Bank writedowns and restructuring positive for bond holders

LONDON, 22 May 2008 — Despite the writedowns across the banking sector, Paul Brain, Director of Investment Management at Newton Investment Management, believes now is a positive time for bondholders, with attractive valuations and a paradigm shift in the way banks run their businesses.

Brain comments: "The events of sub-prime have led to a change in direction for banks. After years of pushing the boundaries focusing on high growth and increased leverage, banks are now reducing risk and tightening their lending practices. This shift from capital efficiency to capital protection is a significant transformation and positive for bond holders."

The Newton Corporate Bond team has been gradually increasing exposure to bank bonds since January this year across the Newton Strategic Corporate Bond and Newton Global Dynamic Bond Funds.

Brain currently likes the bonds of Barclays, Lloyds TSB, JPMorgan and Bank of America.

However, despite the positive move by banks to tighten up their lending practices, restructure their balance sheets and retain dividends, Brain believes that there are still some risks on the horizon for the sector: "We could see further writedowns from banks, particularly those with exposure to the US housing and consumer lending markets. An economic slowdown in the US, Europe and the UK with increased default rates on credit cards and consumer loans could weaken the banking sector."

Newton Investment Management Limited is a London-based global asset management subsidiary of The Bank of New York Mellon Corporation and part of BNY Mellon Asset Management. With assets under management of more than €38 billion, the company provides a broad range of award-winning investment products and services to individuals, pension funds, charities and corporations. News and other information about Newton is available at www.newton.co.uk.

The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has more than $23 trillion in assets under custody and administration, more than $1.1 trillion in assets under management and services $12 trillion in outstanding debt. Additional information is available at bnymellon.com.

Portfolio holdings are subject to change at any time without notice and should not be construed as investment recommendations. Newton Strategic Bond and Newton Global Bond Funds are sub-funds 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 (BNYMFM) is the Authorised Corporate Director. Registered in England No. 1998251 The investment adviser of the Newton sub-funds is Newton Investment Management Limited (NIM). Registered in England No. 1371973. The registered address for BNY Mellon Fund Managers Limited and Newton Investment Management Limited, 160 Queen Victoria Street, London EC4V 4LA. Both firms are authorised and regulated by the Financial Services Authority.

All information source BNY Mellon Asset Management International Limited as at 31 March 2008. This press release is issued by BNY Mellon Asset Management International Limited to members of the financial press and media and the information contained herein should not be construed as investment advice. Not available or offered to U.S. investors. Past performance is not a guide to future performance. Registered office: The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorised and regulated by the Financial Services Authority.
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