AROUND THE

WORLD IN 80

MINUTES

A new world order

– implications for bond investors

BNY Mellon Asset Management

For professional advisers only

For illustrative purposes only

Ret

urn

s

Time

2000s– ? trend

Ret

urn

s

Time

1980–2000s trend

… a more volatile world

The ‘great moderation’ is over …

2Your starting point is all important…A perspective on investment returns

Investment solutions in a lower return/volatile world• Active, flexible approaches• Emphasis on income• Strategies that protect capital and aim for asymmetry of return• ‘Return based’ objectives

Then and now… it’s a different world

¹ September 2011. ² Calculated by the Bureau of Economic Analysis in the US in calculating the national accounts³ Used 10 years of earnings to remove the effect of the economic cycle from the PE calculationSource: Census, Bloomberg, Datastream, Newton

United States 1982 2011¹Fed funds rate 12% 0.25%10-year bond yield 14% 2%Monetary base $149 billion $2.6 trillionBudget deficit as % of GDP -2.2% -10.1%Household debt to GDP ratio 47.1% 88.3%Inflation rate, % yoy 8.9% 3.8%Savings rate 11.9% 4.5%Unemployment rate 8.5% 9.1%Profit margins (national accounts)² 9.6% 17.5%S&P 500 P/E ratio (1 year trailing) 8.0x 14.0xS&P 500 cycle adjusted PE³ 7.8x 20.3xS&P 500 dividend yield 5.7% 2.3%Demographics – average age of babyboomer Median age is 27 Median age is 56

3Your starting point is all important…A perspective on investment returns (cont’d)

The US financial position: Or put it another way…let’s pretend it’s a household budget:

Source: Newton, October 2011

($)

US tax revenue 2,170,000,000,000

Federal budget spending

3,820,000,000,000

New debt 1,650,000,000,000

National debt 14,271,000,000,000

Recent budget cuts 38,500,000,000

($)

Annual family income 21,700

Annual outgoings 38,200

New credit card debt 16,500

Outstanding balance on credit card

142,710

Budget cuts 385

4A perspective on investment returns

Peak debt year

Peak debt in USD bn

Peak debt proportion of domestic GDP

Peak debt proportionof global GDP

A perspective on investment returns

* Precrisis debt peak except for Eurozone figures, which are as at February 2011Note: Bubbles are not to scale and for illustrative purposes only

** GDP stands for Gross Domestic Product, and is the monetary value of goods and services produced within a country’s borders in a specific time period. It is usually calculated on an annual basis and gives an indication of a country’s economic health and standard of living. Source: IMF, Bloomberg

S. Korea/Thailand

1997

1,836

248%

6.1%

Russia

1997

347

86%

1.2%

Greece

1982

40

80%

0.4%

Argentina

2002

489

181%

1.5%

Eurozone*

2011

36,157

297%

57.4%

Theme(s)

Less debt

More ‘balanced’ economic variables

Higher energy costs

More older people

Unprecedented connectedness

Five important transitions to a world with:

6Global thematic framework

Key economic factors: Debt, growth, competitiveness

Primary trend: Extended period of deleverage

Secondary trend Loose Monetary Policy, State intervention

Major fault lines: Eurozone economic collapse

US growth and budget arithmetic

China growth uncertainty

Diverse outcomes: Printing of Money, Rate Cutting and Default

Market distortions remain

7The post-bubble landscape

*Source: JPMorgan Global Bond, as at 31 Dec 2011

AAA CLUB % %REST OF THE WORLD

UK 6.74   BrazilAustralia 0.95   ChinaCanada 1.82   Czech RepublicGermany 5.96   IndonesiaSweden 0.41   MalaysiaDenmark 0.57 16.45 Mexico      New ZealandMONEY PRINTERS   NorwayUSA 33.70   PolandJapan 32.42 66.12 South Africa      South KoreaCREDIT RISK SingaporeFrance 6.09   SwitzerlandHolland 1.63  Belgium 1.63  Italy 5.36  Spain 2.71 17.42    100.00

Index* weightings

8

Managing money against a bond indexis fraught with danger

9

Govt debt held abroad as % GDP vs. 5yr CDS spreads

Source: Datastream as of 31 October 2011

As economic growth slips the reliance on foreign support becomes more important.

Government debt held abroad

10Wage growth and the problem with Europe

Source: Bloomberg, OECD January 2012 Source: Bloomberg, OECD January 2012

11

Source: Newton, February 2012Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations.

• Emphasis on traditional fixed income asset classes

• A return seeking core with particular security characteristics

• Risk offsetting positions for dampened volatility and downside protection

Global Dynamic Bond strategyConceptual representation

12

Source: Newton, Merrill Lynch Indices Hedged into Sterling, 31 December 2011Past performance is not a guide to future performance.

1st 2nd 3rd 4th

2011EM6.80

Govt6.32

IG5.14

HY2.92

2010 HY

14.87EM

12.04IG

7.46Govt3.89

2009HY

59.71EM

27.51IG

16.09Govt1.18

2008Govt11.66

IG -3.38

EM -10.23

HY-27.01

2007Govt6.38

EM5.89

IG3.76

HY2.53

2006HY

10.22EM9.68

IG3.32

Govt2.82

2005EM

13.73Govt6.50

IG5.20

HY4.91

2004EM

15.07HY

14.69IG

8.66Govt8.02

2003HY

30.57EM

29.01IG

8.73Govt4.39

2002EM

15.18Govt10.73

IG10.72

HY1.61

2001IG

9.95Govt7.31

HY4.76

EM1.52

2000EM

13.19Govt10.22

IG8.49

HY-6.15

1999EM

21.65HY

3.06IG

1.74Govt1.33

1998Govt13.03

IG10.75

HY5.01

EM-12.83

EM Emerging-market govt bonds Govt Govt bonds IG Investment-grade corporate bonds HY High-yield corporate bonds

The fixed income asset classes rankings change depending on the economic cycle

*The higher the target return the greater the potential for the returns to be significantly higher or lower than expected***Based on long term volatility statistics

Risk control (portfolio guidelines)

Risk monitoring

Newton Global

Dynamic Bond

Fund

Risk parametersTarget volatility 6% – 8%**

Portfolio diversification Max 5% in any corporate issuer at purchase

Portfolio concentration Max 50% in any sector.

Quantitative risk assessmentHow much risk? – (bond weights, correlation, volatility)

What kind of risk? – (currency, credit, interest rate)

Is risk consistent? – (strategic views, economic cycle)

The performance aim of theFund is to deliver cash (1 month GBP Libor) + 2% p.a. over 3 to 5 years before fees are deducted. There is no guarantee that this return will be achieved or that your capital will be maintained.

13

Global Dynamic Bond Fund

Source: Newton, 29 February 2012Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations.

EM Sovereign 19.61 %

Government Bonds 23.95%High Yield 19.58%

Investment Grade 32.00 %

14Newton Global Dynamic Bond Fund Positioning as at 29 February 2012

15Newton Global Dynamic Bond Fund performance versus IMA Sectors

Source: Lipper as at 14 Feb 2012. Please note that sector returns are likely to vary, depending on the timing of data extraction from Lipper Fund performance calculated as total return including income net of UK tax, net annual charges, no initial charge, in GBP. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request. Past performance is not a guide to future performance. The performance aim of the Fund is to deliver cash (1 month GBP LIBOR) + 2% p.a. over 3 to 5 years before fees are deducted. There is no guarantee that this return will be achieved or that capital will be maintained.

A higher yielding addition to global government bonds

• Government bond yields at new lows

• Investors looking to work their bonds harder – looking to invest in a wider bond universe

• Defaults on a declining path. Corporate credit still attractive.

• Plenty of individual credit stories – they don’t all move together

• Emerging market debt a serious alternative – credit story improving

• Government bond yields at new lows

• Investors looking to work their bonds harder – looking to invest in a wider bond universe

• Defaults on a declining path. Corporate credit still attractive.

• Plenty of individual credit stories – they don’t all move together

• Emerging market debt a serious alternative – credit story improving

• NEWTON GLOBAL DYNAMIC BOND FUND invests wherever there are fixed income opportunities

• Investing in a diversified universe of generally high yielding securities:

– Government bonds

– Emerging market sovereigns

– Corporates – high yield and investment grade

• Currency overlay

• Derivatives – principally to manage duration

• NEWTON GLOBAL DYNAMIC BOND FUND invests wherever there are fixed income opportunities

• Investing in a diversified universe of generally high yielding securities:

– Government bonds

– Emerging market sovereigns

– Corporates – high yield and investment grade

• Currency overlay

• Derivatives – principally to manage duration

The present The future

Going forward a dynamic fixed income asset allocation is

required

16Why Newton Global Dynamic Bond Fund?

17Important information

This is a financial promotion and is not intended as investment advice. The information provided within is for use by professional clients and should not be relied upon by retail clients.

All information relating to Newton Investment Management Limited (Newton) and Newton Global Dynamic Bond Fund has been prepared by Newton for presentation by BNY Mellon Asset Management International Limited (BNYMAMI). Any views and opinions contained in this document are those of Newton at the time of going to print and are not intended to be construed as investment advice. BNYMAMI and its affiliates are not responsible for any subsequent investment advice given based on the information supplied.

This document may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised.

Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.

The Prospectus and/or Simplified Prospectus should be read before an investment is made. This document can be obtained from www.bnymellonam.co.uk or by calling 0500 66 00 00. To help us continually improve our service and in the interest of security, we may monitor and/or record your telephone calls with us.

Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations.

Tax treatment will depend on the individual circumstances of clients and may be subject to change in the future.

Newton Investment Management Limited are authorised and regulated by the Financial Services Authority. Newton Investment Management Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1371973

Newton Global Dynamic Bond Fund (NGDBF) is a sub-fund of BNY Mellon Investment Funds, an investment company with variable capital (ICVC) incorporated in England and Wales under registered number IC27 and authorised by the Financial Services Authority. BNY Mellon Fund Managers Limited (BNY MFM) is the Authorised Corporate Director. BNY Mellon Fund Managers Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1998251. Authorised and regulated by the Financial Services Authority. The investment adviser of the Newton sub-funds is Newton Investment Management Limited.

ICVC investments should not be regarded as short-term and should normally be held for at least five years.

There is no guarantee that either the target or positive returns will be achieved and no form of capital protection will apply. The higher the target return the greater the potential for the returns

to be significantly higher or lower than expected.Changes in the rates of exchange may affect the value of investments. The Fund can invest in overseas securities which may also generate profits overseas and pay dividends in foreign currencies, which means the fund is exposed to changes in currency rates. The Fund may invest in emerging markets. It should be noted that these markets have additional risks associated with local custody and registration practices that may be less developed than more mature markets. The Fund takes its charges from the capital of the fund. Investors should be aware that there is potential for future capital erosion if insufficient capital growth is achieved by the Fund to cover the charges. Capital erosion may result in the amount of income that can be drawn declining over time. The Fund may hold sub-investment grade bonds that typically have a low credit rating and carry a high degree of default risk, which can affect the capital value of your investment. The Fund may hold fixed interest securities, which are particularly affected by trends in interest rates and inflation. This may affect the capital value of your investment. The Fund may invest in illiquid securities, which means that there is a possibility that they cannot be readily converted into cash when required. The value of these securities is subject to greater fluctuation if they are not regularly traded. The Fund may use derivatives for efficient portfolio management (EPM) purposes. EPM restricts the use of derivatives for the reduction of risk, the reduction of cost and the generation of additional capital or income with no or an acceptable low level of risk. EPM transactions must be economically appropriate and the exposure fully covered. In addition to EPM, the Fund uses derivatives in pursuit of its investment objectives. All of these factors may affect the performance of the Fund.

This document is issued in the UK by BNY Mellon Asset Management International Limited. BNY Mellon Asset Management International Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Services Authority.

BNY Mellon Asset Management International Limited, BNY MFM and Newton and any other BNY Mellon entity mentioned are all ultimately owned by The Bank of New York Mellon Corporation. BNY MFM and Newton are members of the IMA.

CP8112-15-03-2012(3m)