2


●

Actively invests in emerging market bonds and FX, seeking to deliver consistent absolute returns via:–

Country selection –

Active currency management–

Views on interest rates and duration–

Robust credit selection

●

Top-down, conviction investors with a focus on anticipating the changing drivers of emerging markets–

Seek to profit from understanding the ‘crisis cycle’–

Actively manage risk at portfolio, country and position level–

Emphasis on maintaining liquidity: can unwind majority of portfolio in <3 days with minimal price impact

●

Balance meaningful position sizes with diversification–

Typically around 30 positions across 3 to 4 themes

expressed in 5-6 trades –

Capture both strategic and tactical opportunities

●

Sophisticated, unconstrained strategy developed over more than a

decade of emerging market debt investing

Overview

Source: GAMAllocations and holdings are subject to change.

3

GAM Emerging Market Rates Hedge -

USDPerformance from 1 Nov 2004 (inception) to 31 Dec 2011

Source: GAM, Thomson Reuters

Past performance is not indicative of future performance. Performance is provided net of fees. Funds do not have the security of capital which is characteristic of a bank deposit.

Performance information provided for GAM Emerging Market Rates Hedge Fund excludes the performance of the L-1 and L-2 classes. The L-1 classes hold claims against Lehman Brothers International (Europe) Limited (LBIE), which amounted to 22.1% of the fund as at 1 Dec 2008. Performance of the USD L-1 class was -69.8% from 1 Dec 2008 to 31 Dec 2011. The L-2 classes hold certain assets custodied

with LBIE, which amounted to 35.5% of the fund as at 1 Oct 2010. Performance of the USD L-2 class was -0.4% from 1 Oct 2010 to 31 Dec 2011. Presented as supplemental information only. Please refer to the relevant GIPS compliant report and the GIPS supplemental text. Please note that the chart above shows the performance of an offshore fund that follows the manager's same investment process and the investment restrictions may differ between the Offshore Fund and the Star Fund.

FOR ILLUSTRATIVE PURPOSES ONLY

Performance information provided for GAM Emerging Market Rates Hedge Fund excludes the performance of the L-1 and L-2 classes. Further details of the L classes are provided below.

4

GAM Star Emerging Market Rates –

USDPerformance from 28 Apr 2010 (inception) to 2 Feb 2012

Source:


Presented as supplemental information only. Please refer to the relevant GIPS compliant report and the GIPS supplemental text.

5


Return objective To produce absolute returns of approximately 10% over Libor pa regardless of market conditions

Manager Paul McNamara, Caroline Gorman and Denise Prime

Investment style Top-down, macro driven approach focused on value-based opportunities

InstrumentsLocal and hard currency denominated sovereign and quasi-sovereign bonds and related derivatives (eg interest rate swaps, CDS etc)

Currencies and their related derivatives

Key characteristics

Source: GAM

There is no guarantee that targets will be achieved.

6

GAM Star Emerging Market RatesFund facts

Vehicle Type Irish UCITS

Currency classes USD, EUR, GBP, CHF, JPY and SEK

Inception date 13 April 2010

Dealing day Daily on five days’

notice

Minimum subscription USD 10,000 or currency equivalent

Investment Manager and Sponsor Fees1 1.50%

Performance fee 20% over 3-month Libor, on a high watermark basis

Source: GAMExcludes administration and custodian fee –

please see Prospectus for further details on fees.

77

Emerging Markets and Foreign ExchangeInvestment team manages over USD 7.4 billion in assets

7Source GAM. Assets under management as at 31 Oct 2011 Team experience as at 30 Nov 2011

Paul McNamaraInvestment Director–

14 years’

investment experience–

Holds a Masters degree in Economics from the London School of Economics

–

CFA charterholder

Caroline GormanInvestment Manager–

5 years’

investment experience

–

Holds an MSc in Investment Management from the Cass Business School in London

Robert ChampionDealer–

Provides support and execution for bonds and currencies

Denise PrimeInvestment Manager–

6 years’

investment experience

–

Holds a CFA charter and a BA in Economics from Bryn Mawr

College, PA, USA

Sujata

PradhanDealer–

Provides support and execution for bonds and currencies


Investment philosophy and approach

9

●

Discretionary macro approach

●

Absolute Return Emerging Markets investing is conviction-driven. The number of themes in the portfolio should be small

●

Emerging Markets investing inflicts a high cost of turnover. Trade small and seldom

●

Emerging Markets do not lend themselves to relative value trading at the arbitrage end of the spectrum. Stay clear of anything that smacks of arbitrage

●

Liquidity is the only real defence against being wrong. Only invest in positions which it should be possible to unwind i.e.; non complex instruments

●

For all these reasons, the hurdle rate for adding leverage to a trade is higher in Emerging Markets than it is in conventional Developed Markets macro. Risk reward measures such as Sharpe ratios take second place to the primary risk management consideration of keeping trades as small and liquid as possible

Works in UCITS III structure

Underlying philosophy and principles

10

Argentina 2001

0

50

100

150

200

250

300

350

Dec

-98

Mar

-99

Jun-

99

Sep-

99

Dec

-99

Mar

-00

Jun-

00

Sep-

00

Dec

-00

Mar

-01

Jun-

01

Sep-

01

Dec

-01

Mar

-02

Jun-

02

Sep-

02

Dec

-02

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Total Return Spot FX (RHS)

Macro vs Bottom-Up

●

Most of the portfolio will be driven by global macro themes.

●

Focused outlook on the global economy to emerging market variables–

Identifying the key differences and trade the most extreme examples when emerging markets differ to developed markets

–

Exploiting pricing differences in the same economic features when emerging markets are similar to developed markets

●

Historically purer emerging market trades –

where emerging markets move independently of global markets e.g., crises –

so the non-macro returns tend to be in the tails of the distribution

–

Big returns from the short side, being short currencies or credit ahead of a devaluation or default.

–

The pattern on recoveries is typically easier as carry tends to be positive due to the large premium attached to re-enter countries after a crisis as interest rates spike and currencies overshoot e.g., Argentina

-43%

+142%

Source: Bloomberg

11


●

Harness information advantage of a combined 25+ years' emerging market debt and FX investing–

A comprehensive, top-down, macroeconomic approach is required to understand what drives emerging markets

–

Certain common indicators exist that can systematically identify

crisis cycles

●

Fundamental, value-based approach instils discipline–

Focus on trade-off of upside vs downside potential–

Maximise capture of price movements within each market–

Willing to take directional stance in ‘recovery stories’

eg Turkey 2003, Russia 2009

●

Active approach to risk management–

Extensive use of scenario testing–

Liquidity a key consideration in instrument selection–

Coherent, logical limits in portfolio construction –

Clear upside and downside expectations on each position

Investment approach

12

Investment processTop-down, thematic process with fundamentals at its core

●

Assess global economic environment to search for key uncertainties●

Understand emerging market growth, capital flows and financial conditions

Clear view of countries nearing inflection points

~3 –

4 investment themes

Set of realisable investment opportunities

Portfolio of around 30 –

40 positions

Portfolio rebalancing

●

Identify ‘recovery’

countries entering significant growth phase●

Identify ‘crisis’

markets at risk of violent devaluation/default

●

Capture current economic indicators in each country●

Assess where investment ideas and economic conditions come together

●

Identify structural and tactical trades●

Select instruments that are purest expression of views●

Size and time trades based primarily on technical analysis

●

Monitor market developments, position level and portfolio level risk ●

Conduct regular stress-testing and monitoring with GAM Market Risk Team

‘Crisis cycle' filter

Macro market backdrop

Country analysis

Portfolio construction

Risk management

and monitoring

Step 1

Step 2

Step 3

Step 4

Step 5

Activity/description Outcome

13

Step 1: Crisis cycle filter

●

Apply ‘crisis filter’

to highlight countries at extremes of economic cycle

–

Developed and tested over more than a decade –

Scores each country based on nine economic drivers –

Focused on complex areas (eg public and private sector debt crises, inflationary episodes, policy mismanagement etc.)

–

Identifies economies approaching inflection points

●

'Recovery countries' become focus for long investment opportunities

–

Score less than three ‘negatives’–

Expected to have healthier, stable economies –

May signal turning point to recovery for defaulted countries

●

'Crisis countries' become focus for short investment opportunities–

Score five or more 'negatives’–

Signals significant potential for violent devaluation or default

Thailand 1997

Argentina 2001

Vietnam 2009

Falling foreign exchange reserves X X Probably

Falling ratio of FX reserves to broad money X X Almost

certainly

Zero or negative real interest rates X

Rapidly rising inflation X

Rapid rise in credit/GDP ratio X X

High and rising current account/exports of goods and services

X X X

Uncompetitive exchange rate X X X

(Qualitative) Vulnerable banking sector X X X

(Qualitative) Rapid deterioration in fiscal position X X

Certain indicators can systematically identify turning points in

economic cycles

Past market crises scored by crisis filter

Source: GAM

14

Step 1: Crisis cycle filter

August 2008: Take short position via FX

●

Real interest rates becoming more negative –

Measured by 3m Mosprime

–

2009 CPI forecast

●

From August 2008 reserves begin to fall –

Ratio of reserves to broad money also begins to fall

●

Banking system vulnerable to shocks–

Fitch’s Banking System Indicator of ‘D’

is second worst category–

Tighter liquidity position of the corporate sector threatening asset quality

–

Credit facilities secured by shares proving to be a threat to system stability

●

Rapidly rising inflation: from 9.4% in Sept 2007, to 15% in Sept

2008

March 2009: Take long position via bond and FX purchases

●

Real rates turned sharply positive–

Peaked close to 20% in January 2009

●

Ruble had depreciated ~30% in basket terms since the team squared its position

–

Brought the exchange rate to a more competitive/ appropriate level after the commodity-driven collapse in Russia’s terms of trade

Example: Russian positioning and the crisis indicators

in the 2008 credit crisis

Russia Aug 08 Mar 09

Falling foreign exchange reserves X

Falling ratio of FX reserves to broad money

X

Zero or negative real interest rates

X

Rapidly rising inflation X

Rapid rise in Credit/GDP ratio X


Uncompetitive exchange rate X

(Qualitative) Vulnerable banking sector

X X

(Qualitative) Rapid deterioration in fiscal X

Source: GAM

15

Current filter –

Mounting concern, but not smoking guns

Source: GAM

16

Problems in the marginal markets

Vietnam Pakistan Belarus Nigeria

Falling foreign exchange reserves X X X X

Falling ratio of FX reserves to broad money X X X X

Zero or negative real interest rates X X X X

Rapidly rising inflation X X X

Rapid rise in credit/GDP ratio

High and rising current account/exports of goods and services X

Uncompetitive exchange rate X X

(Qualitative) Vulnerable banking sector X X

(Qualitative) Rapid deterioration in fiscal position X X X X

The weakest links in the chain…

Source: GAM

17

Step 2: Macro market backdrop

Global Theme Emerging Market Opportunity

Continuing difference between cyclical slowdowns (countries with healthy financial systems) and much deeper balance-sheet recessions

●

Capital flows to stronger-growth countries –

which are overwhelmingly emerging

Concerns about sustainability of government balance sheets in the developed world (PIIGS and beyond)

●

Emerging market allocations from global investors likely to be bigger on a diversification/flight to quality basis

Europe is a trigger point for the world economy ●

Source of financial stress and both up-

and downside risk

●

Deleveraging by Eurozone

banks will affect some EM more than others

China is attempting to carry out a “soft landing”

in unprecedentedly difficult conditions

●

The outcome in China is uncertain. Asset prices in LatAm

and Asia primarily depend on this outcome

Example: From global views to local themes –

Q3 2011

Source: GAM

18

Step 2: Macro market backdrop

●

Develop global macro views on what drives asset prices within the global financial system–

Use focused approach because whole system is too complicated to model in its entirety

●

Leverage wider investment team of fixed income sector specialists –

Average 13 years’

investment experience –

Specialisations across full range of bond and currency markets–

Formal and informal discussions generate and test ideas

●

Emerging markets team use global macro views to determine key drivers of emerging market behaviour–

Define best variables to monitor emerging markets in current environment –

Set expectations for capital flows, growth and financial conditions over the medium term

●

Results in 3 –

4

key investment ideas with greatest influence in near and medium-term

Emerging markets must be viewed in context of global market dynamics

Source: GAM

19

Step 3: Country analysis

●

Experience enables managers to understand what is driving each market at a certain point in time

●

Apply proprietary 'market driver matrix' tool–

Captures 14 current and forecast economic indicators–

Highlights global influences, systematic factors (eg commodity prices) and purely idiosyncratic local factors for each market

●

Analyse matrix with particular sensitivity to –

Global risk appetite–

Domestic liquidity–

Forecast revisions in certain variables

●

Outcomes of analysis: –

Testing, validation and evolution of investment ideas–

Identification of specific markets best positioned to play them out

●

Results in well-defined set of realisable investment opportunities

Drivers of emerging market currency and fixed income performance

vary over time

Example: Market driver matrix

Source: GAM

20

●

Portfolio balances opportunities over different time horizons:

●

Choose instruments that provide good liquidity and allow purest expression of views on:–

Currency: Exchange traded currency futures and forwards–

Rates/duration:

Interest rate swaps–

Credit: Credit default swaps and occasional exposure to corporate credits–

All of the above: Government and quasi-government bonds

●

Time entry and exit of positions using–

A range of technical analyses –

Identification of catalysts and timeframes for realisation

●

Results in medium-diversified portfolio of around 30 positions across 3 –

4 themes

●

Structural trades: typically >80% of assets–

Fundamentally-driven trades, seriously mispriced–

Sizeable positions in highest conviction ideas –

Can last for months

Step 4: Portfolio constructionSeeking to capture high-conviction opportunities in a low-correlation portfolio

●

Tactical trades: typically <20% of assets–

Driven more by technical factors–

Exploit temporary pricing anomalies –

Depend heavily on liquidity–

Typically last weeks or even days

Source: GAM

21

Step 5: Risk management and monitoring

●

Scenario analysis carried out pre and post implementation of positions

●

Investment managers constantly monitor the portfolio –

Clear target valuations and stop-losses on each position –

Update tools and expectations with new information –

Monitor correlation between positions–

Review daily RiskMetrics reports

●

Additional oversight from independent GAM Market Risk Team –

Reports directly to GAM’s Group COO–

Conduct weekly, in-depth performance and risk reviews–

Meet weekly with portfolio managers to discuss RiskMetrics reports

●

Actively manage costs and market, credit, counterparty, liquidity and legal risks–

Strong preference for markets with guaranteed liquidity via primary dealer system

Integral part of investment process; actively managed at several

levels

Example: Portfolio stress-testing

RiskMetrics reports

Source: GAM

22

Why GAM for Emerging Market Rates?

●

Highly experienced emerging market debt managers–

Structured and repeatable process developed over more than a decade–

Backed by the full resources of an established, global fixed income team

●

Proven ability to understand and anticipate crisis cycles–

Willing to invest early in recovering markets–

Anticipate violent defaults and position to profit from them

●

Top-down, high conviction style expressed through diversified portfolio–

Global emerging markets–

Bonds, currency and credit–

Structural and tactical opportunities

●

Focus on active risk management and maintaining liquidity

●

Track record of producing strong, positive absolute returns


Outlook

24

Debt: The one great certainty

●

One issue will dominate the global economy for the next decade

●

Emerging Markets are the right way round on this

Source: IMF, Fiscal Implications of the Global Economic and Financial Crisis Staff Position paper

25

Advanced EconomicsPerformance from 31 Dec 2007 (inception) to 2 Feb 2012

Source: , GAM, GAM, GAM, GAM

Past performance is not indicative of future performance. Performance is provided net of fees.

Advanced EconomicsCEE

95

100

105

110

115

120

2008 2009 2010 2011 2012

GDP Index, 2008 =100

Source: IMF, World Economic Outlook Update Jan 2010, UBS

26

(Western) Credit Rating Agencies seen to underestimate credit damage

AAA AA A Lower

Japan

Spain

United States

Australia

Denmark Norway

Singapore Austria

Finland France

Germany

Portugal Italy

Mexico Ireland

Poland Malaysia

Sweden

United Kingdom

Netherlands

Switzerland

Canada

Belgium

MexIre Portugal

Poland Malaysia

Sing SwitDen

Nor Fin

Bel

Japan

Can Australia France Austria

United States

UK Swe

Neth

Germany

Spain

Italy

●

Western fiscal shortfalls have been filled by savings surpluses out of Asia

●

Asians noticeably less enthusiastic about Western credit opinions now

●

China’s Dagong

Credit Rating Agency takes a noticeably harder line on Western creditworthiness (RH chart) than do the Western rating agencies (LH chart)

Source: CitigroupAs at Feb 2011.

27

Austerity is bad for businessWe are in a liquidity trap for some time to come

Non-Federal Federal Government EMU corporate LendingUS Commercial and Industrial LendingUK M4 Lending

Source: Federal Reserve, ECB

-1000

-500

0

500

1000

1500

2000

2500

3000

Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Oct 04 Oct 05 Oct 06 Oct 07 Oct 08 Oct 09 Oct 10 Oct 11

28

80

90

100

110

120

130

140

150

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Asian rally against a strong dollar? A leap of faith

ADXY –

JP Morgan Asian Currency vs USDDXY –

USD vs majors

Grey bars show Asian currencies vs strong $

29

The PIIGS as Emerging Markets

Greece Ireland Spain Italy

Falling foreign exchange reserves

Ask The ECBFalling ratio of FX reserves to broad money

Zero or negative real interest rates

Rapidly rising inflation

Rapid rise in credit/GDP ratio


X X

Uncompetitive exchange rate X X X X

(Qualitative) Vulnerable banking sector X X X

(Qualitative) Rapid deterioration in fiscal position

X X X X

Certain indicators can systematically identify turning points in

economic cycles

EU Sentiment Indicators

60

70

80

90

100

110

120

May

06

Dec

06

Jul

07

Feb08

Sep

08

Apr

09

Nov

09

Jun

10

Jan

11

Aug

11

EU27 Greece Portugal Spain Italy

Source: GAM, Bloomberg as at Oct 2011

30

Contagion to EM 1: European Credit crunch comingNet percentage of banks contributing to tightening standards

40

30

20

10

0

-10 -10

0

10

20

30

40

09Q

4

10Q

3

11Q

2

09Q

4

10Q

3

11Q

2

10Q

1

10Q

4

11Q

3

10Q

2

11Q

1

09Q

4

10Q

3

11Q

2

Factors contributing to tightening credit standards

Costs related to

bank’s capital

positions

Access to market

financing

Bank’s liquidity position

Expectat. general

economic activity

ActualExpected

%

Source: ECB

31

Decoupling? Good luck with that

GDP

Developed Emerging

Exports

Domestic Bond MarketsEquity Market Capitalisation Currency Market Turnover

●

Emerging markets account for a large and growing share of world economic output

●

However, share in financial markets is much smaller –

and even these numbers overstate the case, given the much smaller “free floats”

in both bond and equity markets

●

As such, hopes of “decoupling”

seem to us over optimistic, given the small size of EM financial markets relative to the potential in-

and out-flows from the developed world

Source: GDP/Exports: IMF World Economic Outlook 2010; Equity Market Capitalisation: World Bank World Development Report 2010; Domestic Bond Markets, Currency Turnover –

Bank For International Settlements. As at Feb 2011.

32

Contagion to EM 2 –

EU Banks have to delever

–

That means selling EM

85

90

95

100

105

110

UK

US

Euro area

2008 2009 2010 2011

MFIs

and Eurosys: Loans to Euro Area Residents (EP) –

Euroland

AggregatesM4 Lending excluding Securisations, excluding Intermediate OFCS -

UKUS bank loans (exCC)

International Exposures

0

500

1000

1500

2000

2500

3000

3500

4000

European Banks US BanksU

SD b

n

LatAm

Europe

Asia Pacific

MEA

Source: Thomson Reuters Datastream, Arbuthnot estimates, BIS

33

-4 %

-2 %

0 %

2 %

4 %

6 %

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Asia Latin America Eastern Europe

Output gaps are closing

Source: CitigroupData from 1 Mar 2000 to 1 Dec 2010.

34

-2

0

2

4

6

8

10

Dec-00 Dec-03 Dec-06 Dec-09

%

Central bank policy rates Real policy rates

2.5

5.0

7.5

10.0

12.5

15.0

17.5


%

0

2

4

6

8

10

12


LatAm (1) Asia CEEMEA

%

CPI rates

And policy is loose

(2) (3)

Source: Bloomberg, Swiss & GlobalData as at 31 May 2011. [1] Argentina, Brazil, Chile, Colombia, Mexico, Peru. [2] China, S Korea, India, Indonesia, Philippines,

Taiwan, Thailand [3] Poland, Hungary, Czech Rep, Slovakia, Romania, Russia, Turkey, Israel, S Africa.

35

Cyclical CPI peaks come into sight in some –

but certainly not all markets…

-50

50

150

250

350

450

550

650

Dec-91 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09-60

-30

0

30

60

90

120

150

Energy prices

Index

-20

0

20

40

60

80

100

120

Dec-91 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09-60

-30

0

30

60

90

120

150

Food prices

Index%y/y %y/y

%y/y (rhs)

%y/y (rhs)

Source: IMF, Swiss & Global

36

Private credit to GDP ratio, up everywhere in Asia (%)

0

50

100

150

200

250

CH HK IN ID SK MY PH SG TW TH JP

Q1 2008Q2 2011

Source: CEIC, HSBC

37

Asian Balance Sheet not quite as clean as many imagine

100

95

90

85

80

75

Mar 91 Mar 93 Mar 95 Mar 97 Mar 99 Mar 01 Mar 03 Mar 05 Mar 07 Mar 09 Mar 11

Asian financial crisis

Global financial crisis

Leverage

Credit to GDP ratio Asia ex JapanAsia ex JP ex CH

Source: CEIC, HSBC

38

Safety cushion redistributed, not gone

2008 drawdown (from peak)Post-crisis Build (from trough)Net Change (from 2008 peak)

Foreign Exchange Reserves

-200

-150

-100

-50

-

50

100

150

Rus

sia

Mal

aysi

a

Ukr

aine

Egy

pt

Indi

a

Arg

entin

aC

hile

Per

u

Col

ombi

aC

zech

Rom

ania

Turk

ey

Kaz

akhs

tan

Pol

and

Sou

th A

frica

Hun

gary

Phi

lippi

nes

Isra

el

Mex

ico

Indo

nesi

a

Sin

gapo

re

Sou

th K

orea

Thai

land

Taiw

anB

razi

l-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Hun

gary

Thai

land

Ukr

aine

Sou

th A

frica

Sou

th K

orea

Phi

lippi

nes

Per

uIs

rael

Pol

and

Col

ombi

aTa

iwan

Cze

chIn

done

sia

Mex

ico

Chi

leIn

dia

Bra

zil

Turk

eyR

ussi

aA

rgen

tina

Mal

aysi

aK

azak

hsta

nC

hina

Sin

gapo

reV

enez

uela

Hon

g K

ong

Nig

eria

20082011 ForecastChange 2011 vs 2008

Current Account

USD

bn

% G

DP

Source: Domestic Central Banks, Haver

Analytics, BloombergAs at May 2011.

39

Taking the drugs away

“A wide range of market indicators supports the view that the Federal Reserve's recent actions have been effective. For example,

since August, when we announced our policy of reinvesting principal payments on agency debt and agency MBS and indicated that we were considering more securities purchases, equity prices have risen significantly, volatility in the equity market has fallen, corporate bond

spreads have narrowed, and inflation compensation as measured in the market for

inflation-indexed securities has risen to historically more normal levels. “

Ben Bernanke, Monetary Policy Testimony March 1 2011

Sounds like the Feds targeting asset markets

20

40

60

80

100

120

Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-110

500000

1000000

1500000

2000000

2500000

3000000

S&P 500 Fed Balance Sheet

Source: Bloomberg as at Oct 2011

40

Emerging valuations: Rich? Yes. Bubble? No.

Cyclical P/E – price vs 5-yr earnings

●

This measure uses 5-year earnings to try to smooth out the impact of a one-off “hit”

to earnings from the crunch

●

On this measure, the historic premium accruing to developed markets has been wiped out. This premium probably “should”

exist, suggesting that EM equities at least are probably a little bit rich relative to the developed world –

although we also have to account for a much quicker return to trend growth in emerging markets

●

It is very hard to make the case however that either 1) emerging

markets are wildly expensive “bubble”

level relative to history or 2) that equities globally are in a bubble stage

●

But “some questions about historical valuations”

is a less catchy headline than “bubble”

0

5

10

15

20

25

30

35

40

Jan00 Jan01 Jan02 Jan03 Jan04 Jan05 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11

GlobalEM

5y US Treasury

EM Local Yield

Hard Currency EM1

3

5

7

9

11

13

15

Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10

0

500

1000

1500

2000

2500

Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10

10th-90th percentile

Median Spread

Source: CITI, MSCIAs at Oct 2011.


Performance and risk informationGAM Star Emerging Market Rates

42


EURPerformance from 13 Apr 2010 (inception) to 2 Feb 2012

Source:



43


USDPerformance from 28 Apr 2010 (inception) to 2 Feb 2012

Source:



44


USD

●

The Fund also holds a variety of derivative positions, including long CDS protection in France, short CDS protection in Hungary, and short Italian BTP futures.

Bond and currency breakdown as a % of fund NAV as at 31

Dec

2011

FX forwards

Local currency bonds

US bonds

-30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00 50.00

US Dollar

Mexican Peso

Brazilian Real

Hong Kong Dollar

EURO

South African Rand

Argentinian

Peso

Russian Rouble

Chinese Renmimbi

Source: Bloomberg; GAMAllocations and holdings are subject to change.

45


USD

●

Our expertise is macro –

rather than bottom-up credit

●

Primary judgement was that credit markets had overshot –

choices therefore 1) macro 2) low-rated

Regional, sector and credit breakdown

as a % of fund NAV at 31 Dec 2011

Geography Sector Rating

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

South Africa

Latin America

Europe

MEA

Asia

0.0 10.0 20.0 30.0 40.0 50.0

Sovereigns

State-owned banks

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

AAA

B

BB

BBB

A

Source: GAMAllocations and holdings are subject to change.

46


USDMaturity and risk as a % of fund NAV as at 31 Dec 2011

Maturity Breakdown Risk type Breakdown

0.00% 0.10% 0.20% 0.30% 0.40%

0 -

6M

6M -

18M

18M -

3Y

3Y -

7Y

7Y -

15Y

15Y+

0.00% 0.50% 1.00% 1.50% 2.00% 2.50%

FX Risk

IR Credit

IR Mkt

+ Credit

IR Market

Equity Risk

Vega

Source: GAMNote: figures are expressed as VaR

/ Fund NAV using 99% confidence interval per 1month.


Performance and risk information

GAM Emerging Market Rates Hedge is an offshore fund managed by Paul McNamara, Caroline Gorman andDenise Prime that follows the same investment process and is shown to illustrate the long-term performancerecord of the team.

48


USDPerformance from 1 Nov 2004 (inception) to 31 Dec 2011

Source: GAM, Thomson Reuters


Performance information provided for GAM Emerging Market Rates Hedge Fund excludes the performance of the L-1 and L-2 classes. The L-1 classes hold claims against Lehman Brothers International (Europe) Limited (LBIE), which amounted to 22.1% of the fund as at 1 Dec 2008. Performance of the USD L-1 class was -69.8% from 1 Dec 2008 to 31 Dec 2011. The L-2 classes hold certain assets custodied




49


USDPerformance history to 18 Jan 2012

Source: GAMPresented as supplemental information only. Please refer to the relevant GIPS compliant report and the GIPS supplemental text.

Past performance is not indicative of future performance. Performance is provided net of fees.FOR ILLUSTRATIVE PURPOSES ONLY

50


USDCompound annual growth rates as at 18 Jan 2012

Source: GAMPresented as supplemental information only. Please refer to the relevant GIPS compliant report and the GIPS supplemental text.

Past performance is not indicative of future performance. Performance is provided net of fees.FOR ILLUSTRATIVE PURPOSES ONLY

51

Past performance is not indicative of future performance. Performance is provided net of fees.

GAM Emerging Market Rates Hedge –

USD

●

The fund was named JB Credit and Emerging Market Hedge Fund until 2 Jan 2007

●

The strategy combined both emerging markets and investment grade

corporate credit globally until that time

●

From 2 Jan 2007 to 1 March 2010 the fund was named JB Emerging Market Hedge Fund

Performance since inception to 31 Dec 2011

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

2004 4.36 3.70 8.21 108.21

2005 1.56 4.57 -4.81 0.05 1.66 3.90 3.43 -0.66 1.83 -2.30 1.69 0.53 11.63 120.80

2006 3.04 0.87 -2.82 2.43 -3.27 -1.25 1.26 0.40 -0.54 1.68 1.90 1.93 5.52 127.47

2007 1.20 -1.57 2.70 2.13 2.90 -1.71 -2.30 -2.67 2.31 0.90 3.22 0.97 8.13 137.83

2008 1.06 1.85 0.14 -0.38 1.43 4.64 1.50 1.60 -3.46 -3.19 0.29 2.77 8.27 149.23

2009 0.42 2.33 2.62 3.27 7.71 -2.29 3.25 0.92 3.86 -1.82 -0.13 3.16 25.47 187.23

2010 4.29 3.01 4.18 3.69 -3.48 1.63 -0.07 5.00 2.59 3.07 -0.89 3.32 29.33 242.16

2011 -1.96 -0.21 0.69 0.91 -0.42 -0.64 0.05 0.77 -1.05 1.61 0.32 -0.43 -0.41 241.16


Source: JP Morgan, Thomson ReutersPerformance information provided for GAM Emerging Market Rates Hedge Fund excludes the performance of the L-1 and L-2 classes. The L-1 classes hold claims against Lehman Brothers International (Europe) Limited (LBIE), which amounted to 22.1% of the fund as at 1 Dec 2008. Performance of the USD L-1 class was -69.8% from 1 Dec 2008 to 31 Dec 2011. The L-2 classes hold certain assets custodied




Appendix

53

Managing Emerging Market Fixed Income during the credit crunch

●

Tight control of liquidity and gearing

●

Focus becomes a much more nimble, macro-oriented portfolio with relatively high weights to FX trading and a lower than usual emphasis on gearing-heavy relative value

●

Markets are in the process of returning to ‘normal’–

‘Normal’

is likely to look a lot more like 2004 than 2006

●

‘Rotate into the underperformer’

is a workable strategy in momentum-driven bull markets–

Bear markets are characterised by extreme and sustained divergence between stronger and weaker assets and currencies

●

Liquidity in all markets much reduced compared with even 15 months, let alone 2 years ago–

Trade sizes (dv01, FX notional) should be much smaller for the same target return than in previous periods–

Any trade with a price target that is less than 5x the bid-offer on the market can be dismissed out of hand

●

Bonds rather than CDS are the preferred method of taking credit exposure–

Avoids counterparty and regulatory risk

●

Manage market risk using hedges in G7 instruments (FX, Treasury futures)

Source: GAMThe views expressed are those of the manager at the time of publication and are subject to change. These views are aimed to help

readers in understanding the Fund manager's investment process and should not be construed as investment advice.

54

About GAM’s fixed income capabilities

●

More than 25 years experience in specialist fixed income

●

Active, fundamental approach developed by key management team together for over a decade

●

Extensive capabilities across traditional fixed income and non-traditional strategies

Expertise across the full spectrum of fixed income sectors

Long only strategies•

Global •

International •

US Core Plus•

Local Emerging Bonds•

Convertible Bonds

Absolute return strategies•

AR Bond•

AR Bond –

Plus•

AR Bond –

Defender •

Global Rates•

Discretionary FX•

Emerging Market Rates•

Convertible Bonds

USD 26.6bn in assets for institutional and wholesale clients globally

USD 10.6bn USD 16.0bn

Source: GAM as at 30 Jun 2011Allocations and holdings are subject to change. Latest data available at time of production. Assets under management are released on a six monthly basis in line with GAM Holding policy.

55

GAM Fixed Income Investment teamSpecialist teams with average experience of 13 years and average

tenure of 7 years

Global Rates Team

Contribute to Long Only and Absolute Return Bond portfolios

Global Rates and Discretionary CurrencyAdrian Owens (24)Rahul Mathur

(6)

Multi-Strategy and Specialist Teams

Dealers*

Investment Teams

Long Only and Absolute Return

Tim Haywood (23)Daniel Sheard (21)

Long Only and Absolute Return

Chris Jarman

(14) Paul Ferrier

(22)

Investment Grade and Asset-Backed Securities

Darren Reece (21)Haroon Shaikh (4)Amy Kam (1)

Convertible Bonds

Ben Helm (22)Alex McKnight (15)

Emerging Markets and Foreign Exchange

Paul McNamara (14)Caroline Gorman (5)Denise Prime (6)

Emerging Markets and Foreign Exchange

Robert Champion (11)Sujata Pradhan (8)

Global Rates and Discretionary Currency

Clare Rockenbach** (17)Scott Watson (5)

Developed Marketsand Interest Rates

Philip Mann (21)Tom O’Shea (18)

High Yield BondsJohannes Wagner (16)

Foreign ExchangeMark Dragten (7)

US CreditJack Flaherty (27) Casey Derbyshire (4)

Source: GAM as at 31 Dec 2011* Dealer experience shown in brackets includes total industry experience.**

Maternity leave.

56

GAM / Augustus corporate history

1983

Local Emerging Bond Fund launched

1998 1999

First in-house SMHF

launched

GAM founded by Gilbert de Botton and

begins managing absolute return

strategies

First FoHFs launched

1989

Acquired by Julius Baer, but

continues to operate

independently

2005

Fixed income team

established at Julius Baer Investments

Limited (JBIL)

1983

First single manager hedge funds launched

20022000

Launched Core Plus

long only FI strategy

1984 2004

Augustus formed following a

management buyout

2007

GAM acquires Augustus

May 2009

Parent company, GAM Holding AG,

independently listed on SIX Swiss Stock

Exchange

Sept 2009

Absolute Return Bonds

launched

Acquired by UBS, but continues to

operate independently

Timeline of important developments

57

Paul McNamara

Investment Director

Paul McNamara is an Investment Director, and is the lead manager

on emerging market bond and currency long only and hedge fund strategies. Paul joined GAM following its acquisition of the fixed income and foreign exchange specialist, Augustus, in May 2009. Paul joined Augustus (then Julius Baer Investments Limited) in 1997 from the

Export Credits Guarantee department of the UK Civil Service, where he was an economist. He began his career as a lecturer at the University of Warsaw. Paul holds an MSc in Economics from the London School of Economics and is a CFA charterholder. He is based in London.

58

Caroline Gorman

Investment Manager

Caroline Gorman is an Investment Manager, and co-manages emerging market bond and currency long only and hedge fund strategies. Caroline joined GAM following its acquisition of the fixed income and foreign exchange specialist, Augustus, in May 2009. Caroline joined Augustus (then Julius Baer Investments Limited) in 2006 from 4Cast Limited (London), where she worked for eight years as an emerging markets analyst. Prior

to that, she was an economist in the Australian Treasury. Caroline holds an MSc in Investment Management from the Cass Business School in London and a BCom

(Hons) from the University of Melbourne. She is based in London.

59

Denise Prime

Investment Manager

Denise Prime is an Investment Manager, and co-manages emerging market bond and currency long only and hedge fund strategies. Prior to joining GAM in April 2010, Denise worked as a portfolio manager at both Rogge Global Partners and Henderson Global Investors, focusing on emerging market debt. Denise holds a BA in Economics from the Bryn Mawr

College and is a CFA charterholder. She is based in London.

60

Robert Champion

Dealer

Robert Champion is a Dealer, and provides dealing support to a number of investment managers, as well as executing bond and currency trades and related derivative trades in rates, foreign exchange and credit. Robert joined GAM following its acquisition of the fixed income and foreign exchange specialist, Augustus in May 2009. He

joined Augustus (then Julius Baer Investments Limited) from Bear Stearns in 2005, and eight months later joined the trading desk. Robert holds an HND in Business and Finance from Kingston University and the Investment Management Certificate. He is based in London.

61

Sujata

Pradhan

Dealer

Sujata

Pradhan

is a Dealer providing support and execution for both long only and emerging market trades. Prior to joining GAM in December 2011, Sujata

spent five years at Deutsche Bank where she started as a trader assistant before moving to a senior sales assistant role on the emerging markets team. Prior to this, she worked at BNP Paribas for over two years, latterly in structured credit derivatives trade capture, and before that at Orion Capital Managers and Ivorygrove

Ltd. Sujata

holds an MSc in International Banking and Finance from Metropolitan University, a BSc in Mathematics and Management from Kings College London and the Investment Management Certificate. She is based in London.

62

GIPS Supplemental Information

All GAM's

discretionary assets have been allocated to appropriate GIPS composites. GAM's

funds often are structured as investment pools with underlying currency classes and it is at the investment pool level that GIPS composite allocations have been made. Supplemental information shown in GAM's

materials, including performance, geographic/industrial asset allocations, attribution details and other statistical analyses are based on a sample account of the relevant composite that represents the management style. Other accounts in the composite may have slightly different portfolio characteristics. In some cases sample accounts have history that pre-dates GAM's

compliance with GIPS of 30 June 1996. Indices other than the benchmark are sometimes used in presentations for illustrative purposes. Please refer to the relevant GIPS compliant report.

63

GAM Emerging Market Rates Composite (G332)

Composite Performance 2007 2008 2009 2010 2011

Composite Returns % 11.87 13.90 35.99 36.38 0.83

Benchmark Returns* % 5.44 3.13 0.76 0.34 0.33

Composite Standard Dev 3Yr % N/A N/A 9.62 9.87 9.38

Benchmark Standard Dev 3Yr % N/A N/A 0.55 0.37 0.09

Number of Portfolios in Composite < 6 < 6 < 6 < 6 < 6

High Return % N/A N/A N/A N/A N/A

Low Return % N/A N/A N/A N/A N/A

Composite Asset value (USDm) 95 30 29 256 346

Total Firm Assets (USDm) 75,783 39,207 49,372 56,725 50,381

1:

Performance information provided for GAM Emerging Market Rates Master Hedge Fund excludes the performance of the L-1 and L-2 classes. The L-1 classes hold claims against Lehman Brothers International (Europe) Limited (LBIE), which amounted to 22.1% of the fund as at 1 Dec 2008. Performance of the USD SPC L-1 class was -96.3% from 1 Dec 2008 to 31 Dec 2011. The L-2 classes hold certain assets custodied

with LBIE, which amounted to 35.5% of the fund as at 1 Oct 2010. Performance of the USD SPC L-2 class was 0.5% from 1 Oct 2010 to 31 Dec 2011. The Emerging Market Rates Hedge Fund represented 100% of composite assets as at

1 Dec 2008.

2:

Established in 1983, GAM delivers active investment management to private clients, institutions and intermediaries. All GAM's

assets are included in the GIPS definition of the firm, except for clients who set up separately-

managed accounts which are administered by an independent third party for their fixed income hedge strategy and/or currency hedge strategy. 3:

GAM claims compliance with the Global Investment Performance Standards ('GIPS®') and has prepared and presented this report in compliance with

the GIPS standards. GAM has been independently verified from 1 January 1996 through 31 December 2010. In May 2009, GAM acquired Augustus Asset Managers Limited ('Augustus') and subsequently claims compliance for a single firm representing the combined business. Having determined that the GIPS portability criteria were satisfied, the pre and post acquisition performance records of Augustus are linked. Augustus has been subject to independent verification testing from 1

January 2000, the date from which Augustus performance results are first displayed.

4:

The composite was created by GAM in Mar 2010 and applied retrospectively. 5:

Prior to GAM's

acquisition of Augustus in May 2009 this composite was called Emerging Market Hedge Fund Strategy. The composite strategy has not changed. 6:

Accounts in the composite invest primarily in government and quasi-government bonds and currency instruments of emerging markets using a top-down, macro driven, value-based, opportunistic investment style. The team invests in local and hard currency denominated sovereign and quasi-sovereign bonds and related derivatives, as well as currencies and their related derivatives. The fund typically seeks to achieve strong, positive absolute returns above cash regardless of market conditions.

7:

Derivatives are an integral part of the investment strategy for the portfolios within the composite. Instruments used include interest rate forwards and swaps, and currency forwards, futures and options. For reporting purposes the fixed income securities included have been delta-adjusted on a 10 year US Treasury equivalent basis so that they can be compared like for like. Further detail is available on request.

8:

Composite results are presented gross of investment management fees and net of trading expenses and net of withholding taxes on dividends, capital gains and interest. Benchmarks are gross of withholding taxes on dividends.

9:

The maximum investment management fee for accounts is 1.75% per annum plus performance fees. Management fees may vary by product

and jurisdiction. 10:

High and low returns (for those constituents present in the composite throughout each period) are presented above to demonstrate

dispersion within the composite. Dispersion information is only

required by GIPS where there are 6 or more portfolios in the composite.

11:

The benchmark shown is the 3 Month Libor Index. 12:

In 2005 GAM changed its methodology for calculating its Total Firm Assets (TFA) to follow the principles and guidelines of FINMA, resulting in TFA as of Nov 2005 increasing by 38%. In May 2009, GAM acquired Augustus resulting in an increase of 22% in TFA and a change in the Firm definition to incorporate an exclusion of certain assets as detailed above. GAM's

TFA before these exclusions were $51,020 m. GAM discloses its TFA on a quarterly basis. Current data is as at 30 Sep 2011.

13:

Total firm assets prior to the acquisition of Augustus relate to

GAM, thus the percent of firm assets and total firm assets are not meaningful in respect of Augustus. 14:

GAM aims to produce composite reports relatively quickly following month end. For this reason the most recent month end performance figures may be based on estimated month end figures. 15:

Policies for valuing portfolios, calculating performance and preparing compliant presentations are available on request.

GAM has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). A complete list and description of composites is available on request.

Source: GAM as at 31 Dec 2011

* The benchmark shown is for comparative purposes only. The composite is not managed to a specific benchmark.

There is no guarantee that targets will be achieved.

64

Disclaimer

Source: GAM unless otherwise stated. (Unless otherwise noted, where shown, performance is shown net of fees, on a NAV to NAV basis).This material is confidential and is intended solely for the use

of the person or persons to whom it is given or sent and may not be reproduced, copied or given, in whole or in part, to any other person. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision. It is not an invitation to subscribe and is by way of information only. The fund is a sub-fund of GAM Star Fund plc. GAM Star Fund plc is an umbrella fund

with segregated liability between sub-funds. GAM Star Fund plc is authorised as a UCITS pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003 (S.I. No.211 of 2003) and is a recognised scheme under the Financial Services and Markets Act 2000. The fund is managed by GAM Fund Management Limited which is regulated by the Central Bank of IrelandSubscriptions will only be received and shares or units (‘Shares’) issued on the basis of the current prospectus for the fund. Copies of the fund’s prospectus, simplified prospectus and financial statements can be obtained free of charge from GAM

Fund Management Limited, George’s Court, 54-62 Townsend Street, Dublin 2, from its representative in Switzerland GAM Anlagefonds

AG, Klausstrasse

10, CH -

8034 Zurich, from the information agent in Germany Bank Julius Baer Europe AG, An der

Welle

1, D-60322 Frankfurt am Main, from the information agent in Austria, UniCredit

Bank Austria, Schottengasse

6 -

8, A-1010 Vienna. Shares are not available for sale in any state or jurisdiction in which such sale would be prohibited.The fund is not authorised or registered for public sale in Asia

Pacific. Therefore, no public marketing must be carried out for

it in Asia Pacific. In Hong Kong, this material is restricted to professional investors (as defined in the Securities and Futures Ordinance (Cap 571)) only. In Singapore, this material is limited to institutional investors (as defined in the Securities and Futures Act (Cap. 289)) ('SFA') only. The fund is not authorised or recognised by the Monetary Authority of Singapore and Shares in the fund are not allowed to be offered to the retail public in Singapore; and any

written material issued in connection with the offer is not a prospectus as defined in the SFA and, accordingly, statutory liability under the SFA in relation to the content of prospectuses would not apply. In other countries in the Asia Pacific region, this document should only be distributed in accordance with the applicable laws in the relevant jurisdiction. In Japan, the fund mentioned herein shall not be disclosed publicly pursuant to the Financial Instruments and Exchange Law (the “FIEL”) nor registered for public sale or private placement pursuant to the Law on Investment Trusts and Investment Companies. Therefore, none of the shares of the fund mentioned herein may be solicited in Japan or

to residents in Japan. This material is intended for circulation to professional, institutional and/or qualified investors only. Any person in receipt of this material is not allowed to distribute it to residents in Japan nor communicate to residents in Japan about the fund mentioned herein. The Shares of the fund have not been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and the fund is not registered under the US Investment Company Act of 1940, as amended (the “Company Act”). Accordingly, unless an exemption is available, such shares may not be offered, sold or distributed in the United States or to US persons. However, pursuant to an exemption from registration under the Securities Act and the Company Act, the shares may be sold or resold in the United States or to certain qualified US investors in transactions that do not constitute a public offering. The views expressed herein are those of the manager at the time and are subject to changes. The price of Shares may go down as well as up and the price will depend on fluctuations in financial markets outside GAM's control, as a result an investor may not get back the amount invested. Past performance is not indicative of future performance and reference to a security is not a recommendation to buy or sell that security. Prices quoted refer to accumulation Shares unless otherwise stated. Historic data may be subject to restatement from time to time. In the United Kingdom, this material has been issued and approved by GAM London

Ltd, 12 St James's Place, London SW1A 1NX, authorised and regulated by the Financial Services Authority. In Switzerland, this material has been issued by GAM Anlagefonds

AG, Klausstrasse

10, CH-8034 Zürich.

Gam star emerging market rates citywire paris 2012

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