Investment forecast combined presentations

Yield curve signal often disregarded, but usually works

10 year yields over Fed Funds through multiple recessionary periods

Source: Bloomberg. NBER –National Bureau of Economic Research

Annual Yie

ld

Year

US Asset Back Securities – Auto

US Asset Back Securities –Credit Card

US Leverage Loans

US Commercial Mortgage Back Securities

Annualized Cdn Bond CorrelationReturn Volatility

InformationRatioIndex

Source: 1- Government of Canada > 1 yr 2- BarCap Canadian Issue > 300 m Corporate Total Return Index 3- JP Morgan US Aggregate Bond Index Total Return Unhedged USD 4- BarCap ABS Auto Total Return Index Value Unhedged USD 5- BarCap Global Agg Credit Card Total Return Index Value Unhedged USD

Period: January 1, 2007 to December 31, 2010

Fixed Income risk categories within the asset class in North America

1.2

0.1

1.4

0.1

100%

80.6%

17.0%

73.9%

4

3

1

2

4.5%

25.3%

4.7%

25.3%

5.2%

3.5%

Cdn Government Bonds

0.9 (5.2)%7 5.2%4.9%

6.6%

3.5%

Canadian Credit

1.1 29.9%6.8%7.3%

US Credit

0.5 11.8%13.4%7.3%6

5

6- BarCap Global Agg US CMBS Total Return Index Value Unhedged USD 7- Market iBoxx USD Leveraged Loans TRI

Basis

Fixed

Fixed

Floating

Fixed

Floating

Fixed/Floating

Floating

Calculations: Marquest Asset Management Inc.

Carnegie Asset Management

Carnegie Asset Management

Bo Knudsen

|Carnegie Asset Management 10

You need to focus to succeed

Unconstrained stock-picking

Concentrated portfolio - maximum 30 positions

Long-term investment horizon

Stable team of experienced portfolio managers


Large cap quality – stable growth

Dividend Yield* 10 Year Bond Yield 3 Month T-Bills Yield** Corp Bond Yield***

British American Tobacco 4.80 3.44 0.57 4.74

Vodafone 5.40 3.44 0.57 4.49

Diageo 3.60 3.44 0.57 4.01

Nestlé 3.20 1.63 0.45 1.80

Philip Morris 4.20 3.07 0.12 4.05

Lorillard 5.30 3.07 0.12 6.43

Last updated: December 2010 * 2010E **T-Bills: UK = 6M, Switzerland = 2Y*** BAT: 12/12/19 , VOD: 11/26/18 , PM 03/26/20, LO 05/01/20, DIAG 05/15/18, NESTLE 02/14/18 (YTM)


The big consumption shift in China

Instant noodlePork

Beer

Mobile phone

Internet

Fixed phone

Sport shoes

Bicycle

PC

Bottled water

Disposable diaper

Auto

DairyAir traffic

Cosmetics

Grape wineJuice

Health care

Chocolate

Life insurance

Online travel

Fragrance

Pork

Beer

Mobile phone

Internet

Fixed phone

Sport shoes

Bicycle

PC

Bottled water

Disposable diaper

Auto

DairyAir traffic

Cosmetics

Grape wineJuice

Health care

Chocolate

Life insurance

Online travel

Fragrance

0% 50% 100% 150% 200% 250%

GDP per capita (PPP): China = 57% of world average in 2008

Penetration rates/per capita consumption in China relative to world average (as % of world average)

Mature marketsMature markets

Partly developed marketsPartly developed markets

Under-penetrated marketsUnder-penetrated markets

Mature marketsMature markets

Partly developed marketsPartly developed markets

Under-penetrated marketsUnder-penetrated markets

| 13

HDFC stock-pick

|

Stay focused!

Carnegie Asset Management 14

Specialists in emerging markets

2011 Pension Investment Forecast

Julian Mayo Co-CIO Charlemagne Capital (UK) Ltd

18th January 2011Canadian Pension and Benefits Institute

A Case for Emerging Markets

17A Case for Emerging Markets

Emerging economies as % of total world, 2008-2010

* GDP on PPP basis

Source: Merrill Lynch calculations, BP, Goldman Sachs, CIA World Factbook, IMF World Economic Outlook, MSCI, Nov 2010

Emerging markets increasingly dominate

80% of population 73% of foreign exchange reserves

50% of GDP* but only 13% of market capitalisation

18

Strong personal balance sheets


Personal debt

Source: CLSA, August 2010

Consumer debt as % of GDP

99%

18%12%

0%

20%

40%

60%

80%

100%

120%

USA China India

19

-3.8

-5.0

-2.4-2.6 -2.6

-2.4

-1.3

-0.5-0.9

0.3

-0.1-0.4 -0.2

-6

-5

-4

-3

-2

-1

0

1

98 99 00 01 02 03 04 05 06 07 08 09 10E


Figures are for Brazil, Russia, China, India, Korea and Taiwan

Source: UBS, April 2010

Strong finances

Fiscal balances as % of GDP

Low deficits – can afford to reflate

20A Case for Emerging Markets

Trade between Emerging Markets: e.g. Korea

Source: Nomura, CLSA, Oct 2010Intra-GEM trade increasing

Korea: exports to emerging market as % of total

20

25

30

35

40

45

50

Jul1993

Jul1994

Jul1995

Jul1996

Jul1997

Jul1998

Jul1999

Jul2000

Jul2001

Jul2002

Jul2003

Jul2004

Jul2005

Jul2006

Jul2007

Jul2008

Jul2009

Jul2010

21

Priavte consumption

45

50

55

60

65

70

75

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2010

% o

f G

DP

US Emerging Economies

Gross national savings

15

20

25

30

35

1980 1984 1988 1992 1996 2000 2004 2008

% o

f G

DP

Developed Markets Emerging Economies


Consumer story at infant stage

Source: IMF, The Economist Intelligence Unit, June 2010Move from exports to consumption

22

0

2

4

6

8

10

12

14

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

China Japan India Korea


Copper consumption per capita

Source: ICSG, World Bank, Macquarie Research, April 2010

Kilo

gra

ms

per

pers

on

Commodity story – years to run

23Disclaimer

Charlemagne Capital (UK) Limited advises funds which are Collective Investment Schemes recognised by the Financial Services Authority (“FSA”) under section 264 of the Financial Services and Markets Act 2000 for marketing to persons in the UK. In relation to such funds this document must not be relied on for the purposes of any investment decisions. Before investing in any fund(s) we recommend that recipients who are not professional investors contact their independent financial adviser and should read all documents relating to the particular fund(s) such as any report and accounts and prospectus, which specifies the particular risks associated with the fund, together with any specific restrictions applying and the basis of dealing. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance will not necessarily be repeated. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. There are additional risks associated with investments (made directly or through investment vehicles which invest) in emerging or developing markets. The information in this document does not constitute investment, tax, legal or other advice and is not a recommendation or, an offer to sell nor a solicitation of an offer to buy shares in the fund(s) which may only be made on the basis of the fund’s prospectus/offering memorandum.

Charlemagne Capital (UK) Limited reasonably believe that the information contained herein is accurate as at the date of publication but no warranty or guarantee (express or implied) is given as to accuracy or completeness. The information and any opinions expressed herein may change at any time. Charlemagne Capital (UK) Limited also advises “Unregulated Collective Investment Schemes” (“UCIS”), the promotion of which within the UK or from the UK is severely restricted by statute. Such funds are only made available to Intermediate Customers and Market Counterparties as defined by the FSA and to persons falling within the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.

This document is aimed only at persons with professional experience of participating in unregulated schemes and any other person who receives this document should not rely upon it. This document and shares in the fund(s) shall not be distributed, offered or sold in any jurisdiction in which such distribution, offer or sale would be unlawful and until the requirements of such jurisdiction have been satisfied. The purchase of shares in the fund(s) constitutes a high risk investment and investors may lose a substantial portion or even all of the money they invest in the fund(s).

Issued by Charlemagne Capital (UK) Limited - Authorised and Regulated by the FSA.

Charlemagne Capital (UK) Limited

39 St. James‘s StreetLondon SW1A 1JDUnited KingdomTel: + 44 (0)20 7518 2100Fax: + 44 (0)20 7518 2199

www.charlemagnecapital.cominstitutionalbusiness@charlemagnecapital.com

http://www.charlemagnecapital.com/

mailto:[email protected]

BAILLIE GIFFORD

Copyright © Baillie Gifford & Co 2009. Authorised and regulated by the Financial Services Authority.

CPBI Forecasting Conference

Confessions of an Optimist

T. Scott Nisbet

BAILLIE GIFFORD

26

Overview

• Optimism = smarter than pessimism

• Growth is exponential, so profit! (Imitation and Innovation)

• 3 clues to understanding the credit crunch

BAILLIE GIFFORD

27

Understanding the Credit Crunch

• 1917 and David Lloyd George

• 2008 and Abu Dhabi

BAILLIE GIFFORD

31

Optimism

• Prevailing Pessimism and the First Scotsman

• But the Great Change is for the better

• And Growth is Exponential

BAILLIE GIFFORD

32

The Amazing Acceleration in GDP Growth

BAILLIE GIFFORD

33

Optimism and Making Money

• Drivers of faster growth:

• The power of Imitation (EM)

• The Beauty of Innovation (Technology)

• Find them and profit

BAILLIE GIFFORD

34

• (Anglosaxon) Media worries:• Chinese inflation, European

peripherals, North Korea psychological issues

• Serious worries :• Massive random event and... Our

Industry (greed and dishonesty)

Worry, Worry

BAILLIE GIFFORD

35

Conclusion

• Understand the credit crunch: once in a Century change of leadership

• Profit through optimism:

• Growth rate unprecedented

• Imitation and Innovation keys to this

Investment forecast combined presentations

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