURING 4.1 2. MICROSOFT 4.0 3. ASTRAZENECA 3.4 4. CRH 3.4 5. SCHNEIDER ELECTRIC 3.2 6. ELI LILLY 3.0 7. AMAZON 3.0 8. RELX 3.0 9. RIO TINTO 2.8 10. NEXTERA ENERGY 2.6 Source: LGT, Figaro, 30th September 2024
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© LGT Top 10 performers Stock Contribution – Q3 2024 Name Average Weight % Total Return % Contribution % CRH 3.07 16.10 0.46 NATIONAL GRID 2.57 16.70 0.39 NEXTERA ENERGY 2.60 13.23 0.33 HALEON 1.37 22.45 0.27 AIA GROUP 0.86 25.50 0.22 ENEL 1.82 12.00 0.21 ADYEN 0.79 23.65 0.17 VOLARE OFFSHORE STERLING FIXED INTEREST FUND 6.39 2.47 0.16 ZURICH INSURANCE 2.28 6.82 0.15 ORSTED 0.89 17.93 0.15 Bottom 10 performers 16 Paisley Common Good Fund – 3 months to 30th September 2024 Source: LGT, Figaro, Q3 2024 Stock contribution is measured gross of management fees. Investors should be aware that past performance is not a reliable indicator to future performance. Name Average Weight % Total Return % Contribution % ASML 3.12 -23.97 -0.88 MICROSOFT 4.05 -9.11 -0.39 ALPHABET 2.35 -14.08 -0.37 AMAZON.COM 2.97 -9.13 -0.29 ELI LILLY 3.10 -7.65 -0.25 ASTRAZENECA 3.76 -5.64 -0.21 AIRBNB 0.80 -21.19 -0.21 TAIWAN SEMICONDUCTOR MANUFACTURING 3.66 -5.56 -0.19 WEST PHARMACEUTICAL SERVICES 1.18 -14.06 -0.19 MERCEDES-BENZ 1.54 -7.80 -0.18
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Engagement Case Study: Proctor & Gamble 17 Image: https://www.wildsingapore.com (Google Creative Commons License) https://www.natureaction100.org/ LGT engaged Nature Alpha a leading biodiversity data provider to carry out geospatial analysis on P&G’s operations and those areas of biodiversity crisis. We voted against the public accountability board and continue to advocate for stronger commitments from P&G over sourcing of wood-pulp from primary forests, their narrow definition of deforestation and their use of3rdparty carboncertificates. To amplify our voice, we have recently joined Nature Action 100, a global investor engagement initiative focused on driving greater corporate ambition and action to reverse nature and biodiversity loss. Friends of the Earth filed a notice of exempt solicitation, urging shareholders to "Vote No" on the election of Board Chair/CEO, Chair of the Governance and Public Responsibility Committee, due to concerns regarding the board's insufficient actions to adopt adequate no-deforestation commitments. P&G sources a large amount of palm oil and wood pulp and that its sourcing of these forest products is driving deforestation and the degradation of primary forests. Forests play an important role in sequestering carbon to protect against global warming and allowing forbiodiversity.
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The world’s largest private bank and asset manager owned by a single family LGT has been owned by the Princely Family of Liechtenstein for over 90 years, creating long-term stability and an entrepreneurial approach. This forward-thinking, private ownership structure enables investment into the business to enhance and continuously improve client service. Private ownership Strong balance sheet with a history of stable growth and profits. The Princely Family invest in LGT, alongside clients and employees, creating an alignment of interests. LGT has one of the strongest balance sheets in the industry, with high levels of liquidity and an equity capitalisation significantly above regulatory requirements. Sound financial stability Resources and knowhow of our research and investment teams have been developed with a global outlook. Represented in all the major financial centres worldwide, our clients have access to multiple booking centres. A global perspective As a highly values-oriented family-owned company, we think and act in terms of generations.” H.S.H. Prince Max von und zuLiechtenstein, Chairman LGT 18 A portrait of LGT
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What makes us different? Privately owned, entrepreneurial firm Entrepreneurial spirit drives a flexible and dynamic approach, underpinned by the financial strength and long-term stability of our private ownership. Genuine focus on putting our clients first A highly personalised ethos focused on developing long-term relationships, demonstrated by our 98.8% client retention rate. High conviction, quality investment approach Rigorous investment process and research. Long-term investment approach focused on consistent and stable returns. Commitment to sustainability Recognised early on how important sustainability is for our environment, society and future. Being entrusted with your money is a privilege we never take for granted. Ben Snee, CEO LGT Wealth Management 19
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Your partner for investing sustainably Global and well-resourced team of sustainability experts across research and portfolio management Our owner, the Princely Family of Liechtenstein, recognised early on how important sustainability is for our environment, society and future. Private ownership allows us to commit to significant targets ahead of the industry: LGT has been carbon neutral since 2010 and is committed to net zero by 2030 across our own investments and operations. Private ownership Across LGT Group, investment exclusions apply to controversial weapons and thermal coal. A globally coordinated approach to stewardship includes active engagement and proxy-voting. A global perspective LGT Group has a range of options for clients including sustainable investing, philanthropy via LGT Venture Philanthropy and impact investing solutions offered by Lightrock. We have built our own proprietary LGT Sustainability Rating tools to assess the sustainability of companies, which we continually evolve and improve. In-house expertise 20 For us, sustainability means managing our company with a sense of social responsibility and with a long-term as well as a holistic perspective. Olivier de Perregaux, CEO LGT Private Banking
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Global investment capabilities A personalised experience with leading capabilities and expertise across the globe As part of LGT Group, we leverage the resources and knowhow of our global research and investment teams. Our experts are continuously analysing economic developments and global financial markets to provide a solid basis for well-considered, conviction- led investment decisions. Our clients benefit from the wider services of the group, including multiple booking centres, all whilst receiving a personalised experience. 5,600+ employees across 30 locations in Europe, Asia, Australia, the Americas and the Middle East* LGT Private Banking key facts £313.4 billion of clients assets under management 6 booking locations Ratings (LGT Bank Ltd.) Moody’s/Standard & Poor’s Aa2/A+ Regional expertise in all key financial markets Strong focus on sustainable and alternative investments *as at 30 June 2024 21
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Offices: 30+ locations worldwide LGT Group Employees: 5,600+ Assets under management: £294.7 billion as at 31.12.2023 22 Our business at a glance Our entrepreneurial philosophy, together with LGT Group’s stability, enables us to make decisions that we believe will provide long-term benefits for our clients. This flexibility allows us to tailor our business model to suit our vast range of client types and the unique requirements that they have. A boutique approach with a global reach
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Our commitment to sustainability 23 We cannot tackle big challenges like climate change, social inequality or political polarisation alone. Together we can achieve more and change the future Memberships and signatories Principles for Responsible Investment (PRI) United Nations Global Compact (UNGC) Principles for Responsible Banking (PRB) Institutional Investors Group on Climate Change (IIGCC) Partnership for Carbon Accounting Financials (PCAF) Net-Zero Banking Alliance (NZBA) Climate Action 100+ (CA100+) Task Force on Climate-related Financial Disclosures (TCFD) Finance For Biodiversity Pledge Nature Action 100 UK 10+ SI experts, research analysts EUROPE 10+ SI experts, analysts, portfolio advisers APAC 5+ SI experts, specialists As well as drawing on expertise at LGT globally, we work with other organisations and within our sector to pursue similar goals and exchange ideas. We have received a number of awards to recognise our commitment to a more sustainable future. Wealth for Good Awards 2023 Winner International Investment Awards 2022 Winner International Investment Awards 2021 Winner
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Intentionality Are positive sustainable outcomes intentional or is this a function of chance? Integration How are sustainability factors integrated into decision-making? Impact What is the impact generated from the investment decisions? We do not rely on third parties to provide us with assurance. We leverage our global sustainable investment teams to screen and scrutinise all of our underlying investments. Via our proprietary sustainability tool, SMax, we screen all investments to inform our understanding. Implemented by your Portfolio Managers, supported by sustainability specialists Our sustainable investment framework 24
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Investment approach Quality, sustainable growth Quality focused Seek to avoid the blow-ups Focus on delivering consistent outperformance Start by considering risk in terms of permanent loss of capital Investment in companies with generating robust returns, strong management and healthy balance sheets Structural growth, not speculation High visibility of growth provides confidence in generating sustainable returns over the long term Focus on beneficiaries of long- term structural growth trends Globally active, robust process We engage and advocate We engage and advocate for positive change on our clients’ behalf We engage and advocate for positive change on our clients’ behalf for positive change on our clients’ behalf In-depth research process; consideration of ESG factors helps us to understand key risks and assess quality Company engagement on a global basis Active stewards of our clients’ investments returns. Flexible and transparent outcomes Portfolios meet a range of objectives and risk profiles Tailored to align to your specific values Transparent and cost effective Direct holdings enable flexibility and transparency Institutional-level resources underpin discretionary investment approach 25
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Energy transition Decarbonisation; circular economy; electrification of transport; emissions regulation; EU Taxonomy; EVs Healthcare innovation Ageing demographic; growth in biologics and GLP-1s; personalised medicine; evolving healthcare provision and preventative treatments Next gen technology AI, The Internet of Things; automation/advanced robotics; cloud; digital infrastructure; virtual reality; blockchain applications; digital analytical tools Changing consumer Digital payments; ecommerce; athleisure; eSports; gaming; experiential consumption, democratisation of wealth Diminishing global interdependence De-globalisation, onshoring, domestic self-sufficiency © owned by each of the corporate entities named in the respective logos. Sample companiesare for illustrative purposes only and are not a recommendation for investment. Sample companies Appendices Our strategy for maintaining investment performance Quality, sustainable growth 26
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Discharging our stewardship responsibilities 27 Global approach underpinning our net zero ambition and Sustainability strategy 2030 Climate change Dedicated stewardship strategy in NZI project SBTI or equivalent Integration of a Just Transition in decarbonisation plans TCFD aligned disclosures Fairer societies Current business focus on Human Rights Underpinning the UN Guiding Principles on Business and Human Rights In developed markets we take Human Rights as umbrella term (Human Capital Management in Asia) In UK – Find it, Fix it, Prevent it Decent Work + Diversity & Inclusion Nature & Biodiversity We consider the loss of biodiversity to be among the most pressing challenges of our time Building an understanding of impacts and dependencies on nature Disclosure of risks and opportunities Deforestation (palm oil/primary forests) Forever chemicals (agricultural & manufacturers) Strong governance © owned by each of the corporate entities named in the respective logos.
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© LGT Charity resource hub We offer practical added value, insights, training for trustees and guidance on best practice. 28 www.lgtwm.com/uk-en/charities
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Your team Gair leads the Scottish charity and endowments offering from LGT, managing portfolios for charities, trusts and public institutions. He joined LGT following the acquisition of abrdn's discretionary investment management business in 2023, bringing over 20 years’ experience in the charity sector as a volunteer, Executive Director and Investment Manager. Gair moved into investment management in 2011 to specialise in charity investments and prior to that, spent six years in MilitaryIntelligence,commissioned in theRoyal Air Force. Gair is a former Trustee and Finance Committee member of the Officers’ Association Scotland and the John Muir Trust. He is a Fellow of the Chartered Institute for Securities and Investment and holdstheCFA’s Certificatesin ESG InvestingandClimate Finance. Gair Brisbane Senior Investment Manager and Charity Lead (Scotland) Josh works in our Charities Team in Edinburgh office as an Investment Assistant. He is a University of Bristol and Durham University graduate. Josh holds the following CISI qualifications: Level 4 Investment Advice Diploma (IAD) in Financial Planning and Advice, Level 4 Certificate in Paraplanning, Level 3 Extended Certificate in Investment Operations (IOC), and the Level 3 Certificatein Derivatives(Capital MarketsProgramme). Joshua Ryan Investment Assistant +44 (0) 131 385 1326 gair.brisbane@lgt.com +44 (0) 131 385 1256 joshua.ryan@lgt.com 29
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© LGT Disclaimers Any data contained herein which is attributed to a third party (“Third Party Data”) is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by LGT Wealth Management. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, by LGT Wealth Management or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses orpromotes the fund orproduct to which Third Party Datarelates. ARC Private Client Indices (“PCI”) are based on historical information and past performance is not indicative of future performance. PCI are computed using a complex calculation and the results are provided for information purposes only and are not necessarily an indicator of suitability for your specific investment or other requirements. ARC does not guarantee the performance of any investment or portfolio or the return of an investor’s capital or any specific rate of return. ARC accepts no liability for any investment decision made on the basis of the information contained in this report. You should always complete your own analysis and/or seek appropriate professional advice before entering into an agreement with any PCI Data Contributor. The content is the property of ARC or its licensors and is protected by copyright and other intellectual property laws. Use of the information herein is governed by strict Conditions of Use as detailed on https://www.assetrisk.com/research/ ©2024 Morningstar. AllRights Reserved. Neither any of the Factset companies nor any of their information providers shall have any liability, contingent or otherwise for (i) the accuracy, completeness, timeliness, or correct sequencing of any information provided on it or through this website; (ii) the performance of any software, products or services, available on or through this website; (iii) any interruption in your being able to access any of the foregoing or any other aspect to the website; or (iv) any decision made or action taken by you in reliance upon any of them. The past performance of an investment or investment strategy does not guarantee its future performance. 30
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LGT Wealth Management UK LLP is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales: OC329392. Registered office: 14 Cornhill, London, EC3V 3NR. LGT Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Registered in Scotland number SC317950 at Capital Square, 58 Morrison Street, Edinburgh, EH3 8BP. LGT Wealth Management Jersey Limited is incorporated in Jersey and is regulated by the Jersey Financial Services Commission in the conduct of Investment Business and Funds Service Business: 102243. Registered office: Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB. LGT Wealth Management (CI) Limited is registered in Jersey and is regulated by the Jersey Financial Services Commission: 5769. Registered Office: at IFC1, The Esplanade, St Helier, Jersey, JE1 4BP. LGT Wealth Management US Limited is authorised and regulated by the Financial Conduct Authority and is a Registered Investment Adviser with the US Securities & Exchange Commission (“SEC”). Registered in England and Wales: 06455240. Registered Office: 14 Cornhill, London, EC3V 3NR. This publication is marketing material. It is for information purposes only. Certain services described herein are not available to retail clients as defined by the FCA or the JFSC, as applicable; please speak to your investment adviser for further clarification in this regard. All services are subject to status and where local regulations permit. The wording contained in this document is not to be construed as an offer, advice, invitation or solicitation to enter into any financial obligation, activity or promotion of any kind. You are recommended to seek advice concerning suitability from your investment adviser. Any information herein is given in good faith, but is subject to change without notice and may not be accurate and complete for your purposes. This document is not intended for distribution to, or use by, any individual or entities in any jurisdiction where such distribution would be contrary to the laws of that jurisdiction or subject any LGT Wealth Management entity to any registration requirements. When we provide investment advice it is on the basis of a restricted approach that is to say, whilst we review and advise on retail investment products from the whole of the investment market. Investors should be aware that past performance is not an indication of future performance, the value of investments and the income derived from them may fluctuate and you may not receive back the amount you originally invested. Legal information 31