Lux citywire conference 26 april 2012

Emerging Market Local Currency Debt –risk asset or safe haven?risk asset or safe haven?Thanos PapasavvasStrategist Fixed Income & CurrenciesStrategist, Fixed Income & CurrenciesApril 2012

Fixed income is a core capability of InvestecFixed income is a core capability of Investec

● Over 25 years successful experience in our chosen markets

● $30.8bn* under management – over 34% of Investec Asset Management’s total

● Specialist teams ensure expert decision-making

● Best investment ideasBest Large Bond Group Award 3 YearsSecond year running

● Best investment ideas matched to mandate objectives

Page 2 | Fixed Income Update – March 2012 | CONFIDENTIAL08003

Source: Investec Asset Management, 31.12.11*On a net managed basis

The case for emerging markets debtThe case for emerging markets debt

● Strong emerging market fundamentals – Emerging markets as percentage of world

better placed than many developed markets

● Significant and growing part of global

Contribution to world GDP 35%

Contribution of emerging markets to aggregate growth over the 3 year period Jun 2008 to Jun 2011

92%

C t ib ti t l b l t d 37%g g g p g

economy ● History of fiscal and monetary reforms● Favourable demographics

Contribution to global trade 37%

Government bonds outstanding (includes both domestic and international)

14%

Population 84%● Favourable demographics● Plenty of room for productivity gains● But emerging markets can be more risky

Population 84%

Total land surface area 74%

Known oil reserves 86%

Convergence to developed markets should lead to outperformance of EM assets


Source: IMF World Economic Outlook Database June 2011, BIS (Bank for International Settlements) June 2011,CIA World Fact book and EIA (US Energy Information Administration).

Emerging markets do not face the challenges that the developed world is facingdeveloped world is facing

Rising public debt in industrial countries poses fiscal challenges

of G

DP

of G

DP

% o

% o

Fiscal situation much stronger compared with developed markets


g p pSource: IMF, June 2011

Benefits of Emerging markets local currency versus $ debtBenefits of Emerging markets local currency versus $ debt

20

25US Treasury yield

Brazil USD yield

Brazil local yield

15

Compensation for: Inflation and currency

exposure5

10

Compensation for: Credit quality

5

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Opportunities available from over 40 local bond and currency markets


pp ySource: US treasury yield: J.P.Morgan GBI US Index YTM; Brazil USD yield: J.P.Morgan EMBI Brazil Index YTM; Brazil local yield: GBI-EM Broad Brazil Index YTM. Updated to 24 February 2012

Strong returns from two different sourcesStrong returns from two different sources

Local Emerging Markets Debt –C t ib ti f B d d FX (i US$)

Local bond and Contributions from Bonds and FX (in US$) currency

performance benefits from:9%

23.0

%

% 8.1%

22.0

%

%% 8%

25% Total return

Bond return

● High yields● Economic reforms

I d dit

16.9

.3%

15.2

% 18

15.7

%

5% 7.7%

7.3%

7.2%

0% 4% 2%

8.6%

%

11.4

% 15.3

%

8.0%

13.1

% 16.8

7.1%10%

15%

20%Bond return

FX Return (incl carry)

● Increased credit quality

● Strong growth

6

%

5.5 7

5.0 5.4

5.2

4.5%

%

7

0%

5%

● Demand for commodities-5

.2-% -1

.8-%

-1.0

-

0.6-

% -6.2

-%

-15%

-10%

-5%-1

0

-20%2003 2004 2005 2006 2007 2008 2009 2010 2011


Sources: JPM, Investec Asset Management, GBI-EM Global Diversified, 31 December 2002 – 31 December 2011

Local debt can absorb strong inflowsLocal debt can absorb strong inflows

● AUM tracking local indices total $146bn* Local vs Dollar EMD (in US dollar billion)

1,400

1,600

1,800

Local currency debt

Dollar denominated debt

in a universe with a market cap of $1.46tn, i.e. 10.0%

● AUM tracking $ indices total $231bn* in a

800

1,000

1,200

guniverse with a market cap of only $467bn, i.e. 49.5%

● Emerging markets now account for 31%

200

400

600Emerging markets now account for 31% of global GDP and substantially higher percentage of GDP growth

● But investable bonds issued by emerging -

Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

● But investable bonds issued by emerging markets now form 8.6% of the global government bond universe**

Investors are generally underinvested in local EMDSource: JP Morgan, BarCap, Investec Asset Management. * AUM data from the J.P. Morgan Investor Survey Dec 2011. Market capitalisation from J.P. Morgan DataQuery 31 January 2012 for the GBI-EM Broad and the EMBI Global indices


the GBI-EM Broad and the EMBI Global indices. ** The two JP Morgan EM indices as percentage of the total for all government bonds, i.e. Local EM, USD EM and Developed Market bonds (GBI-EM Broad, EMBI Global and the BarCap Government Global Bond Index)

Local debt markets compare very favourably with other asset classesDecember 2002 to January 2012

asset classes

(Return/correlation data since the start of JP Morgan GBI-EM Global Diversified index, our preferred local currency comparative index)

Ann Return

Standard deviation

Sharpe ratio

Correlation with Local EM debt

EM equities 17.9% 24.8% 0.72 0.79 Local EMD 12.6% 12.0% 1.05 1.00 Blended EMD 11.5% 10.0% 1.16 0.96 Dollar EMD 10.4% 9.1% 1.14 0.78 Global high yield 10.5% 11.8% 0.89 0.72 Developed property 10.5% 22.9% 0.46 0.72 EM Credit 8.1% 9.1% 0.89 0.72 EM Currencies 8.0% 8.1% 0.99 0.94 Global equities 7.7% 16.6% 0.46 0.76 Hedge funds 7.5% 6.3% 1.18 0.67 Global bonds 6.6% 7.4% 0.89 0.57 Global credit 6.3% 6.3% 1.00 0.64 S&P500 6.6% 15.2% 0.44 0.69 US bonds 5.0% 4.9% 1.04 0.11

Data from 31.12.2002 – 31..1.12, standard deviation and correlation of monthly returns in USD, Local EMD = JP Morgan GBI EM Global Diversified.

Blended EMD=50% JP Morgan GBI-EM GD+50% JP Morgan EMBI GD; Dollar EMD=JPMorgan Emerging Markets bonds Index EMBI GD; Developed Property = S&P/Citi Developed REIT Index TR; Hedge funds = CS/Tremont Hedge Fund Index; EM currencies =JPMorgan Emerging Local Markets ELMI Plus


p g g g g gComposite; Global high yield = Merrill Lynch Global High Yield Index (100% hedged to $); EM equities =MSCI Daily Gross Returns USD EM; Global equities = MSCI Daily Gross TR USD World Indx; Global credit = Citigroup World Broad Investment-Grade Index; Global bonds = Citigroup WGBI All Maturities USD; US bonds = Citigroup US GBI All Maturities USD; Commodities = S&P GSCI Total Return

Huge dispersion of returns offers plenty of opportunityHuge dispersion of returns offers plenty of opportunity

● Additional opportunities in currency hedging, yield curve plays and issue selection

45%

55%Annual returns by country ($)

25%

35%

%

5%

15%

-15%

-5%

outh

Afri

caCh

ileCz

ech

Hung

ary

Mex

icoM

alays

iaPo

land

Slov

akia

Czec

hCh

ileM

exico

Mala

ysia

Turk

eyCh

ileG

BI-E

Mou

th A

frica

Slov

akia

Hung

ary

Indo

nesia

Slov

akia

Thail

and

Polan

dG

BI-E

MM

exico

Chile

outh

Afri

caBr

azil

GBI

-EM

Hung

ary

Thail

and

Russ

iaPe

ruou

th A

frica

Mex

icoSl

ovak

iaCz

ech

GBI

-EM

Hung

ary

Turk

eyEg

ypt

Chile

Mex

icoBr

azil

Colom

biaEg

ypt

Chile

GBI

-EM

Hung

ary

Polan

dTh

ailan

dIn

done

siaBr

azil

Thail

and

Chile

Turk

eyPe

ruEg

ypt

S S S S

2003 2006 2009

Big difference between best and worst performing countries Our opportunity set is much larger

2005 2007 2008 20102004


pp y gSource: JP Morgan

Investec’s emerging markets debt pedigreeInvestec s emerging markets debt pedigree

● Investec Asset Management’s origins are South African

● Total assets in emerging markets approximately $50 billion*pp y

● Over 75 investment professionals across our equity and fixed income teams, covering over 60 emerging countries overcovering over 60 emerging countries over the world

● Almost $10 billion invested in global emerging markets debt plus furtheremerging markets debt, plus further $18 billion* in South African fixed income


As at 31 January 2012 (* as at 31 Dec 2010)

What sets Investec apartWhat sets Investec apart

● A long history in Emerging Markets− More than 15 years experience in local bond markets and more than 10 years in emerging currencies− Local presence and experience across emerging asset classes gives us excellent insight in what drives

emerging market returns

● Process specifically designed for local currency emerging debt− Built on proven local bond and global currency processes− Focus on key local driversy

● Systematic approach identifies wide range of opportunities− Proprietary EM currency model provides objective input

W t li t th− We are not reliant on one theme

● Specialist and highly motivated team − Diverse and complementary skill set− Experienced professionals focused on local bond and currency markets as well as EM credit


Assets under managementAssets under management

● Increased assets significantly across different strategies

Assets under ManagementAssets under management

29 February 2012

Emerging Markets Local Currency Debt (Broad) $6,851mg g y ( ) $ ,

Emerging Markets Local Currency Debt (Dynamic) $2,300m

Blended EMD (50% local / 50% hard) $281m

Hard Currency Debt $158mHard Currency Debt $158m

EM Corporate Debt $69m

Emerging Market Currency $179m

Cross-over and other EMD $489mCross over and other EMD $489m

Total $10,327m

A well-supported capability


pp p y

Emerging Market Debt & CurrencyEmerging Market Debt & CurrencyEmerging Market Debt & Currency Strategy Leaders

Peter Eerdmans –Asia

Werner Gey van Pittius –MEA & CIS

Investment Specialists – Sovereign & FX

Antoon de Klerk – AfricaMark Evans – Asia

Vivienne Taberer – Latam Michail Diamantopoulos – CEE

Grant Webster* – MEA & CISDuncan Ngandu – Latam & CEE

Investment Specialists – Credit

Leah Parento – EM Credit

Sergey Bolshakov** – EM Credit

Victoria Harling* – Frontier and Quasi Sovereign

Tammy Lloyd – EM Credit

p

* New joiners from August 2011

g yy y

Thanos PapasavvasFixed Income & Currency Strategist

5 Fi d I & C D l


New joiners from August 2011** New joiner from October 2011 5 Fixed Income & Currency Dealers

Disciplined and repeatable process driven by bottom-up viewsDisciplined and repeatable process driven by bottom up views

BOTTOM UP TOP DOWN FINAL

Fundamentals, valuation and market behaviour

Beta discussion

PORTFOLIO

Disciplined approach based on Vigorous debate unlocksStructured approach

capturesDisciplined approach based on “Compelling Forces”, covering wide

range of factors

Vigorous debate unlocks insight across Investec’s

investment teams

captures experience and

controls risk

Portfolio built bottom-up, supplemented with top-down checks and balances


p, pp p

Latest Dynamic portfolio – active positionsLatest Dynamic portfolio active positions

Active duration positions Active currency positionsTotal: -0.18 Total: -3.89%

0 11

0.18

0.19

0.23

Q t USD

Russia

South Africa

Brazil

2.32%2.42%

3.94%3.95%

RUBCZK

KRWINR

0.00

0.00

0.04

0.11

Czech

Philippines

Turkey

Qatar_USD

0 00%0.06%

1.87%1.89%1.92%

RONBRLPLNIDRCLP

-0 01

-0.01

-0.01

0.00

Chile

Peru

Malaysia

Egypt

-1 98%-0.12%-0.09%-0.06%

0.00%

COPMYRZARTRYRON

-0.15

-0.02

-0.02

0.01

Indonesia

Poland

Hungary

Chile

-2.54%-2.44%

-2.14%-2.08%-1.98%

THBILS

HUFMXNCOP

-0.30

-0.19

-0.15

-0.50 -0.30 -0.10 0.10 0.30

Thailand

Mexico

Colombia

-4.37%-3.90%

-2.54%

-6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00%

TWDPHPPEN


0.50 0.30 0.10 0.10 0.30

Source: Investec Asset Management, 31 March 2012

Emerging Markets Local Currency Debt (Aggregate)Performance to end of March 2012 (in USD)Performance to end of March 2012 (in USD)

Performance vs. Local EMD (Aggregate) and USD EMDEmerging Markets Local Currency Debt (Aggregate)composite performance

12 0%14.0%16.0%18.0%20.0% EM Local Currency (Aggregate) Composite

GBI-EM Global Div

EMBI Glbl Div

composite performance

EM Local Currency (Aggregate) Performance%

Comparative index %

Alpha%

IR

One year 2.70 3.44 -0.74 -0.41

Th li d 18 84 16 83 2 01 0 79

2.0%4.0%6.0%8.0%

10.0%12.0%

See source 1.

Three years, annualised 18.84 16.83 2.01 0.79

From 31 July 2006, annualised 13.21 11.62 1.60 0.51

0.0%1 year 3 years (ann) Since inception

(ann)*

EM Local Currency Debt (Broad) Lipper rankingRank** 1 year

Rank** 3 years

Rank** since inception Lipper Universe

133/196 41/133 3/90 All onshore and offshore

Strong performance relative to benchmark and peer groupSee source 2.

See source 1.133/196 41/133 3/90 Global EMD funds

Source: 1. Inception date 31 July 2006. Gross performance, annualised, with gross dividends reinvested2. Lipper, net of fees. ** Ranking of Investec Emerging Markets Local Currency Debt Fund A Acc Gross GBP

The performance quoted is of actual performance post share class launch date of the 'A' GBP share class (1 June 2007) and synthesised performance pre 'A' GBP share class launch date The synthesised performance is based on oldest share


and synthesised performance pre A GBP share class launch date. The synthesised performance is based on oldest share class since fund launch and takes into account the difference in total fees between the oldest and the synthesised share classes

Emerging Markets Local Currency Debt Performance attributionPerformance attribution

Major alpha sources ( l ti % t ib ti i i ti )

2.0% Currency Local Debt Other

Top 5 contributors Contribution (ann)

Brazil 0.32%

Russia 0.30%

(relative % contribution since inception)

1.0%

1.5% Israel 0.28%

Colombia 0.27%

Chile 0.26%

0 5%

0%

0.5%

Bottom 5 contributors Contribution (ann)

Czech -0.07%

-1.0%

-0.5%

FX Beta Currency selection

Duration Beta

Country selection

Curve &issue

selection

Dollar sov debt

Credit Admin Total

Slovakia -0.02%

Indonesia -0.01%

Namibia 0.01%

Argentina 0.01%

Positive contributions from the key bottom-up alpha sources


y p pSource: Investec Asset Management Attribution based on actual positions and end-of-day prices. From 31 July 2006 – 31 March 2012

Global Bond and Global Strategic Income

There are many ways to make money in fixed incomeThere are many ways to make money in fixed income

Annual Returns in USD for different fixed income asset types – best to worst

● Returns vary significantly across the range of fixed income

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

13.5% I8.9% 22.0% 27.9% 23.0% 6.3% 15.2% 18.1% 13.9% 60.9% 15.7% 9.6%

9.2% 6.7% 11.6% 18.5% 12.1% 3.7% 10.8% 11.5% 10.1% 22.0% 15.3% 5.2%

Highest return

range of fixed income opportunities

● We look to hold assets that suit the economic

6.6% 4.2% 11.4% 16.9% 11.3% 3.4% 6.9% 9.0% 2.9% 16.3% 7.4% 5.0%

2.0% 3.5% I8.4% 6.3% 5.5% 3.4% 5.2% 5.4% -4.8% 4.4% 5.8% 3.2%

-2.6% 3.2% 1.8% 2.3% 3.5% 2.8% 3.8% 3.4% -5.2% 0.3% 5.2% 0.2% that suit the economic environment and that offer value

● We avoid those Emerging market debt Investment grade corporate bond

Lowest return-5.3% -3.5% -1.0% 1.2% 1.5% -9.2% 3.1% 2.1% -26.6% -3.7% 0.3% -1.8%

that don’tTreasuries Cash

Global High yield corporate bonds

A strategic fund that adapts exposure to suit different environments Source: Investec Asset Management Bloomberg BBA 1 month Libor Citigroup Treasury Index Citigroup WGBI-ex US JP


Source: Investec Asset Management, Bloomberg BBA 1 month Libor, Citigroup Treasury Index, Citigroup WGBI-ex US, JP Morgan ELMI+ in USD to 2003, JP Morgan GBI-EM Global Diversified in USD from 2003, Merrill Lynch Global HY Index hedged into USD, Merrill Lynch Global Corporate Index hedged into USD

Global Bond and Global Strategic Income - How they differHow they differ

Global Bond Global Strategic Income● Benchmark aware*● No High Yield● Limits of 50% Credit & 25% EM Debt**

● Benchmark Unconstrained ● High Yield allowed● No fixed limits but well diversified● Limits of 50% Credit & 25% EM Debt**

● Focus on high quality global government and corporate bonds

● No fixed limits, but well diversified● Income seeking, but total return

orientated

A more conservative way to exploit global bond & currency markets

A more aggressive way to exploit global bond & currency marketsg oba bo d & cu e cy a e s g oba bo d & cu e cy a e s

Two sides of the same coin


* Barclays Global Aggregate for performance comparisons** Please note these are internal limits and are subject to change

Disciplined and repeatable processDisciplined and repeatable process

Asset Allocation DecisionSTEPAllocation to Global government bonds, Corporate bonds, Emerging

market bonds, Developed and emerging market currencies1

Specialist Asset Decision MakingUnderlying specialist teams manage the allocated exposure

STEP

2

Risk ManagementRisk budget scales positions to reflect the mandate

Risk analysis ensures appropriate overall risk exposure

STEP

3 Risk analysis ensures appropriate overall risk exposure 3

STEP Final Portfolio

A sustainable and repeatable process

4 Bringing together our best global fixed income house views


A sustainable and repeatable process

Final portfolio evolves to reflect our best ideas

90%100%

90%

100%Currency exposureAsset Allocation

Final portfolio evolves to reflect our best ideas

40%50%60%70%80%

50%

60%

70%

80%

0%10%20%30%

0 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 0 00%

10%

20%

30%

40%

End

200

Mid

200

End

200

Mid

200

2E

nd 2

002

Mid

200

End

200

Mid

200

4E

nd 2

004

Mid

200

End

200

Mid

200

6E

nd 2

006

Mid

200

End

200

Mid

200

End

200

Mid

200

End

200

Mid

201

End

201

Emerging Currencies Commodity Bloc

Western Europe Japanese Yen

0%

End

200

0M

id 2

001

End

200

1M

id 2

002

End

200

2M

id 2

003

End

200

3M

id 2

004

End

200

4M

id 2

005

End

200

5M

id 2

006

End

200

6M

id 2

007

End

200

7M

id 2

008

End

200

8M

id 2

009

End

200

9M

id 2

010

End

201

0EM Local Debt EM $ Debt

Duration exposure (years)

45678

p p

US DollarHY Corp IG Corporate

Major Inflation-linked Major Gov't

Cash

Duration exposure (years)

1234

000

001

001

002

002

003

003

004

004

005

005

006

006

007

007

008

008

009

009

010

010


End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Mid

20

End

20

Source: Investec Asset Management

Investec’s Global Strategic IncomeAllocation Duration and Currency exposureAllocation, Duration and Currency exposure

Allocation Currency exposureDuration exposure (years)


The portfolio may change significantly over a short period of time.Source: Investec Asset Management as at 20.04.12

Attractive risk-adjusted returns versus competitors

13 0

Attractive risk adjusted returns versus competitors

10 Year Annualised Return & Risk versus Peer group

11.0

13.0

e

Investec GSF Global Strategic Income A AccInvestec GSF Global Bond A Acc

9.0

man

ce %

cha

ng

7.0

nual

ised

per

form

3 0

5.0Ann

Past performance figures are not audited

1.0

3.0

3 0 5 0 7 0 9 0 11 0 13 0 15 0 17 0 19 0 21 0

and should not be taken as a guide to the future. Source: Lipper, dates to 31 March 2012, NAV based, (inclusive of all annual management fees but excluding any initial charges), in USD. Chart axes converge on Lipper Global Bond Global sector average.


3.0 5.0 7.0 9.0 11.0 13.0 15.0 17.0 19.0 21.0

Annualised standard deviation

Lipper Global Bond Global sector average.

Why Investec Asset Management?Why Investec Asset Management?

● Specialist approach ensures expert decision making

● Clear investment philosophy drives investment thinking

● Best ideas blended to create well diversified high conviction portfolios● Best ideas blended to create well diversified high conviction portfolios

● Over 25 years successful experience in our chosen markets

Committed to a successful, long-term partnership with our clients


, g p p

Important informationImportant information

This communication is not for general public distribution. If you are a private investor and receive it as part of a general circulation, please contact us at +44 (0)20 7597 1900contact us at +44 (0)20 7597 1900.

The value of this investment, and any income generated from it, will be affected by changes in interest rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. The Fund’s investment objective will not necessarily be achieved and investors are not certain to make profits; losses may be made.

All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete Any opinions statedAll the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions stated are honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particular security. The portfolio may change significantly over a short period of time.

This communication is provided for general information only. It is not an invitation to make an investment nor does it constitute an offer for sale. The full documentation that should be considered before making an investment, including the prospectus and simplifiedfor sale. The full documentation that should be considered before making an investment, including the prospectus and simplified prospectus or offering memorandum, which set out the fund specific risks, is available from Investec Asset Management.

The Fund is domiciled in Luxembourg. This communication should not be distributed to private customers who are resident in countries where the Fund is not registered for sale or in any other circumstances where its distribution is not authorised or is unlawful. Please visit www.investecassetmanagement.com/registrations to check registrations by country.

In the USA, this communication should only be read by institutional investors, professional financial advisers and, at their exclusive discretion, their eligible clients, but must not be distributed to US Persons.

THIS INVESTMENT IS NOT FOR SALE TO US PERSONS.

Telephone calls may be recorded for training and quality assurance purposes Issued by Investec Asset Management Ltd (IAM)Telephone calls may be recorded for training and quality assurance purposes. Issued by Investec Asset Management Ltd (IAM), January 2012. IAM is authorised and regulated by the Financial Services Authority.


Lux citywire conference 26 april 2012

Economy & Finance

returns offers plenty

investec asset management

embi global indices

repeatable process driven

brazil local yield

global strategic income

final portfolio evolves

synthesised performance pre