Kames Capital Investment Conference Kames Equity Market Neutral Strategy

David Griffiths – Investment Manager, UK Equities

Kames Equity Market Neutral Strategy Monthly returns since launch

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Source: Lipper as at 31 October 2016. NAV to NAV, noon prices, income reinvested, net of ongoing charges, excluding entry or exit charges. Cumulative performance of B (Acc) GBP share class. Performance shown is for the Kames UK Equity Absolute Return Fund. *Fund launch: 22 February 2010.. © 2016 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is not a guide to future performance.

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

2010 0.50* 1.09 0.46 0.26 0.36 0.32 -0.09 0.36 0.28 0.21 -0.25 3.54%

2011 -0.12 -0.44 0.76 0.41 -0.60 1.55 1.30 -0.46 0.82 0.73 0.48 -0.17 4.32%

2012 -0.62 0.96 0.12 1.05 0.52 -0.72 -0.07 0.48 -0.48 0.66 0.24 -0.53 1.59%

2013 0.73 0.25 0.94 0.22 1.52 0.96 -0.83 0.10 -0.20 0.94 0.80 0.56 6.14%

2014 0.35 0.15 -0.28 -0.71 -0.37 0.68 1.00 0.10 2.08 -0.21 1.10 0.27 4.20%

2015 0.02 0.30 0.80 0.21 0.92 -0.38 -0.10 0.09 -0.37 -1.06 0.86 1.19 2.48%

2016 -0.08 -0.76 0.07 -0.80 0.34 -2.83 0.26 -0.19 1.25 -0.63 -3.36%

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Kames UK Equity Absolute Return Fund LIBOR GBP 1 Month

Kames Equity Market Neutral Strategy Performance

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Source: Lipper as at 31 October 2016. NAV to NAV, noon prices, income reinvested, net of ongoing charges, excluding entry or exit charges. Performance shown is for the Kames UK Equity Absolute Return Fund. Cumulative performance of B (Acc) GBP share class. Fund launch: 22 February 2010. The benchmark is LIBOR GBP 1 month. Benchmark and sector median source: Lipper. Risk statistics based on net annualised daily returns. Maximum Drawdown period based on daily returns. Past performance is not a guide to future performance.

Cumulative performance since launch Total since launch Total return % 20.20

LIBOR GBP 1 Month % 3.67

Difference % 16.52

Best month (Sept 2014) % 2.08

Worst month (June 2016) % -2.83

Up months 53/81

Down months 28/81

Maximum Drawdown % -4.59

Volatility % 2.50

Sharpe Ratio 0.90

Fund size £580m

The need for something different

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Source: Lipper as at 31 October 2016. Past performance is not a guide to future performance.

Growth (%)

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Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16

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FTSE All-Share (lhs) IA Targeted Absolute Return median (rhs)

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Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb 16

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Kames UK Equity Absolute Return Fund FTSE All-Share

Upsets and turning points

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Source: Lipper NAV to NAV, noon prices, income reinvested, net of ongoing charges, excluding entry or exit charges as at 29 February 2016. Performance shown is for the Kames UK Equity Absolute Return Fund B (Acc) GBP share class. Fund launch: 22 February 2010. Total return is FTSE All-Share, based on gross closing prices. The benchmark is Bank of England base rate. Past performance is not a guide to future performance.

Total return (%)

Same input, different output

Source: Lipper NAV to NAV, noon prices, income reinvested, net of ongoing charges, excluding entry or exit charges as at 29 February 2016. Performance shown is for the Kames UK Equity Absolute Return Fund B (Acc) GBP share class. Fund launch: 22 February 2010. Total return is FTSE All-Share, based on gross closing prices. The benchmark is Bank of England base rate. Past performance is not a guide to future performance. 6

Period Trigger Total return % Fund return %

15 Apr – 30 Jun 2010 Greek crisis -14.2 +1.2

7 Jul – 4 Oct 2011 US debt ceiling -18.2 +1.2

16 Mar – 1 Jun 2012 Whatever it takes... -11.0 +1.2

22 May – 24 Jun 2013 Taper tantrum -11.3 +1.0

4 Sep – 15 Dec 2014 Oil collapse -9.2 +2.8

25 May – 24 Aug 2015 China crisis -14.3 -0.46

2 Dec – 11 Feb 2016 High yield wobble -13.3 +0.45

►  Unique return stream

►  Uncorrelated to other assets

►  Increases diversification, lowers risk

Delivering something different

As at 31 October 2016. Data for correlation, noon for fund and close of business for asset classes.

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Asset Correlation 3 year

Correlation 1 year

FTSE All-Share -0.16 -0.10

UK Gilts -0.15 -0.30

Gold -0.14 -0.34

Brent Crude -0.10 -0.08

Copper -0.15 -0.20

MSCI Emerging Markets -0.28 -0.22

MSCI World -0.06 0.04

MSCI EM / MSCI World -0.37 -0.43

►  Three investment strategies –  Layers of diversification

–  No single theme or position dominates performance

►  Allocation will change to find alpha

►  Style will adapt to changing market conditions

►  Residual beta managed via index futures

Portfolio construction

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Themes

Pair trades Best ideas

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Dec 11 Aug 12 Apr 13 Dec 13 Aug 14 Apr 15 Dec 15 Aug 16

Futures Pairs Best ideas Themes

Investment module allocation

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As at 31 October 2016

Some extreme outcomes… regime change?

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Top row, left to right: Source: Chart 1: Datastream, 2 year rolling on YoY price changes between S&P500 and US 10Y bond. Chart 2 & 3: FactSet. Bottom row, left to right: Source: Chart 1: Bloomberg. Chart 2 & 3: FactSet. As at November 2016.

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Nov 11 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16

Coal API Price – (1 year % change)

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Nov 01 Nov 04 Nov 07 Nov 10 Nov 13 Nov 16

US Benchmark Bond – 10 Year Yield (1 week % change)

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Nov 86 Nov 91 Nov 96 Nov 01 Nov 06 Nov 11 Nov 16

Dollar Exchange Rate, USD/GBP – (1 month % change)

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114

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May 15 Nov 15 May 16 Nov 16

Asian dollar vs basic resources

SXPP Index (EUR) / SXXP Index (EUR) (lhs)

ADXY Index (EUR) - Last Price (rhs)

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2004 2006 2008 2010 2012 2014 2016

Value versus growth: 12 month (% change) Bond – Equity correlation (%)

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0 -20 -40 -60 -80

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98 00 02 04 06 08 10 12 14 16

Kames Equity Market Neutral Strategy – Portfolio manager response

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Source: APT/FactSet as at November 2016

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Stock specific risk (%)

►  Live monitoring of portfolio

►  Pre-trade analysis informs the appropriate position size

►  Weekly performance attribution review, stock by stock

►  Prefer rigorous review over stop-loss

Risk management – Portfolio managers

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As at 31 October 2016. Correlation data as at noon for fund and index. VaR limit set using a 1 month investment horizon at a 95% confidence level. Benchmark is the FTSE All Share. Volatility ex-post number is based on 1 year trailing calculations.

Metric Limit Current Beta +/- 0.15 0.01

Net exposure +/- 10% 3.16%

VaR (95%) 0-3.5% 0.97%

Gross exposure 91.49%

Volatility (ex-ante/ post) annualised 1.99%/2.77%

Correlation 0.02

Information ratio 0.85

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Rolling 12 month % growth

Kames Equity Market Neutral Strategy Performance

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Source: Lipper as at 31 October 2016. NAV to NAV, noon prices, income reinvested, net of ongoing charges, excluding entry or exit charges. Cumulative performance of B (Acc) GBP share class. Fund launch: 22 February 2010. Past performance is not a guide to future performance.

Kames Equity Market Neutral Strategy Performance

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Source: Lipper as at 31 October 2016. NAV to NAV, noon prices, income reinvested, net of ongoing charges, excluding entry or exit charges. Cumulative performance of B (Acc) GBP share class. Fund launch: 22 February 2010. Past performance is not a guide to future performance.

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Rolling 36 month % growth

For Professional Clients only and not to be distributed to or relied upon by retail clients.

Opinions expressed represent our understanding of the current and historical positions of the market and are not a recommendation or advice. Opinions should not be relied upon by non-professional investors.

This document is accurate at the time of writing and is subject to change without notification.

Data attributed to a third party (“3rd Party Data”) is proprietary to that third party and/or other suppliers (the “Data Owner”) and is used by Kames Capital under licence. 3rd Party Data: (i) may not be copied or distributed; and (ii) is not warranted to be accurate, complete or timely. None of the Data Owner, Kames Capital or any other person connected to, or from whom Kames Capital sources, 3rd Party Data is liable for any losses or liabilities arising from use of 3rd Party Data.

The Kames Equity Market Neutral Fund and the Kames Equity Market Neutral Plus Fund are notified/registered for sale in: Ireland; UK; Guernsey; Jersey; Spain; Italy; Switzerland; Austria; Germany; Belgium; Luxembourg; the Netherlands, Sweden and Portugal.

All references unless stated otherwise are to the Kames UK Equity Absolute Return Fund B (Acc) GBP share class. This fund is UK domiciled and not for sale outside of the UK.

This document does not constitute an offer or solicitation to buy any funds mentioned, and no promotion or offer is intended in jurisdictions other than those where the fund(s) is/are authorised for distribution.

For investors in Austria, Germany, Luxembourg, Malta, the Netherlands, Spain, Sweden and Professional/Qualified investors in Portugal, Italy and Belgium - Kames Capital investment Company (Ireland) plc (the “Company”) is a UCITS collective investment scheme registered with the relevant regulator in each jurisdiction. The Prospectus, Supplement, Key Investor Information (KIID) and reports for the Company together with relevant information and details of paying and information agents, as required by local regulators, are available free of charge and links to them may be found at www.kamescapital.com

For investors in Switzerland, the Company is authorised by FINMA as a Foreign Collective Investment Scheme. The articles, Prospectus, Key Investor Information and reports are available from www.kamescapital.com or from the Representative and Paying Agent in Switzerland, CACEIS (SA) Switzerland, Chemin de Precossy 7-9, CH-1260 Nyon / VD, Suisse, Phone: +41 22 360 94 00, Fax: +41 22 360 94 60

Kames Capital Investment Company (Ireland) plc (KCICI plc) is an umbrella type open-ended investment company with variable capital, registered in the Republic of Ireland (Company No. 442106) at 25-28 North Wall Quay, International Financial Services Centre, Dublin 1. Board of Directors: M Kirby and B Wright (both Ireland), A Bell (UK). KCICI plc is regulated by the Central Bank of Ireland. Kames Capital plc is the investment manager and promoter for KCICI plc. Kames Capital plc is authorised and regulated by the Financial Conduct Authority.

Important information

FPID: 2016/24863

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